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Economists back Johari Ghani’s “cap GLICs’ stakes in listed firms” idea

KUALA LUMPUR: Former second finance minister Datuk Seri Johari Abdul Ghani has received a solid support from economists over his call for a cap on government-linked investment companies’ (GLICs) shareholding in listed companies.

Speaking at Parliament last Thursday, Johari had spoken against GLICs owning significant stakes in listed firms.

Johari suggested that GLICs own only up to a 10 per cent stake in a company to avoid costly bailouts or big losses.

He said Malaysia needed to observe the investment strategies adopted by developed countries in investing not more than a five per cent stake in a single company.

This, Johari added, would make it easier for GLICs to dispose of the shares if the companies were badly managed while avoiding the government from being dragged into bailout for the failed companies.

Economists contacted by NST Business said the move would allow for the restructuring of government investments in businesses and make the GLICs more agile.

Bank Muamalat Malaysia Bhd head of economics and market analysis Mohd Afzanizam Abdul Rashid said the suggestion would allow the GLICs to be more nimble in the face of heightened uncertainties in the financial market.

“This would mean the fund managers have a high degree of freedom in deciding the entry and exit point of every investment and are guided by the risk management parameters and strategic asset allocation.

“And to a large degree, we do need to acknowledge that there is a huge difference in skill set between being a fund manager and an entrepreneur.

“I suppose strategic investment would require an entrepreneur skill set where their risk appetite and world view can be 180 degrees different from a fund manager,” Afzanizam said.

He, however, noted that some matters needed to be considered including the ability of these funds to invest abroad more flexibly.

“In that sense, consultation with the central bank could be a prerequisite as this move would have an impact on Malaysia’s balance of payment,” he said.

Pacific Research Centre principal adviser Oh Ei Sun lauded the idea, saying if the funds had concerns on the amount of returns, they could cap it at not more than 15 per cent.

“It also forces the government to make investments in more companies rather than just select a few. This would enable more companies to benefit from these investments,” Oh said.

Universiti Kuala Lumpur Business School economic analyst Associate Professor Dr Aimi Zulhazmi Abdul Rashid said the domestic economy was in need of further investments from foreign and local investors.

“At the same time, there is also the need to restructure government investments in the GLCs and GLICs. The benchmark of 10 per cent is a good figure or target to work on thé restructuring.

“Nonetheless, the government needs to look at it on a case to case basis as some of the GLICs hold government strategic holdings such as nation security,” he said.

He noted that there needs to be a “balancing act” instead of a “one size fits all” solution.

“There is a need to restructure incorrect government exposures and the need to support the domestic economy growth in this challenging time,” he added.

Source : NST

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