By WU VUIDE
KOTA KINABALU: Sabah’s government-linked companies (GLCs) were originally created to drive industrialisation and spread economic development across the state, said Datuk Dr Mohd Yaakub Johari.
However, weak governance, poor oversight and slow economic transformation in the past have prevented many from fulfilling that mandate, he said.
Yaakub, who is the chairman of University College Sabah Foundation (UCSF), said the origins of Sabah’s GLCs dated back to the administration of former chief minister Tan Sri Harris Salleh.
The GLCs were envisioned as development catalysts to spearhead strategic industries such as oil and gas, pulp and paper, and other resource-based sectors.
By operating with greater flexibility than government departments, GLCs were expected to attract private financing, create jobs and stimulate economic growth, particularly in less-developed regions, said Yaakub.
However, over the years, the performance of Sabah GLCs has been uneven.
“Some GLCs have demonstrated that the model can work, while others illustrate what happens when governance and oversight fail,” he said when speaking on a podcast.
He cited Sabah Energy Corporation Sdn Bhd (SEC) as a positive example, highlighting its ability to generate dividends for the State Government and remain relevant in energy resource development.
In contrast, he said Sabah Forest Industries Sdn Bhd (SFI), once intended to anchor the pulp and paper industry, collapsed under heavy debt and operational inefficiencies before ceasing operations in 2016.
SFI’s downfall was the result of poor financial management, weak corporate governance, operational inefficiencies, outdated infrastructure, declining market conditions and unresolved land issues, he added.
He stressed that a clear separation of roles is essential for effective GLC governance, where the chairman must provide leadership to the board, ensure accountability and represent the board.
On the other hand, he said the board of directors, being vested with the powers necessary to manage and supervise the business and affairs of the company, is the apex decision-maker responsible for overall direction, policy, strategy, oversight and regulatory compliance.
The CEO, in turn, must execute the board’s decisions and manage day-to-day operations in line with approved policies and directives, he said.
While acknowledging that board appointments are often influenced by political considerations, he said political involvement is not inherently problematic, provided appointees are qualified, experienced and balanced in terms of skills and diversity.
“Problems arise when appointments are made purely on political grounds without regard to merit. That undermines professionalism, public trust and long-term performance,” he said.
Yaakub argued that reviving underperforming GLCs requires more than piecemeal reforms.
Instead, restructuring must begin with identifying the root causes of failure, whether external factors such as global economic fragmentation, technological disruption and volatile macroeconomic conditions, or internal issues including governance weaknesses, operational inefficiencies, financial mismanagement and a lack of professionalism.
He welcomed recent efforts by the Chief Minister to introduce KPI-based performance monitoring and quarterly reporting, including the possibility of closing persistently non-performing entities.
“There must be no ‘business as usual’ mindset. Reform has to be comprehensive. Leadership professionalism, governance, financial restructuring, operational turnaround, risk management, digitalisation and ESG compliance must move together,” he said.
Among his key proposals is the establishment of a high-level independent GLC oversight committee under the Chief Minister’s Office, with representation from the Finance Ministry.
The committee would monitor performance, identify governance gaps, reduce duplication, enhance synergies and recommend corrective actions, he said.
He also called for a Sabah GLC transformation plan aligned with the Madani economic framework, SMJ 2.0 and the spirit of MA63 to provide long-term strategic direction.
This would include standardised guidelines on board composition, tenure, responsibilities and remuneration, as well as efforts to place more Sabahans in leadership roles within national GLCs at the board of directors and top management levels to enhance local talent.
GLCs should venture into strategic growth sectors such as renewable energy, healthcare and biotechnology, the digital economy, artificial intelligence, semiconductors, logistics, maritime and aerospace, while being mindful not to compete with or crowd out the private sector, he added.
To safeguard public interest, Yaakub also supported mandatory vetting of all GLC joint ventures by the State Attorney-General’s Office and the Finance Ministry before Cabinet approval.
Despite managing substantial public assets, Sabah GLCs are not currently required to table regular financial and performance reports in the State Legislative Assembly, he said.
While a monitoring committee exists at the Finance Ministry, he believes transparency can be further strengthened through a publicly accessible online GLC performance dashboard under the Office of the Chief Minister or the Finance Ministry.
On the listing of GLCs on the stock exchange, he said public listing can improve governance, transparency, access to capital and investor confidence, but may not be suitable for entities involved in sensitive or security-related activities.
“Listing should therefore be pursued selectively, particularly for fundraising, joint ventures, or mergers and acquisitions,” he said.
‘Some GLCs have demonstrated that the model can work, while others illustrate what happens
when governance and oversight fail’ – Yaakub
