KUALA LUMPUR — Government-linked investment corporations (GLICs) have safeguards in place to ensure public funds used are safe and generate good returns, former CIMB Group chairman Tan Sri Nazir Razak told a forum.
Every investment proposal goes through “proper filters” and committees, as well as the board of directors in these GLICs, he said in response to a question on the safety of re-investing public savings into the domestic economy as well as high-risk sectors.
GLICs such as Khazanah Nasional Berhad and the Employees Provident Fund (EPF) would look at whether investment opportunities “pass the test” in terms of desired returns on investment (ROI) before committing funds, he added.
“If it (investment opportunity) doesn’t (pass the test), then they shouldn’t invest,” Nazir said during a dialogue titled “Risky Ventures: Is The Government Putting Our Savings at Risk?” organised by Sinar Daily on October 3.
The dialogue touched on the Finance Ministry’s (MoF) GEAR-uP programme, launched this year, to consolidate efforts across six government-linked entities to catalyse growth in key economic sectors domestically.
The six GLICs are Khazanah, EPF, Retirement Fund Inc (KWAP), Permodalan Nasional Bhd (PNB), Lembaga Tabung Haji, and the Armed Forces Fund Board (LTAT).
Nazir’s co-panelist, political economy analyst and academic Edmund Terence Gomez, voiced concerns about GLICs and pension funds making investments in high risk sectors.
Gomez said it was worrisome that the decision-making power is concentrated in the Finance Ministry (MoF), which at present is also led by the Prime Minister, Datuk Seri Anwar Ibrahim. Gomez said there would be better checks and balances atCabinet level if MoF and the Prime Minister’s Office (PMO) are run separately.
“But that (separation) does not exist at the moment, and that is to my mind, a red-flag,” said Gomez, who is Universiti Malaya Honorary Professor.
He also expressed concerns that pension funds used by GLICs for investments in the past had resulted in huge debts and some scandal. He named the Maminco-Makuwasa scandal in the 1980s and the Pembinaan PFI Sdn Bhd scandal which used funds from EPF and Retirement Fund Incorporated (KWAP).
Gomez was also concerned that pension funds would make high-risk investments into sectors such as green energy, high-tech and semiconductors, when they were supposed to venture into low-risk investments.
However, Nazir disagreed with the academic, emphasising that some investments should not be presumed as high-risks just because they involved certain economic sectors.
He said in every investment deal, professionals come in to package the details in a way that gives the funds the desired returns.
“So if you do a healthcare deal or maybe a startup, and a promoter comes in and puts in his collateral, EPF puts in capital, and if it is packaged it correctly, banks may come in as guarantors.
”Suddenly, it is not a high-risk investment. So we cannot assume that just because (investment is made into a certain economic) sector, it is high-risk,” said Nazir, who now heads Ikhlas Capital and also chairs the ASEAN Business Advisory Council (ASEAN-BAC) Malaysia Chapter.
Nazir agreed with Gomez that EPF had a chequered past in the 1980s, but added, it has been “on a good ride since then”.
Ipoh Timur MP Howard Lee, who was the third panelist, said investor confidence in the domestic economy was evident from the RM160 billion in approved investments in the first half of this year – where 53.4% or RM85.4 billion of the amount was by domestic investors.
The GEAR-uP programme will see the six leading GLICs collectively invest RM120 billion in domestic direct investments over the next five years, on top of RM440 billion in public market investments under their steady-state investment programmes.
These investments are primarily directed towards high-growth high-value (HGHV) industries such as the energy transition sector, advanced manufacturing especially in the semiconductor space, investments across all life cycles of firms from start-ups, venture capital to mid-tier companies and finally to support listing of such companies, according to the ministry. – October 5, 2024
