Are GLICs in Capital Intensive Sectors?

The Institute for Democracy and Economic Affairs’ (IDEAS) latest research found that government-linked investment companies (GLICs) hold high equity shareholdings in capital-intensive sectors. These include telecommunications and media, transportation and logistics, as well as utilities.

The report, entitled “GLIC Footprint in the Private Economy: Sectoral Concentration and Policy Dilemma”, is a research by IDEAS on GLIC shareholdings in Malaysia’s top 100 public listed companies. It highlighted the outsized role they play in Malaysia’s economy.

The high concentration of GLIC shareholding in the said companies raises concerns about whether the outsized GLIC footprint in these industries ultimately poses concentration risks to their depositors. For example of 78.6% cumulative stake held by Khazanah Nasional Bhd, the Employees Provident Fund (EPF), Retirement Fund (Incorporated) (KWAP), Lembaga Tabung Haji and Permodalan Nasional Bhd in telecommunications company Axiata, or GLICs’ near-majority stake in Malaysia Airports.

IDEAS has called for the government to provide more disclosure on what entails in the Perkukuh Pelaburan Rakyat (PERKUKUH) programme announced on Aug 12. This was designed to reform the mandate and roles of Malaysia’s GLICs to align them with the national agenda and to support the country’s economic recovery plan.

Source: https://www.mstar.com.my

IDEAS also welcomed measures under PERKUKUH to differentiate between sovereign wealth funds (SWF) and institutional investors. It will enable the latter to maximise investment returns, including diversifying abroad, while SWFs will be able to invest in strategic sectors while acting as stabilisers in the local financial market.

IDEAS also called for the programme announcement to be accompanied by a policy document that would detail how key outcomes will be achieved and how the 20 key initiatives will be implemented through 2024.

The key problem is the political masters and their interference in the management of the GLICs. Many have Board members and CEOs appointed from the ruling coalition. The agenda will therefore be quite different from a public listed company. This is where depositors/taxpayers need a say through a Parliamentary Select Committee on GLICs and GLCs. Otherwise the “check and balance” is overridden by narrow political discourse.

Reference:

IDEAs’ research shows GLICs hold high equity holdings in capital-intensive sectors, CEO TheEdgeMalaysia, CEO Morning Brief, August 25, 2021