This article first appeared in The Edge Malaysia Weekly on January 29, 2024 - February 4, 2024

AS Tun Abdul Taib Mahmud’s term as Yang di-Pertua Negeri Sarawak has ended, the question is whether his family’s influence on numerous Malaysian public-listed companies will continue to hold sway or lose momentum.

Taib is replaced by Tun Dr Wan Junaidi Tuanku Jaafar, 77. His appointment, effective from Jan 26, 2024, to Jan 25, 2028, comes as no surprise given the widespread speculation that he is the favoured candidate among leaders of the state. 

Sarawak Premier Tan Sri Abang Johari Tun Openg had in the past praised Wan Junaidi, the former Dewan Negara president, for his significant achievement in amending the Federal Constitution to uphold Sarawak’s rights as per the Malaysia Agreement 1963 (MA63). According to Abang Johari, while serving as a Minister in the Prime Minister’s Department, Wan Junaidi was instrumental in securing parliament’s support for the amendment to Article 160 of the Federal Constitution. The amendment, which passed with more than two-thirds majority, included MA63, the Cobbold Commission and the Inter-Governmental Committee (IGC) Report, effectively safeguarding Sarawak’s constitutional rights.

Although Wan Junaidi is anticipated to make substantial contributions to the state, his arrival does not eclipse the narrative of Taib concluding his political career, a journey that extended more than six decades.

Taib, who was chief minister of Sarawak for 33 years, starting from 1981, and was officially appointed the seventh Yang di-Pertua Negeri of Sarawak — succeeding Tun Abang Muhammad Salahuddin Abang Barieng — in March 2014, was a powerhouse in his day, with his family wielding a lot of clout and amassing much wealth.

Hence, the question is whether Taib’s stepping down as Yang di-Pertua Negeri will adversely impact his family’s and associates’ interest in Malaysian public-listed companies, which collectively is valued at more than RM1.8 billion, according to corporate filings with Bursa Malaysia and the Companies Commission of Malaysia.

The listed companies linked to Taib’s family, with market capitalisations ranging from the RM1.14 billion flagship CMS to the RM99.7 million Sarawak Cable Bhd, span industries such as financial services, cement manufacturing, oil and gas, plantation, timber and engineering. Some firms that used to have ties include Quality Concrete Holdings Bhd, in which Taib’s sister Datuk Raziah @ Rodiah Mahmud was a director, and the delisted SIG Gases Bhd.

The Taib family network previously held stakes in public-listed companies that have since been taken private, including Glenealy Plantation (Malaya) Bhd, Putrajaya Perdana Bhd and Loh & Loh Bhd. A notable event was CMS’ sale of Utama Banking Group Bhd to RHB Bank Bhd for RM1.8 billion — RM937 million in cash and the remainder in loan stocks — in 2002.

Despite familial ties to various companies, Taib, owing to his role as governor mandated by the Constitution of the State of Sarawak, maintains a clear distance from these businesses. Meanwhile, his cousin Datuk Abdul Hamed Sepawi holds significant stakes in some public-listed companies and is associated with more than seven firms (listed and private).

With Taib officially ending his political career as state governor, will his extended family and network slow down or will they continue to have a huge presence in Sarawak?

Even before Taib’s impending departure as the Yang di-Pertua Negeri of Sarawak and conclusion of his political career, signs of a tense relationship between the state and CMS were already evident.

“The relationship between the state and CMS is at its lowest ebb … Since the appointment of the premier [Abang Johari], I was told that MD Sulaiman [Datuk Seri Sulaiman Abdul Rahman Abdul Taib, son of Taib] has not made a courtesy call on the premier. And it doesn’t help that CMS is taking [state-owned] Sarawak Energy Bhd to arbitration,” says a source familiar with the goings-on in Sarawak.

The conflict between CMS and Sarawak Energy began when Syarikat Sesco Bhd — a subsidiary of Sarawak Energy — charged CMS’ 79.07%-owned Cahya Mata Phosphates Industries Sdn Bhd (CMPI) RM266 million for cumulative electricity and security payment shortfalls in 2022, despite CMS asserting that the plant had not officially commenced operations.

The disagreement was referred to the Asian International Arbitration Centre but took a bad turn with the Court of Appeal’s dismissal of CMPI’s preservation order, which resulted in a power cut at CMPI’s phosphate production plants in July last year.

In the latest development on this case, CMS earlier this month said CMPI was subject to a RM342.25 million counterclaim from state utility firm Sesco. The case is due for an evidential hearing from Aug 26 to 30.

Similarly, CMS’ monopoly and dominance in other areas seem to be eroding as well. Although the company still has a monopoly of cement production in Sarawak, the state government has been active in forming partnerships with YTL Corp Bhd and Siam Cement, among others, to import cement for government projects. There are also plans to construct large-scale cement plants, but this remains conjecture at this point.

“In addition, PPES Works [CMS’ subsidiary and an infrastructure, construction and road maintenance contractor] is no longer assigned or awarded new infrastructure projects,” says an observer.

It is understood that companies linked to the Taib family no longer have major concessions. “The road maintenance concession has been segregated into four parcels to four distinct contractors. CMS has a 50% stake in Sacofa [Sdn Bhd], yet the federal and state authorities have ceased issuing new telecoms infrastructure projects to Sacofa,” says a source. As at press time, CMS officials had yet to respond to inquiries about the concessions.

The Taib family has found itself engulfed in a controversial legal battle lately over the ownership of a substantial stake in CMS. The conflict started when Sulaiman, the group managing director, challenged the alleged transfer of shares made by his father, Taib, to his stepmother Toh Puan Datuk Patinggi Raghad Kurdi Taib.

The shares in dispute constitute a 10.33% stake in CMS, which originally belonged to Sulaiman’s late mother Puan Sri Laila Taib. In September, he filed an injunction with the Kuching High Court to stop the share transfer, naming Raghad and RHB Bank as defendants, according to national news agency Bernama.

Sulaiman also questioned the authenticity of his father’s signature on transfer-related documents in court and attempted to submit fresh affidavits to challenge these. However, Raghad’s counsel, Shankar Ram, refuted the challenge, suggesting a lack of proper notice.

In a surprising escalation of the feud, in November last year, Sulaiman, together with his brother Mahmud Abu Bekir Taib, named their father as the third defendant, according to the defence who insisted that the shares were rightfully transferred to Raghad.

However, it is noteworthy that specific legal protections could potentially shield the governor from litigation, or in this case possibly shield him as long as he is in office.

The uncertainty over the family’s 23% stake and the group’s future weighs on CMS.

The current legal dispute at CMS is notable because a change in ownership could substantially impact the conglomerate’s strategic decisions.

Eyebrows were raised when Norway’s Government Pension Fund Global, managed by Norges Bank, reduced its interest in CMS in early January, only four months after acquiring a 5.03% stake.

Norges Bank did not comment on whether the family feud influenced its investment decision, but clarified that its divestment from any company is due to risk factors or ethical issues outlined in its guidelines, and CMS is currently not in either of these categories.

“We have two ways of divesting from companies. The fund itself may take the decision to divest from companies that impose substantial costs on other companies and society as a whole, and so are not considered long-term sustainable. These might be companies with business models that do not align with prevailing technological, regulatory or environmental trends. We call this risk-based divestments,” Norges tells The Edge.

“The second way is ethical exclusions. The independent council on ethics evaluates whether the fund’s investments are consistent with its ethical guidelines, and makes recommendations to us on observation or exclusion of companies.”

A global fund manager with knowledge of the stock states that the “family feud does not necessarily represent an ethical issue or a matter of corporate governance”.

As for the rest of the Taib-linked stocks, the fund manager tells The Edge that there could be buying opportunities given that most, if not all, of the stocks are trading at discount.

“There are a few ways of looking at it. Taib-linked stocks are currently trading at a discount. There is a Taib discount instead of a Taib premium. When he steps down, coupled with the family feud, it creates a situation where there will emerge opportunities for third parties … It would be different if the stocks were trading at a premium,” he adds.

“Fundamentally, the companies’ prospects are there and, not to mention, the developments coming up in Sarawak. CMS, for instance, still holds the monopoly of cement production in Sarawak and has benefited from the cement price hike since 2022.”

According to a head of research at a global investment bank, the sectors in which Taib-linked stocks operate rely extensively on resources and thus are not sustainable, in contrast with Sarawak’s recent shift to a new, technology-driven and renewable energy-focused economy. “Ultimately, it comes back to the structure of the state economy,” he says. 

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