TMI reported yesterday that government-linked companies (GLCs) would see another round of heads being removed. These appointments were seen as being too politically involved with the previous Barisan Nasional government.

In the past, GLCs were sometimes treated as an extension of the ruling party, with regards to funding, usage of GLC assets and awarding of contracts, and perks or other goodies.

We have seven main government-linked investment companies (GLIC) who own hundreds of companies. Some estimates place them at around 35% of the value of Bursa.

MOF Inc., one such GLIC, controls 68 GLCs on its own. A December 2017 valuation placed the top 20 Malaysian GLCs as having a collective capitalisation at over RM 450 billion.

GLCs have a near monopoly on utilities, plantation and public transport, and over 50% presence in finance and banking, telecommunications, development and broadcasting, and a significant presence in nearly all remaining sectors in the country, from hospitals to hospitality. Many of these GLCs have overlapping functions, and in some cases, compete against each other unhealthily.

The previous administrations have attempted to reform the GLCs, but the emphasis has been on performance, streamlining SOPs, enhancing transparency and adopting best practices.

Some realignment did take place successfully, along with some mergers and acquisitions between GLCs, resulting in the top 20 being reduced to 17, and in GLCs generally experiencing an increase in revenue from overseas business and subsequently, a reduction of reliance on protectionist policies.

But issues of overlaps in areas of business and internal competition are still very plaguing GLCs. Due to the somewhat monopolistic nature, these often do not present a problem as there is still money to be made, but in some cases, over-issuance of licences and ‘friendly’ competition in some industries, such as ports and airports, are cutting into local profit, while the emphasis should be having a common strategy to effectively compete against neighbours like Singapore or Thailand.

Better coordination is needed between both state and federal GLCs so as to maximize our potential. A good starting point could be consolidating physical and intellectual resources of the various GLCs, and coordinating goals between them, according to their own expertise and capacities. Tenaga Nasional for example, already competes successfully for contracts in the Middle East, while Telekom Malaysia could be turned into a dominant regional telecommunications giant.

Coordination between GLCs in similar industries should be improved, instead of seeing each other as mere competition, niche markets should be drawn out from specialisation and local geographic advantages. This improves technical know-how, preserves profit margins and builds capacity.

Such coordination already exists between companies within the stables of individual GLICs and should be extended beyond that to include not only all government investment funds, but eventually across other state investment funds, capital guarantee companies and companies with government golden shares. This will allow GLCs to really benefit from each other’s strengths and learn from each other to improve on their weaknesses.

Many of Malaysian GLCs have hidden talents within the companies and much technical and corporate know-how within their ranks. With less political interference and proper support by the new government, they could raise the bar of our GLCs and with it, a large part of our economy. – June 20, 2018

* Emmanuel Joseph firmly believes that Klang is the best place on Earth, and that motivated people can do far more good than any leader with motive.