This article first appeared in The Edge Financial Daily on July 27, 2018

KUALA LUMPUR: The move by all nine Khazanah Nasional Bhd board members to offer their resignation to the government is “appropriate” as it will give the government ample opportunity to reinvent the sovereign wealth fund, said academician Prof Edmund Terence Gomez.

However, this has given rise to the issue of government transparency in its decisions involving the recent shake-up of government-linked companies and government-linked investment companies (GLCs and GLICs).

“It makes sense [if Khazanah’s board members resign]. The prime minister has a free hand to do what he thinks he should with Khazanah,” Gomez told The Edge Financial Daily in a phone interview.

“By right I would argue that the board members [of other GLCs and GLICs] whom the prime minister is not happy with should take the cue from Khazanah [and resign], giving the prime minister room to reinvent the GLCs and GLICs,” he said.

The Khazanah board’s en masse resignation offer yesterday came three weeks after comments by Prime Minister Tun Dr Mahathir Mohamad that the sovereign fund “should go back to its original focus” of empowering bumiputera entrepreneurs.

It was also reported the board has not met Dr Mahathir since the change in federal government following the May 9 election.

Formed in 1993, Khazanah was tasked to “hold and manage the commercial assets of the government, and to undertake strategic investments on behalf of the nation”. In 2004, it undertook a more active investment approach which included enhancing the performance of its existing core holdings.

Earlier this month, Dr Mahathir said Khazanah has strayed from its real task to assist the bumiputera public acquire and hold equity in companies. He lambasted the fund for hoarding ownership in such companies for itself, and not for eventual divestment to the bumiputera public.

On this, Gomez disagreed with Dr Mahathir’s view that Khazanah should allow for gradual privatisation of its subsidiaries as part of the bumiputera ownership agenda.

Khazanah, he said, was established as a sovereign fund and not to hold assets in trust for the bumiputera public. “[That role is played] by Permodalan Nasional Bhd (PNB),” said Gomez.

He pointed to the bigger issue of a “debate” that has emerged over the role of GLCs and GLICs, as well as the manner of appointment and the remuneration of the agencies’ directors and top executives.

“If Dr Mahathir wants to instil changes in Khazanah’s role, the matter should be debated in parliament. We are still waiting for the public debate [on this matter].

“And why hasn’t the government formed a committee to look into the role of GLCs and GLICs? What is the reason for the government to parcel out GLCs from one ministry to another?” he said.

On the need for greater transparency in the changes involving GLCs and GLICs, Gomez raised the ensuing question of who would take over the helm at Khazanah.

Calling the board’s move “wise”, Finance Minister Lim Guan Eng has said that the final decision on Khazanah’s leadership rests with Dr Mahathir.

“My primary concern is how he is going to choose the successors,” said Gomez, who is with Universiti Malaya and has written extensively on GLCs and GLICs.

The right way, suggested Gomez, is for Khazanah’s oversight body to form a proper selection committee to propose able names, before they are scrutinised and appointed.

“The criteria for choosing the board members should be made known to the public,” said Gomez, considering how critical the GLIC is in influencing the public and the nation’s well-being. “The selection should be done openly and accountably.”

Under current managing director (MD) Tan Sri Azman Mokhtar, Khazanah has greatly expanded its portfolio — its realisable asset value rose to RM157.2 billion as at end-December 2017, from RM50.9 billion as at end-May 2004.

Additionally, the contract term for Azman is not supposed to last beyond end-May 2019. Last year, Khazanah appointed executive directors Ahmad Zulqarnain Onn and Tengku Datuk Seri Azmil Zahruddin Raja Abdul Aziz as deputy MDs effective Jan 1, 2018, as part of the fund’s succession plan.

Khazanah is supposed to announce Azman’s successor this year, MIDF Amanah Investment Bank Bhd head of research Mohd Redza Abdul Rahman told The Edge Financial Daily.

“What happened is ahead of the original [succession] plan,” Redza said, adding that the latest development will not affect the performance of Khazanah’s subsidiaries in the short term.

Any short-term impact will be minimal, he said, as there are “not many” Khazanah board members who are directly involved in the operation of its subsidiaries — which includes Malaysia Airlines Bhd, IHH Healthcare Bhd and Axiata Group, among others.

“Khazanah and its subsidiaries are managed by professionals in their respective fields ... I don’t see any impact on their day-to-day operations in the short run.

“What is important is whether the objective and mandate of Khazanah and similar entities will change with new leaderships,” Redza said.