In Malaysia, government-linked companies (GLC) and multinational corporations (MNC) are different. In literature studies, it is found out that multinational corporations are not only reliable with a good reputation but also they are successful. On the other hand, GLCs are often indulged in fraudulent practices or mismanagement. The state-owned enterprises are considered as the leading providers of basic necessities such as utilities, postal, public transport, airports, sewerage, and construction. The Malaysian GLCs make 5% of the total national workforce, which is also a 36% of the stock exchange market. This capitalization is worth 54% in Kuala Lumpur Index (Surbaini, K.N., 2018). The discussion provides that government-linked companies are significant in the Malaysian economy, so there should be intensive research in this regard.
GLCs are considered hybrid companies that can get financial returns only when they accomplish their social responsibilities—these small earlier public enterprises or government agencies that served social purposes. The privatization policy in Malaysia was introduced in the 1980s that was on the belief that it will drive government-based agencies to help them become cost-effective. Despite privatization, all the hold of government was maintained on GLCs. The government is a supreme body that can exercise its power to control all the activities, appoint senior management, as well as the board of directors. In addition to this, the decision making, strategy formulation, divestment, and acquisition-based decisions were also conducted by the government (Yazid, A.S., Hussin, M.R., and Daud, W.N.W., 2011).
Due to all these conditions, the financial performance of these companies was not favorable, so the government remained concerned about it. In Malaysia, it is also argued that GLCs are large, so there are main problems of strategic direction and internal control. The other arising issues are low productivity, high gearing ratio, handling of procurement, and less effective performance management systems. However, the dual objectives GLCs have to consider are the maximization of the return of shareholders. Rewarding and evaluating employees is also a big issue because there is a weak linkage in reward and performance. It is argued in studies that employees in GLCs are prone to inflate their accomplishments, while seniors are in a better position to use corporate ladder for their own benefits (Kumaran, V.V., Abdullah, H. and Hussin, F., 2015).
On the contrary, the MNCs in Malaysia are manufacturing firms that are based on import substitution production. The main areas linked to MNCs are chemicals, foods, and pharmaceuticals. After Vietnam and Thailand, Malaysia is the third favorite country for foreign direct investment. In MNCs, the export margin is high, so dramatic transformation was seen in 1970, and in the 1980s, the domestic market became a secondary manufacturing hub. Foreign direct investment has a strong role in any country’s economy. The MNCs in Malaysia is promoting domestic firms with this concept, so advanced technologies are better attracted under spin-off firms, subcontracting, and training and OEM activities. The government is providing significant support to MNCs to flourish and invite foreign direct investment by promoting the labor industry, quality investment, and provoking in discretionary authority. Multinational corporations are conducting business activities under franchise and joint venture setup (Lau, Y.W., 2013).
In Malaysia, multinational corporations from more than 60 countries are investing, and 182 international procurement centers are built. Germany, the US, Japan, are the leading countries that are interested in foreign direct investment. The electronics and manufacturing goods make most of the export. MNCs role to promote trade and international growth relations cannot be ignored. They also provide a significant incentive to the economy to establish subsidiaries that can give benefits in the long run (Issham, I., Fazilah, A.S.M., Hwa, 2008). Some crucial incentives are the taxation allowances, rights of ownership for investment, high tech industries involvement, and regional relationships that offer learning opportunities and enhance research and development activities. Government is a preeminent body that can practice its capacity to control all the exercises, choose senior administration, just as top managerial staff.
The environment for MNCs in Malaysia is conducive that allows for development and self-improvement for employees. The most crucial factor that promotes the growth of MNCs in an economy is the management of employees (Norhayati, M. and Siti‐Nabiha, A., 2009). Managing employee sand performance through reward and appraisal increases efficiency and retains them. If employees in any organization feel less encouraged and motivated, it directly impacts their productivity. The role of MNC in managing trade is also significant due to globalization. The focus of Malaysia on its MNCs is considerable in terms of managing incentives, giving them tax breaks, and maintaining employment prospects for people (Norhayati, M. and Siti‐Nabiha, A., 2009).
Part of the growth in MNCs is linked to the strategic roles that foreign factories perform, such as source factory, offshore factory, output, and contributory factory & lead factory. These factories focus on product development and life cycles. They also offer the saturated and fragmented market that is aligned on increased demand from customers, rapid process advancement, and technology-based dynamic situations. In Malaysia, MNCs are working as a powerful vehicle that is supporting production and capital based functions (Surbaini, K.N., 2018). These functions are not limited but extended to technical and managerial skills/knowledge across the globe. Diversity is also the critical element to consider in MNCs.
Since 2004, the Malaysian government has undertaken the initiatives to expand the scope of GLCs as per their competitors in the same regions. This program was known as the transformation of GLCs, and it was established to intensify the culture of commercial orientation. A committee known as Putrajaya High Performance worked in 2005 to follow this transformation program, so a quarterly report was set up to implement the government policies (Kumaran, V.V., Abdullah, H. and Hussin, F., 2015). Due to the GLC management, many restructuring processes were developed. The khazanah National Bhd was redeveloped, and composition initiatives under key performance indicators were introduced. GLCs in Malaysia have enhanced accountability structure and established divisional accounting.
The role of multinational companies in Malaysia is considered exploitative that is hostile to human rights and also devastating stablished communities. This process is linked to development, which is unfavorable for the local communities. GLCs are working under the strategic challenges of talent management to improve policies and practices regarding the virtual workplace, labor market, and diverse workforce. Tenaga Nasional Berhad in Malaysia is the largest utility company. The electricity company is most efficient and involved in the distribution, transmission, and generation of electricity with excellence. Taking this company as an example, the employees’ competencies in the company are enhanced and promoted under structural programs to improve efficiency (Tahir, W.M.M.W. and Sinnasamy, G., 2012).
To talk about multinational corporations in Malaysia, the foreign subsidiary is promoted by dual imperatives of the parent company. There is a growing trend of MNCs to leverage the best practices for organizations across their companies/subsidiaries so that organizational skills can be improved allover in the world. Some traditional literature assumes that corporate headquarters are responsible for the decision making aspects and foreign subsidiaries’ capabilities. Due to cultural differences, MNCs are facing issues in these companies yet joint ventures are also facing conflicting pressures. Moreover, the dynamic, methodology definition, divestment, and procurement based choices were additionally led by the government. Because of every one of these conditions, the money related execution of these organizations was not good so the government stayed worried about it. GLCs are involved in talent management activities to establish a competent workforce just according to the vision and mission of the company. It is argued that to revive the private investment, the government has to consider policy and investment plans to management talent (Wahab, S.N.A.A. and Ramli, N.A., 2013). To achieve talent management expertise, the government has to introduce divestment plans, but GLCs in Malaysia are facing issues regarding the acquisition of finance and property developers. GLCs are crowding out the options of investment, yet no empirical evidence is supporting it. The role of GLCs cannot be ignored for the development of the economy because they have a commercial objective and also involve in management position, financing, restructuring, and contract awards. These companies and affiliate subsidiaries are promoting development. Most of these GLCs are associated with banking, communication, agriculture, and retail trade so there is strategic involvement. In Malaysia, it is likewise contended that GLCs are huge in size, so there are primary issues of key heading and central control. The remote direct venture has a stable job in any nation’s economy (Yazid, A.S., Hussin, M.R. and Daud, W.N.W., 2011).
The intra-firm organizational network is aligned on MNCs while its main categories are autonomous, active, receptive, and quiescent subsidiaries. The responsive industries are integrated ones while MNC’s operations hold little power when related to local markets. The autonomous subsidiaries are not so much integrated with MNC’s services and networking. The MNCs in Malaysia are advancing local firms with this idea, so trend-setting innovations are better pulled in underside project firms, subcontracting, and preparing and related exercises. Both MNC and GLCs are significant for the economic development of Malaysia.
References
Issham, I., Fazilah, A.S.M., Hwa, Y.S., Kamil, A.A., Ayub, A.A. and Ayub, M.A., 2008. Economic value added (eva) as a performance measurement for glcs vs non-glcs: evidence from bursa malaysia. Prague Economic Papers, 17(2), pp.168–179.
Kumaran, V.V., Abdullah, H. and Hussin, F., 2015. Growth Slowdowns and Role of Government Linked Companies (GLCs) in Malaysia. Advanced Science Letters, 21(6), pp.2073–2076.
Lau, Y.W., 2013. Government-linked companies (GLCs) performance – a structuration perspective: Malaysian evidence. International Journal of Critical Accounting, 5(2), p.213.
Norhayati, M. and Siti‐Nabiha, A., 2009. A case study of the performance management system in a Malaysian government linked company. Journal of Accounting & Organizational Change, 5(2), pp.243–276.
Surbaini, K.N., 2018. Training Effectiveness And Employee Performance In A Malaysian Government-Linked Company.
Tahir, W.M.M.W. and Sinnasamy, G., 2012. Dividend policy: Evidence of Government-Linked Companies (GLCs). 2012 International Conference on Innovation Management and Technology Research.
Wahab, S.N.A.A. and Ramli, N.A., 2013. Determinants of Capital Structure: An Empirical Investigation of Malaysian Listed Government Linked Companies (GLCs). SSRN Electronic Journal.
Yazid, A.S., Hussin, M.R. and Daud, W.N.W., 2011. An Examination of Enterprise Risk Management (ERM) Practices among the Government-Linked Companies (GLCs) in Malaysia. International Business Research, 4(4).