I REFER to “Misplaced concerns over MAHB privatisation” and “Are concerns over MAHB privatisation misplaced?” published by The Malaysian Insight and thank both the authors.

On June 17, 2024, Channel News Asia reported, “Malaysia’s privatisation of airport operator with BlackRock entity faces a bumpy ride, but likely to go ahead”. “This train has left the station and the time to back out is no longer an option because a formal offer has been made”, said a Finance Ministry official. The international reputation of Khazanah Nasional and the Employees Provident Fund will be at stake.

Aviation experts, bankers and the investing community questioned the economics as it will not guarantee results with no clear plans but very “transaction-driven”.

There is some truth as the latest MAHB share price is below RM10 against the RM11 offered. By convention, the price should creep up to the offer price.

It seems the advisory firm was incorporated in Hong Kong.

Khazanah defended the proposed plan, stating that the GIP was picked after a robust review of potential technical partners, including global airport operators with strong track record of value creation and goes beyond what current airport managers are doing and can achieve. Proponents noted that GIP would lend much-needed financial muscle and technical expertise to get MAHB back on course to compete.

However, airports under GIP’s management do not rank highly in international rankings such as Skytrax. The London Gatwick Airport is ranked 48th in Skytrax’s 2024 ranking while the Sydney Airport was in 55th place.

GIP bought Gatwick in 2009 for £1.5 billion and spent £1.9 billion modernising in subsequent years. In 2018, Vinci of France acquired a 50.01% majority stake for £2.9 billion reducing its stake to 42% (although the firm’s extra voting rights meant it still controlled the airport’s board).

GIP bought Edinburgh Airport in April 2012 for £807.2 million, equivalent to £1,204 million in 2023. In April 2024, Vinci acquired a 50.01% shareholding for £1.27 billion.

Gatwick Airport was rated as the worst performing in the UK for flight delays last year, with Edinburgh coming fourth in the list.

Only few days ago, Sydney Airport was chaotic as nationwide technical outage affecting e-gates causes significant delays. In January, former US ambassador Joe Hockey slammed lengthy queues which he claimed are “worse than the worst in the US”. News reporting in October 2023 said it was out of order on an average of 88 times a month.

Gatwick and Edinburgh airports are distinctly uncomfortable, leaving the impression the operators prefer to cram as many passengers as possible which saves on capital expenditure and at the expense of customer experience. Even GIP roped in an airport operator, Vinci Airports, to run London Gatwick Airport.

There seems to be a disconnect between Khazanah and EPF’s claims of looking to enhance customer experience while choosing GIP as a lead partner.

GIP acquisitions were standalone airports but MAHB has 39 airports in Malaysia alone and this is a non-Western environment.

The new operating and land lease agreement with a fresh 45-year term until 2069 will allow for better financial planning and airport expansion programmes. It provides a clear investment recovery framework based upon a pre-agreed rate of return to pursue viable airport developments. It includes a loss capitalisation mechanism, under which MAHB will be able to recover up to 90% of actual revenue shortfall versus actual economic costs from June 2024 to December 2026. MAHB had also made significant investments to replace ageing assets and modernise the airports.

What other values can GIP bring to the table and did the valuation take the extended OA into consideration?

Let us not allow foreign parties to have a free ride on our strategic asset.

Another potential challenge for GIP is coordination with multiple agencies such as immigration, customs, the Transport Ministry, the Malaysian Aviation Commission, and the Civil Aviation Authority of Malaysia. They are not the easiest to work with.

Trust the government will not bend backwards for GIP’s sake.

If we are looking for a professional shift, the arguments used that increasing the collective shares of Khazanah and EPF from around 41% to 70% and to replace short-term with long-term investors considering that foreign shareholding is already at 27%, shows a lack thereof.

Worse, when it is said that strategic decisions can be made faster as a private entity.

Another issue is we do not have an open skies policy because to protect Malaysia Airlines.

A point to note is, at the recent Group of Seven 50th Summit in June, there is an investor coalition comprising among others, GIP, BlackRock, KKR, Rockefeller Foundation, Temasek and the US government. It will facilitate the identification, promotion, and development of successful infrastructure projects and support coordination with governments. Aimed to de-risk investments and driving layered investment across sectors in partner countries to drive sustainable and transparent investment in quality infrastructure.

It will access and benefit from the World Bank’s new streamlined guarantee platform, which will be launched on July 1. This clearly handicapped the emerging economies.

They will deploy US$25 billion in Asia’s emerging economies.

The spice in the sauce of the infrastructural commitment stew is Microsoft’s US$5 billion to ignite the fires of development in Kenya, Indonesia, Malaysia.

They are aiming for smart capital deployment into emerging markets and is MAHB privatization one of them?

In May 2023, Anwar stressed, any monopolistic practices by local companies must be put to an end to ensure healthy competition. Would this privatisation fit the monopolistic practice? Further, by taking it private, invites lack of transparency.

Khazanah had injected billions into Malaysia Airlines for recapitalisation without success while EPF have shown many successes. How about getting EPF to led on this deal?

Remember, politicians don’t win elections or re-elections on the promise of austerity.

What say you… – June 19, 2024.

* Saleh Mohammed reads The Malaysian Insight.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.