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Saturday, April 25, 2015

Entrepreneur Liew Kee Sin from SP Setia to Eco World, passing the baton to the right person

Liew and his son Tian Xiong (left) at the interview. The biggest shareholder of Eco World Development Group is Tian Xiong, who at 22 in 2013 became the major shareholder of the company.

Entrepreneur who drives the smaller Eco World group is still a much talked-about figure in corporate world

AT 57 years of age, Tan Sri Liew Kee Sin can easily count himself to be one of the most talked about personality in Malaysia’s corporate circle – by the Government, the private sector and property investors.

Amidst the unravelling of events over the past four years, including his exit from SP Setia Bhd, Liew continues to be among the corporate figures today that enjoy the adulation of some and the wrath of others.

Since leaving SP Setia a year ago, Liew has been furiously on the ball, trying to “regain” what he has lost. He has kept a fast and furious pace, though buffeted on every front by unabating current.

Although he has previously overcome challenges thrown at him, the pressure this time is different, in severity and magnitude. It’s a pressure cooker in Eco World Development Group Bhd (EWB), he admits.

“The momentum is on-going. It forces me to be the face of Eco World,” he says.

The positive side to all these is that he has about 300 out of a staff count of 800 who joined him from his previous company. This round of rebuilding includes his son, Tian Xiong, 24. That may also account for him being more driven than before.



While he has made a success of the 4,000 acres in S P Setia’s flagship development in Shah Alam years ago, today’s climate of high house prices and stagnant wages mean his team would have to work doubly hard. So far, however, most of his projects in the Klang Valley and Johor seem to enjoy take-up rates of 80% and above.

His latest launch in Batu Kawan, Penang, has prices hovering in the RM700,000-RM800,000 bracket.

Credited with making something out of 4,000 acres in Shah Alam, Liew is trying to do the same in Semenyih, Selangor, and Batu Kawan, Penang, on a smaller scale. Liew says his objective is to set a new benchmark in terms of concepts, ideas and designs for branding purposes.

Next month, he will be launching 1,130 units in London City Island with a gross development value (GDV) of £617mil, at a time when house prices are frothy, with wages stagnant. The May 7 elections is another dampener. The Employees Provident Fund (EPF) has just sold a building at a profit and may be selling another.

The weakening ringgit works for and against him. For local investors, a property abroad is a good hedge against exposure to any possible future weakening of the ringgit. The downside is that the pool of buyers shrink with the weaker ringgit.

However, the target market for the London City Island project goes to Hong Kong, Singapore and London.

Even as he is keeping his finger on sales, other challenges faces Liew and the Eco World group.

Eye on SPAC

In October last year, Liew and his team proposed to list Eco World International Bhd (EWI) as a SPAC (special-purpose acquisition company). But the Securities Commission has yet to approve the application.

While awaiting the SC’s nod for the the proposed SPAC, in January, he and his right hand man Datuk Voon Tin Yow in their personal capacity, via a private vehicle, entered into a joint venture with UK-based Ballymore on a 75:25 basis to develop three projects in London – with the first slated to kick off next month.

The plan was to inject the three properties into EWI, which will be the vehicle for the proposed SPAC. Shareholders of EWB would not be left out as they would be offered up to a 30% stake in EWI.



It was a neat plan – at least on paper.

But the snag is that a SPAC is a blank cheque listing. It is supposed to list without pre-identified and ready assets, which is an issue when it comes to EWI. This is despite Liew’s plan to inject the private purchases “at cost plus holding costs” – meaning Liew and Voon do not profit from the asset injection.

“But this goes against the spirit of SPAC guidelines as set by the SC. A SPAC is a blank cheque listing ... a cash box looking for assets,” says a merchant banker.

“To go global, we must react quickly to market conditions, better design concepts and learn. We have the skill set,” he says. He learned a lot managing and marketing Battersea. No matter how challenging a project, “you gotta break it down to smaller bits”.

Nevertheless, Liew hopes to see some development with respect to the SPAC application within the next month or so.

Keeping EWB and EWI on separate lanes will help him to manage the gearing of both companies and reduce dilution for shareholders of EWB that includes his son, who is the major shareholder.

Liew says he also does not want to park the London assets under EWB because they are too big for its balance sheet.

Although his stake has diluted from 35.05% in 2013 to 13.52% on March 27, 2015, he is still the major shareholder.

Visionary though he may be, time was on his side when Liew built his previous “priced possession”, which is S P Setia. He built S P Setia over the years at a more even pace while the momentum and task he faces today with regards to the Eco World Group has been nothing short but blistering.

Within two years, the company has accumulated 5,396 acres with a GDV of about RM55bil. Debts was up at RM1.15bil as at Jan 31, 2015, from RM215mil in September 30, 2014. (Sept 2013: RM52mil). EWB completed a rights issue raising RM800mil and will undertake a placement. At the end of the corporate exercise, EWB’s gearing will be less than 0.6 times and it will be sitting on a pile of cash that will be used for working capital to develop the massive land bank here.

Liew says he received a lot of offers to work with landowners.

“People ask, why so aggressive? It’s because of the brand. We want to charge ahead in Malaysia. We are using up about 800 acres a year.”

Dealt a good hand

Although Liew has been dealt a good hand in his working life, he may be losing another priced project, all within two years.

As he goes about tying up loose ends on the Battersea chairmanship, a legacy from S P Setia days, and finishing the restructuring in EWB by the end of this month, questions about conflicts of interest have surfaced.

The Battersea Power Station is a 40:40:20 project with S P Setia and Sime Darby holding equal share and EPF remaining 20%.

“When I resigned from S P Setia in April 2014, the Battersea board suggested I wait till September 2015. At that time, there was no Eco World Ballymore (Holding Co Ltd, a developer of the three projects) yet.”

The private vehicle belonging to Liew and Voon – Eco World Investment – has a 75% stake in EcoWorld-Ballymore while UK-based Ballymore Group owning the rest.

At about June of last year, he declared to the board of Battersea of his interest to go into property development in Britain. He was told to wait.

Six months later in January this year, Liew and Voon went public with their 75% stake in the UK-Malaysia joint venture. At that point, he felt “obligated to resign” but was told to wait.

“We have three projects which may seem to be competing with Battersea Power Station although in terms of price point, they are priced differently.”

The latest Battersea Phase 3A units are priced at £1,700 per sq ft while the EcoWorld-Ballymore units are being sold at about £1,000 per sq ft. About 90% of the EcoWorld Ballymore units will be less than £1mil.

Ironically, a vexing issue confronting Liew these days is his chairmanship of Battersea. The roots of the situation he is caught in today can be traced to his entrepreneurship that created Malaysia’s biggest property company that he lost control to Permodalan Nasional Bhd – after a protracted corporate exercise which started in 2011.

Liew, however, is still capable and motivated to use his set of skills to further create value for himself and those around him. But the dichotomy is between duty and interest.

“I do not want to offend anyone anymore. But I (also) feel duty bound,” says Liew.

The Battersea project, which is Liew’s brainchild when he was in S P Setia, has several key milestones in the next one year.

Phase one of the project will be handed over to buyers next year. Work on Malaysian Square – the pride and joy of Malaysia – has just started. Work on London’s underground Northern Line extension, which connects to Battersea, begins this year. These milestones will help the investment to appreciate.

The British authorities are concerned about the reconstruction of the four white chimneys and the restoration of the power station brickwork. So Battersea has quite a bit of important obligations to meet in the next one year and it cannot afford any slip-ups.

“I am under a lot of pressure ... Morally, I should resign. But when I buy (my land in London), I also declare (to the board). I am duty bound to declare on the grounds of good governance. At the same time, I am also duty-bound as chairman because this year is crucial for the Battersea.

“I am trying to get out of this (situation) because I want to reduce the areas of conflict between myself, the Government and everybody else. I have lost S P Setia and I should gentlemanly give up (Battersea),” says Liew.

Time will only provide an answer.

With London mayor Boris Johnson ending his term in 2016 – and considering Liew has a good working relationship with him – there are are more than several reasons for shareholders of Battersea to continue to retain him for another year as chairman. Before works such as the construction of the underground station and reconstruction of white chimneys take off, there is a lot of interaction with the London authorities, something that is not easy to cultivate.

Interest versus duty

Whatever the outcome of his Battersea chairmanship, there are at least two broad contentious issues here. His fiduciary responsibility and duty of care is one. Liew has taken that duty seriously and returned value for that which was entrusted to him. The second issue is his skill set. Life has obviously given Liew a good card, despite his losses.

Now, the question that arises is if he should wait if opportunities come, complete all ties with Battersea and S P Setia before embarking on new ventures that may not come knocking every day?

Every day, directors are offered various opportunities which conflict with their fiduciary duty. Often times, the fiduciary duty of directors, parallel to trustees, can be onerous. But the law is the law.

Yet, in many ways, Liew’s situation is parallel to a 1978 case of Queesland Mines Ltd v Hudson. The company Queensland Mines was an iron ore mining company that established as a joint venture between A Ltd and F Ltd. Hudson was the managing director of A Ltd and had negotiated with the Tasmanian government for mining licences.

Just before the licences were issued, Hudson’s joint-venture partner ran into financial difficulties and was unable to proceed with the venture.

Hudson resigned, taking the licences with him, and formed his own company. At considerable risk and expense, Hudson exploited the licences and earned profits. Queensland later filed a suit against Hudson for what it claimed was abusing his position to divert opportunties for himself.

However, the courts ruled that although the opportunity to make profits came to Hudson through his position at Queensland Mines and was something that the board was made aware of, Hudson was not in a position of conflict.

The position Hudson was prior to 1978 is the predicament Liew faces today. In both these cases, the contention boils down to timing and turn of events.

If one were to consider the big picture and balance out the events surrounding Liew in the last four years, should he not be allowed to exploit the resources due to him because of his skills and expertise? Or should he be shackled by time and ties, despite having added value to those he has been entrusted with? That would be unfair to Liew.

The legacy issue – passing the baton to the right person

AT the spanking new Eco World International Centre in the Gardens office block in Kuala Lumpur recently, a photo session was in progress. There was a light-hearted camaraderie in the air.

Tan Sri Liew Kee Sin and his top management were present, all of them in their white Nehru-collared shirt with green trimmings.

The photo session was as much symbolic as telling. It was as if to say: “These are the people I will need to grow Eco World Development Group Bhd (EWB).”

With a staff strength of about 800, about 300 of them were from Liew’s previous company S P Setia Bhd. Despite the market conditions working against the property sector and crushing issues confronting him, Liew was his usual warm, confident self.

A lot of this has to do with the people around him. Liew was named chairman in March and his right-hand man Datuk Voon Tin Yow, previously from S P Setia, joined the group officially as executive director.

A notable addition was newbie Liew Tian Xiong, 24, bright-eyed and smiling. He first surfaced in 2013 and has been seen as a proxy of his father. The presence of that young man has changed the landscape for Liew.

Passing the baton

It is a legacy issue. As one considers the property sector, a number of the country’s developers have in one way or another paved their sons and daughters to join Dad.

There is Datuk N.K. Tong, 47, group managing director of Bukit Kiara Properties Sdn Bhd who joined Datuk Alan Tong, who is known as Condo King for his work in Sunrise Bhd’s Mont’Kiara.

It was the elder Tong who saw the potential of the area, then Segambut and bought 100 acres there. Over the years, Mont’Kiara has progressed to become a thriving suburb and is currently considered as “an aspirational location” among the young.

Ken Holdings Bhd group managing director Sam Tan, 35, joined his father Datuk Kenny Tan. That was 2004, and he was 24.

Over at the Sunway group, Sarena Cheah, 40, the daughter of Sunway Bhd founder Tan Sri Dr Jeffrey Cheah and anointed successor, will assume full control of the group’s key property unit effective May 1. She may well have been the youngest to join Dad, when she was just 20, in 1995. She started out in the corporate finance and group internal audit divisions.

Passing the baton cannot be done overnight. There is a lot of planning to do. There is also the task of moulding and nurturing the right person for the job and looking over the shoulder of the young person to ensure they are constantly on the straight and narrow. If there are more than one, then there is the selection process of who will take up the position of annointed successor.

After the painful lesson of having lost S P Setia, Liew would clearly circumspect legacy and stewardship issues.

Which takes this story to next level.

Who is working for who?

The years of passing the baton may be painful, for both parties. This explains why the years of preparation are so crucial before the final moment of actually handing over the reins. In each of the three cases – N.K., Sam and Sarena – the children joined Dad and allowed themselves to be moulded.

Which takes us to the next question.

Is Tian Xiong working for Dad, or is Dad working for Tian Xiong?

Every parent wants the best for their children and Liew is no exception.

By joining the company now, Tian Xiong will have “the history” of the company. But will he be able to take on turbulent times?

He ponders: “It’s a pressure cooker here.”

If the staff do not accept him, he will never be the “real boss”, says Liew.

Of late, Liew has been keeping the young man closely by his side.

The rationale, says Liew is that, whatever Tian Xiong had learned in EWB in the last two years, he would take years to learn outside. So he better learn fast and learn now.

Stewardship

It is not just passing the baton. It is stewardship.

Says Tian Xiong after Liew steps out of the room: “Every night, from 9 to 10pm, he would nag me about how I dress, my tie, what time I get into office, how long I took for lunch and what I did after lunch. And other larger office and market issues.

“He also told me that I have to earn it, that it is not going to drop on me, that I have other siblings,” says Tian Xiong.

On whether he was pressured into returning to Malaysia from Melbourne where he graduated in 2012 with a Bachelor of Commerce from the University of Melbourne, Australia, he says he returned on his own free will.

The young man first surfaced in 2013 as a buyer for a little known company Focal Aims Holdings Bhd. His emergence “caused a tsunami” because during that period, there was many questions as to Liew’s move.

Tian Xiong started out in corporate finance department for the first two years and is currently in corporate marketing.

By Thean Lee Cheng The Star/Asia News Network

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S P Setia's head honcho Liew resigns, looking forward to mentoring in Eco World. Ten months after S P Setia Bhd unveiled its succession plan, head honcho Tan Sri Liew Kee Sin has announced his intention to resign as president and chief executive officer. Also quitting the ... Liew would leave the property giant on April 30 while Teow would stay on until July 31. Liew and Teow would continue to be involved in the Battersea Power Station project in London until ..
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Tan Sri Liew Kee Sin, President Executive officer of SP Setia Berhad, with the Malaysian Ernst & Young Entrepreneur of the Year 2011 award yesterday at the J W Marriot Hotel in Kuala Lumpur. Liew stands out for his ...

Thursday, April 23, 2015

IJM's outlook downgraded to negative, debt notes reaffirmed by MARC


MARC: IJM Corp outlook downgraded to negative

KUALA LUMPUR: Malaysian Rating Corp (MARC) has affirmed its AA- rating on IJM Corp Bhd’s RM1 billion debt notes but downgraded its outlook to negative from stable.

The ratings agency said decline in palm price to current low levels of RM2,200 per tonne and the weak near-term outlook of the sector would likely drag IJM’s plantation division’s earnings.

MARC also noted that the slowdown in the property sector has seen demand moderating at several of IJM’s projects.

MARC said IJM's RM1 billion debt notes involved the commercial paper/medium-term notes programme (CP/MTN).The outstanding notes under the programme comprise RM300 million CPs and RM250 million MTNs.

“IJM's borrowings have steadily increased, standing at RM6.3 billion as at end-December 2014,” MARC said, adding at the holding company level, the borrowings amounted to RM1.3 billion.

The rating agency highlighted IJM’s funding of infrastructure projects and capital requirements for its oil palm plantings in Indonesia could further pressurise its credit profile.

On the other hand, MARC observes that IJM’s orderbook for construction division has improved to about RM7.2 billion as at end-financial year 2015. “The improved prospects for the construction division may provide some buffer against weaker performance in the other divisions,” it said.

Going forward, MARC may raise the group's outlook to stable if it is able to show financial resilience in restoring cash flow protection measures.- New Straits Times

IJM’s debt notes rating reaffirmed, MARC also revises the company's long-term rating to negative from stable 

PETALING JAYA: Malaysian Rating Corp Bhd (MARC) has affirmed its AA- rating on IJM Corp Bhd’s RM1bil debt notes.

In a statement yesterday, MARC said it had also revised IJM Corp’s long-term rating to negative from stable, due to the challenging outlook for the company’s core business.

“The negative outlook incorporates the challenging prospects for IJM group’s core businesses, namely, the palm oil and property development sectors, from which the group generated a combined 45.3% and 60.6% revenue and pre-tax profit for fiscal 2014,” said the rating house.

MARC added that the sharp decline in palm oil prices from last year and the weak near-term outlook for the sector would drag the group’s plantation division earnings.

“The sharp decline in palm oil prices since April 2014 from RM2,800 per tonne to about RM2,200 per tonne currently and the weak near-term outlook for the sector would further weigh on the group’s plantation division earnings.”

The rating agency also said the slowdown in the property sector had seen demand moderating for several of IJM’s property development projects.

“Against this backdrop, MARC observes that group borrowings have steadily increased, standing at RM6.3bil as at end-December 2014. At the holding company level, its borrowings stood at RM1.3bil as at end-December 2014,” it said.

Meanwhile, MARC said the RM1bil debt notes involve the commercial paper/medium-term notes programme (CP/MTN). The outstanding notes under the programme comprise RM300mil CPs and RM250mil MTNs.

It said the funding for the group’s infrastructure projects and capital requirements could add further pressure on its credit profile.

MARC noted, however, that the group’s orderbook for its construction division had improved to about RM7.2bil as at end-financial year 2015.

“The improved prospects for the construction division may provide some buffer against the weaker performance of the other divisions,” it said.

Going forward, the rating agency said it may revise the group’s outlook to stable, if the group was able to show financial resilience in restoring cashflow protection measures, reflecting the credit strength.

“The long-term rating, however, could be lowered should key financial metrics deteriorate due to weakening performance of key business segments and/or additional increase in borrowings,” it said.

Separately, BIMB Securities Research said it was optimistic on the related-party transaction involving the transfer of The Light Waterfront development in Penang from Jelutong Development Sdn Bhd to Aura Hebat Sdn Bhd (AHSB). Both companies are subsidiaries of IJM Corp.

“We are positive on the development, as it will provide an avenue for prodigious development on the land.

“No significant impact to our 2015 and 2016 earnings forecast, as construction will start later in the year,” said the research house.

AHSB will acquire The Light Waterfront development from Jelutong Development, an 80%-owned subsidiary of IJM Properties Sdn Bhd, for RM402.8mil, subject to, among others, the receipt of documents of title to the property from the relevant Penang authorities..

Sources: The Star/Asia News Network

Wednesday, April 22, 2015

FireEye threats of cyber espionage loom with the coming 26th Asean Summit in Malaysia

Photo by hfuchs/Relaxnews.

PETALING JAYA: Regional government and military officials, businessmen and journalists involved with the coming 26th Asean Summit in Kuala Lumpur could be among the targets of a recently discovered cyber espionage group, claims an Internet security firm.

 
https://www.fireeye.com/

FireEye, which exposed the presence of the APT30 group of hackers snooping on governments and businesses, including those in South-East Asia, said some of its previous attacks had been launched before key Asean meetings.

“Based on previous experience, I believe that this group and possibly others will try to use that meeting (26th Asean Summit) as part of their ruse to potentially target businesses and governments in the region,” said Bryce Boland, FireEye’s chief technology officer for Asia Pacific in a telephone interview here yesterday.

In its report, FireEye, which is based in the United States, said APT30 had a distinct interest in organisations and governments associated with Asean.

The group had released a malware in the run-up to the 18th Asean Summit in Jakarta in 2011 and the Asean-India commemorative Summit in 2012.

One of the domain names it used to command its malware was aseanm.com

AFP had reported that the APT30 group was “most likely sponsored by China” and that there was no immediate reaction from the Chinese government, which had always denied allegations of cyber espionage.

The two-day Asean Summit from April 26 is expected to discuss various issues, including maritime disputes between China and Brunei, Malaysia, Vietnam and the Philippines in the South China Sea, and the formation of a single market and production base in the region.

“The hackers are after intelligence and information, primarily about political changes, political positions, especially over disputed territories, border disputes and trade negotiations,” said Boland.

“We have also seen that when they target journalists, they are specifically looking for information in relation to understanding concerns about the legitimacy of the PRC (People’s Republic of China),” he said.

The group has also attacked businesses to steal information on deals, manufacturing plans and intellectual property such as schematic diagrams.

According to the FireEye report, Malaysia is one of seven countries with targets hit by the group, which has operated largely undetected for the past 10 years.

Others are Thailand, Vietnam, South Korea, Saudi Arabia, India and the United States.

Boland said the group mostly attacked their targets via spear phishing emails with attachments that appeared to be from a known contact but were in reality sent by the hackers.

The attachment, which can be in the form of a document with an Asean-related title, will contain a customised malware that is activated the moment that it is opened.

It allows the attacker to gain control of the victim’s computer and retrieve information from it.

Boland advised computer users not to open suspicious e-mails.

“Businesses and governments should ensure that their IT infrastructure not only protects them from attacks but can detect the extent of damage done in the event of a successful hack.”

By Razak Ahmad The Star/Asia News Network


Related:

 FireEye: Cyber Security & Malware Protection

Monday, April 20, 2015

Regional issues today developed from the past to predict the future, the winds of change in Asia

To appreciate how issues today had developed from the past is also to understand how they are likely to develop in the future.
 
"Since Sultan Mahmud Shah of 15th-century Malacca at least, Malay rulers have had no problems with a powerful China".


MANY people can be so absorbed by specific issues as to neglect the larger picture that created them. Thus much misunderstanding persists of the issues themselves.

This failure to see the wood for the trees also affects many professional analysts or “country watchers”.

Putting issues in the news in their proper context is crucial.

In the late 1980s, economic growth in East Asia had become both contagious and self-evident. Talk of the coming 21st century as “the Century of Asia and the Pacific” had been gathering momentum.

After Japan’s stellar economic performance from the 1970s, rapid growth would visit the East Asian “tigers” – Hong Kong, Singapore, South Korea and Taiwan – then the other countries of South-East Asia and then China.

Few countries at the time could see that never before in history had both Japan and China, old rivals with their historical baggage still in hand, achieve economic ascendancy at the same time like now – but Malaysia was one of them.

Since economic strength meant diplomatic and political clout, tensions between Tokyo and Beijing could grow to unmanageable proportions with potentially devastating effects throughout the region.

Something had to be done to anticipate and contain any such fallout.

In December 1990, on the occasion of the visit to Malaysia by Chinese Premier Li Peng, Prime Minister Datuk Seri Dr Mahathir Mohamad proposed the formation of the East Asia Economic Grouping (EAEG).

This would comprise all the countries of South-East Asia and China, Japan and South Korea working together towards a more integrated regional economy.

Since economics was less controversial than politics, the EAEG would skirt political sensitivities while a culture of working together as a region could in time overcome them.

Such regional cooperation that acknowledges and encourages regional integration could also pre-empt and minimise any economic crisis.

But that was not to be. Australia and the US had not been included and opposed the EAEG, the latter also pressuring Japan to reject it.

Within Asean, Indonesia’s Suharto rebuffed it because as senior regional leader he had not been consulted, while a West-leaning Singapore still preferred Occidental leadership to anything so distinctly Asian.

Singapore then proposed a watered-down East Asia Economic Caucus (EAEC), this compromise being a subset of the larger Asia-Pacific Economic Cooperation (Apec) grouping largely to assuage US insecurities. After the EAEG died, the EAEC withered away.

By 1997 a financial and economic crisis struck East Asia, devastating the economies of Indonesia, Thailand and South Korea in particular.

There was no regional grouping or bank to help deflect, absorb or otherwise mitigate it.

South Korea then stepped up the drive to form an Asean Plus Three (APT) grouping, with the EAEG’s same 13 countries. The crisis also gave China an opportunity to demonstrate regional leadership: it suspended its planned currency revaluation, thereby helping to cushion the shock of the crisis.

Throughout the whole long-drawn saga, the unspoken issue for some countries was the impending economic dominance of China that they could not accept.

Thus they opposed the EAEG, as if China’s economic dominance could be restrained in the absence of a regional grouping. The reality would have been quite the reverse: with South Korea and Japan balancing China, and Asean countries at the fulcrum.

Meanwhile an underlying Western presumption shared by West-leaning Asians is that once China achieves economic ascendancy, it would mimic the West in acquiring overseas colonies and generally throwing its weight around.

That remains a heavily constructed hypothesis at odds with the history of China and the region.

China had been a great maritime power before, but had never embarked on naval conquest in a region where naval power trumps all other strategic options.

And through the years of talk on the EAEG, EAEC and APT, China’s economy kept on growing.

Then came China’s massive projects resulting from, and further empowering, that growth: the New Silk Road Economic Belt (“One Belt, One Road”) linking Asia and Europe overland, the Maritime Silk Road at sea, and the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank to fund them.


In contrast only Indonesia’s still formative and insular “maritime highways” idea, just a tiny fraction of China’s proposals in scale albeit grandly positioning Indonesia as a Global Maritime Fulcrum, appears to be the only response from the region.

Why has the rest of South-East Asia, or East Asia in general, become mere passive spectators to China’s bold plans? Why have other countries not offered their own thought contributions in response to China’s proposals?

Indonesia has, through different presidential administrations, clung to its informal position as first among equals in Asean. It has foraged for opportunities lending it such a profile, though not always elegantly or consistently.

On President Joko Widodo’s first visit to Beijing for an Apec summit last November, one month after he became president, he asked that the AIIB be moved from Beijing to Jakarta. That was a non-starter.

He recovered some equilibrium last month on state visits to Japan and China. On the day of his arrival in Tokyo, an interview was published in Japan in which he said China had no legal basis to its South China Sea claims.

That was three days before his arrival in Beijing, where the news had preceded him. One day after his arrival there, a bilateral agreement had been fleshed out for full-scale economic cooperation.

Now that much of the dust has settled on which countries would, or would not, be founding members of the AIIB, the challenge of projecting possible futures begins.

The positives include there being more international support for the multilateral lending institution than expected, a good mix of countries in Asia and Europe, and that the bank will proceed unimpeded.

However, the negatives include the voluntary absences of the US and Japan, two major economies that would have made the bank more multilateral, better resourced and further enriched with the collective experience of multilateral lending.

Playing somewhere in the background is the Western-oriented anxiety that a militarily powerful China may one day edge the US out of the region.

That prospect goes against the grain of China’s deep policy pragmatism and interests.

US military dominance in East Asia is often credited for keeping the peace in the region.

That peace has meant unfettered transportation and travel that has benefited the region, most of all China, in its imports of fuel and raw materials and its exports of manufactured goods.

China has had ample opportunity to learn from the tragic errors of not just the Soviet Union but also neighbouring North Korea, where overspending on military assets only wrecks the economy. The same applies to the US itself in profligate spending on questionable foreign wars.

China’s focus on infrastructure for facilitating trade is clear, its economic priorities echoing those it has had for centuries. Since Sultan Mahmud Shah of 15th-century Malacca at least, Malay rulers have had no problems with a powerful China.

Such a China had prioritised economic growth and cooperation without meddling in local affairs except to provide protection against hostile outside powers.

There are still no indications that modern China would deviate significantly from such a position, other than perhaps “protection” today including cushioning the shocks of economic crises.

Behind the Headlines by Bunn Nagara

Bunn Nagara is a Senior Fellow at the Institute of Strategic and International Studies (ISIS) Malaysia. The views expressed are entirely the writer’s own.



Winds of Change in Asia

The birth of new development banks led by developing countries and the United States’ failure to block them are signs of rebalancing of economic power, especially in Asia.

The world must adjust to the rise of new powers. It will not stop just because the United States can no longer engage. If the results are not to the United States' liking, it only has itself to blame! - Martin Wolf
 
China’s Asian Infrastructure Investment Bank (AIIB): U.S. Asian, European “Allies” Pivot away from Washington

IN the last month, the international media has been carrying articles on the fight between the United States and China over the formation of the Asian Infrastructure Investment Bank (AIIB).

Influential Western economic commentators have supported China in its move to establish the new bank and judged that President Barack Obama made a big mistake in pressurising US allies to shun the bank.

The United States is seen to be scoring an “own goal” since its close allies the United Kingdom, Australia and South Korea decided to be founding members, as well as other European countries, including Germany and France, and most of Asia.

The United States also rebuked the United Kingdom for policies “appeasing China”, but the latter did not budge.

The United States did not give any credible reason why countries should not join the AIIB.

Treasury Secretary Jack Lew said the new bank would not live up to the “highest global standards” for governance or lending.

But that sounded like the pot calling the kettle black, since it is the lack of fair governance in the International Monetary Fund (IMF) and World Bank that prompted China to initiate the formation of the AIIB, and the BRICS countries (Brazil, Russia, India, China and South Africa) to similarly establish the New Development Bank.

For decades, the developing countries have complained that the developed countries have kept their grip on voting power in the Breton Woods institutions by clinging to the quotas agreed upon 70 years ago.

These do not reflect the vastly increased shares of the world economy that the emerging economies now have.

Even the mild reform agreed upon by all – that the quotas would be altered slightly in favour of some developing countries – cannot be implemented because of US Congress opposition.

The big developing countries have been frustrated. They had agreed to provide new resources (many billions of dollars each) to the IMF during the financial crisis, but were rewarded with no reforms in voting rights.

In addition, the unjustifiable “understanding” that the heads of the World Bank and IMF would be an American and a European respectively remains in place despite promises of change.

So much for legitimacy of lectures about good governance, merit-based leadership and democratic practice, which are preached by the Western countries and by the IMF and World Bank themselves.

The BRICS countries then set up the New Development Bank, which will supplement or compete with the World Bank, while China created the AIIB to supplement the Asian Development Bank (ADB), which also has a lopsided governance system.

The new banks will focus on financing infrastructure projects, since developing countries have ambitious infrastructure programmes and there is gross under-funding.

Critics anticipate that the new banks will finance projects that the World Bank or ADB would reject for not meeting their environmental and social standards.

But that is attacking something that hasn’t yet happened. True, it would be really bad if the new banks build a portfolio of “bad projects” that would devastate the environment or displace millions of people without recognising their rights.

It is thus imperative that the new banks take on board high social, environmental and fiduciary standards, besides having good internal governance and being financially viable.

The new institutions should be as good as or better than the existing ones, which have been criticised for their governance, performance and effects.

It is a high challenge and one that is worthy of taking on. There is no certainty that the new banks will succeed. But they should be given every chance to do so.

The AIIB, in particular, is being seen as part of the jostling between the United States and China for influence in the Asian region.

A few years ago, the United States announced a “pivot” or rebalancing to Asia. This included enhanced military presence and new trade agreements, especially the Trans-Pacific Partnership Agreement (TPPA).

It seemed suspiciously like a policy of containment or partial containment of China. The United States combines cooperation with competition and containment in its China policy, and it retains the flexibility of bringing into play any or all of these components.

China last year announced its own two initiatives, a Silk Road Economic Belt (from Western China through Central Asia to Europe) and a 21st century Maritime Silk Road (mainly in South-East Asia).

The first initiative will involve infrastructure projects, trade and public-private partnerships, while details of the second initiative are being worked out.

The AIIB can be seen as a financial arm (though not the only one) of these initiatives.

China is also part of negotiations of the RCEP (Regional Comprehensive Economic Partnership) that does not include the United States.

Last year, it also initiated a study to set up a Free Trade Area of the Asia-Pacific, which will include the United States.

These two intended pacts are an answer to the US-led TPPA. It is still uncertain whether the TPPA will conclude, due both to domestic US politics and to an inability to reach a consensus yet among the 12 countries on many contentious issues.

Meanwhile, prominent Western opinion makers are urging the United States to change its policy and to accommodate China and other developing countries.

Former US Treasury Secretary Larry Summers said this past month will be remembered as the moment the United States lost its role as the underwriter of the global economic system.

Summers cited the combination of China’s effort to establish a major new institution and the failure of the United States to persuade dozens of its traditional allies to stay out of it.

He also called for a comprehensive review of the US approach to global economics, and to allow for substantial adjustment to the global economic architecture.

Martin Wolf of the UK-based Financial Times said that a rebuff by the United States of China’s AIIB is folly. This is because Asian countries are in desperate need of infrastructure financing, and the United States should join the bank rather than pressuring others not to.

The real US concern is that China might establish institutions that weaken its influence on the global economy, said Wolf.

He added that this is wrong since reforms on influence in global financial institutions are needed and the world economy would benefit from more long-term financing to developing countries. China’s money could push the world in the right direction.

In a devastating conclusion, Wolf said the world needs new institutions.

“It must adjust to the rise of new powers. It will not stop just because the United States can no longer engage. If the results are not to the United States’ liking, it has only itself to blame.”

The winds of change are blowing in the global economy, and many in the West recognise and even support this.

Global Trends by Martin Khor

> Martin Khor is executive director of the South Centre, a research centre of 51 developing countries, based in Geneva. You can e-mail him at director@southcentre.org. The views expressed here are entirely his own.


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Saturday, April 18, 2015

SY Lau, a Malaysian took China's WeChat by storm


SY Lau has made the country proud through talent, perseverance and hard work

Known globally as the WeChat Company, Tencent is the largest Internet service provider in Asia, with a market capitalisation (as of April 16, 2015) of US$193bil. It delivers value-added Internet, mobile/ telecom services and online advertising, in order to fulfil the strategic goal of providing users with “one-stop online lifestyle services”.

In 2006, when SY Lau (pic) joined Tencent as one of the senior management team, he focused on driving corporate growth with the specific mission of overseeing Tencent’s Online Media Group (OMG).

Today, OMG is one of the largest media companies in the world, with a portfolio that includes a matrix of online information and entertainment products.

We sit down to talk to the Star Speaker of this year’s Chief Marketing Officers (CMO) Conference.

Early days

I came from an average family and was raised by parents who believed strongly in traditional Chinese parenting. I am the eldest in the family with two younger sisters. My dad worked in the Nanyang Press for more than 25 years before he passed away at an early age due to illness. My mom was an excellent tailor, but I guess my sisters and I would remember her most as a disciplinarian who instilled the spirit of inquisitiveness and competitiveness within us during our formative years.

I studied in St John’s Institution before graduating with a major in Mass Communication from one of the local universities. Subsequently, after working for 10 years or so, I obtained my MBA from Rutgers, the State University of New Jersey, and graduated from Harvard Business School upon completing their pinnacle AMP programme.

My first job was with McCann Erickson as a trainee account executive. How did I get the job? When I was in the final year of my undergraduate studies, I decided to conduct a field research on the Malaysian Advertising Industry using collections of communication theories. The research effort opened up doors for me to conduct field work with more than 10 leading advertising agencies in Malaysia.

A month before my graduation, I received six job offers from the top 4As agencies, and Noel Derby offered to pay RM1,000 to have my work translated into English for use by his company.

I chose McCann because of two reasons. I strongly believed in the motto of the company, Truth Well Told, and, more importantly, Ong Thiam Hong impressed me as a sincere business leader.

Did you go to China by accident or was that part of your plan for a long time? How did it all begin?

Well, it was both by accident and somewhat part of the plan. I was fluent in both English and Mandarin and I thought that if I had an opportunity to venture overseas, China would certainly be my first choice.

I remember when the opportunity came, I was already working with Leo Burnet. One day during lunch, I met Ong Thiam Hong and he told me McCann Hong Kong was in trouble.

One of their biggest international clients, Nestlé, had a new managing director for Greater China, and she was about to fire McCann. The new MD was Leong Ming Chee, a highly respected Nestlé veteran from Malaysia, with a remarkable track record in one of the most significant markets in Asia. So, the McCann regional management team was frantically looking for a lead person to solve this problem. Apparently Ong had given my name to the regional team based on the fact I used to be one of the well-respected account leaders on the Nestlé account in Malaysia.

I spent the next three years stabilising and building the Nestlé business for McCann, by nurturing and building a professional local team from scratch.

We ended up winning more than a dozen new business accounts for both China and Hong Kong markets.

During this time I won the prestigious Milo Account for China and the media Agency of Record (AOR) , which was a first in Asia.

Lessons learned

China is a huge market, and I have seen many business professionals cutting corners here and there in the name of responding to pressure. Irrespective of industry, I think business people today could excel more if they were more conscious of focusing on leadership led by principles.

This reminds me of an advertising campaign that I saw recently on CNBC; I think it is for a bank from Singapore. The story goes... a father was bringing his son to a fun fair. As the father was purchasing tickets to enter the circus, the ticket seller said it would cost a dollar for an adult ticket and half price for children under four. The father then asked for two tickets. The ticket seller appeared to be shocked and asked curiously about the age of the boy, to which the father replied five. The ticket seller then said you could have told me he was four and I would have let you in without knowing. The father replied while holding his son’s hands, “Well, you may not have known, but he would have.”

Today, we live in a world where few people believe principles really do define who we are. It is my wish we have more principle-driven executives in the business world.

Leadership talks

In recent years, I have been honoured to be invited to deliver a number of speeches at some of the world’s leading universities. The main topics of the speeches explored the development of China’s digital economy environment and Tencent’s role in that development.

In 2012 at Stanford, taking into consideration that the number of Chinese web users had increased slowly since June 2008, I predicted that the demographic dividend (the organic growth brought by the growing number of Chinese Internet users) is going to be cashed out.

So, I proposed that targeted advertising placement and personalised content creation would be the key to break the bottleneck.

I believe that mobile media can not only help advertisers with product promotion, brand communication and customer relationship management, but also with the integration and optimisation of business models, which can become a new marketing platform in the long run. Future digital marketing will go Personal: shifting from media buying to user buying; go Richer: developing a technology-driven creative team and raising the proportion of developers; and go Offline: powering the integrated marketing model with O2O, and achieve closed loop marketing from advertising to sales.

At the Said Business School of Oxford University last year, I shared opportunities brought about by the growth of mobile Internet access across China; we see opportunities at three different levels: the consumer level, the industrial level, and then extending to the level of the whole economy.

Mobile Internet meets the pent-up demand of Chinese people for increased and upgraded levels of consumption, facilitates a long called-for industry transformation as well as expediting the liberalisation of the national economy.

In short, the Internet plays the role of an enabler to transform the new thinking of sustainable development into reality under what we call the New Normal.

The second-mover advantage triggered by the Internet industry can be summarised by examining two different perspectives: Industrial and Geographical.

Very simply put, the Internet has changed the lives of people in China in profound and meaningful ways.

It provides not only a new way of thinking and doing, but a feasible methodology for achieving China’s economic goals. The Internet is not just a resource; it is a means to turn dreams into economic reality.

Digital vision

I think Malaysia had the vision a long time ago, but unfortunately this vision was not implemented to the best of its potential. At the end of the day, the Internet today has become a basic infrastructure, and it should be discussed at a national policy level.

When I attended the recent BoAo Economic Forum, I had the privilege to meet and dine with Tun Abdullah Ahmad Badawi.

He patiently listened to my story of how the private sector got involved in formulating a national policy for Internet Plus in China.

As you know, one of the most significant characteristics in the development of China’s digital economy exists in its integrating with various industries at high speed.

In China, we call this procedure “Internet Plus” – Internet plus the retail industry, plus the real estate industry, plus the manufacturing industry, and of course, plus the media industry.

China has already revealed that Internet Plus will become a policy for the country alongside another national strategy for the manufacturing industry, that is “Made in China 2025”.

A government fund of 40 billion yuan (US$6.38bil) has already been put in place for investment in China’s emerging industries.

Meanwhile, the “Broadband China Project” is being carried out. It will help to make broadband coverage in China reach over 250 million users, and a newly-gained user number of 4G service hit 200 million by the end of 2015.

All of these provide guarantees for the development of the digital economy.

Tencent’s future

Since Internet companies are always impacted by the combined forces of technology and users, I want to talk about some opportunities that I see as solid and realistic here...

Connecting the last billion

First of all, it took 20 years for the Internet to really take hold in China, turning 47.9% of the total population into Internet users.

For the other half of the population who are not yet using the Internet, a lot of them are elderly, young children, or those who cannot afford the necessary equipment.

To plug those people into the Internet world with easy and inexpensive access will be our major mission in the near term.

I think mobile phones are the most viable option to achieve this goal. Through what Nicholas Negroponte of the MIT Media Lab calls, “connecting the last billion”, I believe Tencent will be capable of enabling the development of China even more.

Media of the ‘Mega Web’

Actually, I call this idea of a fully inter-connected world “the world of the Mega Web”, in which the role of the media will greatly expand. The media is already connecting users to content, and it will further connect us to many more things; more devices, more context, more people.

Media will expand to touch almost everything, everywhere. When connectivity expands to that level, singularity will be triggered. The information that we have will become “intellectual” as Big Data accumulates, interconnects and becomes available to even more devices. This expanded access to intelligence is the basic information we act upon, machines act upon and entire smart cities act upon.

The future: connect, call out, make the whole community answer When data itself becomes both interpretive and predictive, a judgment like “Something needs to be done to improve this situation” will more frequently be made by media rather than people, and more insightfully than we can imagine now. Once everyone is inter-connected, we will be able to reach out to every member of the society, in every remote part of the globe, and call for collective actions to solve problems both locally and globally.

Currently, our mission is to support the Internet Plus Action Plan of China. We are ready to cooperate with the partners and potential partners coming from different vertical industries on a strategic level, so that together we can provide better O2O commerce, online payment experiences and smart livelihood services for our users. We see opportunity around the world, whether this is for our own apps like WeChat or for partnership and investment in Western businesses.

I think WeChat is possibly the most recognisable brand for those in the US or UK.

Tencent also supports other famous brands around the world in markets like gaming and social. Companies like Epic Games and Riot Games are owned by Tencent, while we have our own gaming IP that is successful in China.

To see SY in action on April 21, visit www.marketingmagazine.com.my/cmo20015

- The Star/Asia News Network

Related:

Tencent: The Growing Giant

by Simon Kemp in News
Tencent 2014Q1
 Tencent released its Q1 results earlier this month, including the latest monthly active user figures for its various social platforms.

As the chart above shows, Tencent’s platforms have attracted a huge share of the world’s social media users, even if the majority of those users are still based in China.

Despite this geographic focus, Tencent now accounts for 3 of the world’s top 5 platforms, driven by the continuing growth of QQ, Qzone and WeChat:

We Are Social - Largest Social Channels May 2014

Qzone alone now accounts for around 40% of the world’s social media users.

Moreover, the impressive growth of WeChat (Weixin), both in terms of its active user numbers as well as the platform’s functionality, suggests that Tencent is still far from reaching its peak.

Is it only a matter of time before the rest of the world joins the Tencent family?

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