• Reforming a flawed system
Many of Malaysia’s GLCs were born out of the need to elevate the nation’s economy with the support of the government and many of these companies have done exactly so. But due to the acts of several individuals, these companies have gained an unpleasant reputation over the years, giving rise to the need to reform policies surrounding these companies.
According the reports by Bernama, Assistant Professor of Management at Asia School of Business Dr Renato Lima de Oliveira said a series of resignations and changes in the GLCs would give greater leeway to the new government to pursue their policy priorities and manifesto.
“There is a lot of goodwill with the current government, with Malaysia’s historical alternation of power, and PH will have the ability to put together their governing team. Many can see these changes as part of a unique historical moment,” he was quoted as saying.
However, there is still a lot that needs to be done to reform what seems to be a flawed business system which benefits only certain people as Oliveira stressed it is important that one of the key points of PH ascension to power was to strengthen the country’s institutions.
“It is important in the long run to strengthen the governance of GLCs and protect them from political changes and pressures,” Oliveira, who is also a a fellow at the IDEAS, was quoted as saying.
Despite the changes, Oliveira stressed that the new government needed to draft a vision and engage the society via public hearings, forums or parliamentary debate.
“Ideally, recruit ( the right people) through a system such as an independent search committee that ensure positions are filled by merit. If you are not changing the vision but just changing teams, it would be easier to replace,” he added.
He also highlighted that this way, key state positions would not have to change hands every time there was a change of government.
Nevertheless, he noted that the GLCs should be protected from political changes and pressures to enable them to become more focused in executing the policy priorities of the government in power.
IDEAS also pointed out that another reason for widespread dissatisfaction with government intervention and a critical factor that has hampered the rise of entrepreneurial firms is the manner of implementation of affirmative action- based policies.
“While it is important to nurture entrepreneurial Bumiputeras, to rectify the injustices of colonial rule, how this is to be done must be reviewed. This is imperative for two reasons: first, to inspire investor confidence and to reduce investment risks, such as expropriation, as a firm develops; second, an outcome of trying to simultaneously foster entrepreneurial firms and Bumiputera- owned companies has been the undermining of both objectives.
“The costs of government intervention in business have been huge because institutional constrains are weak and legal protections against expropriation by powerful politicians are ineffective, inhibiting entrepreneurship in the process,” it highlighted.
It further pointed out that the level of transparency of government intervention in the corporate sector through the GLCs must also be enhanced to avoid political abuse on these GLCs which could lead to inefficient allocation of public resources.
“A key factor contributing to corrupt practices within GLCs is the appointment of politicians to their boards of directors. The members of these boards are public trustees, but do not act as such. One consequence of this practice, also a form of political patronage, is that it undermines public ownership of corporate enterprises and contributes to the idea that this form of government intervention is not viable or sustainable.
“This practice of appointing politicians to the boards of listed GLCs is more common among enterprises owned by the state governments, where the conduct of patronage is extensive.
“What is required of GLCs is a set of well-defined long-term goals, in line with policy priorities, with regular checks on their progress.
“The reasons why GLCs get involved in corporate exercises must be publicly disclosed to constrain the self- serving behaviour of politicians. Disclosure is important as political leaders, through GLCs, have access to enormous funds and rents that can be deployed to garner electoral – even party – support.
“How GLCs are employed in the economy can also have a bearing on the implementation of ethnically-based affirmative action, as this policy can be deployed by politicians to garner support during electoral battles, particularly in Bumiputeramajority constituencies,” it explained.