KUALA LUMPUR: The GEAR-uP programme announced by the government is a tremendous positive move designed specifically to reinforce the domestic economy.
The programme aims to harness the liquidity of RM1.8 trillion in assets under management currently held by six GLICs. The Employees Provident Fund holds by far the largest slice of this RM1.8 trillion pie, at 63%.
The first round of the GEAR-uP programme will see RM120 billion channelled directly into the local economy through direct domestic investment.
It must be noted that of the six GLICs involved, four have members of the public contributing directly into them, namely EPF, Permodalan Nasional Berhad, Lembaga Tabung Haji and Lembaga Tabung Angkatan Tentera.
Institute of Corporate Directors Malaysia fellow Mazli Noor said it is crucial to establish clear, strategic and critical KPIs for these investments upfront to ensure the programme’s success and safeguard the public that make up their investor base.
“Perhaps the most important of these is to establish a minimum return value that must be achieved by the GLICs involved, from the investments executed directly under the GEAR-uP programme.
“Clear and tangible KPIs must be established based on what returns are deemed feasible and reasonable, to ensure the welfare and savings of contributing members are guaranteed. In my view, the optimal annual return level must be no less than 6%.”
Mazli said a classic example is Kumpulan Wang Amanah Pencen’s (KWAP) own success in turning around its financial performance.
KWAP reported excellent results for the financial year ended Dec 31, 2023, recording a net income of RM9.7 billion, almost 37 times higher than the RM263 million recorded in 2022.
“Given its strong position, KWAP is very capable of absorbing an even higher proportion of this commitment, thereby reducing the financial burden on the government.
“In addition, all GLICs, especially those involved in the GEAR-uP programme, must undertake to function strictly as fund managers and institutional investors, that is investing strategically in order to maximise shareholder returns, rather than placing themselves as default business owners or managers.”
Mazli said a prime example is Norway’s Government Pension Fund Global, the world’s largest sovereign wealth fund.
Despite its size, the fund only invests in fundamentally small stakes in some 9,000 companies worldwide, including the likes of Apple, Nestle, Microsoft and Samsung.
In Malaysia alone, the fund holds shares in 214 Malaysian companies worth US$2.32 billion (RM10.26 billion) as of June 2024 – although none are in real estate or renewable energy – and another US$178 million (RM789 million) in Malaysian Government bonds.
The fund’s total market value at the time of writing stands at more than 17 trillion Krone, (RM6.7 trillion).
“Given the right discipline and strategies our GLICs can also achieve the same results, fulfilling their raison d’etre. It bears repeating that the main objective of GLICs must be to provide tangible, sustainable and long-term returns to its members and shareholders.”
