October 4, 2022

Leave PLUS with Khazanah

6 min read

THE news about private sector groups proposing to the government to purchase and take over PLUS Malaysia Berhad (PLUS) has not stopped despite the clear statement made by Khazanah managing director/CEO Datuk Shahril Ridza Ridzuan that the national wealth fund has no intention of divesting the highway asset as it is regarded as a strategic investment in its large portfolio of companies.

It is worth noting that there were proposals in the past to acquire PLUS. They were all rejected.

Khazanah was set up in 1993 and began operations in mid 1994 to take over the functions of the Finance Division of the Treasury in the Finance Ministry (MoF) in managing the ministry’s companies.

Khazanah was tasked with managing selected, important 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 directors and was free from ministerial control, even though the MoF Inc is the ultimate shareholder. Khazanah’s 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 15 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. The other companies that were transferred to Khazanah on its inception were smaller.

Later, Khazanah acquired the Renong/UEM Group with PLUS as its core asset. The Group was acquired as a rescue operation to save it from collapsing in the awake of the East Asian financial crisis of 1997/98. The Group was very large and politically-linked and was led by capable Malays and was regarded as a success story under the New Economic Policy designed to strengthen bumiputra participation in the modern corporate sector.

But it had serious financial and governance issues.

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, focusing on making PLUS an attractive company suitable for listing on the local stock market. However, 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 the reluctance to increase the toll rate was all about politics, which made investors uncertain about the future of PLUS

Thus, from a public company owned by hundreds of big and small shareholders, including foreign investors, PLUS became a company owned by only two shareholders: Khazanah, with a 51% share, and the EPF (Employees Provident Fund) with a 49% share. These two institutional shareholders quickly led the way for its transformation, keeping in mind also that PLUS had to continue to assist in promoting bumiputra interests in employment and business opportunities.

The board started to prepare the company to face the challenges of the digital revolution, as the directors realised that PLUS could easily lose its market share to emerging highway concessionaires and to the public transport system if it did not act fast to modernise its toll operations and raise the efficiency of its road and customer services along its vast network of highways on both coasts of the peninsula.

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 10 toll highway companies in the world. In South-East Asia, PLUS is considered the most experienced operator in the business.

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 government authorities and, subject to their approval of the enabling framework of rules and regulations, introduce a multilane, 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 bumiputra, will benefit from all these improvements.

The whole idea behind the business plan is to make travel with PLUS both a safe and enjoyable experience in keeping with an increasingly affluent Malaysian society. It will also place the PLUS highway in the forefront of Malaysia’s modern infrastructure to serve the new townships and industrial areas along the highway corridors. The business plan will fulfil its social obligations under the Shared Prosperity Vision as PLUS believes that being a good responsible corporate citizen is good for business.

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 bumiputra institution in the formal definition of the term. It is a national wealth fund with a mission to enlarge assets that are strategic to its expansion so that it can grow to become a major contributor to government revenue in the future, as 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 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 benefiting 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 function to create new wealth for the country.

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.

Khazanah’s CEO has made it clear PLUS will not be sold, a statement which I, as former director-general of the EPU (Economic Planning Unit), Finance Ministry secretary- general, Khazanah National Berhad CEO and recently retired chairman of PLUS, fully support.


Kuala Lumpur

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