Cabinet agrees to Terengganu’s own asset manager

A major obstacle to the setting up of a RM10 billion sovereign wealth fund by the Terengganu state government has been cleared. The Cabinet at its weekly meeting yesterday agreed that the federal government would provide a RM5 billion guarantee to the Terengganu Investment Authority, a move which would help the authority raise capital from the local and foreign markets at a lower cost.

The Cabinet decision to provide the all-important government guarantee is also a backhanded acknowledgment that the 5 per cent oil royalty money which the state has received since 1978 should be better managed.

For years, there has been a litany of complaints on how the oil royalty has been squandered by successive Barisan Nasional governments. Despite billions of ringgit flowing into the state over the last 30 years, Terengganu remains one of the poorest states in the country.

Disturbed by this situation and aware that oil and gas resources in the state will run out one day soon, the Yang di-Pertuan Agong, Tuanku Mizan Zainal Abidin, who is also the Sultan of Terengganu, mooted the idea of channelling some of the oil royalty money into a sovereign wealth fund run by a team of professionals and supervised by well-regarded Malaysian and foreign bankers and investors.

The King believes that only by managing the royalty money prudently can the prosperity of future generations be secured.

The setting up of the TIA was endorsed by the Menteri Besar Datuk Ahmad Said and his state exco on Wednesday. Under the authority, the Sultan of Terengganu will be the chairman of the Board of Advisors. The Menteri Besar will also be represented on the board.

The RM10 billion will be invested in Terengganu and in other parts of Malaysia. But the fund will also have the mandate to invest globally. Dividends will be declared to the state and its partner investors.

Without the 5 per cent royalty payment, Terengganu’s revenue amounts to about RM400 million a year.

-TMI