Daim's Expanding Empire
Michael Vatikiotis. Far Eastern Economic Review. Hong Kong: Mar 25,
2004.Vol.167, Iss. 12; pg. 42, 2 pgs
http://proquest.umi.com/pqdweb?did=589212781&sid=4&Fmt=4&clientId=68814&RQT=
309&VName=PQD
Abstract (Document Summary)
Daim Zainuddin is turning his deal-making skills to Southeast Asia, buying into
Indonesian banks and advising governments of two of the region's most liquid investors Singapore and Brunei - on where to invest their money. Daim has already set up a string
of small banks in Africa and Eastern Europe, where he acknowledges he is playing for
high returns in risky markets. Analysts wonder if Diam's overseas investment strategy
reflects a reaction to new Prime Minister Abdullah's tough approach to cronyism. Daim
says that he is currently chasing a stake in what he describes as a small clean bank in
Indonesia, and is also interested in a piece of the state-owned Bank Nasional Indonesia,
which will put up 30% of its shares for sale this year. He notes that many oil-producing
countries in West Africa lack banking expertise and he sees the region growing in
importance as an energy supplier.
Full Text (1327 words)
Copyright Dow Jones & Company Inc Mar 25, 2004[Headnote]
MALAYSIA
Daim Zainuddin played a key role in creating a
Malay entrepreneurial class during former Premier
Mahathir Mohamad's heyday of high growth. Now,
in a more sedate political climate, Daim is focusing
his energies on building a private global-hanking
empire
FLAG BEARER: As finance minister and Umno's
treasurer, Daim was the architect of Malaysia Inc.
DAIM ZAINUDDIN may be one of Asia's richest men, but his business is headquartered
in a grimy, converted hotel in an unfashionable neighbourhood alongside a busy Kuala
Lumpur highway. Working from a cluttered office, the diminutive Malaysian tycoonMalaysia's long-time finance minister and treasurer of the United Malays National
Organization, the dominant party in the ruling coalition-is plotting a new business
strategy that he hopes will transform him from a savvy domestic corporate player into a
global financier.
"Personally, I have retired and I don't want to compete with Malaysians" at home, Daim
told the REVIEW in a rare interview. Hunched behind his large desk wearing a simple
checked shirt, slacks and his trademark sandals, the moustached Malaysian maverick
explains how he plans to reinvent himself. Daim is turning his deal-making skills to
Southeast Asia, buying into Indonesian banks and advising governments of two of the
region's most liquid investors-Singapore and Brunei-on where to invest their money.
Daim has already set up a string of small banks in Africa and Eastern Europe, where he
acknowledges he is playing for high returns in risky markets.
Eccentric a strategy as this may seem, Daim is worth watching because of his
formidable wealth and the powerful influence he once wielded on Malaysian business.
The 66-year-old country-lawyer turned politician and corporate deal maker helped build
the nexus between corporate and political power in Malaysia after becoming chairman of
Umno's main investment arm in 1984.
Daim worked in the shadows, and many of his private investments and those of Umno
were held in the names of nominees or close associates. Daim was a close confidant of
former Prime Minister Mahathir Mohamad, until they fell out towards the end of
Mahathir's years in office. But some of the biggest Malaysian companies once controlled
by Daim or his associates and proteges in the late 1980s and 1990s were battered and
discredited in Asia's 1997-98 financial crisis and their ownership has since changed
hands.
With new Prime Minister Abdullah Ahmad Badawi trying to create a new business
climate in Malaysia, some analysts see Daim's move offshore as a reflection off his
declining political clout. "Daim was very confident when Abdullah came in that he would
be approached and restored to what he sees as his rightful place in Malaysian politics,"
says an economist in Kuala Lumpur who has followed Daim's career closely.
Daim himself is cagey about his political role. He has given up his seat in parliament, but
indicates that he is helping with the election campaign for Malaysia's parliamentary vote
on March 21.
Other analysts wonder if Daim's overseas investment strategy reflects a reaction to
Abdullah's tough approach to cronyism. As Umno's treasurer and main business
strategist, Daim oversaw the endowment of Umno-linked companies with privatized state
assets and big government infrastructure and supply deals in the 1980s. Following a
1988 court ruling, the government divested Umno assets, beginning in 1990, to "private
investors," who were, in many cases, the same Daim associates who previously
managed them for Umno.
There has been no public accounting of Umno finances since. Asked if there were
outstanding issues regarding his long tenure as Umno treasurer, Daim smiles and says,
"They don't owe me any money and I don't owe them anything."
Daim doesn't see Abdullah making much headway with his current anti-corruption
campaign before he runs into resistance from within the party. "We have always been
trying to change the business culture, but we always relax after some time and
exceptions are given," he says.
CHANGE OF GUARD: Mahathir (left) and Abdullah
But it's business that is now preoccupying Daim. Last month, he was in the news for his
involvement in the Singapore government's purchase of a 5% stake in Malaysia's
Alliance Bank though its investment arm, Temasek. Alliance Bank is owned by
Malaysian Plantations, in which Daim has been a key investor through a holding
company called Langkah Bahagia, and is run by associates. Daim says he divested his
Langkah Bahagia stake in 1998 to one of those associates. Details of that sale have
never been publicly disclosed.
Daim does acknowledge helping Temasek in Malaysia, however. "Since I know
Temasek, they said they were looking at opportunities in Malaysia. They asked me to
make enquiries," he says. Temasek, however, declined to comment on its relations with
Daim.
Daim's also working with the Singapore's investment arm elsewhere. Late last year Daim
was part of a consortium led by Temasek, which bought a 51% stake in Bank Indonesia
Internasional, or BII, formerly owned by the Widaja family. The consortium, Sorak
Financial Holdings, included Temasek, Britain's Barclays Bank and Daim's Zurich-based
banking group International Commercial Bank, which now holds a 13.3% stake in BII.
Daim likes banks, and says he's eager to acquire more of them in Indonesia. One of the
attractions, he says, is handling remittances from the country's growing number of
overseas workers. "There are more than a million Indonesians working in Malaysia and
they have to send their money home," he points out.
Daim says that he's currently chasing a stake in what he describes as a "small clean
bank" in Indonesia and is also interested in a piece of the state-owned Bank Nasional
Indonesia, which will put up 30% of its shares for sale this year.
Daim says he is working with the oil-rich sultanate of Brunei on some of these
prospective deals in Indonesia. "Indonesians like to work with Malaysians," he says.
"They present a friendly face."
The forays into Indonesia aren't hard to understand. "For Daim, it's a bigger playground
and assets are going cheap," says an Indonesian economist formerly with the
Indonesian Bank Restructuring Agency.
But most of Daim's other overseas banking business is currently done in Africa and
Eastern Europe by his ICB group. The Zurich-based group has branches in Tanzania,
Guinea, Zambia, Ghana and Sierra Leone, according to Daim. ICB has also applied for
banking licences in Zimbabwe, Mali and Senegal, he says. There are additional
branches in Albania, Hungary and the Czech Republic in Eastern Europe.
The banking group is privately held and isn't required to publicly disclose its financial
records. A listing on a Web site for the West African Banker's Association lists the ICB
branch in Conakry, the capital of Guinea, as having 43 employees and paid-up capital of
5 billion Guinea francs ($2.55 million) at the end of 2002. Daim is listed as a
shareholder.
Mention Africa and Daim's eyes light up. "There's money to be made in the remittance
business," he says. "In my European banks I do business in the Chinese communities.
It's one area people have not looked at. In Africa, you have the Indians and the
Lebanese. Our approach is to be customer-friendly."
Daim declines to discuss ICB group's performance except to say the banks are profitable
and managed by professionals. "The reason for this is mostly that the deposit- and
lending-rate gap is big in these countries, so you make a lot of money," he says. "The
foreign banks don't lend, they say the risk is too big. But we're lending."
But there is more to his banking aspirations than remittances, Daim insists. He notes
that many oil-producing countries in West Africa lack banking expertise and he sees the
region growing in importance as an energy supplier. "I see Americans buying more oil
from West Africa because of the conflict in the Middle East," Daim says. "This means
more exports from Nigeria, and also Chad, Angola and the Gambia-all these places are
finding oil." And if there's money to be made, Daim for one is not going to pass up the
opportunity.