Sunday 21 Jul 2024
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This article first appeared in Forum, The Edge Malaysia Weekly on March 4, 2024 - March 10, 2024

Nobody is indispensable. Not even the director-general of Tourism Malaysia or the chief executive of Lembaga Tabung Angkatan Tentera (LTAT). But when they leave their positions — whether upon demotion or abrupt resignation — it suggests that something is amiss.

On this score, two ministers — Datuk Seri Tiong King Sing and Datuk Seri Khalid Nordin — have some explaining to do in respect of the portfolio under their watch. Tiong faces a barrage of criticism for demoting director-general of Tourism Malaysia Datuk Dr Ammar Abd Ghapar, while Khaled is under the spotlight for the sudden resignation of three key executives of LTAT in less than two months, after he took the helm of the Ministry of Defence in December.

LTAT’s chief executive Datuk Ahmad Nazim Abdul Rahman and its chairman Raja Affandi Raja Noor both resigned in early February due to disagreements on the restructuring of LTAT and its flagship company Boustead Holdings Bhd. They claimed that Khaled was not following a cabinet-approved plan that had been put in place under the previous minister, Datuk Seri Mohamed Hasan.

Demotion and bak kut teh

Tiong, the MP for Bintulu, is no stranger to controversy. He barged into the Kuala Lumpur International Airport (KLIA) last June to handle the case of a person who had arrived from China and was being told to pay money if she wanted to enter the country. His actions brought to light the corrupt practice of some immigration officers demanding money in exchange for allowing foreigners to enter the country. It was an issue that was often talked about but never raised in public until Tiong created the furore.

In the latest case, Tiong is being taken to task by certain MPs and politicians from Barisan Nasional for demoting Amaar. He is also being questioned in relation to bak kut teh being named as one of the 10 national heritage foods by the Heritage Commission. The feisty Tiong has not replied to critics on this issue.

However, in his usual outspoken style, Tiong has stated that Ammar’s performance had not been up to expectations. Ammar says he was not given any reasons for his demotion nor an opportunity to explain the allegations against him.

As the minister in charge, Tiong has the power to promote and demote officials holding key positions to get work done. Tourism as an economic multiplier for the Malaysian economy is not as significant as it is for Thailand. Even though the ringgit is weakening against the US dollar and Malaysia’s transport network is far superior to that of its northern neighbour, we lag behind Thailand in terms of tourist arrivals and money spent by tourists.

Last year, Thailand drew 28 million tourists, who were estimated to have spent 1.2 trillion baht (RM158 billion). The largest arrivals in Thailand were from Malaysia, followed by China and South Korea.

According to the Department of Statistics Malaysia, 14.5 million tourists arrived in the country in the first nine months of last year, and were estimated to have spent RM49 billion. For the whole of 2023, the number of arrivals is expected to be close to 20 million, with Singaporeans leading the pack, followed by nationals from Indonesia, Thailand and China.

Indonesia had more than 11.7 million tourist arrivals. Singapore attracted 13.6 million tourists in 2023 despite its strong currency, with most tourists coming from Indonesia, followed by China and Malaysia.

Apart from providing employment to the service industry, tourism is an important source of foreign exchange income for the country. China and India are major sources of tourist arrivals to this region.

On that score, the Malaysian government has made it easier for tourists from China and India to enter the country with visa-free entries of up to 30 days. The incentive will be in place until December this year, and its extension will be subject to a review then.

As the minister in charge of tourism, Tiong has to make sure that the tourist arrivals are encouraging. He is accountable, more so now that he has replaced the director-general.

Credibility issues at LTAT

Khaled faces a different problem as the new defence minister. He has to come out looking credible in the restructuring of LTAT, which is saddled with a highly geared Boustead Holdings Bhd.

The old structure was inefficient as Boustead was a holding company that owned the valuable assets of LTAT and was the beneficiary of the cash generated by those assets. The problem was that Boustead used most of the cash to settle its debts.

Very little money went to LTAT. For instance, between 2017 and 2022, Boustead is estimated to have received RM1.3 billion in dividends from the six business divisions under its control. The dividends that flowed up to LTAT during the period amounted to only RM425 million. There were several years when LTAT did not get any dividends from Boustead.

The restructuring started last year, with LTAT privatising Boustead and its associate, Boustead Plantations Bhd (BPlant). Eventually, Boustead as an entity would be removed so LTAT will have direct interest in the assets currently being held by Boustead.

Apart from BPlant, the prized assets under Boustead are Pharmaniaga Bhd, BH Petroleum, valuable parcels of property under Boustead Property and a substantial stake in Affin Bank. Boustead also controls Boustead Heavy Industries Corporation Bhd.

The idea behind the restructuring is to see that LTAT brings strategic partners into all the companies to drive operations and make them more profitable. An example was to rope in Kuala Lumpur Kepong Bhd (KLK) as a strategic partner in the privatisation of BPlant. But the government turned down the plan.

Under the current structure, the senior management and board members of Boustead call the shots at the operating companies.

Boustead’s senior management has been entrenched for years without significant changes. It was under the control of one person — Tan Sri Lodin Wok Kamaruddin — between 1982 and November 2018.

Even after Lodin left in 2018, the directors at the various levels and senior management remained, making it difficult to bring changes to operations and create value for LTAT.

Khaled has said that he has no problems with the restructuring plan but his actions so far suggest otherwise. An example is the proposed fundraising exercise at Pharmaniaga to recapitalise the company. Under the old structure, the exercise would see LTAT increase its presence in Pharmaniaga while Boustead’s interest would be reduced substantially. But that is not happening.

Dramatic changes to top positions in the civil service or entities such as LTAT are rare. Most of the time, if the persons involved are unhappy, they leave quietly. If there is a question of incompetence, the person concerned is moved to another department or put in cold storage until they finish their term or retire.

In the private sector, an incompetent person would be sacked.

Ammar is due to retire next year. Tiong could have easily “managed” him by moving him to another position in the ministry but he took a decisive step and will be held responsible for it.

As for the changes at LTAT, Khaled had attempted to play down the resignations. But he failed miserably as he was forced to correct his statements, especially on the resignation of Raja Affandi.

Khaled cannot afford to fail in the restructuring of LTAT as it involves the savings of personnel from the Armed Forces. His actions will be closely watched.

M Shanmugam is a contributing editor at The Edge

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