EBE1073: Government Linked Companies (GLCs) were Described as Corporations - Economics Assignment Help

Assignment Task:

Task:

1.0 Introduction

Government-linked Companies (GLCs) were described as corporations that had variety one commercial intention and during which the Malaysian Government had an immediate controlling stake, not just percent ownership, but influences within the appointment of administrators and senior manage officers and selection making and company planning that covered contracting awards, strategizing, restructuring, financing, and acquisitions and divestments, directly or indirectly, through the Government-connected Investment Companies (GLICs). GLCs are controlled thru the Malaysian authorities through the Federal Government-Linked Investment Companies (GLICs). GLICs are government funding palms which assign government finances to the GLCs. Besides owning GLCs, the Malaysian authorities also influence the appointment of people from the board of administrators and senior management, the authorities even have an immediate stake in making the foremost important decisions like contract awards, policy, restructuring and funding, acquisitions and divestments, etc. this allows the govt to exercising effect on the operational sports activities of GLCs thru Government Linked Investment Companies (GLICs). GLICs are the investment agencies affiliated with the federal which assign some or all of their charging range to GLC investments. GLCs should then leverage the charge home in constituting huge sports activities on behalf of the nation's economy. In Malaysia, GLCs rent an expected 5% of the national staff and account for about 36% and 54% respectively of the marketplace capitalization of Bursa Malaysia and therefore the benchmark Kuala Lumpur Even with lively divestment and privatization, GLCs remain the principle provider organizations to the state within the strategic utilities and offerings comprising electricity, telecommunications, postal offerings, airlines, airports, conveyance , water and sewerage, banking, and financial services. 2.0 Background details In order to deal with national expectations, social needs, and global challenges, the govt has acquired a big shareholding in many Malaysian companies (Beh 2007; CPPS 2006; Tselichtchev 2007; Vietor, 2007). they're referred to as 'Government-Linked Firms' or GLCs (Ang & Ding, 2006; ISIS, 2007), and play an important role within the economy of the 2 country. Bursa Malaysia is listed on quite 47 GLCs. For the 15 biggest GLCs comprising 65 percent of market capitalisation , they accounted for 34.9 percent of market capitalisation .

2 They contributed an estimated 5 per cent of the national population in terms of jobs (MOF, 2009). Although GLCs were undeniably a serious element in Malaysia's economic process , they were hit hard by the late 1990s Asian financial crisis, leading to quite 90 publicly listed companies (PLCs) including GLCs being delisted. Since the normal paradigm of the deep involvement of the govt within the development of industry and therefore the management of public sector companies had essentially collapsed, things forced the govt to adopt a policy of rationalization (Vietor, 2007). This included significant corporate reform and therefore the bailout of massive, economically important GLCs (Ching, Jomo & Fay, 2005). Despite the intervention of the govt, several of them continued to underperform as reflected by key financial and operational indicators and have become a financial burden on the govt (MOF, 2009; Musa, 2007); The Malaysian economy faces considerable challenges now. Globalization forces are creating intense competitive pressures within international trade. GLCs are now struggling to plan plans for effectively engaging with new entrants and competitors during a more liberalized trading climate (Thompson, Strickland & Gamble, 2007).

3.0 The Role and Contribution of Government Link Company

A government linked companies is a legal entity created by a government to take control of the commercial activities on behalf of the government. Their legal status varies from being a company that stock own by the government and stock own by regular people. There is no standard definition of a government linked companies. The most unique trait that they have is that they have distinct legal form and they are able to established and operate in commercial affairs. GLC company put the public policy as their objective and goal for the companies and can be differentiated by others government agencies or state entities by pursuing a purely non-financial objective. Some examples of GLC in Malaysia are Affin Holdings Bhd, Maybank Bhd, Axiata Group Bhd, BIMB Holdings Bhd, Cimb Bhd, Malaysia Airline System Bhd, Malayan Banking Bhd, Tenaga Nasional Bhd, the UEM Group, TH Plantations Bhd and Sime Darby Bhd. And all of these companies have their own role to play and contribution that they are making to the country.

3 The overall objectives for a government link company (GLC) or also known as state ownership enterprise (SOE) can be generally break into 5 parts:

• Supporting economic and strategic interests of the nation

• Making sure continuous national ownership of enterprises

• Supplying specific public goods or services

• Performing business operations in a “natural” monopoly situation

• Creating or maintaining a state-owned monopoly (or oligopoly) where market regulation is deemed infeasible or inefficient And we will go through all the categories explain about it in detail as we go through the report and the example of such cases in Malaysia.

The first role of GLC is supporting the national economic and strategic interest. Malaysia's economic system is principally a laissez-faire, a free economy with the government controlling what is national interests and lowering the wealth gap between the rich and poor, focusing on investment, trade, services, and manufacturing. The economic development in Malaysia is contribute by the wealth of its natural resources in agriculture and forestry. Some major produces in the country include cocoa, palm, rubber, rice, natural gas, and oil. Furthermore, Malaysia also huge amount of natural resources which include minerals, petroleum, iron and tin. Malaysia also contribute a big share in the export of electric component export to the entire world. We are the largest exporter of semiconductor devices and electrical goods and appliances in the world. The service sector of Malaysia are also in a pretty dominant position that comprises Islamic banking, education, telecommunications, finance, and tourism. And GLC are the one who managing these company and making sure that all of these sector are thriving which will lead us to the 2nd role of GLC which is ensuring continued national ownership of such enterprises.

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