Parliament is not the risk committee for individual firms: Foo Cexiang on SIA’s Air India investment

SINGAPORE – Parliament’s role is to ensure accountability, but the House is not the “risk committee” for individual companies, said Minister of State for Trade and Industry Foo Cexiang on Sept 15.

Foo was criticising Workers’ Party MP Kenneth Tiong’s statement that Parliament is the risk function for the reserves and Singapore Airlines’ (SIA) board is the investment team, calling it “a major leap of logic”.

MPs have every right to raise questions about the national reserves, including how they are safeguarded and stewarded, but that does not make Parliament the risk committee for individual companies, he said.

MPs do not have the operational data, expertise, or mandate to determine how much commercial risk companies should take, he added.

“If Parliament were to take on that role, what then would be the responsibility of the SIA board, and the boards of other Temasek portfolio companies?”

Foo’s comments follow a Sept 8 exchange in Parliament between Tiong and Transport Minister Jeffrey Siow on SIA’s 25.1 per cent stake Air India, which has reportedly asked its owners for a capital injection of about US$1.5 billion (S$1.9 billion) months after it posted a record annual loss.

Tiong had asked if SIA’s losses from its foreign investments have been assessed against its capacity to provide essential transport services, and said he does not support further cash infusions from state investor Temasek – SIA’s majority shareholder.

Siow said in response that SIA’s investment in Air India has no adverse impact on its ability to operate and serve Singaporeans, and that the airline must continue to stay the course in challenging markets to remain competitive globally.

The SIA board is not simply an investment team, Foo said on Sept 15.

SIA’s management runs the business, while its board oversees the management, sets the company’s strategic direction, and is responsible for governance and risk oversight.

Temasek, as shareholder, exercises stewardship over its portfolio companies, he said.

He added that Tiong’s argument, taken to its logical conclusion, would mean Parliament setting political limits on how much risk every Temasek portfolio company can take – not just SIA, but also DBS, Singtel and others too.

That would cripple Singapore’s companies commercially and is a “sure recipe for failure”, said Foo, who is also Minister of State for Manpower.

Once commercial decisions become subject to political direction, accountability is blurred, he said.

MPs would be drawn into decisions they have neither the information nor the mandate to make. “That would not strengthen governance. It would weaken it,” he said.

He also criticised Tiong’s points on SIA’s debt during the exchange in Parliament.

Then, Tiong said that SIA is in net debt and as at June 30 held $10.5 billion in cash against $10.7 billion in debt.

Without context, this says little about SIA’s financial health, Foo said.

“What matters is not simply how much debt it has, but when the debt must be repaid, what it costs, and whether SIA can comfortably meet those obligations,” he said.

He drew an analogy of a household with half a million in the bank and a $510,000 mortgage.

Technically, that household is in “net debt”, but one would not conclude from that fact alone that the household is in financial distress, he said.

Instead, one should look at the household’s income and monthly expenses, as well as mortgage payments and interest rates, and its overall ability to service the loan.

The same applies to companies, he said.

Debt is not automatically a sign of financial weakness and in SIA’s case, most of its borrowings are long-term.

Its liabilities within the next year are well within its cash reserves, and SIA has one of the most conservative and low-risk capital structures amongst major global airlines, he said.

“Having been a business analyst, Mr Tiong must know these accounting basics. But he disregarded them to paint an alarming narrative by juxtaposing SIA’s physical cash available today against long-term liabilities that aren’t due for a decade,” Foo said.

“As MPs, we can and should ask hard questions. But our aim should be to create greater clarity, not confusion; to improve outcomes, not make them worse,” he added.

Tiong is MP for Aljunied GRC and was formerly a portfolio manager for a hedge fund.

His criticism of SIA’s investment in Air India, which began after news of the Indian carrier seeking fresh equity broke in August, has drawn responses from the Government inside and outside Parliament in recent weeks.

On Sept 5, Senior Minister and Coordinating Minister for National Security K. Shanmugam said Temasek portfolio companies must not fear making investment decisions because of political pressure or politically motivated criticism.

He separately called out racist comments online surrounding the issue, including claims that Temasek CEO Dilhan Pillay Sandrasegara would favour Air India because of his Indian ethnicity.