IN 2027, all Government-Linked Companies (GLCs) in Sarawak will cease to receive government funding. Instead, these companies will be required to secure their funding for operational purposes.
According to the Premier of Sarawak Datuk Patinggi Tan Sri Abang Johari Tun Openg, this decision aims to bolster the state government’s financial position. It also serves to motivate GLCs to explore profitable ventures, enabling them to provide dividends to the government.
Abang Johari emphasizes that without this approach, GLCs may become complacent, relying on government funds to cover any deficits. He expresses confidence that this strategy will ensure the long-term financial strength of both the GLCs and the state government.
This decision should be embraced and supported by all stakeholders for the greater benefit of Sarawak and its residents.
Although cutting grants to GLCs carries some risks, it also offers several potential benefits.
Primarily, it would enhance the efficiency and accountability of GLCs. Without government grants, these companies would be compelled to operate more efficiently to remain competitive and profitable.
They would need to prioritize cost-cutting, innovation, and productivity improvement.
Moreover, GLCs would have to adopt a performance-based culture, driven by measurable metrics rather than guaranteed government support. This would foster accountability and yield tangible results.
For the government, this move would alleviate its financial burden, freeing up funds for other essential public services such as water, electricity, road infrastructure, and the refurbishment of dilapidated schools and clinics.
It would undoubtedly aid in managing and potentially reducing national debt levels.
In addition, removing these grants would promote fair competition between GLCs and privately-owned companies.
This action would level the playing field, encouraging healthy competition and potentially leading to superior services and products for consumers.
Consequently, this would create a more competitive environment that stimulates private sector growth, innovation, and investment, thereby contributing to overall economic development.
By operating without government grants, GLCs may attract more private investment, as investors would perceive them as more efficient and profit-driven.
While Sarawak may not be the first to adopt this strategy globally, there is indeed a global trend towards reducing or eliminating government grants to GLCs in various countries. However, Sarawak may be among the first states in Malaysia to implement this approach.
Globally, this trend is driven by a combination of factors, including the need for fiscal consolidation, the desire to increase efficiency and accountability, and the intention to create a level playing field for private-sector competition.
For instance, in Europe, the European Union has implemented stringent state aid rules that limit government subsidies to companies, including GLCs.
This measure aims to prevent market distortions and promote fair competition. Governments are required to notify and obtain approval for state aid measures, encouraging GLCs to operate without relying on continuous government support.
In the United Kingdom, many GLCs are moving toward privatization, thereby reducing direct financial support from the government. In Australia, the government’s role has shifted from providing direct financial support to regulating these companies.
These examples illustrate a broader trend where governments worldwide are moving away from direct financial support for GLCs, encouraging them to become more self-reliant, competitive, and efficient. This trend aligns with wider efforts to foster a dynamic and sustainable economic environment.
The views expressed here are those of the writer and do not necessarily represent the views of the New Sarawak Tribune.
