Sarawak to decide fate of SOEs with no strategic value in State Budget 2027

KUCHING (Sept 22): The future of Sarawak-owned enterprises (SOEs) that no longer serve a purpose or hold strategic value will be determined by the policy direction and decisions to be outlined in the Sarawak 2027 Budget, said Premier Datuk Patinggi Tan Sri Abang Johari Tun Openg.

However, he declined to say whether the state government had identified any SOEs that could see government funding injections discontinued, saying such matters should be left until the Budget is tabled.

“It is the same matter as I explained earlier. That is the policy direction. Wait for the Budget, it is not the Budget yet,” he said when met by reporters after the Sarawak SOEs Transformation Programme — Phase 2 here today.

He was responding to a question on whether the state government had identified SOEs that could potentially have government funding injections discontinued ahead of the Sarawak 2027 Budget.

In his keynote address earlier, Abang Johari said Sarawak was prepared to consider consolidating, merging and restructuring several SOEs to ensure the state’s structures and assets generated greater value.

He said the Phase 2 study of the Sarawak SOEs Transformation Programme had identified several possible approaches, including consolidation, merger, enhancement and refocusing of selected entities.

Among the matters being considered was the consolidation of several port authorities under the Sarawak Ports Authority (SARPA), he said.

“These are preliminary considerations. They require proper feasibility studies, due diligence, and careful assessment.

“But where there are overlapping mandates, duplicated functions or structures that no longer serve us effectively, we must be prepared to make difficult decisions,” he said.

Abang Johari said subsidiaries and investments must have a clear strategic justification, whether to support the mandate of the parent company, create value, provide specific capabilities or open up strategic opportunities.

“Where these criteria are not met, we must consider the appropriate course of action – whether restructuring, consolidation, divestment or, where necessary, winding up.

“If it is, strengthen it. If it can be improved, improve it. If two organisations can create greater value by working together, bring them together. If an organisation needs to return to its core mandate, refocus on it,” he said.

He stressed that decisions on the structure of SOEs should not be driven by sentiment but guided by the long-term interests of the individual entities and Sarawak as a whole.

“This is not restructuring for the sake of restructuring. It is about creating greater value from the state’s assets and investments,” he added.

Abang Johari said the study had also identified dormant, inactive and underperforming subsidiaries that required attention.

He said entities should not be maintained simply because they had once served a purpose.

“We should not continue to maintain an entity simply because it once served a purpose,” he said.

He said portfolio rationalisation did not necessarily mean downsizing organisations, but would allow capital and talent to be concentrated in areas where they had genuine competitive advantages.

“By exiting non-core activities, an SOE can focus capital and talent on businesses where it has a genuine advantage.

“This is how a portfolio becomes stronger without necessarily becoming larger,” he said.

Meanwhile, Abang Johari said SOE transformation could not be implemented in isolation, as the study had identified several issues beyond the control of individual entities, including policies and regulations, inter-agency coordination, funding, infrastructure and market constraints.

For example, he said regulatory fees imposed by the Sarawak Rivers Board (SRB) had not been reviewed for more than 30 years, indicating that the relevant regulatory framework would also need to evolve if the entity was to strengthen its revenue and financial sustainability.

“If we want the entity to strengthen its revenue and become more sustainable, the framework around it must also evolve,” he said.

He said a similar approach was needed across other sectors, with ministries, state agencies and SOEs required to work together to address issues beyond the jurisdiction of individual entities.