GLICs control 68,000 companies and 42% of Bursa Malaysia

Edmund-Terence-Gomez-pnb-1KUALA LUMPUR: Government-linked companies (GLCs) are today the key players in the economy, with the Ministry of Finance as the super entity in the economy, according to an academic.

This, said Universiti Malaya’s Prof Edmund Terence Gomez, an expert on corporate Malaysia and politics, had resulted in an “unprecedented concentration of power in the executive”.

By 2013, he said, seven of the top 10 companies were GLCs, which also made half of the top 30.

“What we are seeing here are dynamic firms (GLCs) maintaining their performance as the top companies in the country,” The Edge quoted Gomez as saying at a lecture at Monash University Malaysia in Bandar Sunway.

Gomez’s research shows that just seven government-linked investment companies (GLICs), control over 68,000 companies directly and indirectly with minority interest.

The seven GLICs analysed by Gomez’s team are Minister of Finance Inc, Permodalan Nasional Bhd, Khazanah Nasional Bhd, Kumpulan Wang Persaraan (KWAP), the Employees Provident Fund (EPF), Lembaga Tabung Haji and Lembaga Tabung Angkatan Tentera.

“The seven GLICs control important companies in the economy. They have majority ownership of 35 public-listed companies and in terms of market capitalisation, they control about 42% of the entire Bursa Malaysia,” Gomez was quoted as saying by The Edge.

He said this was of concern because there was “extreme concentration of power” in Minister of Finance Inc.

Gomez noted that the nature of corporate control was different under the different prime ministers.

“The nexus between state and business is under constant transition. Under (second prime minister) Razak (Hussein), it was about public enterprises, (prime minister Dr) Mahathir (Mohamad) was about big business, (prime minister) Abdullah (Ahmad Badawi) was focused on SMEs and (Prime Minister) Najib (Razak) is back to the GLICs.”

Gomez said Dr Mahathir was “extremely involved” in the economy, Abdullah was not very involved, and Najib was selectively involved.

Gomez proposed several reforms to reduce this concentration of power in the finance ministry. He said that to ensure proper checks and balances, the prime minister could not also maintain the finance portfolio.

Gomez called for an operational oversight body for GLICs and GLCs, instead of concentrating it in the ministry of finance.

This could provide policy coherence and coordinate GLIC and GLC activities to achieve specific social and economic objectives, according to The Edge report.

Gomez pointed out that the professional managers of the GLICs and GLCs should be given autonomy to run their respective companies.

He added: “Professional managers with autonomy but accountable to parliamentary select committees headed by opposition members. This can be done tomorrow.”

Gomez noted that another interesting development in 2013 was that foreign-controlled firms were re-emerging as important players in the economy. This includes DiGi.Com Bhd, British American Tobacco (M) Bhd and Nestlé (M) Bhd.

His research shows that manufacturing firms are no longer a major force in the economy.

“The industrial elite of old have fallen away. Industrial companies have not been investing in R&D. They have been fearful of the state.

“Where are all the companies involved in the high-technology sector or highly innovative companies? If you look at this list, we are looking at companies involved in utilities, finance, construction and property development. It’s not going to take you anywhere in the long run,” Gomez was quoted as saying by The Edge.

His research findings will appear in his book Minister of Finance Inc: Ownership and Control of Corporate Malaysia, to be released at the end of this month.