PETALING JAYA: An economist has called for reforms in government-linked companies (GLCs) following the auditor-general’s expression of concern over the portion of development funds used to pay the matured debts of 11 such companies.
Juita Mohamad of think tank Institute of Strategic and International Studies (Isis) said the “age-old question” about bailing out enterprises should have been resolved before the Covid-19 pandemic.
She told FMT the pandemic had shone a spotlight on the merits of investing in such companies amid the government’s cost-cutting measures and a global recession.
“Reform in Malaysian GLCs is very much needed,” she said.
“GLCs need to be independent. The government has no business being in business. The money used to bail out these companies is money from taxes. It’s the people’s money.
“When your resources are limited, you should be concentrating on what you are supposed to be doing anyway, which is letting private companies become efficient and allowing them to pursue business activities.”
A total of RM5.66 billion was channelled to the 11 companies for the purpose of repayment of loans guaranteed by the government, according to the Auditor-General’s 2019 Report. The sum is an increase of RM1.52 billion over 2018’s total of RM4.14 billion.
Juita said GLCs were attractive propositions for both domestic and foreign investors because they knew that these companies would “never go bankrupt” as the government would always bail them out.
She also said many GLCs had not been transparent with their activities, with some even failing to publish their annual reports.
“This leads to unaccountability without any checks and balances,” she said. “Losses in investments seem to be rampant in the system, which shows what kind of leadership these companies have.
“Their projects come from the government, and this also breeds bribery.”
Among the companies the auditor-general mentioned in the report are 1MDB and its former subsidiary, SRC International.
In a court decision last July, former prime minister Najib Razak was found guilty of seven counts of corruption in connection with RM42 million belonging to SRC International.
Najib also faces 25 charges of abuse of power and money laundering over the alleged deposit of RM2.28 billion of 1MDB funds into his AmBank accounts between February 2011 and December 2014. The trial is set to resume on Dec 14.
Ramon Navaratnam, a former deputy secretary-general of the Malaysian treasury, agreed that GLCs needed to be re-evaluated and called for prudence in government spending.
“We need to address this structural problem. The AG’s report is timely, and there must be a growing recognition that there are limits to government financing.
“But since this is a time of crisis, we need to spend more despite constraints in the form of rising deficit and debt. So we have to get the private sector to play a bigger role.
“We have to get foreign and domestic investors to spend more together in joint enterprises. And private-public partnerships should be stepped up in a big way during this time,” he said. -FMT