Tan Sri Azman Mokhtar.

EXCLUSIVE 1
FROM STRENGTH TO STRENGTH

KHAZANAH Nasional Bhd, the linchpin of GLC  transformation, has made huge gains on many fronts since 2004. Not the least of which is the increase in its investment portfolio to RM150.2 billion in 2015 from RM50.9 billion. Tan Sri Azman Mokhtar, managing director of the strategic investment fund, however, is cognisant of the challenges ahead — the revival of Malaysia Airlines, preparing for the implementation of TPPA, fulfilling the Bumiputera agenda and ‘reparing for succession as well’.

Reported by: A Jalil Hamid and Lokman Mansor

Source: Prime News / New Straits Times / April 14, 2016

"KHAZANAH NASIONAL BERHAD, which has led the transformation of government-linked companies (GLCs) for more than a decade, is primed to face future chal­lenges from a position of strength.

Its financial track record and per­formance is impressive. Malaysia’s strategic investment fund has spent RM74.7 billion across 144 invest­ments from 2004 until last year. It has also made 77 divestments worth RM48.1 billion, resulting in gains of RM22.3 billion.

“Our portfolio grew from RM50.9 billion to RM150.2 billion, and on a net worth adjusted basis (total assets less total liabilities), from RM33.3 bil­lion to RM109 billion, as at end 2015,” said Khazanah managing director Tan Sri Azman Mokhtar.

In an exclusive interview with the New Straits Times Press, the 55-year-old Azman said Khazanah - which means “treasure' in Malay - was able to treble its portfolio “ value while maintaining as­set cover more than three times.

Azman, who is also chairman of Iskandar In­vestment Bhd and Axiata Group Bhd, said Khazanah’s mandate went beyond just finan­cial targets.

Khazanah and GLCs have stepped up to the plate when the private sec­tor was unable to - either because of high risk, high capital outlay, com­plicated coordination problems, or all of the above.

“This is the reason for Khazanah’s involvement in Iskandar Malaysia, where we invested in, among others, EduCity, theme parks, hospitals, wellness centres and movie studios.

“Our efforts in Iskandar Malaysia helped create the initial impetus of economic traffic, jobs, technology and skills formation, and foreign partnership, which, in turn, would attract the private sector to come in and participate.”

A famous Khazanah investment in technology was China’s Alibaba, with an initial investment of US$250 million that later recorded a gain of about US$1 billion when the com­pany was listed in 2014.

“Out of this, we’ve realised about three quarters of that gain, and some of it, we’ve invested globally in tech­nology companies,” said Azman, who was previously managing direc­tor and co-founder of BinaFikir Sdn Bhd.

The setting up of Pinewood Iskan­dar Malaysia Studios, meanwhile, has catalysed other investments and technology transfers, including Imagica from Japan, Imaginarium from the United Kingdom and Uni­versity of Southern California’s School of Cinematic Arts.

Azman, who was formerly head of country research at Salomon Smith Barney Malaysia and Union Bank of Switzerland in Malaysia, said Khaz­anah also played an important role as the custodian of national and strategic assets, such as highways and airlines.

Malaysia Airlines’ restructuring, for example, has shown encour­aging progress, with the na­tional carrier recording a profit in February - its first positive monthly result in the three-year turn-around plan.

“It’s still early. If it were a football game, this would be only around 30 minutes into the first half,” said the chartered accountant by training.

On the Trans-Pacific Partner­ship (TPP) agreement, Azman said Khazanah had initially expressed concern over some provisions that it felt might put GLCs at a disadvan­tage.

“To be fair, the negotiators have renegotiated an outcome that enables us to move on,” he said, adding that Malaysia needed to prepare for TPP, including enacting a State-Owned En­terprise and GLC Act (SOGA).

SOGA would consolidate all the good work under the GLC Transfor­mation Programme and help ad­dress issues of sovereignty, said Az­man, who is also a trustee of the Asia Business Council.

Azman, whose contract has been renewed for a fifth term until June 2019, described his latest tenure as “daunting”, given the current eco­nomic headwinds and the signifi­cance of Malaysia approaching its 2020 developed nation target.

“In many ways, the progress over the years has prepared us for this, and I believe we are immersing our­selves in this period of great chal­lenge - and opportunity - from a position of some strength.

“It is now very important that we focus on not just delivering success, but indeed, preparing for succes­sion, as well,” he said, adding that a major part of his work currently was focused on strengthening the Khaz­anah institution, and infusing the right values and culture into the group’s talent pool.

“We do not know exactly what fu­ture corporate and economic battles and wars will be like, but it is the job of the leadership team and myself to ensure that the ‘army’, or the in­stitution, is prepared to handle whatever battles and challenges in the future.”

Additional reporting by Cheryl Yvonne Achu

“Our progress over the years has prepared us”

2020 TARGET: Khazanah's track record proves that it's ready to face future challenges, says managing director Tan Sri Azman Mokhtar

‘KHAZANAH MANDATE GOES BEYOND FINANCIAL TARGET’

EXCERPTS of an interview with Khaz­anah Nasional Bhd managing direc­tor Tan Sri Azman Mokhtar.

Q: Khazanah has spent RM74.7 billion across 144 investments from 2004 until last year, and al­so made 77 divestments worth RM48.1 billion, which resulted in gains of RM22.3 billion. What are your plans moving forward; will it involve an expansion of the cur­rent business portfolio or are there any new industries that the company is looking at? What is Khazanah’s direction for the fu­ture?

A: This is the 12th year of the Khaz­anah revamp, which started in 2004. What has been achieved is well recorded. Every year, in January, we announce our performance in some detail at our Khazanah Annual Re­view.

This has been happening for the last 12 years, and at the last review in January this year, we announced that the Khazanah portfolio had more or less trebled in the 11-plus years since the revamp started in June 2004 - our portfolio grew from RM50.9 billion to RM150.2 bil­lion, and on a net worth adjusted basis (that is, total assets less total liabilities), from RM33.3 billion to RM109 billion, as at end 2015. Alhamdulillah, that’s a rate of growth of 10.7 per cent per annum com­pounded over that period, which stacks up well against various peer comparisons.

A total of RM23.5 billion of cu­mulative profit before tax was achieved during the period between 2004 and last year - a 4.7-fold in­crease compared with the RM5 billion in profit before tax achieved for Khazanah’s first 10 years ending 2004. This translated to a 13.8 times increase in cumulative taxes and dividends paid of RM9.9 billion for the period between 2004 and last year, compared with the RM781' mil­lion for the first 10 years ending 2003.

As per Khazanah’s financing model, this was achieved essentially without net additional funds being injected, and hence, there has been a clear financial value-add over the period.

The increase in our portfolio has really been through the organic growth of existing investments and the growth in the value of our in­vestments. We’ve achieved this with a risk profile that is manageable, and this is important because you can grow, but sometimes, you are unable to sustain it because you do it in a very risky way.

One major measure for us is asset cover, which is how much have, relative to our liabilities. This is an important risk management ratio, and demonstrates that we have been able to treble our port­folio value while maintaining our asset cover at more than three times.

Khazanah’s mandate goes beyond just financial targets, and in that re­gard, there has also been significant progress made in developmental outcomes.

Some notable examples include the establishment of new industry clusters, such as the creative indus­tries, life sciences, leisure and tourism, and education services; es­tablishment of new economic zones, such as Iskandar Malaysia; job cre­ation; building a regional and global footprint; restructuring of key na­tional companies; supporting and driving major national reform pro­grammes and policy formulation where appropriate; as well as un­dertaking, through our core compa­nies, major national infrastructure projects.

In 2004, we were tasked with looking at not just Khazanah com­panies, but a broader set of GLCs (government-linked companies). We came out with the 10-year GLC Transformation Programme, which officially started in July 2005, and in August last year, we successfully graduated the companies under the programme. A lot of effort was put into the 10 years in terms of strengthening governance, value creation and internationalisation, among other things.

Most of the companies emerged from the 2008 crisis in relatively good shape and have since partic­ipated in helping with private in­vestment.

They have been catalysts for national development in many re­spects.

For example, we’ve supported do­mestic stimulus efforts, especially since 2009, when Datuk Seri Najib Razak became prime minister. One of the first things he did in response to the 2008 crisis was to drive a do­mestic stimulus package.

Private investment was a bit slow at that time due to global condi­tions, so GLCs stepped up to the plate. There was a whole series of initiatives around leisure and tourism, creative industries, Iskan­dar Malaysia, and national projects like klia2 and the Penang Second Bridge, among others.

We have also made significant so­cietal contributions, principally through our work in CSR (corporate social responsibility), Yayasan Khaz­anah scholarships and through a RM3 billion endowment fund in Yayasan Hasanah that focuses on five key areas - education, com­munity development, environment, arts and heritage, and knowledge development.

More than RM575 million has been spent benefiting many recip­ients since 2006, with the largest al­location of more than 50 per cent going to the education sector, in­cluding scholarships under Yayasan Khazanah. Under the knowledge de­velopment sector, a major contribu­tion is the Khazanah Research In­stitute, which was set up in 2014.

Going forward, the board of Khaz­anah has seen it fit to renew my con­tract for a fifth term, which is quite daunting in some ways because you really don’t want to overstay, nor do you want to “understay”.

This fifth term will actually take me to June 2019, Insyaallah, which, at that point, has two significant milestones - firstly, 2019 will be the 25th year of Khazanah, and second­ly, the period from the beginning of the Khazanah revamp in 2004 to June 2019, which is just on the eve of may be seen historically as the period bridging the Asian financial crisis and 2020.

It is a period that has seen quite a bit of change and some turbulence domestically and internationally, in markets and economies, and in the emergence of “new normals”.

While we believe much has been achieved, there are still gaps, and the pace and demands of change and competition from globalisation and liberalisation, technology dis­ruption and greater stakeholder ex­pectations are relentless and in­creasing. In many ways, the progress over the years has prepared us for this, and I believe we are immersing ourselves in this period of great challenge - and opportunity - from a position of some strength, Alhamdulillah.

Building on this track record of good governance and solid perfor­mance overall, a key area of focus not often seen from the outside, but is absolutely critical from a sustain­ability standpoint, is to build a strong and benign institution.

This means strengthening our governance and stewardship prac­tices, our talent pool, our networks and relationships, and ultimately, our corporate culture, to always be in service to and worthy of the trust of the nation. Still quite a bit to do.

Q: How is the company’s business overseas?

A: Regionalisation and internation­alisation is an important aspect of what we do. When we started in 2004, Khazanah was very much do­mestic-based. More importantly, on our doorstep were Indonesia, Asean, China and India, which offered plenty of opportunities. So, we went out in a measured way, starting nearby with Indonesia in 2004/2005.

We then went into China and In­dia, and as we got a bit more com­fortable, we started to look at the Middle East, with which Malaysia, as an OIC (Organisation of Islamic Cooperation) country, shares some cultural and common heritage.

We chose Saudi Arabia, which is the largest economy in the Gulf re­gion, and that’s done quite well. We also chose Turkey, which is tech­nically in the broader Middle East, and that has done very well.

You can see there’s a certain sequence - first, nearby areas, such as Indonesia, in areas such as bank­ing, telecommunications and infras­tructure. We then moved further outwards, and in the last few years, we went into San Francisco because of Silicon Valley. Our reasoning is that San Francisco and technology is exposure that we need.

It’s an international game, and while our companies have done well, they themselves could poten­tially be disrupted by technology.

This disruption is already happen­ing in the sectors where our com­panies operate in, such as telecom­munications, financial services and healthcare.

Our point of view is that, not only do our existing companies need to upgrade, but we are also looking at companies that we think are poten­tially disruptive.

We opened our London subsidiary late last year, and with that, we have completed our global network, which includes Beijing, Mumbai, Is­tanbul and San Francisco. With this network, we’ve covered the areas we want to cover. The focus of London and San Francisco is more on the technology and innovation side. In developing our network, we also look to bring investments into Malaysia.

When we started the revamp in 2004 the portion of our portfolio attributable to foreign operations was fairly small at under 10 per cent (by what we call “see-through” val­ue, and even smaller at a very nom­inal one per cent for foreign incorporated investments).

As the portfolio has trebled, the foreign component is now at 45 per cent-and 19 per cent respectively, in terms of see-through and foreign in­corporated value. While over the last 11-plus years, the portfolio overall has grown at a compounded rate of 10.7 percent per annum, foreign in­vestments have actually significant­ly outperformed at a compounded rate of growth of 18.3 per cent.

This reflects the profitable and fi­nancially valuable nature of foreign investments to date.

Furthermore, foreign investments have other major and positive strate­gic and portfolio attributes, includ­ing diversification benefits, in major foreign direct investment into Malaysia, especially in Iskan­dar Malaysia and certain key sec­tors. We should also highlight that at the same time, we have been active domestically, supporting both existing core companies as well as developing newer growth sectors.

Q: Lately, we have seen Khaz­anah intensifying its focus on high-potential IT companies. Will this continue to be the fo­cus in the near future? How far do you see Khazanah being able to repeat the success that it achieved with the investment in Alibaba?

A: The journey thus far has seen value creation through the work on GLC transformation, expanding into new high-growth geographies, principally in Asia, through cor­porate restructuring, mergers and acquisitions (M&A), and divest­ment — in other words, through both organic growth and restruc­turing, as well as M&A. We recog­nised around five years ago that the next phase of growth will also need to address the issues of tech­nology, innovation and disruption. It is a powerful megatrend that is both a challenge and a great op­portunity.

Our move to San Francisco in 2013, and investments in technol­ogy and biotechnology companies in various places, including China, -were with this in mind, along with our work domestically through various innovation and science and technology platforms, espe­cially. One of our first major in­vestments in technology interna­tionally was actually Alibaba in China, which we got into relatively early. We put in about US$250 mil­lion and made, on top of that, about US$1 billion. Out of this, Al- hamdulillah, we’ve realised about three quarters of that gain, and some of it, we’ve invested globally in technology companies, as you have seen.

Q: Most of the technology/Internet-based companies that Khaz­anah has invested in are from abroad. Do you have any plans to invest in local companies and entrepreneurs?

A: We have to get plugged in in­ternationally, especially in a fast- moving, globally competitive sec­tor such as technology. At the same time, we actively search for and invest in good local technology companies. For technology invest­ing, we have several investment styles, for example, through funds for early-stage companies and di­rectly for later-stage companies, more often than not, in non-con­trol positions in order to back en­trepreneurs. We recently invested in Aemulus, a, listed company based in Penang that is exporting high-technology automated test equipment in the semiconductor industry. Apart from Aemulus,’ we have been investing in Malaysian technology companies through lo­cal funds due to the companies’ smaller size. In addition, Celcom, for example, has a programme where they support entrepreneurs developing applications, while Axiata has a venture fund for Bumiputera entrepreneurs. Khazanah also has several direct and indirect venture funds into technology and biotechnology.

Furthermore, in several other technology-related sectors, for ex­ample, the creative industries, the setting up of Pinewood Iskandar Malaysia Studios has also catal­ysed other investments and tech­nology transfers, including through world-class and cutting- edge entities, such as Imagica from Japan, Imaginarium from the United Kingdom and Univer­sity of Southern California’s School of Cinematic Arts, in tie- ups with local entities.

We’re also trying to groom more entrepreneurs. From the 1998 cri­sis to 2004, we focused on sta­bilising our companies. Following that, we sold non-core assets, and hopefully, this would have created entrepreneurs. We actively seek the right balance, which is impor­tant for the country because in certain things, institutions can

take the lead, but in other things, entrepreneurs should take the lead and we can back them.

TIME dotCom is an example that is often cited. As a result of holding the asset after the Asian financial crisis - we already had Telekom Malaysia (TM) - we de­cided to let go of TIME dotCom through a restricted bidding process. We scanned the market and invited four or five Bumiputera and local entrepreneurs. The win­ning bid came from a relatively unknown young team in their ear­ly 30s, with a fairly impressive business already worth maybe RM30 million to RM40 million in data centres, selling to the likes of Google. We thought this was quite impressive, and they won the bid fair and square.

However, they were taking over an asset 10 times larger than their own. We told them not to go to the bank because we remembered past lessons; we didn’t want to ru­in them with high personal debt levels if they don’t succeed. In­stead, we structured a three-year earn-out mechanism, which al­lows the entrepreneur’s sharehold­ing in Pulau Kapas Ventures, Khazanah’s holding company for TIME dotCom, to increase from 38.8 per cent to 70 per cent if fi­nancial targets are achieved. With­in three years, the entrepreneur had successfully taken control, and we’re very proud of this. It shows that the earn-out model, when carefully put together, can be a big catalyst for change. Before this, there were also divestment cases that were done on a careful arm’s length basis, for example, Crest Petroleum (from the then UEM-Renong Group), which has j grown to be a significant part of i Sapura Kencana. Another example I would be the sale of TIME Engineering Bhd, which is now I known as Dagang Nexchange Bhd.

We’re in the market to find more and more of these situations, but  Khazanah also plays an important role as the custodian of national and strategic assets, hence, it obviously has to be done with great i care and, perhaps, some skill. For example, in several strategic sectors, such as highways or airlines, which are important national assets, we can’t simply give them away without due cause. There were private parties who came forward, saying, “We can do this and that”... We listened, but also said, you have to show proof. We have to look at potential parties being both fit and proper.

Q: This begs the question - the role of the state - how involved j; should the government be in business, and at what level j should it step back and let businesses prosper? Another question is whether GLCs should be crowding out others,

A: We spend a lot of time and j analysis thinking this through, that is, the risk of crowding out and its opposite or antidote, crowding in, which is another name for catalysing. Under what circumstances should Khazanah or GLCs get involved and when do we sit out or divest out? Proper i analysis and execution will determine whether it’s crowding out (which is negative), or crowding in or catalysing economic development, which is positive. The objective criteria rest on two tests  whether such an investment or undertaking is considered core, and even if it’s core, whether the  GLC is indeed properly competitive.

This has several further implications. First of all, what is core?

For us, it is clearly by virtue of several key attributes, including being strategic, of public interest, public good or natural monopoly j status. This would include the North-South Expressway, the electricity utility and network, the high-speed broadband and fixed-line telecommunications network and airports. There is also the chicken-and-egg situation, where j the private sector is either not willing or able to start the initial set of investments into newer sectors, either because of high risk,

high capital outlay, complicated coordination problems, or all of the above. Iskandar Malaysia and the aftermath of the 2008/2009 global financial crisis, when private investment stalled, are good j examples of Khazanah and GLCs taking up the initiative in catalysing economic growth to significant positive effect.

This is the reason for Khazanah’s involvement in Iskandar Malaysia, where we Invested in, among others, EduCity, theme parks, hospitals, wellness centres and movie studios. It takes a lot of capital, organisation and patience, as well as  endurance, especially where the ! private sector was not willing or, perhaps, not able to do all this on  its own. Our efforts in Iskandar Malaysia helped create the initial impetus of economic traffic, jobs, technology and skills formation, and foreign partnership, which, in turn, would attract the private sec­tor to come in and participate. We have some listed companies there, for example, UEM Sunrise, but they’re only one player among many property players. We think that’s not crowding out; that’s a form of crowding in.

Another related effort is to di­vest what we call non-core or non­competitive assets. As an example, why should GLCs own a travel agency - unless you’re Tabung Haji, as that would be their core. Also, why should we own a second telco like TIME dotCom since we already have TM? Many GLCs have actively divested non-core assets such as these during the GLC Transformation Programme.

We should also highlight that some of these assets were, unfor­tunately, companies that were not able to sustain themselves under private-sector ownership. Ironical­ly, they had to be revived under careful government-linked-investment-company-led restructuring. These companies include Celcom, Renong and MRCB (Malaysian Re­sources Corporation Bhd), which were successfully revived, as well as the likes of Proton and MAS, which are still struggling.

This suggests that there is no di­rect correlation between ownership and performance as such, and the issues are more complex than just ownership. In our experience, what is more important is to be clear  that it is performance that matters more’ not ownership per se.

For the economy at large, what is healthy is a good balance be­tween and-co-existence of both institution-led companies as well as entrepreneur-led companies, an­chored on strong performance, with good governance being the key.

Q: Are you planning to let go of any of your assets?

A: As mentioned, over the years we have divested quite a lot, like TIME dotCom, Pos Malaysia, Pro­ton. So, this is ongoing based on our framework of exiting non-core and non-competitive assets, as we have mentioned.

Q: How many of these are your non-core assets? What about Bank Muamalat?

A: By now, not that many. If you look at the figures on divestments since 2004, a portion of the RM48 billion in proceeds has been from the divestment of non-core assets. Today, many of our businesses are Domestic innovation and technology

core. Some of the businesses that we groom will, at some point, eventually become non-core. For example, we have been building leisure and tourism assets, some of which, in principle, we can di­vest at a certain stage, or restruc­ture and create REITs (real estate investment trusts). Our hospitals are another instance where we can and have tranched the property asset as REIT. Other people might want to invest because it is a sta­ble investment, and we can recover some of the capital and put that in new areas. So, there are many ways of divesting or partially di­vesting.

Bank Muamalat is considered non-core because we already have CIMB as our flagship financial in­stitution. Secondly, we are not the major shareholder. We own only 30 per cent. We track what the major shareholder wants to do, and if it aligns with our plans and notion of value, we have no problem in selling.

Q; Apart from IT companies, do you have any new investments in the pipeline?

A: We are constantly on the look­out. Khazanah’s criteria are always i twofold - we have to, first and foremost, discharge the commer­cial mandate, so whatever invest­ment we make must generate some returns, and secondly, the investment must have a strategic developmental element.

In the act of investing, one area that is rightly topical and which we are constantly on the lookout for is what is sometimes referred to as “impact investments”, which means they are not only finan­cially attractive, but also have a high social  development and in­clusion quotient.

For example, we found this company in the Philippines called 8990 Holdings that builds afford­able housing, and interestingly, 92 per cent of their clients have no bank accounts. They’re growing at 40 per cent, ROE (return on eq­uity) is also 40 per cent, and yet, they can service a segment that banks don’t think is bankable. We invested in a 10 per cent stake, and now, the share price has gone up 40 per cent. We’re also study­ing the model to see if we can apply it here, as well as in places such as Indonesia and India, where we have a presence.

TEAM EFFORT INVOLVED IN MAB TOURNAROUND SAYS AZMAN

If it were a football game, this would be only around 30 minutes into the first half. We’ve roughly done only 19 of the 60 months of the restructuring period to December 31, 2019.

MALAYSIA Airlines Berhad’s turnaround is showing progress and should return to the black as its cost base gets more in line with industry standards, said Khazanah Nasional Bhd managing director Tan Sri Azman Mokhtar.

"The recovery will mean that when we take the medication, not only must it be well-diagnosed and prescribed, but we must also be determined to finish the full treat­ment and medication’s course,” he said in an exclusive interview with the New Straits Times Press.

The national carrier, which is targeted to return to profitability by 2019 under the five-year MAS Recovery Plan (MRP), reported its maiden monthly profit in Febru­ary.

"That’s for the airline’s opera­tions alone, while the total group is still in the red, albeit improving.

“There has been encouraging progress and we should thank all concerned... as it has been a team effort,” said the 55-year-old Az­man.

“That said, it’s still early. If it were a football game, this would be only around 30 minutes into the first half.

"We’ve roughly done only 19 of the 60 months of the restructuring period to Dec 31, 2019.”

He said when MRP was an­nounced in 2014, MAB’s cost base had increased by 45 percent from 2004, while the global average de­creased by 15 per cent.

Average revenue was about six per cent below its full-service peers.

“If we regain that six per cent and bring costs closer to benchmark levels, we would more or less break even and begin to be back in the black.

“So, can we re­cover? I believe yes, Insyaallah, with a lot of hard work and the commitment of all.

“We’ve renego­tiated the con­tracts of suppli­ers, as well as plane lease agreements, among several things.”

Azman said another major aspect for the flag carrier’s turnaround was to revive its net­work.

This involves redeploying capac­ity to a more regional footprint and cutting loss-making routes.

“At the same time, we had to ensure that the one world alliance remained intact.

“When we transferred our busi­ness from the ‘Old Co’ (MAS) to the ‘New Co’ (Malaysia Airlines Bhd or MAB), we needed to transfer the alliance (as we have done), as it was critical at a time of consolidation.” The recently announced part­nership with Emirates is also a ma­jor initiative, and the partnership mindset and initia­tives will be key to MAB’s recovery and consolidation.

On the appoint­ment of Christoph Mueller as MAB chief executive of­ficer, Azman said the decision to have a foreign CEO was made with the view that the na­tional carrier’s sit­uation was very critical.

“In such a situation, you basi­cally need the best person for the job.

“While Mueller’s job is certainly complex, at the heart (of it), it is also distilled into two aspects: to help turn around our national car­rier and to help groom eventual local succession.”

MALAYSIA stands to benefit from the Trans-Pacific Partnership (TPP), provided government- linked companies (GLCs) prepare themselves for greater liberalisa­tion and the necessary legislation is in place.

“Being part of an open and free global economic system is at the heart of our DNA.

“At the end of the day, we have a duty to ensure that it is not just free trade, but more importantly, also fair,” said Khazanah Nasional Bhd managing director Tan Sri Azman Mokhtar.

He said the government’s strate­gic investment arm had actively contributed to and supported the successful negotiation and passage of no less than six free trade agree­ments (FTAs) through the Finance Ministry and International Trade and Industry Ministry.

“Our research side has built cer­tain capabilities to be able to anal­yse trade agreements and trade economics, which can be complex areas.

“We have built these capabilities precisely with the aim of support­ing national policy formulation - trade policy, in this case,” said Az­man, who is also a trustee of the Asia Business Council.

He said Khazanah had initially expressed concern over some pro­visions that it felt were unduly lim­iting and constricting, and focused on parentage (the so-called “state ownership”), rather than on proper behaviour.

“We have never asked for, want or expect any undue .favours by virtue of our parentage.

“We are very open to being judged and regulated properly based on our performance and be­haviour.

"We felt some of the provisions did not uphold this basic tenet, and would put us and some govern­ment-related companies at an un­due disadvantage.

“We gave a lot of feedback in­ternally, and we appreciate the space given for us to state our views professionally,” said the 55-year-old Azman.

“To be fair, the negotiators have renegotiated an outcome that en­ables us to move on.

“It is now highly critical to pre­pare very diligently, as there are a lot of details and the attendant proverbial devil is in the details.”

An important part of the prepa­ration is the decision to enact a State-Owned Enterprise and GLC Act (SOGA), which, among others, will consolidate all the good work under the GLC Transformation Programme.

“If we have our own ‘gold stan­dard’ and a good act, it will enable us to address the issue of sovereignty, and provide us with a good defence,” said Azman, who is also chairman of Iskandar Invest­ment Bhd and Axiata Group Bhd.

He said Khazanah initially sum­marised the TPP agreement to bring in 20 per cent benefit and 80 per cent risk.

The negotiators, led by Datuk Seri Mustapa Mohamed, improved the terms for the chapters affecting GLCs, to the point that it was 50:50 at the signing in Atlanta.

“With proper preparation and coordination of all parties, includ­ing through SOGA, we believe we can take it to as much as 80 per cent benefit and 20 per cent risk.

“We would like, as always, to be constructive, anchored on being thorough and diligent, and work with all parties on that basis,” said Azman.