Malaysia's Public Enterprises A Performance Evaluation

Malaysia's public enterprises (PEs) account for almost one-third of the country's GDP. This share is among the highest in the world, and clearly surpasses the importance of PEs in other ASEAN countries. In this article the performance of Malaysia's PEs is analysed. The evaluation of performance is based on trends in the number of profitable PEs; trends in the rates of return; and comparisons with private sector on the basis of profitability and cost efficiency. It is found that PEs had low rates of return during the entire period of the study, and well below the opportunity costs of funds. An estimate of the foregone output due to the inferior performance of PEs is derived and the maximum estimates are found to approach ten per cent of the GDP in 1986. Explanations for low performance, in terms of theoretical reasoning, government policies, and the Malaysian institutional setting, are also provided. Malaysia's public enterprises (PEs) account for almost one-third of the country's gross domestic product (GDP). This share is among the highest in the world, and clearly surpasses the importance of PEs in other ASEAN countries. In Malaysia, pub lic enterprises have been used as a response to market failure; for achieving income distribution goals and restructuring of society; for the pursuit of socio-economic objectives; and for the creation of a heavy industrial base. Their growth has been spectacular and unrestrained. Once set up, they acquired a dynamism of their own. Relatively autonomous corporations and holding companies have, for a variety of reasons, expanded and di versified. Often this expansion has been in areas not envisioned at the time of their establishment