KUALA LUMPUR: The incidents surrounding 1Malaysia Development Bhd (1MDB) are not an accurate representation of how the government or government-linked companies (GLCs) are run, according to Second Finance Minister Datuk Seri Johari Abdul Ghani.
“To say that the government has no governance is also not right because we are producing the numbers and have good standing in international and regional rankings. We have strong fundamentals of governance. It is not because of this (1MDB) that the entire country collapsed,” he said.
Speaking at the Invest Malaysia 2017 panel discussion, he cited examples of some well-run GLCs, including CIMB Group Holdings Bhd, Tenaga Nasional Bhd (TNB), Telekom Malaysia Bhd (TM) and Plus Malaysia Bhd. “These are all good companies under Khazanah Nasional Bhd that are well-run,” Johari said.
Pertaining to the 1MDB, he said the government was actively dealing with the “elephant in the room”.
“We overlooked certain aspects of it. But we came back and relooked and then recognised the wrong business model with weak management,” Johari said.
“If you look at Malaysia Airlines, we have addressed that. As for 1MDB, we have openly admitted that this is an issue of a wrong business model, weak management and poor governance. And we are addressing these issues,” he added.
In the panel discussion, Johari also addressed concerns that some quarters have voiced on the large influx of investments from China into Malaysia.
“When the government looks at China, you must also understand that China is the only country that is in investment mode in the world today. In 2015 alone, it invested some US$150bil in Malaysia and this is not a small amount of money. We are always open to countries that give us money,” he said.
“When China comes here to invest, it is not investing in something that we already have. But rather, it is investing in something that we want but cannot afford to do.
“For example, it came here to invest in something that provides connectivity for Malaysia – in either land or maritime through the One Belt One Road initiative,” he pointed out.
Commenting on the government’s debt position, Johari said that the government always took the debt position relative to the revenue position in all seriousness.
“Today, we are still at a threshold of below 55%. The issue some see is with the off-balance-sheet financing. However, there are two types of off-balance-sheet financing and they are unlikely to trigger anything that would need the attention of the government,” he said.
He pointed out that one type of off-balance-sheet financing was government guarantees to commercial entities such as Khazanah, TNB and TM that used to get assistance.
“Today, these are commercial and self-sustainable entities which are very unlikely to trigger anything from the government,” he said.
He added that the other type of off-balance-sheet financing was for the mass rapid transit, light rail transit and high-speed rail project investments.
“We need to build this infrastructure for the future of the country. All the investments can be easily paid off through increased economic activities in the future, and reduce the need for people to have cars eventually,” he said.
He likened the response of the people towards the building of the infrastructure to the reaction when the government decided to build the KL International Airport in the mid-1990s.
“If we had not built the airport, then we wouldn’t have been able to get the (spillover) benefits to the tourism sector. We need to create economic entities and what’s more, these are for future generations,” he said.
Prime Minister Datuk Seri Najib Tun Razak also touched on the 1MDB in his keynote address at the Invest Malaysia KL forum.
He conceded that there were lapses of governance, but said that the government had taken measures to address the issues surrounding the now-defunct state-investment fund.
“At 1MDB it is now clear that there were lapses of governance,” Najib said.
“However, rather than bury our heads in the sand, we ordered investigations into the company at a scale unprecedented in our nation’s history. Rather than funnel good money after bad to cover up any issues 1MDB may have faced, I instructed the rationalisation of the company... and it is progressing well,” he added.