Thursday, August 05, 2010

Sime Darby Financial Losses: A Ticking GLCs' Timebomb for BN

I was asked to comment on the Sime Darby financial losses by Reuters. Alarmingly, this should not be viewed as a stand alone case. The Sime Darby management fiasco and poor investment decisions should trigger a deeper look at the government's GLCs strategy. I will touch on a few key points which must be considered before other time bombs are being set off.

The Malaysian Insider reported that the government conglomerate will next month announce that potential full-year net loss could top RM2 billion — and go as high as RM2.5 billion. Most of the losses are down to ill-advised investments in the energy and utilities sector in Qatar as well as tardy business practices in the development of the Bakun dam in Sarawak.

The online news portal also mentioned that property division managing director Tunku Badlishah Tunku Annuar has been removed from some units within his division while other top officials are being put on notice after Sime Darby instructed former chief executive Datuk Seri Ahmad Zubir Murshid to take a leave of absence last May 13 in relation to the losses.

There are several issues which must not be taken lightly:

1) There were calls for the removal of the entire BODs led by Chairman Tun Musa Hitam whom most critics argued was responsible for the losses and poor investment decisions. However, it must be noted that the removal of the BODs is not a solution to the current problem. It is a non-issue that the directors are responsible for the poor results and ought to step down. The main is the direction of the conglomerate and all other GLCs. Eventually the government should shoulder some responsibility for not properly defining the scope and objectives of the GLCs. What is the main purpose of GLCs?

2) The investment evaluation process for GLCs should be more transparent and stringent because they are public trust companies. GLCs should have a clear risk barometer or level that they should not break.

3) The executive appointment process has been in the limelight for many years. Are we putting the best people to run these companies? Are the executives and directors subjected to same rigorous standards set by private practices? Is affirmative action involved in the selection process and is it contributing to the poor placement record? Political nominees and retired politicians should stay out of running the GLCs if the government wants to protect its investments.

4) Are GLCs performing at their optimal level and doing business within their scope of core competency? In the case of Sime Darby, it is obvious that the company had overstepped its boundaries by investing in projects beyond its capability and capacity. This is not the first time it had happened. Its foray in the banking industry was equally disastrous.

5) GLCs are being assigned to help catalyst the development of several regional economic corridors. Now, the government must relook at this possibility of not overloading these companies. Should GLCs be further burdened with public projects and at the same time expected to deliver profitability as public listed companies?

6) Does the use of GLCs to spearhead and help fund public projects exposes the flaws and weaknesses in the BN socio-economic policies? Why aren't we able to attract private investments and foreign direct investments to help spur the economy through our economic policies?

The catastrophic performance of Sime Darby should not be taken as an isolated case. It may just be a trigger for similar cases in GLCs. We do not know how well or poorly these companies are being managed unless something bad has happened.

It is inevitable for the government to admit the weaknesses in its GLCs strategy and socio-economic policies and find proper long-term remedies to address them. Otherwise, it will turn into an agitated spirit which will haunt the coalition for a long time to come.

If not carefully managed, Malaysia may already be on a path of financial crisis.

11 comments:

Anonymous said...

I look at all these fiasco in GLCs in this way: If you think you can not compete successfully against your fellows citizen in your own country based on merit, and need to be protected by certain "rights", then I don't think you can manage well a huge conglomerate with oversea operations.

Anonymous said...

"The catastrophic performance of Sime Darby should be taken as an isolated case."

Did you mean to say, "The catastrophic performance of Sime Darby should NOT be taken as an isolated case."

The government does not pick managers on merit or ability. Its political affiliation and skin colour.

telur dua said...

Monkeys should not get involved in multi-million ringgit deals. They should stay in a zoo, eat bananas, just lay about and procreate.

This way, all those billions lost could be used to build luxury homes and given free to the likes of Abraham Ellie. Then there would be no need for UMNO Youth to make police reports and go berserk over Tony Pua's proposal.

vinnan said...

FFB prices have been above RM400 for the past 2 years and yet Sime Darby can still lose money. I shudder to think of what is going to happen to the GLCs which depend on projects funded by petrodollars. With Blocks L amd M gone the petrodollars needed to keep these GLCs alive have already started to dwindle very rapidly. Greece is not as far off as many have chosen to believe and we have no EC to save us.

Anonymous said...

Lim Guan Eng should be arrested for bribery and corruption. This Cheap Minister thinks he can buy votes with his RM100 gift to senior citizens . This is political corruption or political bribe , isn't it ? To look at it from a different perpective , all senior citizens above 60 yrs old is entitled to this RM100 bribe , as to qualify for it you must register your name at only DAP service centers. Read more here http://justice4otk.blogspot.com/2010/08/guan-eng-arrest-me-if-rm100-payout-to.html

Anonymous said...

Aiyah Khoo,It is just a matter of time lah!Not only Sime Darby but all other GLCs will bleed. Not only you don't have the talents to compete internationally but domestically these GLCs also have to pull cables!!!

Asia News Girl said...

"The government does not pick managers on merit or ability. Its political affiliation and skin colour."

Asia News Girl

Anonymous said...

Those PLC companies link with the ruling parties are dead.

Now those PLC companies link with the government or Khazanah are also gone.

Only can invest with Pendatangs own companies and hopefully the authorities have some sense (zen cheng ) or else the country going bankrupt will be sooner.

There is not much hope same as the US unemployment rate above 9.5% it is difficult to bring down . In Malaysia it can never go up again I mean the Growth.

Anonymous said...

All GLCs must be run by people with integrity, capability and honesty irrespective of what race they belong. But in Bolehland, control by those greedy , racialistic and corrupted Umnoputras, only half pass six, unethical, kampong mentality type of cronies are fit to run.
They dont care a damn even $$$$$$$billlions have been wasted or pocketed. After all, it is rakyat money. Who cares, when the country is bankrupt they blank on the non malays.

Anonymous said...

Where were the auditors when you need them? Surely these losses did not just happened overnight or are GLCs exempt from audits?

najib manaukau said...

Any idea why this GLC fail so badly, in fact all the GLCs are about to go bankrupt ? Just like Bank Bumiputra as an example remember. Plus all the corruptions of the Umno/BN cronies soon very soon it will be the Malaysian government's turn. Why are the governments of Singapore, Hong Kong and Taiwan are able to turn their governments to have such massive reserves when these countries do not have what the corrupted Ketunan Melayu have to begin with ? One thing the Ketunan Melayu government have is their big dreams like the living beyond their means !
Also they are all managed by incompetent corrupted Umno appointed officers especially those who were appointed by shenanigan Mahathir.
Can cow horns, even after polishing, become elephant ivories ? Cow horns will always remain as cow horns no matter how hard shenanigan Mahathir tried or tries. He will never directly admit it but the truth is he has failed to turn cow horns into elephant ivories even though he tried so very hard to. He must have the illusion that he could be Allah but the sad truth is he is not even fit to lick his backside with his tongue !
He and his muslim cronies are bloody disgrace to the muslims and are setting extremely bad examples of what a true muslim is.