Getting a share of the Khazanah Cake–Here’s How


July 26, 2018

Getting a share of the Khazanah Cake–Here’s How

by P. Gunasegaram@www.malaysiakini.com

 

Image result for khazanah nasional Board of Directors resign

Apart from Khazanah Managing Director Tan Sri Azman Mokhtar, Tan Sri Md Nor, former banker Mohamed Azman Yahya; Datuk Mohammed Azlan Hashim; former central banker Andrew Sheng Len Tao, who previously served as the deputy chief executive of the Hong Kong Monetary Authority; Tan Sri Raja Arshad Raja Uda, former chairman and senior partner at PriceWaterhouseCoopers in Malaysia; Datuk Nazir Razak, chairman of financial group CIMB Holdings and brother of former premier Najib Razak; Datuk Nirmala Menon, a highly respected insurance sector executive; and banker Yeo Kar Peng have tendered their resignations.–July 26, 2018

 

QUESTION TIME | Can members of the public, instead of just the connected bigwigs, get a slice of the corporate cake, if all or part of Khazanah Nasional Bhd’s realisable value of about RM160 billion at the end of last year is disposed of?

This is about 57 percent of total assets under national unit trust management company Permodalan Nasional Bhd or PNB with RM280 billion of assets managed as at end 2017.

The unequivocal answer is “yes”, a unit trust scheme can be easily devised for Khazanah’s assets and you and I and millions of other Malaysians could become beneficiaries – provided the new Pakatan Harapan government under Dr Mahathir Mohamad shunts Malaysia Inc aside in favour of a partnership with the public. It really can be done and it will earn plenty of credit for Harapan..

When Prime Minister Mahathir accused Khazanah Nasional of deviating from its original objective of helping the bumiputera, what did he mean? Was he confusing this with Permodalan Nasional Bhd which was set up specifically to increase and retain bumiputera participation in the corporate sector?

“But along the way, Khazanah decided it should take all the shares for itself and if they are good shares well why not acquire the shares at the time of listing when the price of shares was very low and so they forget entirely about holding the shares for the bumiputera. They decided that they should be holding the shares forever as a part of the government companies owned by the government,” he said.

But an examination of its corporate profile shows no such objective for Khazanah. Here is 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.”

Yes, under the previous government it was to divest some of its stakes in investments gradually, but not necessarily to bumiputera. Increasing the bumiputera stake in the corporate sector fell squarely upon the shoulders of PNB which was set up for that purpose.

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Its first chairperson, former Bank Negara Malaysia Governor the late Tun Ismail Ali, Mahathir’s brother-in-law, set up PNB in 1978 and came up with the structure of PNB and its unit trusts to increase and retain bumiputera corporate interests.

Surely Mahathir knows that as he was Prime Minister and chairperson of PNB’s holding company from 1981 up to 2003 during his previous term.

Image result for Mahathir Mohamad--Whats your game?

What is Mahathir’s game? And is the seeming pressure that appears to be put on Khazanah and its staff, alleging high salaries etc, an attempt to justify the selling of Khazanah’s investments to others?

Is this fair on Khazanah executives who have done a pretty good job of transforming Khazanah after Abdullah Ahmad Badawi took over as Prime Minister in 2003 from Mahathir and instituted wide-ranging reforms to make it a professional organisation run according to strict rules of governance and accountability?

Few who have followed Khazanah closely over the years will deny the tremendous improvement Khazanah has undergone since 2003 compared to the first 10 years of its existence after its establishment in 1993 during Mahathir’s previous tenure when it had been associated with some questionable investment decisions to bail out crony companies.

Image result for tan sri azman mokhtar

Tan Sri Azman Mokhtar and his Board colleagues deserve a lot of credit for remaking and re-imaging Khazanah Nasional Berhad into a model of good corporate governance for Malaysian GLCs.–Din Merican

In fact, Khazanah led the transformation of GLCs (government-linked companies) through various initiatives which included systematic strengthening of board and management, a system of key performance indicators and a series of rules for good corporate governance. If 1MDB had followed the measures instituted, it would not be where it is because its mismanagement and theft would have been discovered and exposed a long time ago.

A revolutionary scheme

Khazanah’s investments include some of the largest companies on the stock market which have a respectable amount of management expertise with them. These are listed companies and salaries must be competitive with others to retain and build a good staff.

 

Among key companies, four of whom are among the top 10 in terms of market value, are Axiata Group Berhad, CIMB Group Holdings Berhad, Tenaga Nasional Berhad, Telekom Malaysia Berhad, Malaysia Airports Holdings Berhad, IHH Healthcare Berhad and UEM Sunrise Berhad.

If Mahathir wants to sell major stakes in these companies, perhaps to raise funds or perhaps to increase bumiputera participation, or perhaps to sell to favoured people, he must remember two things – there may not be enough bumiputera with the means to acquire these companies and as in the past, unscrupulous investors may sell down their stakes for profits or cut costs so much that businesses become unviable.

There is another way to do it – spread the wealth around. PNB and Ismail Ali showed the way a long time ago – unit trusts. Put good investments into a unit trust and sell the units to the general public. Give them a better deal than current unit trusts which have exorbitant entry and exit fees and a high management fee to boot.

With some RM160 billion under its management, just a 0.25 percent management fee and with no other charges, Khazanah can get RM400 million a year which should be more than enough to cover staff operating costs. The government gets RM160 billion or thereabouts if all investments are put into the unit trust, and the public gets to invest its excess funds in quality assets at zero entry and exit costs and a low management fee.

But it has to be prepared to pay market costs for subsequent sale and purchases as with any other unit trust, which is fair. You could even allow EPF withdrawals for purchases.

To keep it within reach for as many people as possible, cap the maximum amount of investments by anyone Malaysian at RM50,000, same as for PNB units. This could mean an investor base of probably at least 3.2 million people (160 billion divided by 50,000) and perhaps much more than that as many people can’t afford to invest RM50,000 in one go.

You can set bumiputera allocation at 30 percent at least and allocate other parts of it to other disadvantaged communities. You can issue the units in stages.

Khazanah’s track record has been pretty good and mimics quite closely the main index tracking of the Kuala Lumpur stock market. Its value, adjusted to accurately reflect performance, increased annually by 9.3 percent on a compounded basis between 2004 and 2016 which is very much in line with the FBM KLCI index growth of 9.4 percent over the same period.

This also means that despite divesting the shares, the government will still have control over the companies through the unit trusts, and ensure that both their social as well as profitability roles are fulfilled. It actually is the road to greater corporate social responsibility.

There you have it, a simple but revolutionary scheme, easily implemented, and shall we say, the most inclusive deal that anyone can come up with.

Over to you Harapan, and if you want a catchy name for this, here are two:

Government-People Partnership (GPP) or Public People Partnership (PPP).

Take your pick.


This is the fifth in a series of six articles on Malaysia post GE14. The next and final part: What Harapan should prioritise going forward.

Part 1: Mahathir’s patently unfair cabinet

Part 2: Did Mahathir win the general election?

Part 3: Do we really need a council of elders?

Part 4: Proton, Khazanah, Malaysia Inc and Mahathir

P GUNASEGARAM  E-mail: t.p.guna@gmail.com

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

12 thoughts on “Getting a share of the Khazanah Cake–Here’s How

  1. The reported resignation of Khazanah Nasional Board is a case of sekali air bah, sekali pantai berubah. That is normal, but let us acknowledge the sterling contributions of the outgoing Khazanah Board. Tan Sri Azman Mokhtar and his team should be congratulated for a job well done.

    Today, Khazanah Nasional is the best managed Malaysian GLC with a stable of profitable and well managed companies like CIMB, Sunrise, and Axiata Group.–Din Merican

  2. Can you imagine what will Singapore’s economic position be if one US Dollar is valued at 4.10 SG Dollars? Well I leave the rest to the economic pundits.

  3. The decades of gross abuse and rorting are shocking, affecting all government department, agency and authority and at all levels.

    The country will need a miracle to recover…….the miracle could be TDM, considering the many inexperience ministers in the Cabinet, if he serve long enough to build a great team and lay proper foundation.

  4. “Was he confusing this with Permodalan Nasional Bhd..?”

    Look fellas, Octo is fallible and getting more and more ‘nyanyuk’ (senile) due to a normal ageing process. He is no god or deity. Especially nowadays when he is not getting his regular quota of afternoon naps – as prescribed by Tun Siti.

    Just look at the number of ‘misspoken misquotes’ and you’ll get the drift. The mind is willing but the flesh (and in this case, the hippocampus), is unable to process the sheer volume of information.

    Do any of you yodelers’ actually know what is happening? I don’t – but am expecting the unexpected.. Much of what is playing out is confusing – as intent and clear concise communication are mo longer working in tandem. Common sense has gone out thru the window of populist hubris…

    Cakap tak serupa bikin. Bikin tak serupa cakap.. All because of Birkins.

    That’s why i don’t wanna whine or bark anymore. Waste of time and bandwidth.

  5. “Tan Sri Azman Mokhtar and his Board colleagues deserve a lot of credit for remaking and re-imaging Khazanah Nasional Berhad into a model of good corporate governance for Malaysian GLCs.–Din Merican”

    A doubt to clear > if the Board members of Khazanah Nasional Berhad had done great job as what Din puts it, why then they have to resign en bloc? I am little confused of new government’s views and that of yours in supporting the board for their excellent job. I have also read of Finance minister’s statement commending the resignation of the board. What’s happening with this new government and its objectives? Many are posing many questions as the 100 days nearing.

    People have already started complaining of lackadaisical attitude of certain Ministries for not following the election promises. Though time is essential, but there should be a way to act fast by at least reshuffling of Heads of Departments, Secretary Generals, Director Generals and at school levels, HMs and many others to follow the new orders of the changes. Will this transfers put the government machinery haywire?

    Those who have served for ages under the UMNO/Barisan rule would still influence the downline staff. Many Heads who directed the civil servants to vote for the hands that fed them not to disappoint Najib in G14. One culprit is Hamas, Secretary to Government and he is still enjoying the perks. Do we have wait for another decade to get rid of all these nonsenses of racist and fanatics of the government today?
    ________________
    It is normal for GLC directors appointed by a previous administration to step aside when there is political change.–Din Merican

  6. I read the article twice, line by line and word by word but still fail to see how I can get a share of the Khazanah cake. Grantrd The team had managed Khazanah well with tons of profit but what is there for me the ordinary rakyat? The Directors rake in huge salaries and perks, bonuses, travel, allowances, car and much much more sometimes in multiple since many of them are Directirs of several Khazanahs companies.
    For PNB, a Malaysian can buy unit trust and in return gets dividend at the end of the year, but how do i get a piece of Khazanahs cake short of being a Director or Senior Manager in one of Khazanahs companies.
    Mahathir have a point when he says Khazanah have lost its way. Khazanah no longer buys share at IPO but rather buy shares in matured companies or companies that are successful but needing additional capital or leverage such as Sunrise, UEM and IHH and playing around with the stock market.

  7. Everything is great except wages for the middle class and those below. All those economies that we are trying to emulate have had the value of their currency moving on a very narrow band. Maybe just maybe there maybe some wisdom in that kind of policy.

  8. You cannot trust a few people to manage this huge amount of public and taxpayers’ money without proper control and oversight.

  9. The new Chairman and directors to the Kahzanah Board are all Pakatan political appointments in which its own (new ) government is trying to get rid of completely.
    They should be investment graded professionals.

    So, where is the beef?

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