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The Governance of Malaysia’s State-Owned Enterprises Deserve Further Scrutiny

Kuala Lumpur, 10 August 2017 – The Institute for Democracy and Economic Affairs (IDEAS) has launched a book titled “Minister of Finance Incorporated: Ownership and Control of Corporate Malaysia”, which offers a deep analysis of government-linked investment companies (GLICs) and their ownership and control of Bursa Malaysia’s top 100 publicly-listed enterprises.

During the event, author Professor Edmund Terence Gomez, an IDEAS Senior Fellow and Professor of Political Economy at the University of Malaya, described the pyramid structure controlling corporate Malaysia. According to his research, commissioned by IDEAS, most of the country’s largest corporations are controlled by seven government-linked investment companies (GLIC), which in turn fall under the jurisdiction of the Ministry of Finance.

The extent of the GLICs involvement in the economy can be seen from their ownership of 35 public-listed companies that constituted an estimated 42% of the total market capitalization of all listed companies in 2013. Through these 35 government-linked companies (GLC), the seven GLICs are ultimately linked with about 68,300 companies.

Commenting on the book, Wan Saiful Wan Jan, IDEAS Chief Executive said, “There is a remarkable concentration of political and economic power in the office of the Prime Minister, by virtue of him also being the Finance Minister. Through the Minister of Finance Incorporated (MoF Inc.) and six other GLICs, his economic reach is phenomenal. Coupled with the fact that the Minister is responsible for the appointment of directors of GLICs and can even remove them, I am concerned that this may undermine the trusted system of checks and balances and lead to abuses of powers.”

“It is a huge incentive for any Prime Minister to continue appointing himself as the Finance Minister. If we continue with this system, the two roles will never be separated because the Prime Minister will always fear losing such a huge control of the economy.”

“There is a real issue here with regards to corporate governance of our state owned enterprises because today too much power is concentrated in one hand. We need to look at improving the system. But we don’t have to reinvent the wheel because there are many international standards that we can follow. I strongly urge the government to look into the OECD Guidelines on the Governance of State-Owned Enterprises which I think provides a good enough framework for us to start with,” concluded Wan Saiful.

*The article was first published in IDEAS Website on August 10, 2017. (http://www.ideas.org.my/ideas-governance-malaysias-state-owned-enterprises-deserve-scrutiny/)

*This event was published in the Free Malaysia Today Website on August 10, 2017. (http://www.freemalaysiatoday.com/category/nation/2017/08/10/ideas-state-owned-enterprises-deserve-further-scrutiny/)