Lau Zheng Zhou is Research Manager of the Economics and Business Unit at IDEAS. His research interest is in the intersection between markets and institutions, such as government-linked companies (GLCs) and corporate welfarism, and also global value chains, China’s Belt and Road Initiative, and financial sector development. Lau obtained a First-Class Honours in Business Economics from the University of Nottingham and a Master’s degree in Political Science and Political Economy from the London School of Economics.

Nur Zulaikha Azmi is a Research Executive in the Economics and Business Unit at IDEAS. She is a JPA scholar and obtained a First-Class Honours in Economics and International Economics from the University of Nottingham . Her interests include developmental economics and public economics.

* We would like to take this opportunity to thank the following individuals for the effort and expertise that they contribute to reviewing this report. Prof. Terence Gomez, Prof. James Chin, Lee Hwok-Aun, and Tricia Yeoh.

We would also like to thank our intern Tay Yi Thong for providing much needed support in data collection

** Cover image download from www.freepik.com, www.parlimen.gov.my, www.mara.gov.my and www.benarnews.org

2 Making sense of complexity in statutory body governance: A case study of MARA Policy Brief NO. 22

Photo by Nour Betar on Unsplash

Introduction

The recent surge in politicians appointed to head government-linked entities has attracted broad criticism. These appointments are widely seen as political maneuverings by Prime Minister to solidify his command of support of members, thus ensuring the survival of the (PN) government which he currently heads. What could the implications of these appointments be to the governance of public entities, especially in the case of statutory bodies?

The practice of political appointments in government-linked entities is longstanding, one in which all ruling parties, past and present, have indulged in, with the difference being that the current administration carries it out in a more conspicuous manner. But, in terms of governance, it is not clear that a blanket ban on political appointments is sufficient as an antidote to the financial irregularities and mismanagement that have plagued many of the public sector entities, particularly since there are well-documented cases implicating top managers who were non-politicians too.

Compared to government-linked companies (GLCs), there is also an additional question of shifting policies following a regime change which could result in a deviation from the pursuit of the original mandates. So, in order to better align public and private interests in the management of statutory bodies, public governance reform could be a more sensible starting point.1

This Monitor briefly discusses the recent political appointments in statutory bodies from a governance perspective. It then considers changes in the policy orientation of (MARA) in three separate administrations.

1. According to OECD, public governance refers to the formal and informal arrangements that determine how public decisions are made and how public actions are carried out, from the perspective of maintaining a country’s constitutional values when facing changing problems and environments.

www.ideas.org.my 3 Policy Brief NO. 22

Statutory body appointments dominate

It is no surprise to find statutory bodies registering a high number of shake-ups in the top positions which counted Chairman and Board members since the PN took power. Table 1 and 2 list appointments of politicians and non-politicians who are not members of the civil service respectively (see Table 1 and 2).

Table 1. Appointment of politicians on statutory bodies, by Ministry

Ministry Statutory Body Position Name Affiliation Economic Planning Unit (Prime Minister’s Federal Land Development Authority (FELDA) Chairman Besut MP (UMNO) Department) Federal Agricultural Marketing Authority (FAMA) Chairman Mohd Fasiah Hj Mohd Fakeh Sabak Bernam MP (Bersatu) Ministry of Agriculture and Food Industries Fisheries Development Authority of Malaysia (LKIM) Chairman Abu Hussin Hafiz Syed Abdul Fasal Bukit Gantang MP (Bersatu) National Higher Education Fund Corporation (PTPTN) Board Member Fathul Bari Mat Jahya Kangar UMNO Deputy Division Chief Ministry of Education Hulu Bernam, State Assemblyman National Higher Education Fund Corporation (PTPTN) Board Member Rosni Sohar (UMNO) Ministry of Energy and Natural Resources Sustainable Energy Development Authority Malaysia (SEDA) Chairman Lukanisman Awang Sani Sibuti MP (GPS - PBB) Ministry of Human Resources Human Resource Development Fund (HRDF) Chairman Nelson Renganathan Former MIC Youth Chief Malaysian Cocoa Board (LKM) Chairman Anyi Ngau Baram MP (GPS-PDP) Ministry of Plantation Industries and National Kenaf and Tobacco Board (LKTN) Chairman Azman Ibrahim Jabi , State Assemblyman (PAS) Commodities Malaysian Board (MPOB) Chairman Machang MP (UMNO) Nik Mohamad Abduh bin Nik Lembaga Kemajuan Selatan (KESEDAR) Chairman Bachok MP (PAS) Abdul Aziz Lembaga Kemajuan Terengganu Tengah (KETENGAH) Chairman Senator Razali bin Idris Terengganu Bersatu chairman Lembaga Penyatuan dan Pemulihan Tanah Persekutuan (FELCRA) Chairman Tasik Gelugor MP (Bersatu) Ministry of Rural Development Chairman Hajah Azizah binti Mohd Dun Beaufort MP (Bersatu) Majlis Amanah Rakyat (MARA) Board Member Zainal Abidin Kidam PAS Central Committee Member Board Member Md Alwi Che Ahmad Kok Lanas, Kelantan State Assemblyman (UMNO) Rubber Industry Smallholders Development Authority (RISDA) Chairman Mohd Salim bin Sharif Jempol MP (UMNO) Chairman MCA Secretary General Port Authority Chairman Koh Chin Han MCA Central Committee Member Ministry of Transport Port Authority Chairman Robert Lawson Chuat Betong MP (GPS-PBB) Port Commission Chairman Tan Teik Cheng Penang MCA Chief Ministry of Works Construction Industry Development Board (CIDB) Chairman Yusuf Abd Wahab Tanjong Manis MP (GPS-PBB) Note: The information presented here is as of 10 June 2020. The EPU has taken over the responsibility of the Ministry of Economic Affairs. FELCRA, established as a statutory body in 1966, has become a GLC since 1997.

4 Making sense of complexity in statutory body governance: A case study of MARA www.ideas.org.my 5 Table 2. Appointment of non-politicians (excluding civil servants) on statutory bodies, by Ministry

Ministry Statutory Body Position Name Affiliation

National Higher Board Ahmad Nazim Former CEO of Ministry of Education Education Fund Member Abd Rahman Pelaburan MARA Corporation (PTPTN)

Kamal Board Vice Chancellor of Nasharuddin Member UNITEN Mustapha Ministry of Rural Majlis Amanah Rakyat Mohamed Farid Board Chairman of Development (MARA) Mohamed Member Kowamas Holidays Zawawi Board Jamelah CEO of Kuwait Member Jamaluddin Finance House

One interesting observation with regards to the choice of politicians entails the inclusion of not just elected Members of the Parliament (MP), but also state-assemblymen and those holding senior party positions. This could suggest an attempt to promote a wider cementing of interests between the political elites, and also a potential cascading effect in the distribution of resources to party loyalists from the top.

The Ministry of Rural Development (MRD) stood out with the highest number of shake-ups which saw five new Chairmen being appointed, all of whom are currently public office holders. State development boards KESEDAR (Kelantan) and KETENGAH (Terengganu) are headed by local MP and state party leader respectively. Intriguingly, the absence of UMNO appointee in these development boards and Bersatu’s leadership in KETENGAH in PAS-controlled Terengganu might suggest an undercurrent of inter-party competition for state resources as well as control for the Malay heartland.

The high number of political appointments in statutory bodies raises serious concerns about the qualities of public governance. Most statutory bodies are not as exposed to market forces as the GLCs which could act as an external disciplinary mechanism to the senior management team so that decisions made are better aligned with shareholders’ interests.

By comparison, the way in which statutory bodies are governed is less transparent and understood since public participation is more muted. Therefore, it is possible that the obscurity of statutory body governance makes it convenient for politicians to intervene and make major decisions such as appointments of Chairman and Board members.

In the next section, a brief comparative study between current governance practices in GLC and statutory body (MARA) will be presented using selected OECD guidelines to highlight gaps in governing statutory bodies.

6 Making sense of complexity in statutory body governance: A case study of MARA Policy Brief NO. 22

SOE governance best practices: Comparing GLCs and statutory bodies

A 2018 OECD report provided an overview of national practices to professionalise SOE boards of directors in a sample of OECD countries and other developing economies.2 Based on a self-reported questionnaire that was circulated to participating countries, including Malaysia, the report identified common challenges re- lated to SOE ownership and governance, and also shared good practices and recommendations for effective reform.

While the report only included the GLCs in Malaysia’s case, the best practices guidelines and questionnaire responses are still relevant to compare gaps in governance of GLCs and statutory bodies. For this purpose, MARA will be used as a case representing statutory body.3

Clarity in the mandate and roles of the Board

According to OECD guidelines, the Boards of SOEs should be assigned a clear mandate while its roles should be clearly defined in the legislation, preferably in line with general company law. In practice, the Malaysian GLCs comply strictly with statutory requirements under the watchful eyes of regulators such as Bursa Malaysia, Se- curities Commission and Bank Negara Malaysia.

But the questionnaire respondents also cited strong influence by the Ministers and public officials on key -de cisions by the Board, especially if the GLCs in questions are not listed and are under the direct supervision of the Ministry of Finance (MOF). This influence could hamper the effectiveness and neutrality of Board members in discharging its duties. Therefore, important questions about accountability can be raised in areas such as the appointment of directors, various committees, and tender procedures.

Similarly, for statutory bodies, the respective incorporation acts give Ministers not only direct, but also broad powers to intervene, including to decide on the roles of the Boards. For instance, section 5 of the MARA Act 1966 (the Act) stipulates that “the Minister may give to the Majlis directions, not inconsistent with this Act, as to the exercise of the functions of the Majlis; and the Majlis shall give effect to all such directions.”

But the loose descriptions of the economic and social developmental activities that fall under the duties and powers of MARA’s Board, as provided in the subsequent section of the Act, suggest a lack of clarity in the mandate and roles of the Board. Also, Board members are to discharge its duties subject to the prior approval of the Minister rather than adherence to a clearly laid out mandate as recommended in the OECD guidelines.4

This creates the possibility of frequent shifts in policy as a direct result of a change in the administration with long-term implications to the achievement of socioeconomic objectives as originally envisioned when statutory bodies such as MARA were set up.

2. OECD (2018), Professionalising Boards of Directors of State-Owned Enterprises: Stocktaking of National Practices. 3. MARA, incorporated under the Majlis Amanah Rakyat Act (the Act) in 1966, was set up as a statutory body, traditionally reporting to the Ministry of Rural Development, to strengthen the socio-economic development and competitiveness of the community. 4. OECD (2015), OECD Guidelines on Corporate Governance of State-Owned Enterprises, 2015 Edition.

www.ideas.org.my 7 Board nomination and appointment practices

The OECD finds the nomination of SOE directors a government responsibility in virtually all countries although the degree to which the state has centralized its enterprise ownership function has an impact on whether the nominations are put through a dedicated state unit (in the case of higher ownership centralization) or some form of inter-ministerial process (in the case of lower ownership centralization). In these cases, the OECD recommends to subject ministerial decisions concerning board nominations to some form of consensus by a wider group of ministers.

The Malaysian government’s ownership of GLCs is considered decentralized by the OECD since the GLICs (government-linked investment companies) are the major shareholders of these companies and they in turn are held accountable through respective Ministerial reporting lines.5 Questionnaire respondents cited state leadership as being responsible for the appointment of non-listed GLCs directors in accordance to GLCs’ articles of association. But, interestingly, the vetting of independent director appointments rests with the nomination committees of respective GLC boards, not dissimilar to other privately-owned companies.

This suggests a nomination process that invites a higher degree of non-political participation and hence more aligned with the OECD best practices. Intriguingly, the OECD also reported that at present, most of the GLC board members are retired professionals or public officials from the MOF or relevant line ministries, hence suggesting an implicit need to ensure continuity in the pursuit of socio-economic objectives.

By comparison, the nomination and appointment processes of leadership positions in statutory bodies are less understood, not least the fact that the Minister has broad powers to make those appointments as stipulated in the acts of incorporation.

In the case of MARA, the Minister is given the power under section 3(3) of the Act to appoint a Chairman, a Deputy Chairman, and a maximum of nine individuals as members of the Board. The qualities of the Chairman are not spelled out other than the provision under section 4(1) of the Act where the appointment is to be made “upon such terms and conditions as the Minister may determine.” Similar power is also given to the Minister in appointing the chief executive, better known as the Director General, which further blurs the separation of Ministerial ownership and executive management control.

Therefore, without a nomination committee as in the case of GLCs or an inter-ministerial consultation process in order to vet the nominations, the governance of statutory bodies is deemed less effective than GLCs as there is an absence of checks and balance internally.

5. According to official definition by the Ministry of Finance, a GLIC has control over a government-linked company (GLC) when it is the majority shareholder or single largest shareholder and when it has the ability to exercise and influence major decisions such as appointment of board members and senior management.

8 Making sense of complexity in statutory body governance: A case study of MARA Policy Brief NO. 22

The evaluation of Board

The OECD recommends regular Board evaluations for SOEs with the end goals of understanding the Board’s overall functioning more comprehensively and identifying needs that could be addressed through future nominations. However, as reported by the OECD, only a small number of countries can in practice influence the nomination process following an evaluation (OECD, 2018). This raises concerns over the effectiveness of Board evaluation as a mechanism to impose internal discipline.

In Malaysia, the GLC boards usually go through a peer review exercise that is deemed informal to the OECD. Governments in countries such as Sweden, Thailand and Viet Nam make formal requests to SOE boards to carry out annual evaluations of their performance. In terms of informing future nominations, the peer review exercises conducted by Malaysia’s GLCs are found not to be too effective according to questionnaire respondents, and there is no strong practice of board induction and training too.

So, it is unclear if GLC Boards are generally as well-equipped as their counterparts in other countries. Also, personal characteristics such as professional working experience is no guarantee of good performance since the skills needed of a Board member is different from that of a chief executive or senior manager.

Similarly, for statutory bodies, there is no formal requirement for Board evaluations to be carried out. Section 18 of the Act provides that the accounts of MARA “shall be audited annually by the Auditor General or other auditor appointed by the Majlis with the approval of the Minister.” MARA is also required, as stated in Section 19 of the Act, to make available an annual report to the Minister that entails the activities and information relating to the statutory body’s policy “not later than 30 June of each year.”

However, the degree of adherence by the statutory bodies to these stipulations is questionable. It is not uncommon for annual reports to lapse or at least not made available for public access in a timely manner. In MARA’s case, the most recently available audited statement and annual report to the public is for the year 2017 at the time of writing. Given the Board’s shake-up following GE14 in 2018 and subsequent communication on policy shifts, the two-year lapse in statutory reports will mean that the evaluation of the conduct and performance of the Board during this entire period is severely limited.

But the more important question to understanding the statutory body’s overall performance is the level of capacity for key institutions such as the National Audit Department and MPs to play the role of checks and balances effectively. The perceived lack of capacity and resources for the MPs to conduct studies and gather information can have long-term consequences to imposing Board discipline in the pursuit of socio-economic agenda as per the mandate.

During the (PH) administration, the Dewan Rakyat Speaker with the support of MPs, had created 10 new thematic select committees, including the Special Select Committee on Major Public Appointments to vet candidates for senior public positions, as well as to create a set of policy rules on accountability and transparency of such appointments. A similar select committee can be considered to vet leadership appointments of wholly-owned GLCs and statutory bodies, with also the power to conduct public hearings on the performance of chief executives and Board members as part of the public governance process. Given the recent spate of political appointments, there is an urgency to revisit the issue of lack of capacity in the Dewan Rakyat for MPs to perform their governance duties.

www.ideas.org.my 9 The next section will explore policy shifts by MARA following changes in three different administrations and to also provide an outlook of its trajectory under the present PN government.

Divergence from MARA’s mandate: A case for public governance reform

Background

Since independence in 1957, the had high expectations that the state would resolve the socio- economic imbalances generated by British rule. In June 1965, the inaugural Bumiputera Economic Congress was convened in response to a government report indicating low corporate equity control by the Malays which had led to the establishment of MARA as an organization that would help develop Malay and later Bumiputera entrepreneurs.6

MARA has since played an invaluable role in supporting Bumiputera entrepreneurs through business loans and skills training, creating education institutions and sponsorship opportunities, as well as in investment to enhance equity holding of the community. But, at the same time, MARA also serves as a vehicle for political outreach in the Malay heartland. A Minister had always been appointed from UMNO to oversee MARA until PH took power in 2018 when Bersatu replaced UMNO as the dominant Malay party in the government.

PH embarked on a reform agenda beginning with the appointments of private sector professionals to MARA’s Board, signifying a break from previous practice. The Board also attempted to shift MARA’s commercial orientation to emphasizing education as the core pillar of Bumiputera empowerment.7 MARA’s mismanagement and financial irregularities over the years, as elaborated upon in the section below, were potential motivation for this reorientation. However, this shift was met with pushback from the Malay interest groups over concerns of Bumiputera entrepreneurship development.

The trajectory of this reform agenda is now uncertain under the PN government. New appointments have been made which also saw the return of the practice of appointing politicians as Chairman and Board Members of MARA (see Table 3).

6. See E.M. Kuhonta (2013). The Institutional Imperative: The Politics of Equitable Development in Southeast Asia. Stanford CA: Stanford University Press 7. See H.A. Lee (2020). MARA’s Future: Stuck Between Pakatan’s Attempted Revamp and Perikatan’s Hasty Takeover for discussion about MARA’s reorientation from commercial activities to education under PH’s administration.

10 Making sense of complexity in statutory body governance: A case study of MARA Policy Brief NO. 22

Table 3. MARA’s non-civil service Board members, PH (October 2018 - March 2020) and PN (March 2020 – Present)

PH (October 2018 - March 2020) PN (March 2020 – Present)

Chairman of Maybank Hasnita Hashim Azizah binti Mohd Dun Asset Management Beaufort MP (Bersatu) (Chairman) (Chairman) Group Syed Tamim Ansari Syed Chairman of Maybank Kamal Nasharuddin Vice-Chancellor of Mohamed Life Assurance Mustapha UNITEN

Tengku Mahaleel Tengku Mohamed Farid Chairman of Kowamas Former CEO of Proton Ariff Mohamed Zawawi Holidays Chairman of Malaysian Central committee Nungsari Ahmad Aviation Commission Zainal Abidin Kidam member (PAS) (MAVCOM) State assemblyman for Zakri Mohd Khir CEO of Allianz Malaysia Md. Alwi Che Ahmad Kok Lanas, Kelantan (UMNO) Chairman of Scomi Jamelah Jamaluddin Chairman of Scomi Jamelah Jamaluddin Energy Malaysia Berhad (remain) Energy Malaysia Berhad Managing Director (vacant as of 15 May Ameer Ali Mydin of Mydin Mohamed 2020) Holdings Ahmad Bazlan Che Principal Advisor of (vacant as of 15 May Kassim Enervive 2020)

Mismanagement and financial irregularities

It is stipulated in the Act for MARA Board to be given the power to carry on commercial activities - not least to establish entities in various ownership patterns so that MARA can fulfil its socio-economic development duties.8 As a result, the Minister and the Board have over the years allowed for the surge in the number of new subsidiary companies created, and curiously so since the 1990s against the backdrop of a privatization drive by the then Prime Minister (see Table 4).9 The resultant financial scandals then exposed weaknesses in the governance structure of MARA and raised questions about the stewardship of the statutory body, and whether it had diverged from its original mandate.

8. Section 6(2) of the MARA Act 1966 stipulates the powers for the purpose of the discharge of its duty. 9. Subsidiary companies under MARA can be considered as government-linked companies (GLCs) if MARA is either the biggest single shareholder or is the majority shareholder. In most cases, these subsidiary companies are wholly-owned by MARA.

www.ideas.org.my 11 Table 4. Number of new MARA subsidiary companies created (1961-2017)

1961-1970 1971-1980 1981-1990 1991-2000 2001-2010 2011-2017

4 7 5 13 17 11

Note: See Appendix A for the list of MARA subsidiary company names.

MARA began to establish property investment subsidiaries as early as 2006, some of which were established in tax haven such as Bower Property Ltd., MARA Investment (Australia) Pty. Ltd. and Billion Ascent Enterprises Corp. in the British Virgin Island. It is therefore no surprise that MARA’s more recent financial scandals were related to its global property investment, mainly through the wholly-owned subsidiary MARA Incorporated (MARA Inc.).

Better known as the ‘MARA property scandal’, it was first reported that a series of questionable transactions concerning the purchase of Unilodge in 2012, a Brisbane-based university housing and apartments, were “sold” to MARA by officers from MARA Inc. and their external partners at a price nearly doubled that of its market value. Then, in 2015, the Australian media reported yet another explosive scandal concerning the purchase of Dudley International House, an Australian student hostel network, where MARA Inc. had allegedly overpaid by RM13.8 million and implicated then Chairman Mohammad Lan Allani and CEO Halim Rahman, both non-politicians, among those who were allegedly involved in the scandal. In response, the Malaysian Anti- Corruption Commission (MACC) began investigation in 2017, but there is no conclusion to date.

The MARA property scandal pointed to the fact that professional appointment alone is no guarantee against corporate mismanagement. As described in the previous section, the lack of clarity in the mandate and role of the Board, especially given the broad provision of duties and powers in the Act, has also resulted in a deviation from its original socio-economic advancement objectives.

PH’s reform agenda and challenges

In its GE-14 manifesto, PH promised to ensure the appointment of state and national GLC Board members will be made based on merit and professionalism, and not based on politics. But the promise fell short as there were multiple cases of political appointments during PH’s 22-month rule too.

But in the case of MARA, it was notable that Hasnita Hashim was made the first non-politician to head the statutory body. The only Board member who has some political affiliation was Nungsari Ahmad, a former UMNO MP. However, the resolve to professionalize MARA leaderships were marred by the appointments of Bersatu members Sukiman Sarmani and Akramsyah Sanusi to chair MARA’s subsidiary entities – Universiti Teknikal MARA and MARA Corp. respectively. These appointments highlighted the continuous appeal of MARA as a vehicle for Malay-based political parties to seek legitimacy as defenders of the Bumiputera community.

In terms of direction, the new Board’s decision was for MARA to focus solely on education, especially to rural and low-income students while raising their academic quality. Efforts were also made to ensure that MARA graduates were employable and competitive, in line with the organization’s original mandate.

12 Making sense of complexity in statutory body governance: A case study of MARA Policy Brief NO. 22

On the other hand, MARA Corp., established in 2016 during the Najib administration, was tasked to consolidate all related assets held by 10 subsidiaries amounting to about RM400 million. This was considered necessary by the Board in light of previous incidents of abuse of powers and financial irregularities. In addition, the reformist Board had also set up an oversight committee to manage MARA subsidiary companies and to “make recommendations on whether to keep, wind-up or sell off the companies to other Bumiputera entities”.10

MARA’s reform had drawn intense push back from various Malay interest groups, particularly on the proposal to shut down MARA Corp. as an exit strategy from commercial undertakings. The Malay Chamber of Commerce Malaysia (DPMM) denounced MARA’s decision as a betrayal to the Bumiputera community by taking the easy approach in cutting investment losses. Concerns were also raised by the Malay Economic Action Council (MTEM) on the future of Bumiputera entrepreneurship and equity holdings should MARA continue with the closure of its business arms.

The different interpretation of MARA’s roles with respect to advancing Bumiputera interests reinforces the argument about the lack of clarity in mandate and roles of the Board. The Act included both commercial development and educational objectives as duties of the Board, so the push back from Malay interest groups over the scaling down of MARA’s commercial activities was not totally unfounded. At the same time, this push back over a pivot in MARA’s policy could have been better dealt with if the Board nomination and appointment processes were made more inclusive and representative of various stakeholder interests.

The return of political appointments and MARA’s future under PN

PH’s reform agenda was halted after losing power in late February 2020. The new MRD Minister Abdul Latiff, an UMNO MP, terminated the services of the eight Board members. This included the replacement of Council Chair Hasnita Hashim by , a Bersatu MP. Given PN’s need to boost legitimacy and its brand as a Malay-dominant government, how will the return of political appointees in MARA’s Board affect the trajectory of reform started under PH?

First, under this new Board, it is likely that MARA Corp. will assume a more proactive role in making investments on behalf of MARA by tapping into existing funds and business loans. New subsidiary companies may also be created to penetrate into new industries that are considered promising. Since a general election has to be called in two years’ time, it is possible for MARA to pursue greater commercial-based activities, effectively reversing the education-centric policy under PH, in order to accumulate resources for the purpose of political outreach.

Second, MARA’s various investment arms and subsidiary companies are expected to be utilized as a platform for dispensing business financing. Considering the economic implications of the Covid-19 pandemic, MARA’s ability to sustain Bumiputera entrepreneurship could be instrumental to preserve income and employment. However, given past episodes of mismanagement implicating both politicians and non-politicians, it is of concern whether the existing governance structure in MARA is resilient enough to safeguard against malpractices and political interference. The lapse in MARA’s audited statement and annual report as highlighted in the previous section further complicates the ability for public institutions, including Parliament and the media, to monitor and evaluate the performance of the Board in a timely manner.

10. See (2019). Mara to refocus: No more new investments except in education.

www.ideas.org.my 13 In short, the broad interpretation of MARA’s mandate and the powers that are provided to the Minister and Board members in the Act to pursue both commercial and social undertakings might result in an undue emphasis on investment returns at the expense of relatively less profitable social programmes. By having access to MARA’s finances and its commercial reach globally, the quality and integrity of the Board’s stewardship have been regularly compromised, first by individuals seeking personal gains, and second by the Board’s collective failure to call out malpractices in a timely manner. So, public governance reform is both sensible and necessary in order to better align personal interest to the public interest.

Conclusion

The focus on political appointments to government-linked entities as means to shore up support for the Prime Minister is a symptom of a more fundamental problem with public governance. This paper shows that governance is more complex and by merely ensuring appointment of non-politicians on the boards does not ensure transparency and efficiency in allocation of resources. MARA is a case in point.

Instead, this paper highlights the need to fix the governance structure, calls for making the entire process autonomous and transparent, and empowering the Boards of government-linked entities by redefining their mandate, roles, and responsibilities.

The lack of strength and capacity of other public institutions such as the Parliament and the Attorney General’s Chamber to play an effective check-and-balance role also necessitate a serious discussion on broader public governance reform. Nowhere is this a more urgent task considering the pace and scale of recent political appointments to government-linked entities.

14 Making sense of complexity in statutory body governance: A case study of MARA Policy Brief NO. 22

Appendix A

No of subsidiary companies created by MARA

1961-1970 1971-1980 1981-1990 1991-2000 2001-2010 2011-2017 4 7 5 13 17 11 Harta Prima Masmara Travel Premiera Hotels Pelaburan MARA Liner Powerwell Realties Sdn & Tours (S) Pte. & Resorts Sdn. MARA Berhad Sdn Bhd Holdings Ltd. Bhd Ltd. SG Bhd. MARA YPM Insurance Kayu Sedia Sdn Rural Capital PMB Investment Kolej Poly-Tech Investment Brokers (1974) Bhd Sdn Bhd Berhad MARA Sdn Bhd (Australia) Pty Sdn Bhd Ltd BVI PMB Nominees UniKL Yayasan Giatmara Sdn Carlton Garden (Tempatan) Sdn PMB Tijari Bhd Resources Sdn Pelajaran MARA Bhd Pte. Ltd. SG Bhd Bhd Pusat MARA MARA Glocal Link Med Bumikar Pembangunan Aerospace & Marinn Property Incorporated Travel & Tours MARA Sdn Bhd Reka Bentuk Technologies Pte. Ltd. SG Sdn Bhd (M) Sdn. Bhd. Sdn Bhd Sdn Bhd MARA Universiti Excellent Glocal Link (M) F.I.T.Center Sdn Peters Equity Pty Teknikal MARA Ventures Sdn Sdn Bhd Bhd Ltd. Australia Sdn Bhd Bhd Masmara Travel Malaysia France Technology Park Queville Pty Ltd. & Tours Sdn Institute Sdn Malaysia College Australia Bhd Bhd Sdn. Bhd. Asia Bower Institut Infotech PMB Consulting Aerotechnic Property Ltd MARA Sdn Bhd Sdn Bhd Sdn. Bhd. BVI Strand Thrushcross PMB Assets Sdn Aerospace Land Holdings Bhd Malaysia Sdn Ltd BVI Bhd

KPTM MARA Beaumont Corporation Corporation House Ltd. BVI Sdn Bhd Sdn Bhd British Malaysian ICmic UniKL Edubiz Institute Sdn Academy Sdn Development Bhd Bhd Sdn Bhd

Mara Inc. Vortex Holdings P.C.M Sdn Bhd London Ltd UK Ltd.

www.ideas.org.my 15 Raffcom Mara Ventures Technologies Ltd BVI Sdn Bhd Unimara Sdn PMB Analytics Bhd Sdn Bhd

Porthouse Marketing Ltd BVI Symbolic Avenue Sdn Bhd

UniKL Medical Services Sdn Bhd

1Media IPTV Sdn Bhd

Source: Data compiled from MARA 2017 Annual Report, CTOS Credit website, EMIS Company Profile website, and respective company website.

16 Making sense of complexity in statutory body governance: A case study of MARA Policy Brief NO. 22

Reference

Credit Check, Credit Score, Credit Report & Credit Bureau | CTOS. 2020. CTOS - Malaysia’s Leading Credit Reporting Agency. https://ctoscredit.com.my.

Emerging Markets Research, Data And News | EMIS. 2020. Emis.Com. https://www.emis.com.

E.M. Kuhonta (2013). The Institutional Imperative: The Politics of Equitable Development in Southeast Asia. Stanford CA: Stanford University Press

H.A. Lee (2020). MARA’s Future: Stuck Between Pakatan’s Attempted Revamp and Perikatan’s Hasty Takeover. Singapore: ISEAS – Yusof Ishak Institute

Majlis Amanah Rakyat Act 1966.

Majlis Amanah Rakyat, 2017 Annual Report, p. 219 - 221

Malaysiakini, December 21, 2019 “Mara to refocus: No more new investments except in education”

OECD (2015), OECD Guidelines on Corporate Governance of State-Owned Enterprises, 2015 Edition. Paris: OECD Publishing

OECD (2018), Professionalising Boards of Directors of State-Owned-Enterprises: Stocktaking of National Practices. Paris: OECD Publishing

www.ideas.org.my 17 Notes

18 Making sense of complexity in statutory body governance: A case study of MARA Policy Brief NO. 2

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www.ideas.org.my Reg №: 1219187-V Selection of IDEAS’ Publications (2019 - 2020)

Policy Ideas

Policy Paper No 63: The Political Economy of Federal-State Relations: How the centre influences resource distribution to the periphery by Tricia Yeoh (May 2020)

Policy Paper No 62: SMEs’ Compliance Cost in Malaysia by Adli Amirullah, Aiman Wan Alias, Sabrina Sabu (September 2019)

Policy Paper No.61: Malaysian Property Market: Affordability and the National Housing Policy by Carmelo Ferlito (June2019)

Policy Paper No.60: Economic Impact of Granting Refugees in Malaysia the Right to Work by Laurence Todd, Adli Amirullah and Wan Ya Shin (April 2019)

Policy Paper No.59: Reviving the Spirit of Federalism: Decentralisation Policy Options for a New Malaysia by Tricia Yeoh (April 2019)

Brief Ideas

Brief Ideas No 21: GLIC Footprint in the Private Sector: Policy Dilemma by Lau Zheng Zhou and Zulaikha Azmi (April 2020)

Brief Ideas No 20: COVID-19 and the MCO: An Exit Strategy for Malaysia by Carmelo Ferlito (April 2020)

Brief Ideas No 19: Education during COVID-19 by Wan Ya Shin (April 2020)

Brief Ideas No 18: GLC Monitor 2019-State of Play Since GE14 by Terence Gomez, Lau Zheng Zhou and Yash Shewandas (October 2019)

Brief IdeasNo 17: A Counter-Cyclical Tax Reform by Carmelo Ferlito (October 2019)

IDEAS Position Paper: Making Shared Prosperity a Reality in Budget 2020 by IDEAS Research Team (September 2019)

Reports

Projek Pantau: Final Report of the Pakatan Harapan Government’s Performance - May 2020

WHITEPAPER: Rare Diseases in Malaysia - December 2019

Projek Pantau Report Card No. 3 - December 2019

Effectiveness of State Trading Enterprises in Achieving Food Security: Case Studies from BERNAS in Malaysia and BULOG in Indonesia - November 2019

Navigating the Palm Oil Debate - October 2019

Policy IDEAS are IDEAS’ regular publications that introduce and propose ideas for policy reforms based on analysis of existing policies or best practices.

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