GLCs must review startup investment frameworks after fraud case, says PAC chair

Malaysian government-linked companies (GLCs) must scrutinize their investment evaluation frameworks, particularly for high-risk startups, following a significant fraud case. Datuk Mas Ermieyati Samsudin, chairman of the Public Accounts Committee (PAC), stated that the incident involving Kumpulan Wang Persaraan (KWAP) should serve as a critical lesson for all parties.

She emphasized the need to strengthen due diligence processes and investment assessments, especially when public funds are involved. "This case needs to be an important lesson for KWAP and also for other GLCs," Mas Ermieyati told Utusan Malaysia. "The due diligence process and investment assessment must be strengthened and given attention, especially for high-risk investments involving technology companies or immature companies like startups."

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This case needs to be an important lesson for KWAP and also for other GLCs. The due diligence process and investment assessment must be strengthened and given attention, especially for high-risk investments involving technology companies or immature companies like startups.

Previously, Prime Minister Datuk Seri Anwar Ibrahim revealed that KWAP had been defrauded of approximately RM200 million by an Indonesian aquaculture startup, eFishery. The company allegedly manipulated financial reports to attract investment, also ensnaring prominent international investment institutions like Temasek Holdings, SoftBank, 42XFund, and Northstar Group.

Mas Ermieyati stressed that investments using public money require stricter, more transparent reviews based on good governance. She acknowledged that GLCs should not entirely avoid investing in startups, as the sector is vital for nurturing new companies, including those founded by young people. "GLCs can invest in startups that are just beginning but must undergo stricter reviews. If we are too strict, preventing GLCs from investing in startups, then startups will die. We really need many startup companies, especially involving young people with various creative ideas," she said.

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GLCs can invest in startups that are just beginning but must undergo stricter reviews. If we are too strict, preventing GLCs from investing in startups, then startups will die. We really need many startup companies, especially involving young people with various creative ideas.

She called for a primary focus on monitoring, independent reviews, and robust standard operating procedures (SOPs) for investment decisions. Key weaknesses to address include over-reliance on company-provided information without sufficient independent verification. "I think it's time for all GLCs and government-related funds to review their investment assessment frameworks," she stated. "This includes strengthening independent due diligence, forensic audits, especially for high-risk investments, and establishing an early warning system."

Mas Ermieyati also highlighted the need to clarify accountability for every investment decision to ensure responsible parties are not absolved if weaknesses or losses occur.

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I think it's time for all GLCs and government-related funds to review their investment assessment frameworks. This includes strengthening independent due diligence, forensic audits, especially for high-risk investments, and establishing an early warning system.