Malaysian government ups business involvement

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KUALA LUMPUR (Oct 7): Malaysian government-linked companies (GLCs) appear to be crowding out private investments as observers argue that the government’s involvement in business has increased.

This is despite the government's intention to reduce its role in business under the Economic Transformation Programme (ETP), The Edge Malaysia business and investment weekly reported in its latest October 9 - 15 issue.
 
Asian Development Bank lead economist for trade and regional cooperation Jayant Menon told The Edge : “There has been a spate of acquisitions of finance institutions and property developers by GLCs ... for instance, making it more of a diversification than a divestment programme.”

“There is now clear empirical evidence that the growing presence of GLCs has been crowding out private investment. This may also contribute to rising inequality, to the extent that it makes it more difficult for micro and small and medium enterprises to compete domestically," he said.

Socio-Economic Research Centre executive director Lee Heng Guie said concerns about the government’s involvement in business require more data before the impact becomes clearer.

Lee said private investment has risen since the ETP was launched due to the government's emphasis on the private sector as the engine of economic growth.

“So, whether (government being in business) would lead to crowding-out ... at the moment, we need more hard evidence,” he said.

At the time of writing, the Malaysian government had not issued a statement in response to claims that GLCs have been crowding out private investment.

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