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SCMP Reporter

When Singaporean Eddie Taw Cheng-kong's nine-year jail sentence for accepting bribes in Hong Kong was overturned on appeal, he must have felt all his problems were evaporating.

 However, the ruling meant that the troubles had just begun for Singapore's government and judiciary.

 The appeal verdict in January last year not only caused a constitutional crisis in Singapore, but also sent resounding shudders through the government's S$100 billion (about HK$451.21 billion) overseas investment arm that are still being felt to this day.

 It is widely believed that one impetus for the wide-ranging revamp of the Government of Singapore Investment Corp (GIC) unveiled this week stems partly from the Taw case.

 It was embarrassing for the GIC that such a case could have arisen and it highlighted accountability and transparency problems.

 The reorganisation, which took effect on April 1, has seen the GIC's real-estate and special-investments departments hived off into separate firms with specialist boards better able to keep a closer watch and offer guidance on day-to-day affairs.

 'The GIC was getting so big, they needed to split it up to better see how each division is doing,' an analyst said.

 Another key factor behind the revamp is that it makes good business sense and hopefully should lead to better returns.

 One senior GIC insider said: 'The new structure gives more resources and decision-making to different people.

 'If you have one pot and a whole big spectrum of activities inside, it does not make sense. If everything is in the same pot, it all gets blurred,' he said.

 'Now there will be different profit centres.'  The GIC, which has traditionally operated in top secret, had grown large and unwieldy.

  Even the GIC's own board is believed to have had difficulties keeping adequate track of how its money managers were investing taxpayers' funds in recent years.

 Mr Taw, 46, had been the GIC's Hong Kong-based Asia-Pacific regional manager, responsible for investing S$1 billion worth of government funds in the region.

 In May 1997, he was convicted in a Singapore court of accepting S$2.4 million in bribes, even though the alleged offences took place in Hong Kong. Mr Taw was convicted in Singapore under Section 37 of its Prevention of Corruption of Act, which makes it a crime for Singapore citizens to take bribes overseas.

 However, Mr Taw appealed and his 111-month jail sentence and S$2.4 million forfeit were quashed after the appeal judge, Justice M. Karthigesu, ruled there had been insufficient evidence. The judge also said the Prevention of Corruption Act breached Singapore's constitution, which guaranteed equal treatment for all.

 Section 37 of the act had applied solely to Singapore citizens and not permanent residents of Singapore or other similar groups.

 Even though Mr Taw was cleared of any wrong-doing, his case exposed fundamental flaws in the GIC's operations.

 The reorganisation has seen two new companies set up under the GIC umbrella: GIC Real Estate and GIC Special Investments, to manage property and equity investments.

 The old GIC will continue to oversee its investments in financial markets.

 Chang Siew Khang, director of GIC's corporate affairs and planning department, said: 'As separate companies, GIC Real Estate and GIC Special Investments will be given business autonomy to evolve their own business practices.'  The new structure will make money managers accountable to their respective corporate or divisional board, which in turn would be accountable to GIC's overall directors chaired by Senior Minister Lee Kuan Yew.

 In other words, there will be an extra layer of senior management. The three different arms will be free to appoint boards comprising of specialists in their particular fields.

 The Monetary Authority of Singapore manages the republic's S$124.3 billion worth of foreign reserves.

 What GIC and its sister firm Temasek Holdings manage is the Singapore Government's other longer-term reserves.

 Temasek is the holding arm for the government's stakes in Singaporean equities and long-term stakes in government-linked companies, while the GIC is its main standard bearer for overseas strategic investments.

 The GIC has more than S$100 billion under its charge, while Temasek's shareholders' funds were S$34 billion as of January.

 The bulk of Temasek's money is in government-linked firms such as Singapore Airlines and Development Bank of Singapore. As of December, just S$320 million of the S$34 billion was invested in other Singaporean equities.

 Under the new structure, GIC Real Estate and GIC Special Investments will become separate companies, with Seek Ngee Huat and Teh Kok Peng their respective presidents.

 Among GIC Real Estate's assets is a stake in the giant Tung Chung property development near Chek Lap Kok airport.

 GIC Special Investments principally invests in private equities, but will also consider debt securities with an equity component. It will participate in management buy-outs and venture capital investments.

 Singapore's US$1 billion Technopreneurship Investment Fund announced by Deputy Prime Minister Tony Tan last week to invest in technology ventures will come under this arm.

 GIC Special Investments also has GIC Infrastructure, a unit which invests in infrastructure projects and in the giant AIG Asian Infrastructure Fund of US insurer AIG.

 The old GIC will be left to handle its public market investments, such as bonds, equities and foreign exchange. Ng Kok Song has been redesignated its managing director to replace Lee Ek Tieng, who has become managing director for the whole group.

 It is not known whether Temasek will now undergo a similar revamp.

 Temasek has traditionally been a bit more transparent, given that it is obliged to declare transactions in Singapore-listed firms according to standard stock exchange regulations. But wherever possible, its moves are also kept under wraps.



Singapore court case forces carve-up, greater transparency