KUALA LUMPUR, Dec 19 – Federal government bailouts for government-linked-companies (GLCs) have cost an estimated RM85.51 billion over the last 36 years, according to a study.

In a report titled: “Government Linked Companies: Impacts on the Malaysian Economy” by the Institute for Democracy and Economic Affairs (Ideas), the study said that besides the bailouts, expansionary budget positions for GLCs have also drained the nation’s coffers.

“One estimate suggests that around RM85.51 billion have been used to bail out GLCs over the past 36 years.

“Given the enormous sums involved, it is also likely that the pressure placed on interest rates as a result of recurring budget deficits may have been a separate factor operating to crowd out private investment, at the margin,” said the paper’s author, Jayant Menon.

He pointed out that the bailouts have been a “huge drain on the public purse” and cited the RM1.5 billion bailout for Proton in 2016 and the RM6 billion bailout for Malaysian Airlines in 2014 as the most recent and obvious examples.

“GLCs also continue to be a drain on public resources, and the massive bailouts suggest that there are huge financial costs associated with maintaining them,” he argued.

Jayant added that although he noticed that the federal government’s fiscal deficit have been declining, the public sector’s deficit have been increasing due to “rising development expenditures by the government and GLCs, particularly Petronas.”

However, the report did not elaborate further on Petronas’ rising development expenditures.

The report also argued that the “preferential treatment” received by GLCs in one form or another does have a social and financial cost to it, although it is more difficult to quantify the social costs related to GLCs.

“The financial costs arise when the special treatment extends to the provision of direct subsidies, concessionary financing, state-backed guarantees and the like.

“There may also be social costs that accrue for such treatment, but there is a direct financial cost coming out of government coffers,” Jayant said.

 

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