THE consolidation of Bumiputera investment institutions under Yayasan Pelaburan Bumiputera (Bumiputera Investment Foundation) and Permodalan Nasional Bhd (PNB) does not necessarily ensure the elimination of management errors, economic experts said.

The consolidation, announced by Prime Minister Anwar Ibrahim during the presentation of Budget 2024, is unlikely to completely eliminate mismanagement and other management failures, said economic expert Barjoyai Bardai.

“It only means a prerequisite to reduce the possibility of mismanagement in administration because to curb mismanagement, there must be strict corporate governance.

“However, this step is seen as an effort to restructure or consolidate the forms of investments that can be offered to investors,” he said.

Barjoyai suggested the government offer venture capital investments as another form of trust fund investment, after equity and real estate trusts.

“Perhaps in the future, the government could offer a portfolio of shares containing these three elements,” he said.

While presenting Budget 2024 in the Dewan Rakyat on October 13, Anwar said mismanagement of state institutions in the past had caused the government to incur losses, like that in Tabung Haji, Felda and the Armed Forces Fund Board.

The concentration and merger of the Bumiputera investment institutions is aimed at placing greater professionalism and the realisation of the long-term investment potential for the stakeholders.

Through this initiative, Putrajaya intends to merge Pelaburan Hartanah Bhd (PHB) under PNB, while Ekuiti Nasional Bhd or Ekuinas would be placed under YBP.

The goal set for them is to play a role in strengthening the economic development of the Bumiputera, including cooperation with Perbadanan Usahawan Nasional Bhd (PUNB).

YBP was founded in January 1978 to establish policies and guidelines for Bumiputera equity participation and ownership in the corporate sector in line with the New Economic Policy (DEB).

In the same month, PNB was established as the largest fund management company in Malaysia to encourage the Bumiputera community equity ownership.

Ekuinas, formed in 2009, serves as a private equity fund management company using trust funds under the National Equity Foundation.

Unlike PNB, which manages trust funds, Ekuinas focuses on investments in sectors with high growth potential.

PHB is a real estate investment holding company, a wholly-owned subsidiary of the Amanah Hartanah Bumiputera Foundation established in May 2006 to increase Bumiputera ownership in major commercial real estate.

Barjoyai said even though the consolidation and merger of Bumiputera investment institutions are a good idea, everything must still be managed separately.

“It must be managed separately because the Securities Commission of Malaysia mandates that these investment institutions be managed separately. In fact, every fund launched by PNB must be managed separately,” he said.

He said the nature of these investment institutions would become too general if everything is equated through consolidation and merger, as announced by the prime minister.

Meanwhile, economic analyst Ahmed Razman Abdul Latiff from Putra Business School at Universiti Putra Malaysia (UPM) sees this government effort as aiming to ensure that the Bumiputera economic empowerment agenda is not jeopardised due to weak governance and management.

He believes the consolidation and merger of investment institutions will reduce the risk of investment failure because all institutions will technically be placed under PNB.

“The risk will be lower than the current model where it is administered separately because the larger an organisation, the greater its asset diversity.

“If one investment incurs losses, it does not affect the overall situation because it is invested in various portfolios,” he added. – December 13, 2023