KUALA LUMPUR: National economic growth can be driven by a multiplier effect, particularly in high-growth, high-value (HGHV) sectors, if government-linked investment companies (GLICs) consistently make domestic investments.
Universiti Teknologi Mara's Malaysian Academy of SME and Entrepreneurship Development (Masmed) coordinator, Dr Mohamad Idham Md Razak said sectors such as semiconductors are highly competitive and integrated into global value chains, providing Malaysia with a strategic advantage.
He said this is evident in Dana Impak, by Khazanah Nasional, which has the potential to attract private capital and strengthen the technology ecosystem, while Dana Perintis and Dana Pemacu, by the Retirement Fund (Incorporated) (KWAP), could encourage long-term strategic investments.
"The success of these initiatives depends on transparent, merit-based project selection and proper alignment with industrial policies to prevent crowding out effects or inefficient allocation of funds.
"South Korea's experience in MEMS (Micro-Electro-Mechanical Systems) shows that focusing on HGHV sectors with GLIC support can increase productivity by eight to 12 per cent within five years, provided they are managed aggressively," he told the New Straits Times.
He also said that semiconductors remain a strategic choice, given that Malaysia holds 13 per cent of the global market share.
However, he said there is a need for investment in downstream activities, such as wafer fabrication, rather than limiting involvement to assembly and packaging.
"Alternative sectors such as biotechnology, valued at USD 1.37 trillion or carbon services with an estimated potential of USD 12 billion annually by 2030 could be overlooked," he said.
However, Idham said the government must implement mandatory disclosure of quarterly performance reports for these funds, including key metrics such as Net Present Value (NPV), Internal Rate of Return (IRR), and job creation impact to ensure that investments yield meaningful returns.
"The establishment of a bipartisan oversight committee — comprising representatives from Bank Negara Malaysia, academia, and civil society organisations — could help reduce the risk of cronyism.
"Singapore's Temasek serves as a model with its transparent ESG rating system and whistleblower protection policies.
"The use of blockchain technology for transaction records could also enhance transparency, as seen in the United Arab Emirates' infrastructure fund trials," he added.
He also warned that the main risks include project failures due to weak due diligence, financial leakages, and debt burdens if funds are financed through leverage.
He suggested that GLICs adopt "stage-gate financing" to mitigate these risks, where funds are released in phases based on key performance indicators (KPIs).
Additionally, portfolio diversification across sectors and geographies and a clawback mechanism for failed projects should be implemented.
"For example, Norway's Government Pension Fund Global (GPFG) mitigates risk by capping investments at a maximum of 10 per cent in any single company.
"Regular independent audits and stress tests are also crucial to ensure that returns exceed the cost of capital — at a minimum of 7 per cent annually," he concluded.
Previously, Prime Minister Datuk Seri Anwar Ibrahim called for government-linked investment companies (GLICs) to invest around RM120 billion domestically over five years to boost the country's economic growth.
Anwar said that the government's focus and key performance indicators (KPIs) are not solely profit-based but also on the 'GEAR-uP' approach.
Source: https://www.nst.com.my/news/nation/2025/03/1191142/domestic-investments-glics-vital-economic-growth-says-expert