When billions vanish, who answers?

MALAYSIA'S repeated experience with troubled government-linked investments comes back to one uncomfortable question: when public money is lost, who takes responsibility?

The answer is not to suggest that government-linked companies (GLCs) and funds should never take risks.

Investing always involves uncertainty. Even the world's most respected pension funds and sovereign wealth institutions make wrong calls and suffer losses.

But there is a crucial difference. These are not private investors risking their own money.

When a government-linked entity makes a costly mistake, the impact is felt far beyond the company itself. The burden eventually falls on settlers, pensioners, contributors, taxpayers and the wider public whose trust these institutions carry.

Malaysia has seen this happen in several forms.

The most damaging case remains 1MDB. Set up as a strategic investment vehicle to support economic development, it ended up becoming one of the country's biggest financial scandals, leaving behind billions of ringgit in debt, international investigations and a lasting damage to public confidence.

The Felda and FGV experience tells a different but equally important story — how an institution with a clear social purpose can lose its way. Felda was established to develop land and improve the lives of settlers. But as it expanded into areas beyond its traditional expertise, including costly acquisitions and diversification efforts, it encountered financial difficulties and years of restructuring.

Now, attention has turned to Kumpulan Wang Persaraan’s (KWAP) investment in Indonesian aquaculture startup eFishery, which reportedly suffered losses approaching RM200 million following allegations of financial misrepresentation.

The episode has once again raised familiar questions: Was the due diligence strong enough? Were the risks properly assessed? Were the right questions asked before public funds were committed?

And across all these cases, one question refuses to go away: where were the boards?

A board is not there simply to approve what management puts forward. Directors are entrusted with a responsibility to challenge, question and scrutinise. They must test assumptions, demand transparency and make sure decisions are in the institution's long-term interest.

Of course, no board can predict every failure. Businesses collapse. Markets shift. Unexpected events happen.

But good governance is not judged after a loss has occurred. It is judged by the decisions made before that loss.

Did the directors challenge unrealistic projections? Did they ask whether the organisation had the expertise to enter unfamiliar industries? Did they seek independent views? Did they pay attention to warning signs?

These are not unreasonable demands. They are the basic responsibilities that come with being entrusted with public funds.

And good governance starts long before the first board meeting. It starts with choosing the right people.

The strength of any organisation depends greatly on the quality of its board. Directors should be appointed based on their experience, judgement and independence — their ability to challenge assumptions and ask difficult questions — not simply because of their connections, stature or as a reward for past public service.

A board that is unwilling or unable to challenge management risks becoming little more than a rubber stamp. Its role is not to celebrate ambitious plans, but to examine whether those plans are realistic, properly researched and consistent with the organisation's purpose.

Yet too often, accountability seems to stop before it reaches the boardroom.

When investments succeed, boards are praised for their foresight. When they fail, responsibility is often shared among management, advisers, consultants and changing market conditions.

That leaves the public asking some uncomfortable questions: Were directors doing their jobs? Were warning signs missed? Were those responsible held accountable?

Without clear consequences, a dangerous pattern can develop. Bold decisions bring recognition when they succeed, but when they fail, the cost is eventually carried by the institution and the public.

The lesson from 1MDB, Felda and KWAP is not that government-linked institutions should stop investing or pursuing growth.

It is that they cannot lose sight of why they exist.

A pension fund is not a venture capital firm. A settler development agency is not a corporate empire. Public institutions exist to protect and grow resources entrusted to them — not to chase ambitious ventures for their own sake.

Malaysia does not need institutions that avoid all risks. It needs institutions that take the right risks, with stronger oversight, better governance and boards willing to ask difficult questions before millions and billions are committed.

Because when public money is involved, accountability cannot start only after the losses have already happened.