Why wait to close loss-making GLCs?

Why wait to close loss-making GLCs?

P Gunasegaram
Published: Mar 25, 2025 8:15 AM
Updated: 11:15 AM



COMMENT | Prime Minister Anwar Ibrahim wants to shut down government-linked companies that are consistently making losses. That is most welcome but what is Anwar, also finance minister, waiting for? He had the full authority to do so since November 2022.

“If these companies are unprofitable, we will close them,” he said during a question-and-answer session in the Dewan Negara recently.

There are no benefits to establishing a company, having a board of directors and allowances, and continuing to incur losses, he added.

Recently, the 2023 Auditor-General’s Report revealed that 86 out of 217 federal government agency subsidiaries reported losses totalling RM2.81 billion. Why not audit them and close the unviable ones, saving billions?

The prime minister should also focus on the losses incurred by companies owned by the states. These are potentially making huge losses too. It will be easier for states controlled by the Madani government but things can be done to make other states more accountable.

Once the auditor-general audits these, figures should be released state-by-state, highlighting bad practices and even identifying areas where corruption is likely to be prevalent. Set loose the MACC on such corporations.

Bad track record

Valuable time has already been lost even as Anwar speaks about shutting the non-performing GLCs. So far, the track record looks bad for companies persistently doing badly.

I can’t recall any large loss-making GLC being shut down recently - the record shows they were bailed out. For example, Malaysia Airlines, and more recently, Sapura Energy.

Part of the problem is the so-called double bottom line, which means profit has to be made in addition to satisfying social purposes such as bumiputera participation and others such as developing small industries.

The contagion effect

Financial institutions are not allowed to fail because of contagion effects - it has a knock-on effect as banking defaults cause problems throughout the affected industry. Strategic industries are also saved but for different reasons.

An example is Malaysia Airlines, where there are questions of national interest - you cannot be a country and not have an airline, whether private or government-owned. You need to have some control over connectivity to your own country - just as you need airports for connectivity, you need airlines too.

But as far as possible, such strategic industries should be run on commercial lines. If we take Malaysia Airlines as an example again, it has been profitable before. It is most likely the way it is run and by who that determines its profitability.

Unprofitable, Sapura Energy may have been a candidate for closure through liquidation if it can’t meet its obligations - the amount of money spent by the government and bumiputera trust fund Permodalan Nasional Bhd is about RM5 billion.

Problems of cross defaults have been cited as reasons for the bailout, which I wrote about here, where I asked if an RM1.1 billion bailout directly by the government was really necessary.

Closing non-performers

The bottom line is you can’t keep an unprofitable business with little or no prospects of turnaround alive indefinitely. If it is unlikely, in the opinion of professionals - not politicians - that a company is not viable, it should be closed.

Management is a big issue. If it is of high quality, there is a much better chance of success - like Petronas in the early days, and PNB which owned companies such as Malayan Banking and Sime Darby.

Sovereign fund Khazanah Nasional brought about positive changes in its investments through a transformation starting in 2005 and there are many well-managed large GLCs now. Most of the top 10 by market value are GLCs.

But there are literally thousands of GLCs, particularly those owned by state governments and statutory bodies, where patronage is particularly bad if not corruption itself.

These are bleeding tonnes of money and many of them urgently need to be closed, but they are not. I suspect that’s because many who are guilty - whether by omission or commission - are politicians.

It is not just about setting key performance indicators. They first need to be in a business where there is a good chance of making a profit and then have competent and honest management to carry it through and a system of relentless, ruthless monitoring where non-performing companies are revamped and, if necessary, closed.

Political will needed

Political appointments are a huge problem. Despite earlier commitments to reduce it, this has not been done.

If Anwar wants to improve GLCs, the first step is to have professional management throughout, not appoint politicians who already have generous MP salaries and allowances and other responsibilities.

Those under Petronas, Khazanah, PNB, and some where the Employees Provident Fund has an influence are better managed and monitored.

Those under Tabung Haji and the Armed Forces Fund have been quite bad. Many of the companies under these two may not be operationally sound and should be closed.

The worst are the state-owned companies and those by all manner of statutory bodies. Some states are far better than others, like Penang, Sarawak, and Selangor. Many of the others are dismal and must be axed.

The challenge is political. This Madani government is not prepared to do anything which causes even the slightest bit of pain to people and therefore it is nearly impossible for it to reform unprofitable companies.

The solutions are not difficult if there is political will and the willingness to bear some pain.

First, arrest the problem, and stop setting up new companies. Second, reassess them rapidly, get external auditors to do the job and get competent people to run the companies. Third, ruthlessly close down those that can’t be saved. That’s it.

P GUNASEGARAM says with political will, anything is possible. Without it, nothing is.