Bernas' major moves


LAST Wednesday, Bernas announced the redesignation of Datuk Mohd Ibrahim Mohd Nor from executive vice-chairman to non-executive director. This is not the first time he has changed roles in the company. At different times since 1996, Ibrahim, 44, has also been managing director, group managing director and deputy chairman. 

Through it all, he has been widely recognised as the company's driving force.  

Ibrahim was the point man as Bernas progressed from the early days as the privatised custodian of the local paddy and rice industry, to listing on the Kuala Lumpur Stock Exchange in 1997. 

The next phase saw the company making acquisitions and entering into partnerships to expand its operations in the rice business and to diversify into other areas of the food industry. 

In recent years, however, it has become clear that Ibrahim was ready for ventures beyond Bernas. In 2001, he came up with a plan to inject funds into the ailing Sistem Televisyen Malaysia Bhd (TV3) and moved there to be its executive vice-chairman. 

Through his company, Simpletech Sdn Bhd, he would have ended up as TV3's largest shareholder if the proposal had taken off. But it did not and Ibrahim resigned from TV3 in August 2001. 

There had been rumours then that he would leave Bernas despite the collapse of the deal. However, he remained on the Bernas board in an advisory capacity. What was more surprising was his redesignation to executive vice-chairman last October. 

In an interview with BizWeek, Ibrahim confirms that it has long been his intention to reduce his involvement in Bernas. He says he was reluctant to accept the executive vice-chairman position because he wanted to take a break to attend to personal matters. 

But he was persuaded to change his mind and he helped reorganise the company's top management structure. It now has four senior vice-presidents in charge of different areas of operations, and they report to a three-man executive committee comprising board members. 

With the latest redesignation and the change in control of Bernas, it appears that Ibrahim is set to finally make an exit. He dismisses any possibility of a comeback. “I think I've done the best I could. The team is ready to take Bernas to the next level,” he says. 

He reveals little about what he plans to do next but he shares his thoughts on how Bernas has evolved and on the challenges it faces. Excerpts: 

 

BizWeek : It is generally perceived that Bernas has not done as well as it should have 

Ibrahim: There is this misperception that we haven't done enough. But my question is, what is enough? To some extent, it's subjective. Let's first understand what Bernas is all about. A lot of people don't understand whom we have to answer to. First and foremost, there are the consumers and farmers. There are also our shareholders and employees. And then there are the layers in the rice industry – wholesalers, millers, brokers, shops and the government. Everybody has his own views and interests. And we have always been the guy who has to strike the balance. 

 

What is the most significant thing that Bernas has done over the years? 

We linked up the rice supply chain. 

To me, it's one of our most difficult achievements. Many people still don't understand why this is necessary. Is it purely a corporate move or greed? No, it was a defensive move in view of where the world was heading. We are convinced that linking the chain can only lead to economic benefits and efficiency. 

You get a lot of vagaries in life. There can be sudden variations in weather, currencies, prices, and supply and demand. How do we deal with these so that prices and supply to the ground do not vary in the same way? That's one of our key roles – to ensure price and supply stability. 

When you link the supply chain, you can absorb the shock in a more spread manner. We proved this in the economic turmoil in 1997. When the currencies shifted, the whole supply chain was severely tested and we survived it. Not many people did. 

Back then, the players in other commodities such as flour and sugar, quickly went to the government for help. We felt we could sustain on our own. We took a long time to adjust the prices and when we did, we did not adjust across the board. We adjusted higher for the higher grades of rice and lower on the lower grades. 

Can you imagine the traders, on their own, absorbing the losses when the currencies shifted? Could they have told customers that they will tahan for nine months, which was what we did? 

Another key piece of evidence is in our improved ability to play certain inherent roles, such as in stockpiling. Back in the Lembaga Padi and Beras Negara days, our National Rice Stockpile was what there was in the warehouse. This wasn't really representative of the country's stockpile because it ought to include rice at the shops and with the wholesalers. 

But when you link the chain, you wield greater influence over the actual stockpile and it becomes more economical. You don't have a lumpy layer of stocks because the rice is spread over the entire chain. We even have stocks in Thailand.  

 

Can you elaborate on the Bernas-led consolidation in the local rice industry? 

Some people have questioned why Bernas went into wholesaling and branding. Well, there is no choice. The pressure on rice as protected goods becomes greater as the economy opens up. We consolidated without government prodding. 

You link the chain and shorten it; that's what efficiency is all about. You don't care about race or size. 

In any consolidation and in any move towards efficiency, more often than not, there would be some displacement. It’s easier said than done. But we cannot run away from the need to achieve economies of scale. What we've tried to do is to make the industry and affected parties understand this. 

 

Rice smuggling is clearly a major issue and `stumbling block' for Bernas. Can you comment? 

What we are going through now are the pressures of smuggling. The model we have can tolerate maybe five cent of smuggling because it's historical. Anything beyond that level makes things very difficult for us. These guys (the smugglers) don't care. Here we are building market share and consolidating, and they come in – they don't pay taxes and they don't answer to anybody – and push the prices down. And we have farmers, our partners in the supply chain and other players making noise. 

It's not fair to say the government has done nothing at all. How much can you do to secure the borders? You can't stop smuggling totally but you can control it. You need a concerted effort to push them back and this requires an economic solution. 

 

Will the new shareholders be able to address these problems? 

The management is on the ball. They know what they can do and cannot do. Whoever comes in will be updated very quickly on the key issues and what has to be done. The more the new owners know about rice and the bigger their network, the easier it is for them. 

To be fair, Bernas could do with a strong shareholder. The previous shareholders were focused on Bernas. They were not really into other activities. If the new owners have a rich network of resources, and knowledge and experience in the rice trade, it will be better for all. 

The strength of Bernas is its teamwork. The weakness of Bernas is its teamwork. This is the key. If you don't understand this, it can be a problem. No one person can be correct because there are many interested parties. The challenge is to achieve balance. 

We've done a lot, but there's a lot more to do, believe me. The future is dynamic and the board is aware of this. You can have a five-year plan but it has to keep pace with the changes. 

 

How has it been? What have you learnt in all these years at Bernas? 

It’s my most educational experience. I'm wiser now. I've learnt a lot and I've learnt the hard way. It was no joke. When I joined, I was 36 years old. I believe that it all boils down to the heart. I couldn't do the mad work and get the cooperation of the various players if I did not have the heart. It's not just about the mind. You can talk all you want about economic theories but the others in the industry want to know if you're a gentleman. 

I have some feelings about leaving. I'd be lying if I said I didn't. It's like marriage. It's about teamwork. Nothing would make me sadder than if the team is broken up. 

 

So, what sort of plans do you have for Simpletech going forward? It would be like you to have one already ... 

(laughs) We'll stick to simple things. 

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