Driving the Malaysian Economy GLC Transformation and the Iskandar Development Region. 23rd February 2008

Transcription

1 Driving the Malaysian Economy GLC Transformation and the Iskandar Development Region 23rd February 2008

2 Agenda Historical Context of Transformation Khazanah s Mandate GLCT Transformation Iskandar Development Region 1

3 in the Context of Micro-Economic Restructuring From Present Phase I Phase II Phase III Phase IV Privatisations & Partial Public Listing; PLUS and other expressways, IPPs, MAS, Telekom, Tenaga, PetronasGAS, Mobile telcos Co-existence of large GLCs* and nimble owner-manager firms Asian Economic Crisis Stabilization, Capital Controls CDRC, Danaharta, Danamodal Reflationary monetary and fiscal policies Banking consolidation Corporate restructurings, including Mostly war-time financial restructuring, Renationalization; institutional holding and professional mgmt. Danasaham/Renong/UEM Group Restructuring MRCB, KUB Restructuring MAS Widespread Asset Unbundling GLC Transformation Mostly operational ( peace-time ) restructuring Khazanah Revamp Culture of High Performance ; KPI and PLC Leadership changes BOD and management Build on previous base: UEM, MAS, MRCB Initial focus on key GLCs TNB, TM, SD, Focus to increase to industry structures GLCs* = Government Linked Companies 2

4 The Case for Transformation WHY the 40 public listed GLCs that comprise only 5% of the number of companies on Bursa Saham (Stock Exchange), together make up 34% of the total market capitalisation of the Bursa. GLCs also make up the backbone of the country s economy. Through the provision of mission-critical service such as transportation, energy, telecommunications and financial services, GLCs serve a pivotal role in the operation of every commercial concern in Malaysia decisive action requires nothing less than a remaking of Malaysia Inc WHAT it is imperative that we shift the basis to that of tangible achievement and performance KHAZANAH The Government would like to see Khazanah emerge as one of the biggest and most dynamic investment houses in the region emerge stronger, more nimble and able to create more value Dato Seri Abdullah Ahmad Badawi, Prime Minister of Malaysia (14 May 2004) 3

5 Khazanah s Mandate since 2004 Leading strategic investment house that creates sustainable value for a globally competitive Malaysia Accomplish Strategic Vision and Mission Legacy investments GLC transformation New investments Human Capital Development Execute Strategic Pillars Streamline, repair, restructure portfolio Increase shareholder value, strategic value New strategic sectors and geographies Active development of Human Capital for the nation 3 rd : Building capacity in talent, social capital, financial capabilities, processes, knowledge and infrastructure 2 nd : Core values: integrity, diligence, teamwork, professionalism, mutual respect Get foundations right, build capacity 1 st Foundation: a focus on long-term nation-building 4

6 GLC Transformation Long Term Program Over 10 Years 2004 Phase 1: Mobilisation, Diagnosis & Planning 5/ Phase 2: Generate Momentum 14 months months 1/2005 PCG formed 2004 Measures KPI and PLCs Performance contracts Board composition reform Revamp of Khazanah GLC leadership changes Targeted outcomes: Diagnosis of GLCs conducted Determination of Policy Principles Initial 2004 Initiatives launched 29 th July 2005 Transformation Manual Launch Policy Guidelines Ten 2005/6 Initiatives 2005/6 Initiatives implemented Full roll-out in place Key policies endorsed and executed upon Early fruits of sustainable improvements Phase 3: Tangible Results 2-5 years Maintain momentum Tangible & sustained benefits across GLCs Visible benefits to all stakeholders, e.g., customers, vendors, employees, etc. Large scale strategic and financial changes made Material changes to Boards Phase 4: Full National Benefit 5-10 years onwards Several regional champions Most GLCs performing at par with competitors R M m illio n TNB Proton TM BCHB UEM World MAS MAHB Pos Affin Bous te ad TH Plantations Maybank K Gu thrie CCM UMW BIMB Sime D arby FY2005 FY2006 5

7 GLCT Transformation Program Initiatives - The Coloured Books 1 Enhancing Board 2 Strengthening 3 Enhancing GLIC 4 Improving 5 Achieving Value Through 6 Reviewing and Effectiveness Directors Monitoring & Regulatory Social Responsibility Revamping Procurement (GREEN), Apr 2006 Capabilities (MINDA), Dec 2006 Management Functions, Dec 2006 Environment, Sep 2006 (SILVER), Sep 2006 Practices (RED), Apr Optimising Capital 8 Strengthening Talent 9 Intensifying Performance Programme for Implementing 10 Enhancing Operational Management Practices Management Practices Management Practices Value-Based Performance Efficiency and Effectiveness (PURPLE), Dec 2006 (ORANGE), Dec 2006 (BLUE) Aug 2005 Management, Dec 2006 (YELLOW), Sep

8 Khazanah s approach to Value Creation Investment strategy and mandate Drivers of GLIC s M&M Approach Level of ownership Company s capability and performance Khazanah s Five-Pillar Terms of Engagement Framework with Its Investee Companies Leadership Bench Strategy Systems and Controls Industry Structure Description Ensure professional, capable, experienced and appropriate Board of Directors Senior Management team Drive through the Boards and management, high-quality implementable business strategy Place key systems and controls to underwrite growth and value creation: e.g. Governance, Risk Management, Performance Management, Talent Management, Procurement, Internal Audit, Investor Relations Drive or give inputs to how industry structures evolve optimal competitive environment and regulatory structure Government remains responsible for regulation Monitor & Empower Once the above in place, do not micro-manage Continuous monitoring of progress Empower management to carry out its job 7

9 How have we fared so far? G-20 Performance: Headline KPIs and Aggregate Net Profit Total number of KPIs met by G-20 in FY 2006 G-20 met or exceeded 72% of their collective headline KPIs G-20 Aggregate Net Profit The J-Curve Net Profit (RM m) 19,000 17,000 15,000 28% 13,000 72% 11,000 9,000 7,000 5, F Missed KPIs (16 KPIs, 28%) Met KPIs (42 KPIs, 72%) Notes: F numbers are based on consensus IBES estimates for companies with research coverage 2. For companies without research coverage, interim earnings was annualized G-20 is the 20 largest listed GLCs Source: Khazanah analysis 8

10 Value Creation: TSR and Market Cap Increase Total Shareholders Return (TSR) Index As of 24 November G-20* Index KLCI ex G-20 G-20* Index has outperformed KLCI by 2.4% CAGR** 24.8% 22.4% Market Capitalization of G-20 As of 24 November 2006 RM bn % or RM131 billion increase in market capitalization RM145 billion RM276 billion = 14-May-04 May-04 Nov-04 May-05 Nov-05 May-06 Nov-06 May-07 Nov May Dec-07 * A selection of 20 GLCs controlled by the GLIC constituents of PCG ** Compounded Annual Growth Rate for the period 14 May 2004 to 31 December 2007 Source: Khazanah analysis; Bloomberg Note: % increase in market capitalization is calculated based on reweighted market cap of the GLCs in which GLICs are the controlling stakeholders 9

11 IDR: Fast Facts KULAI MUNICIPAL COUNCIL Kota Tinggi Municipal Council City Singapore Area (Sq Km) 690 Population (mil) 4.1 Density ( 000) 5942 Dubai 3, Pontian Municipal Council MUKIM JERAM BATU MUKIM SG.KARANG CENTRAL JOHOR BAHRU MUNICIPAL COUNCIL JOHOR BAHRU CITY COUNCIL PASIR GUDANG LOCAL AUTHORITY Hong Kong IDR 1,095 Officially launched by The Honorable Prime Minister on 4 November times size of Singapore 6.9 2, Double the size of Hong Kong MUKIM SERKAT Well served by air, sea and land from Singapore and KL (45 minutes from KL by air; 3 hours from KL by land) 10

12 Key Attractions for Investors in IDR 11

13 Four Key Components of IDR 1 The Business Plan Comprehensive Development Plan 3 Super Developer South Johor Investment Corporation Supports the existing development planning system Serves as a guide for future economic, social, environmental and physical development Contains policies and strategies for implementation Plan for growth and sustainable development Supports catalytic and sustainable development Identifies and creates demand Fills the gap between public funding and investment of private companies Undertakes large long term high value investments in partnership with others Main contractor for Government infrastructure projects 2 The SuperAuthority Iskandar Region Development Authority 4 Catalyst Initiatives To promote, stimulate and facilitate all economic development To perform certain planning functions within the framework of the Federal and State Governments To function as a one stop centre in relation to approvals for trade, investments and development Includes, but is not limited to the following : - Waterfront Development - Theme park - International Mixed Commercial and Residential Development - Leisure and Tourism Development - Education and Healthcare Based Developments Supply Side Planning and Regulatory Demand Side Commercial Development 12

14 Present and Future Structure of IDR Economy The Vision IDR Economy Strong, Diversified, Dynamic and Global The Main Pillars (Drivers) Support System Electrical and Electronics Petro chemical and Oleo chemical Food and Agro Processing Logistic and related Services Tourism Strong Supporting Industries ( Metal Products, Engineering, Non-metallic, Manufacturing Related Services (MRS)) Strong Supporting Institutions (Education, R&D, Government, Private and social institutions, communication and coordination system) Health Services Educational Services ( Five Existing Pillars shall be reinforced ) ( Four New Pillars to be added ) Financial Services Creative Industries Basic Foundation World-class Professionals and Technical Work Force Excellent Physical, Infrastructures, including IT Excellent Working and Living Environment Stable Political, Social Environment 13

15 Progress at Iskandar Development Region July 2005 Oct Nov Nov Feb Feb Mar May Aug Oct 2007 Khazanah conducted feasibility study for development of special economic zone at South Johor Khazanah presented Conceptual Outline Plan for South Johor Economic Region ( SJER ) Heads of Agreement signed to form South Johor Investment Corporation ( SJIC ), super developer for strategic initiatives in IDR Iskandar Development Region ( IDR ) officially launched The Iskandar Regional Development Authority ( IRDA ) Act 2007 came into effect IRDA and Advisory Council inaugural meetings Announcement of IDR Incentives and Support Package (ISP) High level Malaysia- Singapore engagement Iskandar Development Region attracts first major foreign investment amounting RM4.1 billion to develop Node 1. Soft launch of ISP and release of 1 st edition of Investing in Iskandar booklet SOUTH JOHOR INVESTMENT CORPORATION (SJIC) 14

16 Summary and What Next? Khazanah Sovereign Wealth Fund of Sovereign Development Fund? Khazanah s role in national development GLCT long term value creation IDR nurturing and developing new growth engines Khazanah is committed to EXECUTION to deliver what we have set forth to do 15