Unearthing hidden gems in government-linked companies

  • Business
  • Thursday, 20 May 2004


Much has been said of the recently-introduced Key Performance Index (KPI), but little is known of the potential impact of its implementation on the 40-odd Government-linked companies (GLCs) involved. Starting from today, StarBiz will examine some of these GLCs and look at what lies beyond the KPI-led exercise 

WHEN Prime Minister Datuk Seri Abdullah Ahmad Badawi first mentioned the phrase “Key Performance Index'' (KPI) in his meeting with business leaders in January, many did not expect the concept to be used so widely or implemented so soon. 

Barely six months from its first mention, Malaysia has seen the concept applied to not just Government-linked companies (GLCs), but also members of parliament and various Government-linked organisations. 

The pace of change is likely to speed up with the restructuring in Government investment arm, Khazanah Nasional Bhd, which also saw the appointment of its new chief executive officer Azman Mokhtar. 

The KPI concept is likely to be used to achieve a much wider objective not only in remaking of Malaysia Inc - which aims to promote strong partnerships between Government and the corporate sector - but more particularly, unearth the hidden gems among Malaysian GLCs. 

While Government assets in GLCs are believed to be worth hundreds of billions of ringgit, it is envisaged that the exercise could result in a manifold increase in profits, quality of service and life for ordinary Malaysians. 

As details of these changes are still kept under wraps, one can attempt to look at how the game in the restructuring of GLCs has been played so far. (See also sidebar

Each GLC is likely to take different steps depending on their respective strategies. 

For GLCs like Tenaga Nasional Bhd and Telekom Malaysia Bhd, it looks like the Government wants these two companies to play a key role not only in providing services to customers, but also to be the main players in their respective areas in the region. 

To do that, the two companies could undergo similar Malaysia Airlines (MAS)-style restructuring due to their large shareholding of strategic assets. It will be not be a surprise if the Government takes over the assets and liability from their respective books and provide them with preferential leaseback rates.  

Many experts believe that certain assets could be taken out from these companies in this fashion, but not in the wholesale manner as was implemented in MAS. 

As for efficiencies, Telekom would also have to trim down its operations and that may include cutting down on some of its minor operations. For instance, Telekom's broadband, which is full of units and provides more or less similar services such as streamyx and bluehippo, not only confuse consumers but also stretch its resources. 

Some of these units could be sold off to entrepreneurs, who could run them better. 

With KPIs in place, MAHB Holdings Bhd and MAS would be able to identify several key areas to work together to promote Malaysia as a destination. 

Another GLC to watch is Pos Malaysia Holdings Bhd, which has not moved much given its high net assets and cash position. With KPIs in place, the Government could reconsider the role that Pos Malaysia could play in the bigger context of other GLCs such as Avenue Securities Bhd and Bank Simpanan Nasional. 

The Government could also improve the efficiencies of some of its port operations such as at WestPort and Bintulu Port. 

The same with the relationships between Proton Holdings Bhd and Edaran Otomobil Nasional Bhd, where investors want to see these two companies rationalise their position in the distribution of national cars. 

More values should be created for both of them instead of what appears to be the current competitive situation. Proton also has its own distribution unit Proton Edar Sdn Bhd. 

While some of the mergers and acquisitions of GLCs will be taking place in the next three years - the timeline for the implementation of KPIs - the Government may want to use the time to implement the second part of the exercise. It also wants to balance the move toward efficiencies with social obligations. 

Clearly, some GLCs need to be fine-tuned, some even to be taken private to ease the process of restructuring and implementing of social policy, which could be cumbersome under their present listed status.  

Some companies, which are due for listing such as Celcom Bhd, could also have their proposals fast-tracked to allow value creation in these companies. 

Such moves will only be clearer once Khazanah makes up its mind on the intended appointments of several more top posts in GLCs. 

 TELEKOM : [News]   [Stock WatchTENAGA : [News]   [Stock WatchMAS : [News]   [Stock WatchPOSHLDG : [News]   [Stock Watch]

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