Malaysia’s rationalization of SOEs, lessons for Sri Lanka

Aug 05, 2016 (LBO) – Sri Lanka’s state-owned public enterprises should be rationalized to focus on four main factors to future survival, a top official at PEMANDU Malaysia said.



Speaking at the Sri Lanka Economic Summit 2016, CEO of PEMANDU, Dato Sri Idris Jala, said the most important factor is that the SOEs should be there only if the private sector doesn’t do a better job. Jala said after choosing the SOEs based on the above factor, it is vital to hire the best talent to carry out the operations of the enterprise.



Setting tough targets and insisting on delivery should be the third focus of the program, with the fourth factor being reward and consequence management coming in as motivation factor.

PEMANDU, the Performance Management and Delivery Unit, is an agency under Malaysia’s Prime Minister's department which manages the economic transformation program initiated by the government to turn Malaysia into a high income economy by the year 2020. Jala said public enterprises play an important catalytic role in the early stages of economic development of a country and should remain instrumental in sectors that require huge infrastructural and financial support.





Petroleum refining, utilities, financial services, mining are dominant sectors among SOEs in the Fortune Global 50, he said. Jala who is a former CEO of Malaysian Airlines reveled how they turned the huge loss making airline into a profitable venture in a short period of time.







They used a six-point strategy to get the airline back on track starting from cutting loss making routes. “The airline implemented dynamic pricing to improve yield and has reduced the manpower by 3,000 while selling the headquarters building to raise cash for operations,” Jala said.





“We also implemented a structural cost reduction exercise and started a new subsidiary airline (Firefly) for non-trunk domestic routes.” Jala said they had to monitor the profit and loss account and cash balance of the airline relentlessly on a daily basis.