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Of the bleeding Sabah GLCs
Published on: Sunday, November 19, 2023
By: Datuk Dr Johan Arriffin
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After taking over as chief Minister in 2020, Hajiji ordered an immediate review of agreements and contracts involving all state agencies and GLCs that are underperforming or making losses.
Walking the unpopular course, Hajiji gave an ultimatum to GLCs to pay at least RM1 million in dividends to the state government beginning 2022.
As of October, Hajiji said these entities have paid a total of RM138.7 million in dividends and contributions. Among those paying dividends to the State Government was the “youngest” state GLC, SMJ Sdn Bhd (SMJSB), which paid RM50 million.
The other agencies paying dividends were Sabah Credit Corporation (RM17 million), KKIP Sdn Bhd (12 million), Sabah Energy Corporation Sdn Bhd (RM12 million), Innoprise Corporation Sdn Bhd (RM3.568 million), Desa Plus Sdn Bhd (RM2 million), Sabah International Dairies Sdn Bhd (RM1 million), Borneo Development Corporation (RM355,320), Sabah Air Aviation Sdn Bhd (RM305,210) and Keningau Agro-Venture Sdn Bhd (RM500,000).
Six agencies also contributed to the state government are Sabah Rubber Industry Board (RM1.5 million), Sabah Ports Authority, Sabah Forest Development Authority (Safoda), Rural Development Corporation (KPD), and Sabah Land Development Board (SLDB), each contributing RM1 million, and Ko-Nelayan, contributing RM500,000. Many GLCs did not make the RM1 million cut set by Hajiji.
Finance Minister Masidi Manjun lashed out on non-performing GLCs. He said Sabah government’s patience is wearing thin as more than 90% of its 200-over government-linked companies (GLCs) are making losses.
This is a real shocker. If transparency is in order, Sabahans as taxpayers should be informed which GLCs making losses, how much are the losses and for how long.
Marsidi said the government is not a cash cow and it is the duty of all GLCs to make money for the government or face termination. He said the state government is not a charitable organisations that can continue to inject funds into them whenever they run out of money or make losses just by operating.
He called on those sitting in the board of directors or holding managerial posts of GLCs to show higher competence and start changing their way of thinking. “If you are sitting there, you need to change your perspective, and if you are a politician, you must work in a corporate governance structure because in GLCs, you are no longer a politician.
Sabah must change the way it appoints members of the board of directors of state government-linked companies (GLCs), says Bung Moktar. The Sabah Barisan Nasional chief said the current system gave more priority to a quota rather than merit and this was the reason why most state GLCs were not turning a profit.
Appointments should be based on merit and experience and not on a quota for the ruling political party, he said.
Meanwhile, Parti Kerjasama Anak Negeri president Datuk Henrynus Amin echoed Bung Moktar’s sentiments, urging the state to appoint professionals and avoid or limit political appointees in the GLCs.
Henrynus said the relevant authorities must investigates GLCs which are abused by unscrupulous politicians. He said there were grouses that state GLCs were being run as though they were a family business.
Bung Moktar is like the pot calling the kettle pot black. Umno BN did the same and worse.
This is where most of the problem lies. Most of the Chairman of the GLCs are political appointees. Very few experienced professionals sit on the board of GLCs.
Moves to do away politicians from GLCs has not borne any results and the practice still continues to reward party supporters, rather than appointing professionals and people experienced in the GLCs businesses.
Until then then these GLCs will be bleeders of the taxpayers money. The government needs to walk the talk if they want the situation to change for the better.
One of the most concerning news is SMJ announcement that it aims to conclude its RM1.2 billion acquisition of debt-ridden Sabah International Petroleum Sdn Bhd (SIP) soon.
In a market announcement, SMJ Sdn Bhd, a wholly owned subsidiary of the State Government of Sabah through the Chief Minister Incorporated of Sabah, has successfully priced its inaugural RM900 million Islamic medium-term notes (Sukuk Wakalah) on 16 October 2023. How much of the good money raised will be used to bail out SIP? Is it going to be throwing good money after bad? Although SMJ has issued a RM50 million dividend to the state government, question arises as how much SIP debt is going to affect SMJ profits in the longer term.
The government needs to be transparent and come clean on SIP as rumors are going around that the company is billions in debt over its oil and gas forays.
GLICs & GLCs make up 42% of Malaysia’s market capitalization, which makes Malaysia the fifth in the world in terms of economic ownership by GLCs, behind China, India, Russia, and the UAE (Source: State-Owned Enterprises: Trade Effects and Policy Implications). RM1.8 trillion of our assets are owned by GLICs or GLCs, which represent 5% of our national workforce.
Professor Terence Gomez has written a book on GLCs, ‘Minister of Finance Incorporated’ (2017). It details the web of ownership and control over Malaysia’s economy via GLCs.
In his book he mentioned Sabah state government 4.6% stake in IJM Plantations through a private firm Desa Plus Sdn Bhd, 5% stake in Felda Global Ventures (FGV) through two holding companies and the Chief Minister of Sabah, and Sabah present and former state secretaries as bureaucrats sitting on major GLCs as state representatives.
The number of GLCs at Federal and state levels are mind boggling. State GLCs are mainly ‘sunk’ economy, money disbursed without any expectations of returns. It’s an extension of a political system where the politicians gains more than the rakyat it supposed to serve.
In a recent announcement, the Sabah government has mandated government-related agencies and state-linked companies (GLCs), as well as foreign investors coming to the state, to prioritise the poor in the e-Kasih list for clerical and lower-level job placements.
Hajiji stated the state government has allocated RM175 million in support for government agencies, GLCs and investor companies to implement this approach.
He said this allocation is part of the RM300 million provided by the state government in its efforts to eradicate hardcore poverty in Sabah this year. He added that this approach is among the state government’s efforts to ensure that Sabahans are assisted in order for them to enjoy a better quality of life.
No details are given as how the allocated RM175 million in support for government agencies will be spent to eradicate hard core poverty as most of the GLCs are already non-performing. Since they are non-performing, will the money be used to continue to pay the salaries and perks of the staff of the GLCs already in the red?
How do you assist the poor from the eight poorest region in Sabah by giving them low level jobs in GLCs?
In the CEO Forum 2023, the panelist summarised there needs to be clarity in the objectives of GLCs and GLICs, and what their scope or responsibilities are. The boundaries between GLCs and the government should also be clear. These corporations also need to be clearly defined.
For example, EPF and PNB are not strictly GLICs, but act more like Trustees of public money. For the sake of Malaysia’s economy and for the supply of jobs in Malaysia, the government needs to ensure GLCs are worthy of investment, and that they improve the economy and facilitate the growth of the business sector.
Similarly, the Sabah government needs to define the role of Sabah’s GLCs in the state’s economy. The Sabah GLCs is a big burden on the government coffers and should be reined in as soon as possible.
Marsidi outburst on non performing GLCs may have struck a raw nerve for these non- performing GLCs. However, the matter has to be said in the open.
- The views expressed here are the views of the writer Datuk Dr Johan Arriffin and do not necessarily reflect those of the Daily Express.
- If you have something to share, write to us at: [email protected]
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