Endgame with Gita Wirjawan - Nazir Razak: Reform and Recalibrate

Episode Date: March 10, 2021

Founder of Ikhlas Capital and former Chairman of CIMB Group, Nazir Razak, talks about the art of leadership at the intersection of business and politics, what’s really happening behind Malaysia’s power struggle, and what we should do when the system doesn’t work as envisioned.

I look at ASEAN as being Indonesia's platforming. It is by far the biggest country. It is, today, trying to take a leadership war. It has the largest economy. It has pretty stable democracy. It has quite strong institution. Asian secretary is already there. But unfortunately, I don't get a sense that Indonesia is very committed to Asia.

This is endgame. Amid political turmoil, Datu Tsri Nasirazak pleaded for a new system for his country. A significant reform which will make a clear separation between the economy, government and politics. Today we're having a conversation with Nazirazak about his vision of creating a better Malaysia. His idea to establish a national consultative council, just like in the 70s, still is relevant to Malaysia's current. condition. And will this result in a newer economic policy that would benefit his beloved nation? Nazir led CNB Bank as chairman from 2014 to 2018 and as Group CEO of CNB, he spearheaded CNB's transformation from a local investment bank to the fifth largest universal bank in ASEAN,

the largest Asia-Pacific-based investment bank and a world leader in Islamic finance. He has received some of the most prestigious awards from international journals and institutions as a banker and a corporate leader. He's also recognized as a passionate advocate of ASEAN through his achievements at CIMB, founding the ASEAN Business Club and the World Economic Forum, ASEAN Regional Strategy Group's inaugural chairmanship. Nazir is currently a visiting fellow at the Blavaknik School of Government, University of Oxford. Also, for those of you listening to this podcast for the first time, Endgame is an Indonesia-based podcast presented by the School of Government and Public Policy Indonesia and produced by Viscinema.

Enjoy this episode. Hi, Jay. Hi. Thanks for coming on to our show. Pleasure. Hey, I want to start off with asking a little bit about your background. You want to talk about how you grew up and, you know, academic. and how you got into the profession of banking and how you've seen the two countries of Malaysia and Indonesia, you know, growing in the past few decades.

Please. That's a long, long question. It's like my life story. The idea is for me to ask a simple question, and you give us the long answer. No, no, I had a rather unusual early upbringing. and I mentioned my father was the Prime Minister then. Right. When I was born, it was getting to Prime Minister, and then he became Prime Minister in 1971.

And so until I was nine, I was sort of, you know, PM son for most of it. And that was rather unusual brain, you were kind of living in this humongous government mansion. you had everything you want within seconds and stuff. Then when I was nine, my father passed away rather suddenly. I was at the age of 53. And that kind of took me by shock,

leaving my mother and five relatively young sons to look after. Then about a few years later, when I was 13, I was then taught the boarding school. That was the kind of SOP of the family because my mother father felt that if we stayed in Malaysia, we would be spoiled as PM son. So I had a sudden shock of arriving the North of England at the age of 13 and not knowing a great deal. And at that time, the school also had very few foreigners. So I was really the kind of outside of the, I defined diversity at this very old British institution. I spent five years there and then I went to university.

I did my undergraduate at Bristol in economics and politics. Then I went to do a postgraduate at Cambridge also in economics in politics, but focusing on developing countries. Then at that time, Cambridge was a very left-wing place. You know, we believe that everything state was good. You know, everything to do was just redistribution was good and so on. So I kind of thought I'd go back and join government and serve the people. Wow. Then I arrived home and my brothers told me, you know, government service isn't what it used to be.

and this was the early 80s, sorry, so this was the late 80s. And Mahalai had essentially kind of pushed aside the civil service to some extent, and it was the era of the private sector. So you know, don't go into government, but go into private sector where everybody's going. And so I looked around, I said, okay, look, I'll join banking for a couple of years. The idea was going to banking and learn. a bit about finance and the corporate sector and then go into business. So the plan was to join banking for two to three years. I stayed for 29.

One, it became my calling. I guess I was quite good at it and I loved it and I guess I joined a company which stood to me. So I guess the rest is history. The rest is the kind of history of CIMB. Talk about how you expanded CIMB to what it is today. I mean, you know, it's it's tough to find anybody who thinks that you had no part in the large expansion of the footprint of CINB, particularly in the context of ASEAN over, you know, the last 29 years. Yeah, so the, when I joined CIMB, we were a small shop. I was employee number nine. Wow. And we were a kind of mid-sized merchant bank that you should.

to call it in Malaysia. And I actually applied to the kind of big boys, the top dogs, and got offers, but I decided to join the small shop because I enjoyed the idea of being a bit of an outsider. I enjoyed the idea of, you know, being the challenger business. Right. Reminded me of, you know, the way to go at school, I was always the outsider, fighting the system reminded me of being my childhood being the youngest in fighting the system that made me laugh and stuff like that so and i joined c i joined c i joined in covacianance as you know those days top of finance was the hip hip department joining all but no intellectual negotiations in so i joined that for three years and those first three years was

defining because i was kind of i had a you know right like a certain extent you just all i'm bringing or privilege upbringing. And I remember, firstly, it was a real treasure to get a job. At that time, there weren't so many jobs around. And we worked very, very hard. And I remember my first piece of work was a kind of two-inch book, which was a submission to the regulatory authorities so that it could take company public. And it was such a bad piece of work that my boss picked it up and smacked up on my head. Seriously. No kidding. You know, you get arrested for that these days.

But those days, you know, I was like, I'd do anything, keep my job. So I just get quiet and just, you know, did all the members you wanted and made sure and I would forever do better work. And, you know, he was such a workaholic that you could only, you know, he spent all his time with clients,

you could only meet him at 10 p.m. to 11 p.m. at night. Okay. I have two of those hours every day, at least. So he was grueling. But, you know, we were the time. challenges and somehow rather we were a small merchant bank that did extremely well in IPO and we won the IPO of naga national which was the national electric utility and all the huge IPO in 1992 and that kind of changed the whole profile of cind it became the first global

IPO from Malaysia so you know the first one to do on the IPO road show It was really thrilling. How big was the IPO at that time? It was 3.2 billion ring. Wow, that's huge. It was big. At that time, yeah. So the domestic market couldn't adopt,

so we had to do an international growth show. And because it was such a hot deal that all the global banks wanted a piece of the action. So it became nice to me because I was running the deal. So I managed to look at how global investment bank is structured. I went to New York, Hong Kong, and said, I looked at their offices. and then I decided, look, you know, I understand this and I want to be an investment banker. So two things happen. One is, you know, at the end of the deal, everything was over and there was a bit of climax and so on and so forth. So I was made a couple of very attractive offers. You don't know this,

but you know, it was like, it was like a professional footballer, right? It was a final bonus for Merrill Lynch, Lehmuth brothers there to be based on in Hong Kong and I was going to go but then I thought about it I said why don't instead I'm so invested in CIMD when I try and transform CIMD into the investment bank so I stayed I went into the broken side of the business I helped transform the broken side integrated with the Merchant Bank and we became this thing called an investment bank and by 1999 which was 10 years after I joined in the 8 of 3rd to 2 I became CEO of CIMD wow

And then those days in 1999, you remember, the Asian financial crisis. And what CIB did was, you know, whereas most companies made a lot of money in stock boating and equities in the early 1990s, they re-invested more into their business. We put the profits and invested it into a new business called fixed income. So during the Asian financial crisis, we were actually the only bank that was prepared to intermediate the ring it on month. So when the government needed to raise bonds or corporate needed to exchange loans into fixed income, there was only CIMB where it was kind of structured or able to do it. So CIMB went into the crisis as a sort of top four investment bank came out on the crisis as number one by long shot. And we did that very...

What differentiated was the fixed income business, the only thing that differentiated you from the other banks at that time? More or less. I mean, we were already quite good at IPOs. Okay. But fixed income was the thing. The ring is bond markets, exponentially. And bonds, of course, is not just

IPOs, right? Bonds are also about trading. So we became good at it because we use our balance sheet and we were making markets and bonds. Wow. After the crisis, we were counted number one and decided that, you know, to kind of take it further, I really needed to IPO the bank. And this was in early 2002 when we decided to take CIME public. It was quite a radical decision because our parent companies have been listed. So people say, why do you want to list it completely?

But, you know, I wanted to defend the plan for CIME. And of course, as part of the IPO, I also asked that I be awarded some options on the store. And, you know, they said, fine. So I got some options of 5% of the company at IPO price and I took it public. It wasn't a great IPO to start with. It's a long view that matters, right? Well, it was interesting because it was probably the only IPO where I didn't have a partner. I see because you know we listed and normally used expect an IPO to go at least 10 15 or more than up I was was flasked so this guy who thought he was the king of IPOs actually screwed up his own

IPO so that's one good lesson in life as I said we're not going to put our head in the sandwich and we're going to sit in this room and we're going to decide why we screwed up this IPO we brainstormed it and realized that we kind of made a bit of a hash of you know, the sales story and our capital and so on and so forth. So we did something rather dramatic, which was within four months of IPO, we paid a huge dividend, which is kind of difficult thing to do. Okay. You bought the shares for $1.75 and in four months you got a 40 cents dividend. That was part of it.

So investors wanted to know who this crazies were. And I had another chance to go back to the market and the rest of it, you could have in three years, three years, I'll spot went up 343%. See, the long view matters. You could have also done a share buyback. Yeah, you could have done a share buyback. I wanted to shock the matter. And so, you know, so then, actually it was interesting because then

financial concerns kind of disappeared to me. I was always a bit worried whether I had enough money for my life started. But that ended with the IPO of CIMB and so. So money was set aside. So it was more about evolving CIMB, progressing CIMB to, you know, what it was truly capable of. And after that in the mid 2000s, I decided that it wasn't good enough to be an investment bank. I decided that, you know, there are a lot of things happening, but overall the universal banks will win.

Whereas you know this, the big banks, the H&BC and more variety, in proper banking checks and winning IB mandate. So I said if you really want to be an IB we have to be a UB. We have to therefore convert CIMB into universal bank. So then we decided to buy banks. So we bought our sister bank, which was probably for commerce then in 2005. And then we bought Southern Bank, which was a competing bank in 2006. So with those two acquisition, TINB became, went from the investment bank into Malaysia's, you know, the universal bank. And then, you know, it was at the same time that, um, asian was coming to be named. I don't you recall at the beginning of 2007,

there was a Asian summit where they decided to accelerate and the agency. Right. But 2012, sure. I was part of that. Yeah. Right. So by 2007, there was this notion of an Asian economic community by 2015. And we had already invested. When we bought Buntra commerce, they already had a stake in this bank called Bang Niaga in Indonesia. Right. So when we took it over, we said, look, you know, why do we remain in just Malaysia? We could replicate this model across ASEAN.

And guess what? ASEAN is going to be an economic community in 2015, where there is single production-based remover of scale labour and investments in capital and so on and so forth. So it was all very exciting. So we said, okay, so we're going to build a truly Asian bank. So we went on this acquisition spree after buying two banks in Malaysia. We bought another one in Indonesia, which was Lipo Bank. You remember you hacked it first.

Correct. Yeah. Yeah. We bought Bank Thai in Thailand. And then in Singapore, we couldn't get a banking license. We already had a banking license with two branches. So we decided to go internet banking only or phone banking at that time, digital as well. And then we bought a new license in Cambodia and so on. So by, you know, the target of being in every country was completed by, you know,

by just before I left in 2018. But the interesting part is, of course, Assyan didn't quite live up to its promise by 2040. It wasn't quite what it promised to be, that's one. And therefore, what that meant was that the synergies from having cross-border banking wasn't quite what we thought it would be. Like in Indonesia, we couldn't move people, we couldn't outsource IT and so on and so. So a lot of the value of synergies wasn't quite there.

And the other thing that transpired was the global financial crisis, which led to the re-regulation of banks. And then it became too demanding in terms of capital. So there was some strains on our balance sheet because of all these factors at the time. But you know i i would never uh even think of doing it otherwise it was a tremendous experience yeah a problem experience you know we we are we became the fifth largest bank in terms of assets but you know to me it was about the people it was about meeting people it was about running the experience of building a franchise in indonesia i mean india was you know i saw it all when we wanted to buy first wanted to

to buy Bang Niaga and I was the at that time an investment banker acting for for commerce it was 1999 coming out of the Asian financial crisis right we went to Ebraebra I met the president commissioner then or chairman then which was Glenn Yusuf correct our mutual friend our mutual friend and it took it's only five press comms later that we finally got approval to buy Bang Nyaga. You know, the community was going through this tremendous period of change and uncertainty.

It was very interesting. It was at a time when we first were trying to buy Bang Nyaga, I remember meeting someone who said, look, you know, I can help you buy the banks. I said, really? So I went to see him and he said, yeah. You know, and he was having this conversation when he goes, Indonesia's problem, it is very, very corrupt.

But, you know, and all these people who are corrupt should go to jail. But by the way, if you want to buy Bangyaga, I can help me if you pay me a bit of money. He gave me the spiel without posing. I was quite a strong. But I learned my lesson that, you know, in the end of the day, one thing you must never do, especially in in regionalizing business, is we play that game because, you know, the foreigner is always the one who gets caught. So we never touched any of that stuff. But we were still successful.

Oh, you pulled through. You pulled it off. But, you know, it was scary because when we... I remember Bipra telling me, you better make a good bid because it's a very competitive situation. So I said, okay. So we made a very good bid in terms of valuation and all that. I mean, we paid one half times both, which, of course,

now comes key by the time, you know, it was aggressive. And I remember, Oprah calls it. I remember Uber calling me up and said, you've been shortlisted, you are successful. So I was so happy and I said, you know, oh, who's on the short lid? And said, nobody else is just you. I was like, oh, you mean we're a very short list. So then I got scared. I said, what do we have everyone? What does everyone know that I don't?

And of course, when we announced it, I'll stop what happened, 25%. Oh, the international investors were saying, you know, Indonesia is this country, this failed state, it will never be. And so it was quite scary at that time, but of course we were proven absolutely right. The long view matters. It was incredible. And you know, I really enjoyed every moment of getting to know Indonesia. I remember, you know, one thing I, the mistake we always made was that this whole concept was serumpun.

That means, you know, we're all one ethnic group and so on, and we love each other and so on. But, you know, it's a very different place to do business. And I remember, you know, CIMB has this internet banking where you use a mascot, which was the And I gave the instruction every all since we are regional bank, every part of CIMB must use the octopus as the as the mascot for internet banking. And then I ensure that thousands of octopuses went to Indonesia. And then whilst they were distributing, finally someone had the guts to tell me, he said, sir, you do know that octopus is what the press uses to describe corrupt politicians don't you?

No harm intended. So that was a good lesson that how, you know, in terms of being regional, you mustn't harmonize completely, you must understand the look at. Yeah, yeah. It's so easy to get misinterpreted. Hey, look, you've done okay, man. You started out, you know, when this thing was just a startup, right? and over what 29 years this has become a behemoth. But I want to ask you before we switch to another topic, how you see CIMB further metamorphosizing

by way of the digitization that we're seeing happening so rapidly. You know, it could be very soon that, you know, we could all bank just with a handphone, globally speaking, not just regionally. Now, how do you see the banking industry transforming? Not just CIMB per se, but I think the whole banking industry. Will you see more that will not survive as opposed to more that will survive? I think what's going to happen is that you're going to have two types of banks.

One with reasonable ROEs, the other one with decimal ROEs. And essentially, the ones that would have decent ROE, are the ones that are able to leverage on the customer base and the branding they have now to transform themselves with the customer. The other type of bank will not be able to do that, will not be able to go beyond lending. So therefore, they'll just be providers of balance sheets earning very low ROEs. And this is CIMB's challenge. CIMB has a good brand. He has a, you know, whatever it is, 15 million customers across Asia.

it has to transform into a digital bank. And it's very, very difficult to do it within the bank itself. I mean, I tried it. It was tough. Because, you know, your legacy bankers, your retail bankers will, you know, will kind of put barriers. And they don't do any malintent. It's just the way they have to do things.

Yeah. Then you have these young guys trying to start digital bank to do things differently, and they just get blocked all the way. And so, you know, I always think that for banks to really be successful with this transformation, they really have to do it offline, to create digital bank offline, and create their entrepreneurial spirit, and then kind of reverse it back into the main organization. I agree, I agree. All right, enough of banking.

You know, a lot of people don't know that you're actually the descendant of Sultan Hasanuddin, who was born in the 17th century. Talk a little bit about that historical perspective of yours. Yes, Bugis heritage. In 1722, I think it was the grand child of Sultan Hassanuddin. And the Bugis has seen there. Sultan Hassanuddin was born in 1631, I believe. So the grandson of Sultan Hassanuddin.

Yeah. The grandson or granddaughter, we're not sure, but jumped on a boat. So we had a boat in the 18th century. We had a lot of boats, yeah. And Rome, the east coast of Malaysia, and landed in Paham, on the east coast, in a village, and settled in the village that would eventually be called Kampong Makasa. They still exist today. So there's a Kampong Makasa where they settle, and this family integrated into the local

community and actually became sort of what they called orangayas or chiefs around the, around the... And this part of the law, it means rich man. Yeah. In Malaysia, it's totally important. And they didn't have much money, but they were chiefs. There were four main orangayas around the southern. Oh, yeah. And it was semi-hereditary.

So unless you were badly behaved, you would get it. You were the elder son. So over the next two, three centuries, my family were oranghires. And this meant we were kind of, you know, sort of the administrators and so on of the Malay community in Baham. And that meant that by, you know, the late 19th century during the British administration, my father, my grandfather and so one were actually educated in Malay College, which is kind of the boarding school based on the British model that trained future administrators. My father also did the same thing and that kind of put them in good place to rise up the administrative structure, which eventually then was a platform

for him to go into politics. And you know, we do connect back to us more. lineage. I went to Goa to visit the macum of Panath Grain. And interestingly, when they heard I was arriving through the Siam Niaga branch. My long-lost cousins, which is the Crown Prince, invited me over to the palace. Wow. I was thrilled. So I went there. And presumably he was a CIMB customer. He was a CNB Castamone. So he showed around the palace and he showed me this map.

And he said, our territory was this. And he showed me a map that was a stretch from Northern Philippines all the way down to Northern Australia. Yeah, yeah. And he said, this was the size of our empire. And today we're just this house. So it was... Well, times change, man. Time's changed.

Yeah. And then he said, I need to introduce you to my daughter, at which point I got very worried. But then, so his daughter comes up and it's a very pretty lady and I was like, I hope this is not what I really think it is. He goes, this is my daughter. I want you to meet her. She's standing for elections. Could you ask the Nyaga staff to vote for? So that was a catch over lunch. You can see how modernity. I'm a royal enclave.

And you immediately sent an email to all your staff. I didn't quite. Go out there and vote. Oh man. And, okay, let's talk about your dad's friendship with our dear legendary friend, Des Aoui. Talk about that. I think that's a very, very interesting, the historical part that I think a lot of people here. a lot of people here ought to know. After the war, he then, you know, his studies was

interrupted by the war when he then, you know, he first worked for the Japanese and then he was part of the resistance force and so on, but his studies were interrupted and then after the war, he applied for a scholarship and he went to London. In London, he was politically quite active in the Malaysian Student Society there or Malaysian Students Society. He was in the same batch of Li Kuan Yu and others. In Malaysian, he took a Brahman, who was our first prime. He was his good buddy. And it turns out that his best friend at that time was Indonesian.

He hung around with the Indonesian group. And his best friend was Des Albi. And through Des, I understand that they organized a lot of events for the initially, in kind of sympathy with the Indonesian independence movement. And I know he met with, is it Sultan Sharir? Sultan Sharir, yeah. He met, he definitely, not a legend. Yeah. And I know he traveled to Brussels with Des Al-Wi, and in fact they went on a European road trip together, and they formed a very strong friendship.

Which continued, and interestingly, it then became a very important means for which he, negotiated peace with Indonesia during the confrontassi in 1960. There was even a famous incident where there's how we organized for the teams from Indonesia and Malaysia or Malaysia then in Bangkok. And for the meeting, I understand the Indonesian delegation had to where under uniforms to disguise themselves for the week. And of course, you know, there's then, I think, negotiated with Suharto as the regime change. Right. And then together with Adamalik. Yeah.

Not a legend. Yeah. And of course, those two also came together again in the Bangkok Declaration in 67. The formation of Asia. Wow. The five countries, right? Yeah. Yeah. You know, Des Alwi has a famous place to visit in the Bandas, you know, which has been visited by many royalties around the world and visitors from all over the world.

So he's done wonders for the country. Yeah. So, okay, let's jump into... to your country, man. You want to talk about your country? What's going on, man? As a layman like me, what's the best way to better understand what's going on in Malaysia right now and what to expect of Malaysia going forward? Well, Malaysia is going through a transition period, I suppose. You could call it from 63 years of leadership or government by one party. Then you had a change in ruling party.

And that new ruling party, which was called Pakatan Naraqani, fell after 20 months. And now you have another coalition called Rikata National, which includes the old barisan. in there and they are now ruling. But you know, it's a bit more complex than that. You know, I have a slightly, you know, unique perspective of all this. I believe that developing countries, we don't know or we never knew, or our founding fathers, never knew what was right for the society, for the times and so on and so. So we just, we just, we just, just took on a system at independence. And in Malaysia's case, because we were a British colony,

we took on the Westminster system. There was no other reason. Right. And that Westminster system didn't work, you know, at the first hurdle, which was the May, 1969 elections, it felt, you know, there was an outbreak of race riots then. that and we had an emergency room. I say it fell its first hurdle because the earlier elections you kind of caught up in this euphoria of nationalism, this independence, and then it was confront Indonesia and so on. So 69 it broke down and we had emergency room for 20 odd months and that's when my father ascended to the PM ship. My father was became more or less a dictator after the May 303. They named him director of the National Operations Council,

which by which he ruled by decree. And during that time, you know, he felt that he needed checks and balances. So he set up what he called the National Consultative Committee. And that council, or NCC as I call it, that council essentially also was engaged in order to institute reforms, right, that were necessary to the system. So basically, democracy in the Westminster way had to be tweaked for our pure society and so on. So they came up with a few innovations, including the national principles of local negara, which I think is based on the pancashila, to some extent. Interesting.

Then they came up with the new economic policy. which is affirmative action in favor of the Bhuyndra of Bihubu. And they also came up with some submission laws where you could not question certain things like the role of the monarchy and religion. And they also came up with this, you know, Barisan National, which is essentially a grand coalition of parties. And therefore, minimizing political tension at a time when politics was purely about identity. It was all about identity and, you know, every, and the 69 elections, it was the, the narrative, you know, every campaign was about my, my race versus your race. Yeah, it's coming back nowadays. Yeah, unfortunately.

Yeah. But, you know, Malaysia decided to tweak the system, but that system, which includes affirmative action in favor of Malays to, too, to, um, a great extent than had been previously. I just wanted to qualify that the British introduced affirmative action in the first instance in 1912. So it wasn't then. But what the NEP did was it kind of sanctioned that we would use the state to accelerate redistribution

of wealth between the races. What is often to often is the designers of the NEP's felt that you needed to redistribute wealth in order to have the foundations for national units. It sounds a bit contradictory, but it was felt that you couldn't unify the nation at a time when the Malays, that constitute sort of, you know, over 50% of the population had 2% of corporate wealth. The vast majority had only a small amount of the corporate wealth and they controlled the administration. So it was there's so much imbalance, which was inherited from the British.

So they came out with the system and they said, look, it's not fair. So this system can only last for 20 years. So the new economic policy was set for 20 years and then should be visited. Unfortunately, this system creates a lot of vested interest. Sure. And a lot of government intervention to the economy and so on and so forth. And it kind of burst a lot of kind of negative behavior, if you like to put it in Moundy.

It's such that it was very difficult to remove the system. And once you're in power, you kind of enjoy it because you're basically control everything, control government companies, you control distribution of resources, etc., etc. So this new economic policy remains in place after 15 years. Right? My father and his gang thought it should only be around for 20 years. It's still here after 50 years and it's morphed, it's been abused, and it needs to be rebuffed. And it is also the reason why politics in Malaysia has become some of its function. I see. And it's also the reason why the institutions have become

weak. So if I reflect back, maybe, maybe one could argue that the problem was, the problem was when the Asian financial crisis came, unlike Indonesia, we insulated ourselves. So there was not political change. We had reform in the corporate sector, but there was not reform in politics. And because the political system continued, actually, the reforms in the corporate sector also faded away, in terms of governance and behavior of government companies and so on that kind of faded after a few years whereas if i reflect on indonesia yes you went through a torrid time in the early 2000 but today you're one of the most stable democracies in the world and i look at the independence of your

institution yeah it's not perfect but you know it does a pretty good job in you know diminishing corruption and so on and so forth. So, you know, that's where I think, you know, we are still missing. The system doesn't work and we can't figure out a way of reforming holistically. So I spent a year in Oxford in 2019 to study what I call nation recalibration, how nations need, I think, developing nations often need to go through this renewal process over time. The system has too much, too many weaknesses. You know, unfortunately, many, in most situations, you do need a breakdown before you actually turn to holistic reform. You saw that in apartheid, you saw that in the Asian pandemic crisis

in Indonesia and so on. And Malaysians are generally not hungry enough to go through such such situations of to demand so much change. So I am now kind of trying to advocate this national recalibration from labor. I have one public to say that we need a second national consultative council like we did in 1970. Would you do it exactly the same way you did it in the 70s or would, okay, how would you do it differently this time? So what you need is, what NCC was is a deliberative platform. And if you look at the literature on dilettive platforms today, I mean, this is a popular notion in the West. You saw it in the creation of a national assembly in Ireland to deal with the issue of abortion.

You've seen it in, you know, in Belgium, for instance, when the federal government was dysfunctional, you know, they created these deliberative platforms, which typically involve intellectuals and also general representation from the public and the debate without being deferring to political parties or political allegiance. And if you take that thought further, it is very difficult for parliament of elected representatives to deal with long-term structure issues. People don't vote for what they voted, but people vote for for what the party with tells him to do. So I can deal with issues that are, you know, around the court, you know, a kind of pardon,

and, you know, position me for the next election. But I can't be a long-term structural issue where we talk about the social contract, we talk about the world religion, we talk about the constitution. These cannot dealt with by parliament. So my argument is that, you know, like then, we just need this platform of the good and the great

in Malaysia to debate. the best way forward. Of course, conditions are different. Maybe in 1970 the dictator, my father then could just, you know, decide or to just decree the setup of this committee and who was on the committee. Today we may need the rulers council, for instance, to do it instead of the executive. I don't know, but these are some of the things to consider. But net, you need a very credible representation, yeah. What are the risks of this thing getting de-platformed? Or the risk that this thing has no accountability or has no grip with decision-makers in the country?

Well, you know, it could go wrong. You could have the distributed platform and then it presents a set of proposals to Parliament, which is then rejected. That could happen. Right. But, you know, that's why the credibility of this platform is important. I see. And the ability of this platform to cut the deal. You know, one of the problems we always have is that every time the government wants to do something,

it actually affects one community. The government wanted to, you know, legitimize the UEC or the examination certificates for from Chinese schools. Of course, when they wanted to do that, the Pakistan Harpang government, the Malays was screaming because the Malays, this is disadvantaged meat, so the Malays blocked it, it couldn't be done. So you cannot cut these deals in isolation. We need to put everything on the table and say, okay, this is for this community, this is for this community, and then let's see. Everybody happy, everybody gets something. So you need to cut the deal right across to reconstitute the whole new deal for Malaysia.

You've talked about identity politics, right? And then you've also separately talked about money politics and the concentration of power. How do you see these issues getting more attenuated or even disappearing in your future in Malaysia? I mean, it seems to be prevalent, right? And not just in Malaysia, in just about every other country. That seems to be the common theme. How do you deal with it from a Malaysian perspective? Yeah, so I've written about what I call it three-headed monster.

Right. So this 300 monster basically munches up every piece of this and we form that task. Either you're because of monetary incentives or because I would oppose it using race and religion. And or things are not properly done because there is too much concentration of power in the PM's office. And therefore things are not properly thought through. These are the kind of typical, I can probably attribute every bad decision to one of those three. And, you know, the way I look at it is with the understanding that these are the key traits of this monster. In a national consultative council setting, we need to deal with them.

So if you look at them one by one, if you look at the power of the prime minister, How, you know, for the longest time until recently, until 2018, the prime minister was also the finance minister, his corporate setting, CEO is CEO. Every decision goes through the prime minister. So, you know, when Mahade in the 90s, you know, when he did the privatization program, he had the best of intentions. but unfortunately the system was so concentrated that it wasn't about who's got the best value proposition. It's really about who manages to get Mahadi's not. So how good can that decision making possible? And so you need a situation where power concentration, the PM's office is reduced.

Relatedly, you may also want to devour more power to the state governments. And there's also this big issue about what we call here in Malaysia MA63, which was the agreement we signed in 1963 with Saba and Strawa. Right? Sabah and Strava can always remind you that actually it was a three tri-pacte deal, Saba, Zrawa and Peninsula Malaya. Right. And since then, Saba and Strava believed that they've been relegated to just another state in Malaysia. So these kind of issues have to be looked at as part of me, kind of reducing the power of the PMs out there. Then identity politics, you know, how do you evolve such that you're not, every issue is not translated in a racial or religious stuff? And here, you're not going to deal with it overnight. you've got to think of an evolution process such that you get to a time when,

you know, yes, I still know I'm Malay, but when it comes to national issues, I'm Malaysian. That's the evolution in academic terms from a plural society to a pluralistic society. Right. You put national interest first and you can discuss issues more mature. And of course the third element is money politics, which, you know, as well as I do, every kind of problem. But there are many, many ways of accepting that democracy needs to be mobilized by financial resources, but you kind of put in rules and regulations such that, you know, there are limits to everything. And, you know, one of the problems you have in Malaysia here is that the anti-corruption agency and the electoral commission,

those are the two central bodies that manage political competition are all still reporting to the prime minister. Right? It's like, you know, playing football, the referee reports to one team. We need to rebuild independence of those institutions. You saw the way, you know, in region, those who actually, in many respects, have become more and more independent from the president. Yeah, yeah. Let me push on this identity politics issue. I've been hypothesizing in the past that, you know, to a lot of extent identity politics is correlated with inequality, right? And the more unequal the society becomes, the more or the higher the tendency for anyone to gravitate to his or her, you know, racial,

religious, ethnic identity, right? Because of probably the lack of redistribution of welfare and the inequality of opportunities. I think there is, I think it holds water in that, you know, things like that correlate with identity politics. And it's not just uniquely in Malaysia or uniquely in Indonesia, it's happening in many developed economies, don't you think? Yeah, for sure. I mean, I think in the end there, we just have to look at the US what's driving,

populism was driving in the kind of white supremacy is really inequality and and I think we do need to look at the big picture we do need to look at capitalism right and you know our kind of 90s version 80s 90s version of capitalism and what it what where it fell short i mean certainly there were you know even if you look at the western societies it really was a king where the rich got richer and this is kind of compounded with technology today, right? Or the digital era today is getting worse. So we need to look at how we reduce it. We need to look and what drives this is, unfortunately,

is the very boring topic of taxation. I think that's such an important tool of we just... I agree. You know, and in Malaysia we don't even have capital gains tax. you know and we don't have windfall taxes and there are also many innovative ways like in Thailand they tax you for for land that you don't gainfully use in many ways and there should be taxes on

increasing value of urban property for instance versus world right that's how you create redistribution so I'm in favor of a real aggressive overhaul of the tax framework in countries to create a more justice item across the world. Okay. Hey, let's move on to a different topic. You set up this startup called Ichlas, which I happen to be part of too, so I got to be very careful here and asking and trying to sound as independently as possible, right, or as objectively as possible. What's your thinking along E-Class and what's, you know, what is your idea, you know, about E-Class? No, I think it's an extension of what might look at CIMB in building, supporting

Asian integration. I think we look at banking re-regulation today. Banks have become more constrained, more conservative. And I think there's a vacuum. And private equity can fill that role. When I started in this business, we will call merchant banks. And part of merchant banking was also giving loans, but also taking equity stakes in companies to help them. And I I think the platform that can do that today is the private equity platform. And our private equity platform is quite unique in some ways. We don't take control of companies. We support entrepreneurs and we build value together with them.

And the typical opportunity for us is a, I don't know, a Malaysian company who wants to do more business in Indonesia, where we come in, we take a state, we help them expand into Indonesia with your network in Indonesia, and we all create value together. That's an A-piblical A-class D. And I was talking to some of the other private equity guys, it's quite interesting how, you know, we're all called private equity, but our business models are quite different. And I think we suit a really interesting group of entrepreneurs across the region, And at this time, we're seeing a lot of opportunities for the kind of partnership model that we offer. Now, with COVID, having been around for around a year, talk a little bit about some of the opportunities that are on the horizon from a PE standpoint.

And how do you stack up with some of those other VCs that seem to have been a little bit more aggressive? or proactive in looking for deals. I know there are different schools of thought, but there comes a time when there is a potential, right, of the two intersecting at some point, and that makes it a little bit more difficult for either. Yeah, no, I mean, our history-based COVID is followed, I think that, you know,

that in the run up to COVID, we did not know COVID was coming, but we did feel that valuation were quite floppy. So for 2019, which is our first year, we only did one small deal, which was the acquisition of a five million-ringed stake in a public company in Malaysia. But we were evaluating a lot of deals. And when COVID came, we continued evaluating those deals, but we said to all the entrepreneurs, you know, we need to take a step back. and we look at what we were contemplating in the context of a prolonged pandemic, which is actually we thought was a real and it is coming reality now.

Obviously, at some point, this kind of divergence in view, entrepreneurs always think that their business is great and they don't suffer so much. We basically hold back. At some point, the two shall meet, I think. and we can close these deals. And looking at the situation now, I think we're almost closing three deals at the same time, where we now have a clear picture of where COVID goes on both sides.

And I think that the value proposition of E-Class is such that I think, you know, the entrepreneurs are now anxious that we come on board come on board and then ride this COVID recovery together. Now there's this different theories, right, about how long, how quickly countries are going to get adequately, if not fully vaccinated. To some extent that has bearing on valuations, right, of companies, right? I would argue that some countries are probably going to take some years before they all get vaccinated completely. Some others are going to get vaccinated a lot sooner,

depending on the readiness of the coal chain infrastructure and the healthcare capabilities. So how do you put all that into thinking for this PE exercise? Well, I think that the conservative side is that the kind of herd immunity levels of 70% or so but only be done in most countries within by middle of 2021. That's a conservative view that we build in.

But remember that we don't want to wait until then in order to get business going again. And many businesses do actually quite well, even in COVID. We invested in a whole chain business in the Philippines recently. and that business is actually thriving in the COVID environment. We are looking at technology companies and actually they are clearly benefiting from COVID as well. Obviously healthcare companies have benefited. So, you know, I think with the kind of line, you know, sort of the end-insight type of scenario that we have now, I think it's a

I think it's possible to converge on valuation. So I don't think it's just us. I think many private equity views could be done in the next few months, given that there's some reasonable certainty now. Yeah, I've talked about this a few times, even with some other guest, you know, in the context of investments, you've expressed to me earlier that you were quite concerned with Malaysia's recent ability to attract money, right?

investments. I'm all the view that Malaysia has been a lot more successful than some others in ASEAN, including Indonesia, Thailand, and the Philippines. But to put it in a much broader context, right, there's so much liquidity that's floating around, why is it that ASEAN, or some members of ASEAN countries just can't get, you know, so much more capital? what is wrong or what can be done to remedy this situation? I think, you know, particularly for a country like Malaysia. Yeah. If you look at the ASEAN data, the AEM data was a little bit disconcerting to us,

where the average drop last year in US, FDI in ASEAN was 31%, and Malaysia was 68%. We found that they were quite depressing. And one of the reasons I think is because, you know, countries and Malaysia is suffering from new dynamics. In the past, we were not competing as much with, say, Vietnam or even Indonesia to their extent. And before that, not even China or India, right, if we talked about the early 1990s. And on top of that, we have the situation in Malaysia where we have political uncertain.

Now, for Ascan as a poll, I think what is important is really make it real that we are 600 million plus market. And this has been one of my frustrations as you know for a very long time, which is that, you know, if I invest in a, if I have an investor, say, in Malaysia, it's very difficult for me to figure out whether my market is 32 million people or 600 million people. it's very difficult because there's so much details in terms of how I export my products and so on and so forth. There are too many unknowns and things change. And, you know, the truth about Asian is that we all are better off with an integrated economy. But some people are more better off than others. And it's really sad that that fact that, you know, some are better, more better off, and others is actually holding us back.

Yeah, I agree. Yeah, and we need to get over it and really pull together. And, you know, I think that from for Malaysia's case, we just have to step back and quick our kind of investor engagement strategies to reflect new realities. I mean, in the 90s, when I used to market Malaysia, the first line of any, any sort of any sort of, slide deck that I had was why invest in Malaysia number one is political stability.

Right? That first item is gone, right? At least for the moment and we need to accept that reality and articulate the investment case in Malaysia the same thing. I saw a recent ad in economists in Christmas where it was an ad for our investment agency here and one of the first things they said, we invest in Malaysia we're a very politically stable country. We need to admit. We need to... Why would you say out of wise, right? I mean, if you're trying to advertise the country. Yeah, but you don't need to say it.

Or you can say, no, you don't try and say it's a politically stable. Despite the changes in government and government policies can remain. We've actually never done anything to the detriment of foreign investors. Yeah. But, you know, I had a conversation, with someone else about how the differential FDI per capita's are, right, for the different ASEAN countries. Singapore is the LeBron James at $19,000 per capita in terms of FDI. Malaysia is the number two guy at 270, but Vietnam is the guy that's taken lunch from

other people nowadays, right? This culture of collaborating a little bit better? is not there yet, seemingly, right? And this culture of or habit of just unnecessarily competing with each other, as opposed to competing in unison or collectively with respect to the Chinas of the world, the Koreas of the world, or the Europe's of the world. What would it take for ASEAN's DNA to get there? Well, actually, you know, I've been tried to champion this a few couple of years. and lose and back this.

Hey, you're the one who wrote the book, man. You can talk a lot about this. I mean, I've been pounding my head about this, too. You know, let's take banking. Let's go back to banking. The qualified banking agreement, or whatever it's called, for Ascan banks that was issued, you know, 2015 was a joke. You know, they came up with a framework where, you know, is a

multilateral framework, which the main agenda of the market letter of the market letter framework was that there will be bilateral negotiating and banking license in between countries, right? They spent years working on a document and that's the computer. When the reality is that what is important is actually for central banks to enable movement of people, movement of capital, you know, outsourcing of operations. So why did that happen? Well, because the bureaucrats did it without proper engagement. The private sector is not properly engaged and we look at that across multiple sectors, we have that same problem where you know there's this huge gap

between you know the asian bureaucracy and businesses and I don't think it is unintended. And there's this real kind of feeling that, you know, the official know best and the private sector should just take it or leave it. And there's a real problem. Why can't we appoint a private sector, Ascent Secretary General? I asked that question. Wow. Because I'm serious about going into economic integration. For the private sector guy there who understands business. And really, you know, comes up with prop plans to integrate funds.

Right? And I'm a private sector guy with his first thing would be to engage, you know, people with the domain knowledge to come up with the right rules and regulations so that more businesses can be done for work. And how was that received when you suggested that? No. The Asian way is, you know, the other way is don't talk about anything

controversial and you know you've got to respect the fact that whatever it is I always respect the fact that organization has done a tremendous job in keeping peace and stability from the region right I must never forget that but you know but then you know you cannot therefore mean that you're so sensitive about the discussion on how to make it better and how to improve as you say the time when you know the real challenge is businesses are growing in China with a potential market of 1.2 billion people and all the economy scale around it and then parachuting themselves in ASEAN and having a lunch. Yeah. You know, I've been saying this that sooner rather than later China is not going to be

able to produce enough goods and services for itself. And ASEAN is just a natural alternative. And there is this point of inevitability, right, that we all are the 10 countries in ASEAN have got to work together to serve as that next supply chain bastion beyond China. And we can just supply to China, less to the rest of the world. And that's going to be enough for ASEAN as a manufacturing base and all that. So I know it's easier set than done, but I think the more people think about it, talk about it, I think the better chance we have at it. You know, you've got to look at, say, you know, in Indonesia, I'm either a local or foreign. Yeah. There's nothing in between.

Yeah, that's true. The people are different. You are the local or foreigner? Yeah. So what is this? Yeah, especially if you talk to the millennials, they don't even identify with ASEAN. You know, it's people at our age that somehow identify a little bit more with the concept of ASEAN. Yeah, we need to come up with a new name. I'm also a bit embarrassed for myself, but ASEAN night.

Oh man, oh man. So, okay, I want to talk about the tech TechWolt, you know. What's your take on Tesla? Wow. I want to just throw you a curveball, you know. The stock has gone crazy, right? And it's an appreciation for the new thinking, right? Not the traditional or conventional thinking.

And it seems to be manifestation of robotics, artificial intelligence, and autonomy. and it's priced at a much bigger multiple than any of the peers. It trades at about $5 million per vehicle, whereas Fiat, GM, Fort, they probably trade at about less than $10,000 per vehicle produced. So is that an inspiration or is that something that causes more fear to all of us here in Southeast Asia who can't get their act together seemingly to, to become the next supply chain, bastion? Well, I mean, in the end of the day,

the day reckoning will come. Yeah. The patients have to be, you know, have, they look for reality or something. And I don't know whether my gut series is kind of overdone to be driven by liquidity and some speculation. But obviously, for as long as it lasts, then it's quite terrifying for all of it, right? The kind of capital that they can raise.

It's so phenomenal that, you know, if they use that currency quickly enough and effectively enough, the competition would be white. Yeah. But it's crazy, you know, how money is actually chasing crazy ideas nowadays. And you know you talked about identity politics and we talked about, you know, the correlation of that with inequality, right? And to some extent, inequality is correlated with the lack of education that people are getting, right? To the extent that we're not going to be able to cope or catch up with these new ideas that are coming out from different places, which

money is chasing, the farther back we're going to be in chasing money that's needed or capital that's going to be needed for our own collective development. I don't know. What do you think about that? No, I actually think there needs to be, as I said earlier, there needs to be a global report. Because as we remember this, under this crisis, with the QEU and the banning out markets and all that, people with financial assets are okay.

Yeah. People were going to lose their job, lost their jobs. People are going to get a salary cut, get their salary cuts. And there's a real struggle down there, whereas up there actually people are fine or better. And unless there is some macro rethinking and intervention, people get to very dangerous, dangerous points. To some extent, they attack on the capital. It was more of the reflection of this, right? And people better stand up and listen quickly. Yeah. Yeah.

You know, listening to you, it's tough not to be tempted in asking whether or not you want to end up in politics. You know, I... I mean, you come from a political family. No, I started off not having politics as an option because my brother, when politics was being. in the mid 2010, around 2015, I got dragged into politics to some extent, because I was very upset at what was happening with the one in Malaysia. So I was very... I didn't want to ask you that, but you brought it up, carry on. I was, I almost went into politics and then two ladies persuaded me. One was your mom.

Nairi Woods, who was the dean of the school of government in Oxford. She said, Nazir, look, I completely understand why you want to go into politics, but the very people who are supporting you, encouraging you will never ever trust you because you stabbed your brother. And he said, you know, at milibang never even in the west and miliband never quite because of the stabbing day she said and then the other lady was tant sri rapida i see who was campaigning against nudge but she said you can't join me i said why not she said because your mother's will you will break your mother's long you can't do it so um i took that advice and i you know i did what i could

in terms of voicing my unhappiness um but i didn't enter politics. Then I spent my time reflecting on the system and I said actually there is something political I can do which is to try and change politics rather than be in politics. So today, you know, if you ask me I'm not interested in going to politics, what I'm really interested is changing politics. And that can be a useful contribution and the most useful contribution I can make rather than you know running for elections. How do you change politics? without being politics? Well, this is what I said about my national conservative platform that I want to recruit.

I think that is an opportunity to redefine how we choose our leaders, redefine how our institutions operate. And that would be a tremendous new beginning from Malaysia in my view. That's what I want to champion. Well, you know, you're still young. I mean, you both did. I don't want to say we're old, so. Yeah, yeah.

You know, politics is a function of time, right? Yeah, yeah. But, all right, man. I got to ask you this question, which I forgot to ask you. What did you do with that pony that you got from Desawe? I'm sure some people would like to, you know, hear about it. I was a 10-year-old kid and I went to see Des Al-Wood at that time was living in KL, I had a home in KL. He decided that, you know, I needed a pony. So he gave me a pony without

asking my mum and of course I was quite spot there and I insisted on having it. So I brought a pony back to my house, my mom's house, which was right in the center of KL. So I had this garden with this huge pony running around. And I tried my best to play with a pony, but the pony was pretty angry about being in town. So I think the pony almost ran me over. So finally, I had to give back this gift to this gift to this very kind of thing to think about anyway. That was an experience. It was getting a little too claustrophobic in your garden.

Hey, anything else you want to throw at me, man? Anything else you want to talk about? No, no, I'm good. I'm good. I'm good. But the main thing, I think, is the point you made about, you know, believing in regional integration and how much more people can do together across the region. We just got to get over this hurdle of, you know, just, you know, we all must want to be better off. Right. If somebody else amongst us is even more better off, so be it.

We're still better off. And we can so much more together if we collaborate. Which country in ASEAN, sorry to keep pounding on this, which country in ASEAN do you think we ought to take a look at as a point of reference for the betterment of ourselves? Some people have mentioned Singapore, some people have mentioned Vietnam, some people have mentioned Indonesia, some people have mentioned Malaysia, as a Malaysian. I look at ASEAN as being Indonesia's platforming. It is by far the biggest country. It is today trying to take a leadership role. It has the largest economy. It has pretty stable democracy. it has quite strong institution. Assyan's secretary is already there.

But unfortunately, I don't get a sense that Indonesia is very committed to Asian. I mean, I know the business people there and quite a lot of them are kind of say, you know, if Asian means that you can come and compete on my turf, right? And we have the biggest market here. You want Asian because you can play here, right? That kind of mindset and to be, to be a bit of, To get over that mindset, I think we need strong will from the top. I think the president himself, with his political capital, needs to step up and champion Assyng. To be, you know, with due respect, I think he's been a bit ambiguous about Ascent.

Okay. This is the part where I'm not supposed to say anything about that. I'm only supposed to ask you questions. But it does matter. You know, you ought to read this book by Marty Natalagawa. I have. Yeah, it's a fascinating book. You know, it's so detailed and it's fascinating. Yeah.

To me, he must have said, Jen. You can't get a business guy, get Marty. Yeah. I'll ping him. And I'll tell him that you told me to say that. Actually, we're thinking of inviting him over. I think you'd be a good resource for people to listen to. Hey, Jay, thank you so much, man.

All right. We've spent, you know, 80 minutes and it's been a good chat. Are you sure there's nothing else you want to say? No, no, I'm good. I'm good. All right. Okay. Thank you so much. Thank you so much.

Thank you so much. Yeah. That's, that's Nazirazak. Thank you. This is NG.