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Temasek to Avoid Politically Sensitive Investments :Report

Singapore's state investor Temasek Holdings will adopt a three-pronged strategy to counter the rising tide of nationalism against sovereign wealth funds, a local newspaper said on Friday.

In an interview with the Straits Times, S. Dhanabalan, chairman of the $108 billion fund that invests the city-state's surplus cash, said Temasek would first try to avoid taking a controlling stake in companies with "iconic" value to a country.

Dhanabalan's comments come after Indonesia's anti-trust agency, KPPU, ruled on Monday that Temasek had broken competition law and that one of its mobile phone operators had charged "excessive" tariffs.

"In every country, whether it is in Asia or Europe, there is an increasing tide of nationalism," he said in the interview.

"So when we want to invest in these countries, we've got to take variousfactors into account, such as whether the company or the activity is iconic for that country, whether it will arouse all kinds of emotional sentiments."

Dhanabalan said the second rule would be to look for good local partners to invest with and third, to opt for a minority stake if investing in a company from a sensitive industry.

"If we can invest in a good, growing company which we can help grow further but not take a major stake, just a significant minority stake, we should do that."

"We need to be careful in how we structure our investments."

Indonesia's anti-trust agency fined Temasek and its units, and ordered them to sell their minority stake in either Telekomunikasi Selular (Telkomsel) or Indosat.

Temasek has vowed to fight the ruling in Indonesian courts and said it was prepared to go to international courts if needed.

The fund has also faced criticism for its $3.8 billion purchase of a stake in Thailand's telecommunications giant Shin Corp, owned by the family of the then-prime minister Thaksin Shinawatra, who was ousted in a coup in September 2006.

A police investigation alleged that Temasek had broken Thai laws to take over Shin.

"This is a big investment. It came to the board, the executive committee, everything. We discussed at many meetings, all the pros and cons, all the downside, upside, all were discussed," Dhanabalan said when asked if Temasek performed sufficient checks in assessing political risk of the investment.

"We talked to many people and we got even blue blood Thai institutions like Siam Commercial Bank to become a minor partner with us," he said.

"And everybody that we spoke to, who were very closely connected with the government and all the other institutions in Thailand, told us it's an excellent idea because it will take the prime minister out of business, he can focus on politics. So nobody anticipated that what happened would happen."