KUALA LUMPUR (July 28): Malaysia’s continued reliance on government-linked companies (GLCs) and government-linked investment companies (GLICs) in strategic sectors has created an uneven playing field for private firms, hindering competition and weighing on productivity, the Organisation for Economic Co-operation and Development (OECD) said.
The OECD attributed the prominence of GLCs to the legacy of the New Economic Policy, which sought to empower the Bumiputera community but had also entrenched the presence of state-linked firms in strategic industries, often at the expense of private sector participation.
It urged Malaysia to ensure state-owned enterprises compete on equal terms with private firms, saying this would help foster a more dynamic and competitive business environment.
"Malaysia should adopt competitive neutrality principles, ensuring that GLCs operate on equal terms with private firms, particularly in government procurement and access to finance," the OECD said in its latest Economic Survey of Malaysia released on Tuesday.
It also called for stronger enforcement of competition laws by the Malaysia Competition Commission, particularly in sectors where GLCs compete with micro, small and medium enterprises (MSMEs).
Meanwhile, the OECD highlighted governance weaknesses within GLCs, saying political appointments and opaque decision-making processes persist despite commitments under the 12th and 13th Malaysia Plans to strengthen governance.
Citing the Auditor General’s 2024 Report, it said strategic decisions, including major investments and procurement, were sometimes made without proper board approval, while financial reporting lacked transparency.
The OECD recommended adopting governance practices aligned with its Guidelines on Corporate Governance of State-Owned Enterprises, including merit-based board appointments, cooling-off periods for politicians before joining GLC boards, and greater disclosure of financial and procurement decisions.
The report also said that government support for MSMEs remained fragmented, with 325 entrepreneurship and MSME development programmes implemented in 2024 by 14 federal ministries, more than 50 agencies and all 13 state governments.
It said the large number of programmes had resulted in overlaps, duplication and administrative complexity, making it difficult for businesses to navigate available assistance.
The OECD urged the government to improve coordination and consolidate support programmes to enhance their effectiveness.
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