The journey in life is never a straight line (PART 10)

So, no, I did not make my first million getting contracts from the government, as many people may have thought. I did it by changing the way we did business in the fishing industry. In time, the ‘old boys’ no longer regarded me as a wet-behind-the-ears new kid on the block. And imagine my pride when the ‘old boys’ who had been in business before I was born offered me Chinese tea and called me ‘boss’.


Raja Petra Kamarudin

I was the new kid on the block. I was only 24 years old. And I was trying to break into the market that is older than I have been alive. And it is a very Chinese dominated market, too, on top of that.

After Michael Toh agreed to create Account A and Account B, I had to now take over the business from my partner who had been running it before me. It is not that I wanted to. It is that Michael had agreed to suspend all my debts and will allow me to stay in business only if I took over the business and ran it myself.

I confronted my partner. I knew I would never get my money back but at least I could oust him from the company. And he agreed to sign all the papers and I took control of the company. Once I took control of the business I now had to make it viable.

I drove up and down Terengganu and Kelantan and visited every single fishing village, even the most remote village along the Malaysian-Thai border. In the beginning it was just that — ‘study tours’ of sorts. I needed to not only learn the trade, which I knew nothing about, but I also needed to get to know my potential customers.

Most of them were very nice and humble people. Many were simple fishermen. Some were fishing taukays who had started life as fishermen and now owned a fleet of fishing boats that were operated by other fishermen on a profit-sharing basis.

It was almost like the serf system that the peasants of Europe were subjected to 200 years ago except that they were free to terminate the arrangement any time they wished to and would not be put to death if they ‘ran away’. The majority were Malay taukays but there were many Chinese as well although Terengganu and Kelantan were predominantly Malay states.

Breaking into the market was not that easy. These fishermen or fishing taukays had a decades-old relationship with the ‘old boys’ who had been around even before I was born. Some of the players had been dealing with each other since the first generation so we were now talking about the second generation that had inherited all this ‘goodwill’.

I discovered that ‘old ties’ meant a lot in business. People were not prepared to sever old ties and transfer their business to a still-wet-behind-the-ears new kid of the block. I had to earn their respect and confidence. I had to have something new and something better to offer before people would end 20- or 30-year old relationships and deal with you instead.

I was beginning to wonder whether my effort was futile. An added problem was I could not beat their prices. I was puzzled as to how the other dealers could sell at cost. And if I wanted to beat their prices I would have to sell below cost. This would have been disastrous.

Then I discovered that the others could sell at cost because they were getting 90 days credit and they just wanted the quick cash. They collected cash in advance before they ordered the engines. That gave them an additional 30 days. Then they would ‘drag’ their payment and get an additional 30-60 days. Then they would pay by post-dated cheques.

All in all they got to use the cash for roughly six months or so. They then lent this cash on a ‘10-4’ basis. Basically, it was a loan-shark operation and it worked like this.

Petty traders who needed quick cash — and they could not get it from the bank for obvious reasons — would borrow, say RM2,000, from these money lenders. The borrowers would be charged 4% interest a month or 48% interest a year. (That is why they called it ‘10-4’).

They would then receive the RM2,000 minus the interest. Hence they would not receive RM2,000 but just slightly over half the amount. But the 48% interest a year is charged on RM2,000, not on the RM1,000 or so that they receive.

It was a real cutthroat business (hence it is called ‘loan shark’ business). And that was why they did not care whether they made any money on the sale of the engines. They were not interested in making money on the sale of the engines. They were using the engine business to raise cash and it was by lending out this cash that they made money.

And we must remember that the cash was ‘free’, at least for six months.

I needed an incentive to get the fishermen and fishing taukays to give me their business. My competitors were selling for cash. I needed to sell on credit. But I was ‘broke’ so how could I do that?

One day I saw an advertisement in the newspapers. It was an advertisement by M&F, a finance company wholly-owned by the Hongkong and Shanghai Banking Corporation (now called HSBC). I wrote them a letter applying for finance facilities.

The Kwailo running M&F phoned the Kuala Terengganu branch manager of the HSBC to ask him whether he knew whom I was. “I think he may be an old school friend of mine from MCKK,” replied the branch manager.

The HSBC manager then phoned me to confirm that I was from MCKK. I replied that I was and he was delighted. “But how come you are not banking with us?” he asked. “I want you to open a bank account with us today.”

I went over to the bank and opened an account. In those days you needed RM1,000 to open a company bank account so, invariably, I had to pawn some of Marina’s jewellery to raise that RM1,000. I have to admit that walking into a pawnshop was a most embarrassing experience.

A few days later, the Kwailo made a trip to Kuala Terengganu to meet me. He was not only very pleased that the HSBC manager was an old school friend of mine but when he found out that my mother was from his same ‘kampong’ in London he was so delighted. (Soon after that he visited my mother for Hari Raya and invited her to the Paddock in the Kuala Lumpur Hilton for dinner, with Marina and I as well, of course).

The Kwailo told me he will start us off with RM200,000. Once that is fully used up he would increase it. Eventually I was rolling with RM2 million of the bank’s money, a king’s ransom 40 years ago.

There was another issue to resolve first, though. The fishing boats that we were going to finance needed to have insurance. But no one in Malaysia does fishing boat insurance. I searched high and low but could not find a company that would issue insurance for fishing boats. It was too high risk.

Unless I could find a company that was prepared to issue insurance for fishing boats my deal with M&F would never get off the ground.

I approached a friend of mine who was one of the leading insurance brokers in Terengganu. He had never heard of any company doing fishing boat insurance but he promised me if there was then he would be able to find one. However, it would all depend on the amount of business I expected.

I promised him RM1 million a year in business (insured value) and fully secured. (Actually, I tembak only because I did not know, but I had to ‘play poker’ to entice them with the belief that the ‘stakes’ were going to be very high.)

I then laid out my plan. I would take land from the fishermen as security (almost all the fishermen had land) and with this land as security I would underwrite any potential loss that the insurance company would suffer in the event of a claim. (In all that time we suffered only one claim, less that 1% of the total premium we collected over those many years).

So now I was not only in the engine financing business. I was also in the fishing boat financing business as well as the fishing boat insurance business. I not only gave out 100% financing on the engines. I also financed 50% of the cost of the construction of the boats. Sometimes I even financed the fishing nets, which at times could be more expensive than the fishing boats.

But all this must be backed with insurance plus land, which I valued myself and took at the lower value. Hence if they defaulted I would be able to sell off the land at twice what they owed me. In all that time I never once had to sell off any land to recover what they owed me.

Overnight, our modest business became a multi-million business. I soon had millions floating in the market — all the bank’s money, of course. Each deal gave me a profit of 30-40%, although collectable over 3 years. And from that day on the fishermen in Terengganu and Kelantan knew me as ‘Taukay Yanmar’.

Fishermen and fishing taukays lined up to see me, not to buy engines from me but to obtain loans to finance the construction of their fishing boats. However, to qualify for the loan, they would first need to buy their engines from us. And they no longer cared about the price of the engine. I was pricing my engines 25-30% higher than my competitors. But my competitors collected cash in advance. I allowed my buyers to pay me monthly over three years.

The only thing is, I did not charge loan shark rates, though, because we were bound by Bank Negara’s rules, which was 10% per year fixed-rate interest, which more or less came to 18% per year based on reducing rate.

Eventually, some of the fishermen offered me shares in their fishing boat. They felt honoured to have the Taukay Yanmar as their partner. At the ‘height’ of my fishing business I had a stake in no less than five fishing boats. And we ate fresh fish every day because the fish were delivered to our house straight from the fishing boat.

And the irony of this whole thing is I did not like fish. I only ate chicken and beef. Nevertheless, one can’t say that my business dealings were not ‘fishy’. Whatever it may be, though, that resulted in me making my first million within just three years.

So, no, I did not make my first million getting contracts from the government, as many people may have thought. I did it by changing the way we did business in the fishing industry. In time, the ‘old boys’ no longer regarded me as a wet-behind-the-ears new kid on the block. And imagine my pride when the ‘old boys’ who had been in business before I was born offered me Chinese tea and called me ‘boss’.

That was worth more than the money I was making. I suppose when money is no longer the criteria you aspire for recognition.

And I never realised the goodwill I had made until I returned to Kuala Terengganu in 2008 to campaign in the Kuala Terengganu by-election. Those who I had known back in the 1970s and 1980s still called me ‘boss’, even 20 or 30 years later, and they voted for Pakatan Rakyat (PAS) just because ‘the boss said we must vote for PAS’.

And when the by-election result was announced I cried like a baby because it was not just about winning the by-election but about the people who voted for PAS did so because I wanted them to. (I think Eechia took a photo of me sitting there and crying).

Ah well, I am a sentimental old fool, am I not?