KUALA LUMPUR (Feb 24): The government is preparing to review and enhance existing guidelines governing dividend payments by government-linked companies (GLCs), the Dewan Rakyat was told on Tuesday.
Deputy Finance Minister Liew Chin Tong said the existing framework under the 2024 Guidelines on Governance and Board Members of GLCs provides boards with flexibility to exercise commercial judgement without jeopardising financial sustainability, in line with corporate governance principles and company law.
“The government is prepared to assess improvements to the existing guidelines to ensure a balance between fiscal discipline and the financial sustainability of GLCs. This is to ensure that the commercial autonomy granted to these companies is aligned with accountability to shareholders,” Liew said when winding up the debate on the Auditor General’s Report 1/2026.
During the debate earlier, several lawmakers called on the government to require profitable GLCs to declare dividends after the latest Auditor General’s Report found that dozens of profitable entities failed to do so in 2022 and 2023.
Liew said dividend distribution remains a board decision based on comprehensive assessments of cash requirements, investment commitments and market risks.
While accounting profits and healthy financial ratios may reflect current stability, he noted that dividend decisions must also take into account medium- and long-term obligations, including development expenditure, asset maintenance and working capital needs.
He cited several subsidiaries, including entities under Petroliam Nasional Bhd (PETRONAS), that did not declare dividends after considering cash flow requirements, investment commitments and capital strengthening.
Among them, Cenviro Sdn Bhd utilised profits and available cash to redeem RM100 million in redeemable convertible preference shares while retaining sufficient funds for operations and capital commitments.
Cradle Fund Sdn Bhd, meanwhile, did not declare dividends for 2022 and 2023 due to operational cash flow constraints, reliance on grants and partially unrealised profits. The decision was approved by its board and communicated to the Ministry of Finance.
EPF subsidiaries’ losses largely accounting-driven
Commenting on the Auditor General’s Report stating that 21 Employees Provident Fund (EPF) subsidiaries recorded combined losses of RM1.43 billion, Liew said the losses largely fall into two broad categories: accounting-driven adjustments and strategic investment cycles, rather than structural deterioration in asset value.
Some losses stem from capital structuring, where shareholder loans generate tax-efficient interest income but result in entity-level accounting losses after interest costs are recognised. Others relate to unrealised fair value adjustments due to market volatility, which are non-cash in nature and expected to recover as conditions improve.
Another portion of the losses involves investments in early-stage “J-curve” phases and operational challenges, particularly within the property sector. Initial losses are typical before assets mature and generate stable returns, with divestments expected from 2027 onwards under the EPF’s long-term strategy.
Operational pressures such as low occupancy rates and ageing assets have also weighed on performance, although some assets have appreciated beyond acquisition cost, he added.
Liew said proactive measures are underway to improve performance, including stronger leasing efforts, asset enhancements and, where appropriate, potential disposals to optimise returns for the fund.
For more Parliament stories, click here.