Jun 19, 2003

Michelle Yeoh Can't Spur Malaysia's Markets

By William Pesek Jr.

June 19 (Bloomberg) -- "Malaysia, truly Asia." So goes this country's ubiquitous marketing campaign. Just try turning on a television in Asia without seeing actress Michelle Yeoh's smiling face drumming up interest in her homeland.
It's served this nation of 25 million well. Last week, as I told friends and family I was traveling to Malaysia, just about everyone reflexively replied: "Because it's truly Asia." If marketing is a game of infiltrating consumers' psyches, Yeoh's ads have done that, and then some.
Too bad the campaign has been less effective with investors. Market aficionados may come this way for vacations, but few are bringing investment capital with them, opting instead to put it in Thailand, Indonesia, Singapore and elsewhere in the region. The phenomenon has much to do with stubborn doubts about Malaysia's corporate governance. But it's also about bad public relations.
Kuala Lumpur might be better off putting Yusof Abu Othman in its TV ads. Granted, the head of Malaysia's Minority Shareholder Watchdog Group isn't a household name like Yeoh. Nor does the 50- year-old boast Yeoh's come-hither looks. Yet he has disarming characteristics of his own: a disdain for Malaysia's system of corporate governance and the courage to raise hell over it.
"The government talks a good game of improving corporate governance, but that's the problem -- it talks a lot but does little," explains Kuala Lumpur-based Othman, a former stockbroker turned shareholder activist.
Othman makes a good point. Meeting Malaysian regulators and government officials, one gets lots of spin. The basic argument is that the country's corporate system is now cleaner than you'll find virtually everywhere else -- including the U.S. You'll also hear lots about regulators cracking down on dodgy practices with fines and arrests.
Yet it's important to separate the market rules put in place since the 1997-1998 Asian crisis and their implementation. It's the latter point -- acting on the rules -- where Kuala Lumpur falls short. "There are plenty of good intentions here, but I think we should take our cues from Nike -- just do it," Othman says.
Shareholder activism is an uphill climb anywhere, but that's especially so in Asia. One Malaysian investor told me Othman is anti-capitalist. But nothing could be further from the truth. Asia's markets need more people like Othman.
By shining a bright spotlight on dodgy business practices, Othman hopes to remove what might be called the "Malaysian discount," a phenomenon whereby international markets undervalue companies here. True, Malaysian stocks aren't as cheap as those in neighboring economies. But given the nation's 4-percent-plus annual economic growth rate and its political stability, stocks should be up more than 5 percent in 2003.
In Thailand, for example, stocks are up almost 25 percent this year in U.S. dollar terms. Indonesian equities are up 19 percent, while Philippine shares are up more than 22 percent. That Malaysian shares aren't up more has everything to do with investors' concerns about shareholder value.
Even with the progress made since the crisis, many investors believe Malaysia Inc. lacks transparency and adequate corporate governance. If companies do more to clean up business practices, Othman believes, their market capitalization will increase, making them -- and investors -- wealthier. In this way, he's anything but anti-capitalist.
"Look, this is all about making money -- everybody wants to make more and Malaysian companies have the capacity to do so," Othman says.
Gall and persistence are Othman's weapons. He attends shareholder meetings and asks tough questions of CEOs. He embarrasses them in the media with evidence of misdeeds -- a courageous thing to do here in Malaysia.
Late last year, for example, he helped grill executives involved in the Maruichi Malaysia Steel Tube Bhd. saga. The Malaysian cold-rolled steel company canceled plans to acquire a 32.5 percent stake in a shipping company following protests by minority shareholders.
The plan raised concerns Maruichi was trampling on small investors after state-run Employees Provident Fund and Japan's Nissho Iwai Corp. -- which owned a combined 14 percent stake in the steelmaker -- protested that Maruichi had sidestepped their scrutiny and approval.
Malaysia's markets need more of this kind of ground-up activism if they're going to thrive in the years ahead. It would help Malaysia with its global PR problems, attracting more investment at a time when China is getting most of it.
Kuala Lumpur suffers a kind of "CNN Effect." The international media tends to cover all the bad things that happen here. When there's a corporate scandal, it's front-page news in the foreign press. Ditto for when Prime Minister Mahathir Mohamad rails against foreign investors or U.S. policies.
Little ever gets reported about the progress Malaysia has made in strengthening its economy, raising living standards and maintaining political stability. Newspapers allot little space for articles on how Malaysia's bond markets have evolved or the progress made in drumming up Islamic investment markets.
Yet this nation's PR problems are largely of its own making. The government needs to do more to comfort both domestic and foreign investors. It needs to do more to convince those abroad that the events of 1998 won't be repeated. It was then that Mahathir imposed capital controls, a policy that makes many foreigners reluctant to wade back into markets here.
Michelle Yeah is an excellent spokesperson for Malaysia. Perhaps it's time to give the Othmans of the world some airtime as well. Malaysia's markets would be well-served. Investors, too.