15Ogos2020

Agenda Daily

IN EKUINAS WE TRUST ...

While declining competitiveness and failed foreign investment forays by government-linked companies like Maybank hog the headlines, can Ekuiti Nasional, the government-funded private equity fund management company created to raise Bumiputera equity holding in corporate Malaysia, stay true to its principle and succeed.

THE RESIGNATION OF SIX BOARD MEMBERS OF Malayan Banking Bhd this year, including its Chairman Tan Sri Mohamed Basir Ahmad, and the appointment of new members must be seen in light of the costly fiasco that took place at the bank.

The Permodalan Nasional Bhd (PNB)-controlled financial house had on Sept 8 announced the elevation of Tan Sri Megat Zaharuddin Megat Mohd Nor as the new Chairman effective Oct 1.

In spite of attempts by the bank's president and chief executive, Datuk Seri Wahid Omar, to play down the board changes and disassociate them from the costly purchase of Bank Internasional Indonesia (BII), the fact remains that the fiasco happened during their tenure.

Whether they admit it or not, they must be severely and collectively held responsible along with the political leadership that endorsed the bad call.

The belated pricey purchases of the Indonesian and Pakistani banks have seen Maybank being relegated to second spot in terms of market capitalisation earlier this year.

Since the very same people who had forced the deal through were also disciples of the free market principle, they shouldn't have any problems about being held responsible. Soon after the purchase of the Indonesian bank firmed up, Maybank's share price took a tumble.

Besides Mohamed Basir, those who left in July were Datuk Zainun Aishah Ahmad, Tan Sri Chua Hock Chin and Mohd Hashir Abdullah. In March, Datuk Abdul Rahman Ramli resigned, while Megat Zaharuddin left in February.

With the benefit of hindsight, it's perhaps not agood thing to have an independent chairman of a large state-owned corporation like Maybank staying on the job for too long. Mohamed Basir was appointed to the post in 1993.

While Megat Zaharuddin's credentials and integrity are unquestionable, a point must be made that he was already on the Maybank board when the purchase of BII and other problematic foreign purchases took place. He had served the board as an independent non-executive director from July 2004 until February 2009.

Inherited problems

MEANWHILE, it should not come as a surprise if Maybank is restructured to remove the burden of the bad foreign debts on its bottom line.

This is crucial to protect the interest of PNB and eventually its unit trust investors. The bank has already been forced to write down the asset values of its Indonesian and Pakistani units by RM1.97 billion, resulting in the fourth-quarter net loss of RM1.ii billion.

Its full-year net profits fell drastically from RM2.9 billion to RM692 million.

For PNB, which is seen by many as a fait accompli in the BII purchase, the bad call at Maybank is financially burdensome and unfortunate.

However, its management cannot absolve itself totally from the fiasco because it is represented on the board of the bank.

Perhaps, an oversight committee should now be formed to do a forensic examination and accounting of the bank's money-losing overseas forays, which, according to some market sources, were politically-driven.

It is ironic, or as some may be tempted to say, fated, that the bank's problem has now become the concern of Prime Minister Datuk Seri Mohd Najib Abdul Razak, who is also Finance Minister.

It is recalled that his father, the late Tun Abdul Razak Hussein, had a similar burden back in the mid-196os when the bank suffered its first crisis.

The bank was then a private entity owned and managed by the late Tan Sri Khoo Teck Puat. In 1965, Abdul Razak as Deputy Prime Minister, was tasked with solving the bank's crisis, which led to the ousting of Khoo on the pretext of pumping the bank's money into his own private firm in Singapore.

No further action was taken against Khoo and he went on to build a successful business empire in Singapore, which included the Goodwood Group of boutique hotels and a slice of Britain's Standard Chartered Bank. In 2004, his wealth was estimated at S$2.6 billion.

Now Mohd Najib has the task of overseeing the rebuilding of Maybank's book and its credibility following yet another misadventure abroad.

Although the purchase of BII took place during the tenure of his predecessor, Tun Abdullah Ahmad Badawi, the responsibility of putting things right at Maybank is now his.

RAISING BUMIPUTERA EQUITY

EKUITI Nasional Bhd (Ekuinas) can be seen as the Prime Minister's boldest economic initiative intended for the Bumiputeras since he took office.

The government-funded private equity fund management company was incorporated earlier this month and on Sept 4 introduced itself to the Press in Kuala Lumpur.

This is Mohd Najib's answer to the nagging problem of stagnating Bumiputera equity ownership, which was due largely to the Bumiputera recipients selling off their shares.

But I also think that this is his way of offsetting the effects of the liberalisation of the investment rules that saw the requirements for Bumiputera share ownership being done away with.

Ekuinas has, as its principal objective, the promotion of equitable and sustainable Bumiputera economic participation via the creation of Malaysia's next generation of leading companies.

Mohd Najib has announced an initial `endowment' of RM500 million which will eventually be raised to RMio billion, inclusive of private capital.

The setting up of the private equity fund at this point of time makes good sense. With new initial public offerings being few and far between, the ability of the government to redistribute corporate wealth to the Bumiputeras is limited.

The private equity fund will enable eligible Bumiputera individuals and companies to either build up their own next generation of leading companies — to use Ekuinas' parlance — or buy stakes in nonBumiputera companies.

As Ekuinas chairman, Raja Tan Sri Arshad Raja Tun Uda, put it, through Ekuinas, Bumiputera corporate equity ownership would be institutionalised to ensure New Economic Policy objectives are met on a sustainable basis.

Apart from providing institutional capital, Ekuinas will help raise management capabilities of the existing medium-sized Bumiputera companies so that they can grow and become market leaders within the next five years.

This is a big ambition and a tall order, given the fact that the performance and achievement of a number of similar funds have been less than encouraging.

Many are bogged down by bureaucracy and partisan politicking where government officers and public-sector managers try to play God by pretending that they know better than Bumiputera entrepreneurs.

Ekuinas has to do better to succeed. It must first convince the jaded and disenfranchised Bumiputera business community that this is not another political brouhaha.

At the end of the day, it is the efficiency of implementation, coordination and monitoring that counts.

That includes ensuring that the fund will not be hijacked, bureaucratised, politicised or turned into another opportunity to perpetuate rent-seeking and Ali-Baba business activities.

DECLINING COMPETITIVENESS A WORRY

OUR continuing decline in the global competitiveness ranking should be a source of concern as we try to claw our way out of recession.

The Swiss-based World Economic Forum (WEF) in its latest World Competitiveness Report (2009/10), released on Sept 8 shows Malaysia tumbling three spots from 21 to 24.

The WEF said Malaysia's decline was more a result of poor assessment of the country's institutional framework, which has fallen from 177th to 43rd position in two years.

`The institutional environment is determined by the legal and administrative framework within which individuals, firms and governments interact to generate income and wealth in the economy,' said the report.

This is especially worrying because the government has in recent years been claiming that the institutional framework has not only been strengthened but also made more transparent. Obviously, the people at WEF are not totally convinced of these claims.

The other concerns were about security and crime, and the report also voiced concerns about the size of Malaysia's budget deficit.

The former speaks for itself. We have to admit thatthere has been a decline in security and a massive jump in crime, with murder being a daily occurrence.

This is the task and the responsibility the new Home Minister, Datuk Seri Hishammuddin Hussein, must take very seriously. Malaysia is no longer the safe place we used to know.

On the global scale, the US was displaced by Switzerland as the world's most competitive economy after its financial markets were roiled by the worst crisis since the Great Depression.

The US fell to second place ahead of Singapore, Sweden and Denmark in the list of 133 nations.

The WEF said the loss of efficiency in the world's largest economy is another obstacle to a fast recovery even as it begins to show signs of emerging from its deepest recession since World War II.

Switzerland was credited for its stability and ability to innovate.

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