Author: Fred Hoyt

(Click on any picture to enlarge & see caption)

If yesterday’s visits were about Malaysia as a Muslim country, today’s were about Malaysia’s still-predominantly agricultural economy.  Oil is the No. 1 product, accounting for about 35% of its total revenue, but No. 2 is palm oil, which represents about 10% of the country’s export earnings.  Indonesia and Malaysia are the two major exporters of the product, which, we learned, were used in a variety of foods, as well as soaps.  One visit was to the government-created, industry-sponsored Palm Oil Board, whose function seems to be to research and promote better agriculture on the part of the farmers, and new products and new product awareness for consumers.  It is a major source of cooking oil for McDonald’s Asia and is commonly used for cooking everywhere in Asia.  The industry here employs almost 1 million people, and the plantations cover about 60% of the country.  Surprisingly, the tree came from Africa to Malaysia as a decoration for a botanical garden.   Not until World War I was it commercially developed.  The R&D continues, partly to solve one problem: Harvesting is very labor intensive.  Malaysia is worker-short, and many Indonesians come to work in the plantations.  It seems to me a sign that Malaysia is not Third World; Third World sends workers to do the grunt labor elsewhere.  The planters are worried about the labor shortage (Indonesia banned the travel of Indonesians as maids to Malaysia–that was yesterday’s headline), so the board is investigating ways to grow better, smaller trees which would be easier to harvest, or to mechanize the harvest more.  As it is, the fruit must be refined within 24 hours or it loses its quality, which puts the mills near the plantations.

The tree can grow only a few degrees from the equator, on plantations that are about 60% private, and 40% government owned.  Someone told me that Sime Darby, the biggest one (and one fully integrated with plantations, mills, and refineries) was created by the government from a British company; it ordered a number of the smaller companies to consolidate, which was one of the few direct instances we’ve had here about the government planning and support for business; it’s not Singapore, but it has helped lift this economy to the point where KL is an exceptionally modern city, and Malaysia has some of the best infrastructure (read roads) in Asia.

We went to Cargill’s refinery here to see how the oil is processed for use in other products, including McDonald’s cooking oil.  The plant manager was an American expat whose father had been a Caterpillar expat, so he knew about IWU.  The plant operates at about 110% capacity, so Cargill is building a second facility nearby to ramp up production.  This refinery has moved increasingly up the value chain, producing the more profitable versions of the oil. The 40% value-added products produce 67% of the plant’s profits. What was interesting to me was the packaging, which reflects where the $2 billion in sales come from–Portuguese (Brazil), Spanish (Argentina), Chinese (Asia), and two forms of Cyrillic (Russia and the Ukraine).  The more I learn about Cargill, the more I realize that agriculture may be truly the most international of all businesses.

The gustatorial highlight of the day was lunch at a mall, and the purchase and consumption of a durian pancake.  Durian has the reputation of tasting like heaven (not sure about that) but smelling like hell (true!).  Singapore hotels have signs banning durian.  I saw a “durian pancake house” in Singapore, and wanted to try it, but the line wound around the block. The shop at the mall had one–which consisted of the durian fruit in the center–surrounded by whipped cream and a pancake, together with chocolate sauce.  Not half bad, but I doubt you’ll find it in the United States.

We’re going to a cultural show and dinner tonight, so I’d better get ready.

Good night to me, and salamat pagi (good morning) to you.

Malaysia is a predominantly Muslim country, a fact brought home today at our three stops–two business visits and the newly built capital at Putrajaya.

The first visit was to a University that specializes in Islamic finance, recently empowered to award Ph.D.s in the subject.  The Qu’ran forbids interest, which gives finance a different spin here. Malaysia was one of the first countries to stress Islamic finance, and it seems to me that the topic is part of Malaysia’s efforts to become more than a small tiger. Near as I can figure, Islamic finance means a more cooperative buyer-bank relationship, more akin to what happens in joint venture capital.

The second visit was to the University of Putra Malaysia, the largest university in the country.  We were hosted by the Graduate School of Management, which has nearly 1,000 students.  The university originated as an agricultural school, and its sprawling campus can certainly accommodate many farms.  I think I saw a palm tree plantation on the campus.  The talk dealt with halal food, which is food that conforms to shariah law (the Muslim standard; Islamic banks do have a board which determines whether or not new products meet the shariah codes, with the final say held by the Central Bank’s shariah board).  The standards determine the process for goods not banned by the Qu’ran (alcohol is banned; the joke is that halal beer is served at A&W).  The University conducts research on the topic (halal applies to non-food items as well), but the food industry is one which Malaysia is trying to capture for the Muslim world.  The government has issued a major volume which lists the standards for halal. One thing I briefly glimpsed on our tour was a billboard listing the “prohibited behaviors.”  One was kissing; another handholding. No PDAs here.

The third visit was to Putrajaya, the capital built in the 1990s (I want to say 1996 or so, about the same time as the Petronas towers).  The government moved all its offices about 40 miles from KL, and built apartment complexes to house government employees.  It sold the downtown properties it was evacuating in KL to build the new town, so the guide assured us no government funds were involved in the massive transfer of people and processes.  The first building was an enormous sand colored reddish mosque, built on the shores of a man-made lake, and that pretty much sets the tone of the city.  It is truly monumental, rather on the scale of Chang’an avenue in Beijing.  The difference with Beijing is that the buildings here are Muslim with domes, arches, and latticework.  It is very impressive, indeed, and does seem to mark Malaysia’s coming of age.  Muslim government employees get a 10 % discount, as part of the ruling UMNO (the Muslim party) effort to raise the standards of living of the Malays.  Malays seem to dominate the political sphere, while Chinese dominate business.  When I asked a Chinese professor at the University about Chinese representation at the University, her reply was a cryptic, “It’s very sensitive.”  Malaysia officially does celebrate diversity.

The restaurant we went to had a fish tank with a poster, one Malaysia, all fish, regardless of species, swim together in harmony.  In the back of my mind, though, reflecting my reading on the end of the Ottoman Empire, I wondered whether the goal of Malaysia is to become the new Caliphate, albeit as the political/economic beacon of the Islamic world.

January 8, 2011

I still remember the first time I experienced Malaysia.  It was 14 years ago, and my son and I were on the train from Bangkok to Singapore.  We had to go through Malaysia.  I remember I was reading John Naisbitt’s Megatrends Asia; he raved about this Muslim-dominated country of 25 million people, most of whom live in peninsular Malaysia (as opposed to the states on the island of Borneo.  This was a country, he noted, in the throes of an economic revolution that was proposing to build major highways for India.  Having just come from India, I well knew the challenges that that demanded.

I don’t know whether those highways got built, but I realized Malaysia, another one of those countries one hears little about, was quite capable of doing so.  The long-time president at that time, Mahathir Mohammed, was a rival of Singapore’s Lee Kuan Yew for both vision and ability.  Mahathir’s focus on Asia,  especially on the economically challenged Muslim majority, made him an outspoken critic of the United States and “western values”.

What he attempted to do, and with success, was to meet one of the great challenges in the post colonial world—to define a country that pretty much owed its boundaries and existence to its former colonial overlord.  The country has not really forgotten the potential explosiveness of racial division; the 60s were marked by race riots (the Chinese minority—about 30 per cent of the country have more than 30% of the wealth, and are Christian/Buddhists to boot).  Mahathir’s plan favored the Muslims (bumiputra), and the country does have a Muslim-dominated government.  Our guide insists that there is religious freedom, but non-Muslims cannot attempt to convert Muslims, and as I recall, marriage to a Muslim may require a non-Muslim to convert.

Mahathir created at least in the major cities a modern economy; Malaysia has its own car, the Proton, and a sophisticated high-tech sector that includes the Dell factory we’ve visited in the past and which churns out most of your Dell laptops.  I’m looking forward to our visits here later in the week, which will cover Muslim finance and food (one of the articles we read for the trip said that Muslim students had to by kosher food until a halal provider came along).

Today has just been a long trip across the border (we had to change busses because Malaysia charges Singapore busses more—the switch simply meant our company exchanged a Singapore license for a Malaysian license.

Anyway, the trip North was as I remembered the trip with David in   1997—on first rate highways (the North-South expressway), through a verdant landscape (that’s a nice way of saying it rains a lot) of palm oil plantations (we’re visiting them too) that stretch as far as the eye can see (and have largely replaced the rubber and tin that were the source of British colonial wealth).

We just stopped at Melaka for a baba-nonya lunch, named for the mixed families of Chinese and Malay.  I was glad we came here because Melaka is one of my favorite cities.  It was the seat of a sultanate that was one of the great powers in the area in the 14^th and 15^th centuries.  The Portuguese under the duke of Albuquerque, captured it in 1511, and there are still remnants of the old Luso (Portuguese) fort;  About a 120 years later, the Dutch sailed in, and the Dutch Stadhuys (the governor’s palace) and the Dutch church remain. When I was here two years ago, I went into the museum, and learned a  lot more about the Dutch East India company and the Dutch occupation here than I saw anywhere in Amsterdam!  After the Napoleonic Wars, the British traded Melaka for what became Batavia (now Jakarta), the capital of the Dutch East Indies.  And then in 1957, I think it was, after the end of a communist insurgency (unlike the one in Viet Nam), Malaysian officials declared the independence of Malaysia from Great Britain in Melaka.

I’ve enjoyed my visits there more than students, alas, so on this year’s trip, I took Melaka out in favor of a trip from Saigon to Hanoi—so readers of my blog won’t have to hear this little lesson about Melaka again.

What can you do on a free day in Singapore, provided you’ve been here before and done the basics?  Here’s what I did.

The free day started Thursday night, with about half our group signing up for the “night safari.”  While I recall some of my students had gone to it, I had been skeptical.  To paraphrase Reagan’s secretary of the interior, “If you’ve seen one animal, you’ve seen them all.”  I wouldn’t go to a natural history museum overseas, for example, since we have a great one in Chicago.

As one of the other faculty said, though, it was 120 times better than I thought it would be.  We got on a tram in the park and rode around looking at wild animals in their environment–elephants, water buffalo, giraffes, etc.  Since many are active at night, they sleep all day in the zoo.  Plus, the food was out, so they were up and scarfing.  We got out at one stop and walked through the jungle, viewing (happily there was some barrier) lions (Singapore’s namesake) and leopards.  As is typical in Singapore, it was very well done.

Yesterday for me began with an early morning swim.  While I wanted to do some pilates/yoga, it’s hard to resist swimming outside in January.  Try that at home!

One of the museums I hadn’t been to was the Asian Civilizations museum.  What sold me on it were the building itself (a former government building in the area of the former British government when Singapore was capital of the Straits Settlements [together with Malacca and Penang]), and the blurb in the Lonely Planet that the museum housed an outstanding Muslim exhibit.  Since we’re leaving later this a.m. for Malaysia, a Muslim country, I thought I’d better “be prepared.”  What I was unprepared for were the excellent explanations, so good that I bought the collection catalogue, something I’m loathe to do, because they’re heavy!

Next stop was Chinatown, for lunch (I think I need to take one of the food courts home!), including dumplings and red bean pancakes, and for wandering aimlessly.  It’s a neat old colonial area with pastel buildings and overhangs to keep out the rain/sun, and a wonderful assortment of Chinese New Year trinkets.  I looked for a calendar, and they must be almost as obsolete as letters, but I did find one in a department store.

The evening?  I learned the Singapore Symphony was playing at the Esplanade, a new venue on the harbor that looks like a durian fruit (the one that smells like hell, but tastes like heaven–fortunately, the Esplanade smelled pretty good) that’s relatively new and reputedly had great characteristics.  The program was two Tchaikovsky pieces I had never heard of (does anyone not in a music appreciation class know that he wrote 3 piano concerti?  We heard the second).  The second piece was the Manfred Symphony–toward the end the organ entered.  Aside from Saint Saen’s famous organ symphony, I’d not known of any similar combination before.

All that would have been needed to top off the evening was a visit to the Long Bar at the Raffles hotel for a Singapore Sling, but as one of my Scouts used to say,  “I’ve already done that.”  Two days ago.

Got to pack for the trip to Kuala Lumpur via Malacca.  I understand that we will change buses at the border.

Talk to you soon.

January 8, 2011

 

Malaysia

 

I still remember the first time I experienced Malaysia.  It was 14 years ago, and my son and I were on the train from Bangkok to Singapore.  We had to go through Malaysia.  I remember I was reading John Naisbitt’s Megatrends Asia; he raved about this Muslim-dominated country of 25 million people, most of whom live in peninsular Malaysia (as opposed to the states on the island of Borneo.  This was a country, he noted, in the throes of an economic revolution that was proposing to build major highways for India.  Having just come from India, I well knew the challenges that that demanded.

 

I don’t know whether those highways got built, but I realized Malaysia, another one of those countries one hears little about, was quite capable of doing so.  The long-time president at that time, Mahathir Mohammed, was a rival of Singapore’s Lee Kuan Yew for both vision and ability.  Mahathir’s focus on Asia,  especially on the economically challenged Muslim majority, made him an outspoken critic of the United States and “western values”.

 

What he attempted to do, and with success, was to meet one of the great challenges in the post colonial world—to define a country that pretty much owed its boundaries and existence to its former colonial overlord.  The country has not really forgotten the potential explosiveness of racial division; the 60s were marked by race riots (the Chinese minority—about 30 per cent of the country have more than 30% of the wealth, and are Christian/Buddhists to boot).  Mahathir’s plan favored the Muslims (bumiputra), and the country does have a Muslim-dominated government.  Our guide insists that there is religious freedom, but non-Muslims cannot attempt to convert Muslims, and as I recall, marriage to a Muslim may require a non-Muslim to convert.

 

Mahathir created at least in the major cities a modern economy;l Malaysia has its own car, the Proton, and a sophisticated high-tech sector thatincludes the Dell factory we’ve visited in the past and which churs out most of your Dell laptops.  I’m looking forward to our visits here later in the week, which will cover Muslim finance and food (one of the articles we read for the trip said that Muslim students had to by kosher food until a halal provider came along).

 

Today has just been a long trip across the border (we had to change busses because Malaysia charges Singapore busses more—the switch simply meant our company exchanged a Singapore license for a Malysian license.

 

Anyway, the trip North was as I remembered the trip with David in   1997—on first rate highways (the North-South expressway), through a verdant landscape (that’s a nice way of saying it rains a lot) of palm oil plantations (we’re visiting them too) that stretch as far as the eye can see (and have largely replaced the rubber and tin that were the source of British colonial wealth).

 

We just stopped at Melaka for a baba-nonya lunch, named for the mixed families of Chinese and Malay.  I was glad we came here because Melaka is one of my favorite cities.  It was the seat of a sultanate that was one of the great powers in the area in the 14^th and 15^th centuries.  The Portuguese under the duke of Albuquerque, captured it in 1511, and there are still remnants of the old Luso (Portuguese) fort;  About a 120 years later, the Dutch sailed in, and the Dutch Stadhuys (the governor’s palace) and the Dutch church remain. When I was here two years ago, I went into the museum, and learned a  lot more about the Dutch East India company and the Dutch occupation here than I saw anywhere in Amsterdam!  After the Napoleonic Wars, the British traded Melaka for what became Batavia (now Jakarta), the capital of the Dutch East Indies.  And then in 1957, I think it was, after the end of a communist insurgency (unlike the one in Viet Nam), Malaysian officials declared the independence of Malaysia from Great Britain in Melaka.

 

I’ve enjoyed my visits there more than students, alas, so on this year’s trip, I took Melaka out in favor of a trip from Saigon to Hanoi—so readers of my blog won’t have to hear this little lesson about Melaka again.

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One of the questions we’ve been dealing with is whether Singapore Inc. is a government running a business, or a business running a government.  The two notions are certainly connected.  The government is a partial owner of some of the most successful businesses, including Singapore airlines (if you ever get a chance to fly Singapore Air, you’ll certainly rue the day when you can’t).

It certainly directs the social polity in some ways like a business.  The government has decided to limit the number of automobiles, as I think I mentioned yesterday; it auctions the right to purchase automobiles to ensure a growth of no more than a little over 1% a year (Beijing by contrast adds 1,000 cars a day to its already strained infrastructure).  The price for the right this month was just under $70,000 Singapore, or about $55,000–and that’s for the right to purchase a car (with tariffs, etc., that can at least double the price of an automobile; plus gas is at least $7 a gallon).  Urban planning is long-term and coherent.  We learned the government has numbered each tree in an effort to maintain, if not add, greenspace.

Perhaps the most pronounced government-business interchange can be attested to by the companies we visited today, spanning two really different models–agriculture (Cargill) and Medtronic (high tech pharmaceuticals).

Cargill is an interesting business, with over $110 billion in sales.  Privately held, its corporate headquarters is in Minneapolis, but its operations are around the world.  While 50% of its revenues are still in the United States, the company sees Asia Pacific as its major growth area, doubling sales every 5-7 years,  and has made its hub in Singapore.  As the finance officer explained to us, Singapore is central to Asia, no more than 7-8 air miles from anywhere, where a headquarters in Hong Kong or China might be problematic in dealing with other regions of Asia.  The Asian countries, he explained, were not self sufficient in food, and therefore needed the products and expertise that Cargill brings.  For example, the company is building a $290 million factory to process chicken in Shanghai; I hope to be able to visit the plant in 2012 because the manager is a former student of mine at IWU, Omar Sadek.  I met Omar about 14 years ago in Shanghai, where, a few years out of his MBA program at Baylor, he’d been given $29 million to start a chicken feed processing plant in Shanghai.

I am fascinated with agricultural businesses, partly because, as a city boy, I don’t understand them; and partly because they are really global in nature.  The US has a surplus, and without export markets, American farmers would be in trouble, and the world might go hungry.  He also noted that sometimes farm policies, and especially protection of inefficient farming, are counterproductive.  One of the faculty, from Mississippi, pointed out that catfish and shrimp in that state must have the origin of the product on the label, to sway consumers to buy “American” rather than Thailand’s products.

I know from my visit to Cargill in Vietnam two years ago that the company takes seriously its status as a good global citizen; there, we visited one of the 40 schools Cargill has built in areas where the government was too poor to build schools on its own.

The visit to Medtronic was even more pointed to the benefits of being in Singapore.  Medtronic, one of the best companies to work for in America on the Fortune Magazine list, is another Minneapolis-based firm that moved its non-U.S. headquarters to Singapore about two years ago.  The company fits the profile that Singapore Inc. desires–it’s in pharmaceuticals (makes pacemakers and stents among other goods); Singapore has given up competing with China/India/Vietnam for low-cost manufacturing.  The plant manager took us through the history of the plant, which turned out its first pacemaker this month.  It was instructive that his assistants numbered engineers who had come from the semi-conductor industry; that was yesterday’s industry, he said, and the Singapore government has actively recruited the “right kind” of businesses to Singapore in the same way it recruits the right universities–even recruiting competitors. There are three Singapore Inc. salespeople in the United States.  He noted that while all countries gave incentives, one factor which distinguished Singapore was implementation; he had one contact in the government as an “account manager” who could resolve any problems.

I think what I’ve learned in our business visits is that if more businesses were run like Singapore Inc., they’d be better businesses–and that if more governments were run like Singapore’s, they’d be better governments.

Goodnight on that thought!