1MDB Chairman Lok Wok Kamaruddin Explains


December 22, 2014

1MDB Chairman Lok Wok Kamaruddin Explains

lodin-wok-kamaruddinAs the Chairman of the Board of Directors of 1MDB, I have viewed with surprise recent statements, both in the media and by certain individuals, suggesting that the company has failed to respond to various questions that have been directed at it over the past months.

As the Board of Directors, we welcome debate, and as a company that is wholly-owned by the Ministry of Finance – and by extension, the people – we believe that public scrutiny of 1MDB is a good thing, and will only serve to strengthen the company and its governance.

In the interests of increasing the company’s transparency, I have held meetings with members of the media where I listened to and responded to their concerns.

Furthermore, the company has taken various other measures such as issuing multiple statements responding to allegations directed at the company, publishing a detailed document answering frequently asked questions, and releasing a public statement outlining key highlights from 1MDB’s last financial results – the first time 1MDB has done so since the company’s inception in 2009.

All of this information is freely available on 1MDB’s website, and we believe that these actions reflect our efforts to engage in a more open and constructive dialogue than has perhaps been the case in the past.

Despite this, issues that have previously been raised and, subsequently, addressed by the company continues to be regurgitated by certain individuals. In the interests of providing clarity, we would once again like to respond to the various concerns.

1MDB’s funding and debt levels

Contrary to claims, 1MDB is not a sovereign wealth fund but rather a strategic development company. In practice, this translates into a company that is independently run and funded, but one whose investment decisions are driven by the interests of the national economy.

Whilst a sovereign wealth fund and a strategic development company may not sound very different, there is an important distinction between the two: whereas a sovereign wealth fund is directly funded by the government and invests on its behalf, 1MDB raises and invest its own capital.

In fact, in terms of actual funding, the company has only ever received RM1 million in equity, which was provided by the Ministry of Finance at the time of its inception.

Given that 1MDB does not receiving any funding from the government, it is therefore simply not true to claim that the company is investing or worse, wasting, the state’s – or the people’s – money.

As 1MDB funds its own operations, it should not be surprising that, from time to time, the company raises capital on the international debt markets in order to finance some of its projects. However, all of this debt is backed by solid assets.

trx 2

At present, this includes the 15 power and desalination plants in five countries that comprise our energy business, as well as our extensive property portfolio which includes 70 acres of prime real estate currently being developed as TRX – Kuala Lumpur’s first dedicated financial district, 495 acres of land on the site of the old airport in Sultan Besi earmarked for Bandar Malaysia – a mixed-use urban development, and 234 acres of land in the centre of Air Itam, Penang.

The total value of the company’s assets (RM51.4 billion as at the financial year end of March 2014) comfortably exceeds the value of its total debts (RM41.9 billion for the same period). This means that the company has net assets of close to RM10 billion, representing the value it has created since its inception five years ago.

Furthermore, this does not take into account the expected benefit to be realised from the initial public offering of the group’s energy portfolio, which will help de-leverage the group and contribute towards reducing its debt profile.

Finance costs and interest rates paid by 1MDB

Like any business, 1MDB attempts to secure the lowest rate of interest and finance costs when taking out a loan or conducting a bond issue. However, in certain instances, these interest rates and finance costs have been towards the higher end of the market rate.

It has to be understood that, when it comes to raising debt on the financial markets, there is no one size fits all solution.A number of factors determine the finance costs and the interest rate applied to a loan or bond issuance. These include the length of maturity, whether the loans are underwritten or guaranteed, macro-economic factors, and many more.

To take one example, we are aware that concerns have been raised about the 5.75% interest rate assigned to a RM5.0 billion Islamic bond that was issued by 1MDB in 2009. As a comparison, it has been noted that another government-linked company PETRONAS paid an interest rate of 3.60% on a bond at the same time.

This is an unfair comparison that does not take into account a number of important factors. To highlight just one: when subscribing to a bond, lenders take on a certain degree of risk and the longer the tenure, the higher the risk for the bondholder. Therefore, bonds that have a longer maturity period typically have a higher interest rate.

To the best of our knowledge, the only PETRONAS-related bond issued in 2009 that carried a coupon rate of 3.6% was for a RM100 million bond with the tenure of only three years, whereas the 1MDB bond had a tenure of 30 years. As such, given the significant difference between the maturity periods, it should not be surprising that the bond issued by 1MDB had a higher interest rate.

More broadly, it is important to note that the bond issued by 1MDB in 2009 was the first Malaysian bond with a 30-year tenure, and the first Islamic bond to be issued with a maturity period of that length. Given the economic climate at the time, the fact that 1MDB successfully managed to raise this amount of capital reflects the support, goodwill and confidence placed in the company.

Funds regulated by the Cayman Monetary Authority

There has also been substantial debate about funds invested by the company regulated by the Cayman Monetary Authority. However, anyone familiar with the financial world should be able to confirm that there is nothing unusual about companies of this size investing their funds in the Cayman Islands, which is one of the largest registered fund jurisdictions internationally, with the Cayman Monetary Authority recognised as one of the leading fund regulators in the world.

Thousands of international blue-chip companies have funds regulated by the Cayman Monetary Authority, including over 200 Malaysian companies, many of which are household names.

To provide some background with respect to 1MDB’s investment: in 2009, 1MDB and a Saudi Arabian company entered into a joint venture to facilitate long-term economic cooperation between Malaysia and Saudi Arabia. As part of this, a joint-venture fund was set up to undertake investments on projects which would generate financial and strategic benefits to both countries.

However, due to various factors, both parties eventually decided not to proceed with these plans. As a consequence, 1MDB’s investment in the company was converted into a fixed income instrument in the form of Murahaba notes, essentially a loan, with an annual interest rate of 8.75%. This loan was paid back in full, for US$2.318 billion with a profit of US$488 million, in 2013.

Repatriating these funds to Malaysia would have exposed them to fluctuations on the foreign exchange market, as being witnessed at the moment. In order to ensure that 1MDB maintained a strong liquidity position with a truly diversified global portfolio, these funds were invested in a 1MDB subsidiary that was registered in the Cayman Islands. However, the company has already redeemed a significant portion, US$1.4 billion, of the fund and expects to redeem the remaining amount in the coming months.

Overpaying for power assets

In line with the government’s strategic aim of ensuring Malaysia’s energy security, 1MDB has acquired a number of energy assets since 2012. These acquisitions have allowed the company to diversify its fuel mix and country risks, as well as benefit from healthy cash flows and the expertise of their excellent management teams.

The claims relating to the amounts 1MDB paid for its energy assets revolve around values that were attributed to the assets at the time they were acquired and on the basis of certain assumptions made by external parties.

However, the company takes a long term view and consider broader synergies for the group, as well as the social and economic impact on the country, when we evaluate assets and forecast economic returns.

As such, it is the management team’s strong belief that the value paid for these assets, which may have involved a premium in certain instances – as is common when acquiring another business, is commensurate with their existing and future potential.

It is also important to note that since acquiring its first energy assets in 2012, 1MDB has built this into the second largest independent power producer in Malaysia, with a strong presence in international markets within three years.

In total, 1MDB’s energy business has consolidated 5594MW of net capacity, comprising both gas and coal fired plants. This portfolio provides the business with healthy cash flows and enables 1MDB to participate in bids for coal and gas fired plants, the two primary fuel source for power generation assets in the markets that the company operates in, allowing it to create further value and drive future growth.

As such, the economic benefit gained from these assets means that the company has recuperated any excess value it may have paid at the time of the acquisitions.

Overpaying for land

Any decision the company makes to invest in real estate is reached following an extensive period of due diligence, which includes the appointment of independent appraisers to determine the value of the land at the time of the acquisition, whilst also taking into account the value the company can add to it.

All of 1MDB’s investments are undertaken in line with the best interests of the business, and with a view to stimulating economic growth and prosperity in Malaysia.

We understand that there has been some speculation about the value paid by 1MDB for a land parcel in Penang. This land is located in the centre of the town of Air Itam, a much sought after area where property prices have seen a substantial increase in recent years.

This is reflected in the prices that other developers have paid to acquire land in neighbouring areas which, at over RM200 per sq ft, is substantially higher than what 1MDB paid.

In fact, in one instance dating back to 2013, approximately 9.8 hectares in Air Itam were purchased for RM267.4 million, about RM251 per sq ft, for a mixed-use development. In another, approximately RM251 per sq ft was paid for a mixed development project near the Kek Lok Si Temple.

Given the general difficulty companies face in finding sizeable plots of land in prime areas of Penang, that are suitable for carrying out large-tier development projects, the amount paid by 1MDB for this land was not only commensurate with its value but highly attractive.

Preferential treatment on power contracts

Any award takes a number of factors into consideration: the technical standards of the bid, the track record of the company, the bidding price, the urgency of the project and the whole systems cost of the bid to name a few. The projects that 1MDB have been awarded, in Malaysia and abroad, have been on this basis.

Earlier this year, a joint consortium consisting of 1MDB and Mitsui & Co, Japan’s second-largest general trading company, participated in an open and competitive tender exercise for a 2,000MW coal-fired power plant known as Project 3B. Following due consideration of the various bids, the Energy Commission announced that the joint 1MDB-Mitsui consortium had been chosen as the preferred bidder.

Subsequently, there have been suggestions that 1MDB received preferential treatment, and the basis of these claims is that the company’s bid was not the lowest offered. This rationale is flawed as it fails to take into account the fact that any award is based on a number of considerations, not just the tariff.

Whilst there was a bid that was slightly lower than the one presented by 1MDB, the fact is that 1MDB’s was the lowest compliant bid, with a proposed levelised tariff of 25.33 sen/kWh. There was a bid that was fractionally lower, of 25.12 sen/kWh, but this proposal did not comply with a number of requirements set out by the Energy Commission, key amongst which was their lack of experience operating a coal plant.

As the Energy Commission announced in a public statement, the 1MDB-Mitsui Consortium won the bidding exercise “in a fair and square manner with a well-proven technology that would enhance security of supply expected of a 2000MW coal-fired power plant operating in a grid system of our size”.

It is also important to note that there are other tenders that 1MDB has participated in where the contract has been awarded to other parties.

For example, despite 1MDB offering the lowest bid for a gas-fired plant in Prai, another company was deemed as offering a better overall package and awarded the contract on that basis. – December 22, 2014.

*Tan Sri Lodin Wok Kamaruddin is Chairman of the Board of Directors, 1MDB.

 

UMNO’s Revolt against 1MDB


December 15, 2014

UMNO Revolt Rises Against Prime Minister Najib

by Asia Sentinel Correspondent

http://www.asiasentinel.com/politics/malaysia-pm-attacked-party-member/

mahathir-siti-hasmah-umno

With the filing of a police report late last week by a member of Prime Minister Najib Tun Razak’s own political party, the long knives have appeared in Malaysia, seeking the premier’s scalp over the scandal-ridden state investment fund 1Malaysia Development Bhd.

1MDB is said to be seeking permission for an extension from Bank Negara, the country’s central bank, on nonperforming loans from the country’s Tier 1 banks out a concern that if no extension is granted, the banks could be forced to make major provisions.

Although he has made only oblique comments publicly, the man behind the move to oust Najib is former Prime Minister Mahathir Mohamad, who publicly withdrew his support for the Prime Minister via his blog, Che Det, in August.

Khairuddin Abu Hassan, a Penang-based United Malays National Organization Deputy District Chief, filed the request for a “detailed and comprehensive” investigation including the interrogation of 1MDB’s board of directors and representatives of any companies that might be implicated.

While the Penang UMNO branch distanced itself from Khairuddin’s actions and threatened to bounce him out of the party, there can be little doubt that forces aligned with Mahathir have seriously increased the pressure. Over the weekend, the 700,000-member Perkasa NGO, a Malay supremacy organization closely allied with Mahathir, denounced the Prime Minister, saying he had lost the confidence of the country.

“Realistically Najib’s situation is untenable,” a member of the Mahathir faction said. “Certainly he will fight back but whether he resigns or not point is he is he cannot function as PM.”

When Mahathir began his campaign against Najib more than a year and a half ago, it was given little chance. The former Prime Minister had been out of office for more than a decade and was regarded as a loud but irrelevant force. But political analysts in Kuala Lumpur say his campaign has been gaining traction over the 1MDB issue.

Even at 89, and reportedly seeing a physician for various ailments, Mahathir remains a formidable if flawed figure who during his 22 year reign as Prime Minister forcefully led an industrialization drive to move the county out of its plantation mentality, at the same time resulting in as much as US$100 billion in bad investments..  He forced the departure of Abdullah Ahmad Badawi, the successor he hand-picked in 2003 as premier in 2009, and set his sights on Najib in the runup to the 2013 General Election, charging behind the scenes that Najib hadn’t adequately represented the interests of the Malays.

The vehicle for his surrogates’ attack on Najib is 1MDB, the five-year-old state investment fund which as of March had amassed debts of RM49.1 billion (US$14.04 billion) against assets of RM51.4 billion, registering losses of Malaysian ringgit 63.5 billion at the end of the quarter, mainly on huge finance costs.

Mahathir and his allies have been dissatisfied with Najib’s performance for more than two years over a wide range of other issues as well, however. The 1MDB issue, described as “the mother of the mother of the mother of all scandals” by Democratic Action Party MP Tony Pua in an Asia Sentinel article on December 8, has become the vehicle with which the octogenarian hopes to skewer the Prime Minister.

It has gained additional momentum because of allegations that Jho Low Taek, a hard-partying young friend of the Najib family, may have used Malaysian government guarantees to back the making of The Wolf of Wall Street, a hit movie starring Leonardo di Caprio, and to fund his attempt to take over three of London’s most prestigious hotels.

Najib and 1MDB

Najib is the chairman of the 1MBD advisory board and the motivating force, apparently on the advice of Jho Low, as he is known, a putative whiz kid who is alleged to have steered the fund first into a disastrous alliance on oil exploration on the advice of a Saudi prince he went to school with in London.

When the exploration failed, opposition figures alleged, the money was invested in forex trades in yen. The trades were not successful and, opposition lawmakers alleged, the money disappeared. That was the first of a long string of financial disasters that put 1MDB deep in the red without adequate capital to meet obligations.

Mahathir, who rarely attacks frontally, sought to use his allies to put pressure on Najib at the UMNO Annual General Assembly in Kuala Lumpur in late November, in particular seeking to bring a vote to the floor of the body rejecting Najib’s stated plans to international leaders to dump the country’s imprecise, often-abused colonial era Sedition Act.

Najib short-stopped the plan by announcing in advance that he would not only not discard the Sedition Act, he would strengthen it “to defend Islam” and other religions. Any attempt to bring the disaster surrounding 1MDB was also turned back.

Nonetheless, despite having quelled open rebellion, the widespread feeling is that Najib emerged from the UMNO convention weakened.  A number of political observers including those inside UMNO have suggested that he will be replaced by Muhyiddin Yassin, the Deputy Prime Minister and UMNO Deputy President, sometime later this year.

Following Khairuddin’s filing of the complaint last Friday, allegingAK Jasin “questionable” business, investment and fund-raising transactions and decisions, A. Kadir Jasin, the former Editor in Chief of the New Straits Times and one of Mahathir’s closest allies, wrote on his blog that an additional report may be filed with the Malaysian Anti-Corruption Commission, a notoriously political body – ostensibly modeled on Hong Kong’s vaunted Independent Commission Against Corruption —  that tends to shovel corruption complaints under the carpet unless there is a political motivation to push them along.

The MACC, as it is known, has a long record of refusing reports of corruption or finding no cause of action after reports have actually been filed. If the MACC takes up the report filed by Mahathir’s allies, it raises very interesting questions.

1MDB, in a statement, said “We are aware that a police report concerning 1MDB was filed by a politician in Penang. We have not seen any documentation related to this, so are unaware of the nature of the complaint. However, we are confident that it will have no legal basis. We welcome any investigation into our affairs and the opportunity to rebut malicious allegations.”

lodin-wok-kamaruddinA delegation led by the 1MDB Chairman, Lodin Wok Kamaruddin, along with two other board members, met with Mahathir to vainly attempt to assuage his concerns. Apparently they didn’t deliver the answers Mahathir wanted.

In a thinly veiled entry on his blog, Kadir quoted a source – probably Mahathir himself – saying the former Prime Minister feels obliged to take up the matter and to speak openly because many parties had come to see him to inform him about the goings-on in the company and that he was disappointed that issues surrounding 1MDB weren’t seriously discussed by delegates at the UMNO General Assembly.

 

Tun Dr. Mahathir: Don’t insult us, Malaysians


December 7, 2014

COMMENT: The UMNO political godfather just can’t keep his mouth shut. He must be in the news at every opportunity. This time he chooses to call Malaysians stupid because, according to him, we cannot run Malaysia Airlines (MAS) except to run it to the ground thereby requiring fresh injunctions of public money to resuscitate it.

Dr.MahathirThe only Smart Malaysian?

Tun Dr. Mahathir is objecting to Khazanah’s decision to appoint a foreigner to spearhead the recovery of our national carrier.The former Prime Minister must have forgotten that before his appointment of Tan Sri Tajuddin Ramli as MAS Chairman, Malaysians like Tan Sri Saw Huat Lye and Tan Sri Aziz Abdul Rahman (ably assisted by Dato Kamaruddin Ahmad as Managing Director) with Tun Raja Mohar Badiozaman and Tan Sri Zain Azraai as Chairpersons and outstanding and competent Malaysians as Directors, ran the national carrier well. Tun Dr. Mahathir should know why MAS was not making money during his administration.

So, it is not true that Malaysians cannot run MAS. That remark is not only an insult to us but also to the thousands of Malaysians, past and present, who served MAS  with dedication and whose services are still required to make its operations viable and profitable.

The truth should be told and that is there is too much political interference in MAS (and other GLCs as well). MAS should be allowed to operate as a truly commercial undertaking. No more politics, please. We expect good governance and hard-nosed decisionmaking from the new team in MAS New Co.

Azman MokhtarTan Sri Azman Mokhtar, the Managing Director, Khazanah Nasional Berhad, assisted by his competent professional staff, should be given a clear mandate to make MAS’ restructuring a success. He knows that his career and reputation are at risk if MAS is again a failure. Malaysia can no longer afford to put good money after bad ventures time and again.

I respect his decision with the backing of the Prime Minister and the Khazanah Board to appoint Mr. Christoph R. Mueller of Aer Lingus as the Chief Executive Officer-designate of MAS New Co. This is a strategic move to change the national airline’s corporate culture. Maybe, an orang putih from Germany can do that! 

Christoph R. MuellerChristoph R. Mueller and Aer Lingus

Mr. Mueller knows what he is up against in MAS, given its laid back culture and high operating costs due to leakages and badly negotiated contracts. Furthermore, he has to contend with the Employee and Pilot Unions whose support and cooperation will be needed.

I ask Tun Dr. Mahathir to leave Malaysia’s future in the hands of a new generation of Malaysians who are better educated than men and women of his and my generation, and who can get the job done if they are given the chance to get on with their jobs without political meddling. We should not be cynical and  must stop thinking that we are indispensable. It is best to stay on the sidelines and proffer advice when only asked.

I wish Tan Sri Azman Mokhtar and his team all the best in their attempt to rebuild our national carrier. It is a great challenge for him, probably his biggest one in his illustrious career.–Din Merican

MAS Restructuring: Malaysians are stupid, says “smart” Tun Dr. Mahathir

http://www.themalaymailonline.com (December 6, 2014)

Malaysians are too “stupid” to manage aviation, Tun Dr Mahathir Mohamad remarked today following news that a German is set to captain a revamped Malaysia Airlines Systems Berhad (MAS) from next year.

Malaysia's GeniusHe is a Malaysian Genius–Product of Mahathir’s Education Policy

Yesterday, state wealth fund Khazanah Nasional Berhad announced Christoph R. Mueller as the Chief Executive Officer-Designate of MAS New Co in a bid to turn around the crippled national carrier’s misfortunes much as he did with Ireland’s national carrier Aer Lingus.

“Malaysians are stupid. They don’t know how to manage aviation,” the former Prime Minister was quoted saying by news portal Malaysiakini, after gracing a Proton design event in the city.

“And now those responsible for the losses try to make things right,” he reportedly added in what appears to be a dig at Khazanah, which holds close to 70 per cent shares in MAS.

The flag carrier marked its seventh quarterly loss in a row recently when it posted a net loss of RM575.6 million for the three months ending September 30, widening from a RM373.2 million deficit in the same period last year.

It dove deeper into the red following the mysterious loss of flight MH370 on March 8 and the July 18 shooting down over Ukraine of flight MH17.

MAS had raked in billions in profits during the 1980s but began to suffer losses a decade later, after then Prime Minister Dr Mahathir privatised the airline. The MAS privatisation deal saw Tan Sri Tajuddin Ramli taking out a RM1.79 billion loan in 1994 to buy a 32 per cent majority stake in the airline.

Tajuddin, who was affected by the 1997 Asian Financial Crisis, later sold his stake in MAS to Putrajaya for RM1.79 billion — or RM8 a share — the same amount that he paid in 2001; the company’s closing share price at that time was RM3.68.

In the years since, MAS has undergone three business turnarounds at an estimated cost of nearly RM20 billion to the government. In a statement yesterday, Khazanah said Mueller will officially be appointed as CEO-designate of MAS New Co effective January 1 as they negotiate to bring him on board by March 1 next year.

Mueller has been CEO of Aer Lingus since 2009 and his contract ends on May 1. According to his biodata provided by Khazanah, the German is credited with turning around the Irish airline’s waning fortunes amid a declining Irish market and tepid European market conditions, and developing Dublin as among the leading hubs for North Atlantic long-haul traffic.

Mueller was also a key contributor in German carrier Lufthansa’s corporate turnaround in the 1990s, when he served as Senior Vice-President for network management and corporate planning, and orchestrated the move by a group of investors in the ill-fated SABENA Group, one of its subsidiaries, Delta Air Transport — which has since been renamed Brussels Airlines and operates as Belgium’s national carrier.

Other new appointments include Datuk Seri Mohammed Shazalli Ramli as a non-executive Director on the MAS Board, Tan Sri Bashir Ahmad Abdul Majid as Chairman of the Corporate Reskilling Centre (CRC), Shahryn Azmi as Chief Executive of the CRC and Datuk Boonler Somchit as a non-executive Director and advisor to the CRC.

Khazanah said the appointments were part of the key initiatives under its 12-point MAS Recovery Plan, and that they were agreed to by the Khazanah Board of Directors at a meeting chaired by Prime Minister Datuk Seri Najib Razak Thursday.

Khazanah’s 12-point turnaround plan for the national carrier, titled “Rebuilding A National Icon — The MAS Recovery Plan”, also includes transferring all MAS assets to a new entity tentatively known as “MAS Baru” or “new MAS”. The total takeover is to cost Khazanah some RM6 billion.

Source: http://www.themalaymailonline.com

 

Turning Malaysia Airlines Around


September 4, 2014

Blogging from Tokyo, Japan

Turning-MAS-around-Issue-inside-banner

Story by
Chan Quan Min (09-02-14)
quanmin@kinibiz.com

Make no mistake about it, Malaysia Airlines’ fourth rescue plan in as little as 14 years is more daring than ever. KiniBiz points out the differences, one of which is the severe job cuts, and asks if this is part of a strategy that will lead to a smaller airline with a clear focus on yield management.

_______________________________________________________________________

Over a hundred reporters crammed into a library on the 33rd floor of the Petronas Twin Towers last Friday to hear Khazanah Nasional managing director Azman Mokhtar lay out the details of a 12-point restructuring plan that will plough RM6 billion into Malaysia Airlines over the next three years.

As Azman spoke, it was immediately clear Khazanah had taken over the reins. The “complete overhaul” of struggling Malaysia Airlines or MAS, with an end-2017 deadline to return to profitability, would be under the purview of the state investment fund.

In contrast, previous turnaround plans were initiated not by Khazanah but by former MAS CEO Idris Jala in 2006 and 2009, and more recently, by current CEO Ahmad Jauhari Yahya in 2011.

It turned out that rumours of Jauhari stepping down at the end of his three-year term in September were only half-true. False because Jauhari would stay on as CEO for another year and true because he would be leading what would eventually become just a shell company with up to 6,000 redundant employees.

Khazanah’s restructuring or “recovery” plan is perhaps the most daring yet for being the first to make decisive job cuts.

About 30% of the staff count will lose their jobs and to facilitate this painful process a new company will be set up as the “new MAS.” Just the employees that Khazanah wishes to retain will transfer to this new company in the coming months, an arrangement that eliminates the need for what might be a messy retrenchment process.

“This takes guts, and I give it to them for having the courage,” Mohshin Aziz, an aviation analyst at Maybank IB said in an email to bank clients.Employees left in the old company can elect to join programmes specifically set up for them to learn new skills for employment elsewhere.

Azman MokhtarAccording to the recovery plan, the operations, assets and liabilities of the old company will be migrated to the new company by July 2015. The MAS identity and branding will not be lost in the process, Azman assured.

The new company or new MAS, as Azman puts it, will “critically involve a significantly corrected cost and operational structure” because the airline will unceremoniously terminate any contracts that are deemed unfair during the migration process.

In short, Malaysia Airlines will start on a clean slate. And to make sure that there are no stumbling blocks on the way, the government will seek to pass legislation – a MAS Act – to specifically address any legal issues that might arise.

The likelihood that such a piece of legislation will pass Parliament is without doubt. The highest levels of government have at this early stage shown the conviction to apply the required medicine to nurse MAS back to health.

“Only wholesale change will deliver a genuinely strong and sustainable Malaysia Airlines,” Prime Minister Najib Abdul Razak, who in also the Chairman of Khazanah, said in a foreword to the 38-page recovery plan.

“If we seek a different outcome from past experiences, we must have the courage to choose a different method. Piecemeal change will not work,” he insisted.

Global search

Aside from the job cuts, Khazanah’s Azman appears to have also committed himself to another “different method,” that of a “global search” for a new CEO to lead the new MAS. Khazanah found the current CEO, Jauhari, from within its group of related companies. But his replacement, according to Azman, could come from just about anywhere.

“The search has begun,” he said. “And we are looking at both Malaysian leadership talent and global aviation specialists.”

One of the new CEO’s first tasks, Azman told reporters, would be to make the “decision on who stays and who leaves.”

Khazanah’s mention of “aviation specialists” points to a shift in hiring practices. Past CEOs Idris Jala and Tengku Azmil Zahruddin as well as current CEO Jauhari were appointed without any prior aviation experience. Jauhari’s admission that his turnaround plan was not working, made after the last Malaysian Airline System Bhd Annual General meeting in late June could have spurred Khazanah to consider an aviation man (or woman) as his replacement.

READ On:

http://www.kinibiz.com/story/issues/105921/mas-rescue-4.0-what%E2%80%99s-different-this-time.html?utm_source=applet_mkinicom&utm_medium=web&utm_campaign=mkinicom

AND This:

http://www.kinibiz.com/story/issues/105921/mas-rescue-4.0-what%E2%80%99s-different-this-time.html

Malaysia Airlines will be fully owned by Malaysian Government


August 9, 2014

MAS Restructuring : Leave no stones unturned

by Din Merican

Azman MokhtarWell done, TS Azman Mokhtar for making this strategic move at this time, when Malaysians of goodwill are with our government following MH370 and MH17 tragedies where lives were lost. We look forward to know the details of your plan to restructure our national flag carrier.

We hope you will be tough with the MAS Staff Union, and not allow it to dictate what Khazanah should do in the national interest. So reduce staffing. Deal with crony contracts. Review the routes and financing of aircraft; and appoint competent professionals to manage the airline, and have a truly independent Board of Directors,  and finally please seek the advice of MAS elders like Tan Sri Rama Iyer, Tan Sri Saw Huat Lye, Tan Sri Aziz Abdul Rahman and Dato’ Kamaruddin Ahmad.

All of us want MAS to succeed but the restructuring must be comprehensive so that the rot that has plagued our national flag carrier in recent years can be eliminated. Let us face the moments of truth with a healthy corporate culture. Therefore, make use of this opportunity to start on a clean slate. Let us hope Prime Minister Najib has the political will to make a new beginning for MAS.

Malaysia Airlines will be fully owned by Malaysian Government’s Khazanah

by Thomas Fuller@www.nytimes.com

http://www.nytimes.com/2014/08/09/business/international/malaysia-airlines-to-be-taken-over-by-government.html?ref=asia

BANGKOK — Mired in debt and reeling from two aircraft disasters this year, Malaysia Airlines will be fully taken over by the government as a prelude to a restructuring, the Malaysian government said Friday.

MASKhazanah Nasional, the investment arm of the Malaysian government, formally requested the delisting of the airline in a letter to the Malaysian stock exchange on Friday and offered to buy back shares at a price 12.5 percent higher than Thursday’s closing price.

Malaysia Airlines had been losing money for several years when five months ago, a flight bound for China disappeared, and no trace of the aircraft or its 239 passengers has been found. Just over three weeks ago, another Malaysia Airlines plane exploded over Ukraine, killing almost 300 people.

Khazanah was vague about its plans for the airline, saying only that it intended “to undertake a comprehensive review and restructuring” and that the airline had “substantial funding requirements.” Malaysia’s Prime Minister, Najib Razak, said a “holistic restructuring plan” would be announced by the end of the month.

“This process of renewal will involve painful steps and sacrifices from all parties,” he said in a statement that specifically mentioned the need for support from, among others, the airline’s creditors, raising the possibility of a debt write-down.

The share buyback, which would cost Khazanah about 1.4 billion ringgit, or $437 million, still needs approval by private shareholders, who own about 30 percent of the company. Khazanah’s offer price of 27 sen, 0.27 ringgit, a share appears favorable to stockholders: That price was last reached in February, before the company’s two tragedies.

The disappearance in March of Flight 370 from Kuala Lumpur to Beijing remains a mystery, and a search in the southern Indian Ocean is still underway. On July 17, 298 passengers on a Malaysia Airlines flight from Amsterdam to Kuala Lumpur were killed when a company Boeing 777 was shot down over Ukraine.

The disasters aggravated what was already poor financial performance by the airline, which has lost money for the past three years and has been squeezed by nimbler rivals, like Air Asia, the privately owned, low-cost airline also based out of Malaysia that has grown exponentially since beginning operations more than a decade ago.

Malaysia Airlines, which began as Malayan Airlines, in 1947 during the British colonial period, has suffered a number of sharp losses in recent decades. It has often been managed by business executives close to the governing party, the United Malays National Organization, and was bailed out by the government at least once. Like many other government-linked companies in Malaysia, the airline is saddled with ties to influential contractors connected to the party, which has governed the country since independence in 1957.

The Malaysian government sees the carrier as a national strategic asset. In a statement Friday, Khazanah said the goal of the restructuring was to make the airline profitable but also for it to “serve its function as a critical national development entity.”

Malaysia can’t afford a botched handling of MH17


July 20, 2014

MY COMMENTWe have been hit by two tragedies, MH 370 and MH 17 a few days ago,Din Merican both within a space of four months. MH370 is still shrouded in secrecy and  it is a public relations disaster; our leaders and public and security officials handled the foreign media poorly. MH17 was brought down by Russian made missiles in the hands of Ukrainian rebels backed by  Prime Minister Putin’s government. Our political leaders and officials are again in the eyes of media. Let them handle the situation better this time.

Those who are behind this dastardly violence must be brought to account. Our diplomats and those of countries which lost their citizens and the United Nations Secretary General Ban Ki-Moon must act in concert to ascertain the facts about the downing of this ill-fated 777 aircraft. At home, the new Transport Minister has to ensure that there are no cover-ups, blame games, excuses, and conflicting or contradictory statements. Please provide facts as they come to light, and do it well and ensure that there are no fumbles.

I am glad that our Prime Minister has allowed debate in our Parliament on MH37. I hope Parliamentarians on both sides of Dewan Rakyat can be rational and constructive in their deliberations so that we can achieve consensus on what we should do to restore national self confidence and pride in our national flag carrier, Malaysian Airlines.

No shouting matches please. Bung Mokhtar types must not be allowed to disrupt the debate or make fools of themselves. In this time of national crisis, UMNO-BN and Pakatan Rakyat must stand together. The debate should result in a plan of action for the government. To nudge the debate along orderly lines, there should be a White Paper to Parliament on MH17 in which the government can present its views on what it has its mind to deal with the aftermath of MH 17.Din Merican

http://www.bloombergview.com/articles/2014-07-18/malaysia-can-t-botch-another-air-tragedy

Malaysia can’t afford a botched handling of MH17

by William Pesek (07-18-14)

There’s nothing funny about Malaysia Airlines losing two Boeing 777s and more than 500 lives in the space of four months. That hasn’t kept the humor mills from churning out dark humor and lighting up cyberspace.

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Actor Jason Biggs, for example, got in trouble for tweeting: “Anyone wanna buy my Malaysia Airlines frequent flier miles?” A passenger supposedly among the 298 people aboard Flight 17 that was shot down over eastern Ukraine yesterday uploaded a photo of the doomed plane on Facebook just before takeoff in Amsterdam, captioning it: “Should it disappear, this is what it looks like.”

That reference, by a man reportedly named Cor Pan, was to Malaysia Airlines Flight 370, whose disappearance in March continues to provide fodder for satirists, conspiracy theorists and average airplane passengers with a taste for the absurd. On my own Malaysia Air flight last month, I was struck by all the fatalistic quips around me — conversations I overheard and in those with my fellow passengers. One guy deadpanned: “First time I ever bought flight insurance.”

MH17 CrashThere is, of course, no room for humor after this disaster or the prospect that the money-losing airline might not survive — at least not without a government rescue. This company had already become a macabre punch line, something no business can afford in the Internet and social-media age. It’s one thing to have a perception problem; it’s quite another to have folks around the world swearing never to fly Malaysia Air.

Nor is no margin for mistakes by Malaysia or the airline this time, even though all signs indicate that there is no fault on the part of the carrier. The same can’t be said for the bumbling and opacity that surrounded the unexplained loss of Flight 370. Even if there was no negligence on the part of Malaysia Air this week, the credibility of the probe and the willingness of Prime Minister Najib Razak’s government to cooperate with outside investigators — tests it failed with Flight 370 — will be enormously important.

As I have written before, the botched response to Flight 370 was a case study in government incompetence and insularity. After six decades in power, Najib’s party isn’t used to being held accountable by voters, never mind foreign reporters demanding answers. Rather than understand that transparency would enhance its credibility, Malaysia’s government chose to blame the international press for impugning the country’s good name.

The world needs to be patient, of course. If Flight 370’s loss was puzzling, even surreal, Flight 17 is just MH 17plain tragic. It’s doubtful Najib ever expected to be thrown into the middle of Russian-Ukraine-European politics. Although there are still so many unanswered questions — who exactly did the shooting and why? — it’s depressing to feel like we’re revisiting the Cold War of the early 1980s, when Korean Air Flight 007 was shot down by a Soviet fighter jet.

More frightening is how vulnerable civilian aviation has become. Even if this is the work of pro-Russian rebels, yesterday’s attack comes a month after a deadly assault on a commercial jetliner in Pakistan. One passenger was killed and two flight attendants were injured as at least 12 gunshots hit Pakistan International Airlines Flight PK-756 as it landed in the northwestern city of Peshawar. It was the first known attack of its kind and raises the risk of copycats. The low-tech nature of such assaults — available to anyone with a gripe, a high-powered rifle and decent marksmanship — is reason for the entire world to worry.

The days ahead will be filled with post-mortems and assigning blame. That includes aviation experts questioning why Malaysia Air took a route over a war zone being avoided by Qantas, Cathay Pacific and several other carriers. The key is for Malaysian authorities to be open, competent and expeditious as the investigation gains momentum. Anything less probably won’t pass muster.