The government has started the ball rolling to transform the civil service into an efficient machinery, which is the cornerstone of the new administration under Prime Minister Datuk Seri Najib Razak. In addition, liberalisation is gathering pace in the corporate sector. Are Malaysian companies taking steps to re-engineer themselves to stay relevant in the new playing field?

The new bus terminal in Gombak to divert traffic away from the crowded Pudu Raya in Kuala Lumpur is taking off — at a significantly reduced cost of RM70 million and shorter construction period of less than 10 months. Previously, the cost was RM240 million and the construction period was more than 2½ years.

The proposal to downsize the project in its entirety and decision to implement it was made within six weeks in one of the many laboratories set up under the Government Transformation Plan (GTP) — the mega initiative that started in April this year to re-engineer the civil service and Corporate Malaysia.

The previous plan for the bus terminal had eateries and many extras that contributed to the higher cost and longer time to construct.

“But what was needed is a LCCT (low-cost carrier terminal) type of structure where there are booths to sell tickets and bays for buses to park, drop and pick up passengers,” said Minister in the Prime Minister’s Department Datuk Seri Idris Jala in a briefing recently.

The bus terminal proposal was put together after some 300 hours of discussion by the sub-committee in charge of improving the urban transport system over six weeks. It was handed over to Prime Minister Datuk Seri Najib Razak and approved immediately.

Several proposals and decisions are coming out of the series of laboratories set up by the government in October and November in line with the GTP.

The transformation is also to help Najib achieve his Budget 2010 target of reducing government spending by RM24.2 billion and achieving a 5.6% budget deficit.

“That is the impact on public finance or rather the government’s balance sheet,” said Minister in the Prime Minister’s Department Tan Sri Dr Koh Tsu Koon.

Previously, such a decision would have taken several years to implement because it involved approval from several ministries. For instance, the bus terminal project was mooted some five years ago but never got off the ground.

“By locking everyone in a room at working level and giving them a mandate to come up with a solution, a lot of problems can be resolved quickly,” says Jala.

The ultimate objective of the GTP — which also features key performance indicators (KPIs) — is to change the character of the civil service by changing the work process.

For instance, it takes two weeks for a security pass to be processed, even for a minister. Jala found this out in his first week in Putrajaya. After enquiries were made, it was determined that it took only five minutes for the person responsible to produce a security pass. But before the security pass card can be produced, the officer must get a copy of an official appointment letter, which takes more than a week to prepare.

“The solution is to do away with the official letter,” says Jala.

The flagbearers of the GTP are two non-Umno ministers — Koh and Jala. While the latter is apolitical and the former managing director of Malaysian Airline System Bhd, the former was a lecturer and technocrat in Gerakan before going on to becoming Penang’s chief minister for 12 years.

In April this year, the government unveiled its KPI, which is to meet the objectives of the six National Key Result Areas (NKRAs). Among them is to reduce petty crime by 20% and to get 25% of the people in the Klang Valley to use public transport by 2012.

Those close to Najib describe the GTP as the most important policy change and an important cog in his 1Malaysia Plan. The drivers of the 1Malaysia concept are unity in diversity; economic competitiveness; and a government for all.

The GTP is supposed to improve the efficiency of the government’s delivery system, facilitate more competitive public and private sectors and ensure that the government machinery works for all segments of the people.

“The initiatives under the GTP are aimed at improving the government’s delivery system and help facilitate the re-engineering of Corporate Malaysia. Other changes, such as the relaxation of bumiputera equity conditions are related to his concept of economic competitiveness,” says an Economic Planning Unit official who is  familiar with the policymaking process.

In June this year, during the InvestMalaysia conference, Najib announced the deregulation of Foreign Investment Committee (FIC) guidelines, including the ruling to allocate 30% equity in listed companies to bumiputeras. The FIC guidelines also encompassed property transactions where foreigners need approval before buying property from the locals.

“The measures were lifted primarily to stimulate the private sector to become the engine of growth,” says the official.
Prior to the 1997/98 Asian financial crisis, the private sector was the engine of growth, with investments contributing almost 30% to gross domestic product (GDP). Today, the figure is less than 10%. For an idea of the gravity of the decline, total domestic direct investment decreased from RM72 billion in 1997 to RM56 billion in 2008.

“Once the private sector becomes the engine of growth, the government’s fiscal discipline will kick in,” says the official.

Ironically, some of the policies, such as the 30% quota for companies going for listing, were introduced by Najib’s father.

“But Najib realised some of the policies were irrelevant. It was important then to bring about stability but now, the situation is different,” says an aide to Najib.  “The days of ‘the government knows all’ are over. This is the message he sends to all the ministers.”

The deregulation of the FIC guidelines paved the way for the Securities Commission (SC) and Bursa Malaysia to jointly launch a new framework for listings and equity fundraising exercises. Apart from the merger between the Main and Second Boards and creation of a new board, several restrictions on companies raising funds were relaxed.

Apart from lifting restrictions on bumiputera policy and companies raising funds, Najib announced further measures in Budget 2010, such as allowing 100% foreign equity ownership of firms offering services in corporate finance and financial planning. The previous limit was 30%.

The new measures were implemented in the listing of Maxis Bhd. As for the liberalisation of firms providing financial advisory, the first to take up the offer was Goldman Sachs. On Dec 8, the SC approved an application by Goldman Sachs to establish a fund management and corporate finance advisory outfit in Malaysia.

But while the government is taking measures to improve efficiency and facilitate private-sector investment, certain issues such as the issuance of approved permits (APs) and projects being awarded without transparency often come under the spotlight.

For instance, the reviewed National Automotive Policy (NAP) still allows the issuance of open APs to bumiputera auto traders, who in turn sell these for easy money. Last month, the award of a contract to build a Matrade convention and exhibition centre in return for 65 acres of land in the prime area of Mont’Kiara in Kuala Lumpur, was questioned, as was the multi-million-ringgit concession to Target Resources Sdn Bhd, a private company, to maintain the Scorpene submarines.

“These are legacy issues and decisions had to be taken during Najib’s time. He learnt from Pak Lah [former Prime Minister Tun Abdullah Ahmad Badawi] not to overturn decisions that were taken by the previous administration,” says the aide to Najib.

Najib has learnt from the mistakes of Pak Lah. He makes quick decisions and sticks to them. His policies to stimulate private-sector investment, as seen by the increasing number of listings, will yield results given time.

His biggest challenge in re-engineering Corporate Malaysia, starting with the civil service, is to rise above the legacy issues and cut politics out of business.




This article appeared in Special Focus page of The Edge Malaysia, Issue 787, Dec 28, 2009 - Jan 10, 2010.