KUALA LUMPUR, Feb 24 — The government is prepared to review dividend governance guidelines for government-linked companies (GLCs) following concerns over transparency and consistency, Deputy Finance Minister Liew Chin Tong said today.

He said decisions by several subsidiaries — including entities under Petroliam Nasional Berhad (Petronas) — to withhold dividends were made by their respective boards after weighing cash flow needs, investment commitments, asset maintenance and capital-strengthening requirements.

“Although some companies recorded profits, the priority was placed on operational sustainability and reinvestment rather than short-term distributions.

“At the same time, Petronas through its parent company paid RM32 billion in dividends to the government for the 2024 financial year, reflecting the group’s overall contribution when assessed holistically,” Liew said in his winding-up speech on the Auditor-General’s Report 1/2026 debate in Parliament.

Government open to tightening dividend governance

Liew said dividend payments remained commercial decisions made by boards of directors, as accounting profits alone do not determine whether payouts are appropriate.

He added that companies must account for medium- and long-term commitments such as development expenditure, maintenance costs and working capital needs.

However, acknowledging lawmakers’ concerns, he said Putrajaya is open to improving existing governance frameworks.

“The government is prepared to evaluate enhancements to current guidelines to ensure a balance between fiscal discipline and the financial sustainability of government-owned companies, while ensuring commercial autonomy goes hand in hand with accountability to shareholders,” he said.

The move, he added, signalled possible reforms to dividend governance rules governing state-owned firms.

Why profitable subsidiaries did not pay dividends

Liew explained that several companies retained earnings due to financial and operational considerations.

Cenviro Sdn Bhd used profits and available cash to redeem RM100 million worth of Redeemable Convertible Preference Shares while maintaining sufficient operational liquidity.

Cradle Fund Sdn Bhd did not declare dividends for 2022 and 2023 due to operating cash flow constraints, reliance on grants and partially unrealised profits, with the decision approved by its board and notified to the Finance Ministry.

IJN International Sdn Bhd’s profits were relatively small compared to contributions from its main subsidiary, Institut Jantung Negara Sdn Bhd, while funds were required for operational expansion.

Meanwhile, Liew said Sirim Calibration Sdn Bhd and Sirim Academy Sdn Bhd postponed dividends during financial recovery and asset reinvestment phases, although Sirim Academy has since stabilised and declared dividends for the 2023 financial year.

Dormant government firms to be dissolved once issues resolved

Addressing concerns over dormant GLCs, Liew said some entities inactive for more than five years cannot yet be dissolved due to outstanding debts, liquidation processes or unresolved legal claims.

“These companies will be dissolved once all obligations and legal matters have been settled,” he said.

EPF returns remain strong despite subsidiary losses

On retirement fund performance, Liew said the Employees Provident Fund (EPF) received RM2.271 billion in dividend and interest income from subsidiaries in 2024, which was distributed to members.

He further explained that losses recorded by 12 subsidiaries were largely accounting or structural in nature rather than signs of failing investments.

Primary factors included capital financing structures, early-stage investments undergoing a typical “J-curve”, unrealised fair-value adjustments due to market fluctuations, and entity-level accounting losses despite profitable overall positions.

Operational challenges such as low occupancy rates and ageing assets also affected some companies, particularly within the property sector, he said.

Liew said mitigation measures now under way include more aggressive leasing strategies, commercial upgrades, attracting new tenants and reviewing potential asset disposals.

KWAP investments show mixed performance

On Retirement Fund Inc (KWAP), Liew said it holds RM7.836 billion invested across 19 subsidiaries, of which nine recorded combined profits of RM252 million while 10 posted losses totalling RM93 million.

Six loss-making companies recorded losses for three consecutive years, largely due to low occupancy rates, capital structure issues and long-term strategic investment positioning, he said.

He cited Capsquare Tower Sdn Bhd, owner of Menara Capsquare in Kuala Lumpur, which recorded occupancy of about 42 per cent in 2024.

Following the appointment of Knight Frank Malaysia as asset manager and leasing agent, a local firm has signed a nine-year tenancy beginning March 1, 2026, expected to lift occupancy to about 61 per cent.

“Some subsidiaries recorded accounting losses due to shareholder loan interest costs despite strong operational occupancy, with restructuring planned when loan contracts expire in 2027.

“Four subsidiaries were also structured for tax efficiency, particularly to enable capital gains tax exemptions in future property disposals.

“Overall, some recorded losses stem from financing structures and long-term investment strategies rather than fundamental asset weaknesses,” Liew said.

 Malay Mail – Malaysia