PAC: High investment risks led to Khazanah's losses

KUALA LUMPUR: High investment risks in a handful of companies are among the reasons why Khazanah Nasional Berhad incurred pre-tax losses of RM6.3bil last year, says Parliament's Public Accounts Committee (PAC).

The PAC revealed this following a probe on Khazanah's huge losses in 2018 compared to the RM2.7bil profit the government's sovereign wealth fund made in 2017.

"Although this was not reported in the Auditor-General's Report, the PAC had used its power under Dewan Rakyat Regulations to initiate the proceedings," PAC chairman Datuk Dr Noraini Ahmad said in a statement on Wednesday (Oct 23).

She added the PAC decided to initiate the probe after Khazanah's losses in 2018 gave rise to public speculation.

She said that former senior deputy secretary-general in the prime minister's department Datuk Seri Mohd Zuki Ali and Khazanah's managing director Datuk Shahril Ridza Ridzuan were summoned to testify before the PAC.

Mohd Zuki was Khazanah's monitoring officer while Shahril, the former Employees Provident Fund's chief executive officer, was appointed to Khazanah in August last year.

Dr Noraini said the PAC was satisfied with the explanation given by Mohd Zuki and Shahril over Khazanah's losses for 2018 and restructuring effort under the Pakatan Harapan administration.

Among the factors leading to the losses, she added, was the implementation of government policies, particularly in the telecommunications sector which impacted several companies owned by Khazanah.

"The PAC also took note that there were very high risks under the previous investment strategy which saw between 80% and 85% focused on nine to 10 companies.

"This strategy exposed Khazanah to high investment risks," she said.

She said the adoption of the Financial Reporting Standards in Malaysia in 2018 was also a factor as it resulted in Khazanah reporting RM3.1bil in collective value depreciation.

She added that PAC recommended for Khazanah to implement new risk control strategies, including conducting investment professionally and free of political interference.

Dr Noraini said that Khazanah has been given one year to report back to the PAC on its recommendations to improve.