Putrajaya will have to go beyond dollars and cents and assess any potential entities according to their contribution to the society, says analyst

By RAHIMI YUNUS / Pic By ISMAIL CHE RUS

The government needs to be selective and very strategic in the choice of government-linked companies (GLCs) that have the potential to be listed on the stock market, particularly entities that possess balanced socio-economic objectives.

Malaysian Institute of Economic Research senior research fellow Dr Zulkiply Omar said Putrajaya will have to go beyond dollars and cents and assess any potential entities according to their contribution to the society. 

“The question is how far do you want to privatise the GLCs? The government needs to look at it carefully, because once you privatise it, the entity will be fully motivated by profit and that may lead to higher charges or prices,” he told The Malaysian Reserve (TMR).

As it is, Zulkiply said the private sector may not command the capabilities yet to shoulder commercial and social responsibilities currently held by GLCs in certain key economic sectors, including utility and education.

He singled out Petroliam Nasional Bhd (Petronas) as a good example of an entity that wields the right balance of commercial sensibility and social responsibility, while upholding the nation’s agenda, making it the perfect candidate to be listed.

Earlier, Prime Minister Tun Dr Mahathir Mohamad said the government is considering to list matured government entities including GLCs on the stock market to ensure greater risk control parameters on issuances of government guarantees, while securing better market access as well as potential asset monetisation.

Putrajaya is also reviewing the shareholdings of some of its GLCs in public-listed companies.

Zulkiply said the privatisation of GLCs would reduce financial burden on the government while improving efficiency of the companies.

Universiti Putra Malaysia Putra Business School business development manager associate professor Dr Ahmed Razman Abdul Latiff said the proposal to list some of the GLCs will unleash the entities’ true potential and boost investors’ participation in the stock exchange.

“Some of the GLCs will become big players in the market once they are listed and that will be beneficial to the economy. They can be the catalysts to various industries,” Ahmed Ramzan told TMR.

He said some of the entities which have the potential to be listed include Petronas Carigali Sdn Bhd, KLCC (Holdings) Sdn Bhd, Cyberview Sdn Bhd and Malaysia LNG Sdn Bhd.

Last year, the Institute for Democracy and Economic Affairs stated in a report that by early 2017, 71 enterprises were classified as GLCs on the Bursa Malaysia, among 904 companies in total.

Of the 71 GLCs, 33 were among the top 100 firms, while 73% of them were highly capitalised and listed among the top 300 firms.

The report, lead-authored by political economist Prof Dr Edmund Terence Gomez of University of Malaya, stated that two sectors — construction and property development, and trading and services — stood out as having extensive government intervention.

Entitled “Government in Business: Diverse Forms of Intervention”, the report classified government intervention via GLCs, substantial shareholding or joint ownership.

Malaysia has seven government-linked investment companies (GLICs) that control all the GLCs namely the Minister of Finance Inc, Khazanah Nasional Bhd, Employees Provident Fund, Lembaga Tabung Haji, Armed Forces Fund Board, Retirement Fund Inc and Permodalan Nasional Bhd.

The GLICs hold more than RM1 trillion worth of investment.

The Pakatan Harapan government has been executing major overhauls to these state-owned enterprises.

Under the programme, key economic departments and GLICs that were previously chaired or under the supervision of the prime minister are now within the purview of the economic affairs minister and finance minister.