State-sponsored companies in sad state
By JAY MENON
Petronas has set a new annual profit record, somewhere in the region of $12 billion.
Being Malaysia’s only Fortune 500 company, the 22 percent growth the company is posting should set an example to the rest of the so called state-supported organisations which are two steps short of tatters as we speak. What are our major state-supported companies, such as Proton, MAS, Tenaga Nasional and TM, doing now?
Of the above, Petronas is the only truly multinational corporation, due to its solid foothold in the oil industry. Perhaps it may not be comparable to the likes of Shell or Exxon, but it is significant nonetheless. Having made it onto the Fortune 500 list, the folks at the company must be doing something right.
But what of the rest?
MAS and EON have reached lows beyond the description of the word itself. How can an airline that claims it is one of the best in the business be in the situation it’s in now? You could attribute it to a number of things; for example, when your CEO buys an RM3-million painting for his office on top of remodelling costs, bought from his wife, you know there’s something not quite right.
Another thing which just doesn’t quite cut bread is how the airline was buying meals such as nasi lemak at three or four times the going market rate from sub-con caterers. Following this was the issue of the paper used to print tickets. If Air Asia can do it for less than RM1, why does MAS have to use paper which costs RM5 a page?
The more and more you look at it, it just seems like a conspiracy of funneling funds.
Proton, on the other hand, has issues of a different sort. The word “quality” and EON don’t seem to go hand in hand; they just can’t get along. The company’s inadequacies in this area have had a profound effect on its business - just look at the pathetic efforts the government is whipping up to try and fish them out of this quandary.
It is shocking that some of Proton’s models have yet to pass Failure Mode Effect Analysis (FMEA). The Gen-2 is one of these models, and apparently it was rushed to meet the deadline that was set by Dr. M and never passed FMEA. As a result, there were numerous cases of post-sales failures which were hushed up. According to an anonymous party, there were a number of Gen-2 models which had major engine failures, some of which were even followed by explosions. Customers were “compensated� with bigger and better models. And although the car has not passed the very basic requirements of the automation industry, it still continues to roll off the line.
You would think the company which owns Lotus would produce better machines, but that, sadly, is a misconception. Lotus, with its heritage of motor sport at its pinnacle, only assists Proton on chassis development, and cannot do anything if the car itself is horrible. As a result, models like the Gen-2 go on to win awards such as Worst Car of The Year, which was duly awarded by Top Gear.
How can we expect our economy to grow if the aforementioned major firms can’t seem to get their fundamentals in check? Yes, it’s true the economy doesn’t solely depend on this lot, but its contributions cannot be neglected.
Last year, Petronas’ 55 percent increase in profits contributed 30 percent to the government’s total revenue. Proton, on the other hand, posted a net profit of RM86.51 million on a revenue of RM2.15 billion, which was already RM54.41 million lower than in corresponding quarters. Obviously the growth of the oil industry can’t be compared to that of the automotive industry, but enhancing profits is the same everywhere.
So the question is, why? Why are Proton and MAS wallowing in the doldrums while Petronas continues to grow? Apart from the price of oil and the aforementioned obvious reasons, is it simply down to the people who run the show? I don’t believe it would be completely fallacious to say so.
Preventive actions don’t seem to strike a chord with this lot. “Wait until the crap hits the proverbial fan, and figure it out laterâ€? seems to be the prevalent ethos. It seems rather daft, but they knowingly do so simply because they know they have state support, and all the top dogs are just looking for quick payoffs. Even though MAS had to sell its building in order to stay afloat, and Proton had to sell Augusta for one Euro, despite having purchased it for RM315 million, our government will let not let its “belovedâ€? corporations go under water. They will get bailed out; it’s already happening.
So who pays the bail? We do: your everyday Malaysian taxpayer. Money that could be put to better use is blown away on some corporate fat cat’s retirement funds. It’s a shame.
So, what can these exemplary fiascos be put down to? The Malaysian corporate mentality, or pure and simple corruption? Maybe it’s just the huge proportions of both.
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JAY MENON is a contributing writer for theCICAK.
Jay recently received his Master’s degree in optoelectronics and communications systems. He enjoys talking about football team Chelsea’s ups and downs, and playing his guitar. Visit his site.
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Fact check:
EON is a car distributor. Not a manufacturer.
On another note, maybe we should ask how Petronas would be doing, were oil prices low? Maybe the management of Petronas isn’t any much better. How can you substantiate the claim that Petronas is better managed?
When Proton bought MV Augusta, apparently debt obligations valued in the millions were not discovered. Given that management has just discovered that, the best action would be to dump the stock if they believe that benefits from owning MV Augusta doesn’t exceed the cost to it (honouring the debt obligations). Really, what sort of synergies do you expect between a motorcycle and car manufacturer? As you have already pointed out, even between Proton and Lotus, there isn’t much. In that sense, dumping MV Augusta was good. Even at 1 Euro. You want to knock Proton, ask Proton’s bankers and management in the past why and how they actually ended up purchasing it, with no knowledge of the debt obligations.
Why MAS can win awards and yet have a really rubbish balance sheet and P&L? Because it is run like a Welfare Department for the rich. Why can Singapore, Emirates and Cathay win awards and yet remain profitable? Because they don’t have their governments interfering and telling them to fly JB-Kuching and the likes.
Why we should sell or let Proton die? Because it was never a commercially viable business plan. It was a Mahathir pet project. It made some profits when the market was protected. And now that the market has been opened up, consumers can choose. And surely they know better than Mahathir. What’s the price of our NATIONAL PRIDE? Really awful car designs and death cages.
And you say we should give Proton a chance? Proton is older than many of us here. And after twenty something years you have broken power windows and engines exploding?
If Proton was so good, it would be fit for the Agung, all Royalty and all Cabinet Ministers. But how come you don’t see them retire their BMWs, Mercedess and Roll’s Royce? And the rest of us are cursed with Milo Tins?
If Petronas was so well managed, then why doesn’t the government want to list it on the markets? Right now, Petronas is only accountable to the government. They don’t have to publish detailed financial reports for the public, simply because there are no other shareholders. So do we really want to believe that it is so well managed?
Wait, does being on the 500 even make a company great?
Ken Lay and gang must have done something right to put Enron on the Fortune 500 once? And read through the list and you’ll see so many other state-owned oil & gas companies. So, is Petronas that great?
In conclusion, I am doubtful that Petronas is a much better managed state owned enterprise.
Adding to that, I don’t think we should even bother about our so called GLCs. They overpromise and under-deliver. They promise to distribute wealth and opportunity and to transfer knowledge. They implore us to perform our national duty by buying Malaysian. But really, they are just means for well-connected people to make quick and riskless profits (rents).
I am not here with any right-wing capitalist agenda, but really, I don’t think that the business of Government is running Business.
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Granola : For your info, 3 of Petronas’ subsidaries are listed companies - Petronas Gas Berhad, Petronas Dagangan Berhad, and MISC.
You guys don’t seem to know what you are talking about. What exactly is a state-owned enterprise?
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Yeah you are right about the 3 subsidiaries. One’s in the gas business, the other’s retail and the other’s shipping. Still, it doesn’t answer for the rest of their businesses and that doesn’t make Petronas any much more transparent. The finances of these 3 units are subjected to market discipline, but what about the many other units that aren’t?
I am not going to define SOE. There are Wikipedia listings on SOEs and Government owned corporations. On the other hand, I can’t seem to find any on GLCs. Maybe the government just made up that word.
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When there exists lack of transparency in the organisations, then there exists the opportunity for fraud.
One fraud leads to another, and eventually it gets so big that it can’t be covered up anymore.
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A topic I’ve long been interested in. I like what granola has to say about this. In addition, there is a point I’d like to bring up. Petronas digs oil, something that’s already there, with value, while mas and eon for example markets products/ services whose sales depend on the distributing company/ service provider’s efforts. Plus, petronas digs good oil (the high-carbon argument, we’ve all heard about it) and SELLS them, while we fill our rides with imported gas.
The government indeed has their own agenda, whether positive or negative.
The negative? we all dont know…or know (but that’s not what I wanna talk about)
Still, we can look at this in a positive way. The ex MAS md did an extensive commentary with starbiz a few months ago, stating that some of MAS’ problems being overstaffing. clearly, the government can’t let mas retrench the many staff easily as it might cause massive unemployment. too bad trade unions in Malaysia are not as influential as we would like it to be, coz then, collective retrenchment can be bad.
I might not know everything about all the glc or soe’s structure, but i believe that crappy balance sheets is not just be the management’s fault.
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How can anyone do anything wrong selling oil? I mean, just look at the Saudis. Petronas is successful not because of its managers but in spite of them.
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granola,
If Petronas was so well managed, then why doesn’t the government want to list it on the markets?
i think the answer is that the government wants to keep petronas in their hands. They dont need to raise extra funds anyway. They dont want to open the doors to foreign institutional investors and be responsible to them. The people at the top are milking our oil dry. And the money from the oil is used to bail out other GLC’s and also for the sultans yearly allowance as written in the constitution. A small portion comes back to us “rakyat” in the form of better(*cough*) public transportation, ministers hari raya open house(food not bad la), and fireworks on Merdeka Day…..alot of rakyat enjoy “kau kau”. how to complain like that? hahahahah.
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Btw, if you get and rely on your info from wikipedia, you must be mad!
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and not to forget to fund the very professionally executed public messages 4 times a year. very inspiring, but it must be the work of all the creatives (like yasmin ahmad and other agency ppl).
but at the end of the day, it’s all quite shiok sendiri because politicians will continue to spew vitriol, corruption will continue to prevail and our schools will continue to produce racists.
regarding SOEs and wikipedia, the term SOE is quite widely used.
btw, would you rather believe the definition of SOE from wikipedia or GLC from a politician?
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The thing is, a politician could be the person who submitted the definition of SOE in wikipedia.
Im not saying its wrong, its just an unreliable source of information.
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Petronas is making billions every year is because of the royalty they receive from other oil companies in Malaysia such as Shell, BP and so on. Without the oil royalty, i doubt that they could even make half of what they profitted the last year. Perhaps one should know that being in the Oil business, you’re definately going to make a profit. Look at Russia, the top millionaires are all owners of oil company. How can an oil company make losses when the world depends so much on oil and fuel? All they need is just to spend some money on R&D and also on exploration and bang, money just flows to them.
However, i fully agre with you that major of our GLC in Malaysia are screwed up. Lets take Renong as an example, where does it stand now? Previously it had UEM under its sleeves but look where is it now. Another example would be Perwaja Steel headed by Eric Chia previously. Where does all this company stands now?
I have nothin against the government. However, as a Malaysian, i cannot and i repeat, i CANNOT tolerate hanky panky especially when it is dealing with the goverment’s money because all those cash are actually our taxpayer’s hard earned, blood-sweat and tears money…
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you know when you want to comment and write a critique on the way a company works, you need to at least have some sound knowledge of economic and the field the company is in (whether it is oil and gas, or energy, or transportation or telecommunications). taking the kind of road-side ahpek mentality and mixing and matching that kind of opinion with your very own ‘i read from wikipedia’ brand of research makes your ‘attempt’ very ‘young’. betraying of course, the cicak’s insistent call that youths are a force to be reckoned with.
you just sound like a very unread, young person, my friend in this post, because there’s no water, and there’s hardly any juice in this ‘critique’. your observation of the companies you mentioned above is not new, neither is it fresh. it’s said before, and this is just another flogging of a dead horse.
if you wanna try, try harder and do a little more research before writing things like this. at least, it would make the whole forum slightly more interesting, and would make ‘youth’ seem a little more INTERESTED in how our politics have unsuccessfully dabbled in our economic scene.
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Is there any point of debating about an open secret that have been dragging for decades and put the prospect of our future generations in danger? Or the way they elected government’s acts of wrongdoings, failed policies and corrupted politicians is forgivable and tolerated for the sake of unity of a country? Blames it on the citizen themselves who elected the present government, and blames themsleves for their failures to pursue the truths, and blames those you support as the leader, will not and cannot sacrifice for finding out the truths for you because of his or her own personal agenda, and came out with a lame reason like this is a multi-racial country and avoiding direct confrontations and being tolerance is the best way of dealings with this kind of things. How long more are we going to tolerate this? As far as I concerned, the patience and tolerance of a Malaysian is remarkable, and at last, it seems forever, in any case we are the easily forgiven and forgotten kind. So lets wait and see, will there be more of this corporate bullshits? the questions is immediately answered. What are you going to do about it?
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