WHILE fund managers shift in their views of a world swaying between recovery and recession, Prime Minister Datuk Seri Najib Razak declared last week that Malaysian companies should go global nonetheless, with Felda Global as the latest government-linked aspirant.
It will be the government-linked companies (GLCs) that must heed that call, while the destiny of companies in the private sector will be determined by their respective owners.
Generally, GLCs are positioned regionally, advised by Khazanah Nasional Bhd, a major shareholder in many of these companies.
Critics would say the timing could be wrong; mistakes were made but if the experience is not gathered, the companies will never learn how to expand overseas.
The domestic market is small and, as Najib put it, the country needs to expand the economic cake.
Some of the GLCs have invested heavily overseas and the next step is for management to execute the plans.
The American multinational corporations (MNCs) set the global model, with half their revenue or more, and most of the growth, derived from emerging markets.
If that seems not comparable, the GLCs of nearby Singapore have successfully developed into regional MNCs, such as CapitaLand and Singapore Telecommunications, and two of the world’s biggest oil rig builders, Keppel Corp and Sembcorp Marine. Their path into the region has been followed by many privately-controlled companies.
In Malaysia, one of the earliest to set up a business base overseas was Petroliam Nasional Bhd (Petronas), the national oil corporation. Successfully stepping overseas, Petronas obtained 42% of its revenue from its international operations last year.
It could even make a bid jointly with ExxonMobil Corp recently to develop an oil field in Iraq. While that bid was not successful, it showed Petronas’ stature that it could be picked as a partner by Exxon.
Many privately-controlled companies have also ventured overseas and they have shown there is a learning curve to go through, involving a high cost.
Other companies have indicated they are not willing to pay the cost. That is understandable as they do not have government funds to fall back on should they incur heavy losses overseas.
Some of these companies look to options to develop overseas markets that do not require sending a lot of capital overseas.
One of the “obstacles” is that of small public-listed companies in which the major shareholders feel they have become wealthy enough and there is no need to risk their wealth in foreign adventures.
One of the country’s industries that have successfully developed foreign markets is the rubber glove industry. Exporting their gloves to the United States and Europe at about 8 sen a piece, the companies earn a net profit of just 0.8 sen from each glove they sell.
The global markets gave them the volume and, with that, some have become billion-ringgit companies even by selling products that bring home a net profit of less than 1 sen for each glove.
● C. S. Tan is an associate editor of The Star. This is his last column as he moves on to a job in another company.
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