The building of Malaysia’s Ministry of Finance is pictured in Putrajaya. — Picture courtesy of Google Maps

KUALA LUMPUR, Aug 10 — Despite a pledge to reduce intervention in business, the government remains the most influential player in almost all key economic sectors, owning almost half the shares in the stock market and investing up to RM1 trillion.

The data was compiled and revealed in the latest book written by prominent economist, Edmund Terence Gomez and his research team, which mapped and detailed out just how deep Putrajaya’s hands go into the Malaysian economy.

In the book titled “Minister of Finance Incorporated; Ownership and Control of Corporate Malaysia”, Gomez, a professor of economics at Universiti Malaya, demonstrated how the Barisan Nasional (BN) government remained firmly in control of key economic sectors through indirect and direct control of up to 68,300 companies or entities.

“This book is a study of Malaysia’s new political economy and offers an assessment of government-linked investment companies (GLICs), a type of state-owned institution that has long prevailed in the corporate sector but has not been analysed,” Gomez said.

Gomez provided detailed charts and graphs demonstrating how through the seven GLICs led by Ministry of Finance Incorporated (MoF Inc), Putrajaya’s business influence stretches into all the major economic sectors — from the banking system all the way down to plantations.

Data compiled indicated that the government’s share in the Kuala Lumpur Index (KLCI) had increased from 43.7 per cent to 47.1 per cent from 2011 to 2015, the same period when Prime Minister Datuk Seri Najib Razak vowed to reduce state economic control by divesting GLC shares.

Most remarkably, Gomez said such a structure placed so much power into the hands of the finance minister, also PM Najib, who is accorded by law, direct or indirect control over all the entities through MoF Inc.

“The law serves as a major control mechanism as legislation regulating the functioning of the GLICs accord the Minister of Finance enormous control over these institutions and, by extension, the GLCs,” he said.

“By controlling these two positions, the Minister of Finance has effective control over the running of GLICs and GLCs, extending to ownership of key sectors of the economy, including banking, plantations, media, property development, construction and oil and gas”.

Gomez’s research also indicated that the removal of Umno politicians from the directorship of GLICs and GLCs — under the guise of reform — has given the finance minister more control over the corporate sector, a power that had to be shared prior to the new structure.

Data compiled showed that in 2013, only seven Umno politicians held positions in state companies compared to more than a dozen before in the past.

“Corporate power has shifted from Umno and well-connected businessmen to the government,” Gomez said.

The research findings will likely reinforce calls for Najib to relinquish his post as finance minister, a long standing demand by both the Opposition and concerned economists who have warned that giving the prime minister control over such an influential portfolio could lead to abuse.

“There is a remarkable concentration of political and economic power in the office of the Prime Minister by virtue of him being the Finance Minister,” Institute for Democracy and Economic Affairs (Ideas) chief executive Wan Saiful Wan Jan commented on the matter.

“I am concerned that this may undermine the trusted system of checks and balances and lead to abuses of powers...it is a huge incentive for any prime minister to continue appointing himself as the finance minister”.

Gomez shared the same view and said prohibiting the prime minister from holding the post of finance minister should top the reform agenda.

The economist also said the findings put under the spotlight Putrajaya’s commitment to reduce state meddling in the economy.

“The New Economic Model (NEM) released in 2010 sought to reduce government’s role in businesses, arguing that the old approach was ‘unlikely to provide dynamism needed to spur the country to developed status’.

“However, in Pemandu’s 2015 annual report, its target of reducing government’s role in business was reduced to just a footnote on page 10 of the report”.