Malaysian State Plans 11 Billion-Ringgit Wealth Fund

By Netty Ismail

May 18 (Bloomberg) -- The Malaysian state of Terengganu is starting a sovereign wealth fund of 11 billion ringgit ($3 billion), of which 5 billion ringgit will be raised from capital markets this week.

The Terengganu Investment Authority, the first sovereign wealth fund set up by a Malaysian state, said it will manage the long-term oil revenue of the state, located on the east coast of peninsular Malaysia.

The country’s King Mizan Zainal Abidin, who is also the Terengganu sultan, proposed the fund to ensure sustainable income for the state should its oil and gas reserves run out, the fund said in an e-mailed statement today. The state is one of Malaysia’s biggest oil and gas producers.

The fund seeks to “generate long-term sustainable and recurring returns” and to promote Terengganu’s economic development, Chief Executive Officer Shahrol Halmi said in the statement.

The Terengganu Investment Authority, which was set up on Feb. 27, will team up with “well-known sovereign wealth funds” to invest in tourism, energy and agriculture projects, he said.

The fund plans to invest in “high-impact, strategic projects in Terengganu, other parts of Malaysia, and in regional and international projects that have positive spillover benefits to Terengganu,” said Shahrol, a Stanford University graduate who worked for more than 15 years at consulting firm Accenture Ltd., according to the statement.

It will seek funds from domestic and foreign capital markets, and the 5 billion ringgit it plans to raise this week will come with a Malaysian government guarantee, the fund said. The remaining 6 billion ringgit will come from future oil royalties.

Companies including Exxon Mobil Corp. produce crude oil from projects offshore Terengganu. The state is also home to Petroliam Nasional Bhd.’s Kertih refining and petrochemical complex.