GLC stake sale: Don’t repeat mistakes of 1990s, warns economist

UM's Edmund Terence Gomez says the government must ensure that those taking over the stakes in GLCs have the capacity and financing to take the companies forward.

Economist Edmund Terence Gomez says the government must be careful when divesting its stake in banks or utility and transport companies.

PETALING JAYA: An economist has urged the government to establish proper research, transparency and openness in any effort to divest its stake in government-linked companies (GLCs) to ensure that the exercise does not end in disaster.

Commenting on reports that the government may embark on a divesting exercise, Universiti Malaya’s Edmund Terence Gomez said in some sectors, the government shouldn’t divest while there were no issues in others.

“With the banking sector, I’d be very careful about transferring big banks, like Maybank or CIMB, into private hands,” he said, adding that the same went for utility and transport companies.

“I’d have no problems if the government divested its stake in construction-type companies,” he added.

Gomez, who is an expert on corporate Malaysia and politics, said before divesting its stake, particularly in big institutions, the government must carry out an analysis to avoid concentrating wealth in the hands of a small minority.

“Who are these private investors who will buy these stakes? If we are talking about the continuation of Bumiputera policies, who are these Bumiputeras? By right it should be by open tender.”

He said the big questions surrounding divesting included whether those taking over the government’s stakes had the capacity and financing to bring these companies forward and their sources of funding.

In the worst case scenario, if no such due diligence was carried out, the country could see the selective distribution of assets without transparency, he warned.

“We’ve seen selective patronage to fulfil the Bumiputera agenda. This is fine but in the process, when there was no openness or transparency, it went into the hands of well-connected people who got funding from government-owned banks.”

In the end, Gomez said, a number of these companies failed and the government had to re-nationalise them.

“We cannot repeat the mistakes of the 1990s,” said Gomez, citing past bailouts of companies like Malaysia Airlines, UEM and Renong.

Reuters recently reported, citing sources, that sovereign wealth fund Khazanah Nasional was likely to divest some top state-linked firms, including CIMB, Axiata Group, Telekom Malaysia and even IHH Healthcare.

Gomez also spoke on the need for the government to disclose Bumiputera equity figures, a practice he said was discontinued a decade ago, especially as Putrajaya is organising a Bumiputera economic congress.

“We need to look at the figures and study what went wrong or right before we start debating how we are going to move forward,” he said after launching the Malaysia GLC Monitor 2018 report at Universiti Malaya on Monday.

He added that there had to be a re-tabulation of the Bumiputera equity figures, not on par value but based on their market value. - FMT

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