Khazanah holds the assets of about 40 government linked corporations, which have historically been underperforming. These companies have been put through a transformational process, which included professionalisation of the boards and senior managements, and adoption of business process reengineering, quality assurance programmes, customer relations and supply chain management. These brought about a dramatic change, and their market capitalisation soared. SASAC of China currently manages the assets of the government with a wide remit that includes appreciation of the value of such assets, restructuring, reform, strategic investments/divestments, modernising and public listing (including overseas), board and management appointments and performance monitoring. It is responsible for assets of about 700 trillion yuan (about $835 billion). Similarly, Temasek is now a global player with a portfolio of S$129 billion (about $80 billion). Are these models good for emulation in India Some believe so. At the hypothetical level, such an entity can indeed free the enterprises from ministerial meddling, bureaucratic interference and overwhelming superintendence and accountability systemsand bring about better returns, synergies, reduced costs of capital and so on.
The question is whether it will indeed be in the hands of independent, competent and objective professionalsespecially when some ministers are imposing themselves crudely even in the appointment of independent directors. The current coalition situation may not be hospitable for creating an independent entityit cannot overcome the entrenched interests and sunk costs of political parties and bureaucracy. In case the government does create such an entity, there are bound to be lobbying for top management positions. The entity will be too big and too powerful to let the opportunity pass. On the other hand, some states have shown some desire to professionalise, restructure and reform the State-Level Public Enterprises (SLPEs) without necessarily hoisting the red-rag of privatisation. Kerala has been in the news for its fresh approach, with minister E Kareem explicitly stating that political appointments will be stopped and that unprofessional management has been the main reason for their sickness. He has evidently a vision, a road map for reform with the support of the Chief Minister. Kerala has about 110 SLPEs, accounting for about 10% of the total SLPEs in the country.
Kerala has been in the news for its fresh approach, with minister
E Kareem explicitly stating that political appointments will be stopped and that unprofessional management has hurt
Given all this, Kerala should probably consider a holding company or special purpose vehicle (SPV) to which all the ownership rights and SLPE assets may be transferred. The ministers vision holds the promise that the management of such an organisation will indeed be professional, competent and independent. It would be empowered to act swiftly, initiate a range of innovative strategic options, gain tremendous internal synergies and derive a slew of surprising results.