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Learnings for Sri Lanka on SOE Reforms – Singapore’s Temasek Holdings




A super-holding company for managing State-Owned Enterprises (SOEs) has been identified as a globally successful model for SOE management. This model allows the government to adopt a more arms-length approach to SOEs’ operational decision-making, relieving it of the direct responsibility of overseeing all the SOEs dispersed across various industries, and redirect its budget and energy elsewhere. The merits of this model have enabled countries such as Malaysia and Singapore, which have similar holding company structures, to ensure impressive performances of their SOEs.

This article is the first of a three-part series where part one and two provide an in depth analysis of the case of Singapore’s and Malaysia’s SOE holding company models (Singapore’s Temasek Holdings and Malaysia’s Khazanah Nasional), and their role in enabling economic growth and development for the respective countries. Part three will provide learnings for Sri Lanka, which can be adopted for the country’s SOE reform process. This series of articles is a joint effort by the Ceylon Chamber of Commerce (CCC) and the Colombo Stock Exchange (CSE).

Part One: Singapore’s Temasek Holdings


Temasek was incorporated in 1974 under the Singapore Companies Act to hold and manage assets previously held by the Singapore Government. The objective of transferring assets to a commercial company was to free the Ministry of Finance of the responsibility so that it could focus on its core role of policymaking and regulations, while Temasek would own and manage these SOEs (also known as Government-linked Companies – GLCs) on a commercial basis.

Similar to any commercial company, Temasek has its own Board of Directors and a professional management team. It pays taxes to the government and distributes dividends to its shareholders. Temasek was established to contribute to Singapore’s economic growth by nurturing entities into world-class companies through effective stewardship and strategically driven commercial investments. Today, it operates in 9 countries and its portfolio value amounted to SGD 381 billion as at the end of March 2021. This is equivalent to around USD 283 billion, which is about 6 times Sri Lanka’s external debt accumulated over the years and about 4 times the amount of Sri Lanka’s Gross Domestic Product (GDP).

Temasek invested mainly in Singaporean companies in its early days, but it has turned into a major global investor in recent years. Geographically, the majority of these investments are in China (27%) followed by Singapore (24%), America (20%) and rest of the world (12%). Temasek operates a diversified portfolio spread across many segments such as Financial Services, Telecom, Media, Technology and Transportation and Industry. Please refer figure 01 for a breakdown of sectors.

Source: Temasek Holdings

Why was Temasek Successful?

SOEs are generally regarded as inefficient firms because of political interference, and corruption. Despite this, various studies have shown that Singaporean SOEs exhibit higher valuations than non-SOEs, even after controlling for firm specific factors and also have better corporate governance practices.

The reasons for this lies in the political, social and economic context that Singapore faced during the period of self-governance to the early years of independence from the late 1950s to the early 1970s. The difficult economic conditions coupled with a challenging political environment in Singapore during this period played a significant role in nurturing good political governance in Singapore, which was in turn transposed to Singapore’s SOEs with good corporate governance practices. The Temasek corporate governance framework covers the following broad areas:

1. Board Governance

Temasek aims to help SOEs build effective boards by setting out guidelines on the appropriate composition of board, tenure of the directors, their size, and formation of specialized board committees.

2. Business Charters

Temasek encourages SOEs to stay focused on their core competencies and it will not disapprove of SOEs diversifying if it is done in the best interest of its shareholders.

3. Talent and Remuneration

Temasek encourages SOEs to recruit the best global talent and to reward them competitively.

4. Value Creation

Temasek works closely with their SOEs to adopt appropriate performance benchmarks to maximize returns on shareholder investments. It expects its companies to be profitable and generate a high rate of return on investment like any shareholder.

Therefore, Temasek’s stewardship has enabled SOEs to create value for their shareholders. This has led to the SOEs on average demonstrating higher valuations than non-SOEs, even after controlling for firm specific factors such as profitability, leverage, firm size, industry effect, and foreign ownership.

How has it Contributed to Development Goals?

Temasek is a government holding company that acts as a shareholder on behalf of the Singaporean government (Ministry of Finance). It pursues its developmental mandate by buying direct stakes in global companies, mostly in Singapore and Asian, and then reinvesting its proceeds from asset sales and dividend income into foreign assets, acting similar to a private equity fund.

The arms-length approach from the government has made it possible for Temasek’ to manage its financing and exercise independence. Temasek hasn’t received any regular financing from the government in its close to 50-year history, but receives ad-hoc occasional injections from time to time, which are publicly disclosed.

The compounded annualised total shareholder return since inception in 1974 is at 14% in Singapore dollar terms. The Temasek foundation oversees 23 non-profit philanthropic projects, and has positively impacted 1.5 million lives across Asia and Singapore through their community work.

Contribution to Reserves

In terms of the contributions to the Singaporean economy, the Singapore government can include around 50% of Temasek’s expected long term returns along with the Government of Singapore Investment Corporation (GIC) and Monetary Authority of Singapore (MAS) investment returns. These three institutions contribute to government reserves through the Net Investment Returns Contribution (NIRC). NIRC is comprised of up to 50% of the Net Investment Returns (NIR) on the net assets invested by GIC, MAS and Temasek, and the Net Investment Income (NII) derived from past reserves from the remaining assets.

The full brief can be accessed at: Holding Company for SOEs: Learnings for Sri Lanka.

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Dialog impacted by further forex losses in Q2, accumulated NPAT in 1H negative Rs28.3Bn



Dialog Axiata PLC announced, Tuesday 09th August 2022, its consolidated financial results for the six months ended 30th June 2022. Financial results included those of Dialog Axiata PLC (the “Company”) and of the Dialog Axiata Group (the “Group”).

Sri Lanka continued to be battered by the socio-economic crisis in Q2 2022 which led to adverse movements in macro variables such as Sri Lankan Rupee (“LKR”) depreciating 23% against the United States Dollar (“USD”), Inflation rising to 54.6% (from 18.7% recorded by end Q1 2022), policy rates increasing by 8 percentage points and 12-month T-Bill rate increasing to 21% (from 12% recorded by end Q1 2022).

Despite the challenging environment witnessed in Q2 2022, the Group sustained its consistent performance to record strong Revenue growth across all business segments, namely, Mobile, Fixed Line, Digital Pay Television, International and Tele-infrastructure, relative to prior periods, namely, Year-to-Date (“YTD”) and Quarter-on-Quarter (“QoQ”). Accordingly, the Group recorded consolidated Revenue of Rs.81.6Bn for 1H 2022 and Rs43.3Bn for Q2 2022. However, driven by higher network spend and escalation in the cost base, Group Earnings Before Interest, Tax, Depreciation and Amortisation (“EBITDA”) declined to Rs27.5Bn for 1H 2022 down by a moderate 1% YTD. On a QoQ basis EBITDA declined 14% to record Rs12.7Bn for Q2 2022.

The Group Net Profit After Tax (“NPAT”) was impacted by the forex losses amid continued depreciation of the Sri Lankan Rupee (“LKR”) against the United States Dollar (“USD”). The resulting forex losses reached Rs.14.2Bn for Q2 2022 and Rs.34.3Bn for 1H 2022. The forex losses were predominantly contributed by market-to-market translational losses from USD denominated borrowings.

Group NPAT recorded a loss of Rs28.3Bn for 1H 2022 and a loss of Rs12.5Bn for Q2 2022 amid forex losses. Normalised for the said forex losses, NPAT continued to decline albeit recording profits of Rs6.0Bn for 1H 2022 and Rs1.6Bn for Q2 2022.

Dialog Group continued to be a significant contributor to state revenues, remitting a total of Rs16.9Bn to the Government of Sri Lanka (GoSL) during the first six months of 2022. Total remittances included Direct Taxes and Levies amounting to Rs9.2Bn and Rs7.7Bn in Consumption Taxes collected on behalf of the GoSL. The total taxes paid increased 46% YTD and 56% QoQ. The Direct Taxes included Rs3.8Bn paid during the quarter in lieu of one-off Surcharge Tax of 25% applicable on PAT of FY2020.

The Group continued to support critical investments in 1H 2022 to provide seamless and consistent connectivity whilst meeting the surge in data demand. Accordingly, the Capital expenditure reached Rs22.4Bn for 1H 2022. Capital expenditure was directed towards investments in High-Speed Broadband infrastructure to further expand Dialog’s leadership in Sri Lanka’s Broadband sector. In line with the above Capex, the Group Operating Free Cash Flow (“OFCF”) declined to Rs2.8Bn for 1H 2022.

During the quarter the Dialog Group entered into loan agreement of up to USD150Mn with the International Finance Corporation (“IFC”) that is expected to help expand and improve the network capacity through the upgrading of existing sites and the deployment of new 4G sites. IFC will also ensure that Dialog adopts an enhanced environmental and social management system (ESMS) according to IFC Performance Standards for their mobile network deployment, in line with Dialog’s endeavors of pursuing green connectivity, supporting global climate action goals and achieving net-zero CO2 emission by 2050.

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Emirates invests over US$ 2 billion to take its on-board customer experience to new heights



Priding itself on a brand promise of ‘Fly Better’, Emirates is investing over US$ 2 billion to enhance its inflight customer experience, including a massive programme to retrofit over 120 aircraft with the latest interiors, plus an array of other service improvements across all cabins starting in 2022.

Sir Tim Clark, President Emirates Airline said: “While others respond to industry pressures with cost cuts, Emirates is flying against the grain and investing to deliver ever better experiences to our customers. Through the pandemic we’ve continued to launch new services and initiatives to ensure our customers travel with the assurance and ease, including digital initiatives to improve customer experiences on the ground. Now we’re rolling out a series of intensive programmes to take Emirates’ signature inflight experiences to the next level.”

Some of Emirates’ latest initiatives include: elevated meal choices, a brand new vegan menu, a ‘cinema in the sky’ experience, cabin interior upgrades, sustainable choices and a generous approach to the little touches that make travel memorable.

Starting from August, Emirates’ passengers can look forward to:

New Inspirations, New Menus:  An award-winning team of chefs, a world-class catering team and a wide variety of suppliers have been assembled to design and deliver the best fine dining experience in the sky. New menus will be served on select Emirates routes in First Class, featuring dishes such as pan-fried salmon trout with moqueca sauce and creole rice, roasted duck breast with orange thyme jus, steamed broccolini and fondant potatoes. New menus will also be introduced to Business and Economy on the 1st of September.

Purposefully Vegan Choices: Emirates’ new vegan menu is carefully curated to cater to the growing numbers of customers pursuing this thoughtful lifestyle. Vegans, or anyone interested in a delicious and healthy plant-based meal, will enjoy handcrafted gourmet dishes such as pan-roasted king oyster mushrooms, flavoursome jackfruit biryani and sliced kohlrabi garnished with burnt orange. Desserts are a decadent affair with choices of chocolate truffle cake with hazelnut, pistachio and gold leaf, or green grape tart adorned with candied rose petals, vanilla custard, and berry compote glistening with yuzu pearls. Vegan dishes are available to pre-order in all cabin classes.

The Champagne and Caviar Experience: Emirates’ First Class experience, always a benchmark for service excellence, has been upped a notch in 2022. Customers can now savour unlimited portions of Persian caviar as part of the ‘dine on demand’ service, with an exquisite pairing of the world-renowned Dom Perignon vintage champagne. Emirates is the only airline with an exclusive agreement to offer the luxury brand on-board.

Cinema in the Sky: First Class customers can create a memorable movie moment on-board by ordering cinema snacks as they enjoy the 5,000 channels on Emirates’ ice inflight entertainment system. The cinema snack menu includes moreish classics such as lobster rolls, juicy sliders, edamame, and salted popcorn, and can be ordered on demand. All passengers can also curate their own ice experience before their flight, simply by browsing and pre-selecting movies or TV shows on the Emirates app, which can then be synced to ice the moment they board, maximising the seamless travel experience.

Farm to Fork – Sustainable Supply Chain: Emirates’ customers departing on flights from Dubai can begin crunching on fresh greens harvested from Bustanica, the world’s largest vertical farm and newly-opened US$40 million joint venture investment through Emirates Flight Catering. Emirates is continuing to invest in sustainable operations and supply chains, seeking local food suppliers and farms wherever possible to serve the freshest produce on board.

Specialised Hospitality Training for Cabin Crew: Emirates has partnered with Ecole hôtelière de Lausanne, one of the world’s top hospitality management schools, to craft the Emirates Hospitality strategy and encourage inspiring customer experiences. Emirates Cabin Crew have already begun engaging in intensive training programmes focused on delivering the four service pillars: Excellence, Attentiveness, Innovation and Passion.

Upgraded Cabin Interiors in all Classes: The most significant investment is an extensive and record-breaking refurbishment of the aircraft fleet interiors, where cabins will be retrofitted with new or reupholstered seats, new panelling, flooring and other cabin features. Benefitting all Emirates passengers, every cabin class will be refreshed and new Premium Economy cabins installed. After the retrofit, Emirates will have a total of 120 aircraft offering Premium Economy seats – the only airline in the region to offer this cabin class, and enhanced interiors and features across all other cabins. With its first aircraft scheduled to roll into the Emirates Engineering Centre for retrofitting in November, planning work and trials have begun in earnest.

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Janashakthi Life strengthens board with two new appointments



Janashakthi Insurance PLC, one of the key players in Sri Lanka’s insurance industry, announced the appointments of Sivakrishnarajah Renganathan and Dr. Nishan de Mel as Independent Non-Executive Directors of the organization with effect from 27th July 2022.

“We are pleased to welcome S. Renganathan and Dr. Nishan de Mel to the Board of Janashakthi Insurance PLC, as we continue to accelerate the execution of our strategic priorities to expand our presence in the Life Insurance segment,” said Prakash Schaffter, Executive Deputy Chairman of Janashakthi Insurance PLC.

“Renganathan joins us with a rich tenure of 41 years in the banking sector and extensive financial and managerial experience which will provide valuable insights as we continue to pursue our growth journey. Dr. de Mel is an economist with extensive knowledge and experience in strategic planning, that will enable our growth strategy to drive transformation through effective strategic planning. We are confident that they will provide valuable perspectives and will create a new dynamic within the Board as we continue to transform the insurance industry to better serve our customers and communities”, he concluded.

Sivakrishnarajah Renganathan is the former Managing Director/ Chief Executive Officer of Commercial Bank of Ceylon PLC, Commercial Development Co., PLC and Deputy Chairman of Commercial Bank of Maldives. He had held several key positions in the Bank. He has led Commercial Bank’s acquisition of the banking operations of Credit Agricole Indosuez in Bangladesh. In addition, he has served among others, as a Member of the General Council of the Institute of Bankers of Bangladesh, Founder / President of the Sri Lanka Bangladesh Chamber of Commerce and Industry, Executive Member of the Foreign Investors Chamber of Commerce and Industry in Bangladesh.

Renganathan, a Fellow of the Chartered Institute of Management Accountants, UK (FCMA), Fellow of the Chartered Global Management Accountant (CGMA), Fellow of the London Institute of Banking & Finance, UK (FLIBF) and a Fellow of the Institute of Bankers Sri Lanka (FIB), had received extensive Leadership, Management and Banking training, both locally and overseas.

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