The Role of GLCs in the Modern Malaysian Economy – A Summary of Session B


  • Dato Shahril Ridza Ridzuan, Managing Director, Khazanah Nasional Berhad

  • Tan Sri Leo Moggie, Chairman, Tenaga Nasional Berhad

  • Tan Sri Mohd Sheriff Mohd Kassim, Former Managing Director, Khazanah Nasional Berhad (1994 – 2003)

  • Mr Nurhisham Hussein, Head of Economics & Capital Markets, Employees Provident Fund (EPF)

  • Moderator: Dato’ Abdul Rauf Rashid, Malaysia Managing Partner, Ernst & Young


This session revisits the reasons behind the setting up of GLCs (Government-Linked Companies) in an attempt to provide a clearer definition of GLCs in Malaysia. GLCs should be defined not just on ownership but also its role from the commercial as well as the strategic aspects; GLCs assist the government in defining the policy framework and providing the right incentives to businesses.

Clarity is of utmost importance in differentiating between the role of government and GLCs. Clearly defined boundaries and roles will assure the market and boost business confidence. GLCs will once more be seen as the facilitator of collaborations between the public and private sectors, as well as the catalysts of the economy, if this is needed.

As such, GLCs should embrace IR4.0 to lead the way for the rest of the business sector.

Summarised Points by Panellist

Dato’ Abdul Rauf Rashid

  • GLICs & GLCs make up 42% of Malaysia’s market capitalization, which makes Malaysia the fifth in the world in terms of economic ownership by GLCs, behind China, India, Russia, and the UAE (Source: State-Owned Enterprises: Trade Effects and Policy Implications). RM1.8 trillion of our assets are owned by GLICs or GLCs, which represent 5% of our national workforce.

  • China & Russia have socialist or communist economic underpinnings, hence SOEs (State-Owned Enterprises) are part and parcel of the development.

  • In Malaysia, there needs to be clarity in the objectives of GLCs and GLICs, and what their scope or responsibilities are. The boundaries between GLCs and the government should also be clear. These corporations also need to be clearly defined. For example, EPF and PNB are not strictly GLICs, but act more like Trustees of public money.

  • For the sake of Malaysia’s economy and for the supply of jobs in Malaysia, the government needs to ensure GLCs are worthy of investment, and that they improve the economy and facilitate the growth of the business sector.

Dato Shahril RIdza Ridzuan

  • We have to be very clear in our definition about what is a GLC.

  • GLICs manage excess government funds. Khazanah performs 2 functions:

  • A commercial function, similar to a lot of other funds in the world.

  • A strategic role, where we work with the government to own critical assets, develop technologies, or industries that are important for the country.

  • Not everything owned by Khazanah or KWAP (Kumpulan Wang Persaraan), for example, should be considered a GLC. Hence, I would challenge the statistic given by Dato’ Rauf, that 42% of the Malaysian economy is owned by GLCs. GLCs should be defined not by its parent ownership but by the role that it plays.

  • In Khazanah, we see GLCs playing a role in the regulated industries. This is where GLCs such as TNB, PLUS, and MAB (Malaysia Airports Berhad) play an important role in using a combination of ownership and regulation to derive a balanced outcome for the country. There are two main aspects to their role:

  • A commercial imperative, driven by business and equity owners, which is to improve ROE, improve productivity, and increase profitability.

  • The social responsibilities of providing a public good such as electricity and clean water; where the government can step in to regulate industries, especially those that are monopolistic in nature.

  • There is a need to balance between these two – at times, competing – objectives.

  • When we talk about the role of government in the adoption of new technology by industry, I believe that the government should not directly mandate what needs to be done but build the right framework of policy and incentives to encourage industries to re-tool themselves and to upgrade. For examples, we can look at Japan, China, and Singapore.

  • A combination of the right incentives as well as sufficient stakes work to drive industry and businesses towards renewal and innovation.

Governance in GLCs

  • One of the most important things in the operations of a GLIC is its governance mechanism.

  • At Khazanah, the governing authority is the Board of Directors. Everything goes through our Board. When a strategy is put in place, it is a strategy which the management formulated, discussed with the Board, and for which it has obtained Board approval.

  • The only difference is that as Khazanah is owned by the government, we have the government represented by the Prime Minister, as well as the Minister of Economic Affairs on our Board.

  • Our corporate objectives are very clear: to make money on the commercial front for our shareholders; on the strategic front, to balance our role against commercial and regulatory interests; and on the policy-making front, our role is as an advisor and provider of research and data.

  • My personal belief is that the government does a very bad job of trying to run business, so the government should not even be trying to build the next Instagram or SnapChat. Let the private sector do that.

  • Government should focus on creating the best policy framework and infrastructure to encourage the private sector.

  • Diversity is incredibly important. We take note of what is happening on the boards of newer companies where there is a much bigger push towards diversity, not just in terms of gender but also in terms of capabilities and age.

  • You have to have the right mix of talent as well as perspective to succeed in the future.

  • The future of corporate management is very different from the past.

Tan Sri Mohd Sheriff Mohd Kassim

  • Almost fifty years ago, the NEP was first introduced and this was documented in the 2nd Malaysia Plan, paragraph 26. That paragraph states:

  • The government will participate more directly with the establishment and operation of a wide range of productive enterprises, and either wholly-own these enterprises or enter joint ventures with the private sector

  • Direct participation by the government in commercial and industrial undertakings represents a significant departure from past practices.

  • The necessity of such efforts by the government arises particularly from the aims of establishing new industrial activities in selected new growth areas and of creating a Malay commercial and industrial community.

  • Before NEP, Malaysia was known as a free-enterprise economy. After NEP, Malaysia became known as a mixed-economy with the public sector playing an increasingly important role in investment and production. We had many new agencies created.

  • At the same time, the government introduced many regulatory controls, including the FIC (Foreign Investment Committee) and the Industrial Coordination Act (ICA), all of which were aimed at increasing Bumiputra participation in the ownership of capital in the private sector.

  • The role of GLCs started from the New Economic Policy. Then we came to the 80s and we experienced our first big recession as well as faced a deficit problem. The next downturn occurred in 1997/98, where we had the biggest corporate failures in the history of Malaysia. That is when Khazanah swooped in for a rescue operation which resulted in PLUS becoming part of the Khazanah group after the UEM-Renong group was broken up.

  • The intervention by Khazanah helped to restore confidence, and the stock market began to rise.

  • Khazanah played an important part in bringing back business confidence, but the mistakes that happened in the past, continue to linger.

  • The question fund managers ask is, “Why should we trust you after what happened to your corporate sector?”

  • So, corporate governance, transparency, and accountability are very important qualities that our corporations need to have.

  • Khazanah under the leadership of Tan Sri Azman Mokhtar launched a GLC Transformation Programne to emphasise corporate governance and accountability.

  • In order for GLCs to be well-run, it needs to have good leadership at the board level and professional management at the executive level.

  • Big GLCs should be made accountable to Parliament.

  • Let us remember that there are 3 GLICs in the country: Khazanah, EPF, and PNB.

  • Khazanah is the one that acts as our national investment fund, while EPF and PNB concentrate on making good investments to earn good dividends for their subscribers.

  • Khazanah manages its companies with a strategic vision, and also plays the role of business catalyst in strategic growth areas.

  • I would like to emphasise that Khazanah is not a Bumiputra institution. It is a national institution. As a national institution, its role is to play a catalytic role in the development of the economy.


Tan Sri Leo Moggie

  • One factor that led to the creation of GLCs in Malaysia is the need for government intervention in the supply of basic necessities. Electricity is one example. A government-linked entity managing the nation’s electricity grid will ensure that the supply of electricity can be extended to the far reaches of the country. A private company, in contrast, would only make decisions based on profit and loss.

  • The redistribution of wealth was also a strong factor back in the 70s and 80s.

  • When we talk of cooperation between the government and private sector, leadership and governance are absolutely important.

  • GLCs also need to adapt to change. How well they adapt to change depends on how well they are managed, and the quality of their management.

  • There is a perception that GLCs are inefficient. One thing to point out is that GLC are more involved in infrastructure provision, and infrastructure investment involves a much longer payback period.

  • In TNB’s example, we need to ensure that whatever investments we make will result in electricity being supplied in the most economic manner, ie: cheapest for the consumer. Hence, we always consider the use of new technology.

  • I believe the boards and senior management of other GLCs are sensitive and conscious of the need to adapt to new technology, especially IR 4.0 technology.

  • On incorporating new technology into GLCs, there are two points to consider:

  • Your digital infrastructure needs to be in place to support the connectivity required of IR 4.0 firms.

  • The new technology should be helping GLCs to survive commercially.


Encik Nurhisham Hussien

  • Agree with Dato’ Shahril. We have to be fairly nuanced when we talk about GLCs, whether they are government-linked or not, especially as there is a subset of GLCs that is critical for economic development.

  • There is a need for greater transparency,better governance and tighter focus on specific mandates.

  • There is also the need to build up institutional capabilities.

  • EPF which is a pension fund, managing the savings of the people just like KWAP, has its specific mandate. We have our own governance structure and we have very specific tasks that we are required to do within that context.

  • The problem of trying to conduct economic and social policies through GLICs is that we will have multiple mandates and we tend not to do well in any of them.

  • As far as IR 4.0 is concerned, everybody recognises there is a need for change. You must change before something changes for you.

  • Within EPF, we recognise that the environment and the investment climate are changing and the way we conduct our business needs to change as well.

  • As for the start up or incubation space:

  • It is not the role of EPF to directly be involved in this sector, and

  • The companies of that sector are too small for us to manage, in that we do not have the specialist resources needed to manage investments in these small companies