No room for shadow play in the clean-up of GLCs
THERE are government-linked companies (GLCs) and Ministry of Finance (MoF) owned companies that need to be cleaned up. But in the process, those executives who are performing should not be shown the door.
For instance after Permodalan Nasional Bhd chairman Tan Sri Abdul Wahid Omar and president and group chief executive Datuk Abdul Rahman Ahmad took over the helm at the national unit trust company, there has been a paradigm shift in its outlook. Now there is speculation of Wahid leaving PNB.
Never before had PNB been so transparent. It all started after Wahid and Rahman were appointed to the top two positions in the government’s largest unit trust entity in the last quarter of 2016.
PNB’s style of transparency is taking a leaf out of the 10-year GLC transformation programme initiated by Khazanah Nasional Bhd in 2005. Prior to 2004, the companies that are under Khazanah today had poor governance, inadequate transparency and over-whelming political ties. The companies were saddled with debts and the owners were supposedly forced to undertake transactions to please the government of the day.
There was no semblance of Khazanah being a sovereign wealth fund (SWF) that can be worthy of mention.
Today, Khazanah can dare say it has a better track record in investments compared to many other SWFs in the region. It has a strong leadership team, is a training ground for many well-qualified bumiputra professionals to gain experience and has built companies with regional operations. It is completely different from what it was in 2004.
PNB is also looking to go the same way. Since Abdul Wahid and Rahman took over, they have accelerated the restructuring of listed companies under PNB.
Khazanah is headed by Tan Sri Azman Mokhtar who together with Abdul Wahid share a common thread – a person called Tan Sri Nor Mohamed Yakcop.
Last year, Nor Mohamed was at the centre of the Royal Commission of Inquiry to investigate the Bank Negara forex scandal. It was an effort by the previous government to discredit current Prime Minister Tun Dr Mahathir Mohamad.
During the RCI hearing in September last year, Nor Mohamed never implicated Dr Mahathir who was the Prime Minister when it happened between 1987 and 1992. Instead, after the inquiry, he left his position as deputy chairman of Khazanah and has been out of the limelight since then.
Both Azman and Wahid are the key people behind Nor Mohamed’s efforts to transform corporate Malaysia after 2003 when Khazanah took over several large companies such as Renong, UEM Engineers and MAS from several individuals.
Before Khazanah stepped in, individuals such as Tan Sri Halim Saad and Tan Sri Tajudin Ramli controlled the well-connected companies.
The two and several others, including Tan Sri Wan Azmi Wan Hamzah, were known as the coterie of bumiputra entrepreneurs that Tun Daim Zainuddin groomed to lead the charge into corporate Malaysia. These companies controlled by the individuals got the best of the contracts from the government and known to be “politically-linked” counters.
However these asset-rich companies fell under the weight of debts in the 1998 crisis and eventually Khazanah took over between 2001 and 2003 at the behest of the government then.
The lessons learnt on how not to manage companies such as Renong and MAS formed the bedrock to the GLC transformation programmes.
Under the GLC transformation programme, the companies are to be run by professional managers who in return are supposed to be paid well. The professional managers are to run the business well with high standards of governance, without being political inclined and have to deliver better returns to stakeholders.
Khazanah and PNB are two of the six government-linked investment companies (GLICs) that own hundreds of listed and unlisted companied. The other four are Lembaga Tabung Haji, the Employees Provident Fund (EPF), Kumpulan Wang Amanah Pencen (KWAP) and Lembaga Tabung Angkatan Tentera (LTAT).
Companies under EPF followed the guidelines the standards of the GLC transformation programme. But the same cannot be said to companies under Tabung Haji and LTAT.
There are some 160 companies under the MoF that are said to be poorly managed.
In the run-up to the 14th General Election, some heads of GLCs and MoF companies openly campaigned for Barisan Nasional.
When the new government came into power under Dr Mahathir, those who openly campaigned have been told to resign. Until today many have not done so.
It is easy to fathom why. They enjoy a high salary, benefits from a wide range of perks and do not really have much responsibility on their shoulder. So they do not have a reason to resign until the contract ends.
On top of this, there is persistent speculation that many heads will roll in GLCs due to several reasons – from being affiliated to the previous government to earning too high a salary.
The logic is that the success of GLCs are largely due to its association with the government and hence the professional managers should not earn too much.
So far, some heads of GLCs have resigned or expressed their intention to retire. That is probably because they are known to be close to the previous administration and it would not be palatable to serve under the new government.
However, for those who are still serving, it would be not help if they are unsure about their job. There are a large number of people in GLCs, including the top brass, who supported Pakatan Harapan because they too wanted to see change. They subscribed to the belief that the new government would be able to fight corruption effectively and bring about better management of public finances.
The new government is right in wanting to clean up the GLCs and MoF-owned companies that are not performing or do not adhere to the corporate governance standards. For instance there were some corporate transactions involving companies under Tabung Haji and LTAT that were viewed as being done to help the previous government when they were ruling.
The list of MoF companies range from entities such as Keretapi Tanah Melayu to Felda and the likes of MavCap and SME Corp where there are a lot that can be done to improve performance.
But in the process of cleaning up the companies, the good guys should be retained. It does not matter if they are close to Nor Mohamed or anybody else – as long as they have performed and are loyal to the government of the day.
This exercise to clean-up the GLCs and companies under MoF should not change the way the GLCs are being managed today. The present system already works. It only needs to be implemented on a wider scale.