Thursday, July 3, 2008

Is there any strategic thinking in Malaysia?

TheEdgeFinancialDaily (Wednesday, 2 July 2008) reported on Singapore's Neptune Orient Lines looking to acquire German-owned Hapag-Lloyd. It will give NOL access to Germany's export markets and the huge payload of attendant cargo.
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NOL has a market capitalisation of Sing $4.8 billion (RM11.52 billion). NOL is two-thirds owned by Temasek Holdings. NOL's container line, American President Lines, has one of the most efficient cost structures in the industry. This led Elvind Kolding, CEO of Danish-owned Maersk Lines, the world's largest container shipping line, to observe that if Maersk had the same cost structure as APL, filled its container ships as fully as APL and carried similar types of cargo, Maersk would be two-and-a-half times as profitable!
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What happened to MISC?
What happened to the Malaysian International Shipping Company, in contrast? Set up by the likes of Robert Kuok at the urging of Tun Razak and Tun Dr Ismail, MISC was always intended to be Malaysia's flagship national maritime carrier. In the past 2 decades MISC has been content to carry only Petronas liquid oil bulk and LNG. No interest in becoming world-beaters, content to be jaguh kampung.
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If you recall, in the 1990s MISC was taken-over by Mirzan Mahathir's Konsortium Perkapalan group. When the Asian economic crisis hit, Petronas was summoned to bail-out Konsortium Perkapalan. Now MISC is still principally a shipper of Petronas liquid bulk. This is just a vertical logistics integration exercise.
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Can we attach any blame to Petronas for lack of strategic thinking for MISC to be a world-class shipping company? Presently, MISC is only a logistics appendage to its core business of oil exploration and extraction.
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No strategic agenda
But, as the people in Shell would say, let's take a helicopter up to view Malaysia's maritime agenda from a national vantage point. The view presented is that Malaysia has no strategic vision on matters such as shipping.
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There was some chest-thumping a few years ago when Port Tanjung Pelepas stole a march on Singapore by securing Maersk as a port management partner. This led the world's largest carrier fleet to channel a signifcant amount of cargo throughput to PTP at Singapore's expense.
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Apart from that flicker of light, we have been inundated with the bleak controversy surrounding the Port Klang Free Zone matter which is, to-date, a non-starter. Wasn't the strategy to create a hub for distribution, drop shipments, break-bulk handling etc in order to compete with the Port of Singapore? But PKFZ may drown in a sea of debt and lack of customers.
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The lesson of PKFZ may be that strategic thinking must be predicated on a viable financial model. Otherwise, all projects created by strategic goal-setting may end up as white elephants. In Malaysia, the list of white elephants is long.
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Ku Li's strategic contribution
Some of us may recall Tengku Razaleigh's simple observation in an interview by The Edge last year. Ku Li spoke of the simple strategic move to set up an oil refinery hub at the southern tip of Johor that would compete with Singapore's oil refining hub. Soon after, the government announced that it was setting up such a hub at the southern tip of Johor! No credit given to Ku Li. This is further evidence of an ad hoc approach i.e. a why-didn't-we-think-of-that approach.
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Singapore's strategic planning approach
For decades, Singapore has recognised the need for strategic thinking. A vision formulated by studying regional and global economic patterns to stay several steps ahead of the game. It is not a mere vision and mission statement like Vision 2020. Singapore sets the mission goals without fanfare and tests and, re-tests the goals using sophisticated econometric models. How many Cray supercomputers does Singapore have to support econometric modelling? How many does Malaysia have? Even for the water supply issue with Johor, Singapore has used numerous alternative planning scenarios that led to Newater as an added safeguard against being held hostage by Malaysia on the matter of water supplies.
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In the mid-1970s, Singapore strategic thinkers concluded that they needed to push the nation-state to the next level up the value-chain as countries like M'sia were offering cheaper venues for manufacturers. So, they built Changi Airport and revamped their fiscal policies and investment incentives to attract higher-end electronic manufacturers with great success.
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In this millenium, Singapore has upped the ante again. This time their strategic thinkers decided that a more liberal social environment and the establishment of 2 casino entertainment centres will usher in billions of dollars of tourism-related income, one of its highest GDP contributor.
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Singapore has also actively courted Nobel science prize winners to conduct and further their research projects by creating joint-resource-sharing facilities like Biopolis. These bright minds are intended to enlighten Singapore-based scientists and researchers who will assist these Nobel-standard scientists in their research. This type of knowledge-transfer is invaluable. It may be the base upon which Singapore's next quantum leap will take place from.
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This is in addition to their decades long sovereign wealth funds in the forms of Temasek and their Government Investment Corporation.
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Dr M and M'sian think-tanks
In the final chapters of The Malay Dilemma written in 1972 by Dr M, he wrote about the need for Malaysia to have think-tanks like the Rand Corporation in the US. In his time as PM he was a big fan of people like Alvin Toffler the futurist and, Kenichi Ohmae of McKinsey who is a strategic thinker. He also set up ISIS which is more into external, geopolitical and defence matters but less so on economic matters. While many of us are not big fans of Dr M's Machiavellian approach to politics and uses/abuse of power, we have to admit that Dr M definitely had a point there.
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Who is doing the strategic thinking in M'sia now?
Another case in point is the strategic thinking on wealth management. Permodalan Nasional Berhad has been the wealth manager for the Bumiputras since the 1970s. It is the creation of Tun Razak and Ku Li. PNB's creation was based on the strategic plan to house, in trust for Bumiputras, part of the wealth of the nation.
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In recent years we have Khazanah Nasional which seems to be more a knee-jerk creation to house previously ailing corporates handed-over by the now-defunct Danaharta. The strategic thinking to create PNB as a wealth fund is clear enough. But, what is the idea behind Khazanah? It doesn't seem to have the gravitas of a sovereign wealth fund. Often, it appears to be just a basic fund management company.
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But, really, where are we headed in terms of the strategic positioning of Malaysia in terms of economic competitiveness? EPU? ISIS? ASLI? More on this later.

10 comments:

Anonymous said...

Who is doing the strategic thinking, you asked. None, as far as I (public joe) is concerned.
So much noise now. A lot of ifs and but(t)s. Entertaining, huh? But where is it taking us?

I am much reminded of what LKY said in the lates 70s about unfettered freedom. "It's entertaining, yes, but does it work?

Me, an ordinary wage-earner, I miss the Mahathir years. I know, Iknow, it's very fashionable now to rubbish him. But you must admit we had stability. One thing I'm clear on: I know I personally felt safe when he was in charge.

Malaysia needs a strong leader.


Oneman

CT Choo said...

It's true that in the face of uncertainty we tend to cling to something predictable and reliable. But it's a brave new world now. There is much uncertainty. But look at it this way, "nothing ventured, nothing gained". Previously we tended to leave everything to "the government". Now, we have many voices. This is a transition. It will painful & confusing & aggravating. But I very much believe that this is a forward movement. Eventually we will find it to be a good thing. But the variable here is time...how long will it take before M'sia has a clear idea of the preferred governance structure and economic direction. For now, some of us must believe that we can contribute in any way that we can to help in the process of change and transition. Strong leadership is a soothing balm because it allows us to be indolent. But in the long run the risk of a strong leader is that he/she will lack accountability. Maybe that's why everyone points to Mugabe & Zimbabwe as an example of a strong leader gone mad & the system of checks and balances have disappeared.

Anonymous said...

Is there a third force for the likes of me? Everywhere i look, the politicians (of all ilk) are tainted.
I've polled my own friends. A lot of us are simply disenchanted. We don't like what we are seeing now.
Quo vadis?


Oneman

CT Choo said...

The "third force", if you accept my proposition, may be the NGOs. There are many NGOs that focus on specific issues pertaining to our M'sian society e.g. local govt, environment, disability, age, etc. Those among us who wish to get off our armchairs will have recourse to this third force.

NGOs are politicised on specific issues. They are apolitical in that they are not officially part of political parties. I realise that history has proven repeatedly that there are politicians embedded in NGOs. But from my observation NGO leaders are careful about political affiliations for fear of alienating activists who are leery of alignments with specific political parties - which will compromise their voice.

But those among us who want to preserve the purity of our position have recourse to the blogosphere. This is the route that I have taken. But the choice is yours. The power is within each of us and, within all of us, Oneman!

etheorist said...

Strategic thinking is needed when Malaysia is in a desperate situation.

Malaysia was not in a desperate position, and probably is not yet.

Malaysia has oil money.

Most people imagine the oil money to be a blessing. The oil money has turned up to be a curse for Malaysia.

The only strategic thinking has been and still is how to spend this oil money, and who to get how much.

I believe only when the oil money is exhausted will Malaysia begin to engage in serious strategic thinking of the real kind - how to protect the national interest and how to position the naton in the ever-evolving global economy and politics.

CT Choo said...

Although your views sound cynical and bleak, I tend to agree that our politicians (of either shade) has tended to take populist positions to pander to voter sentiments. But, as individuals, if we can and, are able to, present of views, we should not hesitate to do so.

Politicians come and, they go. Politics is the art of opportunism that favours the opportunist who takes the correct opportunity at the correct time.

But strategic thinking, especially in the formulation of M'sia's economic agenda and development, is something that has lasting effects. The lack of strategic thinking, may lead to policy disasters and mistakes that may take generations of M'sians to resolve.

I don't anyone of us would want that future for the next generations of M'sians.

Anonymous said...

Strategic thinking? Let's see, KJ the Oxford genius mentioned a couple of years ago that when Malay fights, Chinese gain.

Well, now Najib and Anwar are having a good go at each other and how come KJ's prediction do no materialised as it is everybody's loss now.

If Malaysians can be self-critical, practical, adopt meritocracy, abandon racism & religious bigotry that cloud the mind etc, maybe we can start to think properly.

Regards
Lee Wee Tak

CT Choo said...

Point well taken, LWT. It's difficult to ignore the nonsense of the political players & to think of issues that will help our economy without having the distractions caused by politicians. But we've got to try and keep our focus.

ben said...

Is there strategic thinking ? Plenty! Lawmakers are so consumed with political power so much so that they've no more energy for strategic planning.

EPF was setup in 1951. Today EPF has 6m active members. Now the size of EPF fund is about RM350b.

Australian govt introduced Superannuation Guarantee Bill in 2002 where the employer has contribute 9% of the employee's salary. Aust superannuation fund is now A$1.1trillion.

This is shocking isnt it? The big difference (besides Msia lower salary base vs Aust), the contributor is empowered to either personally manage his/her own fund or appoint a super fund manager.

I think it's time that our EPF act be reviewed. As of now, most of the fund is tied to Govt fixed income which is lower than the inflation rate. Afterall it's the contributors' own money and hence, they've the every right to manage their own fund.

Presently, when they declare 5% dividend, they're shamelessly blowing their trumpet!

Don't you think so ?

Anonymous said...

can we ask pak lah to appoint ku li as petronas chairman and hassan merican as khazanah chairman, both men will do good for the country, believe me its workable.....