24th May 2010

Governance Reforms in Asia –

Khazanah’s experience

*Views of the speaker are his; usual caveats apply in that the views may or may

not reflect of Khazanah‟s.

Contents

1. History and evolution of GLCs

2. Khazanah’s role within Government

3. Reporting structure of GLICs and GLCs

4. New Khazanah

5. Our Mandate

6. Khazanah’s Monitoring & Management Framework

7. Khazanah’s Governance and Risk Management Framework

8. Khazanah’s initiatives

9. Conclusion

1951

EPF

established

1957

1969

Maybank

becomes

government owned

1972

LTAT

established

1979

Sime Darby is

Malaysianised

1962

LTH

established

1978

PNB

established

1983

1985

Proton launch

first model

1987

Jabatan Telekom

Corporatised

1992

Malaysian Airport and Postal

Department privatised

1994

KNB began

operations

1994

1997 2000 CURRENT

1999

Bank Bumiputra merger with

Commerce Bank

2000

Government takeover of MAS

2002

MAS widespread asset

unbundling exercise

2001

Financial Sector

Masterplan

announced

1970

Launch of New

Economic Policy

(NEP)

1981

Launch of Heavy

Industrialisation

Programme

1990

Lembaga Letrik Negara

Corporatised

1998

Danaharta

established

2005

Malaysianised GLCs

Value adding to Malaysia’s

Natural resources Corporatised

Providing Essential Public

Services Recapitalised and

Restructured

Recovering from the Crisis Financial Institutions

Becoming internationally

competitive

1. History and evolution of GLCs

Industrialisation and

moving up the value chain

Rapid economic growth

and privatisation

Financial

Crisis

Recovery

and

restructuring

GLCT

Programme

1

1998-2001

Asian Financial Crisis

2000

TM takeover of Celcom

2001

Dana Saham takeover of Renong

2

3

4

1

2. Khazanah’s role within Government

GOVERNMENT OF MALAYSIA

Financial Developer/

Public Goods Regulator

• Providing level and

conducive playing field

• Protection of public

interest

• Enforcement

• Some entities remain

majority by Government for

historical reasons

• Create sustainable economic

value

• Provider of public goods,

infrastructure or services

• Provision of law and order

• More socio-economic in nature

Khazanah as Government’s strategic investment arm

• Focus on shareholder value creation

• Careful not to crowd out private sector

• Optimal and evolving holdings in companies and sectors

• Strengthen management capabilities

• Financial returns as principal measure of KPIs

2

MINISTRY OF

DEFENCE

PRIME

MINISTER’S

DEPARTMENT

KHAZANAH

NASIONAL

BERHAD

KUMPULAN

WANG SIMPANAN

PEKERJA

GOVERNMENT

GOVERNMENT-LINKED

INVESTMENT COMPANY

(GLIC)

GOVERNMENT-

LINKED COMPANY

(GLC)

LEMBAGA

TABUNG HAJI

LEMBAGA TABUNG

ANGKATAN

TENTERA

PERMODALAN

NASIONAL

BERHAD

YAYASAN

PELABURAN

BUMIPUTRA

TNB

TM

MAS

PROTON

TH PLANT

G-20*

MRCB

CIMB POS

UEM

MAHB

BIMB

MBSB CCM

UMW

SIME DARBY

MAYBANK

BOUSTEAD

AFFIN

MINISTRY OF

FINANCE

AXIATA

3

PRIME

MINISTER

3. Reporting structure of GLICs and GLCs

4. New Khazanah

“…the 40 public listed GLCs … that comprise only 5% of the number of companies on

Bursa Saham (Stock Exchange), together make up 34% of the total market capitalisation of

the Bursa.”

“GLCs also make up the backbone of the country‟s economy. Through the provision of

„mission-critical service‟ such as transportation, energy, telecommunications and financial

services, GLCs serve a pivotal role in the operation of every commercial concern in

Malaysia”

“…decisive action requires nothing less than a remaking of Malaysia Inc…”

“… it is imperative that we shift the basis … to that of tangible achievement and

performance”

“The Government would like to see Khazanah emerge as one of the biggest and most

dynamic investment houses in the region… emerge stronger, more nimble and able to

create more value” “

Speech by Dato’ Seri Abdullah Ahmad Badawi, Prime Minister of Malaysia

at the Seminar on Culture of High Performance for GLCs (14 May 2004)

KHAZANAH

WHAT

WHY

4

5. Our Mandate

1st Foundation: a focus on long-term nation-building

2nd: Core values: integrity, diligence, teamwork, professionalism, mutual respect

3rd: Building capacity in talent, social capital, financial capabilities, processes, knowledge

and infrastructure

Leading strategic

investment house that creates

sustainable value for a globally competitive

Malaysia

Legacy

investments

Streamline,

repair,

restructure

portfolio

New

investments

New strategic

sectors and

geographies

GLC

transformation

Increase

shareholder

value,

strategic value

Human Capital

Development

Active

development

of Human Capital for

the nation

1 2 3 4

Accomplish

Strategic Vision

and Mission

Execute Strategic

Pillars

Get foundations

right, build

capacity

5

6. Khazanah’s Monitoring & Management Framework

1. Leadership Bench

2. Strategy

3. Systems and Controls

4. Industry Structure

5. Monitor & Empower

Investment strategy and mandate

Level of ownership

Company’s capability and performance

Drivers of GLIC’s

M&M Approach

Khazanah’s Five-Pillar Terms of Engagement Framework with Its Investee Companies

6

The GRMF has been adopted for the effective management of risk and to inculcate and embed risk management throughout

Khazanah.

Governance and Risk Management Framework

KHAZANAH

Schedule of

Matters for the

Board

Limits of

Authority

Risk

Management

Policy

Policies, Processes & Procedures (including Business Continuity Management)

Code of Conduct (Staff/Supplier) and Raising Concerns

Investments Khazanah

Research &

Investment

Strategy

Strategic

Human

Capital Mgmt

Corporate

& Support

Services

Finance Managing

Director’s

Office

Special

Projects

7. Khazanah’s Governance and Risk Management Framework

7

8. Khazanah’s initiatives

Knowledge Capital

Linkages with Knowledge Centres of

Excellence

Human Capital

Corporate Responsibility

GLC Transformation Programme

8

9. Conclusion

Effective and good governance is absolutely fundamental.

Khazanah continues to work within the existing governance framework.

All parties must play their roles.

9