Govt to cut ownership in major companies to boost liquidity

The reduction will be part of govt’s measures to allow the private sector to flourish


The government will reduce its stakes in state-controlled companies to increase stock market liquidity and allow the private sector to take care of business.

In a major shift of policy from the previous administration, Finance Minister Lim Guan Eng said the reduction of government’s equity will be part of a host of measures it will take to allow the private sector to flourish.

Lim said the current administration believes the government should not be in business and instead, must let market forces determine business.

He said the large government holdings in companies have stifled liquidity in some of the biggest companies on Bursa Malaysia, which can be seen by the Kuala Lumpur market’s low weightage of only 2.48% on the Morgan Stanley Capital International emerging-markets list.

“We’ve heard numerous complaints, from investors and businessmen alike, that our capital markets are too illiquid, controlled effectively by several government-linked investment companies.

“We will reduce the government’s direct participation in equity ownership in companies so that the private sector can take the lead.

“For listed entities, this will lead to higher average daily volumes for Bursa Malaysia, while improving market liquidity,” the finance minister said in a special address yesterday at the Malaysia: A New Dawn 2018 Investors’ Conference in Kuala Lumpur.

Lim said reducing the government’s stakes will also release value that will help the administration pare down the national debt.

“We hope to kill two birds with one stone. We will be unleashing the power of the private sector and reduce the crowding out effect caused by the government.

“We will also be able to gradually realise the value of government-owned assets and utilise these proceeds to pare down our debt obligations,” he said.

With the reduced stakes, Lim said the government will also introduce a new public-private partnership (PPP) model to promote efficiency and competitiveness in the private sector.

“The new true PPP model, or what I would term as PPP 2.0, would decouple the land swap by carrying out open auctions for the land to be sold, while at the same time executing an open tender for the project to be built.

“This will enable the government to achieve the highest revenue for the asset disposed, while receiving the best value for the project to be awarded,” he said, adding that the new model will be applied to all PPP projects that are awaiting approval, as well as future ventures.

Lim stressed ongoing projects will not be cancelled, but will continue under a different format and mechanism.

“These are some of the many examples on how we intend to allow the private sector to flourish and drive economic growth in Malaysia.

“I will certainly spend more time elaborating on these public-private initiatives and cooperation on how we can leverage on one another to bring back the roar of the Malaysian tiger,” Lim said.

He noted, however, the country will need three years to resolve the fiscal issues caused by the RM1 trillion debt and the RM35 billion Goods and Services Tax and income tax refunds.

“We believe institutional reforms will allow the Malaysian economy and investors certainty and confidence in the system. This will not be easy, but I believe it can be done,” he said.