Directives by Ministry of Finance (MoF) to six government-linked investment companies (GLICs) managing RM1.8 trillion to invest RM120 billion over five years in potentially risky high-growth ventures is misplaced. Such investments should be through direct government funding via cutbacks and new revenue sources. And then channelled into one professional, government-owned investing company rather than several with different objectives.
This is especially so since the six - the Employees Provident Fund (EPF), Retirement Fund Inc (Kwap), Permodalan Nasional Berhad (PNB), Khazanah Nasional Berhad, Tabung Haji, and Armed Forces Fund Board (LTAT) - have different obligations to their different stakeholders.
The RM1.8 trillion invested by these GLICs is not liquid. Most of it is not available because they are already invested. To say that they are liquid is incorrect.
The second thing to note is that retirement funds EPF (RM1.14 trillion under management) and Kwap (RM170 billion) account for over 70 percent of total funds managed by the six (see table), with the EPF alone accounting for 62 percent.
They are obliged to preserve capital with stable longer-term investments such as quality bonds and stocks. They should not risk them in potentially high-risk new investments which are the preserve of entrepreneurs and companies who know the business.
Catalysing growth in key economic sectors is not, the aim of retirement funds. It is to provide safe, stable returns to protect old-age savings.
In the case of Kwap, it is government-funded but it is to fill potential gaps in government pension obligations. Prudence dictates it must have similar criteria to pension funds.
PNB, which has over RM300 billion invested, was set up to increase the participation of bumiputera in key businesses. It too must preserve the quality and safety of its investments as a repository of savings of mainly bumiputera.
Similarly, both Tabung Haji (savings for pilgrims to go to Mecca) and LTAT (supplementary retirement savings for armed forces personnel) have obligations to their stakeholders to provide safe, steady returns.
The type of investments these funds are required to make are given in a MoF press release. “These investments are primarily directed towards high-growth, high-value 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.”
That’s a rather ambitious and ominous undertaking which carries tremendous risk. The only one among the six qualified to do this and has a clear mandate to do so by the government is Khazanah (RM126 billion in management), which over the years has built up expertise in investing.
The government should provide the RM24 billion a year to the fund to make RM120 billion over five years - it must come out of their own pockets from cuts in spending and/or new revenue sources. It must ensure that they have reasonable chance of success. It should not be taken out of retirement funds, which is irresponsible
You need to do the groundwork before you decide to invest what, where, how, how much and over what period. These things can’t be done by instructing GLICs to simply go out and invest - that’s a recipe for disaster.
Where is the feasibility study and plan? They need to come first and only then should a decision be made - for or against the proposition. What kind of Keynesian policy is this? Rakyat’s money used to boost the economy or enrich a certain elite group?
Reference:
Comment: RM120b GLIC investments need serious rethink, P Gunasegaram, 13 August 2024, Malaysiakini
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