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1MDB shake-up raises more questions

 | January 7, 2015

Time will tell if the new CEO can indeed make something of what could be the appointment of a lifetime.

COMMENT

arul kandasamy2The latest happening in the controversial existence of 1 Malaysia Development Bhd is the appointment of a 38-year-old banker to head Najib’s biggest white elephant.

The choice of Arul Kanda Kandasamy, who previously headed Investment Banking Group and the Corporate Finance Division of Abu Dhabi Commercial Bank, is rather unusual. With 1MDB essentially being a GLC, the position of CEO is typically given to a Bumiputera candidate. Arul may be the first Indian to occupy such a lofty position in a GLC. He is also very young, though his resume speaks for itself. He has gained a great many accolades, which in itself reeks of meritocracy, a concept we do not usually associate with the ruling government.

In truth, bringing in tested and capable talent now seems to be the modus operandi of the government when one of its arms faces a crisis, like the recruitment of Christoph Mueller for MAS. Mueller formerly headed Ireland’s Aer Lingus, which faced similar challenges in the tough competition provided by the low cost carrier Ryanair. His appointment did not come without grumbling from several Malay NGOs, who questioned if there was no such capable candidate from the Bumiputera ranks. We may be hearing the same question in the coming weeks from would-be detractors of Arul.

Arul faces a challenge as daunting as Mueller’s in heading 1MDB, an initiative of our dear leader which has come under fire from the opposition and Mahathirists, who both accuse the fund of being in debt to the tune of some RM42 billion. Accepting the role is very much akin to volunteering to jump into a tank full of very, very hungry sharks, and Arul may well face challenges from within the corporate structure of 1MDB, which to this point was governed in a manner typical to GLCs.

What is more important, though, is that Arul’s appointment serves not only the purpose of bringing in what seems to be a capable candidate, but also of having such a candidate to fill the role of 1MDB’s public face. With intense public scrutiny focused on 1MDB, he will be expected not only to run the day to day operations of the company, but also to be the spokesman who faces the media, the opposition and the rest of the public.

He is essentially the sacrificial lamb to be fed to the ravening hordes, but time will tell if he indeed can rise to the occasion and make something of what could be the appointment of a lifetime.

However, there’s a cloud surrounding the sudden exit of Arul’s predecessor, Chief Executive Mohd Hazem Abdul Rahman, who was first appointed to the post in 2013. DAP’s Tony Pua hit the nail on the head when he surmised that the statement given by 1MDB Chairman Lodin Wok Kamaruddin indicated that Hazem was actually fired by the corporation.

Pua went on to say that Hazem was fired because he was either doing a “terrible job” or was the “fall guy” for the corporation. He had held the position for less than two years, making this the second CEO change for the corporation in as many years. It is highly feasible that in the coming weeks Hazem’s exit will be positioned by government linked activists and media as a step for the renewal of 1MDB, making it seem like he was indeed incompetent and needed to be removed for a more capable individual to take over.

Ultimately, Hazem’s resignation raises many questions that need to be addressed. If he was indeed incompetent, then was it a terrible mistake to choose him in the first place? What of the RM42 billion debt that 1MDB has found itself in, and how will this affect the corporation going forward? What will a “strategic review” encompass, and what “financial alternatives” will the corporation pursue from this point on?

The appointment as CEO of 1MDB may be a poisoned chalice at this point. What is certain is that this development will only serve to encourage further attacks from the Mahathirists , who have vehemently opposed 1MDB since it’s inception. With the signs of trouble brewing in the usually opaque corporation, Mahathirists will see this as affirmation of their suspicions against it, and will continue to use 1MDB against the Prime Minister.


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