Hajiji has warned that loss-making government-linked companies (GLCs) and statutory bodies under the state’s purview may be shuttered if they fail to demonstrate a credible turnaround plan. The comments come as part of a broader push to improve fiscal discipline and ensure that state assets contribute meaningfully to public finances. The chief minister emphasized that all state GLCs and statutory bodies must adhere to a minimum dividend payment rate of 10% of profit after tax, aligning with governance standards designed to ensure returns for taxpayers and stakeholders.
He outlined that any GLC or statutory body that fails to show strong performance for five consecutive years would be placed under review. This mechanism signals a potential re-evaluation of operations, governance, and strategic direction, with the possibility of restructuring, capital injection changes, or, in extreme cases, shutdowns. The policy underscores a shift toward accountability and sustainability in the state’s corporate arm.
Policy Context and Rationale
The move to enforce a 10% dividend payout ratio from profit after tax is framed as a way to compel GLCs to operate with a clearer bottom line and to return value to state coffers. Supporters argue that dividend commitments help stabilize public finances and reassure investors that state-owned entities are pursuing profitability and efficiency, rather than perpetual subsidy.
Critics, however, may point to the tension between short-term financial performance and long-term developmental roles of GLCs, especially in sectors like infrastructure, utilities, and social services where deliberate investment can take time to bear fruit. The five-year performance review requirement is seen as a firm, event-driven accountability measure designed to incentivize reforms and strategic pivots.
Operational Implications for State Agencies
GLCs and statutory bodies operate across various sectors, including transportation, utilities, housing, and economic development. The five-year review framework could lead to several operational shifts, such as:
– Reassessing non-core, underperforming assets and prioritizing core revenue-generating activities.
– Strengthening governance practices, including board independence, transparent reporting, and performance-linked incentives.
– Introducing efficiency programs, digital transformation, and smarter procurement to drive cost savings.
– Considering partnerships, privatization, or joint ventures for assets with limited turnaround potential.
The state’s leadership stresses that decisions will be data-driven, with independent reviews and clear criteria for determining whether actions are warranted. The aim is to protect the state’s financial health while still safeguarding essential public services that GLCs often support.
Impact on Employees and Communities
Any plan to shutter or restructure GLCs inevitably raises concerns among employees, suppliers, and communities that rely on these entities for jobs and services. Officials say that social impact assessments will be part of the review process, and transparent communication will be maintained to mitigate disruption. In cases where assets are divested or restructured, stakeholders are expected to benefit from clearer accountability and potentially improved service delivery.
Next Steps
Starting next year, the state will implement the new framework across eligible GLCs and statutory bodies. Agencies will be required to report on dividend performance, profitability, and five-year trajectory. The government has pledged to work with affected parties to minimize adverse effects while preserving essential public functions.
As the policy unfolds, observers will watch for the balance between fiscal discipline and public-interest outcomes. If implemented effectively, the plan could signal a credible shift toward more responsible management of state assets, with the potential to unlock value and improve governance across the GLC fleet.
