insight

Revitalising Malaysia: Cutting bureaucratic fat and recharging state-owned giants

MALAYSIA today stands at a crossroads, a nation brimming with potential but held back by systemic inefficiencies and outdated institutions that threaten its forward momentum.

This tale of stagnation is all too familiar. Too often, state-owned enterprises (SOEs) and government-linked companies (GLCs) are populated by figures who have risen through patronage rather than performance, entrenched in outdated thinking and lacking the dynamism needed to propel Malaysia forward.

One can be old and yet brimming with fresh ideas, but in Malaysia's civil service and SOE leadership, such traits seem the exception rather than the rule.

Instead, SOEs have become a dumping ground for well connected retired civil servants and insiders, remnants of an era more concerned with stability than with growth, seemingly oblivious to the demands of a modern, competitive economy.

In the grand theatre of Malaysia's economy, SOEs occupy a lead role, but not always a productive one. Rather than serving as engines of growth, they often crowd out private sector counterparts who could inject much-needed energy and innovation.

SOEs may appear as public stewards, ostensibly championing social causes and protecting essential services. In reality, their influence has grown bloated and inefficient, shackled by bureaucracy and sustained largely by government subsidies and taxpayers' money.

These state-backed giants move slowly, burdened by layers of hierarchy, while private sector players stand on the sidelines, stifled by SOEs' dominance and a regulatory environment that does them no favors.

The result is an economic stage heavily skewed, where SOEs demand subsidies, bailouts, and financial backing like actors insisting on lavish backstage riders.

Malaysia's economic potential is drowned out by these state behemoths, casting a shadow over potential investors who view the landscape as unfair and unpredictable.

Why would private investors take the risk of entering a market where they must compete with monolithic state entities cushioned by government support? In this script, SOEs inadvertently become the villains, suppressing the entrepreneurial spirit that propels economies forward.

Critics argue that Malaysia's SOEs have grown into monopolistic forces, more focused on political loyalty than on advancing the nation's economic goals. They have become monopolies shackled by bureaucracy, rather than dynamic institutions fostering innovation.

The irony is that while these SOEs dominate Malaysia's economy, nimble private companies with potential to transform the landscape languish, held back by policies that favor SOEs and the insiders who lead them.

For these SOEs, creative destruction - a force that would allow fresher and more efficient enterprises to take root - is suppressed, replaced by bureaucratic inertia.

Malaysia's brightest minds - engineers, economists, ex-judges - are frequently sidelined, replaced by loyalists who lack the expertise to effect change.

In stark contrast to global examples where academics and technocrats advise leaders and drive national policy, Malaysia remains entrenched in a system that values feudal loyalty over qualifications.

Here, university professors with valuable insights, economists with the tools to address complex national issues, and professionals with global experience rarely reach positions of influence.

The national dialogue remains confined within echo chambers where dissent is unwelcome, preserving a government culture that regards questioning as rebellion.

These aren't isolated cases. Malaysia's landscape of government-linked companies (GLCs) is replete with individuals whose primary qualification seems to be a privileged last name or social ties.

This exclusive club, where merit is often dismissed as a distraction and family connections serve as resumes, is holding Malaysia back.

The nation's leaders often speak of "reform" and "rejuvenation," but if Malaysia genuinely aims to unlock its potential, the nation must break the grip of this neo-colonial aristocracy, allowing a new generation of qualified Malaysians to rise.

In former Prime Minister Tun Abdullah Ahmad Badawi's words, Malaysia is a country of "first-world infrastructure, but a third-world mentality." Until Malaysia confronts this hard truth, its brightest talents will continue seeking opportunities abroad, where innovation and meritocracy are rewarded.

The mass exodus of talent will only exacerbate the cycle of unfulfilled potential, perpetuating a system where connections matter more than capability and Malaysia's growth remains an unfulfilled promise.

To reinvigorate Malaysia's economy, a recalibration is essential. SOEs must undergo substantial reform, breaking free from the cycle of inefficiency and dependency.

Trimming deadwood in the civil service and reducing bureaucratic dominance can create space for private sector innovation and a balanced distribution of roles. Empowering capable leaders, fostering competition, and valuing new ideas will give Malaysia a chance to claim its place on the world stage as a true leader of economic dynamism.

As Malaysia looks toward the future, the need for fresh thinking is undeniable. A new script is needed, one that introduces transparency, revitalises SOEs, and ushers in leaders who prioritise Malaysia's growth over political favors.

If Malaysia is to realise its potential, it must embrace change, empowering not just loyalists but experts and innovators. Only then can it emerge as a globally competitive player, telling a story of growth, opportunity, and dynamism that befits its promise.

*The writer is an adjunct lecturer at Universiti Teknologi Petronas, international relations analyst and a senior consultant with Global Asia Consulting. He has a background as a senior researcher at the Malaysian Institute of Economic Research.

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