(Petaling Jaya, Saturday): The 10 initiatives announced by Prime Minister Datuk Seri Abdullah Ahmad Badawi to turn government-linked companies(GLCs) into global companies will only succeed with the adoption of a culture based on four key performance aspects that is results-driven, technologically-based, ethically-centred with corporate social responsibility.

GLCs contribute RM260 billion (US$69 billion), or 36 per cent of Malaysia’s market capitalisation, and employ five per cent of its workforce. Some of the major GLCs include Malayan Banking, Telekom Malaysia, Malaysia Airlines, Tenaga Nasional, and Sime Darby. As GLCs are key players in the economy, accounting for about one-third of total market capitalisation of Bursa Malaysia, the GLCs’ performance are expected not only to improve their efficiency and profitability to compete in the global environment but also set the benchmark for other companies to follow

For too long the lack of a results-driven approach has hampered the maximization of profits. Top managers should be subject to a performance bar where they will be sacked if they fail to achieve a certain minimal percentage of rate of return on capital employed of say 8%. Failure to maximize profits and reduce costs is the reason why Tenaga’s rate of return on capital employed is only at 5.2%, the lowest in the region.

There is also a necessity for the GLCs to take the lead on technology, to invest in research and development where some reports estimate less than 5% of profits are ploughed back into research and development. Research and development and technology can ensure that Malaysia be more competitive internationally.

At the same time GLCs must be ethically-centred to establish integrity, prevent corruption and avoid scandals causing loss of public confidence. For instance no action has been taken over the MAS scandal even though police reports have been lodged by MAS directors over hundreds of millions of ringgit involving the previous management.

GLCs must exercise CSR as they should give back to the society that allows them to make profits. Adequate compensation must be paid to those who are affected by their money-making ventures and the refusal to share the profits is not only unethical but also irresponsible. A good example is the intention of Tenaga to increase tariffs despite increasing its profits by 70% to RM 572.8 million.

Another example is the refusal by Petronas to share its RM 35.6 billion record profits with Malaysians, when Malaysians are forced to pay high prices. This failure to share profits is contrary to the fundamental principle that oil belongs not to Petronas but to all Malaysians, who have the basic right to enjoy the benefits of oil revenue.

If these corporate reforms are successful over the next five to seven years, shares of high-performing GLCs could gain between RM250 billion and RM300 billion. To do so, DAP suggests that the government incorporate these 4 key performance aspects to ensure that GLCs not only make money as global champions but contribute positively towards the well-being and a better standard of living for Malaysians.

(30/07/2005)