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Malaysia’s Government-linked Companies: development tools or corruption vehicles?

By Murray Hunter - posted Wednesday, 7 April 2021


This is strategically important because GLCs under this ministry can greatly assist in garnering the rural vote during elections. These include MARA, FELCRA, and other regional development authorities. Powerful GLCs that the Ministry of Finance controls such as the EPF, KWAP, are in the hands of Zafrul Abdul Aziz, from the financial sector, as an independent minister.

Muhyiddin, also appointed Zafrul as a director of the state-owned investment fund Khazanah, while Azmin Ali is still a director as well. Three of nine directors on the board of Khazanahare prime minister and ministers.

This means that politicians now have increased their control over a massive part of the Malaysian economy. Many, if not almost all appointments to the boards of GLCs were made to shore up Muhyiddin’s government without any considerations of meritocracy.

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This brings a number of concerns.

As most activities of GLCs are rent-seeking in lucrative and regulated sectors, value is not being created. Innovation within the Malaysia economy is suffering, as bureaucrats and politicians have not shown themselves to be capable of managing change. This destroys the potential dynamism of the economy. In addition, GLCs are taking away opportunities for potential local and foreign investors, leaving a very subdued private investment environment. Special concessions and privileges to GLCs completely deter private investment within many sectors. 

Monopolies and oligopolies created by the government are creating inefficiency, with consumers forced to pay above parity pricing for goods and services relative to the rest of the region.

The signs of inefficiency and lack of dynamism are there. The agriculture sector lacks diversity, the manufacturing base is lopsided, services are high-priced and the telecommunications sector lags the rest of the region.

Lack of transparency both within GLCs and the marketplace has nurtured a fertile environment for corruption and embezzlement. Many scandals never reach the public arena, where those working within GLCs know that there is little chance of getting caught, and a very low risk of prosecution, should they ever get caught. This also creates an environment where nepotism thrives, where certain employee candidates are favored, and contracts dished out to favored vendors.  The government has demonstrated that it has failed at picking winners, costing billions of ringgit from failed projects which become economic white elephants.

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This article was first published on Asia Sentinel.



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About the Author

Murray Hunter is an associate professor at the University Malaysia Perlis.

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