According to news reports in December 2008 when Najib was not yet the Prime Minister, the proposal for the Terengganu Investment Authority (TIA) was put forward by the then Yang di-Pertuan Agong, Tuanku Mizan Zainal Abidin, who is also the Ruler Terengganu. The state exco endorsed the proposal.
This was from The Star's archives dated Sunday December 14, 2008
KUALA TERENGGANU: The Government has agreed to the setting up the Terengganu Investment Authority, a sovereign wealth fund which will manage oil royalty payments to the state.
Deputy Prime Minister Datuk Seri Najib Tun Razak said the Cabinet had on Wednesday given the nod to the setting up of the authority with a starting fund of RM10bil.
“The Cabinet will continue to discuss the technical aspects of the setting up the fund at the next meeting,” he said after handing a cheque for RM408.6mil as part of the oil royalty to Terengganu Mentri Besar Datuk Ahmad Said here yesterday.
The amount is the remainder that the state was supposed to get for the 2007-2008 period. The TIA was proposed by Yang di-Pertuan Agong Tuanku Mizan Zainal Abidin as a way to channel part of the oil royalty into a sovereign wealth fund which would be operated by a team of professionals and supervised by foreign bankers and investors.
Tunku Mizan will be the chairman of the TIA board of advisers while the Mentri Besar will be also represented on the board.
Najib said the TIA would utilise oil royalty to invest in Terengganu and other parts of Malaysia.
The authority would also have the mandate to invest globally in bonds to ensure the state’s financial sustainability on a long-term basis.
He said revenue earned by the TIA would be able to complement the state’s income when oil and gas resources were exhausted.
Dec 12 — History will be made soon when the Terengganu state government sets up its own RM10 billion sovereign wealth fund, the first state in Malaysia to do so and a move aimed at ensuring steady revenue after the oil and gas money dries up.The decision to set up the Terengganu Investment Authority — a body to be run solely by professionals — is also an indictment of the unsatisfactory manner royalty funds from oil and gas have been used by politicians for the last two decades.
The Malaysian Insider has learnt that the proposal for a sovereign wealth fund was put forward by the Yang di-Pertuan Agong, Tuanku Mizan Zainal Abidin, who is also the Ruler of the east coast state. The state exco endorsed the proposal at its weekly meeting yesterday.
Political observers say that the decision to set up the authority is probably driven by the desire to ensure that royalty from oil and gas is spent wisely and in the long-term interest of the state, and not squandered on flashy projects. While the oil and gas resources in the state have not been tapped fully, concerns have been raised that insufficient emphasis has been placed on how to maximise the royalty payments.
Under the TIA, the Sultan of Terengganu will be the chairman of the Board of Advisors. The Menteri Besar of the state will also be represented on this board. But the Board of Directors will comprise only professional managers. The idea here is to ensure that investment decisions are made by professionals and without the interference of politicians.
Sources in the state said that RM10 billion will be invested both within Terengganu and also the rest of Malaysia. But the TIA will also have a mandate to invest globally. The RM10 billion will be sourced from the local and foreign capital markets with a proposal for the Federal Government to provide a government guarantee of up to RM5 billion.
Coming back to TIA, the idea was to establish the fund along along the lines of Mubadala Development Company, the SWF of Abu Dhabi. In fact, Khaldoon AI-Mubarak, CEO of Mubadala and chairman of Abu Dhabi Executive Affairs Authority, still sits on the board of 1MDB.
But after the initial RM5 billion, raised by a federal government guarantee, the troubles at TIA began. The state, led by Menteri Besar Datuk Ahmad Said, wanted control over the utilisation of the money, something that went against the charter of the fund.
The funds were supposed to be managed by a professional team and overseen by a board of directors and advisers. It was a triple-layer structure to ensure the money is well spent.
But the prime movers behind the funds found out early that this was easier said than done. Subsequently, TIA became a federal entity, which gave birth to 1MDB.