FIRE SALE
Khazanah announced last week that it had sold Iskandar Malaysia Studios for roughly US$7.3 million (RM32 million), a disposal that resulted in a huge book loss for a project that cost more than US$150 million to build. The fund has come up to defend the sale, noting in a statement that the disposal to Singapore-based GHY Culture & Media would “contribute to higher utilisation of the studio by regional and global players”.
But there has been general derision for Khazanah over the deal.
Private economists and bankers argue that the failed studio venture illustrates the flaws in the sovereign fund’s business model, which allows it to venture away from playing the role of a strategic investor and take on direct roles as business developer and manager and operator.
The studio venture was announced in 2009 in collaboration with Britain’s studio group Pinewood and began operations five years later with facilities, including 100,000 sq ft of film studio space, television studios, and production facilities. The grand plan was to establish Malaysia as a production hub and subsequently build a local industry organically.
But like Khazanah’s other ventures in the development of the Iskandar region, troubles began to surface in 2019 when Pinewood pulled out of the venture.
Why Khazanah decided to completely exit from Iskandar Malaysia Studios is unclear. But the deal has raised governance issues for the Anwar’s administration. As prime minister, Anwar holds the position of chairman of Khazanah and it is unclear whether his government was advised about the studio disposal.
Most Malaysians accept that the strong mix of politics and business in the GLC ecosystem is likely to remain a feature in the national economy for a long time.
But the government could introduce reforms by forcing GLCs to sharpen their respective mandates and divest businesses rather than compete with the private sector. The current GLC model also lacks punishment on senior executives of GLCs for pushing ahead with poorly conceived business ideas and management pitfalls that result in ventures performing badly.
Leslie Lopez is a senior correspondent at CNA Digital who reports on political and economic affairs in the region.