Khazanah’s divestments are commercial decisions

graphic by DYG NORAZHAR

THE divestment exercises by Khazanah Nasional Bhd are purely commercial decisions, according to Deputy Economic Affairs Minister Dr Mohd Radzi Md Jidin.

Mohd Radzi said it is normal for the sovereign wealth fund to release investments and then redeploying capital for new investments.

“The decision to sell or hold assets was based purely on commercial reasons,” Mohd Radzi told the Dewan Rakyat yesterday.

He was responding to a question by Datuk Seri Dr Wee Ka Siong (Barisan Nasional-Ayer Hitam) who asked, how would Khazanah receive consistent returns if the fund divests its strategic investments without replacing it.

Mohd Radzi said the sale of Khazanah’s 60% stake in property developer M+S Pte Ltd to its joint-venture partner, Singapore state investor Temasek Holdings Pte Ltd, was a decision made by the previous administration and was recently completed by the Pakatan Harapan (PH) government.

“For example, the sale of M+S was decided by the previous government, and the PH administration went on with it simply because it was a commercial decision made by Khazanah,” he added.

The deputy minister explained that the fund will consider whether it is better to hold the assets or sell and use the proceeds to make new investments.

“What I am trying to emphasise here is that, through this method, Khazanah would be able to yield more value.

“Otherwise, Khazanah would solely depend on a stagnant dividend and portfolio which doesn’t hold much value,” he said, clarifying that the main objective is to invest for the purpose of generating long-term financial returns.

Currently, Khazanah is operating under a new mandate which includes rebalancing its commercial fund while developing strategic assets.

Under the new mandate, the fund will focus on growing financial assets and diversifying the country’s revenue streams as part of its commercial objective. For strategic funds, the fund will hold on to assets that bring long-term economic benefits.

From 2009 to April 2018, Khazanah divested 84 assets under former Prime Minister Datuk Seri Mohd Najib Razak.

Between May last year and June 2019, the fund divested assets worth RM18.8 billion as the government pushes the fund to further pare down its debt which hit about RM55 billion last year.

Mohd Radzi said the sale of an equity is considered immediately after an investment has achieved its financial and strategic goals.

As an entity, he also clarified that proceeds from the sale of equities by any government-linked company are not transferred directly to the government account.

“The payment received by the government is in the form of annual dividends and taxes,” he added.

Khazanah had accumulated borrowings totalling about RM55 billion prior to the asset disposals exercise. A substantial portion of its borrowings are guaranteed by the government as its sole shareholder.

Khazanah reported a loss before tax of RM6.27 billion last year, but expects a RM5 billion profit for this financial year.