KUALA LUMPUR, Sept 2 — Political patronage at state government-linked companies (GLC) practised by Barisan Nasional (BN) has continued in states controlled by the now-defunct Pakatan Rakyat and that of its former component member PAS, a recently released research showed.
The report entitled “Government in Business: Diverse Forms of Intervention” indicated that Selangor and Penang, helmed by chief ministers from PKR and the DAP respectively, had placed a large number of senior party leaders as board members in all strategic state GLCs and its subsidiaries.
While the practice is deemed common in Malaysia and is seen as a key intervention strategy to carry out the social and developmental agenda of the political party in power, it was also prone to abuse and encouraged political patronage, the research said.
“When the government has intervened in the economy through GLCs, its forms of intervention have not always been policy-driven, in the pursuit of its stated economic and social goals,” the research said in the introduction of the report, which also assesses operations of GLCs owned by federal ministries.
“A key factor contributing to corrupt practices within GLCs is the appointment of politicians to their boards of directors. The members of these boards are public trustees, but do not act as such.
“One consequence of this practice, also a form of political patronage, is that it undermines public ownership of corporate enterprises and contributes to the idea that this form of government intervention is not viable or sustainable,” the report added.
The study was conducted by a team led by University of Malaya political economics professor, Terence Gomez, who penned the groundbreaking study that mapped out and explained the extensive influence politics have over the Malaysian economy.
Political appointments to the boards of listed GLCs were more common among enterprises owned by state governments across the political spectrum, where the report suggested “the conduct of patronage is extensive”.
The unlimited power accorded to a chief minister or mentri besar to appoint political directorship, and the extent of corporate control by a state’s chief investment arm, typically the Chief Minister Incorporated (CMI) or Menteri Besar Incorporated (MBI), are factors that allowed for patronage, Gomez wrote.
In Selangor, then Mentri Besar Datuk Seri Azmin Ali through Menteri Besar Incorporated (MBI) Selangor wielded virtually monopolistic control over businesses and social enterprises through political directorships at key state GLCs.
While the companies under MBI’s direct control are social-oriented, it also controls strategic businesses and industry-oriented companies through the indirect ownership of “holding companies” like Kumpulan Darul Ehsan Berhad or Kumpulan Peransang Selangor, the study said.
These two GLCs, among others, own controlling stakes in companies from diverse sectors like logistics, waste management, construction and agriculture.
All these GLCs and its subsidiaries have PKR senior leaders as board members, which the research said showed “some form of patronage through GLC directorships” was practiced by the Pakatan Rakyat leadership then.
Few of the notable figures accorded political directorship cited by the report were Sivarasa Rasiah, Kamarul Bahrin Abbas, Yeo Bee Yin and Teresa Kok, MPs from PKR and DAP respectively.
The research also noted that Selangor MBI’s extensive corporate control via a complex system of equity holdings meant they have indirect control of key agencies like the state media or education and welfare institutions, which can be subject to abuse.
“The chief minister’s direct control of these GLCs reflects the importance of these enterprises...through the other companies, the chief minister can control the state media agency, education institutions and welfare schemes which may benefit him politically,” the report said.
The consolidation of economic power in the hands of Penang’s chief minister was more recent compared to other states, with the creation of Chief Minister of Penang Incorporated (CMI) in 2009 by the then newly-elected DAP state government under the helm of Lim Guan Eng, currently the minister of finance.
Lim, the report noted, had directorships in several GLCs and five subsidiaries or associate companies of Penang Development Corporation and State Secretary, Penang Incorporated (SSI), which owns Invest-in-Penang, Georgetown World Heritage Inc and public-listed PBA Holdings.
In his assessment of Penang, Gomez underlined the concentration of power in the hands of the chief minister by pointing to Lim’s position as the only politician that sat in CMI Penang’s board during his two-term tenure.
The arrangement meant the sitting chief minister has wide decision-making power, a problem the research said demonstrated itself in the allegations leveled against Lim in the controversial RM156 million land deal involving between CMI Penang and a private healthcare company.
Critics claimed the DAP leader authorised the deal, which saw the state selling 6.4-acre worth of land at Peel Avenue to Island Hospital without prior-consultation and through direct-tender. But Lim denied any wrongdoing.
Penang also has a higher number of political directorship in its GLCs compared to Selangor, with notable senior DAP leaders and elected representatives found to be directors of numerous state companies, the research said although it did not state if there were irregularities.
“More intriguingly, they even include politicians representing constituencies outside Penang such as Tony Pua (from Selangor) and Anthony Loke (from Seremban),” the report noted.
Political patronage through GLC directorships is far more prevalent in PAS-led Kelantan, the report said. The MB and deputy MB sit as directors in key state institutions but only the latter has directorships in companies owned by Kelantan MBI, Kelantan SEDC and Yayasan Kelantan Darulnaim.
The deputy MB is also director of several key GLCs that oversee a diverse range of enterprises like agriculture, tourism and construction. These GLCs include Kumpulan Perladangan PKINK, PMBK Development, Majaari Services and KIAS Darulnaim.
There is also particularly high level of political presence in the boards of directors of GLCs, comprising state assemblymen, MPs, former politicians and local division leaders from the governing PAS,
“This suggests extensive patronage at work involving high-ranked politicians and local-level leaders. Besides the politicians, key actors in both MBI and SEDC are the CEOs,” the report said.
It is important to note that the appointments by PH leaders do not necessarily imply irregularities, but political directorships have shown to create both positive development and rent-seeking simultaneously, the report said.
Crucially too, the overlap in how these groups and their institutions employ GLCs in the economy have led to policy hurdles and the overt politicisation of these institutions, the report added.
“For example, the politically-controlled MBIs and bureaucratically-controlled statutory bodies pursue similar goals, suggesting little coordination between them,” Gomez wrote.
“Indeed, the MBIs, a more recent institutional construct, are probably tools by politicians to control, without adequate accountability, GLCs that intervene in the economy.”
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