Temasek Holdings of Singapore is willing to cut its losses and reduce its holding in Shin Corp. But the problem is, who is going to be buyer? "I have heard that Temasek really wants to sell off its stake," said an analyst. "But there is no buyer now in the market. Who really wants to put himself into trouble because of all the legal problems?"

In its statement circulated to the Thai media on Monday, Temasek said it was willing to reduce its shareholding in Shin Corp at the appropriate time and in an appropriate manner in order to ensure an orderly market.

However, it did not address the key question as to whether it had relied on nominees to circumvent Thailand's foreign ownership law in its acquisition of Shin.

Temasek's exposure in Shin turned into a giant mistake following the ousting of Thaksin Shinawatra as prime minister in last month's military coup. There is growing pressure for Temasek to comply with Thai law by reducing its stake to below 50 per cent. It now holds about 96 per cent in Shin Corp from its acquisition of a 49-per-cent stake from the Shinawatra/Damapong families and from a public tender offer.

If the Singaporean state-investment arm were to reduce its stake to 49 per cent, it would realise a steep loss. The deal has been considered an almost purely political one and a unique share sale. The Shinawatra/Damapong families sold off Shin at a high premium.

Its subsidiary, Advance Info Service, Thailand's No-1 mobile-phone operator, was a cash cow at its peak. But to be competitive in an industry in which the trend is moving toward 3G (third generation) technology, it would have cost the Shinawatra family a huge amount of money to invest further.

But unlike other deals, the buyer was a state enterprise of Singapore while the seller was the family of Thailand's then-prime minister. If the deal had been conducted by others, the story would have been less scrutinised or less political.

Over the past several months, despite rising criticism on the deal - particularly on the nominee issue - Temasek kept silent, hoping that after the general election earlier set for October 15, Thaksin would have won and made a political comeback. Then Temasek could have muddled through the criticism.

However, the bloodless September 19 coup has totally changed the political landscape, and the Shin deal has featured prominently in public debate again.

Earlier, the Supreme Administrative Court ordered its lower court to take up the Shin case filed by Rangsit University law lecturer Sattra Toa-on. He alleges that relevant state agencies - including the Information and Communications Technology Ministry, TOT Plc, the Prime Minister's Office and the Transport Ministry - had been guilty of malfeasance in not revoking Shin concessions after the company was sold to Temasek in January. In his filing, iTV, Shin Satellite and Advance Info Service are considered national assets, which should not be sold to foreigners.

Another factor that triggered Temasek to ponder a retreat is the Commerce Ministry's probe into Kularb Kaew Co as to whether it is a nominee of the Singaporean company. The case has now been passed to the police for further investigation.

Temasek now realises that if it prolongs the controversy, it might face further damage from the investigation.

There have been several protests against the deal and the exposure of the Singaporean government's investment arm in Thailand. Therefore, Temasek earlier expressed to Prime Minister Surayud Chulanont its willingness to come to an amicable settlement of the deal. The Thai side reportedly would like Temasek to reduce its stake in Shin to below 50 per cent.

If Temasek were to sell off its Shin group shares, it would face a loss of about Bt21.83 billion as it would be forced to sell at a much lower price than their acquisition cost. Shin Corp shares closed yesterday at Bt34.75 - a Bt14.50 loss compared its public tender offer of Bt49.25 per share.

Temasek has apparently learned its lesson about the Shin deal the hard way. Its officials were reportedly upset about the deal, feeling that they had been tricked into the takeover.

Beyond the tangible damage, the consequences of Temasek's retreat in Thailand may spill over unpredictably into similar deals done by Temasek in other Asian countries which might come under scrutiny for its business practices.

In the final analysis, this controversial deal will finally lead the Thai authorities to deal with a clearer legal framework on the nominee issue.

Jiwamol Kanoksilp

The Nation