To most of the Malaysian public, the offer to resign by the entire board of Khazanah Nasional together with it managing director Tan Sri Azman Mokhtar may come as a surprise.
The resignation letters of the all nine high-profile individuals have been reported to be un-dated. What it means is that the decision to reject or accept now lies in the hands of Tun Dr Mahathir Mohamad.
Finance Minister Lim Guan Eng told reporters at the Dewan Rakyat lobby today that it was a ‘wise decision’ on the part of Khazanah and will ‘leave it to the PM' to decide on the matter.
Lim’s statement conformed with Khazanah board’s resignation statement that indicated; “This is done in order to facilitate a smooth and orderly transition under the new government.
“The current board have been honoured to serve and feels it is appropriate to offer the discretion (to decide on their resignations) and reaffirm the prerogative to form the new board,” the statement said.
The shock resignation no doubt raises a few questions. Will Tun Dr Mahathir accept the resignation en bloc? Or will he select who’s to stay or who’s to go? Second, will there be a change in Khazanah’s direction to move the nation forward?
The Prime Minister had recently raised eyebrows when he stated that Khazanah had deviated from the original purpose of its creation, which is to support Bumiputera equity in Malaysia, enriching itself instead.
On the market front, there’s hasn’t been any rumbles following the resignation announcement despite Khazanah’s ownership in some of the largest listed companies in Malaysia. (As of March 2018, Khazanah has 28.9 percent ownership in Tenaga Nasional, 42.2 percent in IHH Healthcare, 27.3 percent in CIMB, 37.3 percent in Axiata Group, 33.2 percent in Malaysia Airports. The benchmark FBM KLCI ended up 0.14 percent at close.
“I don’t think that this will have any negative impact on the economy in the long-run; in fact, it could well be a positive thing, since the PM has already indicated that the focus and direction of Khazanah and many GLCs need to be re-evaluated,” says Jayant Menon, an economist at Asian Development Bank, who has researched on Malaysian GLCs.
He says the resignation by Tan Sri Azman Mokhtar - who has led the fund for 14 years - and the board members as the right move.
“In fact, it should have probably come sooner, after the news broke that funds from Khazanah were being used to pay for debts of 1MDB. Bank Negara was also implicated in a similar way and the governor had offered his resignation almost immediately,” he adds.
Khazanah was dragged into the 1MDB controversy over the previous government's redemption of RM3 billion worth of redeemable cumulative convertible preference shares (RCCPS).
The sovereign wealth fund defended itself by pointing out that the redemptIon was in effect a repayment of shareholder capital by Khazanah to the Ministry of Finance (MOF). The RCCPS is injected by MOF. As Khazanah's 100 percent shareholder, MOF has the right to redeem the RCCPS at any time.
Meanwhile, opposition parliamentarian and Rembau MP Khairy Jamaluddin tweeted the possibility that Khazanah is just the first tile in the domino.
"Khazanah recruited the best and brightest Malaysians to do this. It would be a shame to dismantle everything that has been built only to replace it with the business model of the 1990s. My fear: GLCs will be broken up and flogged off to a new set of 1990-esque businessmen."
"Post PM, Khazanah was transformed from just a holding entity to a strategic investment arm with a mandate to not just increase asset value but also make investments into sectors that would benefit the nation.
"But, Khazanah’s role as government’s strategic investment arm must continue. It is a very different entity from what it was at the end of PM’s first tenure where it was essentially a holding entity for GoM’s stake in companies. No strategic role."
Khazanah was incorporated in September 3, 1993 under the MOF, during the leadership of Tun Dr Mahathir as Malaysia's fourth PM. He was also Khazanah's first Chairman.
As of December 31, 2017, Khazanah's realisable asset value stands at RM157.2 billion ringgit.