A mood of optimism prevails


  • Business
  • Thursday, 25 Dec 2003

On this Christmas Day, our CEO Outlook features three entrepreneurs who have reasons for good cheer. 

They are Tan Sri Chua Hock Chin of Road Builder Bhd, Datin Irene Gan of Reliance Pacific Bhd, and Datuk Liu Thim Soon of Dancom Group. 

Formerly an engineer with the JKR, Chua was one of the founders of Road Builder. Within 10 years, he has built it into a much respected infrastructure group, through his entrepreneurship and professionalism. 

The group now has four thriving core businesses: tolls, port management, construction, and properties. 

Gan, together with husband, Datuk Gan Eng Kwong (chairman), has been the driving force behind the success of Reliance Pacific, Malaysia’s biggest tourist operator with a strong hotel and leisure division. 

The group has made a very quick turnaround from the SARS crisis, and is looking forward to a great year ahead, with all its divisions projecting strong growth. 

Two innovative products developed in recent years are its network of franchisee offices and its online travel portal. 

Liu went into the telecommunications business after he got tired of working for a Japanese firm, which required him to travel six months in a year. 

It was back in 1985 when the government was opening up the telecommunications industry. His Dancall mobile phones were hulks by today’s standards, but in those days, they were only for the VVIPs, coming with a price tag of RM15,000 per unit. 

Even today, he is known as “Dancall Liu” in the industry. 

Dancom is now a diversified telecommunications and IT solutions supplier with a workforce of 1,400. In Pakistan, 25,000 payphones use equipment supplied by Dancom. 


 

Tan Sri Chua Hock Chin Executive vice-chairman Road Builder (M) Holdings Bhd 

What do you see are the challenges and prospects for Malaysia's economy in 2004? 

One of the main challenges for Malaysia's economy is to continue making the necessary structural adjustments in the face of a rapidly globalising world. In this respect, policy-makers must take stock of the nation’s strengths and weaknesses, and proactively seek out and establish our own niche within the region. 

Raising our competitiveness by improving productivity levels and moving up the value chain will help the country move forward. 

One way to achieve this is to examine our present education system and implement measures to ensure that the relevant skills, knowledge and right mindset are instilled in our younger generation so that they can take on the challenges of the future. 

Malaysia's economy appears set to improve further in 2004 compared with last year. Supported by a strengthening global economy, a return of investor confidence and a highly pro-business government, the ingredients are all in place for possibly a near 6% gross domestic product (GDP) expansion next year. 

What are the prospects for your sector/industry next year? 

In tandem with a stronger economy, all our core divisions within the group are also expected to benefit accordingly. The construction division will position itself to participate in a broad range of infrastructure projects earmarked to come onstream. 

The properties division is already seeing a strong rebound in sales and this will likely continue into 2004. Rising disposable incomes, low interest rates, improved consumer confidence, and the several incentives in place for property buyers should underpin strong demand. Our two recurring income divisions, toll roads and ports, should also benefit from rising consumer spending and new investments respectively. 

The government has outlined numerous incentives for the construction/housing industry during the past two/three years. Have these incentives given a boost to your company’s operations and revenue? 

Most definitely. And we are thankful to the government for assisting the industry during the difficult times. The stimulus package in May this year was one of the key factors leading to the present recovery in the property sector. Our property division is seeing quite strong growth since the implementation of these measures.  

What will be the focus of your company/group in 2004? 

Among our key priorities for 2004 is to ensure the timely completion of our newest toll road, the New Pantai Highway. Designed to take the burden off the highly congested Federal Highway, we have to ensure that the NPH lives up to the expectations of motorists, and provides them all the benefits of a safe, smooth and speedy journey. 

Another important focus for us is to attract new investments to Kuantan and Kemaman, where our ports are located. In order to achieve this, we will continue to market Malaysia to foreign investors, particularly those involved in the oil and gas business. 

We firmly believe that the country is blessed with abundant resources and has the necessary infrastructure and government commitment to attract and protect investors’ interests. With aggressive marketing and the right approach, Malaysia can continue to attract new investments and help promote growth. 

Do you expect your company/group to do better or worse in 2004, compared with 2003? Why? 

We are optimistic that 2004 will be a better year. A more vibrant economy should result in stronger consumer spending, which should impact on our properties and toll divisions favourably. 

We are also hopeful of a pick-up in construction job flow in 2004 compared with 2003. In addition, on the back of a strengthening global economy, and in particular rising inter-Asian trade, we also foresee stronger activities at our port division.  

Is China an important factor in the management of your operations? 

China is an important factor on a macro basis insofar as it can significantly impact on our country’s competitive position and new investment flows. However, we do not have any operations or investments in China, and hence are not directly affected by it. 

On the positive side, though, a strong Chinese economy could positively impact on our port division as the port is ideally located to handle trade between South Asia and China.  

Datuk Seri Abdullah Ahmad Badawi has taken over as Malaysia’s fifth Prime Minister. In your view, what should be his priorities for the country and the industry you are in? 

Our new Prime Minister’s focus so far should go a long way in improving service and efficiency levels and, hence, should eventually make the country more competitive. This, in turn, will sharpen Malaysia’s competitive edge, and increased investments will enable the private sector to play a bigger role in driving economic growth. 

As a business group, we depend on a stable country and a resilient economy, among other things. We hope the Prime Minister will continue to focus on achieving greater economic resilience, as well as maintaining the long-term stability of the nation. 

Datin Irene Gan Chief executive officer Reliance Pacific Bhd 

Challenges and prospects for Malaysia's economy in 2004. 

The global economy certainly appears much brighter in 2004. The United States, Europe and Japan are on track for economic recovery and growth. The good news is that the roaring economic growth in the United States and Europe is not fanning inflation. The job market is also improving as evidenced by reduced unemployment claims. 

With the rosy forecast, Malaysia’s external demand is expected to rise. Coupled with strong commodity prices, brighter employment prospects and stronger equity market performance, prospects for Malaysia in 2004 look brighter. 

However, Malaysia’s biggest challenge is to sustain the momentum of economic growth, particularly in managing the downside risks of terrorism and the remotely possible resurgence of SARS. 

So far, the government has proved its ability to overcome the unforeseen external shocks during the 1997 financial crisis and also the SARS crisis. It has put the economy back on track within a short period of time. However, we should remain vigilant and constantly improve efficiencies to mitigate against any of such shocks. 

How badly was your company affected by SARS and the Iraq war. And has it recovered from these events? 

SARS, in particular, has had devastating effect on the global travel, tourism and hotel industries. None, including the airlines, hotels, travel operators and other tourism-related businesses, was spared. 

We were very fortunate that the then Deputy Prime Minister Datuk Seri Abdullah Badawi and the National Economic Action Council (NEAC) acted swiftly. In consultation with leaders from the various industries, a stimulus packaged was quickly put in place. This has definitely helped cushion the impact of SARS and spurred a quick recovery. 

Following the SARS outbreak, the care divisions, namely travel and hotel management, responded quickly to reduce expenditure, conserve cash reserves and stimulate demand. A new highly scalable low-cost business model was implemented. Operating expenditure was reduced to achieve a high degree of productivity and competitiveness. 

We also adopted demand stimulation measures by focusing on regional and domestic tourism by introducing creative products with high-perceived values. 

The quick turnaround was remarkable. Within a short period of about three months, there was a strong surge in demand for our travel, tourism and hotel services. While our first-quarter results (April to June) were devastating, revenue growth for the second quarter was outstanding. The travel division’s revenue grew by an impressive 89% over the first quarter. 

The hotel division, which was less affected, saw its revenue grow 19% in the second quarter. 

What will be the focus of your company/group in 2004? 

The group will continue with the proven low-cost business model, enhanced productivity and profitability. This model has taken us through very rough times and we are not about to abandon it, even as market conditions strengthen. 

The model has proved viable in an industry that is unpredictable, with high levels of risks and uncertainties that are incalculable. However, in moving forward we are undeterred to sustain the model's initial successes and shall enhance it further by focusing on four key areas. 

First, we will develop and build a new talent pool for the future with younger and more dynamic human resources who are in-synch with the new knowledge-based economy. 

Second, we will be optimising the use of digital platform to distribute our products and services, both B2B and B2C. As a result of available opportunities in Malaysia and globally, our online distribution technology, RT.Com, is able to tap them in the most efficient and effective manner. 

The third key focus is to create demand from new markets and stimulating demand from traditional markets. 

And finally, we will continue to enhance operational efficiency and effectiveness. 

Do you expect your company/group to do better or worse in 2004, compared with 2003? 

On the back of the quick turnaround and the brighter economic outlook for 2004, coupled with the fact that our group has successfully implemented a new business model, we expect better results next year. We are upbeat about the next financial year because medium-term plans that have been implemented are already showing positive results. 

Our priority for the travel division is to widen our distribution through RT.Com’s cutting-edge technology and also expand Reliance franchisees which have grown to a sizeable number in just two years. 

Our hotel division’s 21 properties, to which we provide management services, give us economies of scale. The division’s profits will improve in 2004 through yield improvement strategies, lower operating costs, adding and improving facilities, and enhancing value without sacrificing quality and service. 

Our resort development division has also soft launched a new project in the highly successful Admiral Cove in Port Dickson. Known as Marina View Waterfront Service Suites, the take-up rate so far has been very encouraging and is expected to take off when it is formally launched in early 2004. 

Is China an important factor in the management of your operations? 

We have always viewed China as an economic powerhouse. In the travel and tourism industry, China is about the fastest growing in the world. 

According to the World Tourism Organisation (WTO), Chinese citizens spent US$15.4bil in 2002, registering a growth of 10.7% over 2001. In terms of international visitor arrivals, China ranks fifth in the world. In 2002, it received 36.8 million visitors, a growth of 11% over 2001. Tourism receipts totalled US$20.4bil in 2002 or a growth of 14.6% over 2001. 

Certainly China is an important factor in our business. Having established a network of offices in China since 2000, we have been successful in a few areas, such as in MICE (meetings, incentives, conventions and exhibitions), which is high yielding and suits our company’s profile of travel logistics planner. 

Our focus in China is on expanding our products and services, exporting our know-how in digital travel retail distribution, and Malaysia’s first home-grown travel franchise system. 

What should be the priorities of the new Prime MInister for the country and the industry you are in? 

Since taking over as Prime Minister, Datuk Seri Abdullah Ahmad Badawi has been focusing on the right priorities. His focus on improving the delivery systems is to be lauded. Efficient delivery systems will not only reduce the cost of doing business and increase productivity, but will also make Malaysia more competitive on the world stage. 

By focusing on the software and people of the government machinery, the PM has set his priorities right and this will benefit the nation. 

Tourism is an important industry, being the second largest foreign exchange earner for the country. As such, the government must recognise sustainability as the core of all policy-making and development planning. 

To achieve sustainable tourism growth which is in keeping with our national culture, character and heritage, priority should be placed in a few areas: 

·Consistently investing in developing and training the appropriate human capital for the industry; 

·Promoting product diversification and spreading demand in Malaysia and the world; 

·Allocating sufficient resources and providing incentives to convert interest into visitor arrivals, both domestically and internationally; 

·Designing and implementing an environmentally sustainable development strategy for the tourism industry, encompassing conservation of natural and cultural heritage and environment-friendly development of tourism infrastructure; and 

·Malaysia must continue to build in health/safety and security provisions into our national tourism strategies in the light of possible terrorism threats and globe outbreaks of illnesses like SARS. 

DATUK LIU THIM SOON Group managing director Dancom Communications 

Challenges and prospects for Malaysia's economy in 2004. 

The recovering US economy is still plagued by an ever-growing trade and budget deficits. Though the economies of Europe, Japan, China and India appear to show healthy growth, all these countries ultimately rely on the growth of the US economy and in particular its trade deficit. 

Overall, I would maintain a guarded optimism for 2004. 

Just how fast is the US economy recovering? The United States expects to grow at 3.9%, while its unemployment numbers are rising. The current belief is that the recovery is due to a “productivity boost”, i.e. production is up due to higher efficiency. 

The US is expected to rack up a current account deficit of more than US$550bil – an unprecedented amount. Interest rates are practically zero and have more upward than downward room. The US dollar has been sliding for most of the second quarter as a result of fears over the risks for the economy. 

Our neighbouring countries are steaming ahead. Those that impact us most include China, Thailand and the Philippines. We compete in trade and share of foreign direct investment. 

Prospects and challenges for the telecommunications/IT industry in the coming years. 

The domestic telecoms sector is coming out of its consolidation phase. We expect mobile subscriber growth to remain around 15% a year in 2004. Subscriber Arpus (average return per user) have held steady and the major players will have to be more innovative in their product offerings. 

In my view, the main stimulus for the sector comes from the introduction of new higher-valued services (broadband, on-demand services, etc.), which lead to integration and convergence, especially mobile technology. With this explosion of applications, there will be greater demand for security. Arpu should increase – and by quite a substantial amount. 

As for the telco/IT industry, new, innovative and cost-effective solutions will find their potential. As part of the consolidation phase, businesses will be looking for solutions to better control and safeguard their current systems, as with the advent of the Internet and e-commerce, intrusion can cripple any business, big and small. 

The new war is not about guns and bullets, but unauthorised access and viruses. The challenge will be in the area of profit margins, and the use of innovative techniques and skills will be the differential between profit and loss. 

Nevertheless, the future of the information and communications technology (ICT) industry is very definite. The advent of ICT will spur a knowledge revolution thanks to the speed and ease of transfer of information which is now possible. The application here is very wide, e.g. education, business and commerce, and medical. 

A secondary stimulus will be the increase in user penetration as the government makes efforts to close the digital divide. 

Technological changes have taken place by leaps and bounds, e.g. voice transport has changed from public switching to packet switching, data in now facilitated by the Internet, cellular has been transformed from 2G to 2.5G to 3G and beyond. 

The biggest challenges for the telecoms/IT industry in Malaysia will be how quickly it can induce the local population to embrace the new technologies that are constantly changing both the social and workplace landscape so that Malaysia will not be left behind when competing with other developing countries. 

The business prospects, on the other hand, are good as most companies see virtue in efficiency through new technology, but the price to pay will remain the bigger deterrent. 

Another challenge would be the making of substantial investments (such as in 3G) required in a field that is fast changing. Remember WAP (wireless application protocol)? The entry costs are high and lifecycles short. 

Overall, 2004 could be a year of consolidation. Businesses will have to find new ways of reducing costs and improving productivity. This will lead to better business focus and, hopefully, better results. 

Focus of your company/group in 2004. 

We remain focused on our core competencies in ICT (a generic term covering the convergence of computer and knowledge systems, broadcasting, telecommunications and data networks). 

The main focus for 2004 will be to increase productivity per employee so as to effectively compete in the marketplace while we also aim to constantly improve on our customer relationship. 

We will focus and invest in the area of outsourcing and services (both hardware and software). We aim to be a major player and will also focus on smart partnerships. We see opportunities in fraud management (as businesses want to safeguard their systems) and intrusion prevention (another complex problem) for the larger organisations. 

Do you expect your company/group to do better or worse in 2004, compared with 2003? 

I expect our results in 2004 will be similar or marginally better than 2003's. 

Dancom is continually evolving. We have been doing this for the past 20 years to get us to where we are today. Plans have already been put in place for the coming year. With this planning, we should be able to dictate the direction (and therefore the results) rather than let circumstances control us. 

Dancom has been recording healthy growth since the 1997 crisis and we expect to record positive performance in 2004. Our diversified businesses and our continuing exploration of new markets will carry us through. 

Is China an important factor in the management of your operations? 

I see the potential of China, both as a place to do business and a source of competitive products and services to support our other businesses. With this in mind, we have, in fact, established a presence in China with the setting up of a subsidiary there to explore the possibilities of Dancom representing its products in this region. 

What should be Datuk Seri Abdullah Ahmad Badawi's priorities? 

I am encouraged by the efforts of the Prime Minister to improve the civil service. This will enhance our international image and will further encourage investors to Malaysia. 

His priorities should be to: 

·Ensure continued political stability by steering Malaysia away from extremist tendencies and reinforcing the multi-ethnic and multi-religious state and society as provided for by the constitution; 

·Ensure that security aspects are well looked after. Besides dealing with the threat of terrorism, economic ties and interests should also be safeguarded; 

·Ensure that the public sector is more responsive to the needs of the private sector and the community at large; and 

·Ensure the continuation and enhancement of pro-business growth strategies, including deregulation and liberalisation. 

CEO Outlook 2004

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