KUALA LUMPUR (Aug 2): The Center to Combat Corruption and Cronyism (C4) has called for appointments to the board of Khazanah Nasional Bhd to be done by a committee, to ensure cronyism is avoided.
The centre’s executive director Cynthia Gabriel said in a statement today that the announcement regarding Prime Minister Tun Dr Mahathir Mohamad chairing Khazanah — while not without precedent — raises serious questions about the statutory governance structure and good governance practices within government-linked investment companies (GLICs) and not just government-linked companies (GLCs).
She added that the non-profit policy advocacy group is concerned about how the restructuring of Khazanah takes place to ensure professional competency — especially with GLICs, since they hold other GLCs under their purview.
“What are the criteria for restructuring? If there is a second minister on the board, how can we ensure that cronyism and political appointism can be avoided? Malaysia certainly doesn’t need old wine in new bottles,” Cynthia said.
On Monday, the Prime Minister’s Office announced the appointment of Dr Mahathir as the chairperson of the board of directors of Khazanah, a holding company and strategic investment company wholly-owned by Minister of Finance Incorporated (MOF Inc).
However, C4 claims some quarters have raised the issue that this contradicts the electoral promise in the Buku Harapan manifesto.
“Promise 22 reads: The Pakatan Harapan Government will ensure the appointment of state and national [government-linked companies] board members will be made based on merit and professionalism, not based on politics,” the centre said.
C4 called for a rethink to the convention of the Prime Minister chairing Khazanah, regardless of the performance of the strategic investment fund.
“Appointments should follow principles of good governance, which are needed not just during peak performance periods, but to ensure that Khazanah does not stumble during darker days in the future,” Gabriel added.
She said C4 is “keenly aware” that the politicisation of the board of Felda Global Ventures Holdings Bhd (now FGV Holdings Bhd), Felda Investment Corporation Sdn Bhd and its linked companies, have caused “serious mismanagement and corruption” due to the centralisation of power under the “same leadership and cronies”.
“Khazanah as a GLIC is at greater risk of corporate mismanagement, because Khazanah is not governed by a statutory act which stipulates what powers the respective ministers-in-charge are entitled to, and who they can appoint.
“MoF Inc, the Employees Provident Fund, Lembaga Tabung Haji, Lembaga Tabung Angkatan Tentera or Kumpulan Wang Persaraan Diperbadankan have these incorporating statutes.
“Effectively, these statutes maintain good governance by keeping the concentration of power in check for GLICs — but not for GLCs, which are typically owned by GLICs,” she said.
In addition, C4 said the recent appointment of Petronas chairperson Datuk Ahmad Nizam Salleh appears acceptable, due to the experience he brings to the position.
“However, his appointment causes the same question to resurface: by what criteria does the Prime Minister consider these appointments — is it truly by merit, or are there still political strings attached?
“In this light, C4 cautions against the repeat of questionable governance leading to malfeasance and corruption of mega-scandals involving GLICs,” said Gabriel.
The centre is of the view that considering Khazanah is without an incorporating statute, the method of appointing a chairperson “by convention” does not inspire confidence in the spirit of checking the concentration of power in the political and economic nexus — a key factor that contributed to many other corruption scandals, including the 1Malaysia Development Bhd scandal.
Meanwhile, C4 said while the centre applauds the move to restructure the ownership and governance structure of GLCs in Malaysia, it reiterates that a committee should be formed to vet new candidates for chairpersons of GLICs/GLCs and to advise the prime minister to avoid any conflict of interest.
The centre also called for a total restructuring of the GLC ownership structure that prioritises good governance and service delivery to the rakyat, while maximising the barriers against corruption and illicit enrichment.
“C4 Center calls on [the] Pakatan Harapan government to err on the side of caution, in the name of good governance, to uphold accountability in our economic restructuring and keep Pakatan Harapan’s promise of no politicians on boards of GLCs—GLICs inclusive,” Gabriel said.