KUALA LUMPUR (July 14): Malaysia’s National Trust Fund, also known as KWAN — the acronym of its official Malay name Kumpulan Wang Amanah Negara — is set to see a significant overhaul, including mandatory annual contributions under a newly proposed law: the National Trust Fund Bill 2026.

The annual contributions are proposed to comprise: at least 0.1% of the federal government’s projected annual revenue, at least 2% of the dividend it receives from Petroliam Nasional Bhd (PETRONAS), and at least 2% of export duties collected on depleting natural resources, including crude oil, mineral ores and iron ore.

According to the bill, which was proposed to repeal the existing National Trust Fund Act 1988 and tabled for first reading in Parliament on Tuesday, the export duty contribution applies only to the federal government's share of revenue and will not affect portions legally assigned to state governments.

Contributions from state governments will remain voluntary, coming through resource royalties or investment fund income.

Set up in 1988, KWAN's objective was to save wealth generated from the country's natural resources to benefit future generations. Since its inception, PETRONAS has been the sole contributor to the fund. Its contribution varies year by year and is based on the discretion of PETRONAS' board.

The fund has seen two withdrawals since its establishment. The first was in 2000/2001, when RM42 million was taken out to finance the Malaysia Wetlands Sanctuary project (Paya Indah Wetlands) in Kuala Langat. The second was at the height of the Covid-19 pandemic in 2021, when RM5 billion was withdrawn to procure vaccines and pay for related immunisation expenses.

That last withdrawal sparked concerns about how the fund was managed and protected, and its sustainability, which led to the proposed bill on Tuesday.

As at end-2024, the National Trust Fund’s net assets stood at RM22.43 billion.

Currently, after an initial lock-in period of 10 years from the act, KWAN funds are allowed to be used to finance development projects and provide soft loans to the federal or state governments. In 2021, the government used emergency ordinances to amend the law to tap the fund for vaccines.

The bill specifies that future withdrawals can only be used for education, healthcare and climate change mitigation and adaptation purposes.

Withdrawals from the fund will be capped at 50% of its estimated real rate of return for that financial year. Any withdrawals exceeding that threshold will require prior approval from the Dewan Rakyat.

If the full withdrawal limit is not used in a given year, the balance cannot be carried forward to add to the following year's quota.

A National Trust Fund (Incorporated) board will also be established as the governing body to administer, manage and invest the fund. This board must formulate a strategic asset allocation specifying the long-term investment strategy to the finance minister, whom it must report to. The fund's portfolio is currently managed by Bank Negara Malaysia. 

Besides investments, KWAN’s funds will also be used to remunerate, reimburse and fund other expenses for its board members, officers and servants, as well as cover any cost and payment attributable to the fund’s administration, management and investment.

Deputy Finance Minister Liew Chin Tong, who tabled the bill for its first reading, said its second reading will take place during the current parliamentary meeting, which ends this Thursday (July 16).

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