The private sector proposals to acquire PLUS

Khazanah was set up in 1993, modelled after national investment / wealth funds across the world, to take over the functions of the Treasury in the Ministry of Finance in managing the MoF Inc companies. Khazanah was tasked to manage the companies on behalf of the government on a commercial basis, outside of the civil service system to facilitate efficient decision making. Hence, its management was made answerable only to the board of directorsandfree fromministerial control, eventhough the MoF Inc isthe ultimate shareholder. Its governance system today is in line with the principles of good corporate practices as set out in the Putrajaya GLC Transformation Programme which was launched fifteen years ago.

Khazanah started operations by taking over only a few MoF inc companies initially. The biggest of these corporations were TNB and Telekom. They accounted for a big share of the market capitalisation under the KLSE. A few years later, Khazanah acquired the Rinong/ UEM Group comprising several subsidiaries with PLUS as its core asset. It was acquired as a rescue operation to save it from collapsing in the awake of the East Asia financial crisis 1997/98. The Group was a very large politically linked group and was regarded as a success story under the New Economic Policy to strengthen bumiputera participation in the modern corporate sector. But it had serious financial and governance issues and was crippled by a heavy debt burden. The Khazanah rescue enabled PLUS and other companies in the UEM group to be saved and brought under its control.

Following the acquisition, Khazanah then took steps to unlock the value within the UEM group through a comprehensive restructuring exercise, focussing on making PLUS an attractive company suitable for listing on the local stock market. After a few years of listing on the KLSE, attracting both local and foreign funds, PLUS had to be delisted at the end of 2011 as institutional investors were becoming anxious that the government was not honouring the toll increase as scheduled in the Concession Agreement. They knew it was all about politics, making investors all the more concerned about the future of PLUS.

Thus, from a publicly listed company owned by hundreds of shareholders, including foreign investors, PLUS became a deprivatised company owned by only two shareholders — Khazanah 51 % and EPF 49%. These two institutional shareholders quickly led the way for transforming PLUS. The board started to prepare the company to face the challenges of the digital revolution, as the directors realised the growing competition PLUS is facing against the otheremerging highways and the public transport system. The board therefore decided to recruit the best talents, adopt a new business plan and invest in the latest technologies to bring PLUS operations into the digital age.

PLUS is the largest and oldest toll operator in the country and is among the top ten toll highway companies in the world. In South East Asia, PLUS is considered the most experienced operator in the business. It’s a GLC contributing to bumiputera employment and business opportunities.

There is nothing in the proposals submitted by the various private sector bidders to show that they have better ideas to develop PLUS compared to what is already being implemented under its business plan.

Speaking as the former PLUS board chairman for 18 years, I can say that under the business plan, the company will work closely with the government authorities and subject to their approvalof the enabling framework of rules and regulations, introduce the multi lane free flow traffic system with no toll plazas throughout the journey, install an incentive system of dynamic toll pricing to reduce traffic bottlenecks during peak hours and implement the latest technology to provide real time information on road and weather conditions ahead as well as provide advice on the services available along the highway . The best equipment will be deployed to mechanise road works and ensure safety for highway users and workers. Further, R&R areas in selected locations are being refurbished to turn them into trendy, family friendly places for eating, shopping and recreational fun. Stall operators in the PLUS R&Rs, who are mostly bumiputera, will benefit from all these improvements.

PLUS is a national icon which can add weight to Khazanah’s role as the strategic investment arm of the government. As a strategic investor, Khazanah Is not a bumiputera institution in the formaldefinition of the term. It is a national wealth fundwith a mission to enlarge the assets which are strategic to its expansion so that it can grow to become a major contributor to government revenue in the future as the oil and other natural resources become less important in the economy. With a well-planned portfolio of domestic and foreign assets, Khazanah will become a reliable source of dividend and tax revenue for the government. It will also be able to provide the resources in pioneering into the high end, smart industries of the future and complement the role of the private sector in modernising and transforming the economy.

The Khazanah Group’s revenue stream to the Treasury will become progressively larger as Khazanah’s asset base grows in size. Further, the EPF’s 14 million subscribers will be benefitting as it gets dividends from PLUS’s profits. Thus, whatever profits PLUS makes goes back to the government and the people through Khazanah and the EPF.

The government should not consider any proposals from the private sector to acquire PLUS because this GLC is a national treasure by virtue of its operational excellence as well as its critical role in facilitating Khazanah’s expansion. As Khazanah has explained publicly, there are assets which it will buy and sell for short term commercial and cash flow reasons and there are assets which it will keep for long term strategic purposes. PLUS is one of the assets under its strategic portfolio which should not be divested to anyone. The Khazanah CEO has made it clear PLUS will not be sold, a statement which I as former Director- General of the EPU, Secretary - General Ministry of Finance, founding CEO of Khazanah National Berhad and retired chairman of PLUS, fully support.

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*Tan Sri Mohd Sheriff Mohd Kassim is a former Khazanah Nasional Bhd managing director.