The appointment of Ahmad Zulqarnain Onn and Tengku Azmil Zahruddin Raja Abdul Aziz to the newly created deputy managing director roles is the strongest signal Malaysia’s sovereign wealth fund is sending to the market that it has identified candidates from within to take over from Azman.
Ahmad Zulqarnain, a man of few words, is best known as a bright spark from Harvard who was the first chief executive of Danajamin Bhd, the government company set up to help the private sector raise money through the bond market.
As for Tengku Azmil, an accountant by profession who turned down a partnership in PricewaterhouseCoopers in Hong Kong to join Khazanah, his stint as chief executive of Malaysia Airlines Bhd did not go well.
He has reinvented himself and now takes charge of Khazanah’s foray into investments in technology companies.
Key to their appointments, both are in their 40s, not known to have any political affiliations and have the integrity to lead large organisatons.
But will this put to rest speculation about an outsider being parachuted into Azman's role come April 2019? There are whisperings that several candidates from outside Khazanah are eyeing Azman’s position.
It will not.
The Federal Government owns Khazanah. As a shareholder, technically it can appoint anyone it sees fit to take care of its interests when the time comes.
However, if the sovereign wealth fund performs well in the next 18 months, there would be no reason to rock the boat. There would be no excuse for the shareholder to bring someone in from outside Khazanah to lead the organisation should Azman no longer continue his tenure.
Khazanah has come under criticism that the net worth of its assets have declined by almost RM9bil to RM102bil from 2015 to 2016. The critics are also sniping that the fund has not been paying enough dividends to the shareholders.
However, Khazanah has replied that critics should look at its performance over the last 13 years since 2004 where the net worth of its assets has grown from RM30bil to RM102bil, marking an annual compounded return of 9.3%.
The track record shows that Khazanah under Azman has done better than other regional sovereign wealth funds.
Also, the local stock market has come down 12% on average over the last three years. Even the Employees Provident Fund (EPF) has declared lower dividends to contributors.
Nevertheless, the job of Ahmad Zulqarnain and Tengku Azmil would be to beef up the net value of assets under Khazanah in the next year or so. That would help put to rest speculation over an outsider coming to head Khazanah.
Along the way, Khazanah should exit business sectors such as construction and property development where entrepreneur-driven companies have proven to be better-managed entities.
There are a few reasons to shirk the construction sector – from the way the industry operates to the cut-throat nature of the sector. A slight delay in an engineering and construction job could turn profit into loss.
As for the property sector, Khazanah-led companies typically build on land they have inherited from the government or from companies they have taken over post the 1998 crisis.
Their performance is not the same as that of Eco World Development Bhd and Mah Sing Bhd – companies driven by entrepreneurs who take risks in buying land and quickly turning it around to ensure they make money for shareholders.
After serving Khazanah and seeing through the re-making of Corporate Malaysia since 2004, Azman is likely to give way for younger blood in 2019.
When he took over as head of Khazanah, Corporate Malaysia was mired in various issues. Large companies that were handed lucrative government contracts or assets to manage lacked corporate governance standards and were laden with debt.
This forced the hand of the government in these companies.
The Khazanah today is a different animal altogether. It controls several listed companies that own important infrastructure such as highways and airports. It has a large leadership team as Azman has hired some of the best local talent to be a part of the journey to restructure Corporate Malaysia.
In the next 15 months or so, both Ahmad Zulqarnain and Tengku Azmil have to prove their mettle or risk seeing an outsider take the reins.
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