They are present in almost every sector, sometimes in a towering way. Globally, Malaysia ranks fifth-highest in terms of GLC influence on the economy. Government-linked investment companies GLICs. The GLCs have not been immune from scandals either.
June 14, 4: Data supported his description: GLCs account for about half of the benchmark Kuala Lumpur Composite Index, and they constituted seven out of the top listed firms in They are present in almost every sector, sometimes in a towering way.
Globally, Malaysia ranks fifth highest in terms of GLC influence on the economy. Recent reports confirm that the former government had been using Bank Negara and Khazanah to service the debt obligations of 1MDB.
GLCs have not been immune from scandals either. The most recent relates to the unresolved land scandal involving Felda.
There have also been a series of massive bailouts of GLCs over the years, the cumulative value of which is disputed but could be as high as RM85 billion. Although this may be extreme, it does raise a critical question: Some experts have proposed the formation of an independent body with operational oversight for GLICs after institutional autonomy is established and internal managerial reforms are introduced.
The same applies to the various funds at the constituent state level, which need to be looked at too. For GLCs, the answer is less straightforward. Before the Malaysian government decides what to do, it needs to examine the role GLCs should play — as opposed to the role they currently play — and examine their impact on the economy.
The intention was to help create a new class of Bumiputera entrepreneurs — first through the GLCs themselves, and then through a process of divestment.
Given the amounts of money involved and the cost of the distortions introduced, the benefits to Bumiputeras were unjustifiably small and unequally distributed. There is also empirical evidence that GLCs have been crowding out private investment, a concern raised in the New Economic Model as early as The new government has correctly highlighted the need to include certain off-balance-sheet items and contingent liabilities such as government guarantees and public-private partnership lease payments in any complete assessment of debts outstanding.
All these factors combine to place new impetus on reconsidering the extent of government involvement in business. So how should the government proceed?
It is important to recognise at the outset that there is a legitimate role for government in business — providing public goods, addressing market failures or promoting social advancement. And like in most other countries, there are good and bad GLCs in Malaysia. If a GLC is not crowding out private enterprise, operates efficiently and performs a social function effectively, then there is no reason to consider divestment.
But a GLC that crowds out private investment in a sector with no public or social function or one that is inefficiently run should be a candidate for divestment. In this regard, one has to carefully study why GLCs should be present in retail, construction or property development, for instance.
In assessing performance, one needs to separate results that arise from true efficiency versus preferential treatment that generates artificial rents for the GLC. The latter is a drain on public resources and a tax on consumers. Divestment, in this case, will likely provide more than a one-off financial injection to government coffers — it will provide ongoing benefits through fiscal savings or better allocation of public resources.
The divestment process should be carefully managed to ensure that public assets are disposed at fair market value and that the divestment process does not concentrate market power or wealth in the hands of a few.
This has allegedly happened with privatisation efforts in the past. The new government has committed itself to addressing corruption and improving the management of public resources. As part of this process, one must re-examine just how much the government is involved in business.
This is one of the many tasks that the Council of Eminent Persons is undertaking in the first days of the new government. To do this correctly would require a careful study of GLCs and their impact.
This is an abridged version of an item that first appeared on the East Asia Forum. The views expressed are those of the author and do not necessarily reflect those of FMT.KUALA LUMPUR: Malaysian government-linked companies (GLCs) could do with more transparency, in accordance with one of the key guidelines of the Organisation for Economic Co-operation and Development (OECD) on the governance of state-owned enterprises (SOEs).
Globally, Malaysia ranks fifth highest in terms of GLC influence on the economy. Calls to do something about GLCs have increased since the election following the release of more damning information, although most of it relates to the GLCs’ investment arm: .
By Jayant Menon. About a month before Malaysia’s general election in May, then-opposition leader Dr Mahathir Mohamad raised concerns over the role that government-linked companies (GLCs) were. Abstract: Government-linked companies (GLCs) play an important role in the development of the Malaysian economy.
However, overall public perception of GLCs in Malaysia has been tainted by the poor performance. The Malaysian government controls GLCs through its government-linked investment companies (GLICs) — gargantuan and powerful investment arms including Khazanah Nasional, Permodalan Nasional Berhad — and the Ministry of Finance.
GLC market presence varies by . Malaysia as an emerging market issued its own code on corporate governance in , which was revised in , and is to be followed by all listed companies. Nonetheless, Malaysian‐listed government linked companies (GLCs) have been subject to criticism concerning their role and performance in the Malaysian economy and have recently come under government scrutiny (Abdul Aziz et al., ).