1. What is the GLC Transformation Program?
A: GLC Transformation is the program that improves performance of Government-linked companies.
The Government's efforts at improving performance in companies under its control or stewardship
will have a positive demonstrative effect on the rest of the corporate sector. Undertaking such
a program should result in a sustainable lift to the current trajectory of GLC performance,
improving Malaysia's ability to achieve Vision 2020.
(Definition of Vision 2020 - By the year 2020, Malaysia must be a comprehensively developed country -
developed economically, developed politically, developed socially and culturally, progressive and caring.)
2. Why is the GLC Transformation Program so critical to the development of Malaysia?
A: GLCs and their controlling shareholders, GLICs, constitute a significant part of the economic
structure of the nation. GLCs employ an estimated 5% of the national workforce and account for
approximately 36% and 54% respectively of the market capitalisation of Bursa Malaysia and the
benchmark Kuala Lumpur Composite Index. Even with active divestment and privatisation, GLCs remain
the main service providers to the nation in key strategic utilities and services including electricity,
telecommunications, postal services, airlines, airports, public transport, water and sewerage, banking
and financial services.
In areas of industrial policy and development such as in automotive and semi-conductors, GLCs play an
important role in executing Government policies and initiatives and in building capabilities and knowledge
in key sectors. Further, in the areas of building international economic linkages through investments in
foreign ventures and investments in new growth sectors, GLCs and GLICs are increasingly playing a more
active and significant role in line with a gradual internationalisation of Malaysian economic interests,
in tune with increased global economic liberalisation.
3. What is the difference between this year's GLC Transformation (GLCT) Program and the one launched in May 2004?
A: The GLC Transformation Program is targeted at a deep and sustained structural improvement in
GLC organisational and performance practices where benefits are targeted to be reaped over the
short and medium, but ultimately focused on sustainable longer-term benefit over the next 5 to
10 years. With PCG being established in January of this year, we are now in the next phase of
a continuing journey.
4. What are the key principles for GLC Transformation?
A: There are 3 key principles to the GLC Transformation including:
National development foundation - the GLC Transformation Program
is a subset of the broader national development strategies that
include the principles of growth with equity, improving total
factor productivity, the development of human capital, and the
development of the Bumiputera community.
Performance focus - the underlying rationale of the GLC Transformation
Program is to create economic and shareholder value through improved
performance at GLCs. Hence, specific policy guidelines and initiatives
will be driven by principles of performance and meritocracy within the
broader national development focus described above.
Governance, shareholder value and stakeholder management - the GLC Transformation
Program, while being led by the Government, fully observes the rights and
governance of shareholders and other stakeholders. Hence, the policy measures
to be implemented come in the form of policy guidelines rather than rules that
GLCs are expected to implement through their Board of Directors in line with
good governance. In addition, and within the context prescribed above, GLCs are
expected to engage in managing other valid stakeholder interests, in particular
those of employees, customers, suppliers and the Government itself as regulators
and policy makers.
5. How does the GLC Transformation Program affect each stakeholder?
A: Based on one methodology to estimate the potential for value creation, it is estimated that
high performing GLCs, could in the next 5-7 years, contribute a potential upside of RM250 to
300 billion in market capitalisation.
Further, as an illustration, enhancements in procurement practices and systems alone is estimated
to result in annual bottom-line impact of over RM11billion for the G-15.
Beyond the economic and financial benefits to shareholders, GLCs will benefit all stakeholders
and contribute to Malaysia's future wellbeing in other important ways. For example:
Higher service and quality levels for customers;
Better job prospects in more dynamic GLCs;
Increased transparency favouring higher value-for-money suppliers, with reduced levels of leakages and inefficiencies;
Continued development of the Bumiputera community - with better skilled and more competitive Bumiputeras
6. What is the Transformation Manual?
A: The Transformation Manual is the output of this endeavour and is intended to be a living document
- with new Policy Guidelines and Initiatives to be added over time, and updates or amendments to be
made to existing Guidelines and Initiatives as necessary. The Policy Guidelines were launched on 29th
July, 2005, and amendments and updates shall periodically be made available online.
This Transformation Manual consists of four sections; inclusive of an Introduction in Section I.
Section II comprises the Policy Guidelines of the PCG, which are divided into individual chapters
applicable to different audiences, namely GLICs, GLC Boards, and GLC management. The final chapter
in this second section lays out PCG's recommended approach to implementing the GLC Transformation Program.
Section III comprises the 2005/6 GLC Transformation Initiatives. The initial Initiatives are introduced
in this section. Over time, this section will be augmented with further Guidelines and supporting materials,
such as templates, tools, and best practice case studies. The primary audience of this section is the CEO
and senior management of GLCs, with several Initiatives for GLICs and GLC Boards. Section IV is an Appendix.
7. Who should read the Transformation Manual?
A: The manual is a public document which is available for everyone to read. However, the are certain
sections that are tailored for specific audience. For instance, the 'Policy Guidelines' section is
intended to Government, GLC Boards, GLICs and GLCs.
For '2005/6 GLC Transformation Initiatives' section: the CEO and senior management of GLCs. Some
Initiatives are also targeted at GLICs and GLC Boards.
8. What are the 10 themes of initiatives?
- Enhance Board Effectiveness
- Strengthen Directors Capabilities
- Enhance GLIC Monitoring and Management Functions
- Improve the Regulatory Environment
- Clarify Social Obligations
- Review and Revamp Procurement
- Optimise Capital Management Practices
- Manage and Develop Leaders and Other Human Capital
- Intensify Performance Management Practices
- Enhance Operational Improvement
9. How were these 10 themes of initiatives developed?
A: The PCG through the JWT conducted a significant amount of research and analysis into the
causes and issues surrounding GLC performance. Various research methodologies were employed
including more than one hundred interviews, review of relevant best practices, regional and
international benchmarking, and a review of existing policies and legal frameworks governing GLCs.
10. Who should be accountable in implementing the initiatives?
A: Ultimately, GLC Boards and GLICs bear the responsibility of overseeing the transformation of GLCs.
11. When will the Initiatives be implemented?
A: The GLICs and GLCs need to implement them as soon as possible when introduced.
12. Whom should I contact when having questions regarding these initiatives?
A: Contact email@example.com if you have any specific
questions regarding the initiatives.
13. What is the TMO?
A: Transformation Management Office is a unit that was set up to
The TMO will report on its progress to the PCG every quarter.
Develop, evaluate and prioritise new initiatives in line with themes and objectives
Launch the initiatives identified, including identifying pilots, assembling the
relevant working team, monitoring progress, managing interdependencies across initiatives
and de-bottlenecking any execution issues, whenever required
Ensure codification and dissemination of learnings/best practices from pilots and initiatives
across GLCs and GLICs. For example, via the creation and dissemination of "Books" with
guidelines, workshops led by pilot candidates, facilitating the creation of 'Centers of
Excellence' at GLICs and/or GLCs.
14. How long will this program last?
A: GLC Transformation is a long journey, like any other change management effort. Phase 1 started
in May 2004 with the introduction of 2004 Measures aimed at inculcating high-performance culture at
GLCs. This is followed by the design of the Transformation Manual which culminated in the manual's
launch on 29th July 2005 by YAB Prime Minister.
Phase 2 is designed to generate momentum for continuous improvement efforts at both the GLICs and
GLCs levels through implementation of initiatives between July 2005 and December 2006.
It is envisioned that tangible results will be realized in Phase 3 within 2 to 5 years beyond December
2006 across all GLCs with greater operational and financial performance.
Phase 4 marks the full national benefit from 5 to 10 years onwards as a result of GLC Transformation
implementation, with the hopes of producing several regional champions among the GLCs, able to compete
competitively with their competitors in the global arena.
15. Who are the GLCs? What is the definition of GLCs?
A: Government-Linked Companies (GLCs) are defined as companies that have a primary commercial objective
and in which the Malaysian Government has a direct controlling stake.
Controlling stake refers to the Government's ability (not just percentage ownership) to appoint Board
members, senior management, and/or make major decisions (e.g. contract awards, strategy, restructuring
and financing, acquisitions and divestments etc.) for GLCs, either directly or through GLICs.
Includes GLCs, where the Government of Malaysia controls directly through Khazanah, MoF Inc, KWAP, and
BNM; or where GLICs and/or other federal government linked agencies collectively have a controlling stake.
Includes companies where GLCs themselves have a controlling stake, i.e. subsidiaries and affiliates of GLCs.
16. Who are the GLICs?
A: Government-Linked Investment Companies (GLICs) are defined as Federal Government linked investment companies
that allocate some or all of their funds to GLC investments.
Defined by the influence of the Federal Government in: appointing/approving Board members and senior
management, and having these individuals report directly to the Government, as well as in providing
funds for operations and/or guaranteeing capital (and some income) placed by unit holders.
This definition currently includes seven GLICs: Employees Provident Fund (EPF), Khazanah Nasional Bhd
(Khazanah), Kumpulan Wang Amanah Pencen (KWAP), Lembaga Tabung Angkatan Tentera (LTAT), Lembaga Tabung
Haji (LTH), Menteri Kewangan Diperbadankan (MKD), Permodalan Nasional Bhd (PNB).
17. What is the definition of Economic Profit?
A: In a nutshell, Economic Profit (EP) measures net profit after deducting a charge to account for
the cost of capital utilized to generate this profit. Technically, EP is defined as capital invested
multiplied by the spread between the return on invested capital (ROIC) and the weighted average cost
of capital (WACC). Sometimes, EP is referred to as Economic Value Added (EVA). The formula is:
Economic Profit = Invested Capital x (ROIC - WACC)
Economic Profit = NOPLAT - (Invested Capital x WACC)
where NOPLAT is Net Operating Profit Less Adjusted Taxes
You may find further explanation and details on EP by reading standard Corporate Finance textbooks.
As an example, textbooks written by these authors are a good place to start:
R. A Brealey, S. C. Myers, Principles of Corporate Finance, 6th Edition,
Irwin McGraw-Hill, BurrRidge, IL, 2000.
T. Koller, M. Goedhart, D. Wessels, Valuation : Measuring and Managing the
Value of Companies, 4th Edition, John Wiley & Sons, Hoboken, NJ, 2005
PCG Joint Working Team
GLC Transformation Manual