Khazanah urged to focus on agri-food and high-multiplier ventures

KUALA LUMPUR: Sovereign wealth fund Khazanah Nasional Bhd still has an effective role to play in the venture capital ecosystem, especially in promoting entrepreneurship and fuelling future economic growth engines, despite recent setbacks such as the losses incurred from its investment in FashionValet Sdn Bhd.

It should not withdraw from its original mission to help promising startups and entrepreneurs because, contrary to Fashion Valet’s losses, there have been many success stories, such as dairy producer Farm Fresh, which created huge spillover effects in creating jobs and bringing economic benefits to rural areas.

Putra Business School Professor Dr Ahmed Razman Abdul Latiff defended the sovereign wealth fund, saying, “Khazanah Nasional must remain actively engaged in the venture capital ecosystem despite setbacks like Fashion Valet.” He said the key factor is not withdrawal, but recalibration, by having stronger governance, nurturing co-investment partnerships, and a focus on sectors with strategic national value.

“Abandoning the venture capital ecosystem would risk Malaysia falling behind in nurturing innovation and future economic growth engines,” he told BERNAMA when commenting on the importance of Khazanah to maintain active participation in the venture capital ecosystem, despite recent setbacks.

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said that “Khazanah Nasional’s role in this ecosystem is to be an effective institution that can promote entrepreneurship.”

As in any investment, there are always risks associated with the business venture, which means the investors must have a high tolerance for failure. “Ultimately, such investments would find their exit strategy, which would normally be executed through the listing on the stock exchanges,” he added.

“Khazanah will execute its investment judiciously, and its exposure should be relatively minimal compared to other asset classes. In a nutshell, there are always risks involved, and it is also unfair to single out one particular investment that has not delivered its promised returns for everyone to generalise the investment in the startups,” he said.

In 2018, Khazanah Nasional and Permodalan Nasional Bhd invested RM47 million in minority stakes in FashionValet, with Khazanah’s stake costing RM27 million. Last year, their collective stakes in the country’s first fashion e-commerce platform were sold for a mere RM3.1 million.

Following this, the Public Accounts Committee (PAC) conducted proceedings which attributed the losses to a risky omnichannel strategy, external market shocks caused by the COVID-19 pandemic and shifts in post-pandemic consumer behaviour.

In its report, PAC recognised Khazanah Nasional’s rigorous internal processes but suggested that existing standard operating procedures (SOPs) can be enhanced.

Khazanah Nasional welcomed the findings and recommendations of the PAC and reiterated that it would strive to balance financial discipline with nation-building objectives, guided by strong governance and clear accountability.

Mohd Afzanizam said it is also important for the sovereign fund to monitor and clearly spell out the cut-loss policy as “this would provide the avenue for Khazanah to minimise potential losses.”

Likewise, Ahmed Razman emphasised the need for clear exit strategies coupled with governance and monitoring, where stronger oversight with independent board representation is needed.

He said Khazanah Nasional should ensure that startups have scalable business models, sustainable revenue streams, and clear paths to profitability rather than relying on branding hype. “Market validation should be conducted using rigorous customer demand testing, competitive benchmarking and sensitivity analyses before committing capital.”

Mohd Afzanizam is of the view that Khazanah should focus on sectors like agri-food, which is something that needs greater focus among the tech-savvy entrepreneurs. “And Khazanah can play a catalytic role. They have proven themselves in ventures such as Farm Fresh Bhd. Perhaps it is timely to look at other agri-food sub-sectors such as vegetables and livestock,” he said.

Based on reports, Khazanah’s investment in Farm Fresh not only created wealth but also delivered nutritious food to Malaysian consumers at a competitive price. Through its satellite farmer network, it also increased household income, created micro-entrepreneurs and improved the wealth of local farmers.

“What we want is for Khazanah to develop sectors that have higher multiplier effects in terms of job creation and the impact to be widespread, especially in the rural areas. That way, we can have balanced economic development that is not focusing too much on urban areas,” he added.

Providing a wider perspective, Ahmed Razman said Khazanah Nasional should pursue investments that align with Malaysia’s national priorities, such as green energy, digital economy and healthcare, while ensuring financial sustainability through disciplined risk management and global partnership investments.

More importantly, Khazanah should catalyse local ecosystems by focusing on private capital, nurturing talent and building regional champions, he added. – Bernama

Leave a comment

Your email address will not be published. Required fields are marked *