Patriarch on Buddha Hill, tiger in Forest City
Dr M’s roar should spark a major rethink on strategy for not only Country Garden but the new Malaysia as well
ONE can only imagine what must have gone through the mind of Yang Guoqiang, the chairman of China’s largest developer by sales, Country Garden, on the fateful day in late August when Malaysian Prime Minister Tun Dr Mahathir Mohamad reportedly declared that his government would not allow the Chinese company to sell its properties in Forest City to foreigners.
Prior to that bombshell, Yang had flown to Putrajaya to meet Dr Mahathir in order to seek assurance on his flagship Forest City project in Johor, a massive luxury housing development worth more than RM400bil over 20 years, which the premier had criticised prior to Pakatan Harapan’s shock election victory on May 9.
Yang could be forgiven if he thought he had settled the matter with the Malaysian premier, as many had done before him, like his compatriot Jack Ma, the boss of Alibaba, who also came to meet Dr Mahathir to seek clarity on his e-commerce project in Malaysia.
Yang was not as lucky as Ma, and one can only visualise the Country Garden boss sitting in his Garden of Eden-like corporate headquarters in Foshan in southern China, whose Chinese characters literally mean Buddha hill, looking bemused as his presumed innocence on Malaysian politics got blown away by Dr Mahathir’s roar.
Leaves would have rustled in the headquarters, which is almost completely covered in foliage, plants, flowers and trees, both real and fake. Heck, whole branches would have fallen as the news sent Country Garden’s shares tumbling.
The shock was evident in Country Garden’s response to the news report when the company said that “today’s comments do not correspond with the content of the meeting between Dr Mahathir and the founder and chairman of Country Garden Holdings.”
The company had at first thought that the premier’s comments were taken out of context.
The Malaysian government has since clarified that foreign (read Chinese) buyers of Forest City homes would not be guaranteed a visa to come and stay.
The prime minister’s concern on the social, economic and political impact of a high number of Chinese visitors on long term stay in the country is justified. Dr Mahathir is right to be vigilant on China, after all this is a country which takes all ten fingerprints of foreigners who enter it, and we only take one of theirs.
For Country Garden, the question now is ... does it have the sangfroid to overcome this obstacle? Being a top company with a culture of excellence that has driven them to hire over 1,000 PhD degree holders, it should be able to, as a group of Malaysian journalists found out during a recent media tour of the company’s Foshan headquarters.
For starters, a major change in its sales strategy and branding is needed. Forest City suffers from its Chinese image as the project has been branded essentially as Forest City, Home for the Chinese Away From Home.
Given racial sensitivities in this country, it was a branding and marketing effort that invited trouble, and trouble came.
However all is not lost. The company can consider the Dubai model for its sales strategy. Branding and marketing efforts along the lines of Forest City, Malaysia’s Dubai will no doubt make it more appealing to the Pakatan administration.
A Dubai-style development will be a game changer for tourism in Malaysia and for Country Garden’s global ambitions as well.
If Muslim Arabs can sell luxury homes to a global clientele in the desert, there’s no reason why Country Garden can’t do the same in the middle of the tropics, and in a location between two international tourist hotspots – Thailand and Singapore.
Malaysia too can learn something from Dubai, which has welcomed foreign buyers of high end homes with open arms.
Building afforable homes, a segment highlighted by Dr Mahathir, is another area that the company can explore to improve relations with the Malaysian government.
Chairman Yang is a low profile, Mao-like, father figure who is said to take his compassion-driven corporate philosophies seriously, an approach certainly not out of place for a company operating out of a city called Buddha Hill. Poems in Chinese adorn the walls of his corporate headquarters, exhorting advice and philosophy to employees which can be distilled, perhaps simplistically, to be good, do good.
“You can’t escape the poems,” an employee says. “You can even find them in the toilet.”
The man is said to have spent RM2.5bil on charitable causes since the founding of his company in 1992, helping to rehabilitate damaged villages and provide free education, among others.
Malaysian impact
As the company looks for a way to resolve its troubles in Forest City, it need not look far for a resolution.
The key to overcoming the obstacle lies in one of the company’s founding philosophies, which states that the company should strive to “create a better society with our existence”. Transplanted overseas, it should read “to benefit societies in which we operate.”
And while the man may be from China, Country Garden is no China man company.
It is, in fact, a Fortune Global 500 company that provides free lunch and dinner, as well as free housing, to its employees. Malaysian employees tell of the significant savings they have made because of this.
And it is a measure of the company’s China-centric-ness that the company did not feel the need to highlight the extent of its impact on Malaysia until the breakout of the Forest City controversy.
According to the company, as of September this year, Country Garden had invested RM11.5bil in the Forest City project.
The project has awarded contracts worth RM1.5bil to 150 local companies.
“The employees in Forest City have contributed more than RM50mil of personal income tax to date,” says Ng Zhu Hann, the director of strategy of Country Garden Malaysia, the Malaysian face and voice that the company has put on the controversial project.
According to a projection by Deloitte, Forest City’s economic contribution to Johor, especially local contractors, suppliers and business partners, would amount to RM22bil in GDP by 2035.
As for the country, McKinsey has estimated that Forest City will contribute RM200bil worth of Malaysia’s GDP by then. Estimated stamp duties from the project to the federal government in the next three years is RM500mil.
Besides Forest City, Country Garden has four other developments in Malaysia.
Cumulatively, the group has invested RM20bil in Malaysia so far, making it one of the largest foreign investors in the country.
Due to its Chinese image, not many know that a majority of its workforce is made up of Malaysians. As of May this year, the total workforce in Country Garden’s operations in Malaysia was around 2,000 with 70% Malaysians.
The Forest City project had created 1,545 jobs with 80% filled by Malaysians as of September, out of which 40% are at the management level, according to the company’s data.
Country Garden says Forest City would have generated around 220,000 jobs by 2035 upon full completion.
At a mind boggling worth of over RM400bil, the Forest City project has got to be the largest investment ever in Malaysia.
After letting out its great roar, the Malaysian tiger would do well to do some contemplation, especially on how the economy is being managed.
Country’s financials
The current path chosen by the Pakatan government is to reform the institutions first before undertaking changes to the economy and financials of the country.
But more than five months after the ‘Malaysian Revolution’, the people face a shrinking economy, rising job losses, a ringgit that has remained weak and the prices of goods have not come down.
This is against a backdrop of a volatile external environment.
The lower income group, already left with only RM76 to spend each month according to a Khazanah study, face the prospect of reduced BR1M payouts and having the payouts stopped altogether.
The World Bank has cut its projections of Malaysia’s growth, slashing its estimate to 4.9% from 5.4% for this year, and expects the economy to slow down steadily through 2020.
Amid the tough environment, any investment should be good for the country, especially if it just needs some tweakings in shape and form, like the Forest City project.