Malaysia deepens state-linked firms reform

KUALA LUMPUR: Malaysia has kicked off the next round of steps to revamp firms with large government holdings, aiming to help some of them become Asian “regional champions” and ti bring others on par with their rivals.

Government-linked companies contribute 260 billion ringgit ($69 billion), or 36 percent, of Malaysia’s market capitalisation and employ 5 percent of its workforce. Launching the campaign, Prime Minister Abdullah Ahmad Badawi said there remained much room for improvement in many areas and in many of the firms, but sustaining the transformation would not be easy.

“It will take political will, corporate determination and hard choices,” he told a meeting of chief executives of the firms. State investment agencies such as Khazanah Nasional Bhd, Permodalan Nasional Bhd, the Employees Provident Fund, the Armed Forces Fund Board and Tabung Haji are charged with overhauling the companies. Abdullah outlined a 10-point initiative, to be implemented by 2006, to help improve the GLCs.

They include improving the effectiveness of company directors as well as enhancing procurement policies. The government unveiled its plan to overhaul state-linked firms, some poorly managed and over-staffed, one year ago, when it appointed former investment banker Azman Mokhtar to be the new chief of state investment arm Khazanah.

Investors applauded the move and bought into some of the companies, such as the biggest power and phone firms, Tenaga Nasional Bhd and Telekom Malaysia Bhd, whose chiefs were replaced within days of the reform announcement.

Abdullah, who is also finance minister, said that the initiative had yielded some results.

Total shareholder return of the 15 benchmark government-linked companies has risen 18 percent since May of last year, outperforming a rise of 15 percent in the benchmark Composite Index over the same period. State-linked companies, which employ a combined 400,000 people, should also identify ways of adjusting their work force levels by the end of 2006 to cut costs and raise productivity, according to the government’s blueprint. reuters

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