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IN most economies, Government-Linked Companies (GLCs) are a test of governance. In Sabah, GLC performance has varied, and that gap is now receiving closer attention from the state leadership.

The timing is significant. As Sabah Maju Jaya 2.0 enters a new phase after the state election, scrutiny of delivery has sharpened. 

One of the earliest announcements of the new term was a directive requiring regular performance reporting from GLCs and statutory bodies, a move that raises the question of whether a more disciplined phase of state-led development is beginning.

These steps did not emerge in a vacuum. Early scrutiny under Sabah Maju Jaya 1.0 began to surface persistent value leakage and weaknesses in managerial accountability across the state’s GLC landscape. 

By November 2023, the scale of the problem had entered public view. The state Finance Minister noted that more than 90 per cent of Sabah’s 200-plus GLCs were unprofitable and that only a small number paid dividends, remarking that “we are a government, not a charitable organisation” as he urged underperformers to change course. 

Against this backdrop, the Ministry of Finance then moved in 2024 to convene a GLC Monitoring Committee, drawing on government and private-sector expertise to engage more systematically with the state’s expanding portfolio of GLCs.

The attention is welcome. State-led growth can only be credible if the institutions responsible for it operate with predictable checks and incentives. 

Overlapping political influence, unclear accountability chain, and the expectation that underperformance will be backstopped with additional funding blunt the incentives boards and executives need to manage risk and focus strategy. 

Clear reporting and external review create space for better decision-making and ensure resources are directed toward measurable outcomes.

The stakes extend beyond individual companies

A wider context deserves careful consideration. Sabah is set to engage the federal government on the special 40 per cent allocation, a settlement that could materially expand the state’s fiscal capacity. Once realised, it would amplify the consequences of existing governance choices. 

The case for stronger internal governance does not hinge on any single outcome. Disciplined institutions determine whether additional resources translate into productive investment and sustained development.

Nearby Sarawak offers a practical lesson. By creating Petroleum Sarawak and tightening fiscal arrangements, the state has captured more local value from oil and gas. 

The experience shows how institutional design shapes outcomes, particularly when oversight and commercial decision-making are kept distinct. 

For Sabah, applying these mechanisms to state institutions, rather than importing foreign models wholesale, is the practical goal.

Improving GLC governance would therefore strengthen both fiscal outcomes and institutional credibility. This requires clarifying mandates so lasting that each GLC’s objectives are measurable and enduring, establishing budgetary discipline so recapitalisation follows clear milestones, and simplifying accountability lines to reduce conflicts between Board oversight, and political direction.

A practical tool to strengthen GLC governance

An annual GLC scorecard, produced by Sabah’s Ministry of Finance, could crystallise these objectives. 

Ideally, it would synthesise each GLC’s mandate, key performance indicators, and financial health into one coherent assessment. 

In the first instance, the report card would inform internal budget and governance decisions; over time, a public summary could be published online, offering transparency without political grandstanding and enabling investors and civil society to track performance effectively.

This would not be a leap into the unknown. At the federal level, Malaysia’s GLC Transformation Programme showed how clearer mandates and disciplined performance tracking, backed by central oversight, could improve both governance and outcomes across a wide group of GLCs. 

A monitoring committee provided continuity, while common performance frameworks helped align national development priorities with professional board oversight. 

Sabah’s circumstances are understandably distinct, but the underlying lesson still holds: governance tends to improve when scrutiny is made routine.

The scorecard could also shape incentives. GLCs that meet defined thresholds might qualify for faster access to state financing, priority co-financing from development funds, or more flexible terms, subject to continued delivery and independent review. 

Used carefully, the promise of expedited capital would ideally encourage senior management to improve operations, while conditionality and external review would guard against automatic bailouts.

Current quarterly reporting to the Chief Minister’s office and the GLC Monitoring Committee are useful precursors, but unless reporting feeds into predictable allocation decisions, it risks becoming procedural. 

Tying the scorecard to clear financing outcomes (both rewards for success and structured remediation for failure) would focus attention on the use of public resources, encourage boards to sharpen strategy, and give ministers a concise overview of fiscal exposure. 

At the same time, the mechanism would preserve the state’s ability to pursue developmental objectives by making them transparent, costed and time-bound.

Ultimately, Sabah’s fiscal debate is less about quantum than credibility.

There is indubitably a delicate political balance to maintain. Sabah’s claim for a larger federal share is part of a long-standing conversation about rights and resources, but it is compatible with stronger internal governance. 

A state that demonstrates responsible management is better positioned to negotiate and attract private partners. Conversely, over-reliance on uncertain federal allocations risks dulling the urgency for institutional reform.

Policymakers should look at neighbouring examples for inspiration rather than imitation. States that diversify revenue streams and strengthen institutions are less exposed to fiscal shocks. 

Sabah’s challenge is to shift from reliance on transfers toward development anchored in well-governed public enterprises.

Reform, however, is as political as it is technical. Ministers must accept constraints on discretionary spending and tolerate scrutiny of results. 

Executives must treat evaluation as part of their mandate, and boards must defend professional decisions. These are not radical demands. 

The existence of quarterly reporting and a monitoring committee suggests the political will to begin already exists.

If Sabah pairs renewed federal engagement with stronger internal governance, it can improve outcomes under Sabah Maju Jaya 2.0 and offer a reference point for other states. 

The question becomes: can the state convert resources into results with accountability and clarity? 

Get this right, and Sabah redeems past weaknesses while setting a standard worth emulating. Get it wrong, and larger transfers will change little.

Joey Goh is a Senior Consultant in one of the Big 4 accounting firms, where she advises public-sector entities, listed companies, and financial institutions on governance reform, board effectiveness and regulatory alignment. She is also a 2025 Young Southeast Asia Leaders Initiative (YSEALI) Fellow under the Society and Governance track.

The views expressed here are the views of the writer and do not necessarily reflect those of the Daily Express. If you have something to share, write to us at: Forum@dailyexpress.com.my