GLC Divestments Set To Be On High Gear This Year

By Nor Baizura Basri KUALA LUMPUR, Jan 6 (Bernama) -- The government divestments in the government-linked companies (GLCs) are expected to be on high gear this year with three of them expected to go for listing and some up for grabs via outright sales. Felda Global Ventures Holdings Sdn Bhd and Parkway Pantai are among the names that are going to rock Bursa Malaysia this year, aside from the sale of stake in national carmaker Proton Holdings Bhd by Khazanah Nasional Bhd, the government investment arm. Looking at these developments, one may say the divestments are probably good and crucial as the country prepares for another possible phase of economic turbulence in the form of external global economic environment, likely to happen in the first half of this year. Affin Investment Bank Bhd's Retail Research Head, Dr Nazri Khan, said with the GLC Transformation Programme entering its eighth year, the divestments so far have borne fruits and created a new source of revenue for the government. Nazri said with the goods and services tax still pending implementation, the divestments have somewhat provided "handsome temporary source of revenue" especially with the government likely to face fiscal constraints on the back of global economic uncertainties. "The divestments can also create trading liquidity. A one per cent reduction in the stake of the government can create RM8 billion liquidity. (US$1=RM3.14) "(And) of course, it can also help raise the attractiveness in Bursa Malaysia as an emerging exchange by creating all these liquidities," he told Bernama in an interview. Apart from that, the divestments will also help reduce the burden of tax payers as well as allow the government to separate its role as regulator and being involved in business, he said. Since the programme started in 2004, the GLCs have performed very well with the market capitalisation doubling from RM150 billion to RM300 billion while a few achieved about 80 per cent of the Key Performance Indicators. Nazri said the previous initial public offerings (IPOs) of GLCs, like Petronas Chemicals Group Bhd and MSM Malaysia Holdings Bhd, have benefited the government. "The previous IPOs have been successful, (so) moving forward, there's no reason why the government should not be making money from them," he said. Currently, the government owns 40 per cent, on average, of the top 100 stocks in the FTSE Bursa Malaysia KLCI Index and out of that, Petroliam Nasional Bhd (Petronas) owns 13 per cent, the Employees Provident Fund (EPF) (12 per cent), Khazanah (nine per cent) and Permodalan Nasional Bhd (seven per cent). "These are the four government-linked investment companies that will probably be in focus. "Petronas may list one or two more units, Khazanah, one or two more companies," he said, adding that the EPF may reduce its stakes in some firms. Touching on several "weaker" GLCs, he said, the government has created some kind of "clinic programme" in order to improve their performances. "These include revamping the directorships, collaboration with competitors as well as boosting the marketing arms of these GLCs to show some improvement over the next few quarters," Nazri said. Among the GLCs that are seen as relatively weaker include Malaysia Airlines, MISC Bhd, Proton and Tenaga Nasional Bhd, which are facing uncertainties such as rising costs of raw materials and price mechanism, he added. Last July, Minister in the Prime Minister's Department, Idris Jala, said a total of 33 GLCs had been identified as part of government efforts to realign its involvement in the GLCs under the Strategic Renewal Initiative. Idris, who is also Chief Executive of the Performance Management and Delivery Unit (PEMANDU), said the government will speed up its reduction or the disposal of its equity in the 33 GLCs through three options -- the reduction of its equity, listing or direct sales of its equity to qualified bidders. Out of the 33 GLCs, five are to see a reduction in the government share of their companies, another seven will be listed while 21 companies will be sold directly through the bidding process. Nevertheless, whatever the global economic condition, which is expected to be gloomy, for Malaysian corporates the first half is expected to be exciting. --BERNAMA Malaysia GLCs