This article first appeared in Forum, The Edge Malaysia Weekly on July 1, 2024 - July 7, 2024

On May 1 this year, BlackRock Inc set up a multi-class investment firm in Saudi Arabia with an initial seed funding of US$5 billion (RM23.6 billion) coming from the kingdom’s Public Investment Fund (PIF).

BlackRock Riyadh Investment Management is mandated to attract additional overseas capital to Saudi Arabia, deepen its capital markets and open up funding for alternative investments and infrastructure. It was a major event attended by BlackRock’s founder Larry Fink, who is known as a sympathiser of Israel’s cause in the Middle East.

While BlackRock’s direct presence in Saudi Arabia has met with little resistance from the rest of the Arab world, its potential involvement in Malaysia has drawn protests from the opposition and former ministers.

Based on the debate and comments inside and outside parliament, the crux of the protests is the privatisation of Malaysia Airports Holdings Bhd (MAHB) with the involvement of Global Infrastructure Partners (GIP), which is in the process of entering into a merger with BlackRock.

Khazanah Nasional Bhd and the Employees Provident Fund (EPF) will own 70% of the consortium set up to privatise MAHB, with GIP owning the remaining 30%.

The BlackRock-GIP deal was mooted in January this year and is expected to be completed in the next few months. The merger will create an infrastructure fund of US$150 billion that manages various assets on behalf of its clients.

When MAHB announced the privatisation in mid-May this year, the opposition members of parliament (MPs) were blunt in their opinions. Their stand was that the government should not have any dealings with BlackRock because it was pro-Zionist due to the affiliation of one of its founders, namely Fink.

They contended that BlackRock had investments in companies in the defence business, such as Lockheed Martin, which provided arms to Israel in its fight against Hamas. Some former ministers also joined in the chorus of those opposing the deal because of BlackRock’s presence.

But what the opposition MPs and former ministers do not mention is that BlackRock, which is the world’s largest money manager with more than US$10 trillion in assets, is not only invested in Lockheed Martin.

It is a major investor in a host of companies covering the entire economic space, including pharmaceutical firms such as Pfizer Inc and AstraZeneca Plc. Both these companies played a major role in developing vaccines to help the world combat Covid-19 and saved millions of lives.

The government, led by Prime Minister Datuk Seri Anwar Ibrahim, has defended the deal. From Anwar’s statements in parliament, it is clear that the government is not going to stop the deal on the grounds that BlackRock is in the process of buying into GIP.

He has pointed out that BlackRock is already in Malaysia with minor stakes in several listed companies, and that the bond market and EPF have investments in overseas infrastructure through GIP.

EPF has been working with GIP for many years now and its association with the fund has paid off handsomely. Its investment in GIP, which manages the Gatwick Airport in London and Sydney Airport in Australia, is a case in point.

The question then is, if the MAHB deal is not acceptable with BlackRock-owned GIP in it, would EPF be forced to make a stand on its investments in the infrastructure fund? Obviously, that should not be the case.

Politicians must be mindful of the fact that EPF’s overseas investments have performed much better than its domestic investments. It is the primary reason why the retirement fund has given better returns to contributors than even funds managed by Permodalan Nasional Bhd.

If EPF were forced to make a decision because of political opposition, that would not go down well with the general public. The last thing EPF contributors want is to see the fund becoming a pawn in a political debate.

Machang MP Wan Ahmad Fayhshal Ahmad Kamal has contended that BlackRock’s minority interest of less than 3% in Malaysian listed companies cannot be compared with giving a BlackRock-controlled GIP a 30% stake in the privatisation of MAHB.

Wan Ahmad is right because then GIP would be involved in the board decisions of MAHB in view of its 30% stake while BlackRock’s minority stake in listed companies does not accord the fund manager such a privilege.

But what is of paramount importance in the MAHB deal is the value a strategic investor such as GIP brings to the table. That is what would matter most to ordinary Malaysians. It’s not whether the stake is 3% or 30%.

While Malaysians are in solidarity with the Palestinians suffering in the war in Gaza, we have to draw a line that is in accordance with Malaysia’s foreign policy.

The government’s foreign policy is clear. It does not recognise Israel and will not have any dealings with any company from Israel. And the government has openly declared its support for Palestine and Hamas and gives humanitarian aid to the Palestinians.

Khazanah’s proposal to privatise MAHB together with EPF and GIP is well within the ambit of the government’s foreign policy.

BlackRock is based in the US, not in Israel, although its founder Fink is aligned with Israel. Khazanah and EPF are in negotiations with GIP, not BlackRock. And finally, the airports are in Malaysia, 70%-owned by Malaysian funds and still regulated by government agencies. GIP cannot take the airports away from this country.

There is a reason why BlackRock, even with Fink present at the launch of BlackRock Riyadh Investment Management, is acceptable to Saudi Arabia. The kingdom is latching on to the American fund to attract investments to the country while BlackRock wants to use the kingdom as a platform to venture into other countries in the Middle East and North Africa.

In Malaysia, Khazanah and EPF went through a process before finally deciding on GIP in taking MAHB private. According to Anwar, GIP was prepared to work with the terms set by Khazanah and EPF.

Critics have pointed out that the Malaysian funds could take MAHB private and add value without having to do a deal with GIP and BlackRock. While their assertion is true, the critics should respect Khazanah and EPF’s decision. The proposal would have gone through intense scrutiny by the investment panel before it was approved.

The funds should not be caught between appeasing local political noises, which will fade away when the next issue comes around, and doing what is best for their stakeholders. 

https://www.theedgemarkets.com/node/717363