Malaysia Uncut

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The Truth About Khairy Jamaluddin – 10

The Truth About Khairy Jamaluddin continues here:

Part 10 – The National Auctioneer

The National Auctioneer Azman Mokhtar’s rejection of Khairy Jamaluddin’s demands to be the Chief Operating Officer (COO) of Khazanah was a massive blow to his ego. Khairy had hoped his appointment to Khazanah would be a mere formality. Instead, he found himself politely turned away and in no uncertain terms labelled as young and inexperienced. It was the same reason that saw him catapulted out of the Prime Minister’s Office after successfully planning Abdullah Ahmad Badawi’s historical victory in the 11th General Election.As the main campaign officer of the General Election, Khairy not only devised the image which projected Abdullah as a kinder, gentler man than Mahathir, but he was also instrumental in selecting the Barisan Nasional candidates. A three-man committee comprised of Deputy Prime Minister Najib Tun Razak, Barisan Nasional Executive Secretary Yaacob Muhammad and Khairy himself were given an almost completely freehand in picking and choosing the ‘lucky ones’ who would be given the watikah (authority letter) to become candidates. But the other two members of the committee were left without doubts that it was Khairy who was the eyes and ears of the Prime Minister and had the most sway in making decisions.

In the aftermath of the General Election, Khairy could not help but preen and boast about his role in masterminding the glorious victory that was secured by the BN. This angered not only Najib but other officers in Abdullah’s circle who had been in service longer. Led by Chief Private Secretary Thajudeen Abdul Wahab, they mounted enough pressure to call upon Abdullah to cease the unnecessary brickbats that he attracted through Khairy. By removing the young man from his immediate official circle, Thajudeen told Abdullah that he could still rely on Khairy as a family member, but it would be wrong to continue having him as an official advisor. Fawzi Basri, another Abdullah confidante, suggested that Khairy be given a role in another ministry. It was then that Khairy ally, Ahmad Zaki Zahid, who was also an officer in the PM’s Department, suggested that Khairy be made Chief Executive Officer of Khazanah.

Abdullah discussed the matter with second Minister of Finance Nor Mohamed Yakcop. Both agreed that the then CEO, Anuwar Aji, was incompetent and bumbling. Nevertheless, Nor Mohamed thought that a 28-year old CEO was ridiculous given Khairy’s absolute lack of experience in running a business. In fact, other than being a Special Officer to the Prime Minister, Khairy had absolutely no other working experience except as a trainee journalist in the print and electronic media. Nor suggested instead that Khairy be made the Chief Operating Officer, only one step below the hierachy. In that capacity, Khairy would be responsible for the day-to-day running of Khazanah, while the CEO concentrated on major policy decisions. It was in fact very much the job that Khairy had been doing in Abdullah’s office.

Nor Mohamed Yakcop came to power on the back of advising former Prime Minister Mahathir Mohamad in imposing capital controls and a Ringgit peg as a cure to the Asian financial crisis of 1997. Previously allied to Anwar Ibrahim protégé Wan Hasni as advisor to the Abrar group of companies, Nor Mohamed had also worked as a Bank Negara officer, a role where he lost RM15 billion on bad foreign currency trading bets. It was said that Nor Mohamed made so much money from the foreign exchange foray that he bought a racehorse for the Melbourne Cup race and named it after Bank Negara.

In his stint as Special Advisor to the PM, Nor Mohamed had brought in some bright young things, mostly graduates from Oxford and Cambridge (but not all). These thirty-somethings were either accountants or lawyers who had worked in various capacities as restructuring experts. It was one of them, Azman Mokhtar of Binafikir, who Nor Mohamed chose as CEO of Khazanah. Nor Mohamed had thought that being from this group, Azman would be amenable to having fellow Oxford graduate Khairy as his effective deputy.

But Azman was never enthusiastic about Khairy. In the first place, he did not like someone watching his every move. He could have made much more money as a Binafikir Managing Partner than doing ‘national service’ in Khazanah. In order to perform his Khazanah duties, he wanted a free rein. Having assets of over RM60 billion through 11 subsidiaries, 16 associate companies and hundreds of other minority investments, both in Malaysia and overseas, Khazanah was also too rich a plum for one like Khairy who would be so easily tempted. But the most important reason for Azman rejecting Khairy’s immediate move to Khazanah was that Azman had his own bunch of bright young things who were in no way sympathetic to Khairy. Equally educated with first class degrees from the top universities of the world, these young man in their late 20s and early 30s were swiftly put in various positions in Khazanah, ranging from Personal Assistants to Directors of Investments, Equities and Corporate Finance, where they were expected to concentrate on the job.

These young men did not like Khairy because Khairy represented the scheming face of politics. They knew that Khairy’s presence would force them to compromise business principles in favour of political expediencies. Khairy would bring in cronies and involve them in Khazanah deals. More importantly, Khairy would be a negative influence on the professionals as he would demand every bit of information to be directed to him. It was this group of Azman’s boys who sighed the loudest when they heard that Khairy was going to be made COO, and it was the same group who felt greatly relieved when Azman tore up the appointment letter which had been prepared by Nor Mohamed Yackop’s Political Secretary, Norza Zakaria, waiting only to be signed by Khazanah Chairman and Khairy’s father-in-law, Abdullah Badawi.

Khairy knew that the young things in Khazanah were not in the same boat as his own Oxbridge supporters in Ethos Consulting and other commercial arms used by him as political vehicles. Whereas the latter could be expected to bend and bow to Khairy’s every wish, the former often made fun of Khairy, even if only behind his back. They laughed at his inability to understand basic business procedures, including the reading of spreadsheets and business plans. Khairy was not a complete idiot in such matters, but the six months he spent as a compere for a TV show was hardly the experience needed to understand corporate finance. In spite of that, Kalimullah Hassan had appointed Khairy to a Corporate Finance position in ECM Libra on the basis that he himself (Kalimullah) had no such experience but could just rely on his networking to get deals for his partnership.

Khairy realised he could not leave Khazanah totally in the hands of these young people who were so indifferent to his political ambitions. When Azman rebuffed him, he used another tactic to put his tentacles within the Khazanah system. The swift appointment of Azman meant that many of the old brooms within Khazanah also had to be replaced. Abdullah was persuaded by Khairy to get rid of long-time civil servants and replace them with so-called professionals. Azman nominated the majority of these, but there were some who managed to squeak through by the grace and favour of Khairy. Khairy wanted to use them in the same way that Omar Ong was being used in Najib’s office. They were his spies and they were also responsible for giving him the inside details of the most juicy of Khazanah’s pick of business deals.

Foremost amongst these was a friend of Khairy’s from the Ethos Consulting circle called Gianendra Sarvananthan. Sarvananthan had studied with Khairy in England and had been an active participant in his study circles. When Khairy ascended to Abdullah’s office, Sarvananthan was his main advisor on business and economic matters. At that time, Sarvananthan worked as a corporate advisor to a Singapore-based bank. In this capacity, he introduced Khairy to various Singapore business interests, including the key investment officers of Singapore government-owned Temasek Holdings and DBS Bank (more about this later). When Khairy failed to get appointed to Khazanah, he decided that the next best thing was to have Sarvananthan there in his place.

So Sarvananthan was quickly made Director of Investments in Khazanah. At the age of 29, Sarvananthan, who had no business experience at all in Malaysia, was put in charge of restructuring Khazanah’s businesses and most importantly its equity investments. In spite of his apparent qualifications, Sarvananthan knew nothing about Khazanah’s agenda, nor was he knowledgeable about the Malaysian financial and business environments. This seemed no obstacle though as he was made the most important decision-maker in the so-called Khazanah revamp.

Through Sarvananthan, Khairy put in many of his proposals to Khazanah. The modus operandi is simple. Khairy would identify business deals where he or ECM Libra could have a role. He would then inform Sarvananthan who would go to Azman with the same proposal as if it had been his (Sarvananthan’s) own suggestion. When Khazanah made a decision to execute the deal, Khairy (or his people) would be chosen by the counter-party as their advisors. A percentage of commission would be given to Khairy for managing the deal. While commissions are fairly small in other business circles, Khairy’s was massive due to the huge size of Khazanah’s deal.

One example was Temasek’s entry into TM (previously known as Telekom Malaysia). Temasek had bought 5% of TM for a price of RM1.6 billion in the early days of Abdullah’s administration. It was supposed to be a signal of the major cross-strait thaw in the relationship. As everyone knows, Temasek is also a substantial shareholder of SingTel, run by Lee Hsien Yang, the youngest son of Singapore founder Lee Kuan Yew. It was a massively important political and business deal. What the public did not know was that Temasek had made payments to Khairy through a Singapore based company closely associated to Khairy proxy and UMNO Supreme Council member, Norza Zakaria. The company had its registered address in the Singapore Land Tower at 50 Raffles Place. Seemingly, payments were made to the company for ‘consultancy services’, but in effect it was nothing more than kickbacks.

The deal was made known to the highest levels of the UMNO leadership. Mustapa Mohamad told former Prime Minister Dr Mahathir Mohamad at his office in the Petronas Twin Towers. Mahathir was outraged. While Mahathir himself was never free from blame in his political and business deals, he always ‘kept it in the family’, i.e. within Malaysian business circles. Never would he countenance selling anything to arch-enemy Singapore.

Mustapa was entrusted to gather a number of ministers to express through them that the Temasek sale was not a wise move. In almost every country, telecommunications is considered a strategic industry which is jealously guarded due to potential internal security implications. Abdullah was informed that many of the engineers at SingTel (a Temasek company) were experts trained by countries such as Israel, which had also provided input for SingTel’s sophisticated satellite system. Gilat, an Israeli-owned satellite equipment specialist, were technical advisors not only to SingTel but to the Singapore government. Ministers such as Aziz Samsudin and Azmi Khalid said to Abdullah that opening up strategic industries to Singapore could be dangerous especially since Singapore had already been given footholds in other strategic concerns such as banking, insurance, construction materials and the print media. Singapore’s agents such as Kalimullah Hassan were installed in major positions and there was always the problem that the investments made by Singapore could hardly be reciprocated by the poorer Malaysians.

The troika of Mustapa, Azmi and Aziz were powerful ministers because they were remnants from Mahathir’s era and were known to be honest with Abdullah. Abdullah had no choice but to agree to listen to their objections. However, Khairy persisted in his attempts to get more money out of the Singapore-made deals. Almost all his business connections were with Singapore. Norza Zakaria, his proxy, had Singapore-based interests. ECM Libra, his employer, had a Singapore sister company whose main task was to marry Singapore money to Malaysian assets. Kalimullah Hassan, his stooge, was a Singapore apologist who built his career on delivering good press reports in Malaysia on behalf of Singapore. Sarvananthan, his economic advisor, was Singapore trained and beholden to the interest of Temasek. It was no wonder that Khairy is known in Singapore press circles as ‘The Quiet Singaporean’.

No major foreign investor would ever want to be in a minority position for too long. So Temasek pushed hard to increase their holdings in TM by another 5%. Given current market capitalisation, this would mean a purchase of almost RM1.7 billion. Khairy would normally attract a commission of 1% to 2% to be shared amongst his associates – that would come to approximately RM17 million to RM34 million Ringgit. In addition to the 16 million Ringgit received for the previous transaction, it was a lucrative business by any means, as the only exertion on Khairy’s behalf would be to persuade Abdullah to agree to the deal.

Since March this year, Abdullah has been persuading the cabinet to accept an increase in Temasek’s share of TM. But each time he has faced opposition from some of the ministers who have been prepared and briefed by allies of Mahathir. In addition, Najib Tun Razak has kept studiously silent on the move. In post-cabinet meetings, Najib has been consulting with Mahathir and even former Finance Minister Tengku Razaleigh Hamzah on what to do next. The advice has been the same, i.e., to delay it for as long as possible, if not, to outright block the deal. If Temasek was allowed to gain further shares, Malaysia’s interests might be compromised.

To break this scenario, Khairy had a discussion with Sarvananthan. They came up with the idea of emphasising Malaysia’s increasing prominence in Singapore. Both hoped that if Malaysian companies were seen to be buying bigger shares of Singapore entities, the opposition to Singapore’s purchase of TM would be significantly compromised. Sarvananthan suggested to Khazanah and TM CEO Abdul Wahid Omar that they increase their shares in M1, the third major telecommunications provider in Singapore. However, the deal came at a much higher price than it was really worth. Singapore would not sell their assets cheap and Malaysia had to pay a massive premium for it. The effect of this is that TM shares dived on the back of investor concerns that the move was unwise and expensive. An immediate result of TM’s dip is that a purchase by Temasek of a new block of shares would of course then be much cheaper. Such is the intelligence of Khairy’s boys in Khazanah. Singapore: 2; Malaysia: 0.

At the current moment, Khairy is still hopeful that the deal will go through. But even if it doesn’t, there are many more deals he could broker for Singapore. One such deal is the restructuring of Felda’s assets. Felda is mainly concerned with plantations. But unknown to many, it also has minority investments in major Malaysian banks such as Maybank. These minority investments come to billions in real terms and are ripe picking for a foreign investor if Felda were ever to decide that it would concentrate only on its core business of plantations and divest its non-core holdings. Using ECM Libra, Khairy made a presentation to Felda and Deputy Prime Minister Najib Tun Razak for these non-core assets to be sold to Singapore interests. Khairy lined up both Temasek and DBS Bank to prepare for the sale of these assets. Commission to Khairy? Somewhere in the range of RM30 million to RM50 million.

The problem with Felda is that the restructuring was not planned by Khairy. It was in fact the idea of former Second Finance Minister Jamaludin Jarjis. Jamaludin had appointed his nephew to prepare a plan through the Avenue Capital group. But when Abdullah took office, the plan was shelved in favour of another proposed by Ethos Consulting, the Khairy business arm. Abdullah thought that it would be easy to get Najib to agree to Ethos’ plan. But Najib countermanded Ethos by placing Felda under a new officer, an ex-Mustapa Mohamad ally named Ahmad Maslan. So the situation is at a deadlock. But both parties are lobbying hard to get their hands on the juicy bits of Felda. What started out as Tun Razak’s NEP initiative to help rural Malays has now become the pot of gold at the end of the proverbial rainbow.

So far, Khairy has only taken commissions from these major deals. However, there is one major government asset worth around RM1.7 billion which is about to become Khairy’s road to the Forbes’ Billionaires List. The planning has taken some time due to the complexity of the transactions. But Khariy and Norza Zakaria have now managed a breakthrough. In the next few months, the plan will come to fruition…


The Truth About Khairy Jamaluddin continues…in Part 11: Billion Dollar Khairy


Wednesday, October 11, 2006 - Posted by | Commentary

1 Comment »

  1. […] The Truth About Khairy Jamaluddin continues here: […]

    Pingback by The Truth About Khairy Jamaluddin - 11 « Malaysia Uncut | Wednesday, October 11, 2006 | Reply

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