Asean entrepreneurs of Chinese descent expanding presence in acquisitions overseas
YUJI KURONUMA, Nikkei staff writer
TOKYO -- Direct investment from Southeast Asia to the rest of the world has been increasing steadily, led by companies owned and managed by entrepreneurs of Chinese descent.
Companies in five major members of the Association of Southeast Asian Nations took over businesses outside the region in 194 merger and acquisition deals totaling $26.4 billion in value in the first half of 2014, an all-time high on an announcement basis, according to U.S. market research firm Dealogic.
Of the top 10 in value of the 194 deals done by companies in Indonesia, Malaysia, the Philippines, Thailand and Singapore, nine were carried out by Singaporean firms. An analysis of funding sources for mergers and acquisitions revealed that three of the nine Singaporean companies belong to business groups in Thailand and Malaysia owned by businesspeople of Chinese descent.
Southeast Asian companies established by ethnic Chinese entrepreneurs often conduct acquisitions through group companies set up in Singapore. In June, for example, Frasers Centrepoint, a real estate company in Singapore that belongs to TCC Group owned by Charoen Sirivadhanabhakdi, an ethnic Chinese business tycoon in Thailand, announced the acquisition of Australand Property Group, a major Australian real estate company. Frasers owned nearly 60% of outstanding Australand shares as of Aug. 7, having spent 1.47 billion Australian dollars ($1.36 billion) on the purchase.
Another example is Wilmar International, a top palm oil maker in Singapore that recently bought major Australian food company Goodman Fielder for A$1.3 billion jointly with a Hong Kong-based investment company. Wilmar is owned by Robert Kuok, a Malaysian-Chinese entrepreneur.
Chinese businesspeople in Southeast Asian nations have accumulated wealth by winning concessions from their governments in the early stage of economic development.
Charoen, who was born into a poor family and could not afford to finish elementary school, grabbed business opportunities when Thailand privatized the production of alcoholic beverages and developed his beverage companies into market leaders. The Bangkok Post reported that the Sirivadhanabhakdi family is the largest land owner in Thailand, owning lots totaling 1,000 sq. km.
Kuok also reinforced his business base on the back of Malaysia's industrial development policy. He built the nation's first sugar plant in a tie-up with the Malaysian government and earned his nickname, the "Sugar King of Asia," as he came to control 80% of sugar imports into the country and 10% of the global market.
When the Malaysian government introduced an industrial policy favoring Malay businesses, Kuok moved his business base to Hong Kong. In the 1980s, when prices plunged in Hong Kong, he engaged in active land purchases.
Forbes magazine's list of the world's wealthiest people shows that those of Chinese descent account for 19 of the 20 richest individuals in Southeast Asia. Assets owned by the 19 Chinese individuals increased sixfold on average over the past two decades, reflecting an increase in Chinese entrepreneurs expanding retail and other businesses in emerging economies.
Charoen Pokphand Group of Thailand, led by Dhanin Chearavanont, offers a clue to where wealthy Southeast Asian businesspeople of Chinese descent will invest down the road.
At CP Group's factory in Nakhon Ratchasima, a city in eastern Thailand commonly known as Korat, 4,000 employees work in two shifts to process 330,000 chickens a day for frying, freezing and packing. The plant exports processed chicken to 40 countries. When this reporter visited the plant last year, boxes designated for Japan, South Korea, Britain and other European countries were moving on four packaging lines individually allotted to the destinations.
While pursuing its goal to become the "Kitchen of the World," CP wants to serve not only as cook for the world's kitchen but also as waiter to the world's customers. This business stance was indicated by a senior CP official in charge of supply chains. He said the group, which has been a trader until now, will do business closer to consumers around the world. CP now owns convenience stores and other retail operations in Thailand and China and is eager to do so in other markets in addition to its export business.
Vincent Tan, a Malaysian billionaire with assets of $1.6 billion, pays attention to consumers in Japan as owner of a company that operates the 7-Eleven convenience store chain in Malaysia and controls 80% of the market. When he visited Japan in May, he revealed that he was looking for a resort development site in Okinawa Prefecture. For a British soccer club he acquired in 2010, Tan said he was looking for a Japanese player, indicating his wish to sell broadcasting rights to a Japanese TV station.
Japanese companies can benefit from tie-ups with Southeast Asian business tycoons of Chinese descent, according to Cui Chen, a visiting researcher at the Institute of World Studies, Takushoku University, who said businesspeople of Chinese descent share information to avoid risks and secure opportunities for businesses throughout the world and thus have better networks than U.S. and European companies do.
Southeast Asian Chinese have established personal networks for the sake of survival as a minority in the region. Through these connections, they can promptly obtain information on risks and move their assets to safety when necessary. Japanese companies can receive great benefits if they utilize these networks.
In the past, the social networks of Chinese businesspeople were often closed, but this is starting to change. If Japanese companies appoint professional managers capable of working outside Asean ahead of U.S., European and other foreign rivals, they may be able to work out new business strategies using the enormous financial resources controlled by entrepreneurs of Chinese descent.