AirAsia wake-up call for crony-infested BN business model

UDPDATED In what many see as a blow to Prime Minister Najib Razak’s grandoise economic plans to create a high-income nation, AirAsia’s decision to expand its headquarters to Jakarta may spell the acceleration of an exodus of businesses out of Malaysia, though not many will be as big or as shiny a jewel in the crown as the homespun low-cost air carrier.

When interviewed by the media last week, Tony Fernandes was rather guarded in his comments as to why Jakarta was picked to house its regional offices. The AirAsia group chief executive had said the move was an effort to upgrade his company’s image as a Southeast Asian airline rather than just a Malaysian carrier.

However, Tony denied AirAsia would leave Malaysia.

"AirAsia headquarters always in Malaysia. We were born in Malaysia. My home is Malaysia. Our stock listing is in Malaysia. Hope this clears this up. Silly how some press turn things around,” he said in a tweet posted at around 5pm on Monday.

The clarification may be a sign of what many financial analysts have long suspected other businesses in Malaysia have faced - unnecessary and inappropriate pressure from the BN government and exactly reflective of the malaise and corruption dogging corporate Malaysia.

Expansion not new news

Since the news broke over the weekend, politicians linked to Najib's UMNO had begun lobbying for a retraction from the airline. But as far back as June, AirAsia regional commercial head Kathleen Tan had told the same to theJakarta Post.

“We have chosen Jakarta to be home to our ASEAN office. We will move our regional office operations to Jakarta,” Tan had told The Jakarta Post. “The new office is now under construction and it will be up by August or September this year,”

Fernandes himself had characterized the Jakarta move as a simple business decision to take advantage of Indonesia’s vastly larger economy and population. This is nearly 10 times that of Malaysia’s, although Malaysian annual per-capita gross domestic product of US$14,700 by purchasing power parity is much higher than Indonesia’s US$4,200.

However, the sheer size of the country's populace means that the Indonesian economy is at towering US$1.03 trillion versus Malaysia's US$414.4 billion, based on estimates in the CIA Factbook for 2010.

Business is business

Business is business, and Fernandes' decision seems timely. For years, analysts have pointed out that one of AirAsia's biggest problems was having to battle for more rights to fly in the Malaysian air-space with the government-backed MAS a frequent obstacle in its way. But again, in business, this is to be expected. Nevertheless, every decision to fly within Malaysia has to be scrutinized by the government, and often-times the decisions are made in MAS' favour.

Launched in 2002 as a regional no-frills carrier with just two planes, AirAsia now flies 93 planes all over Asia. In addition, a long-haul service, AirAsia X, flies to Europe, Japan and Korea. The company earlier ordered 300 Airbus A320 to expand its routes across Asia and beyond. Given that the phenomenal growth is mostly its own efforts, the airline is one of Malaysia's more respected firms.

Malaysia's business circles are largely controlled by the UMNO-led government. The playing of favourites can be irritating, degrading and most of all makes Malaysia uncompetitive. It can only hinder firms from becoming the best in the region or even the world.

Asked why he chose to expand the fast-growing airline’s principal corporate base to Jakarta from Kuala Lumpur, Fernandes had told Asia Sentinel : “Asean is based in Jakarta, and Indonesia will be the largest economy in ASEAN in time to come. And I like it there."

There was also Genting

Another Malaysian start-up and successfull business entity is Genting Berhad, which has a market capitalisation of US$13.6 billion as of 31 May 2011, making it the leading Malaysian corporation to date. Fearing a shift to Islamic puritanism in the 1990s and it’s affects on his Genting Highland’s operations, Lim Goh Tong, the late company founder, diversified Genting Berhad’s business ventures.

From its initial leisure and hospitality activities, the Genting Group has since expanded and diversified into other activities including plantations, properties, power generation, oil and gas, e-commerce and the development of information technology.

Genting Group is the founder of Star Cruises the third largest cruise liner company in the world and largest cruise liner in Asia and its headquarter is based in Hong Kong. As of December 31, 2010 Genting Malaysia now owns the the largest number of casinos in the UK with 46 casinos. Lim’s business empire have interests in Singapore, United Kingdom, Philippines, USA and Australia.

The feared curbs on the Genting Highlands' expansion never came to pass, but Lim's relationship with the government was odd. He was forced to renew his business licence every three months, while the sin of gambling was constantly denounced in the run-up to every election.

In other words, Lim had to live in fear his business empire could be closed down any day and any time the religious extremists in UMNO decided to do so. His son, Kok Thay is now in charge and has diversified the Genting franchise beyond recognition into Singapore, Europe and US.

Before Genting, there was sugar-King Robert Kuok who reinvested his money in Hong Kong and China in the 1980s. Even the YTL group has diversified the eggs in its baskets by acquiring stakes in utilities in the UK, Singapore and other parts of the world.

Not that AirAsia, Genting, Robert Kuok or YTL have not benefited from the BN model. For example, Robert Kuok and YTL's Francis Yeoh are frequently reported as being close to former premier Mahathir Mohamad and Genting got its first break from Tunku Andul Rahman, the first prime minister. But in the case of Genting and Kuok, their overseas success is very much their own effort and overshadow their Malaysian assets.

Ineffective GTP, ETP

Najib, for all his grand-sounding Economic Transformation Programmes, would do well to study what makes true businesses work. It is not the wild pie-in-the sky figures that scare potential investors away with just the mere mention of the zeroes involved in his grandoise plans, but sheer savvy and enormous hard work.

There is also such a thing called level-playing-field and rewards based on merit, rather than, "I help you, you help me". If Najib wants to spout such philosophies, he would do better to the treasurer of a community hall in a remote village collecting rents for the badminton court and ping-pong tables, rather than be the Finance minister of Malaysia.

In big business - without corruption that is - recognition must be given to the best talent, to best bid and to the most productive venture. As the Robert Kuoks, Gentings and AirAsias fly off for greener and fairer pastures, the BN's Government Transformation Programme is still stuck and left to languish amid regret for not being able to retain Malaysian start-ups destined for global glory because of its fatal mistake of over-politicising business.

- Malaysia Chronicle