In addition to bolstering shareholder value through improved financial and operational results, Government-Linked Companies (“GLCs”) have broadened the GLC Transformation (“GLCT”) Programme to deliver significant benefits to stakeholders at large, improve procurement processes and embrace corporate social responsibility (“CSR”).

Completing the first 12 months of the three-year Phase 3 (2007-2010) of the GLCT Programme, the GLCs are showing a more consistent and promising results both in terms of financial performance and stakeholders benefits, reports the GLCT 2007 Interim Progress Review.

The Interim Progress Review was presented to YAB Prime Minister, Dato’ Seri Abdullah Ahmad Badawi during the GLCT Programme Update by the Putrajaya Committee for GLC High Performance (“PCG”) chaired by YB Second Finance Minister, Tan Sri Nor Mohamed Yakcop, here today.

The GLCT Programme was launched by YAB Prime Minister on 14 May 2004. The programme, led by the PCG, implements comprehensive policies to transform the G-20 1 into high performing entities.

Improved Financial and Operational Performance

Significant progress has been achieved across-the-board with GLCs rapidly growing, improving in productivity and operational performance. The largest GLCs, the G-20, are on course to deliver strong earnings growth with the total aggregate profits for the year 2007 estimated to rise to RM17.4 billion2 as compared to RM10.2 billion in 2006. This estimated rise of 70% is three times faster than the consensus earnings growth for the broader market3 for 2007.

Capital markets continue to positively recognize these improvements. Since the Programme’s commencement on 14 May 2004, the Total Shareholders Return (“TSR”) of the G-20 has outperformed the KLCI by 3.3% as at 30 November 2007, while market capitalisation increased by 83% (or RM121 billion) to RM266 billion. In addition, the market capitalisation of the G-474 has increased by 70% (or RM148 billion) to RM361 billion.

Key Benefits to Stakeholders

More than just delivering financial and operational benefits, the GLCT Programme has broadened in bringing significantly more benefits to stakeholders at large. Several examples were highlighted at the progress briefing today, including:

• Customers experiencing higher service levels. Tenaga, CIMB and TM saw service interruption, customer queueing and broadband service restoration improve by 19%, 56% and 75% respectively in 2007, while many GLCs including CIMB, MAS, TM, Boustead and Maybank were awarded multiple product and service awards.
• For employees, of which there are approximately 360,000 people including 75,000 professionals, all benefited from rising performance-based compensation, staff benefits and job prospects with the improvement in performance of GLCs. In addition, heavy emphasis on human capital development has seen multiple programmes or staff development and lifelong learning being intensified.
• For the community at large, GLCs have taken the lead to invest in education, environmental protection and alleviation of poverty. Under the PINTAR programme, for example, 96 schools nationwide covering more than 38,400 students have been adopted by 25 GLCs.
• Suppliers benefit from increased active supplier management that involves working in partnership with GLCs under vendor development programmes including an upgraded Bumiputera Vendor Development Programme. More than 10,000 Bumiputera vendors and suppliers are already covered under this programme.

As part of the GLCT Programme, the PCG continues to monitor and track the implementation of 10 initiatives geared at helping GLCs perform better. In the GLCT 2007 Interim Progress Review, in line with the emphasis on broadening the benefits of GLC Transformation to beyond financial and operational gains, two key initiatives – the Silver Book on Achieving Value Through Social Responsibility and the Red Book on Procurement Guidelines and Best Practices – were highlighted.

Among the highlights were commitment by GLCs to generate procurement value creation of a further RM4.9 billion within 4 years and completion of long-term plans in implementing contributions to society by 70% of the G-20 – especially in the areas of developing human capital, engaging with local communities and protecting the environment.

Note

1. The “G-20” is a selection of 20 GLCs controlled by Government-Linked Investment Corporations that constitute the PCG. As of 30 November 2007, the number of GLCs in the G-20 has dropped to 18 with the merger between Sime Darby, Kumpulan Guthrie and Golden Hope Plantations to become the newly re-listed Sime Darby.
2. Estimation based on actual reported 2007 earnings and analyst consensus estimates for 2007.
3. KLCI consensus earnings growth of 23.1% – Source: Bloomberg. Note G-20 accounts for approximately 35% of the market capitalisation of the KLCI.
4. The “G-47” is the group of 47 listed GLCs as of 14 May 2004. The number of listed GLCs has changed over time with new listings/de-listings, restructuring and M&A activities. With the recently concluded Sime Darby merger, the number has decreased to 37 listed GLCs.
5. Refer to the GLCT 2007 Interim Progress Review for more examples, illustrations and case studies highlighting benefits to stakeholders at large.