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PUBLIC ENTERPRISES AND PRIVATISATIONEPEE 3309Discuss 3 Public Enterprises That HaveImpacted On Accountability and ControlMeasures
Prepared By:
CHAN YOON SANG EEE110012
MUHAMMAD KAMARUL BIN SETAPA EEE110071
CHIME GODWIN CHIGEKWU EEE100701
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We want to find out the controversy that took
place in few public enterprises includedPETRONAS of Malaysia, ALSCON of Nigeria, andSime Darby of Malaysia.
Look at the interrelationships among these
controversies Compare and analyze the accountability and
control measures in these public enterprises.
Look at the impact on these public enterprises
after the controversy
OBJECTIVE
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METHODOLOGY
To complete this assignment, few methodologieswere used:
Secondary data is the most important resourcesfor us to do this assignment.
Most of our information through the Internetincluded the official web page for PETRONAS,ALSON and Sime Darby.
Borrowed some journal and books from library
Group Discussion
Seek help from Dr. Kupusammy.
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INTRODUCTION
According to A. H. Hansen, a public enterprise denotes "state
ownership and operation of industrial, agricultural, financial and
commercial undertakings
The chief characteristics of public enterprises are (i) Autonomous
or semi-autonomous organization, (ii) State control, (iii)
Rendering service, (iv) Useful to various sectors, (v) Monopoly
enterprises, (vi) A direct channel for use of foreign money, (vii)Public accountability, (viii) Agent for implementing government
plans, and (ix) Financial Independence
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In ethics and governance, accountability means answerability,
blameworthiness, liability, and the expectation of account-
giving.
Base on Bruce Stone, O.P. Dwivedi, and Joseph G. Jabbra, there
are 8 types of accountability included Moral, Administrative,
Political, Managerial, Market, Legal/Judicial, ConstituencyRelation, and Professional.
Control, from the legal and technical standpoints, is the set of
measures taken by one body and connection with the activities of
another body in order to ensure that the latters action are in
conformity with the standards and principals laid down to govern
that activity.
Example of controls: Legislature, Law, Ministry, Operation
Efficiency and Finance.
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BACKGROUND OF PETRONAS
BACKGROUND OF PETRONAS
PETRONAS, the acronym for Petroliam Nasional Berhad, was incorporatedon 17thAugust 1974 under the companies Act, 1965.
It is wholly-owned by the Malaysia Government and is vested with theentire ownership
It ranked among the FORTUNE GLOBAL 500 largest corporations in the
world Vision : Leading Oil and Gas Multinational of Choice".
Much of PETRONAS success can be attributed to their ability to strike abalance between being a state-owned entity and a full-fledgedcommercial organization.
As a state-owned entity, PETRONAS is responsible for the effective
management of Malaysias Oil and Gas resources, to add value to thisnational asset and to ensure the orderly and sustainable development ofthe nations petroleum industry.
The Board of Directors in PETRONAS is formed by 12 members.
Dato Shamsul Azhar Abbas play the role as President and ChiefExecutive Officer for PETRONAS.
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ALSCON was launched in 1997 and then ceased
operations in 2000.
ALSCON, one of RUSALs key African assets, includes analuminum smelter, a gas-fired power station and a port
on the Imo River, Nigeria. RUSAL acquired a controlling stake in ALSCON in 2007
ALSCON includes an Aluminum Smelter with an annualcapacity of 96 thousand tonnes, a port on the Imo Riverand a gas-fired power station.
Ownership structure: Russia Rusal /Federal Governmentof Nigeria 85%/15%.
Board: Oleg Deripaska ( Chief Executive Officer)
BACKGROUND OF ALSON RUSAL
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BACKGROUND OF SIME DARBY BERHAD
Sime Darby Berhad was founded by William Sime and HenryDarby in 1910 and known as Sime, Darby & Co at that time.
In 1981, the group became a wholly Malaysian ownedcompany after former Malaysian Prime Minister Mahathir
Mohamad engineered a raid by Pemodalan Nasional Berhadto take over the group at the London Stock Exchange.
In January 2007, the three Malaysian giants (Sime Darby,Guthrie and Golden Hope) merged into the vehicle entitynamed Synergy Drive and on 27 November 2007, SynergyDrive was renamed Sime Darby Berhad.
Nowadays, Sime Darby Berhad is an investment holdingcompany. It is also a public enterprise in term of GovernmentLinked Company (GLC).
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The principal activities of the Group are
divided into six businesses namely,
Plantation, Property, Motors, Industrial,
Energy and Utilities and General Trading,Services and Others.
Their operation is beyond 20 countries, with
talent strength of more than 100,000
individuals. It is the largest corporation in
Malaysia in terms of market capitalization
of approximately RM54.68bn (US16.21bn).
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ANALYSIS ON CONANALYSIS ON CONTROVESYControversy is a state of prolonged public dispute or debate, usually concerning a matter of conflictingopinion or point of view. PETRONAS. According to Petroleum Development Act 1974, Section 3 (2)
The Corporation shall be subject to the control and direction of the Prime Minister who may from time
to time issue such direction as he may deem fit. It means that PETRONAS will only report to the PrimeMinister and only the instructions of the Prime Minister will PETRONAS need to obey and follow. For
me, I think parliament should be the one answerable to PETRONAS but not only Prime Minister.
Parliament should decide on issues relating to the revenue earned by PETRONAS including
disbursement of royalties, taxes, reinvestment, and business development and so on and so forth. SIME
DARBY BERHAD. Controversy happened when their chief executive officer (CEO) was removed after
holding him responsible for cost overruns on projects in Qatar and the Bakun Hydro-Electric Dam.
Zamri Mohamed Iderus was the first person hauled to court for abusing his position in a wider
investigation by the anti-graft agency into losses in the company. Controversy is a state of prolonged
public dispute or debate, usually concerning a matter of conflicting opinion or point of view. the anti-
graft agency into losses in the company
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Besides that, investors were unnerved and the problems sparkeddemands for a thorough probe to ensure transparency and publicaccountability.
Meanwhile, the controversy for ALSON when they invited theEconomic and Financial Crimes Commission to investigate the
N16.4bn loss in the companys asset. Chairman of BFIG, Dr Rueben Jaja, said BFIG was aware that the
company was being mismanaged and facing financial difficulties. ALSON currently facing liquidity crisis owing to huge liabilities in its
accounts and a sharp decline in the companys total asset values. Apart from the loss, KPMG in its audit report of ALSCON identified
some discrepancies in the way some items were handled in theaccount.
From here, we can see that different controversy happen in theseenterprises. These controversies should be solved and responsible bysomeone.
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ANALYSIS ON ACCOUNTABILITY AND CONTROL
There are lots of issues arising from control and accountability in these3 company.
In PETRONAS for instance, some measures were or have been put inplace to help address, which have been included
i. Budget Approval
-analyzed to the board authority on monthly basisii. Financial Control Framework
-involves documentation of key controls
I. Crisis Management
II. Business Continuity Plan so on and so forth
A greater transparency and accountability was equally required by
agreeing to give briefings to all MPs on the companys activities, on itsfinancial positions at all time.
Sime Darby Malaysia, focus more on promoting integrity, transparency,accountability and responsiveness.
The framework is primarily implemented in two ways which aretightening of corporate governance & internal controls and revamping
reporting structure.
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3 components are concerned to tightening corporationgovernance including introduce Revised Group Policies and
Authorities, create New Code of Business Conduct Handbookand Compliance Office and establish Flagship Subsidiary Board(FSB), re-managing Divisional and Operation Entities, and
also Assurance, Compliance and Risk as the Key GovernanceFunction Teams. Meanwhile, ALSCON faces lots of challenges it its control and
accountability when the report shows that their value gonedown dramatically on year 2007
It shows a internal crisis on the control of the company and itsaccounting has problems and not healthy.
Above all, issues ranging from control and accounting of thisthree enterprise are much more related in terms of its natureto inefficiency on the part of the management and thosedelegated to handle such evidence
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A report said that ALSCON privatization hasseen three dispensation of leadership and yetthe end is not foreseen had create
uncomfortable among share holders The factors that caused accountability crisis in
Sime Darby were lack in internal control amonghigh level officers .
The employees obeyed certain control policyand remained accountable to the company
TRANSPARENCY as the key words for thecauses of transparency.
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ANALYSIS ON THE IMPACT OF CONTROVERSY.
We had done a analysis regarding the impact of controversy of thethree enterprises and we found that they are closely related.
For example, after being privatized, ALSCON/RUSAL, despite the loss ofN274.25million (double compare before) in 2011, and there are a lot ofemployees lost their job.
For the PETRONAS, the main issue concerned is the transparency inthe system. Lack of transparency will cause inefficiency inadministration and company will lose money. For instance, 80% of theoil produced by PETRONAS is not sold directly to the world market butis channeled through six 'option holders' who obtain the supply fromPETRONAS at below market prices and the contract is bound for 20 till30 years. That crisis impact to the profit got by the PETRONAS whenthe world or market prices increase.
Besides, the accountability crisis in Sime Darby Berhad affects theshare price when the corruption news was exposed and spread to thepublic. This is because public had lost confidence on it.
We can say that controversy that happen in these company reduce theconfidence of public to them
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CONCLUSION
As a conclusion, accountability and control measures is themain key to assure the of the long-term journey of thecompanies.
Accountability crisis that happen in few study cases that wemade included PETRONAS, Alscon and Sime Darby shows anegative impact to their company.
Every company should have a good internal control toassure the accountability of their employees.
To assure the transparency of the whole companies, theleaders also should be checked and controlled by theiremployees and the public
Internal control should be tightened and employees alsoshould be involved in implementing the company policy,involving in making the important decision could be a good
check and balance needed in the company.
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REFERRENCE
http://global.britannica.com/EBchecked/topic/482353/public-enterprise
http://www.publishyourarticles.net/knowledge-hub/business-studies/meaning-definition-and-characteristics-of-public-enterprises.html
Dykstra, Clarence A. (February 1939). "The Quest for Responsibility". American PoliticalScience Review (The American Political Science Review, Vol. 33, No. 1) 33 (1): 125
Jabbra, J. G. and Dwivedi, 0. P. (eds.), Public Service Accountability: A ComparativePerspective, Kumarian Press, Hartford, CT, 1989
http://onlinelibrary.wiley.com/doi
"Global 500 2008:Petronas". Fortune. Retrieved 2008-07-16.
http://www.petronas.com.my/about-us/Pages/default.aspx
AnnualReport_FinancialStatement_2011-Nuance PDF Reader 6.0
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http://www.petronas.com.my/investor-relations/Pages/annual-report.aspx
http://www.agc.gov.my/Akta/Vol.%203/Act%20144.pdf
http://thestar.com.my/news/story.asp?file=/2008/9/6/nation/20080906151356&sec=nation
http://borneoherald.blogspot.com/2012/10/dr-jeffrey-urges-government-to-restore.html
http://thestar.com.my/news/story.asp?file=/2008/6/18/nation/21580058&sec=nation
www.rusal.ru/en/about/51.aspx
http://www.rusal.ru/en/about/history.aspx
http://www.rusal.ru/en/about/management/deripaska.aspx
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http://theeconomistng.blogspot.com/2013/04/efcc-to-probe-n164bn-alscon-asset-loss.html
http://www.simedarby.com/Sime_Darby%E2%80%99s_response_to_MACC_statement.aspx
http://www.simedarby.com/upload/Sime_Darby_Corporate_Governance.pdf
http://www.simedarby.com/downloads/pdfs/SDB/Annual_Report/Sime_Darby_AR2012.pdf
http://www.bharian.com.my/bharian/articles/BekasCEOSimeDarbyditahan/Article/artikel
http://www.simedarby.com/downloads/pdfs/SDB/Annual_Report/Sime_Darby_AR2012.pdfhttp://www.simedarby.com/Shareholders_-n-_Dividend_Info.aspx
http://www.simedarby.com/upload/Sime_Darby_Foreign_Shareholding_as_at_31_Dec_2012.pdfhttp://in.reuters.com/article/2010/08/26/sime-idINSGE67O09K20100826
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THANK YOU!