This article first appeared in The Edge Malaysia Weekly on December 25, 2017 - December 31, 2017

IN recent months, there has been talk about the succession at sovereign wealth fund Khazanah Nasional Bhd. Long-serving managing director Tan Sri Azman Mokhtar is set to step down when his contract expires in 2019.

It has been reported that a succession plan has been in the works since 2016. However, recent events have raised questions as to whether Khazanah’s first changing of the guard in 15 years will see some twists and turns.

In September, deputy chairman Tan Sri Nor Mohamed Yakcop resigned following the Royal Commission of Inquiry (RCI) on Bank Negara Malaysia’s RM32.07 billion foreign exchange losses in the 1990s. He admitted to mistakes in managing the central bank’s forex trading. The RCI panel recommended criminal investigations into Nor Mohamed and other individuals.

Until his departure, Nor Mohamed was reportedly heading Khazanah’s succession panel and was said to strongly advocate an internal candidate. The names floated in news reports included executive directors Datuk Hisham Hamdan and Ahmad Zulqarnain Onn.

However, external names have surfaced with Nor Mohamed’s departure. They include former banker Arul Kanda Kandasamy, who is overseeing the restructuring of 1Malaysia Development Bhd, and CIMB Group CEO Tengku Datuk Seri Zafrul Tengku Abdul Aziz. Any candidate would need to be approved by Khazanah’s board, which is chaired by the prime minister by virtue of office. The race for the top seat may intensify next year as the successor needs to shadow Azman for some time before he — or she — can take over.

Tan Sri Azman Mokhtar

Managing director,  Khazanah Nasional Bhd

Having been at the helm of Khazanah since 2004, Azman is set to leave upon his contract expiring in end-May 2019. Reports say he intends to make way for new blood with the potential successor to shadow him for a year before the appointment is approved by Khazanah’s board.

The candidate will have interesting shoes to fill. Azman, who made his name in the 1990s as an investment analyst, heralded a new era for the sovereign wealth fund as its first professional manager.

In his own words, Azman was recruited by Tan Sri Nor Mohamed Yakcop, whom he first met in end-1998 when he was part of the advisory bank for the government’s Asian financial crisis management. Nor Mohamed was Bank Negara Malaysia adviser at the time.

Azman left BinaFikir Sdn Bhd, a boutique advisory firm he co-founded, to take up the role. BinaFikir was known for planning the asset unbundling exercise for Malaysian Airline System Bhd in the early 2000s.

Talk of Azman’s impending departure gained traction earlier this year as questions were raised on whether it would be an internal succession as planned. The timing coincided with Nor Mohamed’s departure following the Royal Commission of Inquiry into the central bank’s foreign exchange losses in the 1990s — although Azman’s succession had reportedly been planned since 2016.

After taking charge of Khazanah in 2004, Azman rolled out a 10-year transformation programme for Khazanah’s stable of government-linked companies (GLCs) the following year in an attempt to reform practices, lift their performance and enhance returns.

The programme ended successfully in July 2015, based on Khazanah’s metrics. However, some GLCs, like Malaysia Airlines Bhd, remain works in progress.

By 2019, Azman will be 58, and it will be interesting to see if he will take up a major role somewhere in Corporate Malaysia.

Tengku Datuk Seri Zafrul Tengku Abdul Aziz

Group CEO and executive director, CIMB Group Holdings Bhd

If Khazanah turns to an external candidate to succeed Azman, Tengku Zafrul represents a parallel of sorts. When he took over as CIMB Group CEO in 2015, he followed in the footsteps of a predecessor who had also been in office for 15 years — current CIMB chairman Datuk Seri Nazir Razak.

He joined CIMB in 2014 from Malayan Banking Bhd (Maybank) amid an exodus of top officers sparked by the departure of former Maybank president and CEO Tan Sri Abdul Wahid Omar, who went into public service.

Those who left at the time include Datuk Khairussaleh Ramli, who now heads RHB Banking Group. Khairussaleh and Tengku Zafrul, who headed Maybank’s investment bank, were reportedly under consideration to replace Abdul Wahid before Maybank’s board chose Datuk Abdul Farid Alias.

At CIMB, Tengku Zafrul rolled out a group-wide transformation drive called T-18 or Target 2018 in February 2015. Its goal was to restructure the group and introduce various initiatives to boost efficiency, financial performance and returns.

Financially, T-18 aims to reduce the bank’s cost-to-income ratio to below 50% and raise consumer banking contribution to about 60% of group income. It is also aimed at boosting return on equity to over 15%, although Bloomberg reported that this target was revised in April this year to at least 10.5%.

Given that T-18 ends next year, the timing would be right if Tengku Zafrul were chosen as a candidate for the top Khazanah job ahead of Azman’s departure in mid-2019.

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