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Temasek, investment corp distinct entities: Singapore

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Tamal Bandopadhyay Singapore
The Singapore government will not budge from its stand that Temasek and the Singapore Investment Corporation are two distinct entities and each of them should be allowed to hold the maximum permissible stake in an Indian company.
 
This is contrary to the Reserve Bank of India's decision to treat them as a single entity. RBI has insisted that their combined stake can not exceed 10 per cent in ICICI Bank.
 
"If you are not treating them as two separate entities, you are shortchanging us and yourself," Singapore's Minister of Trade and Industry Lim Hng Kiang told a group of visiting Indian journalists on Wednesday.
 
The minister also felt that the banking regulator should have the same set of rules for all foreign banks operating in India and allow Development Bank of Singapore (DBS) to set up more branches.
 
The Comprehensive Economic Co-operation Agreement (CECA) signed last year between India and Singapore has become a bone of contention, with the RBI and the Monetary Authority of Singapore (MAS) at loggerheads on a number of issues.
 
Although, trade between the two countries has increased by 40 per cent since the signing of the agreement in June 2005, there has not been any progress on the opening up of the financial sector. MAS officials declined to comment.
 
The RBI has taken the position that the Singapore government owns both Temasek and GIC and hence their combined stake would not be allowed to cross the 10 per cent limit in ICICI Bank. Under the RBI norms, no single entity can hold more than 10 per cent in a private bank.
 
"They are two separate investment vehicles of the government and they do not act in concert. While GIC's mandate is to invest our national reserves created out of budgetary surpluses in long-term assets, Temasek follows a different investment policy. If the RBI's concerns are on prudential grounds, let me assure the regulator that they are two separate entities and it is not correct to treat them as one body," Kiang said.
 
He also said there was no common director on the boards of the two entities and their investment decisions were board driven. "We give them financial targets but do not tell them where to invest (their money)," he said.
 
The minister will meet his Indian counterpart "" Commerce Minister Kamal Nath "" next month to discuss the issue. He will also meet Finance Minister P Chidambaram and RBI Governor YV Reddy during the World Bank IMF meet, being held in Singapore, in mid-September.
 
"DBS has only two branches and it wants to open a few more.Its application (for opening new branches) has been pending with the RBI for long. While DBS has not been given approval (for opening new branches), other foreign banks in India have got approvals. You should have same rules applicable to every bank," Kiang said.
 
According to the minister, the RBI and the MAS had "excellent relations" and they were "talking to each other to sort out all issues". MAS officials declined to comment on the issue but said that the two regulators have been discussing the issues continuously to move forward.
 
The RBI has not granted any new licence to DBS even though under CECA, three Singapore banks "" United Overseas Bank, OCBC Bank and DBS "" are to be allowed larger presence in India.
 
MAS, on its part, is not willing to give the qualifying full banking (QFB) status to any Indian bank till now even though the treaty envisages such status for three Indian banks. MAS insists that the QFB status is not automatic for any Indian bank and it is subject to prudential norms.
 
Kiang said his government had in talks with India on developing special economic zones (SEZ) in India.
 
"We have experience in developing them. We have built SEZs in China and Indonesia and we are building them in Russia. We can play an important role (in developing SEZs in India) and Singapore's private companies can work with India's state governments. We have put up a proposal and are actively discussing this," he said.

 
 

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First Published: Sep 01 2006 | 12:00 AM IST

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