Malaysia’s GLICs Too Big to Fail : The Need For Stronger Oversight

Government-Linked Investment Companies (GLICs) such as the Employees Provident Fund (EPF), Khazanah Nasional, and Permodalan Nasional Berhad (PNB) are pillars of Malaysia’s economy. Together, they manage a staggering RM1.88 trillion in assets, which is more than 111% of the country’s GDP. These institutions are vital to Malaysia’s financial stability and are too big to fail. However, their immense power brings significant responsibility, and serious concerns are being raised about their investment decisions and accountability.

How Big Are We Talking?

EPF alone manages RM1.1 trillion, or 65% of Malaysia’s GDP. Khazanah Nasional oversees RM150 billion, while PNB controls RM350 billion. These numbers represent the savings of millions of Malaysians, meaning every decision made by these institutions directly affects people’s futures. A poor investment decision can send shockwaves through the economy, affect stock markets, damage investor confidence, and potentially trigger government intervention. For ordinary Malaysians, especially those depending on these funds for retirement, the risks are enormous.

EPF’s MAHB Share Sale: A Costly Mistake

One recent example of questionable decision-making was EPF’s handling of Malaysia Airports Holdings Berhad (MAHB) shares. In 2023, EPF sold 150 million MAHB shares at prices between RM6.80 and RM7.70 per unit, generating RM102 million. However, in 2024, EPF bought back shares at RM11 per unit as part of a privatisation deal. Had EPF held onto the shares instead of selling them prematurely, it could have gained an additional RM600 million. This miscalculation highlights a troubling trend where GLICs prioritise short-term profits over long-term financial security. The failure to secure the best outcome for its members emphasises the need for greater transparency and stronger oversight.

Regulatory Gaps and Conflicts of Interest

Despite managing vast sums of public money, GLICs often operate with regulatory gaps. While they follow regulations like the Companies Act 2016 and Securities Commission guidelines, there are still significant loopholes. The Fiscal Responsibility Act (FRA), which promotes transparency and accountability in public finances, does not explicitly cover GLICs. This means these institutions aren’t held to the same rigorous standards as government agencies, allowing them to operate without the same level of scrutiny.

Additionally, enforcement of existing regulations is weak. Even when GLICs make poor decisions due to mismanagement or bad judgment, there is rarely any real accountability. This creates a dangerous environment where high-risk bets are taken without serious consequences.

How Do We Fix This?

A key solution would be to amend the Fiscal Responsibility Act (FRA) to explicitly include GLICs. This would enforce greater transparency, requiring GLICs to disclose more detailed information about their investment strategies and decision-making processes. It would also subject them to independent oversight, reducing the risk of mismanagement or politically motivated decisions.

Furthermore, stronger enforcement measures are necessary. If a GLIC makes a reckless investment, there should be clear consequences, such as stricter regulations, independent audits, or accountability for leadership. Malaysians deserve assurance that their retirement savings are in safe hands.

The Bottom Line: Reform Before Crisis Hits

GLICs are too important to Malaysia’s economy to operate without proper governance. While they play a crucial role in managing public funds and driving economic growth, they also present systemic risks if not properly overseen. The EPF-MAHB case is a clear example of how poor decisions can lead to significant opportunity costs, ultimately damaging the long-term financial well-being of millions of Malaysians.

Bringing GLICs under the Fiscal Responsibility Act (FRA) is a necessary first step. This would strengthen governance, enforce accountability, and restore public trust. Reform is critical to ensure these institutions remain reliable stewards of public funds and secure Malaysia’s financial future.

Cally Ting Zhao Song

27/2/2025