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