Short position – Corporate governance, FDI, the future


Basic corporate governance

MANY public-listed companies have evolved from traditional family-owned ones that have chosen to go public as a way to access new sources of funds for growth.

Being publicly-listed also gives a company a certain status and higher visibility. This in turn helps it attract investors and bankers who have more confidence in investing or extending credit to such entities.

Once a company gets listed, it then can have a myriad of investors, from individual mom and pops to the top investment funds of the world.

There are rules that govern how a company needs to be run which are also aimed at protecting the interests of all stakeholders including especially its public shareholders. The shareholders in turn elect a board of directors including independent directors who are supposed to carry out their duties without fear or favour to anyone except the shareholders at large.

In this context, Bursa Malaysia Securities Bhd publicly reprimanding Xin Hwa Holdings Bhd and two of its directors for breaching listing rules, is a timely reminder of the importance of adhering to good corporate governance practices.

On Thursday, the logistics firm and two of its directors were reprimanded by Bursa Malaysia on Thursday for making advances and payments worth almost RM800, 000 in breach of the Main Market Listing Requirements (LR).

The two directors, Ng Aik Chuan and Ng Yam Pin, were also slapped with penalties of RM100, 000 and RM50, 000 respectively. The advances and payments were made to Xin Hwa’s holding company NF Capital Management Sdn Bhd and to certain individuals for their personal expenses.

According to the stock exchange operator, these advances and payments were prohibited under paragraph 8.23(1) of the Main Market LR – a breach that “warranted a deterrent penalty involving a public reprimand and fines so as to underline the serious view taken by Bursa Malaysia on such breach and remind the directors on the proper discharge of their duties to ensure compliance of paragraph 8.23 of the Main LR”.

While the contribution of the founding family cannot be denied, good corporate governance helps to cultivate a culture of integrity, leading to positive performance and a sustainable business overall.

Investors these days are increasingly aware of such matters and have higher expectations of companies’ key officials and their boards, plus they do not hesitate to “vote with their feet”.

Crucial FDI

AT a time when Malaysia is going through a tough phase with the Covid-19 pandemic hitting hard, it is heartening to note that some new high-quality investments are making their way into the country, and in the correct sectors.

Global solar energy firm, Risen Energy Co Ltd will invest RM42.2bil over 15 years in a new production facility in Kulim Hi-Tech Park, Kedah, to manufacture high-efficiency photovoltaic (PV) modules.

Notably, this is the Chinese company’s first investment in South-East Asia.

Risen Energy is one of the pioneering solar companies in the world, with a revenue of around US$2bil (RM8.32bil) in 2020, and has exported solar products to more than 100 countries.

Prime Minister Tan Sri Muhyiddin Yassin held a virtual meeting with Xie Jian, the Chairman and President of Risen Energy Co. Ltd., the world's fifth largest manufacturer of solar modules.Prime Minister Tan Sri Muhyiddin Yassin held a virtual meeting with Xie Jian, the Chairman and President of Risen Energy Co. Ltd., the world’s fifth largest manufacturer of solar modules.

The new facility in Kilum is expected to be completed by the year-end and to begin commercial activities by the first quarter of 2022. It will contribute an annual production capacity of three gigawatt (3GW) of high efficiency photovoltaic modules for the first five years to meet growing global demand for solar PVs.

Solar energy is a burgeoning industry within the renewable energy (RE) space as governments around the world move towards a carbon neutrality roadmap.

The International Energy Association (IEA) expects solar PV development to continue to break records, with annual additions reaching 162 GW by 2022 – almost 50% higher than the pre-pandemic level of 2019.

Locally, solar is a key component of Malaysia RE space. By 2025, the country has a target of achieving 31% RE in the power capacity mix, from the previous goal of 20%, to be mainly driven by growth in new solar PV capacities.

Currently, RE contributes 15% for the energy mix for Peninsular Malaysia.

Risen Energy’s entry is a reflection of investor confidence in the country as a preferred investment destination, which in turn will create jobs, housing and opportunities for small and medium-sized enterprises.

Looking to the futureFOR many Malaysian companies, the way business is being conducted will need to change. Financiers and customers are not only looking at top-notch financials or products that offer the best bang for their money.Sustainability and equitability are subjects that are increasingly on the lips of key stakeholders involving businesses.

As it is, regulators, have started to preach about those subjects with more conviction because it is all too apparent that the world is changing and softer issues are now as important as the traditional bottom line numbers.

Investors have been selecting with their money. The risk to the capital markets is that if it is resisting adopting sustainability and equitable requirements of the current climate, then it will get left behind in favour of the countries that offer that focus.

Both Bank Negara and the Securities Commission have brought the subject of sustainability and climate change to the forefront as the subjects are not being demanded by investors and financiers all around the world.

Not embracing the important elements will mean that Malaysia and the companies involved in the segments will get left behind – a risk that can only translate to loss of income, investment and wealth to Malaysian companies and investors that have huge stakes in the development of those markets.

The only option is adoption to preserve and grow the wealth pie in the country.

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