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Malaysia in transition

Board of Malaysian sovereign wealth fund resigns en masse

Khazanah Nasional shake-up to have domino effect on state-linked companies

Azman Mokhtar, managing director of Kazanah Nasional, in 2014: Board members of the sovereign wealth fund exit as Malaysia's government goes on an anti-political-interference drive.   © Reuters

KUALA LUMPUR -- Malaysia's state-owned Khazanah Nasional on Thursday said all nine of the sovereign wealth fund's board members have tendered their resignations to "facilitate a smooth and orderly transition under the new government."

Managing Director Azman Mokhtar, who has served since 2004, and Nazir Razak, the youngest brother of former Prime Minister Najib Razak, are among those who resigned. Nazir is the chairman in CIMB Group Holdings, Malaysia's second largest lender by assets.

The board "feels it is appropriate to offer the new government the discretion and reaffirm the prerogative to form a new board," according to a statement released by Khazanah.

The Minister of Finance Lim Guan Eng said the offer to resign was a "wise decision" that would allow the prime minister to decide on the next move.

The resignations are part of a trend started by the country's new government, which does not want any political influence in the management of state-linked companies, said Nazri Khan of Hermana Capital, a fund management company.

"It will shake up government-linked companies ... by improving their governance," Nazri said.

The departures come weeks after Prime Minister Mahathir Mohamad claimed that Khazanah had diverged from its original objectives, among which was to hold shares allotted to ethnic Malays, known as Bumiputra, under the country's affirmative action policy to assist this marginalized majority.

Some Malay retail investors who were allocated company shares during the initial public offering sold their holdings for quick profit.

"So to stop them from doing that, we created Khazanah," Mahathir told reporters earlier this month. "But now Khazanah seems to be taking up all [sorts of] shares on its own, whether they are meant for the Bumiputra or not."

In an interview with the Nikkei Asian Review last month, Mahathir said some state funds and companies are run by appointees because of "politics." He did not specify, but several politicians from the previous ruling party have since resigned from the boards of Khazanah and other state funds. The top of Telekom Malaysia, Malaysia Airports Holdings and other state-linked companies had also stepped down since the new government clinched power in May.

The Ministry of Finance established Khazanah in 1993. The fund's website says Khazanah's role is to hold and manage the commercial assets of the government. This fund holds significant stakes in key sectors from aviation to telecommunications. Khazanah has stakes in Malaysian lender CIMB Group Holdings, IHH Healthcare, Telekom Malaysia, Axiata Group, Astro Malaysia, Malaysia Airports Holdings and Malaysia Airlines.

Under managing director Azman, Khazanah's total realizable asset value from 2004 to the end of last year grew 140%, to 157.2 billion ringgit ($38.7 billion). Like its peer Temasek Holdings in Singapore, Khazanah in recent years has begun investing in technology companies abroad. These include China's Alibaba Group and India's Infosys.

The shake-up at Khazanah will likely spur changes in it holdings. Mahathir had said Khazanah should focus on its original objective, to hold shares on behalf of Bumiputra investors, and pare down its stakes in companies when appropriate to allow more Malays to own shares.

 

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