Brief Ideas 2020-11-20T17:10:35+08:00
Brief IDEAS No 21 – GLIC Footprint in the Private Sector: Policy Dilemma
Author: Lau Zheng Zhou, Zulaikha Azmi
Date: April 2020
  • Government-linked investment companies (GLICs) have higher presence in policy-driven industries such as Telecommunication and Media, Transport and Logistics, as well as Utilities. High equity ownership in the Finance industry is also particularly concerning as most GLICs have controlling stakes in at least one bank.
  • High degree of GLIC footprint in these industries poses concentration risk to depositors since their savings through these institutions have investment exposure to the same choice of companies. For example, in Telecommunications and Media, the GLICs are majority shareholders in Axiata, Telekom Malaysia and Time Dotcom who are competitors.
  • GLICs’ relatively strong presence in the Finance industry, particularly in banks, raises questions on the allocative efficiency and competitiveness of the financial market. High level of GLIC ownerships may also create “home field advantage” for Malaysian banks over foreign-owned entrants, but it is unclear whether this same advantage could also be reversed when the same banks compete abroad.
  • The concentration risk facing the GLICs may necessitate an increase in investment exposure abroad. But, given the market stabilization factor of GLICs, it is possible that a portfolio reallocation towards global markets may increase volatility in the local capital market and the economy in general.
  • One important debate to have moving forward is the need for a clear separation between ownership and regulation of GLICs. There is also a growing economic price to pay for GLCs to continue serving as a vehicle to pursue socio-economic policies as companies become more competitive through specialisation in the context of global and regional supply chains.
Brief IDEAS No 18: GLC Monitor 2019 - State of Play Since GE14
Author: Carmelo Ferlito, Gaetano Perone
Date: April 2020

IDEAS welcomes progress in combatting COVID-19 and encourages the government to develop an exit strategy for the eventual end to the Movement Control Order (MCO). In our latest paper written by IDEAS Senior Fellow, Carmelo Ferlito and and Gaetano Perone, Research Fellow at the Department of Management, Economics and Quantitative Methods of the University of Bergamo in Bergamo, Italy, we’ve proposed several steps.

In the short run, we must bring the economy back on-line as quickly as possible, prioritising networked industries. Specific recommendations include:

  1. To include logistics as among the essential services
  2. Provide rapid feedback from MITI for the industry-related firms.

In the medium-run develop protocols for lower restrictions under strict sanitary conditions. Specific recommendations include a gradual relaxation of MCO under strict sanitary conditions (including mass testing), as recently proposed by Dato’ Seri Azmin Ali.

In the medium and long-run the government should accelerate adaptation by firms, to cope with prolonged disruptions. Specific recommendations include fiscal incentives to automation, to reduce dependence on a large labour force.

Brief IDEAS No 18: GLC Monitor 2019 - State of Play Since GE14
Author: Wan Ya Shin
Date: April 2020

There are 1.5 billion students from over 165 countries who are out of school due to the COVID-19 pandemic as announced by UNESCO on 26 March 2020. Malaysia is one of the 165 countries which has closed schools due to the pandemic. School holiday in Malaysia has been extended by 3 weeks after the school holidays in March. At the time of writing, there is still a possibility of the extension of the Movement Control Order (MCO) beyond 14 April 2020.

There are many scenarios that might play out after 14 April 2020. First, we might resume back to business as usual, where businesses and schools will be reopened. Second, the MCO might be extended. Third, we might resume businesses and schools but would go back to MCO if there is another surge in the number of infections. In these circumstances, what would happen to our children’s education? What would happen to their learning?

Brief IDEAS No 18: GLC Monitor 2019 - State of Play Since GE14
Author: Terence Gomez, Lau Zheng Zhou, Yash Shewandas
Date: October 2019

Before the general election in 2018, the Pakatan Harapan (PH) coalition promised to reform governance of government-linked companies (GLCs). These reforms included ensuring that the appointment of members of these boards of directors would be made based on merit, not on political considerations.

These were important pledges because Najib Razak, in his dual role as Prime Minister and Finance Minister, had effective control over government-linked investment companies (GLICs) which had majority equity ownership of a broad range of commercial enterprises. This concentration of political and corporate power in the hands of the Prime Minister had contributed to serious abuse of public institutions to advance the political interests of his party, UMNO, in key parliamentary constituencies while also contributing to serious corruption.

Brief IDEAS No 17: A Counter-Cyclical Tax Reform
Author: Carmelo Ferlito
Date: October 2019

In this brief Dr Carmelo identifies that business cycles are unavoidable and to address this, policy makers should establish a set of rules which help to prevent the economy from overheating and cushion the impact when the economy inevitably slows down.To achieve the Dr Carmelo proposes three reforms to Malaysia’s tax system:

  • First, a reformed, more progressive GST to replace the existing and controversial SST.
  • Second, a progressive Capital Gains Tax (CGT) on profits made from the disposal of assets, including company shares.
  • Third, to reformed and reduced income tax to balance the increase in indirect taxation proposed with a new goods and services tax (GST) and a new capital gain tax (CGT)
IDEAS Position Paper: Making Shared Prosperity a Reality in Budget 2020
Author: IDEAS Research Team
Date: September 2019

In this Position Paper, IDEAS put forward the following proposals:

  • A Living Wage Tax Credit. Under this proposal, employers will be incentivised – but not required – to increase wages beyond the Minimum Wage, up to a new Living Wage.
  • Employee Equity Scheme. Under this proposal, employers will  be incentivised to allocate shares to their employees, in order to promote broader distribution of wealth and to provide lower income households with new sources of income and savings.
  • Capital Gains Tax. IDEAS proposes the Government should introduce a Capital Gains Tax (CGT), which is a tax on the profits made on the disposal of assets, including shares.
  • Government Divestment Strategy. IDEAS proposes the Government initiates a Divestment Strategy to create space for new investment and stimulate local business development.

IDEAS believe these proposals can contribute to a bold new economic strategy in Malaysia and help to make shared prosperity a reality: an innovative approach to reaching a Living Wage and higher ownership of Malaysia’s corporate equity by Malaysia’s workers, combined with liberalisation of Malaysia’s capital markets leading to new opportunities for investors to stimulate growth in the economy, at the cost of a modest tax on the profits they make from doing so.