BFM 89.9
The Business Station
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By Melisa Idris, The Morning Run Crew
Malaysia has a unique history of government-business relationships, spanning from a 1957 piece of legislation that permitted the office of the Executive to own companies.
A series of events have ultimately led to the accumulation of corporate wealth in the hands of a mere seven government-linked investment companies (GLICs) -- Khazanah Nasional, Permodalan Nasional (PNB), the Employees Provident Fund (EPF), the Pensions Trust Fund (KWAP), the Armed Forces Savings Fund (LTAT), the Pilgrims Savings Fund (Tabung Haji), and finally, the Minister of Finance Inc.
Recent research by Professor Dr Edmund Terence Gomez, Professor of Political Economy at Universiti Malaya, has found that control of the corporate sector, through these GLICs, now rests at the apex body that is Minister of Finance Incorporated (MoF Inc.).
Here's what you need to know about MoF Inc, the "super entity" in the Malaysian economy:
1. How MoF Inc. came into existence
MoF Inc. was initially created to hold assets taken over from the colonial government, thanks to a 1957 piece of legislation that permitted the Executive to own companies. MoF Inc. functions as the government’s investment holding company. But there are a lot of questions on what is the purpose MoF Inc. post-Independence?
2. Unprecedented concentration of power in the Executive
Unlike a normal company, MoF Inc. does not have a board of directors. It is a division under the Ministry of Finance, controlled solely by the Minister of Finance. What this means? The government can exert a strong influence on GLICs and GLCs when it comes to major commercial decisions, including the award of contracts, key appointments, corporate strategy, financing, asset acquisitions and sales.
3. My Prime Minister, My Finance Minister
In 1998 during the Asian financial crisis, Tun Mahathir Mohamad made an unprecedented move to concurrently take on the role of Prime Minister and Minister of Finance. Currently, Datuk Seri Najib Razak holds both positions.
4. Equity Ownership
The seven GLICs have majority ownership of 35 of the top 100 listed companies in Malaysia -- the combined market cap of which accounts for 42% of the market cap of all the listed companies on Bursa Malaysia.The GLICs control over 68,000 companies directly and indirectly with minority interest. They hold sway over some RM1 trillion worth of investments. Many of these companies operate in key sectors of the economy, such as utilities, infrastructure, property and telecommunications. More information on GLCs and GLICs HERE.
5. Leadership & Board Membership of GLICs
There are now fewer UMNO politicians and UMNO-linked proxies are being appointed to the boards of companies controlled by GLICs, compared to 20 years ago. These positions have now been replaced by bureaucrats.
Most GLICs are now performing well, and are well-run by corporate professionals.
Only Tabung Haji is run by politicians and the others by professionals. Tabung Haji has had several scandals in the past few years, including mismanagement of funds and the controversial land purchase from 1MDB.
To learn more about MoF Inc., do listen or download the podcast below:
In his latest book 'Minister of Finance Incorporated: Ownership and Control of Corporate Malaysia', Professor Edmund Terence Gomez explores the role of the Government in the Malaysian corporate sector. He discusses the findings of his study on Government Linked Investment Companies (GLICs) and the increasing concentration of power in the office of the Executive.
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