Quiet exit for Goldman's Malaysia star

IFR Asia 844 - May 17, 2014
6 min read

Jonathan Rogers

Jonathan Rogers_ifraweb

Jonathan Rogers

It emerged last week that a gentleman called Roger Ng has departed from Goldman Sachs, where he had most recently headed up South-East Asian sales in the US titan’s fixed-income, currencies and commodities unit. It’s no secret that Goldman has done rather nicely from its fixed-income business in Malaysia, and Mr Ng’s connections within the country are often hailed as the root of those successes.

I have written previously about the hefty fees Goldman has earned from arranging private debt placements for the state of Sarawak and for Malaysia’s strategic development company 1MDB. And it seems reasonable to assume Mr Ng banked quite a few generous bonus cheques for his help in placing these and a raft of other debt deals for Malaysian entities totalling around US$8bn from 2009 onwards.

Perhaps, then, he deserves to take a break to pursue other activities after his success story with Malaysia Inc. According to a Goldman spokesperson, quoted in the Malaysian press, he has left to “do his own thing”.

There’s no doubt, however, that he leaves behind a controversial legacy with regard to 1MDB.

1MDB IS A somewhat peculiar entity. It invests principally in power projects and property but became the focus of opposition jibes during the Malaysian general election last year, particularly regarding its relationship with Goldman.

My calculations of the returns Goldman made on a US$3bn private placement it arranged for 1MDB last year put the figure in the hundreds of millions of US dollars. Indeed that calculation, published in IFR, was grasped by an opposition politician who used it on the hustings to pillory the government of Prime Minister Najib Razak, while opposition leader Anwar Ibrahim pledged during last year’s election campagin that his proposed government would wind up 1MDB, if it managed to unseat the ruling UMNO party.

1MDB, which is attempting to complete a stock market listing, has been criticised heavily in the local financial media in Malaysia for changing auditors three times since 2009, as well as for its rapid accumulation of debt. Its M$42bn (US$13bn) of liabilities (including M$36bn of debt) exceed those at Malaysia’s sovereign wealth fund Khazanah or at the country’s Employees Provident Fund. And all this has happened in little over five years, with Goldman an instrumental force in financing the establishment of 1MDB.

There have also been concerns voiced about 1MDB parking funds in offshore vehicles as well as its apparent overpaying for power assets – oh, and also about it paying above market-value coupons on its private placements, which is from where those eye-popping Goldman returns derive.

There’s something rather neat about being the key conceptual adviser to the establishment of an institution from which you subsequently bank juicy fees. It’s rather like Doctor Frankenstein crafting from flesh and blood his ideal mate in a rather cheesy 1970s Hammer horror flick entitled “Frankenstein Created Woman”. I think you can imagine what that movie entails.

Alright, Goldman was not the sole “instigator” behind 1MDB, but it certainly played a part in its genesis. And, whatever the Malaysian government may say in defence of 1MDB’s operations, the fact remains that the company is a public relations disaster when it comes to making a case for the project finance business in Malaysia.

CONTRAST THIS WITH a country that you might not have readily placed as a candidate for best practice when it comes to developing key infrastructure projects: the Philippines. Last week I interviewed one of the directors of the Public Private Partnership centre in the Philippines and I have to say I was rather impressed by the professional zeal he brought to presenting the PPP as an entity.

Indeed, the PPP, which has been in business for around four years, is tasked with helping originate public-private infrastructure deals in the Philippines, ensuring that a level playing field exists for the tendering process, following international best practice of probity and monitoring the entire project process for inception to completion. Its efforts so far impress me immensely.

International companies on the lookout for viable projects in Asia now view the Philippines as a model of best practice and are hungry to bid for business in that country. Such a state of affairs must surely have contributed to the notable economic growth spurt of recent years in a country once dubbed “the sick man of Asia.”

What a contrast to Malaysia, where the likes of 1MDB create an ambiance of obfuscation and evasiveness in the project arena. With 1MDB apparently willing to operate in a manner where pricing is anything other than market-based, it’s not surprising that overseas companies are not rushing en masse to bid for projects in Malaysia. 1MDB seems to have it all sewn up.

Recently the international media were non-plussed by what they perceived as incompetence and complacent hauteur on the part of the Malaysian government in its handling of the missing flight MH370. That was a public relations disaster of epic proportions.

If it is serious about improving its image, perhaps the Malaysian government should turn its attention to addressing the widespread negative perception of 1MDB and the country’s approach to developing infrastructure. Maybe someone else at Goldman can help them.

Jonathan Rogers_ifraweb