KUALA LUMPUR: Six government-linked investment companies (GLICs) have today committed to investing RM120 billion domestically over five years.
However, an economist feels the RM120 billion investment in domestic direct investment (DDI) will unlikely make a significant overall impact.
The economist, Dr. Geoffrey Williams, suggested that this might simply be a reallocation of funds from current sectors to different ones, as directed by the government, rather than being driven by expected returns.
The RM120 billion was commited by Khazanah Nasional Bhd, the Employees Provident Fund (EPF), Kumpulan Wang Persaraan (Diperbadankan), Permodalan Nasional Bhd (PNB), Lembaga Tabung Haji and Lembaga Tabung Angkatan Tentera.
This is under a programme led by the Ministry of Finance (MoF) called GEAR-uP, which aims to boost growth in the crucial economic sectors.
It is an addition to RM440 billion public market investments as part of their ongoing investment activities.
The Finance Ministry, in its statement, said the investments will focus mainly on high-growth, high-value (HGHV) industries, including the energy transition sector and advanced manufacturing, particularly in semiconductors.
Additionally, the programme will support investments throughout the various stages of firms, from start-ups and venture capital to mid-tier companies, and will aid in the listing of these companies.
Prime Minister Anwar Ibrahim said by getting the GLICs to heighten their focus on domestic investments, this deployed capital can benefit Malaysians equitably and birth new economic ecosystems.
"With a combined assets under management (AUM) valued at over RM1.8 trillion, roughly the size of Malaysia's nominal gross domestic product (GDP), the GLICs have the financial capacity to effect the nation's ascent in the economic value chain and transform Malaysians' lives for the better," he said after a briefing on the programme at the GEAR-uP Gallery Walk in Putrajaya today.
Geoffrey noted that the RM120 billion over five years works out to RM24 billion per year or 1.3 per cent of the combined assets of the six GLICs.
"By comparison the Malaysian Investment Development Authority reported RM47 billion of foreign investment in the first quarter of 2024 alone," he told Business Times.
On the future effectiveness of such investments, he said this form of centrally-planned investment is rigid and has proven ineffective in the past.
It is unlikely to be effective in the future, as it relies on the same old government intervention strategies.
Excluding the EPF and PNB, the other funds are small and have a poor investment track record.
Geoffrey said each small fund is creating its own strategy independently, with little apparent coordination among them, and that the investment amounts are too modest to make a significant impact.
He also highlighted that the risks involved is the reallocation could divert funds away from other established and profitable investment areas.
"Second, it will be focused on patronage projects rather than on real investment potential and third that it will be too small to make any difference in investment terms but will crowd out private investment," he added.