Commentary: What the surprise decision on Income-Allianz deal says about the Singapore government’s priorities

SINGAPORE: The Singapore government’s decision to block the Income-Allianz deal was both surprising and extraordinary, but most of all, it was the right call.
When the matter was discussed in parliament in August, there wasn’t a hint that it would not approve the sale of Income Insurance’s shares to the German financial services company.
More than a dozen Members of Parliament had filed questions on how the proposed sale would affect the social mission of the former cooperative, which had been set up to provide affordable insurance to low-income workers.
They were reflecting widespread public concern over whether Allianz, a commercial profit-driven, publicly listed company could be counted on to keep faith with the values of a social enterprise.
The responses from both Second Minister for Finance Chee Hong Tat and Minister of State for Culture, Community and Youth Alvin Tan then were matter-of-fact and non-committal, reiterating the point that the two entities had stated they intend to honour existing commitments to policyholders and that the government would hold them accountable.
It was not reassuring to critics of the deal and most observers concluded at the time that it was a done deal.
Monday’s (Oct 14) announcement by Culture, Community and Youth Minister Edwin Tong was a bolt from the blue by a government that rarely acts out of character.
Because there is now a new prime minister in charge, questions will invariably be raised about what it says of his leadership and whether it heralds a change in style if not substance.
Does it?
There are several takeaways.
First, whatever the decision, the authorities have always been consistent in ensuring that their actions are above board and comply with existing rules. If the deal meets all the requirements of the Monetary Authority of Singapore (MAS) and the Registrar of Cooperatives, it cannot be arbitrarily blocked without seriously damaging Singapore’s reputation as a leading financial centre based on the rule of law.
As far as the MAS was concerned, there was nothing amiss about the proposed transaction under existing law.
It did not have the power to block it, which is why there is now going to be new legislation, which will be rushed through Parliament this week, to enable it to do so.
On this front, there has been no change in the government’s approach.
According to Mr Tong, the penny dropped when his ministry which oversees the cooperative movement discovered that Allianz had proposed, as part of the deal, to return S$1.85 billion to shareholders over three years to reduce the company’s capital holdings.
Such a move, he added, was contrary to what Income had said two years earlier when it was in discussion with the Ministry of Culture, Community and Youth (MCCY) about changing its identity from a cooperative to a company.
This was how the minister put it: “We find it difficult to reconcile the proposed substantial capital reduction, soon after the transaction is completed, with Income’s representations to MCCY during the corporatisation exercise, that it was aiming to build up capital resources and enhance its financial strength.”
In effect, he was saying that Income had not kept to its promise made earlier.
He was even more blunt when speaking about whether it could fulfil its social mission, which was the main concern of many people when the proposed sale was first announced.  
“MCCY is not satisfied that Income will be able to continue fulfilling its social mission after the proposed transaction.
“There are no clear binding provisions or structural protections in the deal to ensure that Income’s social mission will be discharged.”
Ouch!
These disclosures have made Income look inept and out of touch. It was effectively thrown under the bus.
Much now rests on the quality of Income’s management and board to overcome this setback, and make changes if necessary, including to its own organisational structure.
Dare Singaporeans hope that as a result, it will be even more committed to its social mission and deliver on it.   
It also raises the intriguing question whether there was a less public way to prevail on Income to walk away from the deal, even if it meant paying a financial penalty to Allianz.
Given the government’s close association with the labour movement which owns a substantial part of Income through NTUC Enterprise, such a move was not inconceivable. 
That it was not done and instead the government opted for a more transparent and direct way to stop the deal speaks much about its modus operandi.
It has now made clear where it stands on the labour movement’s social mission to support low-income workers.
The message on Monday could not have been delivered more loudly. 
It also says something about the new leadership’s willingness to act when there are important principles at stake.
Is there a danger that there will be more public pressure for the government to intervene or reverse its decision over other issues?
On social media, one popular refrain has been that with the impending General Election, the government is more sensitive to public feedback.
So time to up the noise level?
There is nothing new in this sort of talk and every government faces the political challenge of making difficult decisions and balancing the interests of different groups.
That’s what politics is about.
A new prime minister might face a more testing time in this regard.
Since his inauguration, Prime Minister Lawrence Wong has articulated his vision for Singapore on a wide range of issues, including listening to public feedback before making decisions, valuing diversity and developing a less academic-centric society.
He has said most of the right things but there are questions about what he will actually do to put his vision into effect.
The Income-Allianz decision will count as one such marker.
Han Fook Kwang was a veteran newspaper editor and is senior fellow at the S Rajaratnam School of International Studies, Nanyang Technological University.