Professor Dr.
Edmund Terence Gomez is Dean of Faculty of Economics and
Administration at the University of Malaya. He has held appointments at the
University of Leeds (UK) and Murdoch University (Australia) and served as a Visiting
Professor at Kobe University (Japan) and at the Universities of Michigan (Ann Arbor)
and California (San Diego) (USA). Between 2005 and 2008, he served as a Research
Coordinator at the United Nations Research Institute for Social Development
(UNRISD), in Geneva, Switzerland.
His publications include Politics in Business: UMNO’s Corporate Investments (Forum,
1990), Malaysia’s Political Economy: Politics, Patronage and Profits (Cambridge
University Press, 1997), and more recently the Minister of Finance Incorporated
(Palgrave-Macmillan, 2018).
Lau Zheng Zhou is Research Manager of Economics and Business Unit at IDEAS.
His research interest is in the intersection between markets and institutions which
include global value chains, China’s Belt and Road Initiative, and financial sector
development. Lau obtained a First Class Honours in Business Economics from the
University of Nottingham and a Master’s degree in Political Science and Political
Economy from the London School of Economics.
Yash Shewandas is currently a Research Intern under the Economics and Business
Unit at IDEAS. His interests include behavioural economics, trade globalisation and
global inequality, more specifically the wealth gap. Having completed his A-Levels,Yash
will be pursuing a Bachelor of Commerce degree at the University of Melbourne in
2020, and is hoping to major in Economics.
*Acknowledgments
The team would like to offer special thanks to Juwairiah Tajuddin for the figures on corporate ownership and control
used in this report.
2 GLC Monitor 2019: State of Play Since GE14
Policy Brief NO. 18
Promising Change
Before the general election in 2018, the Pakatan Harapan (PH) coalition promised to reform governance of
government-linked companies (GLCs). These reforms included ensuring that the appointment of members
of these boards of directors would be made based on merit, not on political considerations.
These were important pledges because Najib Razak, in his dual role as Prime Minister and Finance Minister,
had effective control over government-linked investment companies (GLICs) which had majority equity
ownership of a broad range of commercial enterprises.This concentration of political and corporate power
in the hands of the Prime Minister had contributed to serious abuse of public institutions to advance the
political interests of his party, UMNO, in key parliamentary constituencies while also contributing to serious
corruption.
GLC reconfiguration: PMD and big business
The PH government, under Mahathir Mohamad, has made good on one key election pledge. For the first
time since 1999, the Prime Minister does not concurrently serve as Minister of Finance. However, Mahathir,
the Prime Minister who started the practice of simultaneously serving as Finance Minister, has commenced
reconfiguring Malaysia’s longstanding government-business nexus in a manner that suggests concentration
of corporate power in his party, Parti Pribumi Bersatu Malaysia (Bersatu).
Soon after re-taking office in 2018, Mahathir changed the ministerial reporting lines for multiple GLCs in
five key ministries, the Prime Minister’s Department (PMD), Ministry of Finance (MoF), Ministry of Rural
Development (MRD), Ministry of Entrepreneur Development (MED) and the newly-formed Ministry of
Economic Affairs (MEA).Three of these ministries are led by Bersatu members, that is Mahathir (PMD), Rina
Harun (MRD) and Mohd Redzuan Yusof (MED). Azmin Ali, the deputy president of PKR who leads the
MEA, is reputedly a close Mahathir ally (see Table 1).
Table 1. Leadership Composition of Key Economic-Based Ministries
Ministry Minister Political Party
Prime Minister’s Department (PMD) Mahathir Mohamad Bersatu
Ministry of Finance (MoF) Lim Guan Eng DAP
Ministry of Economic Affairs (MEA) Azmin Ali PKR
Ministry of Rural Development (MRD) Rina Harun Bersatu
Ministry of Entrepreneur Development (MED) Mohd Redzuan Yusof Bersatu
Although Lim Guan Eng of the DAP was appointed Minister of Finance, effective control of key government
enterprises under its jurisdiction, including the sovereign wealth fund, Khazanah Nasional, and the leading
Bumiputera-based investment fund, Permodalan Nasional Bhd (PNB), were transferred to Mahathir’s PMD.
These two GLICs have enormous investments in Malaysia’s leading publicly-listed companies, thus giving the
Prime Minister significant influence over these enterprises (see Figure 1).
www.ideas.org.my 3
Figure 1: Prime Minister’s Department (PMD)
Year 2016/2017
Notes:
Ownership
Control
Ministry
GLIC
Statutory Body
Foundation
Holding Company
DFI
SPV
GLC
Year 2018/2019
Meanwhile, the once powerful MoF, in terms of its equity control over the corporate sector, is now more
akin to a regulator where public spending made across all ministries is monitored and assessed based on the
annual budget allocation. MoF also remains saddled with some rather poor performing GLCs, held through
its holding company, Minister of Finance Incorporated (MoF Inc.) (see Figure 2). Finance Minister Lim has
spoken of the need to reform and eventually divest these GLCs.
4 GLC Monitor 2019: State of Play Since GE14
Policy Brief NO. 18
Figure 2: Ministry of Finance (MoF)
Year 2016/2017
Notes:
Ownership
Control
Ministry
GLIC
Statutory Body
Foundation
Holding Company
DFI
SPV
GLC
Year 2018/2019
www.ideas.org.my 5
In September 2018, Mahathir announced that the Bumiputera policy would continue, back-tracking on PH’s
election pledge that race-based policies would cease. Mahathir also critiqued Khazanah for not channelling
government-owned corporate assets to Bumiputeras, although most analysts insist that this was never its
mandate. Subsequently, a well-connected businessman, Syed Mokhtar Albukhary1, already among Malaysia’s
wealthiest Bumiputeras, secured control of key media companies such as TV3, NTV7 and the New Straits
Times by acquiring equity ownership of their holding company, Media Prima Bhd. Other major Khazanah
assets such as PLUS Expressways, the largest highway concessionaire, is reportedly to be channelled to a
Bumiputera-owned enterprise though it is unclear how this transaction will be financed.2
MEA controls Bumiputera GLCs
Effective control of other GLCs with a clear mandate to support the development of Bumiputeras in the
economy were transferred to Azmin’s MEA. Azmin now has assumed control over the restructuring and
development of strategic Bumiputera sectors (see Figure 3).
Figure 3: Ministry of Economic Affairs (MEA)
Year 2018/2019
While it is customary for the minister-in-charge of Khazanah and PNB (via Yayasan Pelaburan Bumiputera)
to assume chairmanship for both institutions, in this case the Prime Minister, it is however unprecedented to
see the Ministry of Finance not being represented in the Board of Directors or Trustees. Equally interestingly,
the Minister of Economic Affairs was made a member of the two boards although it was also common in
the past to have board memberships filled by other ministerial colleagues. Notably too, effective control of
the Bumiputera equity financing entity,YEN, and its wholly owned subsidiary, EKUINAS, was transferred from
PMD to MEA.
1.
As reported by the media, Aurora Mulia Sdn Bhd, the company linked to tycoon Syed Mokhtar Al-Bukhary, has
raised its stake in Media Prima Bhd to 31.22%, thus becoming the largest shareholder of the media company (The
Edge Markets, 2019).
2.
At the time of writing, the media has reported four offers to acquire PLUS, namely from tycoon Halim Saad,
Bumiputera construction Widad Business Group, Malaysian-led Hong Kong-based private-equity firm RRJ Capital,
and another Bumiputera company Maju Holdings Sdn Bhd (The Malaysian Reserve, 2019).
6 GLC Monitor 2019: State of Play Since GE14
Policy Brief NO. 18
MRD: Controlling statutory bodies
The Minister of Rural Development, Rina Harun, oversees Malaysia’s leading statutory bodies, responsible for
the development of areas where much of the country’s low income and poor are situated. Through these
statutory bodies, this ministry also has ownership of a large number of GLCs (see Figure 4).
Figure 4: Ministry of Rural Development (MRD)
Year 2016/2017
Notes:
Ownership
Control
Ministry
GLIC
Statutory Body
Foundation
Holding Company
DFI
SPV
GLC
Year 2018/2019
www.ideas.org.my 7
The MRD transferred effective control of two key institutions to Azmin’s MEA, FELCRA and RISDA. FELDA,
previously under the control of PMD, was also transferred to MEA. FELDA, FELCRA and RISDA are key
primary sector development bodies created to nurture Bumiputeras in these industries. Meanwhile, MRD’s
role appears to be focused primarily on rural socio-economic development, especially on addressing regional
disparities. MRD also retains control of the extremely influential education and enterprise development-
based statutory body, MARA.Table 2 describes the institutions under MRD’s purview whose original mandate
was to reduce regional economic imbalances.
Table 2. Government institutions under MRD
Institution Name Description
Lembaga Kemajuan
Terengganu Tengah Promoting socio-economic development in Terengganu.
(KETENGAH)
Lembaga Kemajuan Established to balance the composition of the residents in Southern Ke-
Kelantan Selatan lantan with the northern part of the state. KESEDAR now spearheads
(KESEDAR) the development of the region’s physical infrastructure.
Lembaga Kemajuan Wilayah Improving rural community life in Kedah so that the urban-rural gap in
Kedah (KEDA) the state can be reduced.
Lembaga Kemajuan Johor Reducing economic imbalance in Southeast Johor through job creation
Tenggara (KEJORA) and economic growth.
Lembaga Kemajuan Wilayah
Promoting socio-economic development in targeted groups in Penang.
Pulau Pinang (PERDA)
Majlis Amanah Rakyat Fostering Bumiputera economic and social development, particularly in
(MARA) the rural areas.
A notable trend in MRD under PH has been the appointment of mostly Bersatu members on the board
of directors of statutory bodies. Many of these politicians had encountered electoral defeats in the general
election in 2018.Table 3 lists these politicians.These appointments are in clear violation of the promise made
by PH to bar any appointment of board members in government entities based on political consideration.
Specifically, the board appointments in KETENGAH and KESEDAR can be interpreted as a form of
“compensation” to election candidates, given their relatively low chance of winning in opposition strongholds
in Terengganu and Kelantan. Furthermore, through these GLC appointments, these politicians can potentially
use MRD’s policy apparatus to reach out to the electorate for political support. This presents a serious risk
because, under UMNO, this ministry was persistently embroiled in allegations of corruption, with MARA
being the prime example.
8 GLC Monitor 2019: State of Play Since GE14
Policy Brief NO. 18
Table 3. Political appointments under MRD3
Board Member Appointments
Institution Name Remark
and Political Affiliation
Zulkifli was defeated by a PAS candidate
Zulkifli Mohamad (Bersatu) in the Ladang state assembly seat,
Terengganu, in GE14.
Marzuki was defeated by an UMNO
KETENGAH Marzuki Wan Sembok (Bersatu) candidate in the Kijal state assembly seat,
Terengganu, in GE14
Zulkifli Ali was defeated by a PAS
Zulkifli Ali (AMANAH) candidate in the Sura state assembly state,
Terengganu, in GE14
Sazmi was defeated by an UMNO
Sazmi Miah (Bersatu) candidate in the Machang parliamentary
seat, Kelantan, in GE14.
Aminuddin was defeated by an UMNO
KESEDAR Aminuddin Yaacob (Bersatu) candidate in the Air Lanas state assembly
seat, Kelantan, in GE14.
Mohd Raslan was defeated by a PAS
Mohd Roslan Puteh (PKR) candidate in the Guchil state assembly
seat, Kelantan, in GE14.
Zakaria is the elected state assemblyman
KEJORA Zakaria Mohd Salleh (Bersatu)
for the Permas seat, Johor, in GE14
Dr. Ismail is the elected state
KEDA Dr. Ismail Salleh (AMANAH) assemblyman for the Pengkalan
Kundor seat, Kedah, in GE14.
MED: Significant influence over SMEs
SMEs, including start-ups, constitute around 98% of local business establishments. Moreover, SMEs are integral
to different stages of industry-related supply chains and often serve as important suppliers of products to
large multinational corporations and GLCs. As indicated in Figure 5, effective control of major SME-focused
institutions such as SME Bank, Bank Rakyat and MaGIC were transferred from MoF to MED.
3.
Based on publicly available information retrieved from official websites.
www.ideas.org.my 9
Figure 5: Ministry of Entrepreneur Development (MED)
Year 2018/2019
MED was established to create an ecosystem capable of producing globally competitive entrepreneurs.
Among the key factors required to achieve that goal include access to financing, training and upskilling, as well
as creativity and innovation development.The relevant institutions under MRD and their key responsibilities
are listed in Table 4.
Table 4. MED institutions and key responsibilities
Institution Name Key Responsibilities
SME Corp Policy implementation for SME
SME Bank Access to SME financing
Bank Rakyat Access to SME financing
Malaysian Global Innovation & Creativity Spearheading the development of an entrepreneurial
Centre (MaGIC) ecosystem
Professional Training and Education for
Youth-based entrepreneurial training
Growing Entrepreneurs (PROTÉGÉ)
Institut Koperasi Malaysia (IKM) Providing entrepreneurial training
Providing business coaching and training targeting
Institut Keusahawanan Negara (INSKEN)
entrepreneurs
Tekun Nasional Access to SME micro-financing
Suruhanjaya Koperasi Malaysia (SKM) Promoting the development of co-operatives
UDA Holdings Berhad Urban property development
10 GLC Monitor 2019: State of Play Since GE14
Policy Brief NO. 18
A core role of the MED, particularly in the industrial and services sectors, is to focus on the creation of
supply and production chains. Related to this is the issue of low value-add in the domestic economy among
Bumiputera-owned firms, an issue contributing to their low high-technology utilisation. Furthermore, these
industries need to be cultivated in the politically-influential Malay-dominant rural heartlands.
In the recently announced Budget 2020, it was disclosed that the SME Bank would be merged with two
other development financial institutions, Bank Pembangunan and EXIM Bank, as well as Danajamin. This will
make SME Bank a huge financial institution, one that can actively facilitate the financing of these enterprises.
Consolidating control of Corporate Malaysia?
A complex institutional architecture involving GLICs, statutory bodies and GLCs was first created in the
1970s, though made more intriguing by Mahathir during his first administration in his endeavour to achieve
a number of different goals, specifically creating Bumiputera corporate captains as well as spawning a huge
SME base in the industrial sector encompassing firms owned by members of this community. This complex
GLC structure was subsequently abused by UMNO to serve the vested business interests of its members,
seen tangibly in the 1MDB, FELDA and MARA controversies.
A major, but covert, reconfiguration of control of GLCs has occurred since PH took power, with these
enterprises now under the jurisdiction of ministers primarily from one party, Mahathir’s Bersatu. As Table 5
indicates, a large number of GLCs have been shifted out of MoF to ministries controlled by Bersatu ministers,
as well as Azmin’s MEA. GLCs within these four ministries have also been shifted between them, though
it appears to serve the purpose of ensuring each minister has enormous influence over a core mode of
enterprise, i.e. large publicly-listed firms, statutory bodies, Bumiputera GLCs and SMEs. These companies
cover the entire spectrum of Malaysia’s corporate sector.
www.ideas.org.my 11
Table 5. Summary of changes in reporting lines for major GLC and state institutions
Before GE14 After GE14
MOF PMD
Khazanah Khazanah
PNB PNB
Yayasan Pelaburan Bumiputerai Yayasan Pelaburan Bumiputerai
PUNB PUNB
PNS PNS
LADA LADA
Bank Rakyatii
SME Bankii MEA
MaGIC FELDA
Changes in
MPRC
PMD reporting lines
Yayasan Ekuiti Nasional (YEN)iii
FELDA
EKUINAS
MPRC
Amanah Raya
Yayasan Ekuiti Nasional (YEN)iii
RISDA
EKUINAS
FELCRA
Amanah Raya
MRD MED
RISDA Bank Rakyatii
FELCRA
SME Bankii
MaGIC
Notes:
i.
PNB is the investment vehicle for Yayasan Pelaburan Bumiputera.
ii.
Bank Rakyat and SME Bank, among several development financial institutions (DFIs), are legally prescribed to be
under the control of MoF. But, in this brief, it is changes in effective control by ministry that is considered.
iii.
The government’s fund granted to EKUINAS is held in trust by YEN.
12 GLC Monitor 2019: State of Play Since GE14
Policy Brief NO. 18
This reconfiguration of control of GLCs probably serves as a mechanism to help Mahathir achieve his
now longstanding goal of creating a huge pool of Bumiputera entrepreneurs. However, the reconfiguration
also suggests a revised form of structural power that could allow PH to use GLCs to serve its political
interests in three ways: first, to channel government-generated concessions to key constituencies to garner
electoral support. Second, to channel government assets into private (well-connected) hands leading to
concentration of corporate wealth. Lastly, to allow for the appointment of politicians to the boards of GLCs
to sustain the support of party members.
Current policy discourses with an emphasis on a race-based agenda, in spite of the rhetoric of a ‘Shared
Prosperity Vision’, serves to promote the drive to attain these goals.The nature of these policy discourses, as
well as the possibility of the transfer of corporate assets into private hands leading to capital concentration
hardly serve to inspire investor confidence. Moreover, since Mahathir has admitted that his Bumiputera-
based business policies have failed4, and since no new ideas have emerged indicating how this policy will
be implemented in a fundamentally different way through GLCs, the possibility of serious wastage of public
funds is likely.
4.
Mahathir has mentioned on several occasions the failure of his Bumiputera-based business policies, most recently at
the Malay Dignity Congress on 6th October 2019.
www.ideas.org.my 13
References
Mahathir Mohamad. (October 5, 2019). Restructuring Malaysia’s Development Priorities. Prime Minister’s
Office of Malaysia.
The Edge Markets. “Syed Mokhtar raises stake in Media Prima to 31.2%.” September 23, 2019.
The Malaysian Reserve. “Government urged to consider public opinion on PLUS sale.” October 22, 2019.
14 GLC Monitor 2019: State of Play Since GE14
The Institute for Democracy and Economic Affairs (IDEAS) is a nonprofit research institute based in Malaysia
dedicated to promoting solutions to public policy challenges. Our vision is :
“A Malaysia that upholds the principles of liberty and justice”
Our mission at IDEAS is to improve the level of understanding and acceptance of public policies based on the
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is independent of vested interests and partisan influences. We act as an intellectual centre creating space for
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Selection of IDEAS’ Publications (2018 - 2019)
Policy Ideas
Policy Paper No 62: SMEs’ Compliance Cost in Malaysia by Adli Amirullah, Aiman Wan
Alias, Sabrina Sabu (September 2019)
Policy Paper No.61: Malaysian Property Market: Affordability and the National Housing
Policy by Carmelo Ferlito (June2019)
Policy Paper No.60: Economic Impact of Granting Refugees in Malaysia the Right to Work
by Laurence Todd, Adli Amirullah and Wan Ya Shin (April 2019)
Policy Paper No.59: Reviving the Spirit of Federalism: Decentralisation Policy Options for
a New Malaysia by Tricia Yeoh (April 2019)
Policy Paper No.58: Improving Access to Orphan Drugs in Malaysia by Dr. Asrul Akmal
Shafie (February 2019)
Policy Paper No.57: E-hailing regulations - striking the right balance by Laurence Todd, Adli
Amirullah and Chiang Hui Xing (November 2018)
Policy Paper No.56: Economic Benefits of ASEAN Single Aviation Market by Adli
Amirullah (November 2018)
Policy Paper No.55: Powering the future - Malaysia’s energy policy challenges by Renato
Lima de Oliveira (November 2018)
Brief Ideas
Brief Ideas No. 17: A Counter - Cyclical Tax Reform by Carmelo Ferlito(October 2019
IDEAS Position Paper: Making Shared Prosperity a Reality in Budget 2020 by IDEAS
Research Team (September 2019)
Brief Ideas No. 16: An assessment of select procurement initiatives in the National Anti
Corruption Plan 2019-2023 by Faiz Abdul Halim and Aira Azhari (March 2019)
Brief Ideas No. 15: Responsible Privatisation - A New Malaysian Model of the role of
government in the economy by Dr Geoffrey Williams (January 2019)
Reports
ASEAN Integration Report 2019- September 2019
1st Kuala Lumpur Roundtable - July 2019 Report (July 2019)
Projek Pantau Report Card No.2 by Faiz Zaidi and Laurence Todd (June 2019)
Policy IDEAS are IDEAS’ regular publications that introduce and propose ideas for policy
reforms based on analysis of existing policies or best practices.
Institute for Democracy and Economic Affairs (IDEAS)
The Lower Penthouse. Wisma Hang Sam, 1, Jalan Hang Lekir 50000 Kuala Lumpur
Website: ideas.org.my Tel: +603 2070 8881 / 8882 Fax: +603 2070 8883
