Malaysia's Strategic Reform Initiatives

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Discovery Reports

Privatisation sets course for country's global rise

Discovery Reports - Malaysia's Strategic Reform Initiatives

PUBLISHED : Monday, 24 September, 2012, 4:49pm
UPDATED : Monday, 27 May, 2013, 12:30pm

Recognising that private sector investments are crucial to attaining high-income nation status, Malaysia is earnestly pursuing the privatisation of state assets in industries where commerce is working well. This thrust is contained in Malaysia's ETP, which sets SRIs designed to raise more than US$400 billion in investments from the private sector over the next eight years.

"We brought the private sector into the SRI discussion right from the start," says Idris Jala, CEO of PEMANDU and minister in the prime minister's department. "We want to make sure that the government and the private sector are moving together on the ETP."

Following intensive consultations, the government redefined its role in business as regulator and facilitator, confining direct investments to strategic areas such as defence, rice production, national infrastructure and regional corridor developments, and long-gestating industries. This led to a divestment programme involving 33 government-linked companies (GLCs) under six government-linked investment companies (GLICs). Eleven of these divestitures were completed last year, 13 are lined up for this year and the remaining nine will be pursued next year.

The impact of sustained privatisation is lasting. TIME dotCom, an early divestiture, has flourished with the entrepreneurial drive of its new owners. The entry of private sector players such as the DRB-Hicom Group into strategic national interests strengthens existing supply chains and makes entire industries globally competitive. Khazanah Nasional, a federal GLIC, sold its stakes in Pos Malaysia, the national postal service, and Proton, a national carmaker, to DRB-Hicom in separate bidding exercises.

Khazanah also sold last year its 10 per cent stake in EON Capital to Hong Leong and has completely divested from tollways operator PLUS Malaysia in favour of private firms UEM Group and EPF. Its divestment from STLR, a property investment company, began in June. Another GLIC, Employees Provident Fund, divested 12 per cent of its holdings in financial conglomerate RHB Capital as of last year.

Bursa Malaysia, a major venue of the privatisation programme, is fast becoming a hot spot for global investors. The market debut of Petronas Chemicals in 2010 and MSM Malaysia last year was just a preview of things to come. The initial public offering (IPO)

in June of Felda Global Ventures Holdings (FGVH), Malaysia's largest state-owned oil palm plantation operator, has been hailed among the world's major IPOs this year and the biggest so far in Asia. MSM and FGVH are GLCs under the Federal Land Development Authority.

The concurrent dual listing in July of IHH Healthcare at Bursa Malaysia and the Singapore Exchange has all the more whetted investor appetite in Malaysia as a global investment destination. IHH Healthcare, previously majority owned by Khazanah, operates medical facilities in Singapore and Malaysia.

"We remain committed to reducing the government's role in business to enable the private sector to take the lead," says Malaysia's Prime Minister, Najib Razak.

With Malaysia's regional champions successfully taking to the global stage, the country's rise to power is just a matter of time.