Media Release: Khazanah Appointments Should Be Done by Committee to Ensure Cronyism is Avoided

C4: KHAZANAH APPOINTMENTS SHOULD BE DONE BY COMMITTEE TO ENSURE CRONYISM IS AVOIDED
PRESS RELEASE 2 AUGUST 2018

PETALING JAYA (Thursday): The announcement that Prime Minister Tun Dr Mahathir Muhammad will be chairing the board of directors of Khazanah Nasional Berhad (Khazanah), while not without precedent, raises serious questions about the statutory governance structure and good governance practices within government-linked investment companies (GLICs) and not just government-linked companies (GLCs).

“We are concerned about how the restructuring takes place to ensure professional competancyespecially with GLICs as they hold under their purview other GLCs too.

What are the criteria for restructuring? If there is a second minister on the board, How can we ensure that cronyism and political appointism can be avoided? Malaysia certainly doesn’t need old wine in new bottles.”

Cynthia Gabriel, C4 Center

On Monday, the Prime Minister’s Office announced the appointment of PM Tun Dr Mahathir as the chairperson of the board of directors of Khazanah, a holding company and strategic investment company wholly owned by Minister of Finance Incorporated (MoF Inc).

However, some quarters have raised the issue that this contradicts the electoral promise in the Buku Harapan manifesto. Promise 22 reads:

The Pakatan Harapan Government will ensure the appointment of state and national [government linked companies] board members will be made based on merit and professionalism, not based on politics.

C4 Center begs to rethink this convention of the Prime Minister chairing Khazanah, regardless of Khazanah’s performance. Appointments should follow principles of good governance which are needed not just during peak performance periods but to ensure that Khazanah does not stumble during darker days in the future.

C4 Center is keenly aware that the politicisation of the board of Felda Global Ventures, Felda Investment Corporation and its linked companies have cause serious mismanagement and corruption due to the centralisation of power under the same leadership and cronies.

Khazanah as a GLIC is at greater risk of corporate minismanagement because Khazanah is not governed by a statutory act which stipulate what powers the respective ministers-in-charge are entitled to, and who they can appoint.

MoF Inc, the Employees Provident Fund (KWSP), Lembaga Tabung Haji (LTH), Lembaga Tabung Angkatan Tentera (LTAT) or Kumpulan Wang Persaraan Diperbadankan (KWAP) have these incorporating statues. Effectively, these statutes maintain good governance by keeping the concentration of power in check for GLICs—but not for GLCs which are typically owned by GLICs.

In addition, the recent appointment of Petronas chairperson, Datuk Ahmad Nizam Salleh, appears acceptable due to experience he brings to the position. However, his appointment causes the the same question to resurface: by what criteria does the Prime Minister consider these appointments—is it truly by merit, or are there still political strings attached?

In this light, C4 center cautions against the repeat of questionable goverance leading to malfeasance and corruption mega-scandals involving GLICs.

Since Khazanah is without an incorporating statute, the method of appointing a chairperson “by convention” does not inspire confidence in the spirit of checking the concentration of power in the political and economic nexus—a key factor that contributed to many other corruption scandals, including the 1MDB scandal.

C4 Center applauds the move to restructure the ownership and governance structure of GLCs in Malaysia, and makes the following recommendations:

  1. a committee should be formed to vet new candidates for chairpersons of GLICs/GLCs and advise the prime minister to ensure that no conflict of interest can happen. We want to see rules for accountability and transparency in place within the Pakatan Government in the governance of GLICs/GLCs.
  2. A total restructuring of the GLC ownership structure that prioritises good governance and service delivery to the rakyat, while maximising the barriers against corruption and illicit enrichment.

C4 Center calls on Pakatan Harapan government to err on the side of caution, in the name of good governance, to uphold accountability in our economic restructuring and keep Pakatan Harapan’s promise of no politicians on boards of GLCs—GLICs inclusive.

Released by:
Cynthia Gabriel (Ms.)
Executive Director, C4 Center

In The News

The Edge Markets, C4 calls for Khazanah appointments to be done by a committee