Khazanah Nasional

I must confess that I knew very little about Khazanah. My impression is that this is the body the government uses to control GLCs. I get the sense that it has a lot of money and therefore a lot of power. And because it is under MoF it has the might of the administration behind it. And through it the government directly influences the economy. However, I never felt that Khazanah’s beneficiaries are Malaysians. In other words, I did not think it is a sovereign wealth fund. Rather it is akin to a bumiputera trust.

Note that these were my impressions. Whether true or not I did not know.

Well, since then I have consulted wikipedia, read this article on Cilisos, and this recent interview of Dr Mahathir on the subject, where he opines that Khazanah has deviated from its original objective.

So going by Dr Mahathir, who started Khazanah, the company (yes, it is actually a public limited company registered in 1994 with all shares except 1 held by MoF) said the firm was formed to hold shares for the Bumiputera until the latter possessed the capacity to purchase those shares.

He said this was because the Bumiputera who received shares had the tendency of selling them and enriching others instead.

“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 was quoted as saying.

According to the Cilisos article, and Wikipedia, Khazanah was given a new mandate in 2004 to exercise control over GLCs and nurture them to become well-run companies. Cilisos likens it to a change in role from being a babysitter to a parent.

This article suggests that the success of Khazanah in nurturing the GLCs can be seen in the fact that no GLC needed bailouts during the 2008 global economic crisis.

So going back to my impressions, Khazanah was at first a bumiputera trust and then became this entity that managed GLCs and nurtured them (and in doing so directly influencing the economy) and finally, from the way it is spoken of now, a sovereign wealth fund, evaluated by the appreciation of its value.

This is as much as I gathered in my simple research. If I am wrong, please correct me in the comments.

What Dr Mahathir wants to do is to return Khazanah to its original purpose. This means that Khazanah should always seek to return the wealth it holds in trust back to the Bumiputera public. It should hold control over companies only as long as it needs to do so.

Dr Mahathir was quoted as saying that Putrajaya would review the companies in which Khazanah has a stake in and sort matters to return the wealth fund to its original path.

“We need to agree with some of these companies to reduce the number (of shares held by Khazanah) and to a certain extent go back to the original intention of holding the shares allocated to the Bumiputera until such time when they can buy (them),” he said.

(In my research, I came to know that another company, Permodalan Nasional Berhad (PNB), was established on 17 March 1978 as one of the instruments of the New Economic Policy (NEP) to re-engineer the economic imbalance in the Malaysia society. PNB has grown from strength to strength, with its assets under management (AUM) now reaching RM271 billion, from around RM3.5 billion in 1981. It is now the market leader in the Malaysian unit trust industry, with ASNB now managing more than 13 million accounts with almost 217 billion units in circulation (UIC). PNB has also enabled the sharing of corporate wealth with all Malaysians by delivering consistent, competitive returns over the years to its unit holders, with more than RM157 billion paid out since inception.)

Tan Sri Dato’ Azman Hj Mokhtar, who was appointed to lead Khazanah in 2004 with the new mandate, defended his record managing the sovereign wealth fund in his farewell message, directly referring to his ultimate shareholders as the “30 or so million Malaysians and then the millions more yet to be born.”

Interestingly, he also wrote of developing and practising the concept of “Building True Value” and elaborated that he interpreted this to include “developing among others human and knowledge capital and through the respect and preservation of the environment. He revealed that Khazanah had built key institutions include Yayasan Hasanah in Corporate Responsibility, Yayasan Khazanah for scholarships, Yayasan Amir for education, Khazanah Research Institute for economic policy development and Think City and the upcoming Taman Tugu Park in terms of the development of cities and community and public spaces.

I came across an interesting article by Dr Musa Mohd Nordin telling of how Khazanah had donated large funds to NGOs during the December 2014 floods, and then went on to tell of how Khazanah had continued to give to advance the causes of several NGOs.

The achievements of Tan Sri Dato’ Azman Hj Mokhtar and Khazanah are well defended by many. This recent article in The Star elaborates yet another aspect of what the company had done.

Looking from the outside, I am struck once again by how much a person can accomplish with the wealth and power he is vested with when he is guided by the simple goal of nation-building. I certainly hope that his recent experience would not sour him to the joy of serving the nation.

One cannot help but see the other side of the truth, that when a person is selfish and seeks only his own benefit, how much destruction he can wreak when given the wealth and power to do so. Of course I am thinking of what Cilisos termed as the sister of Khazanah, 1MDB.

Dr Mahathir seeks to return Khazanah to its original path. This, I think, takes nothing away from what Khazanah had achieved. Neither does the fact of what Khazanah has achieved negate what Dr Mahathir wants to do. It remains to be seen how this change will benefit the country and, as the PM intends, Bumiputeras.

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