Here and There – Malaysia

What is it about Malaysia?  I’ve written about the country on previous occasions, but looking back over the many visits I’ve made, the real puzzle is why I am so fond of the country.  It’s a hot and humid developing economy, largely reliant on palm oil and petroleum, the political system a muddled combination of a residual aristocracy and a so-called democracy, the whole supported by entrenched ethnic differences and an enduring class system.  Everywhere you see evidence of a south-east Asian version of ‘mañana’, that evocative Spanish word with so many meanings, but at heart a term for ‘tomorrow’, not in the sense of the next day, but rather some ill-defined day in the future.  As in many other cultures, locals have an ongoing desire for people to ‘berehat’ (take a rest), or to postpone work today (‘menangguhkan’), or even to agree to ‘berlengah-lengah’ (delaying, putting off for now):  the repeat of lengah makes it clear, as in so much Malay, that this is a term from English – lengah means longer.

Of course, it is easy to assume that this process of putting things off for a while is a bad thing. Delays can mean lost opportunities, lack of urgency can lead to a casual orientation, that it doesn’t really matter, and everything will work out.  On the other hand, precipitate action can be equally damaging.  The tendency to jump in quickly might mean you didn’t notice the crocodiles!  Equally, acting too fast, without thinking through implications, risks and benefits, can lead to disasters and missed opportunities.  By now, we all know that ‘first in best dressed’ is not good advice, and that it is often the second or third person moving into a new area who proposers more than the first entrant.

I was lucky enough to undertake a number of projects with a major Malaysian infrastructure and development group, spread over several years.  When I first dealt with them, the country had emerged from experiencing a downturn, one of a string of Asian ‘crises’.  The family managing the group had been forced to make some unpleasant choices, letting go of staff and taking a major financial hit on some projects.  A few years later, and after I had completed a few consulting tasks with the group, there was another economic downturn.  As I watched, I saw this time the CEO knew what he needed to do.  He learnt from the past and had salted away some of the group’s profits every year.  This meant he was able to keep on all the staff, and the companies were able to maintain activity on all their projects.

Two years into the downturn, he acted.  No, this wasn’t mañana. He hadn’t held off until he had to make cuts, but rather he went shopping.  It was time to use those surplus funds set aside from the good years, time to dip into his ‘piggy bank’ as we might describe it.  Now he could survey the scene, using what he knew to identify those companies in trouble, in order to start buying up former competitors and allied businesses.  As the downturn came to an end, his business had grown, and grew even faster in the aftermath.

The CEO was Malaysian Chinese.  Malaysian Chinese account for a little under a quarter of the nation’s population, from what had been 40% in 1957, the time when Singapore split from the Malayan Federation, and became the Chinese focus for the peninsula.  Malays and other indigenous people account for about 2/3rds of the population, and ethnic Indians around 10%.  The popular view of Malaysia is that it is close to having a caste/class structure.

The rulers and aristocracy are Malays.  Malaysia is described as a federal constitutional elective monarchy.  What that word jumble means is that the system of government is closely modelled on the British parliamentary system.  The head of state is the King, who is elected for a five-year term by and from among the nine hereditary rulers of the Malay States.  There are four other States which do not have hereditary rulers, and these are overseen by elected Governors; they do not participate in the system to appoint a King.  The King, whose role rotates among the nine states by mutual agreement, is largely ceremonial, but he is involved in picking ministers and members of the upper house, his choices based on advice, of course.

Many companies and almost all government departments and agencies are headed by Malays, and almost all rely on Malaysian Chinese to fill several senior executive and management positions.  In effect, it is the Malaysian Chinese who actually run many organisations.  Below this administrative group, the lower-level positions are filled by working class Malays.  Malaysian Indians represent a strange group, some in senior positions, some in managerial positions, and some in the working class, alongside many Bumiputras, (these are Malays who come from one of the many indigenous groups).  Rather like the UK, it is a complex system, and success requires careful navigation.  The company CEO referred to above did that well, recruiting and promoting on the basis of expertise, but always looking after the workforce as a whole, ensuring the Malays felt as much part of the enterprise as the Chinese.  There was no support for laziness, for employees to slack off and ‘take a rest’, but the group companies recognised daily prayer times, especially on a Friday when worked largely ceased in the later part of the day.  I don’t want to black and white the issue (!!), but most groups knew their place in society.

Malaysia is a country that seems to have melded a number of traditions.  For an Englishman, it is easy to understand:  class, education and government all make sense, and enough practice in these areas remains from the days of British rule to sustain familiarity.  What’s more, popular sports include soccer, badminton, hockey, bowls, tennis, squash, horse racing, sailing and skate boarding.  However, a very different perspective becomes clear once the focus switches to religion, and, for everyone, the holidays associated with faith.  Muslim holidays are clearly the most prominent in Malaysia. The more important of these are Hari Raya Puasa, marking the end of the fasting month, Ramadan, together with Hari Raya Adiladha, marking the culmination of the annual Hajj, Awal Muharram (the Islamic New Year) and Maulidur (the Birthday of Prophet Muhammad).

Malaysia Chinese follow the same holidays as for Chinese around the world:  Chinese New Year, the Qingming Festival, the Dragon Boat Festival and the Mid-Autumn Festival.  Hindu Malaysian Indians celebrate Deepavali and Thaipusam; Sikhs celebrate the Sikh new year.  Wesak, the Buddhist festival, is a public holiday,  Finally,  Malaysia’s Christian community observes Christmas and Easter.  If that weren’t enough, New Year’s Day, Chinese New Year, and the start of the Islamic calendar are all public holidays.  Many Malaysians take days off for the holidays of people of another faith; indeed, I have seldom been in Malaysia when there wasn’t at least one holiday to break up the working week!

My Malaysian Chinese CEO had to be a skilled navigator, respecting the hereditary Malay rulers, and the very senior Malays on various of his company boards.  He had to ensure that he recruited good people to work in the businesses, and tried to ensure these included staff from all the dominant groups.  He had to work within the framework of holidays and Muslim prayer times.  He was an excellent business strategist, and at the same time he was an adept politician.  Above all, he made it look easy, always smiling and helpful, while working long hours behind the scenes.  He was an adept juggler, keeping all the balls in the air.

I would have liked him for that reason, but he was also an entrepreneur.  Most entrepreneurs I’ve met have been good at seeing opportunities and setting up enterprises to realise them, but many have been rather less successful as long-term senior leaders.  They tend to slip from looking for future new areas to defending what they have set up, and in so doing lose twice over:  they miss the next entrepreneurial opening, and at the same time they become a heavy weight on the existing organisation, trying to sustain their innovative idea as it had been when it was introduced, rather than let it grow as it needed.  It’s become a familiar story.

Malaysia is well located in Asia, much better than Australia sitting on the fringe.  It has abundant natural resources, oil and gas, good agricultural land, gemstones, minerals.  It sits on a peninsula, reaching close to Indonesia, and at the same time with excellent access to the other ASEAN countries, and beyond them to China.  That’s the entrepreneurs dream, to be ‘in between’, developing businesses raw material suppliers and end users:  Singapore has done that with only its people as the key input, but despite its advantages Malaysia has been slower to seize the opportunities in the same way.  Why?

It would be easy to write this off as the evidence of cultural differences, that Malays with their Islamic background are less driven, less ambitions, whereas the Chinese are more ambitious, seeking rewards now, rather than at some point in the future.  While culture does play a part, there is much more than that.

One issue is what I can best describe as comfort.  Malaysia is a place of simple abundance.  The climate and the land lend themselves to successful agriculture:  rain and rich soil (it’s like the farming land of East Anglia in the UK!).  For a long time, the major business was rubber, with thousands of acres of trees delivering the latex need to feed the world’s demand for tyres and other rubber products.  Today, most rubber tree plantations have been replaced by acres of those squat palms that produce the nuts from which palm oil is extracted. While Malaysia has developed a key role in telecommunications, computers and software, it is still the palm oil that underpins its economy, together with gas and oil.  Well, it is more than that.

Malaysia has two other areas of the economy that have been very successful in the 21st Century, banking and tourism.  It is a centre for Islamic banks and financial instruments in Asia, and it is currently the world’s largest centre of Islamic finance.  With 16 fully-fledged Islamic banks including five foreign ones, it has Islamic bank assets totalling close to US$170billion, accounting for 25% of the Malaysia’s total banking assets.  To put this in perspective, this represents over 10% of the world’s total Islamic banking assets. In comparison, Malaysia’s main rival, the United Arab Emirates, has US$95 billion of assets.  In addition Malaysia is the global leader in terms of the ‘sukuk’ (Islamic bond) market and issued RM62 billion (US$17.74 billion) worth of sukuk in 2014 (the most recent year I could track down quickly).  Malaysia accounts for around two-thirds of the global outstanding sukuk market, controlling $178 billion of the global total of $290 billion.

The other area, tourism, is a huge sector of the Malaysian economy.  To quote from the somewhat dated information in Wikipedia, it had, “over 57.1 million domestic tourists generating RM37.4 billion (US$11 billion) in tourist receipts in 2014, and attracting 27,437,315 international tourist arrivals, a growth of nearly 7% compared to 2013. Total international tourist receipts increased by 4% to RM60.6 billion (US$19 billion). The United Nations World Tourism Organisation (UNWTO) listed Malaysia as the 10th most visited country in 2012.”  Moving on to more recent data, the Travel and Tourism Competitiveness Report 2017 ranks Malaysia 25th out of 141 countries overall, adding “ In an effort to diversify the economy and make Malaysia’s economy less dependent on exports, the government pushed to increase tourism in Malaysia. As a result, tourism has become Malaysia’s third largest source of foreign exchange income.

Why is this so?  Well, Malaysia has several varied natural attractions, and places like the Perhentian Islands, Langkawi, Mount Kinabalu, not to mention the museums and extraordinary twin Petronas Towers in Kuala Lumpur.  Even that conservative body, the World Travel & Tourism Council (WTTC), has declared Malaysia as “a destination full of unrealized potential with the main strength the availability of a vast range of diverse attractions to suit all tastes, relatively affordable prices and a largely unspoilt destination.”

One other investment, years ago, was when Penang was promoted as a tax-free hi-tech development zone for the electronic industry.  In the past twenty years this has certainly paid off.  The electrical & electronics  industry is the most important component of  Malaysia’s manufacturing sector, contributing significantly to the country’s exports (around 33 per cent) and employment (a little over 25 per cent), with the production of smartphones and tablets, cloud computing and data centres, photonics, fibre optics, LEDs and embedded technology, especially integrated circuits, PCBs and LEDs.  For many years this has been a function of low labour costs, attractive to international companies like Intel, AMD, Texas Instruments and many more, and with the emergence of local companies such as Green Packet, Silterra, Globetronics, Unisem and more.   There are more than 50 companies, most multinationals, producing semiconductors devices in Malaysia.  Recently, all this has been complemented by Malaysia emerging as a major hub for solar equipment manufacture.

I wonder if something strikes you as we review these areas of strength.   What is on our list?  oil and gas, palm oil, banking, tourism, and electronics.  Most of these industries share one very intriguing characteristic.  They depend on a relatively small number of highly skilled white-collar workers, supported by a low-level blue-collar workforce.  To put that another way, if money isn’t what drives you, then for many young Malays ‘the living is easy’.  Of course, there are many limitations on the lifestyle of Moslems, and some Malay States would like to impose Sharia law and a greatly restricted lifestyle.  However, if you wander around the Suria KLCC shopping mall under the twin towers, most young people are relaxed, dress is casual (although most Malay girls still wear headscarves), and alcohol is easily obtained.

I often think of Malaysia and Australia together.  Both are easy going countries, at least in some respects.  They were similar in population size many years ago, but today there are 34m in Malaysia and 26m in Australia.  Both survive in the international world through selling natural resources, agriculture, tourism, and a few carefully nurtured industry sectors (and in that regard, Malaysia seems more successful).  Both practice a class/caste separation (and both have small indigenous populations that are treated as living on the fringe).  Both juggle religion, state and skewed wealth.  Above all, and if you don’t look carefully, both are nice places to live.  A laid-back, easy-going lifestyle is enjoyable, if increasingly hard to sustain.

There are differences.  Malaysia is nicely located down south in Asia, with transport infrastructure to give access to key markets, whereas Australia still appears adrift at the base of the world, its close neighbour Indonesia (as is the case for Malaysia), very foreign in terms of language, politics and religion.  Of the two, Australia is relatively affluent.  Malaysia looks to Islam, the Middle East, and, uncomfortably, to Indonesia.  Australia looks to England, Europe, China, and anyone else who’ll pay attention.  Let’s sit back and enjoy nasi lemak, curry laksa, rendang, roti canai, or mee goreng, or shall we throw a few more prawns on the barbeque, as we sip our teh tarik or sauvignon blanc.  Tough choices!