This article first appeared in Forum, The Edge Malaysia Weekly on August 17, 2026 - August 23, 2026

Launched in August 2024, the Government-Linked Enterprises Activation and Reform Programme (GEAR-uP) mobilises six government-linked investment companies (GLICs) to deploy RM120 billion in domestic direct investment between 2024 and 2028, channelled into the industries meant to drive the Malaysia’s next phase of growth. GEAR-uP is investing more capital in the country’s capital markets.

The harder question is whether that capital is building companies that can eventually stand on their own, or whether it is quietly making the market more dependent on the state to keep working.

The programme’s own relay race structure (see diagram) makes that question worth asking. Six GLICs are responsible for identifying companies to support, deploying the capital and, in some cases, participating in their subsequent listings. The same institutions are also among the largest investors on Bursa Malaysia, together making up 27% of the Main Market by market capitalisation, according to GEAR-uP’s own 2026 report card.

That raises a question about market discipline and independent price discovery. When the state selects a company, provides growth capital, anchors its initial public offering (IPO) and remains a shareholder after listing, how much of the eventual valuation reflects the company’s underlying performance, and how much reflects the presence of a large, long-term state investor?

That does not make the investment wrong, nor does it mean the market is being manipulated. It means that, structurally, the state’s judgement and the market’s judgement are not fully independent.

Let’s start with what is working. In 2025, GLICs deployed RM20.3 billion domestically, more than three times the RM6.6 billion deployed in 2024. The 37 government-linked companies (GLCs) under their control delivered a total shareholder return of 8% in 2025, ahead of the programme’s annualised target of 7.5% for 2024 to 2028.

SkyeChip Bhd (KL:SKYECHIP), which was recently listed on Bursa after attracting strong demand from investors, is a good example of what GEAR-uP can deliver. The Penang-based pure-play integrated circuit (IC) design firm was first backed at the growth stage by Gobi Partners, through the Khazanah Nasional Bhd-backed Gobi Dana Impak Fund, before drawing 22 cornerstone investors including Khazanah and the Employees Provident Fund at its IPO. It has proprietary silicon intellectual property for high-bandwidth memory (HBM) and low power memory interface solutions, operating in a part of the semiconductor supply chain where Malaysia is strategically trying to build deeper capabilities.

That is the kind of outcome the programme is designed to produce: capital supporting a company with technology, customers and an identifiable competitive advantage.

But GEAR-uP’s success in backing individual companies does not answer the broader question of how its growing presence is changing the market itself.

In the first half of 2026, local institutions were net buyers of RM2.9 billion of Bursa equities while foreign investors were net sellers of RM3.13 billion. The two figures are not a simple cause and effect relationship: foreign selling reflects global capital flows, interest rates and emerging-market positioning as well as conditions specific to Malaysia. But the pattern illustrates the growing weight of domestic institutions in the market.

The six GLICs already account for roughly a quarter of Bursa’s Main Market by value. As GEAR-uP expands, their influence will grow further.

That makes the distinction between state capital allocation and independent market validation increasingly important.

A state investor can identify a promising company before the market does. It can provide catalytic capital at a stage when private investors are unwilling to take the risk. It can hold a company through a difficult period when other shareholders might sell. These are genuine advantages of having large, patient pools of domestic capital.

But those same advantages can make it harder to judge whether a company has succeeded because it is commercially strong or because it has unusually strong institutional backing.

This is not a theoretical concern. State capital has backed companies with tangible operational outcomes.

Apex Healthcare Bhd, which was taken private for RM1.9 billion, created a platform with EU-GMP certification and distribution across more than 20 countries. Pharmaniaga Bhd’s (KL:PHARMA) Puchong facility is part of efforts to reduce Malaysia’s dependence on imported insulin. Aonic Sdn Bhd’s drone technology is being deployed across agriculture and is exported overseas. These are investments that can be judged against operational outcomes rather than simply their share prices.

The governance question therefore is not whether GLICs should invest. They clearly should. It is whether the system around those investments provides enough independent scrutiny to distinguish a genuinely successful company from one that has benefited from unusually strong state support.

That question matters because the institutions involved are not infallible.

Kumpulan Wang Persaraan (Diperbadankan) (KWAP), one of GEAR-uP’s six core GLICs, lost roughly RM163.4 million on Indonesian agritech company eFishery, an episode the Ministry of Finance described as a “premeditated fraud”. eFishery is not Malaysian and the loss was not a GEAR-uP domestic investment, so it isn’t evidence against GEAR-uP specifically. It is a reminder that even sophisticated state investors can get things wrong.

Domestically, Khazanah and Permodalan Nasional Bhd (PNB) invested a combined RM47 million in FashionValet in 2018 and divested in 2024 for RM3.1 million. In 2025, the Public Accounts Committee (PAC) found that Khazanah lacked a standard operating procedure to conduct post-mortem reviews for divested investments with material losses. The investment predates GEAR-uP, but the finding shows why independent checks on state capital matter.

Lembaga Tabung Haji (TH), another of the six, is also facing scrutiny following the Royal Commission of Inquiry (RCI) into its accounts. The RCI’s findings, examining the period from 2014 to 2020, concluded that TH should have reported a RM1.4 billion loss in 2017 rather than the RM3.4 billion profit it published. The Malaysian Anti-Corruption Commission (MACC) has remanded certain individuals and the police have opened investigation papers since the report’s July 2026 declassification.

The timeline matters here. The leadership in place during the period the RCI examined is no longer there: the CEO was removed in 2021, the chairman in the same year, and a new chairman took over in late 2023, well before GEAR-uP was launched in August 2024, stating publicly that TH’s board has had no political appointees since. Whether that leadership turnover has resolved the underlying governance weaknesses the RCI identified is a separate question from whether it happened, and the RCI’s own findings concern the earlier period, not TH’s conduct within GEAR-uP.

None of these three cases is proof that GEAR-uP itself is poorly run. Two predate the programme entirely and the third involves a company outside Malaysia. But together they establish something more basic: large state investment institutions need independent checks precisely because even institutions with enormous resources and expertise can make serious mistakes, and governance failures can take years to surface publicly after they occur.

A RM20.3 billion portfolio deployed largely in 2025 by GLICs should not yet be judged. Investments can take years to mature and assessing them too early would be misleading.

Nor should foreign selling on Bursa be attributed simply to GLIC buying. Global interest and exchange rates, emerging-market allocations and broader investor positioning all affect flows.

And GLICs do not have identical mandates. Some, including Khazanah and PNB, have both commercial and wider national socioeconomic objectives. An investment therefore cannot be judged solely on financial return.

SkyeChip, Syntiant and nanoSkunkWorkX are among GEAR-uP’s more visible technology investments, but they are not representative of the programme as a whole. The programme’s own report card shows a much broader portfolio, spanning semiconductors, digital and logistics infrastructure, agritech, robotics, consumer businesses, healthcare, energy transition, connectivity and heritage assets. That matters because the technology investments are only one part of a much broader allocation strategy and should not be used as a proxy for the programme’s overall performance.

The real test of GEAR-uP is not whether six state institutions can find good companies. They clearly can. The harder test is whether those companies can eventually earn the confidence of investors beyond the state.

That distinction will become more important as GEAR-uP grows. If the same institutions are selecting companies, providing growth capital, participating in their listings and remaining significant shareholders afterwards, their involvement can help companies get off the ground. But it can also make it harder to tell where state support ends and market validation begins.

Malaysia does not need less state capital. It needs enough independent capital alongside it to test the state’s judgement.

If GEAR-uP can produce companies that attract capital, survive without preferential support and continue to compound value when the state’s balance sheet is no longer the marginal buyer, then the programme will have done something more important than hitting its RM100 billion target. It will have helped build a market that can eventually stand on its own.

Krystle Chan is a finance professional with experience across investment banking and public markets

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