New Administration Eying Singapore’s “Temasek” Model

In an effort to curb lax management of state-owned companies, the Lee Myung-bak administration will seek to privatize public corporations by introducing the “Temasek” model used by Singapore, according to sources.

The Temasek model refers to the method that Singapore’s state-owned investment company, Temasek, applied in the process of privatizing the country’s state-owned enterprises. The model allows the government to own shares of public corporations and leave their management in the hands of private experts to boost efficiency.

President-elect Lee Myung-bak plans to establish a privatization plan by next year and gradually privatize public enterprises starting in 2009, according to the Grand National Party and the Ministry of Planning and Budget on Friday. The Temasek model has been considered as a strong candidate for becoming the basis of reform measure planning.

“Since using the Temasek model is president-elect Lee’s own idea, it is likely to be reflected in his policy. To support the idea, economic experts of the Lee camp gave shape to it through discussions,” a close aide to Lee Myung-bak said.

If the model is adopted, the role that Temasek played in Singapore is most likely to be assigned to the Korea Investment Corp, the state-run investment agency.

Hwang Young-ki, former head of Woori Bank and vice chairman of the economic revitalization special committee of the Lee camp during the presidential campaign, also suggested the Temasek model as a way to privatize Woori Bank early last year.

“You may look at it as a transition from a state-owned and run system to a state-owned and privately-run system. In this way, private experts can be accountable for management and remain free from government intervention as seen in Singapore Airlines, where Temasek is the biggest shareholder,” Hwang said.

Business Traveler magazine selected Singapore Airlines as the best airline in the world in 2007. As of September 2007, 54.58 percent of its shares were owned by Temasek.

As the new government’s plan to reform public corporations takes concrete shape, the Ministry of Planning and Budget, which is in charge of such policies, has begun to collect information about Temasek to brief the presidential transition committee.

If the Temasek model is implemented, the ministry will significantly reduce its supervision of public corporations, as the model will be operated on the premise that the government does not interfere in management.

Although the president-elect has not specified which state-owned companies will be subject to privatization, he promised during his campaign that he would gradually privatize public corporations that no longer pursue their original goals or that are in competition with private companies.

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