PAC to probe Khazanah’s role in KLIA2, MAS-AirAsia fiasco

Malaysian Insider, 21 September 2013

The Public Accounts Committee (PAC) will look into Khazanah Nasional Bhd's role in delays and rising costs of the KLIA2 project and the Malaysia Airlines-AirAsia share swap that led to a RM20 million anti-trust fine, says its chairman Datuk Nur Jazlan Mohamed (pic).

He said PAC will probe the roles of consultants and merchant bankers in these deals although both MAS and MAHB are public listed companies with state asset manager Khazanah as the main shareholder.

“Khazanah should not rely solely on consultants for advice,” Nur Jazlan told The Malaysian Insider in Kuala Lumpur, adding the consultants were only motivated by profit and at times overlooked the laws governing a transaction.

“The deal should not have happened in the first place to avoid these losses. In fact, the Auditor-General, for the first time, is already doing audit on Khazanah, even before PAC brought this issue up,” said the accountant by training.

The KLIA2 project was initially budgeted at RM1.6 billion but has now grown into a RM4-billion project after several amendments. It was initially slated to open in September 2011 but has been delayed five times and is now expected to be ready by April 2014.

Media reports say MAHB has received a staggering 230 non-compliance reports for the budget terminal, including cracks in the buildings as well as ceilings that were built too low, requiring them to be torn down and rebuilt.

In the case of the airlines, the Malaysian Competition Commission (MyCC) imposed a fine of RM10 million each on national carrier MAS and Asia's largest budget airline, AirAsia, for monopolising four routes during their short-lived eight-month pact.

Both airlines have up to October to appeal the fines.

Nur Jazlan pointed out the Auditor-General has the powers to probe Khazanah although most of its companies are listed and are under the Securities Commission.

He also emphasised that PAC was not questioning government policy, but was merely looking at the way projects were being implemented. Only he and PAC deputy chairman, Kepong MP Tan Seng Giaw, have been appointed to the committee. Others are to be named after parliament resumes next week.

The three-term Pulai MP said it was timely for the Auditor-General to look into the corporate governance of Khazanah as "custodians to public invested funds" as his past experience as a Telekom Malaysia Bhd director showed the need for oversight beyond just financial procedures.

Saying he was made a board member based on his credentials as a chartered accountant and council member of the Malaysian Institute of Accountants, Nur Jazlan said, "In 2005, TM wanted to launch the 3G service and the management wanted Alcatel Telecom which did not have commercially deployed 3G equipment while other companies like Ericson and Hua Wei already had.

"As TM's audit committee chairman, I suspected irregularities in the procurement process and wanted the board to investigate it.

“And I quit as the audit committee chairman after the irregularities were not investigated.”

Two years after Nur Jazlan quit the board, the United States Justice Department indicted Alcatel for bribery and giving kickbacks to Telekom executives.

“So I took a huge risk. I resigned, but two years later, it proved my decision was right,” he said.

The no-nonsense politician, now dubbed ‘PAC man’, said he wants to create the idea of the ‘fear of being audited’ as previously no one feared being audited as they would not be held accountable.

“PAC and Auditor-General’s Department work hand in hand. The AG is trying to change their method from a value for money audit to performance audit.

“Currently, government officers who had committed offences were not afraid as nothing is being done to them. There is no accountability. So what the Auditor-General’s Department is doing is to go with performance audit with the aim to change that culture,” Nur Jazlan added.

He also said besides fraud and corruption, most of the expenditure wastage was due to poor planning.

"For example, when a department wants to starts a highway project, but the company has yet to acquire all the lands along the route. Hence, where there is a delay, it would eventually be a liability to the government. It is poor planning and execution,” he said. -September 21, 2013

Malaysia’s ‘Big Government’ economy a dampener

Written by Chua Sue-Ann

Edge, 12 October 2011

KUALA LUMPUR: As the government forges ahead to attract foreign investors and spur domestic private sector activity, independent think- tank Institute for Democracy and Economic Affairs (Ideas) has reiterated warnings that the country’s “Big Government” approach could dampen investor confidence. Ideas chief executive Wan Saiful Wan Jan yesterday noted ongoing concern that the government’s pervasive presence in the economy, including via government-linked companies (GLCs), as well as government dominance in the provision of services would be detrimental to Malaysia’s economic vibrancy in the long run. Wan Saiful said the economy should ideally be driven by entrepreneurs, although in reality GLCs will likely continue to play a role in the economy in the next two to three decades. “There are two elements at play here. First, the government does not trust market forces completely, and second, they think they know best. “It is difficult to see the government [letting] go of control on the economy but its role can be progressively limited,” Wan Saiful told The Edge Financial Daily on the sidelines of the Economic Freedom Network Asia 2011 Conference yesterday. In addition, government policy and implementation must also be consistent for Malaysia to be seen as an attractive destination for investors, be it domestic or foreign players, Wan Saiful added. Indeed, the government has recognised the need to overhaul the present system with a view to making Malaysia into an advanced, high-income nation. Saiful: It is difficult to see the government letting go of control on the economy. Among other policy proposals, the National Economic Advisory Council’s (NEAC) New Economic Model (NEM) proposed a shift from the old approach of dominant state participation in selected economic sectors towards private sector-led growth. To that end, the government is looking to promote competition across and within sectors to revive private investment and market dynamism, the NEAC said. The NEM also argued for the need to re-engineer public institutions to prevent duplication of functions that can be better provided by the private sector, with public institutions being limited to the role of the facilitator. “While this approach (public investment and GLC initiatives) may have served the country well in the past, it is unlikely to provide the dynamism needed to spur the country to developed country status. That will come from new ventures, fresh products and emerging niche markets,” the NEM noted. The NEM’s policy proposals to create an ecosystem for entrepreneurship and innovation include reducing direct state participation in the economy, divesting GLCs in industries where the private sector is operating effectively and ensuring GLCs operate on a strict commercial basis free of government interference. This comes amid longstanding concerns that the size and presence of GLCs could crowd out the private sector. In a frank assessment of the present situation, the NEM noted that the government — in playing the role of business owner and regulator of industries — faces conflicts of interest which can result in GLCs gaining an unfair advantage over private firms. “This in effect discourages new private investment in market segments where GLCs are strong. Such market segments could well be the ones which could attract private investment in high value added products and services,” the NEM stated. Nevertheless, the NEM pointed out that there is still room for GLCs to partner more effectively with the private sector. These collaborations could take advantage of economies of scale, networking and ventures abroad. Earlier at the Economic Freedom Network Asia 2011 Conference yesterday, Prof Dr Jurgen Morlok of the Friedrich Naumann Foundation for Freedom (FNF) argued that the state’s role should be restricted to the regulation of the economy to the extent that it allows for fair competition to take place. “The state should set the rules and act as a referee, no more, no less. When the state becomes the referee and player at the same time, competition becomes unfair,” said Morlok, who chairs the FNF board of trustees. Earlier reports by the Vancouver-based Fraser Institute’s Economic Freedom of the World, meanwhile, show that Malaysia’s ranking on the Economic Freedom Index has been slipping over the past few years. Malaysia has gone from occupying 53rd position in 2006 to 78th place in 2009, with a summary rating of 6.68 out of 10. At the top of the 2009 Economic Freedom Rankings were Hong Kong, Singapore and New Zealand, while countries at the bottom were Venezuela, Myanmar and Zimbabwe. The Economic Freedom of the World report, which ranks 141 nations, measures the degree to which a country’s policies and institutions are supportive of economic freedom. A comparison of Malaysia’s summary ratings for 2005 and 2008 show that Malaysia had recorded slight improvements in the regulation of credit, labour and business and, access to sound money. Malaysia’s summary ratings however declined from 2005 to 2008 in the areas of government size, legal structure and property rights and freedom to trade internationally. The Economic Freedom of the World 2011 report is scheduled to be released today.

Anwar: Was MAS turnaround a mere charade?

By Shazwan Mustafa Kamal

Malaysian Insider, 10 August 2011

Anwar also said today that the deal raises fundamental issues of transparency. — file pic

KUALA LUMPUR, Aug 10 — Datuk Seri Anwar Ibrahim has questioned the latest effort to rescue the loss-making state airline, charging today that the Malaysia Airlines (MAS)-AirAsia share swap meant that Putrajaya’s previous turnaround plans had failed. 

 

He also said the deal would create a monopoly that will burden air passengers.
“Is the government specifically admitting that the so-called successful turnaround of MAS was a mere charade? The Prime Minister must be held accountable for misleading the rakyat on this.

“More importantly, the deal raises the question as to what is the fate of the GLC Transformation Programmes that had been launched by Prime Minister Najib Razak to much fanfare and wastage of millions of the rakyat’s money,” he said in a statement, claiming that the share swap would not benefit MAS employees.
The national airline recently recorded a first-quarter net loss of RM242.3 million against a profit of RM310.6 million in the same period a year ago.

MAS main shareholder Khazanah Nasional Bhd has defended previous efforts at reforming the national flag carrier with managing director Tan Sri Azman Mokhtar saying that the share swap was necessary to keep MAS afloat.

Anwar also raised concerns of AirAsia’s possible “monopoly” of the domestic airline industry with the recently-inked MAS-AirAsia share swap yesterday.

“The MAS-Air Asia share swap announced yesterday raises serious concerns over the dominance of Air Asia over MAS and effectively reducing competition between the two.

“This may lead to a virtual monopoly of the domestic airline industry in the long run and give rise to risks and concerns associated with monopolies, more so because of the involvement of cronies and political power brokers,” the Opposition leader said.

The opposition leader charged that Tony Fernandes’s participation in the MAS board was a possible conflict of interest. — file pic

MAS main shareholder Khazanah Nasional Bhd finalised a share swap with Tune Air Sdn Bhd yesterday which saw the state investment arm pare down its stake in the ailing state carrier by almost a third. 

 

Under the “Comprehensive Collaboration Framework”, Tune Air, AirAsia’s main shareholder, will swap a 10 per cent stake in the no-frills airline for 20.5 per cent share in MAS.

Before the share swap, Tune Air was the biggest shareholder in AirAsia with 26.28 per cent stake while Khazanah held a total of 69.33 per cent share of MAS.

The MAS board will also see some new faces, namely Land & General Bhd founder Tan Sri Wan Azmi Wan Hamzah, former IJM chief executive Datuk Krishnan Tan, Astro chief executive Datuk Rohana Rozhan and David Lau from Shell Malaysia, who will act as independent non-executive directors.
AirAsia founder and chief executive Tan Sri Tony Fernandes and Datuk Kamarudin Meranun have also been appointed as non-independent non-executive directors of MAS.

MAS managing director Tengku Azmil Zahruddin Raja Abdul Aziz, who stepped down will join Khazanah as an executive director effective September 12, 2011. An executive committee led by Tan Sri Mohd Nor Yusof will manage the state carrier until a new chief executive is appointed while day-to-day operations will be handled by Khazanah executive director and MAS board member, Mohd Rashdan Mohd Yusof.
Anwar charged that Fernandes’s participation in the MAS board raised the likelihood of a conflict of interest in spite of Fernandes’s “non-executive” position.

“This is clearly a violation of corporate governance rules and should not be condoned.
“This deal also raises fundamental issues of transparency because of the secrecy in which it was shrouded. In this regard, the Securities Commission must investigate the possibility of irregularities including insider trading of the shares of both entities,” added Anwar.

The collaboration agreement comes into immediate effect for a period of five years with the option of an extension for a further five years.

Despite MAS share swap, Fernandes’ heart is with AirAsia, says FT

Malaysian Insider, 10 August 2011

 

Brown heaped praise on “serial entrepreneur” Fernandes’ business acumen. — File pic

 

KUALA LUMPUR, Aug 10 — The Financial Times has praised AirAsia boss Tan Sri Tony Fernandes’ move to swap stakes and help ailing flag carrier Malaysia Airlines (MAS), but said today the “serial entrepreneur” remains focused on plans to make the low-cost carrier the region’s most successful airline. Fernandes and his partners’ private vehicle, Tune Air Sdn Bhd, yesterday exchanged 10 per cent of their AirAsia stock for 20.5 per cent of the loss-making MAS, which has undergone several financial restructuring but keeps bleeding red ink.

The influential global business daily pointed out that Fernandes has had an uphill battle in the aviation industry, buying a two-plane operation in 2001 for RM1 and taking over its then RM40 million debt despite being sneered by the Malaysian elite as a “comic upstart”.

“If he can help MAS recover, he will. But not at AirAsia’s expense. Recognition is sweet. But victory is sweeter,” wrote Financial Times regional correspondent Kevin Brown in a column published today.
The column pointed out that “So far, Mr Fernandes has hardly put a step wrong. As a serial entrepreneur, he has founded no fewer than four airlines — AirAsia, its long-haul affiliate AirAsia X and joint ventures in Indonesia and Thailand. He is also part-owner, with his business partner, of the privately held Tune Group, which runs hotel, financial services and mobile phone businesses”.

It added that AirAsia has grown from two planes to more than 100 planes now, and has just signed an US$18 billion (RM54 billion) deal with Airbus for 200 A320s over 15 years — the third-biggest order in the aircraft maker’s history.

“Investors are in no doubt about Mr Fernandes’ Midas touch. The shares have outperformed the global aviation index by more than 100 per cent since AirAsia was floated in 2004. No carrier has bettered its average 57 per cent annual increase in net income. The stock, up almost a third this year before the latest turmoil, was worth US$3.6 billion before the shares were suspended on Monday. That is more than double the market value of the Malaysian flag-carrier,” Brown wrote.

He noted AirAsia has benefitted from being in the right place at the right time.
“Its pace of growth is underpinned by the rapid expansion of emerging Asian economies. Average economic growth of about seven per cent a year is lifting millions more people every year to an economic level at which they can afford a budget airline flight.

“But Mr Fernandes is not just grabbing chunks of a growing market. AirAsia has grown consistently, as well as fast, thanks to a rigorous focus on expenses. Costs per passenger kilometre are lower than both Southwest Airlines of the US, which invented the low-cost model, and Ryanair, the Irish group often regarded as the world’s most competitive carrier,” Brown said in the article.

However, the state-owned MAS has “failed either to adapt to the low-cost era, or to trade effectively as a premium carrier, the strategy pursued (albeit with faltering success) by neighbouring Singapore Airlines”, Brown wrote, noting that MAS has had to be restructured twice in the past nine years following financial crises.

“Angered by the airline’s resistance to change and worried by the looming cost of fleet renewal, the government has given up, forcing MAS to accept a deal, confirmed on Tuesday,” he added.

“For Mr Fernandes, this is a moment to savour. Never shy of self-promotion, he has been hurt and offended over the years by the Malaysian elite, which has largely regarded him as a comic upstart. They laughed when he started in business with two old aircraft and US$250,000; they laughed again when he spoke of building AirAsia into the region’s most successful airline, when he launched a Formula One racing team and when he tried to buy an English Premiership football club.

“Their laughter has now ceased. But it would be ironic if Mr Fernandes’ moment of recognition turned out to be a millstone round his neck. This is not an inconsiderable risk. The deal was officially characterised as a partnership, but would be better seen as a last-chance rescue. Both earlier restructurings of MAS failed to resolve its underlying problems, and (Tan Sri) Azman Mokhtar, the head of Khazanah, has spent years putting it through a reform programme, to little effect,” wrote Brown.
But Brown said while the government hopes “the freewheeling Mr Fernandes will provide the missing ingredient”, the aviation tycoon’s new task would divert inordinate amounts of time from running AirAsia and its offshoots, which are soon to be joined by a Tokyo-based joint venture with ANA of Japan.
“With Singapore-based rival Tiger Airways in trouble – suspended from flying in Australia on safety grounds, and bleeding S$2 million (RM4.8 millio) a week – this is not the moment for Mr Fernandes to take his eye off the ball.

“All the signals are that he will not. Indeed, all the obvious gains will accrue to AirAsia: Route rationalisation is likely to favour the lower cost operator, and the deal should reboot government thinking on awarding new routes, on which it has tended to favour MAS. Mr Fernandes will aim to push MAS upmarket, and try to close Firefly, the flag-carrier’s largely domestic budget offshoot, leaving AirAsia with a local monopoly,” Brown said.

Share swap deal: AirAsia's Fernandes to gain 20% stake in MAS

STAR, 7 August 2011

KUALA LUMPUR: Malaysia Airlines (MAS) and AirAsia will swap shares in a surprise deal which will see Tan Sri Tony Fernandes becoming the single biggest shareholder.

Khazanah Nasional Bhd, which owns over 69% of MAS, is said to have concluded negotiations with Fernandes to come up with a deal to save the national carrier.

Sources said the deal, which was struck last week after negotiations over the past year, became urgent after MAS' poor showing in the last two quarters.

Fernandes is set to get 20% of MAS equity under the deal that is to be signed next week, with some sources saying it has already received the Government's approval and could be inked by tomorrow.

Industry players expressed surprise at the deal because of past animosity between the management of the two airlines.

Those who were aware of the negotiations were also surprised at the speed at which it was concluded.

At present, Khazanah, a strategic investment company, holds about 69% stake in MAS, and under the deal with Tune Air Sdn Bhd, it will get a similar stake in AirAsia. Fernandes and his co-founder partner Datuk Kamarudin Meranun hold 26.28% in the world's biggest budget airline.

Fernandes declined to comment when asked about the deal.

Insiders in both airlines confirmed that the negotiations concentrated on the synergy such a share swap would bring.

First, there will be rationalising of routes. Between them, the two airlines cover most of the lucrative routes from Asia to Europe.

Second, when they are seen as a single unit, their bargaining power with airports and aircraft manufacturers will double, said a source close to the deal.

He pointed to the recent move to merge SapuraCrest Petroleum and Kencana Petro-leum via a share swap as an example for the AirAsia-MAS deal.

Insiders said it was unlikely the two airlines would merge into a single unit, but would operate though separate managements at operational level, while sharing common directors and policies.

Malaysia will get the best of both worlds a premier full-service carrier in MAS and the best budget carrier in AirAsia.

“They have been competing with each other for too long, and it's time to work together because there is more than enough to go around,” said a senior government official.

The official added that the “feud” between the two had been going on for 10 years since Fernandes and others took over the ailing AirAsia from DRB Hicom.

AirAsia is twice as big as MAS in terms of market capitalisation. MAS is worth about RM5.3bil, while Fernandes' outfit is worth slightly more than RM11bil.

AirAsia stocks closed at RM3.95 per share yesterday while MAS' was at RM1.60.

A news portal, The Malaysian Insider, which broke the story of the deal yesterday, reported that Fernandes would likely appoint Khazanah's executive director of investments Mohd Rashdan Mohd Yusof as chief operating officer after the share swap. Rashdan already sits on the MAS board.

Sources said no decision was made about the position of MAS CEO Tengku Datuk Azmil Zahruddin.

MAS recorded a first quarter net loss of RM242.3mil against a profit of RM310.6mil in the same period last year. Analysts expect the national carrier to make full-year operating losses due to high fuel costs and falling yields.

In contrast, AirAsia recorded a first quarter profit of RM171.9mil for this year and a record RM1.5bil in profits for 2010.

Sources said the merger would also force the two airlines to take stock of their future aircraft purchases if they are to enjoy any synergy.

AirAsia purchased 200 Airbus A320 aircraft earlier this year with an option to buy another 100, while MAS was set to make a decision on the replacement aircraft for its Boeing 747 and 777 fleet, which is more than 20 years old.
 
*MEDIA STATEMENT FROM KHAZANAH

Kuala Lumpur, 7 August 2011

”We refer to media reports that Tan Sri Tony Fernandes and Dato' Kamarudin Meranun will emerge as the single largest shareholder of Malaysian Airline System Berhad (“MAS”). These reports are incorrect. The aviation sector is a strategic sector to the economy and MAS remains a core holding in Khazanah Nasional Berhad's portfolio. Khazanah will continue to maintain its position as the single largest shareholder in MAS.
As an active strategic investor, Khazanah constantly reviews ways to improve the performance of its portfolio companies and concurrently the competitiveness of key strategic sectors of the economy. Further announcements will be made at the appropriate time with regard to Khazanah's position in MAS' ongoing transformation plan.”
 
*MEDIA STATEMENT FROM AIRASIA'S TAN SRI TONY FERNANDES & DATO' KAMARUDIN MERANUN

Kuala Lumpur, 7 August 2011

"We refer to the press coverage over the last two days that has reported that we would become the single
largest shareholder in MAS.

We wish to clarify that this is not true.

As the major shareholders of AirAsia Berhad and AirAsia X Sdn Bhd, we are committed to increasing shareholder value in both our core investments by continuously exploring various opportunities to enhance our franchise."

GLCs won’t indulge Bumi pressure, says Azman Mokhtar

By Shannon Teoh

Malaysian Insider, June 24, 2011

 

Azman said GLCs were strictly merit-based despite the unpopularity of the policy. — Picture by Jack Ooi

KUALA LUMPUR, June 24 — The federal government’s committee on GLC performance said today that it will not bow to pressure to implement pro-Bumiputera policies which will undermine their own operations.
The Putrajaya Committee on GLC High Performance (PGC) moved to allay fears that recent pressure from Malay hardliners would derail the Najib administration’s commitment to liberalise the economy and put in place merit-based policies.

PGC secretariat chief Tan Sri Azman Mokhtar said today that it had “active and proper” programmes for Bumiputeras which were part of a national development agenda under the New Economic Model (NEM) which would be inclusive, and see growth with equity for all communities.

“It is important that these companies are not a burden on themselves or on their shareholders or the public. They should be part of the solution and not the problem.

“Our programmes are not just for Bumiputeras but all local vendors,” said Azman, adding that GLCs were also fair in terms of employment.

Putrajaya has come under heavy pressure recently from Malay hardliners with regards to contracts from the RM50 billion Klang Valley Mass Rapid Transit project and the proposed Pudu Jail redevelopment plan under UDA Holdings which could be worth up to RM4 billion.

The agency tasked with ensuring Malays have a bigger stake in urban economy activity came under fire recently from right-wingers in Umno and Perkasa as well as Utusan Malaysia for allegedly abandoning the Bumiputera agenda after it chose not to appoint Bumiputera joint-venture turnkey investors for the proposed Bukit Bintang City Centre (BBCC).

Azman, who is also Khazanah Nasional managing director, added that GLCs were strictly merit-based with their contractors even though it was an unpopular policy.

“It is merit-based, you must deliver. Sometimes it is unpopular but we are strict with them,” he told reporters at the GLC Open Day launch today.

Khazanah MD ‘frustrated’ by political handicap

By Yow Hong Chieh

Malaysian Insider, May 30, 2011

KUALA LUMPUR, May 30 — Khazanah Nasional Bhd managing director Tan Sri Azman Mokhtar has admitted to being disappointed by his inability to trim fat from the portfolio he inherited in 2004 due to political interference, the Financial Times reported yesterday.

“We have had our frustrations, and there have been areas, mostly in the regulated sectors such as electricity, automobiles and aviation, where value has stagnated or even declined,” Azman (picture) told the international financial daily.

The Financial Times said that despite scoring a “crushing victory” in a US$3.6 billion (RM10.8 billion) takeover battle with India’s Fortis for Singapore healthcare group Parkway Holdings, Khazanah was still struggling to turn around companies in its legacy portfolio, which includes national carmaker Proton and Malaysia Airlines.

“Big questions remain about Khazanah’s ability to deal equally decisively with the rest of its portfolio, not least because of government opposition to radical surgery on any of its significant companies,” the report said.
“Khazanah’s ability to turn round the biggest legacy companies is tightly bound by government limitations on its freedom of manoeuvre.”

It added that the impact of this “political framework” was evident in the detailed financial information released by Khazanah this year, which showed that the value of newer investments grew by an average of over 20 per cent while older investments only grew by five per cent.

The agency, burdened by a complex and potentially conflicting mandate to grow the portfolio, earn significant returns, lead GLC transformation and help Malaysia become a developed country by 2020, had “significantly less firepower” than other wealth funds, the Financial Times pointed out.

The net portfolio value of Singapore’s sovereign wealth fund Temasek at the end of December was US$149 billion compared to Khazanah’s US$24.6 billion.

Tan Teng Boo, chief executive of Kuala Lumpur-based investment adviser Capital Dynamics, told the daily that while there were many “very capable and committed people” in Khazanah, there were just as many political obstacles to real reform.

Although the investment fund’s portfolio showed “some growth”, he faulted politicians who refused to let Khazanah “do what is necessary” for its failure to transform lacklustre GLCs as mandated.

Azman, however, argued that the agency was fulfilling its mandate for the most part, citing a 39 per cent increase in portfolio value last year, with compounded annual growth of 13 per cent from its level of RM33.3 billion when he took over in 2004.

At the same time, the group has sold its 32 per cent stake in Pos Malaysia, reduced holdings in successful companies such as Malaysia Airports Holdings Bhd and strongly encouraged regional expansion by successful portfolio companies like Axiata and CIMB.

“We are in the seventh year of a major transformation programme, and we have achieved a lot in terms of making the GLCs more efficient while also growing the value of our portfolio and playing our part in helping Malaysia to develop,” said Azman, a former UBS and Salomon Smith Barney banker.

“The GLCs have conclusively improved their performance as a result of the management and other changes we have made, with aggregate earnings for the 20 biggest rising by 49 per cent in 2010 to RM17.3 billion and total shareholder returns of 16.4 per cent since 2004.”

Khazanah begins reshuffling GLC chiefs

KUALA LUMPUR, May 28 — Malaysian Insider

Tenaga Nasional finance chief Datuk Mohd Izzaddin Idris has been named chief executive officer for infastructure group UEM from July 1 as state asset manager Khazanah Nasional Berhad kicked off a reshuffle of top executives in its stable of companies.

Sources said more changes are expected at the top echelons of other government-linked-companies including telecoms provider Telekom Malaysia Berhad and possibly within the sovereign wealth fund itself.

“Datuk Seri Najib Razak wants to put in people with the right expertise to manage these companies. He wants even the chairmen to work, not warm their seats,” a source told The Malaysian Insider.

As the investment holding arm of the government, Khazanah has stakes in more than 50 companies with assets valued in excess of RM60 billion including Tenaga Nasional Berhad, CIMB Group, Proton Holdings Berhad, PLUS Expressway Berhad, Malaysia Airlines System Berhad, Malaysia Airport Berhad, UEM World Berhad, UEM Builders Berhad, and Time dotcom Berhad.

Izzadin has been the chief financial officer and senior vice-president (Group Finance) of Tenaga Nasional Berhad since September 2004. His resignation is effective June 30, Tenaga said in a statement.

Izzaddin will succeed Datuk Ahmad Pardas Senin, who is retiring. UEM chairman Tan Sri Ahmad Tajuddin Ali said with Izzaddin’s wealth of experience, the board was confident that he would be able to contribute towards the UEM Group’’s sustainable growth and success.

UEM, which built the North-South Highway now managed by PLUS Berhad, is one of Malaysia’s biggest infrastructure companies under Khazanah’s control.

Khazanah, which recorded a 53 per cent increase in aggregate earnings in the last five years, was recently questioned by the Public Accounts Committee (PAC) about its finances and investments now topped up by more than RM10 billion in public funds

That fresh amount, excluding off-budget allocations and compensations to its companies and the EPF’s RM5 billion loan to fund manager Valuecap Sdn Bhd, has raised concerns about the usage of public funds as lawmakers feel the money can be used better elsewhere.

Khazanah had received RM10 billion from the RM60 billion second stimulus package announced last March.

The package also included an off-budget allocation of RM2 billion for a low-cost carrier terminal within KLIA and RM250 million to expand the Penang International Airport, both to be built by Khazanah’s

Malaysia Airports Berhad, apart from RM480 million compensation to national highway operator PLUS to not raise toll charges.

In a report on March 13, Khazanah disclosed that the top 20 GLCs (G-20) aggregate earnings in 2008 was 53 per cent higher at RM14.69 billion against RM9.6 billion in 2004 when it launched the GLC transformation programme under new managing director Azman.

However, it was below the RM19.3 billion achieved in 2007 when the global economic crisis began.

The sovereign wealth fund had also touted growth and transformation in several GLCs including Telekom Malaysia Berhad, TM International Berhad (renamed Axiata Berhad), Malaysia Airlines, UEM Berhad and several others.

It disclosed that total G-20 shareholder returns outperformed the KL composite Index by a compounded annual growth rate of 4.8 per cent since it the transformation programme with return on equity growing to 10.4 per cent in 2008 from 8.2 per cent in 2004, peaking at 14.6 per cent in 2007.

But Bagan MP Lim Guan Eng, a qualified accountant, told parliament Khazanah’s performance had not been encouraging despite the economic storm, saying its records showed that in 2008, Khazanah’s portfolio fell RM17.8 billion with overall Realisable Asset Value (RAV) deteriorating to RM70.4 billion on December 31 from RM88.2 billion on May 31 2008.

“What is more frightening is the net worth – RAV less total liabilities – stood at RM 33.7 billion at Dec 31 against RM 53.1 billion at May 31 2008. That is a reduction of Rm19.4 billion or a drop of 36.5 per cent in just six months,” said Lim, who is also the Penang chief minister.

The DAP secretary-general also said Khazanah’s equity investments has been poor with RM5 billion wasted in silicon maker Silterra Corp, apart from the sale of MV Agusta by Proton Holdings for one euro in 2006 after buying it in 2004 for RM368 million in 2004. He noted MV Agusta was later sold for RM800 million to BMW and Harley-Davidson Motorcycles.