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Thursday, November 29, 2012

The journey in life is never a straight line (PART 5)


I had never tendered for fishing nets before so I was not too clear of the costing. I sought the advise of a friend who gave me the previous year’s prices and asked me to drop my bid 7% below that price so that we can be the cheapest bidder. That was the most screwed up advice I ever received, as I would soon learn.
NO HOLDS BARRED
Raja Petra Kamarudin
Most Malays are Ali Baba businessmen, said Chia Kim Peong a.k.a. Ah Piow. The Chinese use the Malays to get business. You, however, are a Baba Ali businessman. It is the other way around. You use the Chinese to do business. And you do all the work while I just sit back and collect my dividends. Ah Piow probably found that very amusing.
That quip was triggered by an episode involving the fishing net business that I started. I tried to get supplies from the Fusan fishing net manufacturer in Port Kelang but they told me that Nam Lee was their sole distributor.
I tried to meet up with Nam Lee but they refused to see me. They told me they were not interested in my business because they already had more than enough business to handle.
I spoke to Ah Piow who told me that he knows the Nam Lee people very well. He asked me to meet him at their office and he brought me in to meet the Managing Director although we had no prior appointment. I tried many times to meet them but failed and Ah Piow can just walk in unannounced. Clearly contacts are the key to business success.
Nam Lee agreed to supply me the fishing nets on condition that Ah Piow guaranteed my company’s debts. Ah Piow told me not to make him ‘lose face’. ‘Face’ is everything to the Chinese so I have to make good my debts to Nam Lee.
Once I had learned the ins and outs of the fishing net business I participated in my first public tender. The tender was for RM12 million and seven companies participated. Amongst the seven were Pernas and Nam Lee plus companies owned by Bank Pertanian and Shamelin, an Umno-linked company founded by Tan Sri Sanusi Junid, the one-time Agriculture Minister.
I had never tendered for fishing nets before so I was not too clear of the costing. I sought the advise of a friend who gave me the previous year’s prices and asked me to drop my bid 7% below that price so that we can be the cheapest bidder. That was the most screwed up advice I ever received, as I would soon learn.
The buyer called the seven of us for a meeting and I was informed that our prices were 30% below everyone else. They said I had clearly made a mistake so they were giving me the opportunity to withdraw, leaving the remaining six in the race. The RM12 million contract would then be divided six ways, around RM2 million per bidder.
I refused to withdraw and insisted that we remain in the race. I noticed the others around the table, who had been in this game a number of years, whisper and snigger. I was furious. There was no way I was going to withdraw and ‘lose face’. I was going to stay and fight even if I lost my pants. And if they were right that I had made a mistake then I stand to lose quite a bit of money. But then this is about ‘face’, not money.
Because our price was 30% lower than all the rest, they had no choice but to give us the entire contract. The rest got nothing. With variation orders and a two-year extension, the RM12 million contract became RM20 million.
As luck would have it, Korea, which had many fishing net factories (unlike Malaysia which had only one) saw an oversupply situation when the market for fishing nets coincidentally took a dive. Fishing nets have a short shelf life so they needed to dispose off these nets as fast as possible. So now many factories in Korea were scrambling and were trying to dump their nets at fire sale prices.
The Koreans came to see me to try and get me to buy from them. They told me that based on normal pricing I was going to lose money big time because I had made a mistake in my pricing. However, they were prepared to supply me and would allow me to make 2.5% over the contract price.
I told the Koreans that their price was not attractive enough and that I could get the nets cheaper elsewhere. They told me that that would be impossible because nowhere in the world could I get nets at that kind of pricing. I told them in that case they should sit back and watch me do it.
They went off after telling me they will remain in Kuala Lumpur in case I change my mind because they were still interested in doing business with me.
I never called them back. In the meantime, the clock was ticking. I was supposed to supply the nets within 60 days and now 30 days had passed. If I can’t get my hands on the supply I would default and the contract would be cancelled plus I would lose the performance bond of RM600,000.
Five days later, the Koreans called again and said they agree to my terms. They will give me 30% and supply all my requirements. But they will require a Letter of Credit. I told them, “No Letter of Credit.” They were the ones chasing me, not me chasing them. If they want me to buy from them then they will have to give me 60 days credit.
The deal was sealed and I made my first delivery after requesting a 30-day extension for the first delivery and then 60 days delivery thereafter.
Fusan and Nam Lee were taught a lesson of their lives. Pernas, which had about RM500,000 in unsold stocks had to write off their fishing nets because the rats and cockroaches had eaten all the nets in their store (nets are perishable items when left in the store).
My satisfaction was not in making around RM5 million on that three-year contract that eventually totalled RM20 million. It was in teaching the ‘big boys’ a lesson to not snigger at me during a meeting as if I did not know what I was doing.
Well, actually I did not know what I was doing. It was just luck and a game of poker with the Koreans that prevented me from losing my pants, yet again. Needless to say, I never tried that stunt again.
TO BE CONTINUED

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