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When auto king Yahaya Ahmad was killed in a helicopter crash in March, all Malays mourned. The shock was palpable; thousands attended his funeral, including Malaysia’s royals and the prime minister. Yahaya, aged 50, was seen as the Henry Ford of Malaysia, an outstanding example of the successful local entrepreneur. Not only was he responsible for building up a successful company, he was expected to make the dreams of ethnic Malays come true. Just six months before he died, Yahaya seemed to demonstrate just that ability. Chairman of the company which makes the modest Proton national car, he paid £51 million for a controlling interest in British sports car maker Lotus International, one of the top design marques in the global industry. Yahaya, it was thought, would put Malaysia on the world map. Ever since the it emerged from years of British colonial rule, Malaysia has been intent on improving conditions for its majority Malay population, which was poor and dominated by the greater commercial clout of its ethnic Chinese citizens. In the 1980s, after years of affirmative action for Malays and government spending on education and training, a new class of Malay businessmen began to emerge. Helped by the government and promoted especially by prime minister Mahathir Mohamad, former finance minister Daim Zainuddin and finance minister Anwar Ibrahim, these entrepreneurs have scaled the heights of Malaysian industry and commerce rapidly. Apart from the motor industry, members of the new Malay elite control the national airline, a large chunk of banking and stockbroking, mobile telephones, toll roads, power stations, property and media. Five names stand out: the late Yahaya; Tajudin Ramli, controller of the national airline Malaysian Airline Sytems (MAS) and the biggest mobile telephone company; Halim Saad, property and transport; Ananda Krishnan, media and lotteries, and Rashid Hussain, Malaysia’s top investment banker. Most of these men have benefited from Malaysia’s extensive privatization programme, under which controlling stakes in state-owned companies have been offered to entrepreneurs to upgrade management. Finance to buy the assets usually comes from the Kuala Lumpur stock exchange, where share swaps and other concession arrangements often allow the entrepreneurs to raise capital up front. Yahaya’s rise to fame is a good example. Malaysia’s national car industry started in 1984 when state-owned Hicom Holdings teamed up with Mitsubishi of Japan to develop a national car suitable for the Malaysian market. Protected by a 200% import tariff and with few other competitors, the Proton, as the car was dubbed, soon made its mark. By 1989 it was selling 72,000 cars out of a market totalling 117,000. By 1995 it had a 62% share of a market which had grown to 225,000 cars annually and it was also penetrating European export markets. Little of this had anything to do with Yahaya. He was the son of a poor forestry official, a bright lad who won a scholarship to the prestigious Malay College, the Eton of Malaysia, where he was a classmate of Anwar Ibrahim and went on to be head boy. After studying engineering at Loughborough College in the UK, Yahaya became a successful car salesman, building up Citroen to become the largest selling European car brand in Malaysia. In 1989 he set up a factory to assemble Isuzu trucks, catching the attention of the prime minister who, in 1993, was planning to privatize the state-owned motor vehicle inspection company, Puspakorn. Yahaya’s company, Diversified Resources, got the deal. Two years later he was offered the chance to buy a 32% controlling stake in Hicom Holdings, valued at $680 million, in Malaysia’s largest privatization. The deal, achieved through a complex restructuring and not involving any cash, gave Yahaya control of a conglomerate whose 15 listed companies had a market capitalization of more than M$12 billion. At the time of his death he was on the expansion trail again, with a deal to make a national motorcycle with Kawasaki of Japan, also likely to get special privileges from the government. He was running bus services in Kuala Lumpur, planning property developments and had taken over a company which had won the construction contract to set up Malaysia’s new airport. But despite the drama of Yahaya’s death, the long-term effect of his loss may not be serious. “Yahaya’s death was a huge shock,” says one broker. “But he only acquired his empire in the last 18 months.” A week after his death his experienced deputy was appointed to the chairman’s post and the conglomerate’s stock price had recovered. A few weeks later, other equally well-connected bumiputra (ethnic Malay) competitors were circling around some of the choicer parts of the DRB Hicom empire. Among them was Halim Saad, chairman of the Renong group, and probably the biggest beneficiary of privatization. Halim, aged 43, is a protégé of Daim Zainuddin. In 1987 his company, United Engineers, was given the M$3.4 billion contract to build an expressway between Kuala Lumpur and Singapore. The government guaranteed traffic projection figures for the company and allowed it to raise tolls in line with inflation, cutting the project’s risks considerably. Halim’s company grew rapidly and the Renong group now has 10 listed companies, involved in telecoms, banking and finance, property and transport. Most were injected into Renong when it took over Fleet group, the investment arm of the Malaysian ruling party in 1990. Among its plum projects are a new bridge to Singapore, accompanied by some choice real estate tossed in by the government and a new sports stadium complex and athletes’ village being built for the Commonwealth Games in Malaysia next year. This contract was also accompanied by some valuable free land parcels, one of them big enough to construct a satellite city. Another graduate from Malay College, Halim is shy and regarded as highly strung and temperamental. “He’ll go straight to the top if anyone tries to get in his way,” says a businessman close to the group. However, sometimes this approach doesn’t work, especially when a number of favoured entrepreneurs are aiming for the top simultaneously. When Halim’s United Engineers bid on the M$1.74 billion Kuala Lumpur airport project in 1994, it lost out to a consortium of two large Japanese construction companies and Pernas, a state-owned company, after a fierce behind-the-scenes battle involving a number of politically well-connected firms. A month later, the late Yahaya, who was not a bidder on the original contract, launched and won a takeover bid for Pernas. Such fast footwork went against the grain at Renong. Among its many government-related activities, Renong is the leader of a state-sponsored consortium to modernize Malaysia’s railway system and eventually to take it over. The government had indicated it planned to award DRB Hicom a M$1.8 billion contract to build a high-speed tilting train line and to offer it a 30% stake in the consortium. Six weeks after Yahaya’s death, Halim acted, proposing an alternative high-speed train project joining Kuala Lumpur to Singapore via Malacca, a line which would cost M$8.3 billion. The government is unlikely to go ahead with two train projects, so if Halim’s is chosen, DRB Hicom’s project is likely to lapse. Halim is also said to have his eye on DRB Hicom’s bus services in Kuala Lumpur, where critical commuters are desperate to find a way of beating traffic snarls. Complaints about flight delays, food and service on MAS are a growing irritation for a third leading Malaysian tycoon, Tajudin Ramli. Tajudin, aged 50, took a controlling stake in the airline in 1994, using his existing shares as collateral to raise a loan of $700 million to buy the airline stock from the Malaysian central bank. A bright graduate, he favours Italian suits and keeps a $12 million private yacht and a private jet, now apparently redundant. In the 1970s he was working his way up the ladder in the private sector, with stints at Dunlop and Chase Manhattan Bank, when he met the influential Daim, who ran the Fleet group before he was appointed finance minister. The pair went into business, buying a majority stake in a local branch of bicycle company Raleigh. In the late 1980s Tajudin gained control of a company, now called Technology Resource Industries, which was given a lucrative five-year monopoly on mobile telephones in Malaysia. Despite competition from other operators, TRI subsidiary Celcom still maintained 67% of the market and made a net profit of M$185 million in 1995. The airline company offers a much tougher challenge. A lacklustre carrier in a region with airline stars such as Cathay Pacific and Singapore Airlines, MAS’s profitability is hamstrung by government controlled low domestic fares and Malaysia’s inadequate airport, which attracts fewer passengers and connecting flights than neighbouring Singapore. Staff are reportedly unhappy about the efficiencies Tajudin has introduced. He has pursued a rapid growth strategy, setting up numerous new routes to places as widespread as Mexico and South Africa. MAS has signed a code sharing agreement with Virgin Atlantic Airways and has set up strategic alliances with airlines in Cambodia and the Maldives. The airline plans a massive fleet expansion on its 99 aircraft and will take delivery of 24 new Boeing aircraft, including 14 long-haul jets, by 2000. Like Yahaya, Tajudin attracts criticism for being too aggressive in a culture which values harmony, and there are rumours that influential leaders are unhappy with his progress at the airline. “People are probably jealous of this as well,” says one banker. “The tycoon’s efforts to increase profits at MAS have been successful.” The new airport is likely to improve the fortunes of MAS further but, like most Malaysian entrepreneurial tycoons, Tajudin relies on the stock market to provide finance. A $1.3 billion rights issue is to be launched later this year to fund the fleet one of several issues which could be threatened if the market does not recover. The country’s telecom policy is the best illustration of the sometimes conflicting interests of Malaysia’s new tycoons. Nine companies, including the privatized but still state controlled national operator Telekom Malaysia, now hold licences to provide telephone services. Having awarded Tajudin’s Celcom a five-year monopoly on mobile telephones in 1989, the government found itself virtually under siege from competitors. Among the successful petitioners are: Halim’s Renong group; a subsidiary of the late Yahaya’s DRB Hicom; a company controlled by tycoon Ananda Krishnan, the 58-year-old protégé of prime minister Mahathir; and another owned by Vincent Tan, a powerful Chinese businessman in the gaming industry. Foreign investors also piled in. Deutsche Telekom bought a stake in existing operator Celcom for $520 million; US West acquired 20% of Binariang, the company owned by Ananda for $230 million, valuing it at $1.2 billion before it had even commenced operations; while Swiss Telecom paid $284 million for 30% of Tan’s company, Mutiara Telecommunications. The national telephone operator protested at the surge of competition, which had arisen without any rules over compensation or fees for access. When the government announced it planned to rationalize the licences, all the tycoons, along with their foreign partners, complained. In the end Kuala Lumpur consigned the dispute to the “too hard” basket. Reportedly, US West is not happy with the progress of its investment in Binariang, but that hasn’t stopped Ananda. He is a Malaysian of the Tamil race, whose family traces its origins to Sri Lanka three generations ago. He was educated at Harvard and made his fortune in oil. He now makes most of his money from gaming, which is outlawed for Muslim Malay businessmen. Tanjong, his listed company, acquired a numbers forecast operation from the state-owned Totalisator Board in the late 1980s. It has sales of M$1.4 billion a year and earnings of M$188 million. He also has a stake in the Petronas Twin Towers development. But Ananda’s main interest is media and telecoms. Through his family holding company he controls Astro, a satellite TV network, the only one in Malaysia showing foreign programmes, formerly banned. He also owns and operates Malaysia’s two Measat satellites and broadcasting production houses in Malaysia and animation studios in the Philippines and Vietnam. Ananda has ambitions for his pay TV network but faces tight competition not least from Rupert Murdoch’s Star TV, still loss-making after three years. However, Ananda gets strong government support because his mulitmedia operations are a key factor in the success of prime minister Mahathir’s mooted Multimedia Super Corridor, now being marketed globally as the Silicon Valley of the future. But satellite projects eat up investment funds; Measat and Binariang have already spent $700 million on infrastructure, and Ananda is another tycoon lined up for funds at the KLSE this year. He plans rights issues to raise $500 million. Perhaps the most widely admired of Malaysia’s elite tycoons is Rashid Hussain, tipped to become the most important banker in Malaysia. He is already the biggest broker. Born in Singapore, the 48-year-old financier has an Indian father and a Malay mother and studied at Singapore’s elite Raffles school. He moved to Malaysia in 1975 and later married Sue Kuok, daughter of Robert Kuok, Malaysia’s wealthiest Chinese businessman. But although Rashid is also close to Daim, few believe he relies on connections alone for growth, though in Malaysia’s politically influenced business climate, they help. In 1983 he was one of three bumiputras who received free stock exchange seats from the government, which wanted to boost local participation. With several years’ experience of broking in London and Singapore, Rashid set up one of the first securities firms to have a research department. The company is fully computerized, and has several regional branches. Underwriting privatization deals has been a big profit generator. When Rashid faced difficulties placing all the shares in an IPO for the national airline, a golf game between Daim and the Sultan of Brunei was enough to do the trick. The Brunei Investment Corporation took the stock. Daim also helped when Rashid wanted to list his brokerage on the exchange. But most people believe Rashid’s success has more to do with his abilities as a dealmaker than with his connections. Earlier this year he saw an opportunity when the government urged a consolidation in the banking industry, which is littered with small, undercapitalized players. In a complex deal, Rashid will take over a bank named DCB holdings, which earlier merged with Kwong Yik Bank to become the third largest in Malaysia in asset terms and the second most profitable, after state-owned Maybank. His company is the least exposed of all the big indigenous groups to property and has probably the best access to alternative financing sources. His bank is widely regarded as sound. Should Malaysia suffer a downturn, Rashid is thought the most likely to survive unscathed. |
