Download Shaping Transformation Unit (STU)

The Future of
Public
Enterprise
Dato’ Sri Idris Jala
Public Enterprises play
an important catalytic
role in the early stages of
Economic
Development
2
The role of Public Enterprises decline as economies
shift to be more developed
Underdeveloped
Developing
Developed
Market
Capitalisation
(% of GDP)
Strategic Investment,
Provide Infrastructural
Support,
End-to-End Business,
Fulfill Market Demand
Strategic Investment,
Provide Infrastructural
Support
STAGE 1
STAGE 2
STAGE 3
Development (GDP)
Catalytic
Facilitative
3
Public Enterprise participation in the economy of selected
countries
Revenue
(% of GDP, 2010)
50
40
30
20
10
0
Thailand
India
Malaysia
Singapore
Australia
USA
Note: PEs included in the analysis refer to those in which the government had a stake of 50% or more.
Source: Chakravarty and Ghee (2012)
Source: OECD Investment Policy Reviews: Malaysia 2013
4
Public Enterprises remain
instrumental in sectors that
require Huge
Infrastructural and
Financial Support
5
Petroleum Refining, Utilities, Financial Services, Mining are
dominant sectors among PEs / SOEs in the Fortune Global 500
Source: PWC Report on State-Owned Enterprises: Catalysts for public value creating, April 2015
6
The Future of Public
Enterprise:
Rationalisation
7
Public Enterprises should be rationalized to focus
on the following

Private Investor needs Co-Investor.

Business must be owned domestically.

Large growth capital, catalytic or new technology required.

National Infrastructure.
8
The Malaysian Story:
The GLC
Transformation
Programme
9
Snapshot in 2005: Malaysian Public Enterprises
are major contributors to the Economy
1
Tun Abdullah Ahmad Badawi’s Keynote Speech during the GLCT Programme Launch on 14 May 2004
Source: GLC Transformational Manual, July 2005
10
The true performance of Malaysian PEs is much
weaker than reported headline profits suggest
Company
Telekom
Maybank
Sime Darby
Tenaga
CAHB
Proton
MAS
Golden Hope
Affin
Guthrie
Boustead
BIMB
UEM World
MRCB
MBSB
Net Profit
USD million, 2004
Economic Profit
USD million, 2004
692
-117
642
394
243
215
92
-778
199
60
135
50
122
1
90
6
61
-8
42
-14
31
21
23
-39
17
-39
9
8
-14
-1
*Economic Profit is an important yardstick to measure value creation to shareholders. It shows a company’s net income after deducting shareholder’s
opportunity cost in investing in the firm. EP is defined as the difference between a company’s return over and above its costs of capital.
[EP = (Return on invested capital – Weighted average cost of capital) x Invested capital]
11
The Malaysian GLC Transformation Progamme

15 years (2004 – 2015)

Hired professional CEOs on contract with clear KPI
targets

10 Guidebooks to improve performance

PM chair biannual review of performance of GLCs via
Putrajaya Steering Committee

The performance of the GLCs improved to match / better
than other private companies
12
G20 delivered strong financial performance over
the past 10 years
Market Capitalization
(USD bil)
Net Profit
(USD bil)
113.8
Economic Profit
(USD bil)
7.7
0.3
FY04
FY14
2.9
39.5
May ’04
July ‘15
FY04
FY14
-0.94
1. FY14 extraordinary break-up basis adjustments due to the restructuring of MAS have been excluded to provide a fair view of operational performance
2. Economic Profit started being tracked since the official launch of the GLCT Programme in FY05
Note: In G20’s TSR & market capitalisation computation, UEM Sunrise (TSR only) & UEM Edgenta (previously known as UEM Faber) are used as a proxy for UEM Group Berhad while MAS has
been excluded due to its delisting
3. US-Ringgit Exchange Rate taken at 10-year average [ 1 USD = RM 3.392]
Source: G20 annual reports, G20 submissions to PCG Secretariat, Bloomberg and PCG analysis
13
The GLCT Programme has provided economic and
social benefits to all Stakeholders
Employees
Government
373,627
USD 32b
Employed by G20 in 2014, of
which 225,050 are Malaysians
G20 dividends paid (FY04 to FY14)
USD 18.5b
G20 taxes paid (FY04 to FY14)
USD1.2b
Spent by G20 on training &
development from 2004 to 2014
Note: US-Ringgit Exchange Rate taken at 10-year average [ 1 USD = RM 3.392]
Source: G20 annual reports, GLICs and G20 submissions to PCG Secretariat, PCG Secretariat analysis
14
We ran an 8-week lab and identified 131 EPPs to
TRANSFORM the Economy
131
USD 406 bil (2011-2020)
Investments
GNI
USD 250 bil (2020)
Gross National
Income
ENTRY POINT PROJECTS
3.3 mil (2011-2020)
Additional Jobs
•
•
Idris Jala – Top 10 Most Influential Policy Makers in the World (Bloomberg Market 2014)
PEMANDU – Top 20 Most Innovative Government Agencies in the World (Bloomberg Philantropies and Nesta 2014)
*US-Ringgit Conversion Rate at the time of the lab, 1 USD = RM3.2
15
With the Economic Transformation Programme,
Private Investment in Malaysia has grown
2.2x
ETP
Launch
16
Malaysia is no longer stuck in the middle income
trap, with worsening fiscal deficit
Gross National Income
2010
USD
12,276
Fiscal Deficit (of GDP)
2015
USD
12,475
-6.6%
(2009)
15%
33%
USD
10,570
-3.1%
USD
8,280
World Bank’s Highincome threshold
(2015)
Malaysia’s GNI per
capita
17
Under the GLCT Programme
many professional CEO’s
were hired to run Malaysian
PEs. I was hired from Shell
to turnaround Malaysia
Airlines.
18
Flash back...
19
Most routes are losing money
NIAT
Unprofitable routes
3
Americas
China
9
Middle East
9
North Asia (Japan, Korea, Taiwan)
10
12
Europe
South Asia
6
Australia & New Zealand
7
Domestic
+163
24
7
-100
4
-84
4
-120
0
-561
-63
6
-317
3
66
114
RM millions
-305
0
10
ASEAN
International
Profitable routes
48
4
-1.3b
Relentless Daily Monitoring of P&L and Cash Balance
21
MAS Profit & Loss 2005 – 2010
USD
P&L
300,000
247,910
200,000
Global
financial
crisis
Record
high oil
price
144,998
83,148
78,025
100,000
0
2005
-22,009
-100,000
-200,000
-300,000
-400,000
2006
-363,486
2007
2008
2009
2010
What we did at MAS

Cut loss making routes

Implemented dynamic pricing to improve yield

Reduce manpower by 3000 staff

Sold HQ building to raise cash for operation

Implemented structural cost reduction exercise

Started a new subsidiary airline (Firefly) for non-trunk domestic routes
23
Future of Public Enterprises

Only where the private sector DOES NOT do a better job

Hire the best talents

Set tough targets and insist on delivery

Reward and Consequence Management
24
THANK YOU
25
APPENDIX
26
Governments around the world have beautiful plans and promises.
However, the main difficulty is the failure to deliver.
30,000 ft
High
Level
Policy / Framework
Big Disconnect
3 ft
On the ground realities
of implementation
Implementation:
Problems differ depending on
countries, sector, companies etc
There is a big disconnect between high level decision making and ground level
implementation
Organizing for Implementation: The 8-Step
BFR Methodology
Planning / Thinking (10%)
•
Strategies, Key Activities &
Responsibilities
•
Organizing
•
Communication &
Engagement
Implementation / Doing
(90%)
•
Monitoring
•
Recursive Problem Solving
•
Assessment / Validation
•
Reporting
We ran an 8-week lab and identified 131 EPPs to
TRANSFORM the Economy
131
USD 406 bil (2011-2020)
Investments
GNI
USD 250 bil (2020)
Gross National
Income
ENTRY POINT PROJECTS
3.3 mil (2011-2020)
Additional Jobs
•
•
Idris Jala – Top 10 Most Influential Policy Makers in the World (Bloomberg Market 2014)
PEMANDU – Top 20 Most Innovative Government Agencies in the World (Bloomberg Philantropies and Nesta 2014)
*US-Ringgit Conversion Rate at the time of the lab, 1 USD = RM3.2
29
Malaysia is no longer “stuck in the middle income
trap, with worsening fiscal deficit”
Gross National Income
2010
USD
12,276
Fiscal Deficit (of GDP)
2015
USD
12,475
-6.6%
(2009)
15%
33%
USD
10,570
-3.1%
USD
8,280
World Bank’s Highincome threshold
Malaysia’s GNI per
capita
(2015)
2.2X growth in Private Investment
ETP
Launch
We promised to create 3.3 million
jobs in 10 years
To date,
1.8 mil Jobs
have been created
We implemented inclusive
measures for rural folks
5,286 kilometers
rural roads completed
3.5
334,593
rural houses
have access
to clean water
6 million
1,681,330
Rural people benefited
from rural infrastructure
projects
144,025 rural
houses have
access to reliable
electricity
720,125 people
people
79,137
rural
houses built
and restored
412,360
people
We implemented inclusive
measures for low income people
6.8 million
Low income households and individuals
benefited from BR1M (cash transfer)
198,943
Individuals participate in the 1AZAM
programme
2.9 million
Lifted out of poverty due to minimum wage
policy
TUKAR is a grass root and touch point project for Rakyat
Modernising the traditional sundry
shops (TUKAR)
An initiative to assist small
retailers in modernising their
business and remain
competitive
This initiative is a collaboration
between the Government and
the hypermarket operators in
growing the retail business
RM
5.6
512,500
billion
GNI
Impact
35
Jobs
Created
The Amazing Transformation – GST ready and better
pricing options
BEFORE
AFTER
36
The Amazing Transformation – GST ready and better
pricing options
BEFORE
AFTER
37
Internationally recognised as
the 1st in the world
38
The Government’s Fiscal
Sustainability
Malaysia is in the fiscal “safe zone”
Note: All figures are as of 2015 est. // Countries markers are masked and coded for confidentiality
Source: MOF; BNM; CIA World Factbook; PEMANDU Analysis
International recognition of PEMANDU
•
World’s Best national transformation programme
(3G Award by Cambridge IF, 2016)
•
Top 20 Most innovative Government Agencies in the World
(Bloomberg Philantropies and Nesta, 2014)
Top 10
•
Idris Jala:
Most influential policy makers / top 50 influential
person in the World (Bloomberg Market, 2014)
•
PEMANDU / BFRI providing consultancy to other countries
Tanzania BRN achieved remarkable results only after 3
years in implementation
Tanzania Big Results
Now!
6.58 million rural population have gained access to clean water
Almost 400,000 households have been electrified
Ship turnaround time halved from 7 Days to 2.92 Days at
Dar es Salaam port
Budget deficit slashed by 64%
Maize and rice production increase by 500,000 MT and
166,000 MT respectively
BFR Andhra Pradesh Lab Wave 1 & 2 Outcome
Renewable Energy
MOU Signed Worth
Biodiesel
Retail
USD 3 billion
8000 direct jobs
Water and Sewerage
Food & Beverage
Water Treatment
Biotechnology &
Vector Control