What is the National Trust Fund (Kwan)?
KINIGUIDE | This instalment of KiniGuide looks at the National Trust Fund, which will be utilised for the Covid-19 vaccination programme.
What is Kwan?
The National Trust Fund Act 1988, or Kumpulan Wang Amanah Negara (Kwan), was passed by the Dewan Rakyat in 1987. The subsequent year saw Petroliam Nasional Bhd (Petronas), as required by law, contributing RM100 million as the fund's start-up capital.
How is it funded?
The law states that Petronas is to contribute to the fund, as are the states that derive any form of royalty from the exploitation of petroleum or other depleting resources.
Gains from the fund's investments are...
KINIGUIDE | This instalment of KiniGuide looks at the National Trust Fund, which will be utilised for the Covid-19 vaccination programme.
What is Kwan?
The National Trust Fund Act 1988, or Kumpulan Wang Amanah Negara (Kwan), was passed by the Dewan Rakyat in 1987. The subsequent year saw Petroliam Nasional Bhd (Petronas), as required by law, contributing RM100 million as the fund's start-up capital.
How is it funded?
The law states that Petronas is to contribute to the fund, as are the states that derive any form of royalty from the exploitation of petroleum or other depleting resources.
Gains from the fund's investments are lawfully required to be reinvested. The law also allows for gifts from any person or authority whose business includes research and development in depleting resources.
However, Petronas, since its initial contribution in 1988, remains the sole funder. Cumulatively, Petronas has funded RM10.4 billion into Kwan as of Dec 31, 2020.
How much is Kwan worth?
Kwan's asset value is RM19.5 billion as of Dec 31, 2020, according to Finance Minister Tengku Zafrul Abdul Aziz.
As of Dec 31, 2019, Kwan had RM1.57 billion in cash, according to the Auditor-General's Report on the federal government's financial statements 2019.
What are Kwan's primary investment instruments?
According to the 2019 Auditor-General's Report, 82.65 percent of Kwan's investment is in debt securities. A quarter of its investments is in Malaysian government securities (ie government bonds), while 23.9 percent is in private debt securities.
Kwan's equity portfolio is 17.35 percent of its total investments.
What is Kwan's mandate?
Kwan's mandate, beginning in 2006, was to invest in government, government agency and corporate-issued debt securities. In 2012, it was expanded to include domestic equity investments.
From 2018, Kwan was allowed to invest in global equity and real estate investment trusts (REITs).
Kwan also invested RM440 million in Putrajaya Holdings Bhd when it was set up in 1995.
How did the policymakers intend for Kwan to be used?
In 1985, then deputy finance minister Mohamed Farid Ariffin, in tabling the bill, told Parliament that the fund was meant to develop the economy through proceeds from depleting resources such as petroleum and tin, among others.
"Isn't establishing this fund a prudent measure for our common interest and for our children?
"As the Malay saying goes, kita sediakan payung sebelum hujan (we prepare for a rainy day)," said Farid, prior to the bill being voted on.
Who decides how to use Kwan's money?
The finance minister. The finance minister also decides on the five-panel members who make investment decisions. However, Bank Negara is in charge of the fund's day-to-day affairs.
How has Kwan's money been used so far?
According to Section 6(a) and (b) of the National Trust Fund Act 1988, Kwan's money can be spent for development purposes and the granting of loans to governments.
Kwan's funds had only been tapped once - RM42 million for the financing of Projek Malaysia Wetland Sanctuary in Ulu Langat, year unknown.
Last week, the government gazetted The Emergency (National Trust Fund) (Amendment) Ordinance 2021 which included a new Section 6(c), allowing Kwan's money to be used for vaccine procurement.
Isn't vaccine procurement covered in Budget 2021?
Zafrul said that although the government promised to set aside RM3 billion for the vaccination programme, it was not part of the RM322.5 billion budget for 2021.
According to his presentation in Putrajaya on April 26, the budget for vaccines rose from RM2.3 billion to RM3.5 billion because the government will not only procure vaccines for 80 percent of the population but acquire a 40 percent stockpile.
The immunisation programme cost had doubled from RM0.7 billion to RM1.5 billion.
These extra costs outlined in the government's "Pemerkasa" stimulus package, which aims to achieve herd immunity by December this year, two months earlier than what was promised in Budget 2021.
What are the critics saying?
Former finance minister Lim Guan Eng believes that Kwan's money should not be touched since it is currently cheap for the government to borrow, and an additional RM3 billion would have a minimum impact on the government's statutory debt ceiling.
Another former finance minister Najib Abdul Razak questioned why another RM2 billion was needed, up from the RM3 billion that was promised in Budget 2021, to shorten the vaccination programme by just two months.
This instalment of KiniGuide was compiled by ANDREW ONG.
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