KUALA LUMPUR: Government-Linked Investment Companies’ (GLICs) have been performing relatively well in recent years despite a spate of scandals.
Ideas Senior Fellow Professor Edmund Terence Gomez of Universiti Malaya (UM) said this at a talk on “Who Owns Corporate Malaysia Now? Ownership and Control of Government-Linked Investment Companies” here today.
“We have seen improved results which demonstrate the GLICs robustness.”
He said there was room for improvement, particularly since GLICs’ also played a role as trustees of the country’s wealth.
However, they must remain autonomous and be apolitical with a clear separation between the regulatory and ownership functions of government, he added.
“This way we can avoid the problem of a government which both regulates and owns GLICs.”
However, he pointed out the separation of powers might not be possible due to the control structure with the prime minister and the Cabinet leading the seven GLICs.
“With the Prime Minister also being the Minister of Finance, there could be extreme concentration of powers by the executive,” he added.
Gomez was presenting the talk in conjunction with the UM Faculty of Economics and Administration’s 50th Anniversary.
The study is the first of its kind on Malaysian GLICs. It was funded by a grant from the Institute for Democracy and Economic Affairs (Ideas).
The study takes a look at Malaysia’s seven GLICs, namely the Minister of Finance Incorporated (MOF Inc), Permodalan Nasional Berhad (PNB), Khazanah Nasional Berhad (KNB), the Employees Provident Fund (EPF), Lembaga Tabung Angkatan Tentera (LTAT), Lembaga Tabung Haji (LTH) and Kumpulan Wang Persaraan (Diperbadankan) (KWAP).
The study was about the context of their ownership, control of the economy and their positions in the Top 100 Malaysian companies.
Commenting on the study, Ideas Chief Executive Officer Wan Saiful Wan Jan said, “This study answers how GLICs own and control the Malaysian economy and what has changed over the years since independence.”
“We can see that there’s increasing dominance of the state over corporate Malaysia.”
There has been a shift since independence from foreign ownership to government ownership and then to private ownership under the Bumiputera agenda and then back to government ownership again as a fallout of the Asian Financial Crisis in 1997.
Much of corporate Malaysia was owned by the GLICs and the GLCs in all key sectors including property, trading, plantations and services.
“In the context of the Government’s promise to reduce government role in business, I have questions about whether the Government even wants to keep its word,” said Wan Saiful. “I do not see a significant reduction yet.”
“I am worried that the Government may be crowding out the private sector, preventing the private sector from becoming the engine of growth.”
The Ideas chief said Gomez was commissioned to look into the subject because it was important to know how state-owned enterprises were governed.
“We have seen a spectacularly disastrous situation with a well-known government company, 1MDB,” he said. “We want to check the governance of other government companies to ensure 1MDB is not repeated.”
Wan Saiful disclosed that Ideas wanted to continue its work on the subject. It is trying to raise money to pay for more research.
The Ideas study by Gomez will be published in a research paper which will be available on its website (www.ideas.org.my) beginning November 2016.