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Thursday, 17 December 2009

Khazanah’s orderly divestitures



In my conversation with The Oracle of Syed Putera (a 4 part series will appear next week), I asked about the selling down by Khazanah. Khazanah is the investment arm of our government. Its chairman is our PM and the MD is Azman Mokhtar. One board member is the minister in charge of the EPU. He was made a member when he was the Finance Minister 2. By right he should relinquish the position to allow the present MF2 to sit on the board. But he wants to hold on to the post. Azman Mokhtar was handpicked by him to head the GLC and to educate the stupid public what is KPI.

Except that the public is not stupid all the time.

When I asked the Oracle about this, he asked me back. Why are we placing too much emphasis on what Khazanah does? The value of the portfolio it holds is relatively minuscule when compared to say, what PETRONAS has. We should focus our attention to PETRONAS.

The more significant portion of the answer was, to whom does Khazanah divest its holdings? We are not exactly clear on that. If Khazanah sells its portfolio holdings to other GLC such as the EPF, this is tantamount of transferring from one pocket to the other. The public is not enriched by such transaction. Of course, Khazanah gets money from selling down its portfolio. It improves it liquidity it says.

The sale to EPF is also questionable for it can be interpreted as temporarily parking the portfolio until a suitable suitor comes along.

It's also questionable since we are also not certain whether EPF has the smarts to manage its new acquired portfolio. Didn't EPF say it the last time, it doesn't have the competency to handle investments and that was the main reason given when it surrendered management of a sizeable fund to another private entity? Remember Valuecrap Valuecap?

Now it has the competence to buy over what Khazanah sells them. It should be able to declare better dividends this year.

A short while ago, the Khazanah boss, Azman Mokhtar hit out at criticisms against Khazanah's divestitures and insisted everything is orderly. In December 2009, khazanah sold 86.85 million shares in TNB and got RM 700 million. This is the beginning of Khazanah's process of divesting shares that it holds to other buyers. And over the last 5 years, Khazanah had sold RM 12 billion worth of shares and gained RM 3.6 billion. It has sold its stakes in Bintulu Port, PTP Port, RHB Bank, Tradewinds Hotels and Time Dotcom.

Who were the buyers? The owners of the other bloc of shares in the respective companies? If that is so, then the shares that Khazanah held in the first place and paid for were means to provide additional liquidity to the owners of that business. In actuality, the money parked by Khazanah was a form of soft loan.

Therefore contrary to the aims of Khazanah as being the investment arm of the government that buys shares for strategic reasons, it was just acting as a business partner binging along with it, OUR money to help out selected businesses. When it sold back to presumably the original owners, it really wasn't looking out after the strategic interest of holding something valuable on behalf of the ketuanan Melayu or on behalf of whomsoever interest it thinks it wants to define at any particular time. All it was doing was holding out for the interests of the privileged few.

Let us debate a little on the semantics of 'orderly'. Just what does this phrase mean? If it means, when doing the transactions Khazanah's accountants and financial experts pored over details, and the lawyers combed through with due diligence, then, we have no quarrel over the term orderly.

But what if orderly means, the prospective buyers are all selected buyers known only to Khazanah? Or in the words of Khazanah's boss- whichever company we feel is non-core, or has reached a certain maturity that we feel we don't need to hold and there are good buyers at the right price and of the right type sp that they can tackle that particular industry and company further….

It doesn't need a rocket scientist to figure out that the right type of buyer will be the existing owners of the other shares not previously held by Khazanah. Because certainly, they know the business and can be the only type of buyers who can take the company farther.

If this is the reasoning, then it reconfirms our suspicions that Khazanah was holding the shares not for reason of strategic Bumiputera/national interests but participated at the beginning, to inject some loan sanitized as capital, into the original venture.

I think full public disclosure of who are the buyers of Khazanah shares is most apt. After that we shall form our KPI on Khazanah so that we can judge how clever these people are.

5 comments:

Richard Cranium 17 December 2009 at 18:12  

You said that Khazanah is taking positions in companies in the interest of Bumiputeras?

Did I miss anything when Khazanah was formed? Was it to take care of Malaysia's interest, not just one race? Didn't the money come from public coffers? Or did the non-Malays stop paying their taxes recently?

donplaypuks® 17 December 2009 at 19:30  

Quite clearly Khazanah has lost the plot!!

It has forgotten what it's there for. It has run amok investing in risky theme parks, prawn farms and movie studios when really it's there to safeguard the national reserves by investing in blue chip strategic projects and investments with good returns.

This is only possible because successive UMNO/BN Govt's have allowed it to operate in almost total secrecy and in an envoronmrnt of utter lack of transparency.

Where are the details of their ROI on realised and unrealised profits and what are their mega write-off from mega imprudent harebrained ventures? Who knows? Can this situation be allowed to continue for one second longer?

dpp
We are all of 1 race, the Human Race

Anonymous,  18 December 2009 at 00:48  

Earlier I was at outsyed the box, and now I'm here and I find more alarming news.
Oh dear, oh dear, whither our nation?
AA

DingDong,  18 December 2009 at 00:50  

Salam Dato,

Can you plz do an article on the 2010 budget e.g cuts to Education like yuran asrama.
Masa saya mrsm jasin bapak saya bayar rm30 p.m(rm1 per day).
Now Mat Dom happily announced he met his KPI by increasing the yuran from rm1 to rm3 thus reducing gov allocation by 200%.
What a crap DG.
Tackle the top 3 cost la which is ur kementerian staff and meeting and makan free kat hotel sini sana..
Baru je bapak mentua puji Gomen saying that 1 of the things he like about BN is sekolah asrama.
"dapat anak masuk asrama macam rahmat.kita bayar rm1 dari umur 13 sampai habis sekolah"translated fr kelantanese dialect..
Can't wait to call him this weekend..
I like to poke Hardcore BN people.lol.

Anonymous,  19 December 2009 at 01:17  

Dato' it is good to tell them off that they are stupid and idiot!!!
No point trying to be nice and you can never win when arguing with idiots. All of them "besar kepala" and about time to break their heads if need be.
Mampus la kita macam ni!!! too many idiots.!!!

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