KUALA LUMPUR, July 12 ― Government-linked corporations (GLC) remain the key cog in Malaysia’s economic machine despite fears these corporate titans are grinding down private enterprise in the hunt for growth, two experts have said.

The Malay Mail Online previously reported that GLCs, born during the era of privatisation championed by the Mahathir administration and which have grown rich and powerful since, were “scaring” off smaller firms and stifling competition.

“[A] GLC is an economic instrument that will steer the economy in a certain direction that the country is heading. So don’t only examine about the role of GLCs in a lopsided manner,” Dr Zakariah Abdul Rashid, executive director for the Malaysian Institute of Economic Research (MIER), told The Malay Mail Online in a recent interview.

Echoing Zakariah’s view was TalentCorp Malaysia Bhd chief executive officer Johan Mahmood Merican, who said that these firms were also pioneering the way abroad for Malaysia’s private enterprises.

“It is these GLCs which are actually seen to be leading the way, particularly in terms of regional expansion. And if anything, these are the companies that seem to be better at attracting back some Malaysians from abroad,” Johan continued.

Putrajaya has in recent years sought to decrease the role of GLCs in a bid to open up the market for private investors and businesses.

In July 2011, Pemandu chief executive officer Datuk Seri Idris Jala said the government will carry out a divestment exercise on 33 GLCs by selling 21 and listing seven of these companies, besides reducing its stakes in five of them.

Despite such efforts, critics of GLCs point out that such firms continue to have greater access to government procurement, hence find it easier to increase investment within sectors in which they are already dominant.

On average, GLCs have total assets almost nine times greater than non-GLCs, and are more likely to invest a higher proportion of their earnings.

But Zakariah challenged the view that their resources meant GLCs necessarily had an unfair advantage.

“We already have a competition policy, so that should be all right,” Zakariah said.

“But some people say it isn’t enough so they want more of the rationalisation of GLCs ... But that doesn’t mean the GLCs have got to be abolished altogether,”

Like Zakariah, Johan disagreed that GLCs are inherently bad or that they enjoyed an uneven playing field.

“If you look at some of the largest GLCs in the country — Maybank, CIMB, Axiata — they do not borrow any money from the government, their businesses are not based on any sort of concession or privatisation,” Johan told The Malay Mail Online.

Johan asserted that the GLCs he mentioned are in reality private entities that happen to have government-linked institutions as their shareholders, but compete in the market fairly with other private firms.

A research paper by the Asian Development Bank (ADB) showed that the government of Malaysia owns 63.2 per cent of Malayan Banking Bhd (Maybank), which is not only the largest GLC but also the largest listed company on the Bursa Malaysia.

The government is also the primary shareholder for the second-largest GLC, Sime Darby Bhd, with 59.3 per cent of shares.

Johan’s TalentCorp is tasked by Putrajaya to identify experienced Malaysians professionals abroad and lure them back home. For him, GLCs offer the opportunities needed to achieve this.

He gave the example of the GLC Gamuda Bhd, which has been able to attract Malaysians home by offering a chance for engineers to put its massive tunnelling projects on their résumés.

Specialising in infrastructure, engineering and construction, Gamuda has been involved in many major government projects, including the RM1.9 billion Stormwater Management and Road Tunnel (SMART), and the Mass Rapid Transit (MRT).

Putrajaya estimates that GLCs employ around 5 per cent of the national workforce, and hold 36 per cent market capitalisation of Bursa Malaysia and 54 per cent of the Kuala Lumpur Composite Index (KLCI) respectively.