Social distancing and govt-owned entities

  • Corporate News
  • Saturday, 18 Apr 2020

Should Wahid’s appointment come under scrutiny? No, it should not as he has all the credentials for the position and passes the fit and proper test. He comes armed with a wealth of knowledge and experience in the corporate world.

WITH a new government and new Cabinet in Putrajaya, it’s only natural that there are changes in statutory bodies, government-linked investment companies (GLICs) and government-linked companies (GLCs).

The latest to be shown the exit door is Bursa Malaysia chairman, Datuk Shireen Ann Zaharah Muhiudeen. The chairman of the board of directors of Universiti Kebangsaaan Malaysia, Tan Sri Abdul Wahid Omar, is taking over the position.

Should Wahid’s appointment come under scrutiny? No, it should not as he has all the credentials for the position and passes the fit and proper test.

He comes armed with a wealth of knowledge and experience in the corporate world.

Some may doubt him being apolitical as Wahid served as a minister in charge of economic affairs for a three-year term under the premiership of Datuk Seri Najib Razak. But he is not an active politician.He is a banker first, before trying his hand in government. He knows the traits of the piranha-infested corporate and capital markets. He experienced twice the journey of managing companies in times of economic crisis.

His first taste was to head the troubled Renong group as corporate Malaysia recovered from the 1998 crisis and in 2008, he helmed Malayan Banking that was in the midst of buying Bank Internasional Indonesia.

There are many others like Wahid who were side-lined under the Pakatan Harapan government. They were not politicians but merely technocrats who faithfully served the government of the day.

Some cheer-leaders of Pakatan contended that they were removed because many went on and above their normal call of duty to assist the government then. But that reasoning to remove a person seems shallow and myopic.

Shouldn’t capability, honesty, and integrity be the criteria in determining the fit and proper mantle of a CEO or chairman?

Many casualties in the Pakatan era were largely due to personal agendas by some who had the ears of Tun Dr Mahathir Mohamad, the prime minister then. The reasoning was that a new government after 60 years needed a clean slate – which really is not necessarily true.

A good many were replaced not because they were incompetent or dishonest but for other reasons, including settling old scores. Ironically, many in GLCs voted for Pakatan. The cleansing exercise was not healthy and did not work in favour of the Pakatan government.

Firstly, if the current government feels fit for another round of changes in government agencies and companies, it should not be because there is a need to start an administration with a clean slate.

Moreover, we cannot afford major disruptions in the running of government-linked entities at a time when the economy is fast falling. More importantly, personal agenda should never be a consideration to replace anyone in any government agency or company.

The Tan Sri Muhyiddin Yassin administration should be well aware of the mistakes of the Pakatan government that were overzealous in its approach to the extent that they threw “the baby out with the bathwater”.

Secondly, not all politicians are fit to helm government agencies or companies. And not all companies or agencies are suitable for politicians.

We have seen what happens when a politician, especially one that is ambitious and gunning to grow his or her influence in the party, helms government entities. Most vulnerable are government entities with big budgets, heavy capital expenditure and large assets.

Fugitive businessman

1Malaysia Development Bhd (1MDB), Lembaga Tabung Haji (LTH) and Felda are stark reminders on why active politicians should not be appointed to helm any such government-linked entities.

In the case of 1MDB, the prime minister himself was the adviser and the board comprised weak personalities who dare not stand up against any wrongdoing. The CEOs of 1MDB did everything and anything possible to please the prime minister then.

As details emerged in court hearings, fugitive businessman, Low Taek Jho or better known as Jho Low, who was a close acquaintance of Najib and his family, was a “shadow director” and called the shots.

The end result is 1MDB became a heavily indebted fund and was caught at the centre of a global financial scandal. A staggering RM31bil were raised, backed by the federal government, and the money was used to throw lavish parties, buy luxury goods, make movies and purchase properties outside Malaysia.

The scale of financial mismanagement was lower at LTH and Felda.Both were headed by active politicians who were more interested in pleasing their supporters and political masters than ensuring the interest of the organisation they headed were taken care of.

A forensic audit detailed LTH’s precarious financial position where liabilities exceeded assets. They paid out dividends which they could not afford.

The government stepped in, set up a special purpose vehicle, issued debt papers and took over over-valued assets of RM19.9bil. The market value of the assets – comprising equities, properties and a plantation – were only worth RM10.3bil, meaning taxpayers bore the brunt of the premium paid.

The case of Felda and FGV Holdings Bhd is well documented. The listing of FGV in 2011 saw both companies together raising proceeds of RM11bil. The money did not go to productive assets. Five years later, both companies needed to be restructured.

Finally, there are roles for politicians in statutory bodies and government-linked organisations. But it has to be confined to entities that do not have large budgets and are not asset heavy. This is to minimise the risk of financial mismanagement.Somehow, active politicians holding positions in statutory bodies and government-controlled companies do not work because of the inherent conflict of interest. Active politicians serve a small group of people and tend to pander to their political masters.

In contrast, statutory bodies and companies owe it to their stakeholders and shareholders, which run into thousands. For instance, Felda’s responsibility is to its 112,639 settlers.

An active politician needs to build up and feed a power base. They need a war chest of cash to pursue his or her political ambitions. Make no mistake about that.

At some point, active politicians will succumb to the need to compromise on duties towards the organisations they serve to increase their influence and gain favours. That is what money politics is all about.

That is why there has to be social distancing between active politicians and statutory bodies, GLICs and GLCs.

The views expressed here are the writer’s own.

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