GLCs meet target by reducing, divesting stake

PETALING JAYA: There was a mixed bag of results from the Strategic Reform Inititiative (SRI) to reduce Government’s role in businesses by divesting their interest in companies that engage in activities that compete with the private sector.

The government-linked companies (GLCs) almost met their target by reducing or divesting their stake in eight out of nine companies that they had earmarked under the asset disposal exercise for 2013.

However, the divestment exercise from the ministries has been rather dismal. Three ministries were supposed to divest four companies; however, only one was disposed of in 2013.

In June last year, under the rationalisation programme at the ministry level, the Youth and Sports Ministry divested Stadium First Sdn Bhd, a subsidiary of Stadium Malaysia Corp, through an open tender process.

Two companies under the Works Ministry and one company under the Federal Territories Ministry targeted for divestment last year have yet to be divested. No reasons were given as to why the two ministries could not meet the targets to divest the companies.

On the divestment by GLCs, a significant transaction was Khazanah Khazanah Nasional Bhd selling all its holdings in mobile phone operator DiGi.Com Bhd in October 2013. Its interest in the company was worth up to RM293.5mil and the shares were disposed of to funds after a book-building exercise.

Since the Economic Transformation Progarmme (ETP) started three years ago, a total 33 companies have been identified among GLCs for divestment. Of all the 33 target companies, 23 had been successfully divested as of November 2013, according to the report.

The Government reckons that one of the main challenges to the sale of its interests is the need to balance the fiduciary duties of incumbent owners with market conditions, which may impact pricing.

Moving forward, the SRI would continue to monitor the companies under the Government’s divestment programme, in line with their efforts to facilitate a competitive environment for business and strengthen the private sector’s role in driving the economy.

The initiative to reduce Government’s role in business is part of the ETP to reduce the public sector crowding out of the private sector. Apart from the crowding out effect, it is also to increase liquidity and the proceeds from the disposal is to improve public financials.

Under the ETP, the areas where Government involvement is targetted are acivities that require huge capital and have a long gestation period such as infrastructure on improving public transportation system and renewable energy.