People and events in 2020 – Part 3

Khazanah’s struggle to parry off the predators

It’s open season on government-owned assets. Up for grabs: a sovereign wealth fund’s possessions.

That was what Tun Dr Mahathir Mohamad made clear upon his return as prime minister. The government needs money. It has to sell assets. And Khazanah Nasional Bhd would be leading the charge.

The no-money narrative was a tactical gambit. Mahathir had moved the sovereign wealth fund from the Ministry of Finance to the Prime Minister’s Department. He then asserted the fund had veered off course from its “Bumiputera mandate”, a contentious remark. More importantly, he insisted he has the authority as Khazanah chairman to greenlight asset sales.

Khazanah managing director Datuk Shahril Ridza Ridzuan (pic) is now under the spotlight. He was appointed under the Mahathir government to ensure the Khazanah ship did not sink while continually pumping in fat annual dividends into the government’s coffers.

Not quite a tall order. Sure, Khazanah had an abysmal 2018. The fund posted a net loss before tax of RM6.27 bil compared to a profit before tax of RM2.89 bil the year prior. Its realisable asset value dropped to RM136 bil in 2018 from RM157 bil.

But it has been delivering dividends. The fund was able to declare a payout of RM1.5 bil for 2018. The government is expecting a RM1 bil dividend for 2019. That was the amount paid by Khazanah in 2017 and much lower than last year’s figure.

And the fund will still be able to do this despite being saddled with Malaysia Airlines Bhd (MAB). The national flag-carrier has been a constant drag on Khazanah’s bottom line. MAB accounted for half of the fund’s RM7.3 bil impairment last year.

There is no doubt over Khazanah’s ability to generate dividends or Shahril’s capabilities. But his integrity is going to be put to a severe test if events are any indication. Corporate vultures are circling Khazanah’s assets, namely highway concessionaire PLUS Malaysia Bhd and property group UEM Sunrise (UEMS).

Four bidders are vying for PLUS, excluding the finance ministry’s own bid: Tan Sri Halim Saad of PN17 firm Sumatec Resources Bhd, Tan Sri Abu Sahid of Maju Holdings Bhd, private equity firm RRJ Capital and Widad Group Bhd. Each of them is linked to the country’s top powerbrokers: Mahathir, his sidekick Tun Daim Zainuddin or, in the case of Widad, the Kedah royal family. Halim, a long-time ally of Daim, is supposedly in the lead to snap up PLUS.

As for UEMS, Khazanah indirectly owns a majority stake through UEM Group. It is believed that EcoWorld group chairman Tan Sri Liew Kee Sin and tycoon Tan Sri Syed Mokhtar Albukhary are pushing for a merger. They have purportedly brought their cause to Mahathir. But the fear is that Khazanah might influence the UEMS board to go along with the plan.

These are scenarios that hark back to the go-go years of crony capitalism. Certainly, there are better corporate controls and governance standards today. But anyone with strong political ties and financial backing can move mountains.

To cover Khazanah and himself, Shahril needs to simply provide a response along the veins of “finding the right strategic partner” and “the deals have been done above board.” But corporate speak does not prove intent.

So, what will Shahril do? Will he buckle under the influence of Mahathir or will he be a critical voice in Corporate Malaysia? The latter is much needed. – by Emmanuel Samarathisa

 

Whither checks and balances in political appointments?

When Pakatan Harapan (PH) hit the streets to campaign for the 14th general election, the coalition promised, among others, to rid government-linked companies (GLCs) of political appointees.

GLCs are a heterogenous band of listed and unlisted companies: banks, conglomerates and monopolies, to name a few. What they have in common include being owned by government-linked investment companies (GLICs), the country’s largest institutional investors, and being positioned close to the government of the day.

Critics say such an ecosystem breeds political patronage and stifles competition. In fact, listed GLCs make up some of the largest companies on Bursa Malaysia.

PH wanted to do away with such negative elements. So, the coalition inscribed Promise 22 in its election manifesto. “The Pakatan Harapan government will ensure the appointment of state and national GLC board members will be made based on merit and professionalism, not based on politics,” reads the manifesto item.

But more than a year has passed since the May 9 electoral contest. PH routed Barisan Nasional. For the first time in history, Malaysia witnessed a change of government. Restructuring Corporate Malaysia has proven arduous.

Activists such as Universiti Malaya’s Prof Edmund Terence Gomez, a political/economic specialist, highlighted the backtracking of PH in fulfilling that promise.

Speaking during the launch of Institute for Democracy and Economic Affairs’ (IDEAS) GLC Monitor 2019: State of Play since GE14 on Oct 30, Gomez hit home a strong but obvious message: Prime Minister Tun Dr Mahathir Mohamad is still de facto finance minister.

“Mahathir knew if he took control of Khazanah and PNB, he would be taking control of the largest enterprises in Malaysia,” he said, referring to sovereign wealth fund Khazanah Nasional Bhd and one of the country’s largest money managers Permodalan Nasional Bhd respectively.

Gomez went on to highlight the influence Mahathir wields through his own party Bersatu as well as political allies across PH. These men and women lead key ministries and agencies.

The Cabinet lambasted Gomez. “Defanged” Finance Minister Lim Guan Eng stressed that PH mostly kept to its promise. “There are people who would aggravate the situation by saying that this 10% is akin to 100% (of positions). You can’t say that these 10% means that we are not committed (to reform), but before this (it was) almost 100%,” Lim told reporters on Oct 31.

His colleague, Entrepreneurial Development Minister Redzuan Yusof, was equally in denial. “If they have a political alignment, perhaps it’s coincidental… Anyone can have alignments to any party but the bottom line is all appointments to GLCs are based on merit,” Redzuan told reporters on Oct 31.

Funny, the IDEAS event overshadowed another glitzier soiree organised by PNB themed “Rebooting Corporate Malaysia” featuring bigwigs such as Mahathir himself. This was the usual highfalutin’ gathering of elites; not a catalyst for mass change.

PH’s struggles to iron out political involvement in business is rooted in the coalition’s compromise to rope Mahathir and Co to win GE14. Today his influence is left unchecked. It also does not help that the Cabinet continually defers to him to make tough calls.

But here’s the problem at large: activists and watchers like Gomez are supposed to be the check and balance. But the change in regime has also seen many from the civil society camp joining the government. The media, too, seems to have lost its bearings in speaking truth to power.

There is a void that needs filling. But that will never happen anytime soon. People like Gomez will continue to be lone voices of dissent in Malaysia’s political wilderness. – by Emmanuel Samarathisa

People and events in 2020 – Part 1

People and events in 2020 – Part 2

People and events in 2020 – Part 4

People and events in 2020 – Part 5

People and events in 2020 – Part 6

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