The NEP cannot help you: you need networking
Raja Petra Kamarudin
During the Umno General Assembly last week, both the Youth as well as Deputy Youth Leaders asked that the New Economic Policy (NEP) be reactivated. They are trying to give the impression that the NEP is the only guarantee for Malays to make it in the business world.
Of course, they both do not believe this. No NEP in the world can guarantee business success for any community. But they needed to say something very controversial and this was certainly the most controversial thing to say.
Business is not about protection and special privileges. If it is, then the Malays would own practically everything in the country by now. In fact, in spite of the NEP, the Malays are finding that the 30% target set as the Malays’ share of the economic pie takes two steps forward every time they take one step forward.
When the NEP was first conjured in 1970, the Malays, as individuals, owned only 1% of the economic pie. 15 years later, by 1985, it was only 2.5%. Today, 20 years on, it is still only 2.5%. It has therefore stagnated the last 20 years as much as the government tries to elevate the lot of the Malays. Of course, we have had two recessions since 1985 so this certainly ‘contributed’ to the stagnation.
The government tries very hard to make up for this shortfall by setting up trust agencies like MARA, PERNAS, FELDA, SEDC-owned companies, and many, many more. But we must remember, the non-Malays own all their wealth individually, not through trust agencies. How can we say MARA, PETRONAS, PERNAS, SEDC and so on belong to the Malays? They belong to the nation — and the wealth of the nation belongs to all Malaysians, irrespective of race. Malays cannot claim that Petronas belongs to them, or any trust agency or government-linked company (GLC) for that matter.
Business success lies in a combination of know-how and know-who. You must know what you are doing plus you must have networking. The Chinese business success the world over is because of their networking.
Cronyism, therefore, is very crucial to succeed in business and do not allow Anwar Ibrahim to tell you otherwise. Without networking, or cronyism, one can never succeed whether it is business or politics. And Anwar, of all people, should know this.
When I started out in business in 1974 I had only one Chinese friend in the business world, Michael Toh, the manager of a Singapore-based company, Chong Lee Leong Seng. I met Michael in 1972 soon after my father died when I was managing the installation of Ford marine engines in some fishing boats in Kuala Terengganu.
The boats were being built by a Malay-owned company and they treated the engine supplier with much hostility and would not extend any cooperation at all. I drove up to Kuala Terengganu to meet the manager of the boatyard to find out what the problem was. The problem was simple. They were losing money on the boat building contract and wanted the engine supply contract to cover their losses. That was why they were being difficult. I sat down and had a heart-to-heart talk with the manager of the boatyard and it was agreed we would give them the sub-contract to install the engines.
Well, in a way I bought them off.
Peace prevailed between the boatyard and the engine supplier and I spent two years in Terengganu, on and off, until the boats were completed.
At the end of the contract period, Michael offered me two options. He can either give me a job or give me a marine engine agency. He was very impressed with the way I managed to solve a difficult problem no one seemed able to handle and felt I can be an asset to his predominantly Chinese company whose only Malay employee was the driver.
I chose the agency and that was the beginning of my business career in 1974.
Michael and I drove to Kuala Terengganu and we found an office that was going for RM250 per month. It was actually half a floor shared with a Chinese tailor above Kuala Terengganu’s first pub.
But I had no money. My salary for the last two years was only RM250 per month and I had no savings whatsoever. Michael gave me 90 days credit for all my purchases but limited to a ceiling of RM30,000. That would enable me to buy at least three engines before I needed to pay for the next delivery. At an average of RM10,000 a month, that would give me a gross profit of RM2,500 or so, enough to pay for my meagre cost of sustaining my Kuala Terengganu operation.
I was not the only marine engine dealer in Kuala Terengganu though. There were many others, Malays as well as Chinese, but they all ran their businesses based on walk-in customers. Being the ‘new kid on the block’, I was at a great disadvantage. I did not even have a shop yet, just a first floor office, and no fisherman was ever going to walk into my office.
So I had to go out and find my market. In fact, I was hardly in the office.
I approached Bank Rakyat and Bank Pertanian in Terengganu and Kelantan to korek (dig) what fishing loans they were about to give out. Armed with the list of pending loan approvals, I toured the fishing villages of Terengganu and Kelantan seeking out the fishermen. I went to Tumpat, Kedai Buloh, Bachok, Kuala Besut, Marang, Dungun, Kemaman, and every small and big fishing village — even down to Nenasi, Mersing, Muar and Batu Pahat in Johor. No marine engine salesman had ever visited them before and they were quite pleased that someone was at last taking an interest in their needs.
I made a deal with the fishermen. They had applied for loans with either Bank Rakyat or Bank Pertanian. Normally, they would need to wait for their loans to be approved before they could receive their engines — and even then only after the bank had disbursed the money to the supplier. What if I was to deliver the engines to them before their loans were approved? They would then be able to install the engines into their boats that had already been built and were awaiting the engines. The engine installation would take many months and by then their loans would be approved and I could get my money. The fact that they had taken their engines would also act as pressure on the banks to approve their loans, and in quick time as well.
Okay, so I exploited the fishermen and used tricks to help them get their loans approved. But is this not what business is all about?
They were delighted and quickly agreed before I could change my mind. Soon word spread throughout the tight-knit fishing community that they could get their engines ahead of their loan approvals. Fishermen started looking me up to negotiate their engines. I also paid ‘spotters commission’ to anyone who offered information on new boats being built. So fishermen ‘whispered’ to me whenever any of their friends were planning to build a boat and they got a free trip to Medan in Indonesia.
My sales for the first year was RM300,000, a king’s ransom for someone who just months ago was playing hide-and-seek with the finance company trying to repossess his car. I closed the year with a net profit of RM20,000. I could not believe it. From RM250 a month to RM20,000 a year! Is it this easy to make money?
But this was peanuts. The market was so much bigger but I was not getting it all. I was depending on just Bank Rakyat and Bank Pertanian. But not all fishermen could qualify for a loan. Many were ‘unbankable’. So my sales were being stifled by the banks.
I approached MAF, Hongkong and Shanghai Bank’s finance company. Would they appoint me as their hire purchase dealer for fishing boats?
Fishing boats? Cars, motorcycles, refrigerators or television sets, maybe. But fishing boats? No finance company in Malaysia has ever financed fishing boats, and probably never will. This was something unheard of.
Why not try, I pleaded with them. Give it a shot and see if it works.
They checked into my background and called the manager of Hongkong Bank in Kuala Terengganu. Does he know a certain Raja Petra? Is he a Hongkong Bank customer?
No, he is not a Hongkong Bank customer, but the name sounds familiar.
The manager phoned me and asked where I went to school. Malay College, I replied. That’s why the name sounded so familiar! He was delighted. He too went to the Malay College, though my senior in school. He wanted to meet me. And maybe I could open an account with Hongkong Bank at the same time?
Needless to say, I got my first hire purchase finance line from MAF — RM200,000 to start. If I managed it well, then the sky’s the limit. RM1 million or RM2 million would not be a problem — but maybe in tranches of RM200,000. MAF had never financed fishing boats before; in fact, no finance company had; so they were excited that they were going to be the first. But the fishing boats would have to be insured, they told me.
Now, how do I do this? I approached an insurance broker, another old school friend of mine. No way. No insurance company insures fishing boats, he told me. The risk is too high.
“Why not consider it?” I again had to go into my sweet-talking and pleading routine. Okay, but only if I paid a high premium and guaranteed them an insured value of not less RM1 million a year.
I signed the RM1 million insured value contract, went back to MAF, and got my RM200,000 finance line. I was now selling marine engines on 36 months instalments with a down payment of 20%. But I took the boat as the down payment so they actually got 100% financing.
My second year’s sales touched RM1 million, which I repeated for the third year. I was now the top marine engine dealer in Malaysia, a Malay dealer in an industry dominated and monopolised by the Chinese.
One day, Michael related my ‘success story’ to Chia Kim Peong, his Chinese dealer in Sungai Besar. Chia was intrigued and wanted to meet me. They both drove up to Kuala Terengganu and I took them round the fishing villages to meet all my customers and to see for themselves how I had developed the market to the point I now control more than half the marine engine market in just three years.
Chia said he would like to buy shares in my company. Shares? He must be joking. My paid up capital was only RM2. He took out his chequebook, signed a cheque for RM10,000, and asked for 30% of the company. How could I turn down RM10,000 — especially when he would own only 30% of that RM10,000 and I the balance?
But it was not so much his RM10,000 that was important. Having Chia as my shareholder gave me a standing amongst the Chinese business community. Raja Petra must be okay if Chia is his partner, was the image that I acquired.
Over the years, Chia received RM250,000 in dividends from his RM10,000 investment.
I then negotiated the sole rights to tender marine engines for Malaysian government contracts. But the government did not buy any marine engines. Why would I want the sole tendering rights? Never mind. I still wanted the sole rights to tender for Malaysian government contracts. Michael gave me the ‘worthless’ sole rights that I asked for. I knew it was worthless at that time but I wanted it locked up just in case. And with Chia as my shareholder, their top Chinese dealer, helping by pressuring Michael’s bosses in Singapore, they gave me the sole rights.
It was now almost the end of 1977 and I had just closed my third year of business. Barely a couple of months later, a Malaysian Airlines plane crashed in Johor taking the lives of 100 passengers and crew. On board was one of Michael’s managers (the first time he had ever flown in a plane) plus the Minister of Agriculture, Ali Ahmad, and many other senior government officers and Ministry officials. Sharif Ahmad, the Deputy Agriculture Minister, took over as Acting Minister. Sharif, who we called Kojak because of the huge cigar he smoked and his bald head, quickly played the role of minister as if he had been born into it.
Within days, Sharif’s political secretary, Khalid Yunos, phoned me. Wow, political secretary of a minister. What an honour. Never in my life had such a thing happened.
Can I come to Kuala Lumpur? The minister would like to meet me. Would I? Of course I would. I would come now if he wanted. Never mind; tomorrow would be fine.
What does a minister want to see me for? A minister! Imagine a minister wanting to meet me. I could not sleep the whole night.
My curiosity was soon satisfied. In a few months they will be calling for a general election, say early 1978. Kelantan was under PAS and there was a danger PAS might also take Terengganu as well. (Terengganu had just ‘discovered’ oil and the government was worried the state might fall to PAS).
So, what did this have to do with me?
Well, according to Michael, I was their government sole tendering agent and the government wanted to buy marine engines to distribute to the fishermen in Kelantan and Terengganu, free of charge of course. So how many engines did I have in stock?
Stock? I had none!
Okay, could I get my hands on any? The government wanted about 12 or 15.
Wow! 12 or 15 engines. Sure, I could probably find 12 or 15 engines, maybe some from Kuala Lumpur and whatever short I could bring in from Singapore.
No, not 12 or 15 engines, Khalid laughed. 12 or 15 million Ringgit worth of engines.
What? 12 or 15 million Ringgit? Repeat that please. I think I heard you say 12 or 15 million Ringgit.
That’s right, Khalid reiterated, 12 or 15 million Ringgit.
Look, what’s the catch? Who do you need me to murder for that amount of money?
No, no catch. Okay, maybe one catch. All the engines must be supplied within the next few months, before March 1978, the date of the expected general election.
I was in a daze for days later. My ‘worthless’ sole rights to tender marine engines to the Malaysian government was a goldmine after all. Michael was flabbergasted. “You must have a very powerful Fairy Godmother looking after you,” he quipped. “Who would have thought your government sole agency would be worth so much?”
We brought back all the engines from dealers all over Malaysia and still there was not enough. We also brought in everything they had in stock in Singapore and still we were short. Finally, we had to contact Indonesia and clean the Indonesian market dry of marine engines.
My contract ran for two years before I could fulfil all the deliveries. Many of the fishermen who were given engines had not even built their boats yet and it would take them a year or two to do so. By the time my contract ended, I had supplied RM24 million worth of engines to fishermen in almost every state in Malaysia. And PAS was kicked out of Kelantan and was denied Terengganu with the ‘vote buying’ conducted by Sharif Ahmad and Khalid Yunos.
On hindsight, I was not really that clever at all. Nothing was actually planned. Everything seemed to have just happened all by itself. In a way, I was fortunate to have been in the right place at the right time. And because 100 souls lost their lives in the Johor plane crash I made tons of money.
I also managed to build bridges with the traditional or old-school Chinese business community who liked my ‘modern’ style of doing business. I did not sit in my shop waiting for customers. I toured the country swallowing up the market. And they liked this ‘breaking away from tradition’.
I realised, even then, that networking is very crucial. And these Chinese business contacts I made, once they trust you, will back you all the way. But fail them once and you are finished for life.
One day, I wanted to participate in a tender to supply fishing nets to the government. The fishing net business is another Chinese dominated industry and no one wanted to supply me. I spoke to Chia and he brought me to meet the only fishing net factory in Malaysia, of course Chinese owned.
Before this they would not even take my phone calls. Now, I was being given VIP treatment, complete with the best imported Chinese tea and all. Chia introduced me and gave them his verbal guarantee that I can be trusted and that my word is good. Chia then asked that they supply me fishing nets and at a special price on top of that.
The details were discussed and the price agreed upon. As an added guarantee, Chia gave them his cheque, post-dated 90 days, which would be returned to him once I paid my bills.
Chia said, “They are holding my cheque for RM250,000 which will bounce if they bank it in. I trust you to pay them on time so that I can get my cheque back.”
I did and Chia was delighted that I had ‘saved his face’. And I had a new business, supply of fishing nets to the government. But that is another story for another time.
Anyway, I do not want to turn this piece into a long story. Rest assured the stories about my business life can fill a whole book of 300 pages. Maybe, next time, I will relate the story about how I beat Eric Chia’s UMW by sabotaging his Mitsubishi marine engines in the middle of the South China Sea or how I beat PERNAS by grabbing their fishing net contract from under their nose and all they could do is look helplessly. But the point I am trying to make is: business is about networking, dirty tricks and wheeling and dealing or, as Michael would always say, arse luck. The NEP cannot help. Maybe the NEP can open the doors for the Malays. But there is no guarantee you can close the door behind you unless you know how to play the game and unless you have the right networking.