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Sovereign Wealth Matters

My friend Serena, who you may know as one of the co-founders of My Mom is a Fob and My Dad is a Fob, is currently trying to find a way out of Thailand, something which protests at Bangkok’s two airports has made much more difficult. I wish Serena and her family the best of luck and a safe trip back.

imageWhile a lot of press attention is dedicated to the direct why’s of the protests (demands that the current Prime Minister step down because of his ties to a previously deposed Prime Minister, his brother), less attention is paid to the role that Singaporean sovereign wealth fund Temasek Holdings played in the whole ordeal.

The Former Prime Minister made the mistake of selling his large 50% stake in Thai telecommunications company Shin corporation to Temasek, despite:

  • being accused of insider trading only a short while before
  • violating a law banning turning over majority control of telecommunications companies by foreign companies
  • making the sale without paying any capital gains taxes

The result of these accusations were widespread riots, the Prime Minister dissolving Parliament, and, eventually, him being removed by a military coup.

image And so, what have we learned here? Sovereign Wealth Funds are not just mere curiosities whereby oil-rich (Dubai, Mubadala, Norway, etc.) and Asian countries (China, Singapore) buy up HUGE stakes in companies private equity style (some of the research I did on these funds back in January put their total global size at about ~$3 trillion). They have serious political consequences, as the world is only beginning to discover:

Yes, we’re in the midst of a global recession right now, but think – what better time for a sovereign wealth fund to buy up companies then when the prices are low and when governments are least likely to raise a fuss about someone willing to inject capital into their struggling businesses?

(Image Source) (Image Source)

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