GLC reforms

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Dear Editor,

UMNO president Datuk Seri Ahmad Zahid Hamidi was reported to have congratulated the MPs from UMNO, MCA and MIC on their appointments to board positions In GLCs and statutory agencies with the hope that they will contribute towards implementing the Perikatan Nasional government’s policies and aspirations.  He also urged them to be worthy and dedicated towards fulfilling their responsibilities.

The government linked corporations and special agencies play an important role in the country’s development, especially in driving the rural development programmes to raise agricultural productivity and incomes. There are also agencies tasked with creating a bumiputera commercial and industrial community through education, training and financing facilities. In addition, there are large government owned corporations operating as commercial enterprises in the   banking, transport, energy and telecommunications sectors.  Thus, the GLCs are indeed a dominant force in the economy, making the public sector share of GDP one of the highest in the world.

It is precisely because of the large  and important role that GLCs  play in the economy that made  the government realise after the East Asia financial crisis in 1997/1998  and the collapse of the ringgit,  that  in order to bring back investor confidence in the economy,  there was an urgent need  to introduce reforms  in the fiscal, financial  and economic policies of the country. Among these reforms are the governance structure of GLCs.  The government learnt from the several GLC failures and bail outs that happened   in the eighties and nineties that the root cause was poor governance especially at the board level with no proper checks and balance in decision making.  Many of the directors and senior executives were either politicians or political cronies.  Malaysia got a bad reputation world wide about the high level of politicisation among the GLCs and the statutory agencies.

When I as Managing Director of Khazanah Nasional  Berhad  led my team  in 2001 to meet  with foreign investors  in London and  American cities  at the time when we were listing PLUS on  the KLSE,  the foreign fund managers  asked    whether  they could trust  Malaysia’s system of corporate governance  again after what they saw  happen in the past.  We assured the sceptics that the government’s reforms were real. Few believed us until later when the government launched a wide-ranging reforms programme under the leadership of the Ministry of Finance, Bank Negara Malaysia, the Securities Commission, and the big three GLICs i.e. Khazanah Nasional Berhad, KWSP (EPF) and PNB.

Among  the important reforms made   under  Bank Negara Malaysia’s new Banking and Financial Institutions Act,  the  Security Commission’s Code of Corporate Governance Guidelines,   the GLCs Transformation Programme and  the Putrajaya Committee  on  High Level Performance  chaired by the Prime Minister,  were  new measures to  ensure  that  appointments  to board positions must be  thoroughly vetted  by the independent directors  to ensure that they are “fit and proper” to become directors and  chairmen of companies.  Politically connected persons are often viewed by market analysts as not   fit and proper to be company directors as they are suspected   not being   Independent to make decisions for the benefit of the company and its shareholders, especially if they are public listed companies.  Shareholders   will be worried whether their investments will be at risk with politicians in the board.

In  more recent years, with  the  growing concerns  over the fiscal deficit  and the national debt, the 1 MDB and other  financial scandals  plus   the weakening ringgit,  and the  GDP  growth rate slowing down  from  year to year,  there  is  an increasing pressure   from our regulatory authorities  that   among other reforms, strict controls over  appointment of directors  and top executives  to GLCs and  statutory bodies  are essential to protect the economy from  another disaster.  It Is therefore regrettable if the new political appointments to boards of government linked agencies and corporations are an indication that we are abandoning the progress that was being made on governance reforms and going back to the bad old days.

I believe that the MPs can best serve the nation by   not sitting on the boards of GLCs and statutory agencies   but instead, by serving in the select parliamentary committees to provide the high-level oversight   and become   the watchdog over them, in the manner the MPs in other democracies do.  These committees can hold regular meetings and conduct open inquiries to make the chairmen and CEOs of GLCs and statutory agencies submit their quarterly and annual reports for scrutiny as well as enable the MPs to raise matters of public concern over their objectives and operations.  Through these hearings, the MPs can show to their supporters that they are providing the checks and balance to prevent abuses of power in the running of the large and important   government linked corporations and agencies.

Whether they   operate   in the business sector to earn revenue and make profits or provide development service to benefit the rural areas and the Bumiputera community, these agencies must be made answerable to the people through the parliamentary select committees. The Prime Minister must himself be reform minded and show his leadership   to make the select committees perform as the ears and eyes of the people so that we can have a parliament that serves the public interest.

 

Tan Sri Mohd Sheriff bin Mohd Kassim
39, Jalan Setiamurni 6, Bukit Damansara, 50490 K.L
HP 013 3622000

28 May 2020

 

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