Government Linked Companies Transformation
(GLCT) Programme
MALAYSIA
Presenter:
Abdul Aziz Abu Bakar
CEO, Malaysian Directors Academy (MINDA)
ICPE High Level Meeting – Ljubljana, Slovenia
1
Sypnosis of GLC Transformation - Malaysia
Government Linked Companies (GLCs) are an integral part of the Malaysian
economic engine. They provide mission critical services, catalyse
developments in strategic sectors and employ hundreds of thousands of
workers.
However, GLCs historically underperformed the broader Malaysian market,
both financially and operationally, a trend that risk derailing our efforts towards
Vision 2020. In 2004, we thus launched the GLC Transformation (GLCT)
Programme with the dual aims of enhancing economic performance and
accelerating the country’s social and economic developments.
The journey to date has been challenging. We had to address old mentalities.
We are already starting to see tangible results following the successful launch
of all the 10 initiatives. We have built strong economic fundamentals, and
improved GLC governance and transparency. We have increased our focus on
Human Capital development. We have also seen the successful execution of
turnaround programmes in situations once thought impossible.
Vision 2020 is on the horizon…there is still much more to be done.
2
AGENDA
1. GLCT overview
2. Progress to date
3. The way forward
3
DEFINITION OF GLC - IN THE CONTEXT OF GLCT
PROGRAMME
•
The Programme only covers GLCs held by Federal Level
GLICs
•
GLCs are companies where
-
GLICs are either the majority or single largest shareholder
-
GLICs have ability to exercise and influence e.g.

Appointment of Boards and Senior Management (via NRC)

Nominee Directors of Ministry of Finance Inc.

Remuneration and Benefits (KPIs based for EDs)

Award of tenders and contracts (via Board)

M&A, divestment, strategy, restructuring and financing, etc.
Source: GLC Transformational Manual, July 2005
4
HISTORY AND EVOLUTION OF GLCs
1969
Maybank
becomes
government owned
1972
LTAT
established
1979
Sime Darby is
Malaysianised
1957
1987
Jabatan Telekom
Corporatised
1983
1962
LTH
established
1978
PNB
established
1970
Launch of New
Economic Policy
(NEP)
Malaysianised GLCs
Value adding to
Malaysia’s Natural
resources
1997
Rapid economic growth
and privatisation
Industrialisation and
moving up the value chain
1951
EPF
established
1992
Malaysian Airport and
Postal Department
provatised
1985
Proton launch
first model
1981
Launch of Heavy
Industrialisation
Programme
2005
2000
Financial
Crisis
1994
KNB began
operations
1994
1990
Lembaga Letrik Negara
Corporatised
Corporatised
Providing Essential
Public Services
1999
Bank Bumiputra merger
with
Commerce Bank
2002
MAS widespread asset
unbundling exercise
1998
Danaharta
established
Recapitalised and
Restructured
Recovering from the
Crisis
Recovery
and
restructuring
CURRENT
GLCT
Programme
2001
Financial
Sector
Masterplan
announced
Financial Institutions
Becoming
internationally
competitive
5
GLCT Programme is driven by
The Putrajaya Committee On GLC High Performance (PCG)
Prime Minister as Chair
Khazanah is
PCG Secretariat
PCG
GLICs
GLCs
TH Plantations Berhad
6
GLCs ARE MAJOR CONTRIBUTORS TO THE NATION
National
workforce
GLCs account for around
5%
of the national workforce
(400,000 employees)
Approx. % to Companies
listed at Bursa Malaysia
Significant
part of the
economy
5% GLCs
Approx. % contribution
to Bursa’s total Market
Capitalisation (USD 440
Billion)
36%
33 Public
listed
GLCs
Mission
critical
service
provider
Telecommunications
95%
Non-GLCs
Transportation
GLCs
64%
Non-GLCs
Banking &
Financial Services
Energy
7
GLC Transformation Programme is now in its 7th year
2004
2005
2006
Phase 1: Mobilisation,
Diagnosis & Planning
Phase 2: Generate
Momentum
14 months
5/2004
12-17 months
We are here
2007
2010
Phase 3: Tangible
Results
2-5 years
2015
Phase 4: Full
National Benefit
5-10 years onwards
1/2005
PCG formed
2004 Measures
 Key Performance
Indicators (KPIs)
 Performance Linked
Compensation (PLCs)
 Performance
contracts
 Board composition
reform
 Revamp of Khazanah
 GLC leadership
changes
29th July 2005
Transformation Manual
Launch
 Policy Guidelines
 Ten 2005/6
Initiatives
Outcomes:
 Diagnosis of GLCs
conducted
 Determination of
Policy Principles
 Initial 2004 Initiatives
launched
 2005/2006 Initiatives
implemented
 Full roll-out in place
 Key policies endorsed
and executed upon
 Early fruits of
sustainable
improvements
 Maintain momentum
 Tangible & sustained benefits
across GLCs
 Visible benefits to all stakeholders,
e.g. customers, vendors,
employees
 Large scale strategic and financial
changes made
 Material changes to Boards
 Several regional champions
 Most GLCs performing at par
with competitors
8
THE PROGRAMME IS BASED ON 3 UNDERLYING
PRINCIPLES AND 5 POLICY THRUSTS
UNDERLYING PRINCIPLES OF GLCT:
1.National development foundation
2.Performance focus
3.Governance, shareholder value and stakeholder management
Policy Thrust 1:
Clarify the GLC
mandate in the
context of National
Development
Policy Thrust 2:
Upgrade the
effectiveness of
Boards and reinforce
the corporate
governance of GLCs
Policy Thrust 3:
Enhance GLIC
capabilities as
professional
shareholders
Policy Thrust 4:
Adopt best
practices within
GLCs
Supported by 10 overarching themes of initiatives
(now commonly referred to as coloured books)
Policy Thrust 5:
Implementing the GLCT Programme
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By 2006, all the 10 GLCT Initiatives were launched.
1
6
Enhancing
Board
Effectiveness
(GREEN)
Apr 2006
Reviewing and
Revamping
Procurement
Practices (RED)
Apr 2006
2
7
Strengthening
Directors
Capabilities
(MINDA)
Dec 2006
Optimising Capital
Management
Practices
(PURPLE)
Dec 2006
Enhancing
GLIC
Monitoring &
Management
Functions
Dec 2006
3
8
Strengthening
Leadership
Development
(ORANGE)
Dec 2006
4
9
Improving
Regulatory
Environment
(WHITE)
Sep 2006
Intensifying
Performance
Management
(BLUE)
Aug 2005
Achieving Value
Through Social
Responsibility
(SILVER)
Sep 2006
5
10
Enhancing
Operational
Efficiency
(YELLOW)
Sep 2006
10
Why is
GLC transformation
needed?
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Reason #1
They play a significant
role in Malaysia’s
economy
12
Reason #2
GLCs underperforming the
market over past 15 years
prior to 2005
13
Reason #3
Time to Vision 2020 is short
(15 years left when GLCT
started)
14
Reason #4
Increasing market
liberalisation and competition
15
Reason #5
Malaysia is caught in the
middle income trap
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AGENDA
1. GLCT overview
2. Progress to date
3. The way forward
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GLCT ASPIRES TO CREATE REGIONAL CHAMPIONS BY
2015
GLC Starting
Point
Domestic
champion
Regional
champion
[All GLCs
by 2015]
[Several
GLCs by
2015]
Global
champion
v5.0
v4.0
v3.0
v2.0
v1.0
GLCs
Majority of
Current GLCs
Examples of
Metrics for
Success:
Comparable to
Top Domestic
Peers
Performance
(e.g. Profitability,
Growth, Market Share)
Comparable to
Top Regional
Peers
Scope
(e.g. Geography,
No. of Markets)
Comparable to
Top Global
Companies
Scale
(e.g. Revenues)
Capabilities
(e.g. Operations,
branding, etc.)
Resilience
(e.g. against
systemic and
non-systemic
risk)
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G20 AGGREGATE EARNINGS
RM bn
17.3bn
17.8% annual
growth rate
since 2004
Compares favourably to:
KLCI EPS growth rate of 6.5%
GDP growth rate of 8%
over the same period
9.6bn
FY2004
FY2010
Source: G20 Financial Reports, Bloomberg Analyst Consensus Estimates and PCG Analysis
19
G20 MARKET CAPITALISATION
RM bn
346
354
293
195
31 Dec 07
Source: Bloomberg
273
123%
increase
172
159
159
14 May 04
293
273
346
31
14Dec
May08
04
172
31
31Dec
Dec09
07
15
Jun
11
29
31
Apr
Dec
1108
31 Dec 09
29 Apr 11
20
G20 TOTAL SHAREHOLDER RETURN GREW BY A
COMPOUNDED ANNUAL GROWTH RATE (CAGR) OF 16%
OVER THE PAST 7 YEARS, OUTPERFORMING KLCI BY 2.1%
G20
290
240
FBM
KLCI
190
140
100 =14/5/04
90
May-04
Dec-04
Source: Bloomberg
Jul-05
Feb-06
Sep-06
Apr-07
Nov-07
Jun-08
Jan-09
Aug-09
Mar-10
Oct-10 15 Jun-11
21
Turnarounds
Transformation
transactions
Regional
Growth
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GLCs Have Brought Increasing Benefits To All Stakeholders
• Over 6,000 unemployed graduates have
benefited with 82% employability rate
• 34 members adopting 222 schools, benefiting
110,000 students
• BIMB, Boustead, Proton, UMW received best product awards
• Axiata, CIMB, MAHB, MAS, Maybank, Pos, TM & TNB
received best service provider awards
• In 2010, 11.15% straight ‘A’s students from
PINTAR schools vs National Average of 10.2%,
an increase of 1.53% from 2009
• 4349 families have benefited across the
nation
Source: GLC reports
Source: PCG, GLC reports
COMMUNITY AND CSR
GLCs
BENEFIT ALL
STAKEHOLDERS
VENDORS AND SUPPLIERS
• TM’s vendor IC Microsystem awarded
Malaysia’s Top Most Innovative SME in 2010
with RM 1 Million grand prize
• TNB organises trade mission to promote its
vendors’ products overseas & more than 10
vendors have ventured into foreign markets to-date
• Proton & CIMB collaborated to provide
financial assistance to their dealers
• >130 vendors graduated under Vendor
Development Programmes since 2004
Source: GLC reports
CUSTOMERS
EMPLOYEES & HUMAN CAPITAL
• Study on impact of GLCT on GLC Employees welfare of G20 employees improved since
Programme began in 2004
• G-GLC Cross Fertilisation Programme
2nd Cycle, 32 participants cross assigned
to increase public-private cooperation
• GLC-GLC Cross Assignment Programme
3rd Cycle, 12 participants cross assigned to
develop talent
Source: PCG, GLC reports
23
AGENDA
1. GLCT overview
2. Progress to date
3. The way forward
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INVEST MALAYSIA 2009
• The Govt. is committed to
ensure GLCT continues to be
implemented, if anything with
greater urgency and focus
• GLCs must aspire to greater
heights, whether best in class or
emerging as future regional if not
global champions
Source: Prime Minister’s Keynote Address at Invest Malaysia Conference 2009
25
Towards The New Economic Model (NEM)
1 Malaysia - People First, Performance Now
Preservation and Enhancement of Unity in Diversity
Government
Transformation
Programme (GTP)
Economic Transformation
Programme (ETP)
Strategic
Reform
Initiatives
Efficient Delivery of
Government Services
National Key Economic
Areas
10th & 11th Malaysia Plan Roll-Out
Macroeconomic growth targets & expenditure allocation
Implementation of Government’s Development Programmes
26
5 ROLES OF GLICs AND GLCs IN THE NEW ECONOMIC
MODEL (NEM)
27
But issues &
challenges
remain !!
28
The massive gap in
talent, execution skills
and capabilities at
GLCs
Source: GLCT Programme Mid-Term Progress Review, March 2009
29
Developmental vs
commercial roles of
GLCs ?
Source: GLCT Programme Mid-Term Progress Review, March 2009
30
Continued & broader
support from all
stakeholders
Source: GLCT Programme Mid-Term Progress Review, March 2009
31
Need to enhance public
sector transformation in
parallel with GLCT
reforms
Source: GLCT Programme Mid-Term Progress Review, March 2009
32
terima kasih !
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