Malaysia-China trade reset with Kuok’s guanxi economics

Prime Minister Dr Mahathir Mohamad, is set to fly to Beijing after appointing his new special envoy to China but the man behind the scenes is surely Robert Kuok, a formidable exponent of “Guanxi” economics, hand-picked by Mahathir himself to be on his Council of Eminent Persons (CEP).

Kuok, 94, made a grand entrance to Kuala Lumpur after flying in from Hong Kong, where he is currently living. He was welcomed by old buddy, former finance minister and tycoon Daim Zainuddin, 80, as CEP chair. Both were locked in an embrace reminiscent of an old boy reunion and cameras flashed away furiously.

That’s the enduring “guanxi” bond between the two; characterised by their penchant to be tight-lipped in public. Both have been given the task to help reset Malaysia’s trade relations with China. The delay in Mahathir’s visit to China may indicate the difficulty in setting the agenda for renegotiating the dubious deals inked by ousted prime minister Najib Abdul Razak.

Kuok, one year older than Mahathir, was named as one of the five members in the new CEP, three days after Pakatan Harapan toppled the BN government on May 9, 2018, the first ever government change in Malaysia’s history.

The others are Zeti Akhtar Aziz, former Bank Negara Governor, Hassan Marican, former Petronas chairperson (both were previously removed by Najib) and noted economics professor Jomo Kwame Sundaram.

Following Kuok's first CEP meeting, Chinese Ambassador to Malaysia Bai Tian met with him on the future of China-Malaysia cooperation. Neither men said anything unscripted. The Chinese embassy issued this statement: “During the one-and-a-half-hour meeting, Bai Tian spoke highly of Kuok’s contribution to the development of Malaysia and also on the progress of China-Malaysia relations.”

That’s how Beijing views Kuok. The statement concluded that: “They (Bai and Kuok) recall the sound development of bilateral relations during Dr Mahathir Mohamad’s last service as prime minister, and are confident that during the term of the new government, China-Malaysia relations will achieve greater progress.”

Chinese Foreign Minister Wang Yi, after meeting Daim on July 18 in Beijing said: “The relationship between China and Malaysia is able to stand the test of time and change. Both countries have recently formed a new government and the relationship between the two countries is standing at a new and historical starting point,” he said.

Daim didn’t say anything but according to the statement on the Chinese foreign ministry website, he said Mahathir understood China and had always been actively developing relations with the country.

Daim went on to meet Chinese premier Li Keqiang at the Zhongnanhai Leadership Compound in Beijing. That’s as high one can meet as a special envoy to China. Again Daim didn’t say anything, at least in front of polite company. Neither did the Chinese premier.

However, Daim did say the obvious: “The prime minister looks forward to an official visit to China soon to discuss bilateral relations and development plans with the Chinese leaders.” That’s what “guanxi” is all about. Speak only if necessary.

Daim was visiting Beijing ahead of Finance Minister Lim Guan Eng’s trip planned for later this week. It was reported that the Malaysian government would be sending a delegation to China to renegotiate the cost of three large-scale projects previously awarded to Chinese firms.

At the last minute, Lim was dropped from Mahathir’s delegation without a plausible explanation. I can only guess Lim talks too much and often forgets that he’s no more an opposition leader but part of Mahathir’s new government.

Penetrative impact

I took a whole chapter in my book “The Dragon Stirs, the New Silk Road,” to explain “guanxi” economics.

“Guanxi” basically means building relationships or networking for mutual benefit. But there’s much more than meets the eye. “guanxi” has its cultural dimensions of building trust where laws cannot always provide a good framework for the Chinese in conducting personal and business matters. It’s a Chinese way of getting things done without either party having to lose face.

One of the enduring instances of “guanxi” at work is in Malaysia and Singapore among the Chinese diaspora. There’s a story told of Tan Kah Kee, who was born in October 1874. He emigrated to Singapore to join his father’s business there. By the 1920s, he presided over a huge business empire including rubber plantations and manufacturing, shipping, import and export brokerage, real estate and rice trading – employing over 10,000 people living in most East and Southeast Asian cities.

Tan was acknowledged as a valued and generous friend of Chinese people inside China, Singapore, Hong Kong and then Malaya. When he died in Beijing in 1961 at the age of 87, he was accorded a state funeral. With his philanthropy, Tan had founded the Xiamen University (XMU) in 1921. Now nearly a century later, the top-tiered university reciprocated by setting up a campus in Malaysia – the first Chinese university to do so.

Xiamen Malaysia is funded by donations from the business communities, both locally and in China. This fundraising is spearheaded by a “guanxi” exponent, Robert Kuok, who contributed RMB200 million.

Both then PM Najib and President Xi Jinping, together with his folk-hero wife, Peng Liyuan, turned up for the official launch for the campus project. It was Xi’s first visit to Malaysia. Kuok was there to greet them.

When Deng Xiaoping made a comeback in the 1970s, China’s economic reform programme needed the generous help of overseas Chinese entrepreneurs. Kuok (the “Sugar King”) was the first to respond. He built China’s first five-star hotel - Shangri-La! When China was strapped for sugar supply, Deng rang Kuok.

The Sugar King immediately put together a war chest and rounded up his buyers from Japan to Brazil to enter the global sugar market quietly. In a blink of an eye, they garnered enough sugar for China. Kuok didn’t ask Deng for anything in return. This is “guanxi” at work without much fanfare. Kuok was the last foreign visitor to meet Deng but the “guanxi” friendship endures till today.

Unfortunately, Najib never understood the penetrative impact of “guanxi” economics. He allowed his bully boys to demonise Kuok by using the race card against him in the run-up to the recent general elections. Among others, Mahathir came to the defence of Kuok. The rest is history as Najib, after losing the elections, now awaits trial on several counts of corruption, money laundering and abuse of power.

Kuok is Malaysia’s richest man and one of the richest in Southeast Asia. He has interests in one of Asia’s largest integrated agribusiness groups, Wilmar International Limited. Its 2017 revenue was US$43.85bil. It has over 500 manufacturing plants and an extensive distribution network covering China, India, Indonesia and some 50 other countries. The group has a multinational workforce of about 90,000 people.

In China, it is one of the largest edible oils refineries, a speciality fats and oleo-
chemicals manufacturer as well as a leading oilseed crusher, producer of consumer pack oils, flour and rice and one of the largest flour and rice millers.

Malaysian palm oil has not succeeded in penetrating China’s edible oils market thus far. Maybe joining Kuok’s “guanxi” network would be a good idea.

Daim Zainuddin has presumably completed his role as Mahathir’s special envoy to China now that DAP chairperson Tan Kok Wai is the new special envoy to China. But Tan is a new kid on the block.

The success of Mahathir’s forthcoming visit to Beijing will very much rely on what both Daim and Kuok have managed to put the table. Thus far, the signals from China are positive but it’s not going to be a walk in the park. Expect some hiccups.

---

BOB TEOH is a media analyst and author of the book The Dragon Stirs - China’s New Silk Road. - Mkini