KUALA LUMPUR: Malaysia has unveiled a new direction for government-linked investment firms (GLICs), splitting them into sovereign wealth funds and institutional investors.
The former category encompasses Khazanah Nasional Bhd, Kumpulan Wang Persaraan (Diperbadankan) or KWAP, Kumpulan Wang Amanah Negara (KWAN) and Minister of Finance (Incorporated).
The institutional investors house the Employees Provident Fund (EPF), Permodalan Nasional Bhd (PNB), Lembaga Tabung Haji (TH) and Lembaga Tabung Angkatan Tentera (LTAT).
Prime Minister Tan Sri Muhyiddin Yassin said this move under the Perkukuh Pelaburan Rakyat (Perkukuh) programme was to reflect GLICs unique mandates better, strategies and asset-liability management.
Muhyiddin said stalling investment returns in the past decade with the exposure in "matured" industries and constant changes within the global investment climate had posed a threat to some GLICs.
This could be a significant investment risk to Malaysia if GLICs fail to keep up with such change, emphasising environmental, social, and governance (ESG) related matters.
Inevitably, he said lower returns had trickled down and affected the rakyat due to plateaued wages, hindering the country's vision of becoming a high-income nation.
Additionally, he said inequality had remained high, undermining social cohesion while stressing the pandemic has certainly aggravated these vulnerabilities.
"These impediments have steered the government to unveil the Perkukuh programme, which aimed at reimagining the role and re-new the capabilities of Malaysia's GLICs," Muhyiddin said at the virtual launch of GLICs recharge mandate today.
The mandate comprises 20 key initiatives with five key objectives to sharpen clarity on the mandate of each GLIC, enhance focus on developmental and catalytical investments to spur new growth and enhance socio-economic impact, as well as crowd-in the private sector while streamlining the role of the government and its agencies in the business.
Muhyiddin said the programme would also allow the government to future-proof GLICs with best-in-class governance, capabilities and strategies; and strengthen social safeguards and fiscal resilience.
"These mammoth holding companies by the GLICs and their entities control about RM1.7 trillion of assets under management, making up more than a quarter of the market capitalisation of Bursa Malaysia, while directly and indirectly employ nearly half a million people," he said.
Muhyiddin said it was imperative for corporate Malaysia to continue evolving, future-proofing itself and strengthening its fundamentals in an ever-changing environment compounded by a global pandemic.
"The GLICs have been at the forefront to mobilise both human and financial resources over the years, to help Malaysia transform from an agrarian driven economy to an export-orientated manufacturing economy.
"Then to a more balanced service and manufacturing economy, and now in the challenging process of reinventing into a more knowledge-driven economy," he said.
Echoing the government's "6R" economic recovery strategy - Resolve, Resilience, Restart, Recovery, Revitalise and Reform - Muhyiddin said the last and key pillar would provide greater opportunity for GLICs and government-linked companies (GLCs) through this long-lasting reform.
"Perkukuh fundamentally begins by recognising the different mandates, funding structures and risk profiles of various GLICs.
"For the sovereign wealth funds, there will be a re-balancing of focus between financial returns and socio-economic deliverables. A key priority will be on patient capital investing in a more strategic and targeted way into new growth areas."
Meanwhile, he said institutional investors would retain their mandate of maximising returns of contributors, be it future retirees or those who wish to pursue the haj while playing a synergistic role in contributing to national development.
This will include a more cohesive and scaled-up approach to corporate social responsibility and supporting national priorities like ESG and green financing.
Muhyiddin said Perkukuh would also look at optimising the operations of the relevant sovereign wealth funds and institutional investors to manage certain asset classes to achieve economies of scale and improved returns.
"This clarity will ensure each GLIC has a laser-sharp focus on its role and maximises the impact in their respective portfolios and areas of expertise.
"Perkukuh will push for optimal capital allocation and sharpen target outcomes for highly strategic new growth areas. This ensures alignment of these areas with key policy measures like MyDigital, the upcoming 12th Malaysia Plan and SPV 2030, a New Growth Coordination Council chaired by me, will be established."
He said the ecosystem built in the new growth areas would be designed to spur private sector investments in the long term.
For instance, Khazanah will kick-start development of new growth ecosystems through its new RM6 billion Dana Impak and its efforts to jumpstart co-investments with several international institutional investors and other sovereigns were underway.
"To crowd-in private investments, Perkukuh will also streamline the relationship between the government and businesses, through, among others, the review of golden shares, the re-definition of previous strategic sectors, and determining new areas of national interest.
"This will increase the attractiveness of relevant GLCs while allowing them to operate effectively in a regulated environment," he said.
Muhyiddin assured the evolution would be gradual and go hand-in-hand with strengthening the regulatory environment while stressing the exercise will be in-line with the best international practices, where the definition and treatment of strategic assets have evolved.
Muhyiddin said Perkukuh would enhance the role GLICs play in the socio-economic sphere and social protection through disaster relief like the GLIC Disaster Relief Network or equitable education outcomes like Pintar Foundation.
"Perkukuh will scale-up these efforts in new areas like human capital development, financial literacy and Bumiputera empowerment."
In formulating Perkukuh, he said the government had drawn on the deep expertise of the GLICs ecosystem, regulators, ministries, and industry captains, including those involved in the first GLC Transformation Programme.
Similarly, implementation will span a wide network of stakeholders, he added.
For instance, the Securities Commission will spearhead the "sustainable investment standard" initiative with Bank Negara Malaysia.
"Together with the GLICs, these initiatives will be driven by the Ministry of Finance's Laksana agency, which will act as the Programme Management Office."
Given the intricacies of each initiative, Muhyiddin said Perkukuh would be implemented on a multi-wave basis – beginning with key initiatives like the "GLIC/GLC 2.0 governance standard".
"All in all, the 20 key initiatives will be implemented through 2024. Perkukuh will create an ecosystem that benefits all stakeholders of the economy," he said.