September 16, 2021 House of Trust

Khazanah’s New Developments: An Analysis

As a valuable sovereign wealth fund driven by the best and brightest Malaysians, Khazanah has successfully pursued its vision ‘to be the leading regional strategic investment house that creates sustainable value for a globally competitive Malaysia.’ Hence, the recent en bloc resignations of Khazanah Nasional Bhd’s entire board of directors is certainly a loss for the new Malaysia.

Under the leadership of Managing Director Azman Mokhtar, Khazanah’s excellent track record is highlighted through the growth of its net worth adjusted from RM40.5 billion a decade ago to RM115.6 billion as at 31 December 2017. In fact, this was a 13.2% increase from RM102.1 billion posted in 2016.

Also, Khazanah has continued to drive the regionalisation and internationalisation of their investee companies, including edotco Group Sdn Bhd, which operates 26,000 telecommunication towers across six countries, Axiata Group Berhad, which serves 350 million customers in 11 countries, and IHH Healthcare Berhad, which is one of the largest healthcare groups in the world by market capitalisation. In terms of giving back to society, Khazanah and Yayasan Hasanah spent a total of RM233.5 million on Corporate Responsibility initiatives in 2017, bringing the total spent to RM1.2 billion since 2006.

Truth to be told, there has not been any blow-out of misappropriation of funds or scrutiny from authorities in other countries on Khazanah’s financial transactions or even any rumour of individuals outside the realm of public service having overwhelming influence on Khazanah’s investment directions.

The accusation that Khazanah was “doing all kinds of funny things” by Tun Dr Mahathir in reference to the failed RM3 billion investment in global bank UBS is baseless, considering how the 2008 subprime crisis was beyond Khazanah’s control and that the matter was pursued aggressively until Khazanah got back half the amount four years later from PriceWaterhouseCoopers, the administrators for Lehman Brothers. Even the auditor-general has singled out Khazanah as an exemplary business organisation and praised its financial performance, business acumen and management under the excellent stewardship of the previous board of directors.

Besides, the allegation that Khazanah had “deviated from its original objectives” is also unfounded. Let’s examine its mandate:

“Khazanah strives to create sustainable value and cultivate a high-performance culture that helps contribute to Malaysia’s economic competitiveness. Utilising a proactive investment approach, we aim to build true value through management of our core investments, leveraging on our global footprint for new growth, as well as undertaking catalytic investments that strategically boost the country’s economy. We also actively develop human, social and knowledge capital for the country.”

Notice that there is no specific mention of generating wealth for the purposes of Bumiputera equity, which is actually the role of Permodalan Nasional Berhad; mistakenly confused by our Prime Minister. On the contrary, the Board has worked hard to strive forward according to the goals set out in the company’s mandate.

As reported in The Khazanah Report 2017, Khazanah progressively internationalised their investment portfolio, with the overseas exposure of  Realisable Asset Value (RAV) currently accounting for approximately 44.5%. On the domestic front, Khazanah’s investee companies were involved in the operationalisation of Tenaga Nasional Berhad’s (TNB) Manjung 5 power plant; the launch of Telekom Malaysia Berhad’s (TM) Iskandar Puteri Data Centre at Nusajaya Technology Park; the joint venture between Malaysia Airports Holdings Berhad (MAHB) and Cainiao Smart Logistics Network to develop an e-commerce hub in KLIA Aeropolis; and partnership between Touch n’ Go, a subsidiary of CIMB Group Berhad (CIMB), with Alipay for mobile wallet solutions.

Thus, there is no denying that Tan Sri Azman Mokhtar and his Board colleagues have successfully built Khazanah into a respectable prized national asset. Yes, they do deserve a lot of credit for remaking and re-imaging Khazanah Nasional Berhad into a model of good corporate governance for Malaysian GLCs.

A final accusation that Khazanah had become a “convenient vehicle for the previous government to reward politicians and non-professionals with positions and lucrative compensation packages” is also baseless considering the vast experience, ample capabilities and high level of integrity of the Board made up of Malaysia’s most prominent corporate figures and economic experts. In fact, this accusation mires of hypocrisy with the appointment of 2 politicians in the new Board of Directors.

In addition, the appointment of Tun Dr Mahathir Mohamad as Chairman goes against the promise to reduce the power of the Prime Minister. If promises by the new government could be broken so easily, can we still trust Datuk Seri Mohamed Azmin Ali’s promise that Khazanah will still be managed by the professionals?

In leading such a valuable sovereign wealth fund, there are fears that Khazanah might eventually revert to unscrupulous deals reeking of crony capitalism present in the first 10 years of its existence. This goes against strong efforts to continue transforming Malaysia’s GLCs and GLICs. In fact, bankers, analysts and economists had generally credited Khazanah for instilling greater professionalism in GLCs under the leadership of Tan Sri Azman. Yes indeed, fears that our national wealth fund might be broken up and flogged off to a new set of 1990-esque businessmen is not unfounded. As the proverb goes, once bitten, twice shy.

With Tun Mahathir at the helm of the Board and Datuk Seri Azmin Ali as Director, there could also be a conflict of interest with their roles in governance. Are they certain that there will be no abuse of GLICs and GLCs for their personal political interests in the future? It is certainly preferable if the Chairman and Director of the Board were not Ministers. The latter should not be involved in Khazanah’s day to day operations as they have other more significant priorities in running the government.

With the current team of 2 politicians and 3 notable experts from the corporate world, is there sufficient checks and balances in place to reign in any form of crony capitalism?

Will the purging of Malaysia’s best brains continue across GLCs and GLICs? Will more promises of Pakatan Harapan be reduced to mere rhetorics? Will the trust of the people be betrayed?

*This article has also been published in Malaysia-Today

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