Malaysia-China Relations: Guanxi Economics, Daim Zainuddin and Robert Kuok


August 20, 2018

Malaysia-China Relations: Guanxi Economics, Daim Zainuddin and Robert Kuok

by Bob Teoh@www.malaysiakini.com

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COMMENT | 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.

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The others are former Bank Negara Governor Zeti Akhtar Aziz and former Petronas chairperson Hassan Marican, who both were previously removed by Najib, as well as noted  Yale and Harvard educated 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 (photo below), 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.

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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 state 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. 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.

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Fast Talking and indiscreet  Lim Guan Eng was dropped out Dr. Mahathir Mohamad’s delegation to China probably because he “talks too much and often forgets that he’s no more an opposition leader but part of Mahathir’s new government”(Bob Teoh). Traditionally, Malaysia’s Finance Ministers do not talk to the media because  their statements are market sensitive. But not Mr. Lim

 

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

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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 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 (photo below with Prime Minister Dr. Mahathir Mohamad), who contributed RMB200 million.

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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 specialty 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.

Related: New Silk Road: Too big to ignore but pitfalls aplenty


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

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

2 thoughts on “Malaysia-China Relations: Guanxi Economics, Daim Zainuddin and Robert Kuok

  1. I don’t know what the author is trying to say. Guanxi in Chinese is nothing more than what we call connections in the US. Guanxi may open the door for you to meet the right person(s) but not necessary you’ll achieve what you intended. There is also a Chinese saying: “親兄弟,明算帳,” literary meaning “even with your own brother, keep your accounts clear.” I find this no difference from an Average Joe in America.

    When it comes to business, business is business. In business the Chinese have a saying: “漫天開價,坐地還钱,” literary meaning “I make you an offer, you return a bargain.” If both agree to it, the deal is done. Even in the old days in the Western world, all you needed was a gentlemen handshake, no such thing as a contract. Of course we have contract today. And a contract is a contract, unless one points a gun to the other’s head to sign it. If the author implies this guanxi stuff may enable Mahathir to get his ways with China on his suspension of the ECRL thing, he is certainly out of his mind.

    They say a picture worth a thousand words. Take a look at the following picture. Judging from the facial expression of Mahathir, he did not get much from China other than selling some durians. He has had a cold reception from the Chinese.

    https://scontent-sjc3-1.xx.fbcdn.net/v/t1.15752-0/p280x280/39700649_656213594753468_2854796098009038848_n.png?_nc_cat=0&oh=53dcef244035c25786c8ee752e38eab4&oe=5BED0414

    It’s customary that a head of state of a country to receive a visiting head of state on the first or second day. Xi Jinping did not meet with Mahathir until the last day of his visit. Of course this is because Mahathir suspended the ECRL project prior to coming to China hoping to get a “better deal”. What’s worse, he went to Japan first on August 6, trying to play the Japan card against China. Obviously, he didn’t get what he wanted from the Japanese, too. The old dog has no new trick, thinking this is still the 1980s when he could play the Japan card against China. Japan today is not the Japan of 1980s and China today is not the China of yesteryears.

    Of course, Mahathir can suspend the ECRL project anytime he wants. All he has to do is to pay the fine and reimburse all the costs the Chinese have already invested into the project, accordingly to the contract. After all the hype, during his press conference in China, nothing was said about the current projects that Malaysia has suspended. Will Malaysia fulfill its contractual obligations or what?! Instead I heard Mahathir playing the sympathy card, pleading: “And I hope that China – and I believe that China – will look sympathetically towards the problems that we have to resolve and perhaps help us in resolving some of our internal fiscal problems.”

    But China cannot set a precedence for Mahathir, for fear that other countries that have contracts with China may follow suit to seek for “better deal.” Mahathir has pulled a page from Donald Trump, but Malaysia is no USA. Malaysia must pay the fine and make the reimbursement. But how those payments would be made could be arranged through negotiation, for China needs Malaysia for its geopolitical strategic location.

    And I suspect Mahathir would back-pedal on the ECRL, when he made a sudden change to his itinerary, testing out the Chinese high speed rail by catching it from Hangzhou to Shanghai after meeting with Alibaba and Geely, instead of flying straight to Beijing. Most importantly, he knows China has not over-charged Malaysia on the ECRL project. The HS2 project in the UK is half as long but costs twice as much. It’s reasonable if he requests the project to employ more Malaysian workers. Keeping this project would encourage China to be more willing to invest more to help out the Malaysian struggling economy.

    You scratch my back and I scratch yours, as the Americans say. Or, as I’ve read from this blog N numbers of time – lu tolong gua, gua tolong lu.

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