Delivery Units and State Owned Enterprises performance — The Malaysian case

“Subsequently, in 2011, the Performance Management and Delivery Unit (Pemandu), situated in the Prime Minister’s Department, included
in its economic transformation program a strategic reform initiative (SRI) called “Reducing Government’s Role in Businesses”. In its 2014 Annual Report, Pemandu stated that the government was committed to shifting the government’s role in business from that of an investor to a facilitator. Pemandu also claimed it would do three things: clearly establish the government’s role in business, develop a clear divestment plan and establish
clear governance guidelines for government and state-owned companies.

However, just one year later, in its 2015 Annual Report, Pemandu’s
target of reducing the government’s role in business was reduced to just
a footnote, on page 10. This footnote read: “divestment had been completed
by the 33 companies that had committed to do so at the launch of
the SRIs in 2011”. There was no mention of the three original targets it
had stated the previous year. It appeared that the government was claiming
that by 2015 it had succeeded in achieving its SRI of reducing its role
in businesses….

Within this context, we recently saw the national embarrassment that
is 1Malaysia Development Bhd (1MDB). It baffles me how the chairmanship
of the Advisory Board, a body that has no legal and fiduciary powers,
can be given to the Prime Minister of Malaysia, the most powerful person
in the country. How can anyone expect the company to be governed
properly when the Board of Directors, the body that is supposed to hold
all the legal and fiduciary responsibilities is, effectively, subservient to the
Chairman of the Advisory Board? Does anyone really expect 1MDB Board
members to say no to the Prime Minister?
My bigger fear is that we do not
know if the bad governance exemplified by 1MDB is more widespread and
affects more than that one company. That is why I have been very keen to
see more open and honest studies on the governance of Malaysia’s SOEs.
For this reason, I was delighted that Professor Edmund Terence Gomez
of the University of Malaya agreed to conduct this study.

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