13Ogos2020

Agenda Daily

PNB MUST CONTINUE TO ENSURE BUMIPUTERA STAKE

The New Economic Policy has spawned numerous entities to improve the lot of the Bumiputeras. While some have succeeded and opened the door to non-Bumiputeras, there is still a lot to be done, especially in a tough economic climate.

 

IF THERE IS ONE CREATION OF THE NEW Economic Policy that cannot be faulted for any serious shortcoming, it has to be Permodalan Nasional Bhd (PNB).

The state-owned Bumiputera investment agency was established with the purpose of investing on behalf of the Bumiputeras in the overall efforts to eradicate poverty in the Bumiputera community and restructure society.

PNB’s most powerful tool is the Amanah Saham Nasional (ASN) scheme, which distributes the wealth it accumulates to the Bumiputeras via unit trust shares, although in recent years, it has started selling limited units to the non-Bumiputeras.

In our most recent cover story, PNB Chief Executive Officer Tan Sri Hamad Kama Piah told us that the ASN unit trust scheme had over ioo billion units in circulation valued at over RM1O4 billion at the end of last year, making it by far the biggest unit trust management company in the country.

I was there when the late Prime Minister, Tun Hussein Onn, launched its first unit trust fund, the Amanah Saham Nasional, in mid-1981.

I was assigned to Johor to get first-hand information on how the poor rural Bumiputeras responded to the scheme. It was overwhelming, thanks to the success of the publicity campaign that involved even its then autocratic and media-shy chairman, the late Tun Ismail Ali. At one of the media briefings, I was literally chased out of the PNB office for confronting him with a tad too many questions.

But it was the honesty and expertise of pioneers like Ismail and Tan Sri Desa Pachi, and the current managers like Hamad Kama Piah and Chairman Tun Ahmad Sarji, and the commitment of leaders like Tun Abdul Razak, Hussein and later Tun Dr Mahathir Mohamad that contributed greatly to the success of PNB and the ASN scheme.

Understandably, the situation has changed greatly from the years when PNB could count on the government to bolster its share portfolio.

Today, the economy is more mature and with the NEP having come to an end, the steady supply of Initial Public Offer (IPO) shares that boosted PNB’s coffers in earlier years have all but dried up. PNB and ASN managers have to compete in the marketplace to build up its portfolio.

The market opening measures by the new Prime Minister, Datuk Sen Mohd Najib Abdul Razak, and the opening of the ASN scheme to the non-Bumiputeras pose both a challenge and an opportunity.

To maintain its status as a Bumiputera trust agency but at the same time opening its unit trust scheme to non-Bumiputeras, PNB has to invest more aggressively in the overall economy instead of relying on the segment reserved for the Bumiputeras.

In the interview with Malaysian Business, Hamad Kama Piah indicated that the next major drive of the trust agency is property.

PNB is already a major participant in the property sector via its subsidiaries like Sime Darby and Island and Peninsular. It is also a substantial shareholder in many large property developers.

With huge land banks around major population centres, it is only natural that PNB expands in this sector, bearing in mind, of course, the pitfalls associated with real estate, one of which is the over- supply situation.

Also, being a Bumiputera trust agency, PNB cannot neglect its responsibility of ensuring that Bumiputeras are not excluded from the new townships it plans to build.

In many cases, the development of new townships and commercial complexes has come to be associated with the continuing marginalisation of the Bumiputeras and other poor Malaysians.

As for the government, since it is no longer actively pumping funds into PNB, it should likewise not impose itself on the trust agency to the detriment of the Bumiputeras.

No more derailing at KTMB

IN the previous issue, we also featured the tussle between the developer of the former Sentul railway yard and the so-called squatters, which actually exposes the larger malice affecting Keretapi Tanah Melayu Bhd (KTMB) or Malayan Railways.

Although Malayan Railways has nothing or little to do with the undelivered or yet-to-be delivered promises, the origin of the problem started with the privatisation of its vast landed assets in the mid-1990s.

All or most of the squatters who are making the claim against Sentul Raya Sdn Bhd, a subsidiary of the conglomerate YTL Corporation Bhd, are either former employees of KTMB or are their descendents.

In the aftermath of the 1997/98 regional financial crisis, the wisdom of those called upon by the-then Prime Minister Dr Mahathir to assist him was to reduce government involvement in business.

In Malayan Railways’ case, although the effects of the crisis were indirect, its money-losing operations were a cause for concern. A long-term solution had to be found.

One of the answers suggested was for Malayan Railways to capitalise on its remaining land bank via the formation of a railway land corporation fashioned along Indian Railways’ (IR) Rail Land Development Authority (RLDA). The RLDA is a statutory authority under the Ministry of Railways and was set up in 1989 to develop vacant railway land for commercial use for the purpose of generating revenue by non-tariff measures.

IR has approximately 43,000 hectares of unutilized land. The land not needed for operational purposes is transferred to RLDA for commercial development.

The suggested Malayan Railways Land Corporation could develop the land either on its own or in collaboration with the private sector, and the revenue used to fund the operations of Malayan Railways, thereby reducing or eliminating altogether its dependence on the government.

Another alternative was to continue with the privatization programs undertaken earlier. One proposal was to sell Malayan Railways lock, stock and barrel, including its debt, to the Federal Government for RM1. Several parties, including Bumiputera companies, had expressed interest.

The first phase of privatization of KTMB assets took place in 1994 when the government awarded the Kuala Lumpur Central Station to a consortium comprising Malaysian Resources Corporation Bhd (46.38%), KTMB (26%) and Pembinaan Redzai Sdn Bhd (9.62%).

The area has been renamed KL Sentral that today incorporates the new KL Railway Station, two international hotels, office towers and high-end apartment blocks.

In the following year, a Bumiputera-controlled company, Taiping Consolidated Bhd, known for its prestigious Lot 10 shopping complex in Bukit Bintang, entered into a joint venture with the railway to redevelop the Sentul land but soon fell victim to the 1997/98 financial crisis and was taken over by the Chinese-owned conglomerate YTL.

Ironically, the most prestigious of all its landed possessions in the Peninsula measuring approximately 42.5 hectares in Bukit Tunku (formerly Kenny Hill) was sold outright to Bolton Bhd for RM75.2 million in 2003. This reversal in policy deprived KTMB of steady long-term revenue.

The challenge now is for KTMB to get the best deal in all future ventures. Of immediate concern is the proposed joint development of its Singapore assets. Malayan Railways owns 217 hectares of prime commercial land in the republic.

It was reported by online newspaper Malaysian Insider in September last year that Singapore had submitted to Wisma Putra a joint-venture proposal to redevelop the land on a 60:40 basis in favour of the landowner.

The 60:40 split was first proposed in the 1990 Malaysia-Singapore Points of Agreement (POA) signed between the-then Singapore Prime Minister Lee Kuan Yew and former Malaysian Finance Minister Tun Daim Zainuddin.

With the government of Prime Minister Mohd Najib pinning high hopes on the railway to play a major role in the improvement of public transportation, KTMB cannot afford to repeat past mistakes and oversights.

Only if Malayan Railways overcomes its mediocre services and financial position will it be able to take full advantage of the ongoing double-tracking project and make rail transportation fashionable and profitable.

According to a statement to Parliament in 2008 and media reports thereafter, Malayan Railways lost RM859 million between 2001 and 2008.

Questions about International Reserves

WITH the much-awaited decision on the leadership of Petroleum Nasional Bhd (Petronas) having been made, the general expectation is for similar changes to happen at other key government-linked companies (GLCs) and agencies.

Mohd Najib stamped his mark on Petronas by replacing the corporation’s long-serving Chief

Executive Officer-cum-Acting Chairman Tan Sri Hassan Merican with Datuk Shamsul Azhar Abbas, the former CEO of Malaysia International Shipping Corporation Bhd (MISC).

A Bloomberg report published by Business Times on Feb 2, credited Shamsul Azhar with boosting the value of MISC sevenfold over the benchmark index as its head. On that basis, the international economic news service said Shamsul Azhar might offer continuity to the management of the state oil company.

Other GLCs and state agencies in the line of sight include Khazanah Nasional Bhd, Tenaga Nasional Bhd and even Bank Negara Malaysia. The Prime Minister may choose not to replace the heads of these GLCs, but the expectation is for him to insist that they establish a clear line of succession and improved performance.

Take the Central Bank for instance. With the Governor, Tan Sri Zeti Akhtar Aziz, being seen as super-efficient, little is said of the need to identify and train her successor.

While it is mostly true that Zeti is doing a good job at managing the country’s monetary system, the question of succession should not be left to chance. A clear line of succession is important.

Furthermore, we should not persist with the habit of depending solely on jobholders just because they are good, or to play down their shortcomings and failures because we like them.

We are talking about public service and the country’s welfare. As such, although we may unreservedly respect Zeti, we must, for instance, know why its international reserves fell by RM3.8 billion in 15 days to RM331.3 billion on Dec 31, 2009.

Business Times reported that Bank Negara’s international reserves took into account the quarterly adjustment of foreign exchange revaluation, following the strengthening of the ringgit against most major currencies during the final quarter.

The Star newspaper in a Jan 30 report noted that recent research by a unit of Swiss-based UBS had questioned Malaysia’s larger than usnal capital outflows in 2009 compared with many countries in the region.

In her response, Zeti said Malaysia received substantial capital inflows in 2007 and 2008 to cause international reserves to peak at US$ 125.8 billion in June 2008.

The outflows, she contended, were largely driven by adverse developments in advanced financial markets that resulted from de-leveraging activities by international investors.

By Jan 15 this year, Bank Negara’s international reserves had fallen by a whopping US$ 29.1 billion from the peak of US$ 125.8 billion to US$ 96.7 billion.

This is too big a decline to be left unquestioned and unanalyzed no matter how much we love and respect the Governor. It also calls for soul searching.

The same goes for Khazanah’s Managing Director Tan Sri Azman Molthtar. Although his tenure has been extended by another three-year term and the sovereign fund is doing well despite the global recession, the task ahead is monumental.

Azman has been quoted as saying that the value of Khazanah’s investment rose by 34% to RM92.2 billion at the end of last year, reflecting the improved market conditions. The net asset value, meanwhile, rose by 63.5% to RM54.1 billion.

Several major concerns can be raised, including the paring down of its stakes in a number of GLCs in recent months, leading some analysts to suggest that Khazanah was raising money for the government, while others say it was hi response to criticism that the GLCs were ‘for crimping market liquidity’.

Another concern is its vast involvement in the controversial Iskandar Malaysia development area in Johor. The fear is Khazanah is spending too much money and energy on one project.

And like PYB. Khazanah’s success should not be measured solely by the money it makes. Equally important is its capacity building and restructuring roles. It must at least ensure that Bumiputeras have a fighting chance in the GLCs it controls and the businesses it participates.

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