Sabah signals tough stance on loss-making GLCs
In a bold move aimed at tightening oversight over state-linked companies, Sabah Chief Minister Hajiji Noor today outlined a plan that could see loss-making Government-Linked Companies (GLCs) shuttered if they show no signs of turnaround. The announcement places efficiency and accountability at the forefront of the state’s corporate governance agenda, with implications for statutory bodies and the broader public sector.
Hajiji stressed that state GLCs and statutory bodies must adhere to a mandated minimum dividend payment rate of 10% of profit after tax (PAT). The policy is designed to ensure that even profit-poor enterprises contribute to public finances and demonstrate a basic level of shareholder value, even in challenging times.
“Starting next year, I will be scrutinizing performance more closely,” the Chief Minister said. “GLCs that fail to show good performance for five consecutive years will be placed under review.” This five-year metric sets a clear bar for ongoing underperformance and signals a willingness to take decisive action beyond mere counseling or reform plans.
Why a five-year benchmark matters
The five-year window offers a disciplined approach to performance review, balancing patience with urgency. In the past, some GLCs faced episodic improvements without sustaining long-term profitability. By instituting a formal review process, the state aims to prevent entrenched losses from eroding public resources and stakeholder trust.
What constitutes “good performance”?
While Hajiji did not spell out every criterion in public remarks, experts say key indicators will likely include sustained profitability, consistent dividend payments, debt reduction, and progress on strategic objectives such as reform initiatives, governance improvements, and strategic asset management.
Implications for governance and accountability
The plan places greater emphasis on accountability within state-run entities. It signals a shift toward performance-based governance, where continued existence and funding may hinge on demonstrable improvements. For ministers and boards, this approach could trigger more frequent reporting, transparent performance dashboards, and targeted reforms for underperforming units.
Advocates for reform say this move could help reallocate resources toward more productive state enterprises, or even enable privatization or consolidation where appropriate. Critics, however, caution that political and social considerations must be weighed, especially where GLCs provide essential services or employment in local communities.
Prospects for the private sector and taxpayers
Taxpayers and private sector stakeholders may welcome a tougher stance on inefficiency, arguing that public funds should support sustainable, value-adding activities. A consistent dividend policy also offers a clearer return-on-investment signal for investors and lenders that monitor state-linked firms.
Hajiji’s remarks come amid broader conversations about reforming state assets to align with Malaysia’s evolving economic landscape. The governance overhaul could set a precedent for other states contemplating similar strategies to throttle losses and reallocate capital toward higher-impact ventures.
Next steps and expectations
As the plan takes shape, stakeholders will be watching for specific timelines, criteria, and the process by which reviews will be conducted. Implementing a structured review framework will be critical to maintaining credibility and ensuring that decisions are made on objective, transparent grounds.
Overall, the announcement marks a pivotal moment for Sabah’s public sector governance. By tying profitability and dividend performance to continued operation, Hajiji aims to foster a more efficient, accountable, and financially sustainable network of GLCs and statutory bodies.
