Market economists argue that firms in private hands are superior to firms in the hands of a government

February 28, 2019 0 Comment

Market economists argue that firms in private hands are superior to firms in the hands of a government (see for example, Boycko et al., 1996; Shleifer, 1998; Dewenter and Malatesta, 2001). This lead to the establishment of privatization program across developing countries. For the case of Malaysia, the privatization policy had been introduced in 1983 which led to the setup of “Malaysia Incorporated”. The main objective of the privatization is to reduce size of the public sector and to improve efficiency and productivity. This privatization policy involves the transfer of former state-owned enterprises (SOEs) to private ownership with the main concern is profit gaining. For this setup, the private transfers are minimal and equity ownership is still largely in the hand of the government, these firms often known as government-linked companies (GLCs). Indeed, even with dynamic privatization, GLCs remain the primary service providers to the country in form of utilities and services including electricity, media communications, postal services, air terminals, public transport, banking and financial services, water and sewerage.
Size of economic activities involved by GLCs in Malaysia is considerably large and thus it has been claimed to be the main drivers for the economy (Menon, 2017). Currently, the listed GLCs constitute almost one-thirds of the total market capitalization and their economic dominance felt in almost all industries (Menon and Ng, 2013). In the Eleventh Malaysian Plan (2016-2020), GLCs are expected to promote Bumiputera corporate ownership by increasing investment in non-core assets and creating a considerable symbiotic relationship with Bumiputera entrepreneurs.
In addition, GLCs have advanced growth with inclusivity by upgrading a decent variety of their workforce in terms of gender, ethnicity, religion and age and also enhancing their work-life balance such as family-friendly facilities and adaptable work plans. GLCs have additionally contributed to country working through different endeavours, for example, supporting the New Economic Model (“NEM”), Government Transformation Program (“GTP”), and Economic Transformation Program (“ETP”); growing new, knowledge-based and service-oriented businesses and sectors; and being associated with the improvement of the economic corridors, in their ability as organizers, investors, and designers.
On the other hand, GLCs and their controlling investors establish a significant piece of the Economic structure of the Malaysian economy. GLCs account for approximately RM260 billion or approximately 36% and 54% respectively of the market capitalization of Bursa Malaysia and the benchmark Kuala Lumpur Composite Index (Razak, Ahmad and Aliahmed, n.d).