KUALA LUMPUR – Bumiputera firms with deep political ties are targeting exclusive deals from government-linked companies (GLCs), especially those helmed by politicians from the ruling coalition, people familiar with the matter told The Vibes.
This comes after national oil company Petroliam Nasional Bhd (Petronas) – touted as having one of the largest Bumiputera vendor development schemes – posted a net loss of RM21 billion for the second quarter ended June 30.
In a September 4 statement, the oil major said the Covid-19 pandemic, low oil prices and weak demand had muddied its future earnings outlook.
“The gloomy sentiment around Petronas has driven corporate vultures to seek safety elsewhere, particularly GLCs with politicians as board members,” said a source.
After wresting power from Pakatan Harapan through a coup in February, Prime Minister Tan Sri Muhyiddin Yassin rewarded loyalists with plum posts in various state-owned firms.
Sources said select publicly listed GLCs seem to be high on the list for these politically connected Bumiputera businesses.
On Bursa Malaysia, there are four such companies with politicians as chairmen. They are Tenaga Nasional Bhd (TNB), Malaysia Airports Holdings Bhd, Boustead Holdings Bhd and Sime Darby Plantation Bhd.
These companies are the largest by market value on the stock exchange. More importantly, they are able to dole out substantial sums for their respective vendor programmes.
TNB, for example, forked out RM16.9 billion between 1995 and 2019 to 822 companies, comprising 32 suppliers and 790 contractors.
This year, it allocated RM7 billion in capital expenditure for new infrastructure and development projects. Some of the money will go to the company’s Bumiputera vendor scheme.
A corporate governance analyst said there are three major problems that can occur with such programmes, even among listed GLCs.
"Weak independent directors, a rigged tender process, and higher costs, since these are confined to Bumiputera contractors, are usually the main issues. More importantly, because these packages are small, they do not need shareholders' approval.”
Vendors are these GLCs’ customers, said the analyst.
“They (GLCs) have a right to choose their customers. But it’s the selection process that matters, and whether there is the needed transparency.
“Having politicians as chairmen over large and important national assets means there is a possibility that they may recommend their cronies in a move to appease their voter base.”
Activists and opposition politicians have rapped Muhyiddin and his Perikatan Nasional regime over political appointees to GLC boards.
However, Finance Minister Datuk Seri Tengku Zafrul Tengku Abdul Aziz played down their concerns, telling Parliament on August 11 that these political appointments serve as a “check and balance” to ensure GLCs toe the government line.
Structurally, that could be a problem, said a fund manager.
“Given how money politics and patronage are rife in Malaysia, usually, the trend is to give in to the request of a politician.
“And that’s the problem with some of these GLCs – a weak governance structure where a politician can ride roughshod over the board to advance his or his party’s political interests.” – The Vibes, September 30, 2020
