GOVERNMENT-LINKED companies (GLCs) and government-linked investment companies (GLICs) were never meant to compete with the private sector, Daim Zainuddin said.

The former finance minister said the dominance of state-run enterprises will stifle the private sector and this will result in losses as running a business is not the same as entrepreneurship.

“They were only meant to go into strategic industries that need a lot of capital and long gestation periods,” said Daim in an interview with The Malaysian Insight, at Menara Ilham, Kuala Lumpur.

He said the GLCs were meant to undertake certain national projects that the private sector cannot.

“The private sector cannot wait but the government can. The government can do JVs (joint ventures) with the private sector. There was also a time in Singapore when the GLCs played a key role but that has changed.”

The 84-year-old was commenting on the shortage of private entrepreneurs in Malaysia and how GLCs were crowding out private companies.

In March, Finance Minister Tengku Zafrul Abdul Aziz said the GLC and GLIC ecosystem constitutes RM445 billion, or 25%, of Bursa Malaysia’s market capitalisation.

Malaysia’s biggest sovereign wealth fund, Khazanah, alone makes up 14% of the Bursa’s market capitalisation.

Malaysia Inc

Daim said the country embarked on the Malaysia Inc project in the 1980s with a business council set up after Dr Mahathir Mohamad became prime minister.

The council, which met once a month, aimed to assist the private sector and grow the economic pie.

“The government also had MOF Incorporated. But when I took over as finance minister (1984-1991), there were too many GLCs, with the majority losing money. They were in all kinds of business and run by civil servants,” said the Kedah native.

“Civil servants are meant to carry out government policies, not run businesses.  

“Running a business is not entrepreneurship. It’s not like I create a company and you can run (it) and make money. All of them were losing money and as such, I had to close some of these companies.

“But the politicians were unhappy because they could not be directors anymore. No more extra income,” he said with a laugh.

He said GLCs, or Malaysia Inc, were meant to do only one thing – grow the economy.

“But when you contract instead of expand, you become a burden to the nation. You might as well close down.”

He said the New Economic Policy had the same aims of enlarging the economy.

Putting civil servants in the private sector

To move the plan along, Daim said he had proposed an early retirement scheme for civil servants who wanted to be entrepreneurs.

Back in the 1980s, many “intelligent” people were in government service, said Daim.

“Maybe this was my mistake. Those days the intelligent ones were in civil service. But I felt that as long as they were in the civil service they couldn’t be in the private sector and compete. And so I wanted the intelligent ones to be in the private sector.

“This was because I’ve always believed that for this country to succeed, the Malays must succeed. If the Malays don’t succeed they will go back to religion and then we will be in trouble.”

The best way to succeed, said Daim, is to be an entrepreneur. But this did not sit well with the conventional Malay mindset then.

“Even the education system those days would say that Malays should only be farmers, drivers and clerks. That’s all.

“When a smart student had the chance to get  higher education, the father would say no and ask him to become a government clerk because ‘I want to go to Mecca’.”

But after more than three decades, Daim said Malaysia has returned to the 1980s when state-owned enterprises are once again dominating the business environment in Malaysia.

Political muddling

To make things worse, Daim said that the politicians have incorporated the GLCs into their patronage system.

“After I left, they started to use GLCs to give high income to the Malays; just (to) give them higher salaries. Some now get RM1 million a month. But this is not based on performance.

“When I was there, the Petronas Bhd chief executive officer was only paid RM30,000 a month.”

As such, some of the CEOs are treating the GLCs like musical chairs, moving from one GLC to another despite (the GLCs) failing, said Daim.

“These are crazy ideas and as such they keep creating more government agencies. It is a vicious cycle but who suffers in the end? The country suffers.”

The government, said Daim, has ideas.

“But they do not understand business.” – July 10, 2022.