May
09
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In defence of Tabung Haji, writes Lukman Sheriff Alias (updated)
As the facts are becoming clearer, Tabung Haji has purchased one lot at 1MDB at a discounted value and rejected the tower. There has been tremendous debate from the likes of our former PM Tun Dr Mahathir Mohamad, blogger Din Merican, Khairy Jamaluddin, and the list goes on.
Lukman Sheriff Alias takes a different perspective. He writes to share with us from his Facebook posting. Also please see updated comment from Lukman in the Comments Section:
It reminded me of some of the allegations made then against the purchase by Tabung Haji of a building at KL Sentral from MRCB. I was PUU then at Tabung Haji and had to defend the deal. The deal was said to be a purchase to help out a crony. It’s a similar allegation now concentrating on who Tabung Haji buys from rather than the transaction deal.
My personal view back then was that Tabung Haji should have bought more. It’s a good location and indeed it has brought great returns benefiting the depositors. We must do what we think is right. They should have bought more then.
Our problem now is similar to the one faced then. We failed to ask whether the deal is beneficial to Tabung Haji . We concentrated much on who Tabung Haji bought from.
Much has since changed in Tabung Haji. Now all investments have to get the approval of the Investment Committee who are independent and reputable. They too now have a Risk Department which assesses the risks to Tabung Haji .
The assets of 1MDB are good assets in my view. Based on public information, the purchase price is reasonable to me. I would say within a fair range of fair value. The last transacted price at KLCC area that I know of has reached over RM3,000 psf. The area here is outside KLCC and so should be lower but it has MRT connectivity and a known development plan for an Islamic finance hub.
I don’t see improprietary. Some may dislike 1MDB or other things or people at Tabung Haji . But the point is that Tabung Haji has an opportunity to buy at a good location with good connectivity. There are other considerations like plot ratio and a detailed development plan which I’m not privy of, but until proven otherwise, I don’t see any improprietary but a fair deal transaction.
And for this I defend the transaction.
Addendum: It’s been revealed that Tan Sri Ismee Ismail, D Johan Abdullah sit on both Tabung Haji and 1MDB Boards. Tan Sri Abdul Samad Alias then sits on TH Investment Commitee and 1MDB’s Advisory Board. There is prima facie of a conflict which can be negated by abstention. At the moment I’m not privy to any facts in relation to the meeting.
PS: I need to declare I’m a solicitor for Tabung Haji . However I’m not involved in the deal and have relied purely from public information on the deal. The client does not know I’m writing this. It’s my own view not representing anyone and not the firm.
Lukman Sheriff Alias adds:
The issue of conflict is certainly valid as per addendum but its not fatal or uncommon. Typically governance requires abstention. TH has confirmed that there were conflicts but they were not involved in the deliberations. The tmi article is therefore incorrect.
At TH there are two important governance structure on investment. One is the investment committteee (IC) and the other is the board. The IC is where independent reputable commercial people sits and if I recall correctly is headed by tan sri syed jamullail. For any investment to go ahead it must obtain approval of two levels before proceeding. Even then certain investments require minister’s approval under the Act.
Conflict are common in commercial and governance require abstension. Here two board members we know now sit on both boards. Governance require they abstain from both board of directors of 1MDB and TH.
On the IC, the highly respected Tan Sri Samad (formerly head of ano of the big four accounting firm then) is reported to sit on the board of advisors of 1mdb. It is highly unlikely that the board of advisors are involved in the daily transaction as there is already a BOD and know of the TH transaction. Nevertheless, abstension would be prudent and a good governance.
The article is thus wrong and presumptuous. The risk department forms part of the management. The management is headed by TS Ismee. My view is that there is conflict and unless facts point to the contrary I believe they have abstained. There are thus many other people involved in decision. I view the safeguards as adequate. Any more layer of governance would make the business inefficient.
Risk management department was set up after the 98 crisis. Risk management is certainly a tool for decision making. But the question that should be asked is whether the deal is in the interest of TH. What is the return to TH? What’s the risks involved? Further to me it’s also a valid consideration that TH being a leading financial institution be involved in a development of an international financial hub in KL. So far no evidence is shown that it’s not commercially viable or TH will suffer a loss. I do therefore think TH acted in the best interest of the depositors.
Though many may disagree with me, I do feel we have focussed too much on who TH buys from, which, though relevant, should not be the sole basis of decision making as in this case.
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