(Nov 26): The Darul Ehsan Investment Group (DEIG) has defended itself against critics, saying the new entity could make better use of state firms in order to generate profits to fund public programmes.

The chief operating officer of state business arm Menteri Besar Incorporated (MBI), Soffan Affendi Aminudin, said DEIG would help separate and refocus on two core functions of MBI, which has assets of between RM20 billion and RM30 billion.

The first role is to generate revenue for the state through investments and the second, to spend that money on corporate social responsibility programmes on behalf of the state government, Soffan told The Malaysian Insider.

Currently, the two roles are merged together within MBI, he said.

DEIG has come under intense scrutiny by critics of Selangor Menteri Besar Mohamed Azmin Ali.

Now considered the biggest issue thus far in Azmin's 14-month-old administration, some have even dubbed it Pakatan Harapan’s “1MBD scandal” after the debt-ridden federal state investor.

Soffan attempted to answer the critics, who include a Pakatan Harapan state assemblyman questioning the need for the company.

“There are two roles which are very clear and big (in MBI). One is to generate revenue through investments. The other is to spend that revenue on social responsibility programmes," he said.

“Because of the confusion of these functions, there need to be a separation in the DNA in terms of the investment professionals and those who are well-versed in corporate social responsibility programmes.

“So one of the proposals of the management to meet these objectives is to separate these two roles. One role is for social responsibility and the other to generate continuous revenue for the state government.

“That is where DEIG comes in. It has to be remembered that DEIG is 100%-owned by MBI.”

He said revenue from DEIG’s investments would be channelled directly to the state government and the public through programmes approved by the administration.

“DEIG will manage the state government’s assets and MBI will manage the social responsibility programmes for the state government,” said Soffan.

Controversy over how the company was set up and its operations led to a probe by JP-ABAS, the Selangor assembly's select committee monitoring government-linked companies.

A July JP-ABAS statement on DEIG said it was a private entity established in December 2014 to manage strategic investments, and to rationalise and restructure all subsidiaries under MBI.

DEIG's board of directors includes the menteri besar, state secretary, state financial officer and MBI’s chief executive officer and chief operating officer.

Azmin said that DEIG, which is his brainchild, would reduce dependence on taxes for revenue and allow it to get more dividends from MBI’s assets.

MBI has assets of between RM20 billion and RM30 billion and owns about 5,000ha of land in Selangor.

JP-ABAS, however, questioned the need to set up DEIG, as MBI’s subsidiaries could be restructured without it.

Soffan said currently, Selangor’s GLCs and their assets were fragmented and in disarray, and DEIG was necessary to rationalise and consolidate them.

“To me, setting up DEIG is not a problem. What we have to instil are issues related to governance and streamline the decision gates before we start operations.

"For the management governance is a very important value in any organisation.” – The Malaysian Insider