NEW policies in the telecommunications sector and a high-risk investment strategy were among the factors that had affected Khazanah Nasional Bhd’s earnings for 2018, the Public Accounts Committee said today. 

The parliamentary committee today unveiled the findings of the proceedings launched on April 1 to look into the losses recorded by Khazanah after it fell into the red in 2018, with a pre-tax loss of RM6.3 billion in 2018 compared with a pre-tax profit of RM2.9 billion in 2017. 

In a statement today, PAC chairman Dr Noraini Ahmad said two witnesses – former senior deputy chief secretary to the government Mohd Zuki Ali and Khazanah’s managing director Shahril Ridza Ridzuan – were summoned to give their statements. 

“As a whole, PAC is satisfied with the statements and explanations given by Khazanah on the RM6.3 billion losses reported in 2018,” she said.

The telecommunication companies in the sovereign wealth fund’s stable were impacted by the policies implemented by the government in the sector. 

“PAC noted that the government’s drastic policy implementation in the telecommunication sector has left a big impact on a few telecommunication companies owned by the government through Khazanah,” the report said. 

In addition to that, PAC also found that about 80 to 85% of Khazanah’s investments were concentrated in nine to 10 companies, hence increasing its exposure to high risk. 

Khazanah has also reported an accumulated impairment amounting to RM3.1billion as of March 2019, following the implementation of the Malaysian Financial Reporting Standard 9 (MFRS9) accounting method for the financial year which ended on December 31, 2018. 

The impairment reported had painted a negative image, said the report. 

PAC also noted that Khazanah has embarked on a new investment strategy to expand and diversify its investments portfolio, in addition to a cost-cutting drive to reduce its operations cost. 

Noraini said PAC has recommended Khazanah to continue its plans and new strategies to control its investment risk. 

“Khazanah also has to conduct strategic investments without political influence,” she said. 

It also has to report to PAC the execution of the committee’s recommendation a year after the tabling of these findings. – October 23, 2019.