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Entrepreneurship in Malaysia

   

Excerpted from: The Malaysian Journey - Progress in Diversity, by Frank-Jürgen Richter and Thang D. Nguyen, Times Edition, 2003

By Francis Yeoh
Managing Director, YTL Corporation Bhd

The term "entrepreneur" originates from the French word prendre, meaning "to take". It relates to the special ability to spot and seize a commercial opportunity and turn it into a successful enterprise. It connotes an original business venture.

The very words "enterprise" and "venture" convey a sense of adventure and a degree of courage that distinguishes the entrepreneur from the average businessman. The entrepreneur must be prepared to take risks. No risk, no gain. But there must also be opportunity. The context within which the entrepreneur flourish is one of free enterprise such as that fostered by the capitalist system.

Entrepreneurship is not confined to the West. Asia too is infused with an entrepreneurial spirit, albeit of a different model. Malaysia is a case in point. For centuries, this country has been an open trading nation, thanks to its strategic location. From the earliest times, it has welcomed successive waves of Hindu, Arab, Chinese, and later European traders. Its place on the commercial map of the world was guaranteed by its command of the narrow waterway of the Malacca Straits - the gateway to the fabled world of the Orient.

Positioned on these Straits, Malacca became the legendary Emporium of the East. Today, Malaysia, with a legacy of vigorous commerce, boasts an investment climate that is conducive to business and extremely hospitable to the entrepreneur.

The country's proud commercial heritage is based on the two main historical movements that helped opened it up to trade, each with its differing strain of entrepreneurial activity. First came the British agency houses of the Colonial Administration where trade followed the flag. This were the hey days of the merchant-adventurer. Dispatched by the East India Company in Leaden Hall Street in London to the furthest comers of the empire, they operated under the auspice of the British Raj.

Many of them were rugged capitalists, who bestowed their names on enterprises well known to this day - Guthries, Harrisons & Crosfields, Sime Darby, Jardine Matheson and many more. The story of Sime Darby, one of Malaysia's conglomerates, began when two strangers Mr Sime and Mr Darby - met by chance in the jungles of Malaya while prospecting for rubber land. They teamed up and never looked back since.

The other entrepreneurial thrust came from the Chinese. This started as far back as the 16th Century with the arrival in Malacca of Admiral Cheng Ho from the Imperial Court of China. He liked what he saw and on the next trip, returned with a ship full of exotic goods. The late 19th Century brought a wave of immigrants from China. These Chinese men were fleeing hardship poverty and the tyranny of the warlords in their homeland. They were called "Sin-keks" (meaning "new arrivals"). They came seeking their fortunes without the benefit of education, kin, or capital. Most started from scratch in an alien land.

They had to be entrepreneurial. Scrimping and saving hard, these early entrepreneurs each established their own fortresses, built around their extended family. The formula by which they succeeded was one of hard work and thrift. They were, in a sense, entrepreneurs by necessity. It was a matter of basic survival.

The Chinese have been described as the Jews of Asia - and understandably so. Both communities have produced some of the most successful businessmen of this generation. The migrant psyche is driven by the urge to succeed. Both groups successfully built up a system of mutual help and protection. Today, we call this system "networking". The Chinese have been networking ever since they came here.

Their Guan Xi (which means "connections") revolved around their clan and dialect affiliations and extents beyond their immediate region. The Malaysian Chinese of today have no desire to return to their ancestral villages. They have dropped roots in the country of their adoption. This contrasted sharply to the early days, when the first ancestors were ready to flee at a moment's notice.

In those days, the Chinese invested their money in "portable" items, such as gold chain and diamond rings - things they could take away in a jiffy if they had suddenly to leave. These days, Chinese businessmen in Malaysia feel far more secure. They build a "Wisma" to their name - a high-rise office building. You can't stuff a high rise into a suitcase and run away with it. In fact, many desire to give something back to the country that has given them so much in terms of opportunities. Most set up charities.

Corporate stories are now the stuff of legends. Lim Goh Tong was one who came here with nothing. He drove a road through the jungle to the top of a hill outside Kuala Lumpur. Half-way up, though, he ran out of funds. But Lim did not give up. He is today the most successful casino owner in Southeast Asia. The Genting Group did not stop with Malaysia. They went on to develop the casino project in the Indian Reservation in Connecticut, US.

I, too, have my own story to tell. The family patriarch, my grandfather, came over to Malaya from Fujian province in China and started a modest timber company. Entrepreneurs like to work for themselves, not others. My father moved into construction and founded the present YTL Company in 1955. Over the span of 50 years, this has diversified and grown into five listed companies comprising construction, real estate, infrastructure, power generation and utilities, transportation, retail, hotels and the hospitality business. We have also become global players.

The migrant tradition is more relevant than ever in today's globalized world. The stakes have been raised but risk does not faze us. After all, if our ancestors had not been prepared to take risks, they would not have emigrated in the first place. Recently, my own company bidded successfully for Wessex Water - against formidable opponents like Li Ka Sheng, owner of Hutchinson Whampoa. It was our biggest investment and our biggest entrepreneurial bid to date. It made us a European player.

Today, in Malaysia, a new bumiputera class has emerged. The government's pro-business policies have brought forth many enterprising individuals who help to build a robust, resilient economy. Foreign direct investment is strongly encouraged, while domestic business collaborates with the government in the spirit of Malaysia Inc.

Malaysia's bedrock stability allows for long range strategic planning. We have had the same government in power ever since Independence - 46 years of unbroken succession with minimal disruption to the business community. Malaysia is fortunate to have its present leader Mahathir bin Mohamad is himself an entrepreneur extraordinaire - a serial innovator who was the inspiration behind the national car project, the Multimedia Super Corridor, the F1 motor race track and Bio Valley.

Truly, Mahathir has earned for himself the title of "role model" for Malaysia's entrepreneurs. So, what have we to show for our efforts? Let's just take a look at Petronas, the national oil company established in 1975 to oversee Malaysia's wealth of oil and gas. In a mere 15 years, the company has gone global, operating in no less than 30 countries. It is now the only organisation in the whole of Asia outside Japan to have attained FORTUNE 500 status.

Malaysia now has a Ministry of Entrepreneur Development (headed by Abdul Aziz), with a focus on small and medium sized enterprises (SMEs). The latest stimulus package, announced in April 2003 gave even more incentives to this sector. Being a multiracial country we find strength in diversity. Joint ventures allow our new enterprises to learn from the accumulated experience of older enterprises.

The Malaysian entrepreneur is a different animal from his Western counterpart. The individualistic cultures of the US and Europe give birth to entrepreneurs of celebrity status - business icons like Bill Gates or Richard Branson. By contrast, leadership in Asia is much more a collective effort. The Chinese family enterprise, for example, is based not just on trust, but trust of the kinship variety.

There is no struggle here to reach the top. Primogeniture dictates that the number one son succeeds as head of the business. Decision-making is collective. At YTL, for example, a "cabinet" of six siblings meet every Monday morning to review our strategy. In such a setup, the spoils of success are shared. We do not seek wealth individually. Instead, we seek wealth as a unit, in order that the wealth that we acquire may be passed on to succeeding generations.

But even small family businesses realize that they must change and transform along the way. That's what keeps the original entrepreneurial spirit alive. For many of us, entrepreneurship is in the blood. I was trained as an engineer but business was my destiny. What, then, is the Malaysian definition of an entrepreneur? He is one who is opportunistic. We do not go in for grandiose schemes that will only overstretch our resources. Get rich quick schemes do not appeal to us. Nor do we believe in economic miracles. Success has to be earned the hard way.

We take only calculated risks with due diligence. Wessex Water was beleaguered and debt burdened but well ring-fenced, thus ensuring a profitable return. Of that we made sure. An entrepreneur has to be business savvy. We value good instincts. An entrepreneur cannot be trained. It takes a special sort of temperament and a certain type of courage - especially if you get in first.

With privatization in Malaysia came new opportunities. YTL managed to secure the first two Independent Power Plant licenses. You need fresh ideas in business - we introduced our version of the E & O (Eastern and Oriental express) train; we created a Parisian style boulevard with outdoor cafes; we are developing a housing project around the biggest park in Kuala Lumpur - a Malaysian Hyde Park, so to speak.

One cannot be timid. We go where others do not want to go. We have to be quick off the mark. If we seek or create opportunities, we make sure they are within our range of core competencies. We have carved out a niche for ourselves in the area of regulated and comparatively risk free utilities. We play to our strengths. Entrepreneurs can be groomed. Take myself as an example. While other children were visiting theme parks during school holidays, I was touring construction sites. I grew up with the pounding and the piling, the dust and the activity.

As a teenager, I sat in on Board meetings. My father made me MD at age 24, pushing me into the deep end, to enable me to make mistakes while there's still adequate guidance around. In Malaysia, entrepreneurship is value-laden. Entrepreneurs do not stop at the conclusion of a deal. A lot of technological, financial planning and good quality management is needed to execute the deal. Indigenous Malaysian business has one advantage.

We are a young country. We do not need to relearn old ways. We were also more ready for experimentation. My company, for example, practiced innovative financing. We were unorthodox when bidding for Wessex Water. We did not resort to recourse debt - we were able to do a deal whereby we came up with 10% of equity to the bank's 90% - it was practical self-financing. A good balance sheet and an assured cash flow are our hallmark. We ran a tight ship. We eliminate inefficiencies. Being an entrepreneur is not just about flair. Our mantra is: First World product at Third World price.

The Malaysian entrepreneur makes a good global player. We have a long history of accommodation. We are ready to cross not just national boundaries but also cultural frontiers.

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