By Lian Cheng
“Given the energy transition (towards green fuel), we expect this (revenue generated by fossil fuel) will be a temporary increase, lasting for at most the next generation or around 25 years. As such, I believe that aligned to our desire to develop a multi-generational sustainability strategy for Sarawak, we should not consume all the increased revenue now but rather put some aside for the benefit of future generations in the form of a sovereign fund.” Abang Johari (May 13, 2022)
AS Sarawak continues to grow, the need to ensure the State’s long-term financial strength and sustainability became a pressing priority. To secure a prosperous future for the generations to come, the idea of establishing a sovereign wealth fund for Sarawak was conceived. Drawing on similar sovereign wealth funds established around the world, the Sarawak government conducted meticulous studies to design a fund tailored to Sarawak.
After his study trips to Norway, Singapore and the United Kingdom, the Premier of Sarawak Datuk Patinggi Abang Johari Tun Openg tabled the Sarawak Sovereign Wealth Future Fund Board Bill, 2022 during Sarawak Legislative Assembly on November 22, 2022. The Bill which was passed unanimously on the same day established stringent requirements to guarantee its effective administration and transparent management. Upon the passing of the Bill, the Sarawak government injected an initial allocation of RM8 billion to set up a sovereign fund owned by the State of Kenyalang—Sarawak Sovereign Wealth Future Fund (SSWFF). This first instalment was from the State Consolidated Fund which was only made possible after the passing of the Bill.
The initial appropriation to SSWFF was RM8 billion with subsequent annual appropriations of RM300 million annually from year two to year five; RM550 million annually from year six to year 10; and RM650 million annually from year 11 to year 20.
Member of International Sovereign Fund
Following the establishment of SSWFF, Sarawak applied to be a member of the International Forum of Sovereign Wealth Funds (IFSWF). The establishment of the Fund subscribes to international best practices which include Generally Accepted Principles and Practices (GAPP) for Sovereign Wealth Funds, better known as the ‘Santiago Principles’ which have also been adopted by most of the world’s sovereign wealth funds.
GAPP advocates the principles of transparency, accountability, good governance structure, and sound investment. These principles are taken up and institutionalised in the establishment of SSWFF. Abang Johari said being a member will allow SSWFF to apply the highest standard of governance and transparency in managing the sovereign wealth fund while also allowing Sarawak to network and share knowledge on best practices with other global sovereign wealth funds as most of the established global sovereign wealth funds are members of the IFSWF.
No Withdrawal for Two Decades
While tabling the Bill, Abang Johari who is also the Minister for Finance and New Economy stressed that these appropriations to SSWFF would be disbursed into its Investment Fund Account and be managed strictly in accordance with the Investment Mandate stated in Second Schedule of the Bill. With the appropriations, the Fund is expected to grow sustainably with no withdrawals except in the case of untoward critical events which might arise within the 20-year period or when it performs better than expected.The Ordinance institutionalised strict requirements for withdrawal of monies from the Fund where specific provisions regulate any withdrawals. There are also provisions for the re-investment of income or monies from investments expected. If the Fund performs better than expected such that there is an excess income above the thresholds set out in the Ordinance, the Board of Guardians who are its custodians may transfer the excess income to an Endowment Fund Account.
The monies in the Endowment Fund Account, which would be transferred to the State Consolidated Fund and held under a trust fund, could be utilised for education purposes for Sarawakians in tertiary institutions or other similar institutions; improvement of the standard of living of Sarawakians based on socio-economic needs; development of the talents, expertise, and the entrepreneurial skills of Sarawakians and other purposes as might be determined by the Sarawak cabinet in a notification to be published in the Gazette and laid before the Sarawak Legislature.
Reporting to Sarawak Legislature
The accounts of the Fund, along with an annual report detailing its activities, would be presented to the Sarawak Legislature in accordance with the Ordinance. There are also provisions in the Ordinance to regulate the expenditure of the Board of Guardians whose annual budgeting expenses would have to be approved by the Sarawak cabinet. The establishment of the Fund, according to Abang Johari, is expected to meet the purposes of converting non-renewable assets to financial assets, investing for the future through forced savings, and securing the continued growth of financial reserves through diversified investments.
To him, Sarawak has enjoyed rising commodity-based revenue, particularly from its oil and gas production over the years. However, these resources are depletable, and if not managed and invested wisely, it could deprive future generations of the same economic benefits. Hence, it is imperative to convert these non-renewable assets into financial assets to preserve and grow the State’s current wealth for years to come. SSWFF was established on the back of the idea that it could sustain the financial fiscal position of the State via revenue diversification and the creation of reserves replacing oil and gas revenue in years to come.
“With this in mind, the setting up of a sovereign wealth fund by adopting a capital maximisation model, with benchmarking against Norway’s sovereign wealth fund, i.e. the Norway Oil Fund known as Norway Government Pension Fund Global (with a fund size of USD1.25 trillion), is the strategy going forward.
“The same model is also adopted by US Alaska Permanent Fund Corporation (with a fund size of USD70.6 billion).
“Incidentally, these jurisdictions also have their prime sources of revenue from oil and gas, just like Sarawak,” said Abang Johari when tabling the Bill.
Safeguarded by Solid Guardians
Abang Johari insisted that the Board of Guardians or the custodians of the monies in the SSWFF to be independent of any political interference and that the Fund must be managed in a professional and transparent manner by the members of the Board, comprising experts in the field of finance and investment. On August 14, 2023, Abang Johari announced that the Fund would officially be set up on January 1, 2024 following the appointment of nine members to the Fund’s Board of Guardians led by former Federal Court Judge at the Palace of Justice, Tan Sri Datuk Seri Panglima Sulong Matjeraie as the chairman. This was after the structural and governance frameworks were put in place.
Sulong has more than 30 years of legal and judicial experience. Prior to his career in the judiciary, he served the Sarawak government for 17 years in various leadership capacities. He also serves as the chairman of the Board of Directors of Universiti Malaysia Sarawak (Unimas) and holds several directorships in public-listed companies. The other eight members of the Board of Guardians for the Fund are Tan Sri Datuk Amar Leonard Linggi Jugah, Tan Sri Ahmad Nizam Salleh, Datuk Iain John Lo, Grainne Dooley (Irish), Mohsen Fahmi (American Egptian), Datu Soedirman Aini, Dato Sri Talat Mahmood Abd Rashid and Dato Sri Dr Wan Lizozman Wan Omar.
Linggi is the chairman of Limar Group and is active in charitable foundations and community service. He is also the chairman and managing trustee of the Tun Jugah Foundation and the Dayak Cultural Foundation, respectively. As one of the pioneer figures responsible for the establishment of Dayak Chamber of Commerce and Industry in 2003, he is presently the advisor to the Chamber’s Supreme Council. Ahmad Nizam was formerly the chairman of Petroliam Nasional Bhd (PETRONAS) from 2018 to 2021, and prior to that, he served PETRONAS in various leadership positions for 37 years. He is now the chairman of KLCC Group of Companies and the chairman of Pelaburan Hartanah Berhad.
Lo is a former chairman of Shell Malaysia Ltd with extensive experience and roles for over 30 years in Shell both in Malaysia and abroad. He serves an independent non-executive director of RHB Bank Bhd, RHB Investment Bank Bhd, and Digi Telecommunication Bhd. Dooley has significant experience in investment and fund management, with deep expertise in corporate governance and financial matters, honed through roles on several highly regulated financial services boards. Currently, she holds non-executive board roles in fund management companies such as Interactive Brokers (Ireland), Haven Green Investment Management, and Forestay Capital II.
Mohsen has spent most of his career in the United States and the United Kingdom, with his last posting with Pacific Investment Management Company LLC (PIMCO) as a member of the Investment Committee, where he was involved in setting investment strategy for the firm’s US2 trillion in assets. He is also a member of the Investment Advisory Committee for Charitable Foundation.
Soedirman has served the Sarawak government for 24 years in various leadership capacities and prior to that, he was with PETRONAS for 13 years. He now serves as a director of Permodalan Nasional Bhd and sits on the board of various government-linked companies and non-governmental organisations. Talat Mahmood is the Sarawak Attorney General of Sarawak and would be an ex-officio member of the Board, serving in similar capacity as Sarawak Financial Secretary Wan Lizozman. The term for the Board of Guardians was set at three years.
Abang Rahmat at the Helm
After the second board meeting, on March 12, 2024, the Board of Guardians of the Fund announced Financial professional Abang Rahmat Yusuf, the former head of Investment Banking (Malaysia) at CLSA Securities, to be its chief executive officer, effective January 29, 2024. Abang Rahmat aged 48 brings a host of experience having served at CLSA Securities from 2019 to 2024 during which he spearheaded fundraising endeavours, including IPOs and placements for institutional and corporate clients.
Prior to his tenure at CLSA, from 2004 to 2019, he held the position of Director of Investments at Khazanah Nasional. During this period, he established and led the Khazanah Turkey Regional Office in Istanbul, overseeing operations in Turkey, Middle East and North Africa region (MENA), and sub-Saharan Africa. Abang Rahmat, who holds a Master’s Degree in Public Administration from Harvard University, also served as the overseeing director for the Financial Institutions Group (FIG), which constituted 20 per cent of Khazanah’s portfolio.
Managing Sarawak’s Asset with Prudence
More recently, during Sarawak United Peoples’ Party’s (SUPP) 26th Triennial Delegate Conference on Dec 8, 2024, Abang Johari stressed again that Sarawak would advance its economic restructuring efforts by allocating RM400 million to RM600 million annually to the Fund. He emphasised the importance of managing Sarawak’s assets prudently and professionally, which was why the Sarawak government announced plans to establish a Consolidated State Asset management system and the SSWFF inspired by Norway’s model.
All these efforts were carefully put in place to ensure that Sarawak thrives through both prosperous and challenging times, while also making certain that its future generations continue to benefit from the State’s sustainable growth initiatives. By laying a strong foundation today, Sarawak is securing a prosperous and resilient tomorrow for its people.
The content featured here is an excerpt from the book “Rise of Sarawak: Abang Johari’s Era of Transformation”, published by Sage Salute Sdn Bhd.
