Published January 20, 2009

Khazanah to invest RM58b in local projects

Focus is on a special economic zone and national high-speed broadband roll-out

By PAULINE NG
IN KUALA LUMPUR

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Malaysia's Khazanah Nasional plans to allocate RM58 billion (S$24.22 billion) over the next three years on 'catalytic domestic investments' which have already been identified such as the south Johor Iskandar Malaysia special economic zone and the billion-ringgit national high-speed broadband roll-out.

Managing director Azman Mokhtar said that although the global financial crisis had thrown up investment opportunities, the state investment agency's focus would be more domestic oriented this year, with capital management a main concern particularly in the first six months.

Last year, total shareholder returns of Khazanah's listed portfolio fell 35.7 per cent, in line with the benchmark KLCI which finished 36.2 per cent down.

Khazanah's realisable asset value fell over the May to end-December period to RM70.4 billion from RM88.2 billion. However, there was a bright spot - about RM1.8 billion reaped from major divestments and monetisation of its assets, including MobileOne - over the past year and a half.

'Thankfully, this gave us some buffer as we enter the crisis,' Mr Azman remarked at Khazanah's annual review yesterday. He stressed that the agency would keep to its long-term divestment programme, and rely on its holding power and would not divest assets for the sake of 'showing profits'.

Because of the flight to quality, Khazanah debt papers have been quickly snapped up, with the result that funding costs have only risen slightly.

Mr Azman said that with capital markets sidelined, it was an opportune time to invest and build on productive capacity in projects with high economic multiplier and job creation potential. Iskandar Malaysia was one such priority project, and Khazanah would pump RM10-12 billion into it over the next few years, in addition to the RM1.9 billion worth of infrastructure contracts recently awarded by the government.

Khazanah and its investee companies spent more than RM36 billion from 2004-2008, a huge chunk of this in the power sector.

The agency believes that unless the crisis worsens markedly, most of its investee firms have been sufficiently strengthened over the past four years to ride it out.

But Mr Azman conceded that the market capitalisation of its top 20 companies was 'back to square one'. As at end of last year, the market value of its top 20 firms came to RM153 billion - RM8 billion more than when the programme to reform the government-linked companies that account for more than a third of market capitalisation began in 2004 - but a far cry from their worth of RM276 billion at end-2007.

The bulk, or 88 per cent, of Khazanah's portfolio is domestic, with 2.4 per cent in Singapore.