Tuesday, July 7

Gee, let’s see (GLC) reform

0

ALTHOUGH we at the Institute for Democracy and Economic Affairs (Ideas) are preparing for our 10th anniversary with old hard drives being scoured for photos, our research and advocacy continues, and the team has been active on a topic that has always been of interest to us: the role of government in the economy.

An early pamphlet we issued in 2011 entitled ‘The Tunku’s Great Ideas’ noted that our first Prime Minister said that “the government does not have the business experience or know-how to undertake business directly itself”. In the same speech in 1961 he noted that “there is a section of the people who advocate nationalising certain businesses and industries. But as long as the Alliance [the precursor of Barisan Nasional which Tunku Abdul Rahman led]remains in power such concepts will not be put into practice because we do not believe such measures will benefit our economy”.

Following the Bumiputra Malaysia Finance scandal, which saw losses of over a billion US dollars, he lamented in 1986 that, “I have always maintained that the government must not indulge in business. There are many losses incurred by the government of late and this should be a good lesson to our leaders not to mix politics with business.”

Alas, for Malaysians of my generation, it is expected that politics and business go together: the tools of patronage, favourable access to contracts and appointments to Government Linked Companies (GLCs) seem like an automatic entitlement for politicians. For the cynical, this is the real motivation to join politics; helping the people is a secondary consideration (though the argument that “I’m acquiring this wealth so that I can better help the people” is a remarkably common defence).

Today one of the hottest topics in the Malaysian public policy space is the role of GLCs, and in Ideas’ recent roundtable on the topic it was pointed out that the current Prime Minister has recently been saying the same thing as our first: that “government has no business to be in business”.

In the current context, that suggests an inclination to divest. However – particularly in light of the cabinet decision not to sell PLUS – a key question is who the beneficiaries of such divestments might be. Indeed, despite rhetoric of divestments and new oversight bodies, the reality of the process could result in state capture and the strengthening of oligarchs.

Many appointments to certain national institutions, advisory councils, and GLCs were widely welcomed following the formation of the government in 2018. However, there is increasing concern about some individuals wielding excessive influence over cabinet members (including the Prime Minister himself) in swaying political and business decisions.

It is therefore incumbent on the true defenders of the Federal Constitution, rule of law, and separation of powers to stand their ground. Although social media provides fertile ground for anyone to denounce anybody for anything, time will vindicate those who do the right thing – as we see increasingly with the 1MDB scandal.

One unique feature of the Ideas roundtable is that it was attended by diverse stakeholders including economists, private sector veterans, former ministry and central bank officials, other think tankers and, crucially, former senior officers of GLCs themselves, providing an unprecedented range of views.

Although a formal communiqué may be released later, I was struck by the fact that, despite the widely acknowledged power of GLCs in the economy, everyone agreed that some basic questions need to be asked before GLC reform can truly happen in an organised way. These include even the definition of what GLCs and GLICs are (recently, Khazanah argued that companies under its commercial fund should not be classified as GLCs, as they should have operational independence to fulfil their commercial objectives). Original mandates need to be looked into before there can be a framework for reform, particularly if entities were set up for one purpose but have now grown to be involved in all sorts of other activities.

One participant highlighted the fact that many private companies themselves desire GLC investment (to escape market discipline and receive other perks), while another speaker pointed out the overlooked role of state GLCs, and the fact that eight political parties are controlling 13 states, all with GLCs that serve as opportunities for political patronage. This factor thus dovetails strongly with the need for political finance reform, meaning that a viable coalition involving political leaders from across the spectrum needs to be created first.

However, as one participant noted, GLC reform can only properly be achieved once the wider economic strategy of the country is articulated first. With much political mudslinging and different ideologies resident in different ministries and agencies, that is a significant challenge in itself.

Tunku Zain Al-‘bidin is founding president of Ideas.