The True Story of Sime Darby by a Former Board Director


May 19, 2010

http://www.themalaysianinsider.com

The True Story of Sime Darby–Dr. Chan Chin Cheung

Poor Datuk Seri Ahmad Zubir Murshid, I sympathise with his present predicament. He was not the first executive of Sime Darby to be mired in circumstances which went beyond his control — the force of historical circumstances which dated back to November 1976.

All these began on January 2, 1972 when I proposed to a high government official that Malaysia would be well-placed to have a conglomerate of its own at the inception of the New Economic Policy (NEP) conceptualised by the team led by the Father of Development, Tun Abdul Razak, a statesman.

At that point, I had not the faintest idea what it was all about. All I knew was that my Malay contemporaries were very keen to do business. They grew up with me in the environs of higher education in the United Kingdom in the 1950s. We were all fired up with the things we could do in a socio-economic way.

Eventually, we all returned and I by force of circumstances became a planter. Then, I could see my Malay friends were quite poor compared with myself. Also, I realised the British dominated the banking, the plantation and tin mining sectors, because the biggest rubber estate owned by a Chinese then was only 7,000 acres and the non-Malays from the urban areas did all the menial business and the hard and unrewarding work at the leading edge of the nascent ‘independent’ Malaysian economy.

The change came with the NEP which promised to give all Malaysians a new beginning.I thought without a huge business entity controlled by the Malays with the co-operation of the non-Malays, we, the Malaysians, would be mired in unhealthy competition socio-economically amongst ourselves.

This would lead to self-destruction because 70 per cent of the Malaysian economy at that point was still controlled by the British, not the Chinese. We would be getting at each other’s throats for third class assets.

Without Sime Darby, which eventually became the flagship of the Permodalan Nasional Berhad, non-Malay billionaires, some of them foreigners, would not be created during the NEP period.

Hence, I proposed that a Malaysian-owned and managed conglomerate should be established or acquired.  By chance in October 1973, Sime Darby was involved in its first scandal concerning its chief executive, and Pernas Securities moved in with the tacit support of the Minister of Finance and the Prime Minister, who both had this great foresight to do what was best for Malaysia on free market terms.

This was their finest hour to agree to take-over a British conglomerate at fair market prices. Arising from this proposal, Tan Sri Taib Andak, the Chairman of Maybank, and myself were appointed as non-executive directors of London-based Sime Darby PLC in October 1974.

But, at that time, there was not much money available for the Bumiputeras. Without informing anyone, I managed to garner the support of important investors residing in a neighbouring country, who entered the fray and helped us to win against all odds by November 1976.

During this period, the British were at their weakest being beset with political turmoil, by the weak pound and a disinterested City in ex-colonial assets. Malaysian control was achieved with a few million ringgits, about RM 23 Million.

Unfortunately, at the crucial moment, our prime minister, Tun Abdul Razak passed away. Then, my view was: Who pays the piper calls the tune. In other words, Malaysians should be put immediately in place to steer this great ship with a purpose that some national sovereign funds only set out to do in the 21st century.

But from this point onwards, no one asked me for my views and this was the theme of the executive management to the day. I was asked to resign 18 years later by the executives who benefited from my concept.

It was all fine and dandy if there were no financial mishaps. The executive management reigned supreme over the Board to this day. This anomaly must now be rectified in the interests of the shareholders. This is not ethical and more.

The management was not “Malaysianised” until 1982.

By 1982, the best assets of Sime were sold in haste, e.g.

  1. the beverages firm Shaw Wallace of India, an Indian monopoly, with the valuable Assam frontier tea-estates. It is believed the son of the purchaser became a billionaire of India and owns the Kingfisher Airline.

  2. the two Orchard Towers, Singapore which are still standing even though the management urgently advised with photos that these would collapsed any moment and had to be sold back to the contractor for S$23 Million quickly.

  3. the Amoy Canning land in Hong Kong, which Sime tried to auction off but failed due to the fact that only the Hong Kong Government auction-off lands to balance its books. Eventually, a joint venture was formed with a member of the property syndicate operating there. This property became the MRT terminus!

And only the 200,000 acres of plantation remained. Lastly, Wisma Sime Darby does not belong to Sime because the company had no money at its completion in early 1980s as the Board was told.

In 1981, a foreign business paper reported that I was instrumental in helping in the sale of Benta Berhad to a well-known gentleman. Unfortunately, I took legal steps too late to clear my name. The famous Singaporean lady lawyer told me that I was a non-starter.

In 1982, as a Director of Consolidated Plantations Berhad I proposed that Sime should enter the China palm oil market. But only a small palm oil refinery was established at Port Said, Egypt.

In fact, in 1972, at another institution, I was urging my colleagues to take note that eventually, palm oil would overtake petroleum in the years ahead for Malaysia. By the early 1990s, all the vital port facilities in China were controlled by other Malaysian palm oil producers but not Sime. We went west instead of east. And sometimes, Sime’s physical stock of palm oil was sold to traders who were caught short.

In 1990, I heard in the market place and from friends who gave me a quizzical look that the well-known gentleman who purchased Benta in 1982, acquired a parcel of plantation land from Consolidated Plantations known as Bukit Berutong for RM4 million.

I asked the executives in charge why this sale was not presented to the Board for approval and was told that since the sale was so minuscule, less than 2 per cent of the total assets of the Company, there was no necessity to do so. From the gentleman, this property was warehoused in a public-listed company and finally sold at the top price of RM 88 Million.

Ironically, the Edge exposé of Sime dated May 17, 2010 also carried the story of the disgraceful state of affairs at Bukit Berutong. I also asked the executives why the valuable property was not sold to Sime-UEP. There was no answer.

In 1992, I was requested to sign a Board resolution authorising the purchase of an oil palm estate in Sabah which no one wanted for many years, for a sum of RM32 million. This money was used to purchase the Sabah Shipyard for RM 22 Million.

I refused to sign because as I was knowledgeable about the plantation industry and was aware that this plantation was hawked around for much less for many years previously. I was asked to resign the following day by the executives. In 1974, the late Tun Abdul Razak and Tengku Razaleigh Hamzah supported me, not Tun Tan Siew Sin who had died in 1989.

Thereafter, the Sandestin Golf Resort, Florida was purchased for US$72 million and it was reported in the press that the purpose was to train Malaysians to manage hotels even though the Mara college was already founded in the 1960s.

After the crash of 1997, Sime announced that the resort was sold for the same sum in ringgit, arising from a depreciated ringgit. The loss in US dollars was not announced.

A bankrupt British refrigerator company was purchased and an attempt was made to revive it in the Philippines. I believe it was written off together with an investment in Mindanao.

And then came the cataclysmic events of 1996.In the early 1990s, I travelled across the Atlantic by Serendipity Air and sat next to a German gentleman who claimed to be the head honcho of the family business of Hitler’s chief spy. I asked him why he did not travel by Lufthansa. He told me that for every US $100,000 he spent with this airline, he got a kick-back of US $30,000. His comment struck a bell in my mind as I noticed that someone was always encouraging the top executives to fly by Serendipity Air.

And Sime through its benevolence followed the executives of the travel division overseas where it has become a favourite watering place for privileged Malaysians connected with Sime. I heard they are doing great things via  Hong Kong and other parts of Australia without fanfare. It is a small world!

Sime Darby was unfortunately caught by the historical circumstances which surrounded its early promise at the beginning. From November 1976, to the present, its leadership was provided by the executive management which enjoyed its magnificent perks.

It takes a company to develop its own culture over a period of at least 10 years. Sometimes, this did not succeed, as in Sime. Apart from its beautiful advertisements, Sime’s real core business is in its plantations with attempts at financial engineering from one company to another to create profits.

Thus, Consolidated Plantations was hollowed out and had to be sold as a shell for whatever the reason! Any analysis of Sime will show it did not do anything since 1976 but was embroiled in scandals of seismic proportions after 1992!

The real substantial shareholders had no say. Because of this, once anything goes wrong in Sime, it goes very wrong. It pays to have a look at divisions where it is difficult to control usage, buying and selling or overseas.

The travel business is one of the most difficult to manage and control because it is a cash business from which Sime should keep clear and has no reason to sully its reputation.

The real purpose and the contribution Sime could make to the corporate life of Malaysia were that it could have acquired worthwhile international companies overseas during the 1970s and 1980s. It was alleged that 10 per cent of Harrisons Crosfield was available for Sime to control this conglomerate world-wide, which would have provided valuable expertise in engineering and other fields for training and transfer.

But somehow, we ended up owning the Golden Chersonese estates in Kelantan for a similar price. The lucky person who was involved, retired to the Scottish Highlands to shoot pheasants.

In my wildest dreams, I did not expect Sime to undertake directly such stupendous engineering works and before this, owned a commercial bank which went bankrupt. As a born optimist, I say Sime Darby is still the valuable company which the late Tun Abdul Razak and Tengku Razaleigh envisioned it to be — a major flag bearer of Malaysia overseas.

It must undertake to do the right business tasks with the right business personnel, i.e. round pegs for round holes, square pegs for square holes.

The business focus of the company has to be reviewed in line with the socio-economic environment at its base and its colourful historical past, notwithstanding the vital and living world in which we do business to make money.

To take a quantum step in catching up, Sime has to co-operate with others or own specialist companies without losing sight it has to contribute to the up-lift of all Malaysians in terms of transfer of knowledge, jobs and a reasonable return to its shareholders in a businesslike manner with transparency.

It definitely should not compete with local business entities as far as possible, e.g. property development, motorcars, travel, vegetable gardens, etc. This was not my vision at all times from 1972.

Sime has better businesses to do overseas.. And greenfield projects should be avoided because many shareholders are Trusts. Decisions should not even reach the risk management stage as information is readily available in today’s world.

By this normal approach, Sime Darby will be recognised world-wide unlike now, a bull-frog in a small pond which only has a feel-good feeling by its wonderful advertisements expounding maybe non-existent overseas businesses which should all be closed down!

In passing, the chief executive of another conglomerate rang me up and said, “Doc, I think we should buy a yacht to entertain our principals.” I replied, “Sorry, Tommy, I am not into yachts for self-entertainment. But if the other Directors agree, I have no objections.” I did not hear from him again.

Not too long afterwards, I was standing by the Star Ferry, Hong Kong, one winter in the early 1990s. A huge yacht berthed beside me. Two young expatriate families disembarked with an Indian butler and matron in attendance.

At the aft, below a huge Hong Kong flag, I saw the words “Sime Darby”. I did not know Sime had a yacht. Later, I asked the management why we had a yacht in Hong Kong, and I was told this was one way to make the expatriate staff happy!

The question logically arose in my mind: What did the management do to make the Directors and the shareholders happy?

In the 1980s, it was alleged that the governor of Hainan Island and two local Hong Kong employees went to jail for illegal business activities.

It is never too late for Sime Darby to do serious business to support, contribute and work within the policies of our Prime Minister Datuk Seri Najib Razak and his 1 Malaysia Concept for the good of the country and the company’s shareholders. It can be done if Sime is focused on its responsibilities to the Nation and its shareholders.

* Dr Chan Chin Cheung was a director with Sime Darby between 1974 and 1992. He was a respected Cambridge educated professional doctor who gave up his practice to concentrate on his family  plantation business. He also served on the Board of Bank Negara Malaysia in the 1960s when Tun Ismail bin Mohamed Ali was the first Malaysian Governor. I knew Dr. Chan in my early days at Bank Negara and subsequently at Sime Darby (1978-1991).  He was a model Board Director whose business acumen and integrity I admired very much.–Din Merican

22 thoughts on “The True Story of Sime Darby by a Former Board Director

  1. Bakun Project got screwed and is still screwing the country . PKFZ screwed and is still screwing the country. Our submarines cant dive , but they too can screw the country and they still are screwing the country. And for this the government paid rm540 million in commissions. And the list goes on and on and on and now we have this new scandal from Sime Darby .

    And here DR.Chan Chin Cheung , relates what looks like Sime’s history of screw ups. And this history seems similar to our country’s history of screw ups. Alas , it looks like we must thank Sabah and Sarawak for joining us in Malaysia . Without their natural wealth , i dont this country could have remained afloat.

  2. You guys forgot to mention how Dr.Mahathir is responsible in bringing Sime Darby to Malaysia.Credit should be given Dr. Mahathir for his foresight.
    __________
    Ilham,

    Sime Darby came home during Tun Hussein’s time (1979). I was there when we were in the process of changing its domicle from London (as Sime Darby Holdings Limited) to Kuala Lumpur (Sime Darby Berhad). If there is any credit to be given for the takeover of British Plantations and London Tin (later to become Malaysia Mining Corporation), it must go to Tun Abdul Razak and Tengku Razaleigh Hamzah(as Head of Pernas Securities and Tradewinds). Because Tun Razak died suddenly, Tun Hussein was the executor of Tun Razak’s strategic vision. Certainly not Mahathir Mohamad.–Din Merican

  3. How the heck did Sime Darby lasted so long if it is really a screwed-up company? Lots of public fund injection?

  4. In rapidly changing global environment, size can be a bane to a corporation. It is like turning the direction of an oil tanker. There is so much inertia, rigidity and informational blockages that strategic course correction is difficult and hazardous.

    On hindsight, the merger of the plantation companies under Sime Darby was not a very good move, although it made financial sense. It would have been more sense to merge them, and then float the Plantations Division as Consolidated Plantations Berhad (there was a Consplant before) on the Kuala Lumpur Stock Exchange. Maybe, it is time to downsize Sime Darby to achieve focus and operational flexibility.–Din Merican

  5. Spare the rod and spoil the child. Worldwide now is the season for bailout of companies that are too big to fail. Sovereign funding has and continues to distort world markets. Governments have taken a hubiristic approach to investments and driving out private equity. We all know what happens to your neighbout who lives beyond his means. I am deeply concerned that mnay countries that are resource rich are not far away form Sovereign Default.

  6. After so many years of Mahathirs disengagement as prime minister , his signature does not seem to want to go away . Name a scandal and everyone sees his signature in the background.

    Hmm .. maybe this is the legacy he was trying to protect .

  7. , it looks like we must thank Sabah and Sarawak for joining us in Malaysia . Without their natural wealth , i dont think country could have remained afloat.- Kanan Kutty

    Yeah! Abg Din bear this in mind each time you choose to speak highly of your Malayan leaders lest you forget , which of your lucky stars to pay tribute to!!

  8. Mr Merican,

    It’s really sad yeah to see Sime Darby going this way. You have said your piece. Hope many more like Dr Chan who are all involved in SD once, will come out and tell all. My neighbor who was a former manager of one of Sime Darby’s plantations is angry and sad about this too.

    And I am deeply worried that my kid and 100s others who are now overseas on a Sime Darby scholarship will get a job if it collapsed? Or will they be send home for not enough funds to continue sponsoring them?
    _________
    Not to worry, sayang bangsa. Sime has the resources to honour its commitment to its employees and scholars and its stakeholders. –din merican

  9. I would never hit a child although I do know several adults whose mental capacity is still at puberty so they are fair game

    Nevertheless I do approve of corporal punishment and believe these should be handed out to thieves and almost all Malaysian politicians. Hang on, they are one and the same. Its always been quite bewildering that the courts are only to happy to flog the poor guy who is trying to get his leg over behind a bush or in a seedy motel or the lass who simply wants a beer to go with her fag. Yet, the real screwing of Malaysia is being carried out blatantly.

    Hello, what’s Sayang doing sending her sprog overseas??? Isnt Malaysian education the best for you. Obviously a little blinded by the fact that Sime has been UMNO funded these last two decades, so next time your neighbour cries over your washing line, dont tell him that Sime is still being screwed, and whatever little money is left is going to a good cause of sending your kid is having a nice UMNO sponsored 2 year holiday package. If and when it ends, im sure there will lots of photos to show mummy.

    I know where I’d be shoving that ‘rod’ now.

  10. Whoa Maureen. Didn’t know you were as capable as Frank in dishing out insults.
    That is below the belt.
    My sprog won it solely on academic and exra-curricular achievements from elementary school.
    Wasn’t just a student who scored As during exam years and a kaki bangku.
    Not because it was Umno funded. Don’t know much about Sime Darby untilI I read it because of the current debacle.
    He had to sit for two rounds of interviews and tests and applied to varsities solely on his own.
    Please don’t have the patronising attititude that Malays are not qualified to earn prized scholarships aside from JPA and MARA.
    You said : “Isn’t Malaysian education the best for you?”
    What exactly is the point?
    That I am a Malay, and an Umno supporter and only fit to study locally. Of course I cant afford to send my kids overseas if not for scholarship.
    I may not go to Universty but I know quality. I ensure that my kids get the best through their own intellect
    And mind you, Malays don’t go runing to UMNO if they fail to get JPA scholarships.
    We dont demand an appeal which could deprive other poorer and more able students to get scholarships.
    That is what MCA is doing for the last three years.
    If we dont get it, we just study locally. If our parents can’t afford to send us to college, we go to work!
    It is ironic you vote for DAP but for scholarships appeal you run to MCA. Kiasu at its height!

    My neighbor is a decent Indian and loving father and grand-father who devoted all his working life in Sime Darby. He rose through the ranks. What is it you are implying?
    Your racism is obnoxious.
    Are you staying in Jinjang and Kepong?
    Go out and meet with other people.

  11. I wasnt insulting, I was merely stating facts. If you ‘know quality’, then you are implying there isnt any in Malaysia, vis-a-vis sending your kid abroad, to learn from the Mat Sallehs. Being an UMNO supporter, shouldnt you support your local UMNO universities?

    Your kid won the scholarship for what he did in ELEMENTARY SCHOOL? What a joke, UMNO couldnt wait till he at least finished his high school and perhaps pre-university? He must have been hot-housed in Kindergarden.

    I used to lecture at Durham University, so I know exactly the current calibre of students coming out of Malaysia, particularly those on UMNO funded scholarships

    Jingang and Kepong, is that where racists live. What makes you think Im Chinese and not Malay.

  12. Yeah right. Malays are only qualified to get Umno-funded scholarships.
    We forgot that Cchinese are the superior race. They are rich, smart, intelligent.
    But how come Chinese are clamorig for JPA scholarships. Malays are not hard-up for it.
    Smart rich Malays even sent kids to Cambridge or Oxford on their own money.
    They want to give to the rich Chinese who wants it badly. Take the scholarships but dont come home to serve.

    Din, its shameful for Sime which you have served, to be giving scholarships to stupid Malays.
    So is Bank Negara, Petronas, Jhazanah, YTL, Maxis and others.

    Maureen
    Get out of your Chinese reservation land or kampug baru China for your own good.

  13. Dear Guys,
    No matter how bad you think about the British’s colonization, however, they left us with few good things i.e. well good structure companies- Sime Darby, Guthrie, Golden Hope, Boustead, Dunlop etc for doing business globally.

    Unfortunately, due lack of integrity, dignity and greeds, they being destroyed for few. I prayed that we don’t back steps …. just our friends in Africa. May Allah bless Malaysia

  14. Dr Mubarak Chan is a crony of the old adminstration, and corrupted to the core himself. He incidentally is being sued by many debtors and himself is going bankrupt.

    His article is rife with inaccuracies.

  15. Dr Mubarak Chan incidentally is being sued by many debtors and himself is going bankrupt.

    His article is rife with inaccuracies.

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