State units show relatively low competitiveness: research

Among the six, PTT Group alone controls market capitalisation of Bt1.4 trillion.
In comparison, Malaysia’s 30 state enterprises are listed with market capitalisation equivalent to Bt4.4 trillion, or 31 per cent of market value.
If anything, the figures compiled by Natchaya Dilokrungteerapop, a researcher for the Stock Exchange of Thailand, show there is a lot to be done to improve Thai state enterprises’ competitiveness.
In “SET Note Volume 2: Lessons from Malaysia”, Natchaya also showed that listed Malaysian state enterprises were now traded at a price-to-earnings ratio of 17.05 times, against the market’s 15.05 times. Listed Thai state enterprises’ PER, as of August 20, was 11.25 times, against the market average of 16.97. High PER means high demand for the stocks, which guarantees greater success in fund mobilisation.
“This reflects higher profitability of Malaysian state enterprises,” Natchaya said.
The report was released after a series of Thai governments have been criticised for lacking long-term policies for state-enterprise development and cronyism that plagues the good governance in several agencies. Despite his ability to turn around Thai Airways International from the biggest loss in its history, Piyasvasti Amranand saw his employment contract terminated unexpectedly. Sorajak Kasemsuvan, an academic and media expert who now serves as MCOT chairman will today officially take over the national carrier’s presidency.
According to data obtained by Krungthep Turakij from the National Economic and Social Development Board (NESDB), 53 state enterprises are expected to show a combined net profit of Bt79.78 billion in the 2013 fiscal year. Though this is an increase of 13.5 per cent from the previous year, most state enterprises still rely on government budgets or loan guarantees from the government. Between 2014 and 2016, they are expected to report combined net profit of Bt222 billion, or Bt74 billion per year on average.
The data will be soon submitted for the Cabinet’s approval. In the package will also be the NESDB’s proposals that state enterprises get ready for public-private participation and the Asean Economic Community. According to the board, these 53 state enterprises are committed to invest Bt1 trillion in the fiscal year, but their own funding will cover only Bt215 billion.
In Natchaya’s research, from 2002 to 2011, Malaysian state enterprises showed continued growth in net profits, based on the comparison of profits of enterprises in the same categories: Krungthai Bank against CIMB Bank and Malayan Banking, TOT and CAT Telecom against Axiata and Telecom Malaysia, and Airports of Thailand against Malaysia Airports Holding.
“SET Note” attributed the stronger position to Malaysia’s state-enterprise reform project, “which turned several state enterprises into regional players” while most Thai state enterprises play an insignificant role in boosting the country’s competitiveness. “Long-term policies are essential to ensure efficient social and economic development.”
In 2004, Malaysia launched the Government-Linked Companies (GLC) Transformation Programme to enhance state enterprises’ competitiveness to match private companies’ within 10 years and turn several into regional companies by 2015. Under the programme, five key areas are stressed.
First is clear business targets, with greater concern on shareholders and stakeholders.
Second is good corporate governance, allowing an individual to serve no more than five state enterprises, with clear boundaries on the roles and responsibilities of chairmen and chief executives. Local and foreign experts are appointed to the board, which is subject to periodic evaluation.
Third, government-owned investment companies play a greater role as shareholders of the state enterprises.
Fourth is improvement of internal practices.
The fifth area is clarity in government policies towards the state enterprises and regular evaluation by the Putrajaya Committee on GLC High Performance – chaired by the prime minister and represented by the Finance Ministry and government-linked investment companies. In the process, Khazanah Nasional, one of these investment companies, also acts as the committee’s secretary.
Under the policy, some state enterprises are merged or de-merged. Sime Darby was born from the merger of three palm-oil companies. Axiata was de-merged from Telecom Malaysia. CIMB was born from the merger of financial-services providers.
The Malaysian government also sold some shares in Time dotCom, Pos Malaysia and Proton to strategic investors.