Skip to main content
Government Investing Agencies - Less Is More
There Are Valid Reasons For Their Existence

Rohan888 wrote the following: "Should a country actually hold shares in companies? You mention Temasek as an example, but I think there are dozens of countries who do not own any shares in any (local or foreign) companies or only limited (for instance only the natural resources industries like oil and gas exploration). I think that the Singaporean example is both positive and negative. Most initiatives seem to come from the government holdings, not from private investors/inventors etc., not sure if that is so healthy for the future." Thank you Rohan888 for helping me to clarify my opinion.

As a rule of thumb, governments should NOT own shares in companies (local or foreign) unless the industry or sector needs to be protected or controlled (to some extent) - e.g. utilities, telecommunications, media are good examples. So, the first exception is where national interest is at stake. Some countries will also pull in the media as a political mouthpiece. Then there are natural resources within the country that needs "protection" to save it from being controlled by foreign parties - such as oil & gas reserves, ports, timber concessions, etc...

One can argue that a government can already control investment flows into and out of the respective sectors by laws/approval and review committees, hence you do not actually need to own them. Yes and no, when the assets are huge, no one company can even think of swallowing such an asset, least of all try and control it.

The second reason why governments have to get involved is size. Assets can be too big for a company. For Malaysia & Singapore's case, certain ventures may require too high a capital base, thus a government linked venture has to step in. Things like the MSC, Putrajaya, the two casinos in Singapore, national car project, industrial parks ... require government intervention.

The third reason is diversification. Malaysia and Singapore are small countries and the industrial base is tiny. Neither do we have critical mass of population to support our economic production, hence we need to trade and export - which means we have to be reliant on other countries. We need to diversify our "accumulated earnings" into industries that we are not strong in to solidify and secure our economic competitiveness. Say, a country like Sri Lanka and 90% of export earnings is from exporting tea leaves. Plus they do not reinvest the earnings into other foreign industries. The country would be so vulnerable to the vagaries of price movements in the tea market. Even if they can produce and export 10% more tea each year, it will ruin the nation if the price of tea falls by 15% every year or crops get wiped out every now and then.

A state investment vehicle is usually vibrant when a country has managed to record good trade surpluses for an extended period. In Singapore, I agree that the government linked arms are very strong and their decisions are heavy handed. It could mean that nothing big will be accomplished or undertaken by private enterprises if they keep inviting government linked arms to take the lead in significant projects. These state units should be there to "support" local companies, allow entrepreneurship to bubble among the masses - once the public get the feeling that the big stuff are left for the big fish, no one will bother to venture out from their pond to the big sea. No one should feel that nothing ever moves unless the government moves! In Malaysia, control in certain companies should be reduced by the government gradually - intervention by the government should be minimised, hands-off policy... less is more.

Comments

zentrader said…
Look at Russia and China (last 50yrs), I think a State Planned Economy should be a minus sign. A lot of misallocation of resources.

No good at economics so please don't laugh. :(

Dali, any report card for vision2020? You think is a fantacy or reality? Tq

Popular posts from this blog

My Master, A National Treasure

REPOST:  Its been more than two years since I posted on my sifu. This is probably the most significant posting I had done thus far that does not involve business or politics. My circle of close friends and business colleagues have benefited significantly from his treatment.


My Master, Dr. Law Chin Han (from my iPhone)

Where shall I start? OK, just based on real life experiences of those who are close to me. The entire Tong family (Bukit Kiara Properties) absolutely swear that he is the master of masters when it comes to acupuncture (and dentistry as well). To me, you can probably find many great dentists, but to find a real Master in acupuncture, thats a whole different ballgame.


I am not big aficionado of Chinese medicine or acupuncture initially. I guess you have to go through the whole shebang to appreciate the real life changing effects from a master.


My business partner and very close friend went to him after 15 years of persistent gout problem, he will get his heavy attacks at least…

PUC - An Assessment

PUC has tried to reinvent itself following the untimely passing of its founder last year. His younger brother, who was highly successful in his own right, was running Pictureworks in a number of countries in Asia.

The Shares Price Rise & Possible Catalysts

Share price has broken its all time high comfortably. The rise has been steady and not at all volatile, accompanied by steady volume, which would indicate longer term investors and some funds already accumulating nd not selling back to the market.


Potential Catalyst #1

The just launched Presto app. Tried it and went to the briefing. Its a game changer for PUC for sure. They have already indicated that the e-wallet will be launched only in 1Q2018. Now what is Presto, why Presto. Its very much like Lazada or eBay or Alibaba. Lazada is a platform for retailers to sell, full stop. eBay is more for the personal one man operations. Alibaba is more for wholesalers and distributors.

Presto links retailers/f&b/services originators with en…

How Long Will The Bull Lasts For Malaysia

Are we in a bull run? Of course we are. Not to labour the point but I highlighted the start of the bull run back in January this year... and got a lot of naysayers but never mind:






























p/s: needless to say, this is Jing Tian ... beautiful face and a certain kind of freshness in her looks and acting career thus far



http://malaysiafinance.blogspot.my/2016/12/bank-negara-may-have-switched-on-bull.html


I would like to extend my prediction that the bull run for Bursa stocks should continue to run well till the end of the year. What we are seeing for the past 3 weeks was a general lull where volume suddenly shrunk but the general trend is still intact. My reasons for saying so:

a) the overall equity markets globally will be supported by a benign recovery complemented by a timid approach to raising rates by most central banks

b) thanks to a drastic bear run for most commodities, and to a lesser extent some oil & gas players, the undertone for "cost of materials" have been weak and has pr…