2econdsight

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Accountability & Parliamentary Oversight Of Sovereign Wealth Fund

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The purpose of this short discussion is to contrast the practice of and need for accountability and transparency in regard to Norway’s and Singapore’s sovereign funds.

Introduction
Norway’s Government Pension Fund Global (GPFG) made international news last week.

The Guardian, 28 May 2015 initially reported that a bipartisan parliamentary committee had deliberated and decided to recommend that GPFG “should sell stakes in firms that generate more than 30% of their output or revenues from coal-related activities.”

A week later, NYT, 5 Jun 2015,“Parliament voted Friday to order the fund to shift its holdings out of billions of dollars of stock in companies whose businesses rely at least 30 percent on coal. A committee vote last week made Friday’s decision all but a formality; it will take effect next year.”

Google search shows up SG’s MSM last reported on GPFG, Mar 2015, to ensure Singaporeans are informed that the “world’s biggest sovereign fund eyes S’pore property”. But, as of 7 Jun, our #153-ranked MSM is surprisingly silent on the latest GPFG’s development. Why?

Perhaps, climate change is not a top Singaporean concern even if, with sea levels rising, parts of our coastline may be submerged. So, local editors may deem the latest news less relevant to us.

But I suspect there are other reasons why it was not reported. Let’s see what those may be.

How Norway GPFG & Temasek Holdings Operate
The GPFG is technically owned by Norway’s Ministry of Finance “on behalf of the Norwegian people.”

Its governance structure has the Norwegian Parliament setting the legal framework (Government Pension Fund Act), delegating the fund management to the Ministry of Finance then delegated the operational aspects to the Norwegian Central Bank which in turn appointed their Investment Management arm to run GPFG. GPFG managers then have a free hand within a given investment mandate to pursue opportunities without undue interferences.

GPFG’s website has only 5 headings. Since ALL the money belongs to the 5mil Norwegians, “TRANSPARENCY” is included as one of the headings to assure ordinary citizens that their pensions are not placed in an opaque Black Hole. Here’s the manager’s commitment.

We manage the fund on behalf of the Norwegian people – both current and future generations. We are dependent on confidence to achieve our mission, so we aim to be a professional, transparent and responsible investment manager. However, there are some topics we cannot inform about – matters that others should discuss, and information that is market sensitive. Otherwise, our goal is for the people of Norway and others to be able to find all the information they need about the fund and its investments.

Contrast GPFG’s unambiguous, no-nonsense, zen-like presentation with Temasek’s ‘more-is-less’ website with its colourful bells-and-whistles intro page. And, its ‘governance framework’ and ‘commercial discipline’;

Our governance framework emphasises substance over form, and long term over short term, and put institution over self. It provides for accountability and a robust balance between empowerment and compliance.
We espouse the principles of commercial discipline, built on our set of MERITT values, namely: meritocracy, excellence, respect, integrity, teamwork and trust.

Can someone please show/demonstrate with examples what it means to Citizen 2cents how “meritocracy, excellence, respect, integrity, teamwork and trust” have to do with investing my money to ensure my retirement adequacy?

Next, The CEO, Mr Yngve Slyngstad, holds 4 Masters in Law, Economics, Biz Mgt & Political Science and, yes, had much more than 10 years in investment and equity management prior to his CEO appointment 1 Jan 2008. He is supported by a team with impressive and role-relevant backgrounds. Click to discover the detailed information of each key executive.

Contrast this with, for starters (leaving out GIC & MAS for now), Temasek Holdings (TH). A quick scan shows up at least 5 top managers previously from Singapore Technologies (& subsidiaries). TH CEO cut her teeth in Singapore Technologies (ST) and a President came also from ST, also from a tech, not an investment, environment. Additionally, there’s an apparent preference for country managers with connections or “guanxi” in their home markets.

GPFG appears to have only Norwegians in their top ranks whereas, perhaps one-third of Temasek’s are Foreign Talent (no prizes for guessing the make-up at GIC). Note: GPFG manages 4X what Temasek does, each country has about 5 mil population while Norway’s GDP is US$512bil vs Singapore’s US$298 (2014). Are we missing something here?

What The PAP Govt-Controlled Press Will Not Have You Thinking
Back to SG MSM not reporting on Norway’s divestment decision.

Any report at all will be incomplete without revealing how the GPFG ended up having to act on the divestment decision.

Norwegians and their government (doesn’t matter the parties in power) take their money and investments very seriously. Aside from wishing to demonstrate their adherence to ‘ethical investment principles’ on issues dear to their hearts, every Norwegian is engaged (via their MPs or writing/speaking to ministers directly – no need for National Conversation or Hong Lim Park protest) to knowingly ensure that their pensions are adequate to meet retirement costs and expectations.

Singaporeans should, too, don’t you think?.

Through all these, Norway’s Parliament has the ultimate say and oversight of the GPFG. Regular reports are also made by the fund managers to the Ministry of Finance with voluminous but relevant details – down to the cost of management costs/fees (for FY2014, management fee including bonuses = 0.06% of fund value).

Now, why should Singaporeans be denied the ultimate say and oversight of our CPF and other assets or money owned by our government on OUR behalf?

This question is especially relevant – urgent even – since we are as educated as the Norwegians, our living costs have shot through the roof – and, indeed, our retirement funds thus far are manifestly inadequate after 50 continuous years under the governance model set up and operated solely by the PAP-dominated government…without real Parliamentary accountability and oversight.

It is ridiculous and stinks of abusive arrogance to be dismissively told, when pressed for info, that ‘it is not in your strategic interest to know’.

Whether you are a diehard or marginal PAP supporter or not a fan of the present government, whether you have enough retirement funds or not, whether you are just starting out in life or already retired – it is YOUR MONEY and RETIREMENT that each of us has to content with – WE MUST THEREFORE KNOW and BE IN ULTIMATE CONTROL of our money held by the government (PAP or not) and invested by paid managers.

Do we have to wait till a Nick Leeson shows up, loses a chunk of our money before we realize and decide that just the same few directors who sit in the cabinet, in the MAS and related entities board of directors are too secretive or suffering groupthink to be able to objectively raise a red flag in good time to protect YOUR MONEY & MINE?

Change we Must. End PAP’s dominance.

Law Kim Hwee aka 2cents

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3 thoughts on “Accountability & Parliamentary Oversight Of Sovereign Wealth Fund

  1. Pingback: Daily SG: 9 Jun 2015 | The Singapore Daily

  2. How would anyone know if there has been no Nick Leeson or worst?

    Prof Christopher Balding of HSBC School of Business at Peking University just posted the following in his blog –

    http://www.baldingsworld.com/2015/06/25/the-largest-financial-discrepancies-ever/

    Here is the red flag –

    “This will include evidence of how key Singaporeans have benefited enormously from this flow of money, historical examples of financial impropriety, and raise serious questions about ongoing financial transfers.”

    Like

  3. Pingback: What does US Banks credit downgrade say about Temasek? | 2econdsight

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