Khazanah as an SWF and industrial policy
Friday 6 June 2014
1
Khazanah’s House Chart sets out our scope of activities
Leading strategic
investment house that creates
sustainable value for a globally competitive
Malaysia
Accomplish
Strategic Vision
and Mission
1
2
3
4
Legacy
investments
GLC
transformation
New
investments
Human Capital
Development
Streamline,
repair,
restructure
portfolio
Increase
shareholder
value,
strategic value
New strategic
sectors and
geographies
Active
development
of Human Capital for
the nation
3rd: Building capacity in talent, social capital, financial capabilities, processes, knowledge
and infrastructure
2nd: Core values: integrity, diligence, teamwork, professionalism, mutual respect
Execute Strategic
Pillars
Get foundations
right, build
capacity
1st Foundation: a focus on long-term nation-building
Source: Khazanah analysis
2
The political economy continues to swing between state and market
“Political Economy Balance” – State vs Markets
ILLUSTRATIVE
(Not-to-scale)
State
Markets
Post-colonial
market economy
1960’s
NEP
(1970)
Formation of BN
(1974)
1970’s
1969 riots
ICA
(1976)
PNB “dawn raid” on Guthrie (1981)
1980’s
Heavy industrialization policy (1982)
1985
recession
1990’s
Plaza Accord
(1985)
Privatization / “Piratization”
FDI - friendly
Mega-Projects
Rapid growth of
capital markets
Crisis response:
• NEAC
• Danaharta, Danamodal, CDRC
• Capital Controls
2000’s
Khazanah; GLC Transformation
Programme (2004)
Restructuring (e.g. Renong, MRCB)
2010 &
Beyond
Asian Financial Crisis
(1997/98)
Global financial
Crisis (2008)
Build
• Capacity
• Institutionalise
Transform
• Legacy assets/issues
• Exit or reduce
CATALYSE
• Divestments
• NEIs
• Collaborations / Co-investments
Source: Khazanah analysis; “In Search of Gold and the Golden Mean” speech at Invest Malaysia April 2011
“Crowd-in”
3
Steady growth in portfolio value with acceptable level of risk
Note 1: Based on unaudited 2013 accounts
Note 2: RAV: Market value of all equities, securities and cash held. Where no market price is available, a conservative estimate of value is used.
Note 3: NWA: RAV less Total Liabilities and adjusted to measure value created
Note 4: Compounded Annual Growth Rate
Source: Khazanah analysis
4
Whilst still largely domestic focused, we continue to gradually expand our
regional exposure
RAV by domicile of companies
RAV by geographic exposure1
Note 1: An estimate of attributable value according to the countries where investee companies have operations
Source: Khazanah analysis
5
SOEs have outperformed the rest of the market, underpinned by
fundamental improvements
2004
2005
Phase 1:
Mobilisation,
Diagnosis &
Planning
14 months
5/2004
2006
2007
Phase 2:
Generate
Momentum
2010
Phase 3: Tangible
Results
12-17 months
2-5 years
We are here
2015
Phase 4: Full
National
Benefit
5-10 years
onwards
1/2005
PCG formed
29th July 2005
2004 Measures
Transformation Manual
 KPI and PLCs
Launch
 Performance
 Policy
contracts
Guidelines
 Board composition
 Ten 2005/6
reform
Initiatives
 Revamp of
Khazanah
 GLC leadership
changes
Targeted outcomes:
 Diagnosis of GLCs
 2005/6 Initiatives


conducted
Determination of
Policy Principles
Initial 2004
Initiatives launched



implemented
Full roll-out in
place
Key policies
endorsed and
executed upon
Early fruits of
sustainable
improvements
 Maintain momentum
 Tangible & sustained benefits



across GLCs
Visible benefits to all
stakeholders, e.g.,
customers, vendors,
employees, etc.
Large scale strategic and
financial changes made
Material changes to Boards
 Several regional
champions
 Most GLCs performing
at par with competitors
Source: Bloomberg; companies’ financial reports; analyst consensus estimates for 2013; PCG analysis; Khazanah analysis
6
SOEs have been restructured via transformative transactions …
• Investment into Lippo Bank and subsequently Bank Niaga in Indonesia to
support CIMB’s regionalisation strategy
• Today, the group has over 1,000 branches and 40,000 employees across
17 countries
• Demerger of TM and Axiata in 2008 to allow both companies to focus on
core growth strategies
• TM’s HSBB offering has reached more than 665,000 customers across
Malaysia whilst Axiata has 215m subscribers across Asia
• Merger of UEM Land and Sunrise to form Malaysia’s largest property
developer by market capitalisation
• Synergistic transaction to leverage UEM Land’s landbank and Sunrise’s
expertise in luxury property development
• Consolidation of regional healthcare players to form the world’s second
largest private healthcare group
• Recently listed in both KL and Singapore to overwhelming response
• RM23bn privatization of PLUS by UEM Group and EPF
• National Fund Management – transfer of a mature cash-generating asset
to new owners who can better harness its strengths
7
… with many now on course towards regional championship
A number of Malaysian companies are poised for regional championship:
Global Challengers (2006)
South East Asian Challengers (2012)
…in line with our roles in the NEM:
Source: BCG: “New Global Challengers” and “Companies Piloting a Soaring Region”; PCG
8
Khazanah has successfully delivered on milestones in Iskandar Malaysia
projects and other NEIs, with much more work in the pipeline
Source: Iskandar Regional Development Authority (“IRDA”); Khazanah analysis
9
At Khazanah, we create value for the wider stakeholder economy
Corporate
Responsibility
Knowledge
Development
Ideas & Thought Leadership
•
•
•
•
•
•
•
•
•
•
Performance-Focus, Transformation and Execution
Khazanah as Macro-Manager, GLCs as Micro-Managers
Sovereign Development Fund, not just SWF
Sensible Finance, Real Finance, and Islamic Finance
Cities and Economic Density
Complementary Advantage and Collaboration
Regional Champions
Malaysia Inc. v3.0 – Rebalancing and Crowding-in
Talent and Culture
Institutionalize
Source: Khazanah analysis
Support of National
Transformation Initiatives
Human Capital
Foreign
8%
Board
Composition of
Khazanah-Linked
Companies
Loca l
92%
10