By T K Chua
As a well-known economics professor, whatever Terence Gomez says probably carries weight. Recently he suggested that a coordinating ministry be set up to oversee all government-linked companies (GLCs) in the country. From information gathered, there are too many GLCs at the moment and many of them are left without proper monitoring or supervision.
As a layperson long observing development economics in this country and elsewhere, I think the problem is not due to the absence of a coordinating ministry per se. We ought to be more careful when dispensing a solution to a complex problem.
Most GLCs now report to the Ministry of Finance (MoF). The boards of directors of GLCs are appointed with the approval of the ministry. However, the issue of concern is the ability of the ministry to provide effective oversight and guidance. Does it possess the expertise and capability to monitor, counsel and direct the GLCs? I doubt it.
That being the case, how then could another coordinating ministry be any different from the MoF? I can’t envisage how a new coordinating ministry will be able to play a more effective role than the MoF in terms of providing governance standards, expertise and professional advice.
When the government set up GLCs, the problem was essentially a “moral hazard” issue, more so when many of these GLCs are indiscriminately and haphazardly established without clear functions and objectives. Seriously, what could be more reckless than doing business/investment using public money?
When public money is used to run a business, there is hardly any incentive to explicitly consider the risks involved. Many GLCs take excessive or unrealistic risks knowing that it is not their own money that is at stake. This problem is further compounded by the board of directors that are helmed by non-professionals. They not only take excessive risks, they don’t understand risks or business.
Instead of setting a coordinating ministry to supervise the ever increasing number of GLCs, I would prefer that the government scale back its involvement in GLCs. The success stories of any government getting involved in business and GLCs are few and far in between anywhere in the world. I think Malaysia is no exception. It is, therefore, better for our government to do less than more.
If setting up GLCs is unavoidable due to certain extenuating factors, I would prefer that the government focus on governance standards than establishing another coordinating ministry. Another ministry will not ipso facto provide better governance. Better governance needs parliamentary oversight, transparency, checks and balance, and imminent rewards and punishment of those responsible.
TK Chua is an FMT reader.
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