1 government linked companies transformation (glct) programme malaysia presenter: abdul aziz abu...
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Government Linked Companies Transformation (GLCT) Programme MALAYSIA
Presenter:Abdul Aziz Abu BakarCEO, Malaysian Directors Academy (MINDA)ICPE High Level Meeting – Ljubljana, Slovenia
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Sypnosis of GLC Transformation - MalaysiaSypnosis 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.
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AGENDAAGENDA
1. GLCT overview
2. Progress to date
3. The way forward
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DEFINITION OF GLC - IN THE CONTEXT OF GLCT DEFINITION OF GLC - IN THE CONTEXT OF GLCT PROGRAMMEPROGRAMME
• 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
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1951EPFestablished
1957
1969Maybank becomes government owned
1972LTATestablished
1979Sime Darby is Malaysianised
1962LTHestablished
1978PNB established
1983
1985Proton launch first model
1987Jabatan TelekomCorporatised
1992Malaysian Airport and Postal Department provatised
1994KNB began operations1994
1997 2000 CURRENT
1999Bank Bumiputra merger withCommerce Bank
Industrialisation and moving up the value chain
Rapid economic growthand privatisation
FinancialCrisis
Recovery and
restructuring
GLCTProgramme
2002MAS widespread assetunbundling exercise
2001Financial Sector Masterplanannounced1970
Launch of New Economic Policy(NEP)
1981Launch of HeavyIndustrialisation Programme
1990Lembaga Letrik NegaraCorporatised
1998Danaharta established
2005
Malaysianised GLCsValue adding to
Malaysia’s Natural resources
Corporatised Providing Essential
Public ServicesRecapitalised and
Restructured Recovering from the
CrisisFinancial Institutions
Becoming internationally
competitive
HISTORY AND EVOLUTION OF GLCsHISTORY AND EVOLUTION OF GLCs
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PCG
GLICs
GLCT Programme is driven byGLCT Programme is driven byThe Putrajaya Committee On GLC High Performance (PCG) The Putrajaya Committee On GLC High Performance (PCG)
GLCs
Prime Minister as Chair
TH Plantations Berhad
Khazanah is PCG Secretariat
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GLCs ARE MAJOR CONTRIBUTORS TO THE NATION GLCs ARE MAJOR CONTRIBUTORS TO THE NATION
95%
5% GLCs
Non-GLCs
64%
36%33 Public
listed GLCs
Approx. % to Companies listed at Bursa Malaysia
Approx. % contribution to Bursa’s total Market Capitalisation (USD 440
Billion)
GLCs
Non-GLCs
National workforce
GLCs account for around 5% of the national workforce
(400,000 employees)
Significant part of the economy
Mission critical service
provider TransportationTelecommunications EnergyBanking &
Financial Services
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GLC Transformation Programme is now in its 7GLC Transformation Programme is now in its 7thth year year
2005 2006 2007 2015
Phase 1: Mobilisation, Diagnosis & Planning
Phase 2: Generate Momentum
Phase 4: Full National Benefit
5/2004
29th July 2005 Transformation Manual
Launch Policy Guidelines Ten 2005/6
Initiatives
14 months 12-17 months2-5 years 5-10 years onwards
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
Key Performance Indicators (KPIs)
Performance Linked Compensation (PLCs)
Performance contracts
Board composition reform
Revamp of Khazanah GLC leadership
changes
2010
1/2005
Diagnosis of GLCs conducted
Determination of Policy Principles
Initial 2004 Initiatives launched
Outcomes:
2004 Measures PCG formed
2004
Phase 3: Tangible Results
We are here
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THE PROGRAMME IS BASED ON 3 UNDERLYING THE PROGRAMME IS BASED ON 3 UNDERLYING PRINCIPLES AND 5 POLICY THRUSTSPRINCIPLES AND 5 POLICY THRUSTS
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
Policy Thrust 5:Implementing the GLCT Programme
UNDERLYING PRINCIPLES OF GLCT:
1.National development foundation
2.Performance focus
3.Governance, shareholder value and stakeholder management
Supported by 10 overarching themes of initiatives (now commonly referred to as coloured books)
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By 2006, all the 10 GLCT Initiatives were launched.By 2006, all the 10 GLCT Initiatives were launched.
Enhancing Board
Effectiveness (GREEN)Apr 2006
1 Strengthening Directors
Capabilities (MINDA)Dec 2006
2 Enhancing GLIC
Monitoring & Management
FunctionsDec 2006
3 Improving Regulatory
Environment(WHITE)Sep 2006
4 Achieving Value Through Social Responsibility
(SILVER)Sep 2006
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Reviewing and Revamping
Procurement Practices (RED)
Apr 2006
6 Optimising Capital Management
Practices (PURPLE)Dec 2006
7 Strengthening Leadership
Development(ORANGE)Dec 2006
8 Intensifying Performance Management
(BLUE)Aug 2005
9 Enhancing Operational
Efficiency(YELLOW)Sep 2006
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Why is Why is
GLC transformation GLC transformation
needed?needed?
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Reason #1Reason #1
They play a significant
role in Malaysia’s
economy
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Reason #2Reason #2GLCs underperforming the
market over past 15 years prior
to 2005
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Reason #3Reason #3Time to Vision 2020 is short
(15 years left when GLCT
started)
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Reason #4Reason #4
Increasing market
liberalisation and competition
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Reason #5Reason #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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Domesticchampion
Regional champion
Global champion
v3.0
v4.0
v5.0
v2.0
GLC Starting Point
Performance(e.g. Profitability, Growth, Market Share)
Comparable toTop Domestic
Peers
Comparable toTop Regional
Peers
Comparable to Top Global Companies
Examples of Metrics for Success:
Scope(e.g. Geography, No. of Markets)
Capabilities(e.g. Operations, branding, etc.)
Scale(e.g. Revenues)
Majority of Current GLCs
GLCs
[All GLCs by 2015]
[Several GLCs by
2015]
Resilience (e.g. against systemic and non-systemic risk)
v1.0
GLCT ASPIRES TO CREATE REGIONAL CHAMPIONS BY GLCT ASPIRES TO CREATE REGIONAL CHAMPIONS BY 20152015
19Source: G20 Financial Reports, Bloomberg Analyst Consensus Estimates and PCG Analysis
G20 AGGREGATE EARNINGSG20 AGGREGATE EARNINGSRM bn
FY2004 FY2010
17.3bn
9.6bn
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
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G20 MARKET CAPITALISATIONG20 MARKET CAPITALISATION
Source: Bloomberg
RM bn
195
354
15 Jun 11
123% increase
21Source: Bloomberg
G20 TOTAL SHAREHOLDER RETURN GREW BY A G20 TOTAL SHAREHOLDER RETURN GREW BY A COMPOUNDED ANNUAL GROWTH RATE (CAGR) OF 16% COMPOUNDED ANNUAL GROWTH RATE (CAGR) OF 16% OVER THE PAST 7 YEARS, OUTPERFORMING KLCI BY 2.1%OVER THE PAST 7 YEARS, OUTPERFORMING KLCI BY 2.1%
G20
FBM KLCI
90
140
190
240
290
May-04 Dec-04 Jul-05 Feb-06 Sep-06 Apr-07 Nov-07 Jun-08 Jan-09 Aug-09 Mar-10 Oct-10
100 =14/5/04
15 Jun-11
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Transformation Transformation
transactionstransactionsTurnaroundsTurnarounds Regional Regional
GrowthGrowth
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GLCs Have Brought Increasing Benefits To All StakeholdersGLCs Have Brought Increasing Benefits To All Stakeholders
COMMUNITY AND CSR CUSTOMERS
EMPLOYEES & HUMAN CAPITALVENDORS AND SUPPLIERS
GLCs BENEFIT ALL
STAKEHOLDERS
• Study on impact of GLCT on GLC Employees - welfare of G20 employees improved since
Programme began in 2004
• >130 vendors graduated under Vendor Development Programmes
since 2004
• 4349 families have benefited across the nation
• 34 members adopting 222 schools, benefiting 110,000 students
• In 2010, 11.15% straight ‘A’s students from PINTAR schools vs National Average of 10.2%, an increase of 1.53% from 2009
• TNB organises trade mission to promote its vendors’ products overseas & more than 10
vendors have ventured into foreign markets to-date
Source: GLC reports
Source: GLC reportsSource: PCG, GLC reports
Source: PCG, GLC reports
• Proton & CIMB collaborated to provide financial assistance to their dealers
• BIMB, Boustead, Proton, UMW received best product awards
• Axiata, CIMB, MAHB, MAS, Maybank, Pos, TM & TNB received best service provider awards
• TM’s vendor IC Microsystem awarded Malaysia’s Top Most Innovative SME in 2010
with RM 1 Million grand prize
• Over 6,000 unemployed graduates have benefited with 82% employability rate
• 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
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AGENDA
1. GLCT overview
2. Progress to date
3. The way forward
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INVEST MALAYSIA 2009INVEST 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
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Towards The New Economic Model (NEM)Towards The New Economic Model (NEM)
1 Malaysia - People First, Performance NowPreservation and Enhancement of Unity in Diversity
10th & 11th Malaysia Plan Roll-OutMacroeconomic growth targets & expenditure allocation
Implementation of Government’s Development Programmes
Government Transformation
Programme (GTP)
Efficient Delivery of Government Services
Economic Transformation Programme (ETP)
National Key Economic Areas
Strategic Reform
Initiatives
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5 ROLES OF GLICs AND GLCs IN THE NEW ECONOMIC 5 ROLES OF GLICs AND GLCs IN THE NEW ECONOMIC MODEL (NEM)MODEL (NEM)
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But issues & But issues &
challenges challenges
remain !!remain !!
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The massive gap in
talent, execution skills
and capabilities at
GLCs
Source: GLCT Programme Mid-Term Progress Review, March 2009
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Developmental vs
commercial roles of
GLCs ?
Source: GLCT Programme Mid-Term Progress Review, March 2009
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Continued & broader
support from all
stakeholders
Source: GLCT Programme Mid-Term Progress Review, March 2009
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Need to enhance public
sector transformation in
parallel with GLCT
reforms
Source: GLCT Programme Mid-Term Progress Review, March 2009
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terima kasih !terima kasih !