Where do we draw the line in debating BlackRock’s role in Malaysia?

Prime Minister Datuk Seri Anwar Ibrahim has been one of the most prominent champions of the Palestinian cause.

As a leader of the Muslim world, he has gone the extra mile to ensure the voice of the Palestinian people is heard by those who are unabashed in their support of Israel.

During the APEC 2023 Summit with United States president, Joe Biden in attendance, Anwar strongly condemned the ongoing violence in Gaza, characterising it as a severe humanitarian crisis. He emphasized that the destruction in Gaza represents a significant abandonment of moral responsibility and a blatant violation of international law.

Anwar highlighted that the crisis not only impacts Palestine and the broader Middle East but also has far-reaching implications for global relations. This was a high moment for Malaysia’s efforts to champion the cause of the Palestinian people which has been a cornerstone of our foreign policy since independence.

However, with such a high-profile campaign also come the perils of politics and politicisation.

On May 15, 2024, it was announced that BlackRock-backed Global Infrastructure Partners (GIP) is to invest in Malaysia Airports Holdings Berhad (MAHB). This consortium, which includes Khazanah Nasional Bhd, the Employees Provident Fund (EPF), and the Abu Dhabi Investment Authority (Adia), aims to take MAHB private with an offer of RM11 per share, valuing the company at approximately RM18.26bil (US$3.9bil). This move is expected to be completed in the fourth quarter of 2024, pending regulatory approvals in Malaysia and other jurisdictions such as Türkiye because MAHB also manages the Sabiha Gokcen Airport in Istanbul.

Critics, including Perikatan Nasional and Khairy Jamaluddin, have expressed strong opposition to the deal because it involves GIP.

Perikatan Youth has criticised the deal, arguing that profits from such investments enable Israel to continue its aggressive actions in Palestine. They questioned the necessity of involving GIP, alleging that it has failed to manage other airports effectively and highlighting the inconsistency of being vocal about Palestinian issues internationally while engaging with companies linked to

Israel domestically.

Khairy has warned that continuing with the deal would make the Malaysian government complicit in Israel's actions in Gaza, calling the deal both morally unacceptable and commercially unnecessary.

He pointed out that major airports in the region are managed locally rather than by foreign entities, suggesting that Malaysia should follow the same model.

The logic employed by Perikatan Youth, while far-fetched because BlackRock and GIP are not owned by the Israeli state, will not have any bearing on the Israeli oppression of Palestine.

However, it does present this government with a significant challenge - where does it draw the line and how does it balance national commercial interest with foreign policy and moral imperatives like supporting and advocating for the Palestinian people.

In response to his critics, Anwar defended the deal, emphasising the economic implications of cutting ties with companies connected to Israel and arguing that the negotiations with GIP occurred before its acquisition by BlackRock.

Anwar accused his critics of using the Palestinian issue for political mileage and stated that the government cannot sever relations with companies based on their ties to Israel without harming the country’s economy.

To digress a little, BlackRock holds equity investments in hundreds of Malaysian corporations. As of May 2024, BlackRock’s investments in Malaysia are substantial, amounting to approximately RM24.7bil in Bursa Malaysia shares and RM7.9bil in government and corporate bonds. Their MSCI Malaysia Equity Fund alone holds equity in 37 major Malaysian companies, including significant stakes in blue-chip companies such as CIMB Holdings, Tenaga Nasional, and PETRONAS.

As such, it is not easy in the way the critics of BlackRock suggest to de-couple its investments in Malaysian holdings.

Further, there is little to be argued that MAHB needs to buck up. KLIA has plunged in the global airport rankings and the failure of the aero-train system has been a sore point.

This deal is important for MAHB and Malaysians by extension because it promises substantial investment in the modernisation and upgrading of Malaysia’s airport infrastructure. This includes enhancing passenger services and improving airline connectivity, which can elevate the operational standards of Malaysian airports and make them more competitive on a regional and global scale.

Moreover, the economic impact of the deal is significant. It is expected to stimulate economic growth by developing ancillary businesses around the airports, thereby creating jobs and supporting local economies. This aligns with Khazanah Nasional’s broader objective of advancing Malaysia’s economic development through strategic investments. The commitment to modernising infrastructure not only positions Malaysia’s airports as world-class facilities but also boosts the local economy through increased employment opportunities and business activities.

The deal also benefits from the expertise and experience of GIP, a renowned infrastructure investor with a strong track record in managing large-scale assets. GIP’s involvement can lead to enhanced efficiency, customer service, and overall management of the airports, drawing from its substantial experience in the sector. This partnership brings international best practices to Malaysia, potentially improving operational excellence and customer satisfaction at MAHB’s facilities.

Financial stability and growth are other key advantages. The infusion of capital from GIP and its partners ensures that MAHB has the necessary funding for expansion and modernisation projects without solely relying on government resources. This reduces the financial burden on the Malaysian government while ensuring that the airports can continue to grow and improve. The deal thus supports long-term financial sustainability and growth for MAHB.

Additionally, the consortium has committed to safeguarding existing employment rights and ensuring there are no layoffs because of the deal. This provides job security for current MAHB employees, helping maintain workforce morale and stability during the transition.

So, on paper this is a good deal – it is hard to argue otherwise. But where do we draw the line between investments and moral imperatives?

I for one argue that any deal, no matter how good it is, that waters down our moral imperatives can never be countenanced. However, the global economic web is tightly interwoven and we must be ready to accept that some kind of overlap is bound to happen because many companies and countries invest and trade with us respectively, but they also have relations with Israel.

A rational understanding of this is fundamental.

Malaysia needs to do more to climb the economic ladder and in doing so, we need good infrastructure including good airports. Changi Airport is a prime example of how much of an economic spillover a good airport can deliver. It was reported in 2019 that Singapore’s aviation sector, including Changi Airport, contributed approximately 6% to Singapore’s GDP. Why is Malaysia not making such gains?

And for too long, policy-making has been held hostage to politics. We must avoid this. What is good for the country is good for both the government and the opposition.