Malaysia 2017 | ECONOMY | ROUNDTABLE

TBY recently gathered some of Malaysia's top businesspeople to discuss the role of fintech, the innovation ecosystem, and the outlook for the next five years.

Mahendra Gursahani
Managing Director & CEO
Standard Charted Malaysia
Mohamad Hanif bin Hashim
Country General Manager
Petrofac Malaysia
John Stocker
BAE Systems, Malaysia

How can multinationals add value to the local economy by bringing innovation?

Mahendra Gursahani Fintech is the new buzzword in the financial industry and in many of the services we provide we are starting to see companies outside the traditional banking sector providing services that traditionally would have been supplied and provided by banks. Fintech has been around in different shapes and forms, and what has changed now is that it has exploded into this massive opportunity for new players and has become a real threat to the status quo in financial infrastructure. We have always considered technology as an enabler and adapting to digital ways of communication with our client base just became more acute, especially with changing demographics. A bank targeting a more affluent segment of the market will typically have clients in their 40s, 50s, and 60s because that is when wealth is created. This group is reasonably comfortable with having limited technology offerings and really would prefer the sort of face-to-face relationship through our branch network and relationship managers. However, future generations are unlikely to ever visit a branch; they would rather conduct all their business through digital means. There are few products and services that we cannot offer electronically. Our latest digital product is video banking, which caters in particular to those who still prefer to have direct interaction with our staff. It is not even new technology, just a new adaptation via which we try to fill those voids that we believe new fintech companies will not be able to fill. In addition, we envision more partnerships between banks and new service providers, rather than just direct competition.

Mohamad Hanif bin Hashim Innovation is one of our six core values. It is our differentiator when benchmarking against other global energy companies; it is the backbone of our operations. Given the volatility in energy prices, this is the right time for companies in our industry to innovate and be nimble. We have brought creative solutions into Malaysia, and we were the first to introduce a mobile offshore production unit (MOPU) in the country, which was inexpensive and provided the right solution to our client. We have to change our thinking and mindset in finding ways to commercialize new fields at reduced costs. Together with PETRONAS, we are part of CORAL 2.0, which is a cost-reduction alliance made up of all PSCs in Malaysia looking to find innovative means to bring unit costs down. PETRONAS being our key client, the key element to consider when delivering our required production is providing innovative, low-cost solutions for drilling and completion activities.

John Stocker Innovation is one of our key values. We spent billions on R&D and developing our end products. We have been in Malaysia for more than 50 years and have always worked closely with a wide range of Malaysian partners to spur economic and industrial development. Companies like CTRM and SME Aerospace have been going from strength to strength since the 1990s, and we have long-standing relations with them. We have been able to transfer our technology—at the time mostly in civil aircraft programs—and that has allowed companies to become regional leaders in their fields today. Aerospace in Malaysia has developed tremendously, and the industry today supplies Airbus and Boeing. In addition to our aerospace activities, we have our global cyber security-engineering center in Kuala Lumpur that currently employs 350 people, which we anticipate to double in the next few years. It is one of our fastest-growing areas globally and activities here are innovative by default, by nature of the rapidly evolving digital economy. We are glad to host these activities in Malaysia, a tech-savvy market with a highly educated workforce. We collaborate closely with several Malaysian SME firms, one of which is Loka Wireless, which uses our technology called Navigational Signals of Opportunity (NAVSOP), which allows for navigation when GPS is not available. This collaboration is an excellent example of adding value to the local economy as a multinational firm.

How does Malaysia fit into your global strategy?

MG Malaysia is a key contributor to the business in the ASEAN region besides complementing our global solutions, as our shared services center is located here. This center, where we employ 5,000 people, develops technology that is applied elsewhere in the group. On a national level, we are seeing a shift from lower-skilled work to higher graduate employment and a knowledge-based economy. In 2014, we invested MYR10 million in our Collective Intelligence and Command Centre (CnC). From here, we can monitor our global facilities, volume downtimes, technology breaks, and secure the safety of our operations worldwide. We currently employ 150 people at the CnC and we are growing rapidly. We approach technological innovation from two angles: either we develop our own expertise or we partner with new emerging fintech companies. Banking remains a people's business and thus we will not convert ourselves into a digital-only bank; however, we will respond to the demands of our customers and try to stay ahead of the curve of innovation. We provide multi-channel services and our presence in Malaysia is integral to developing our customer responses. From the government side, we have witnessed many incentives and encouragement for bringing in foreign talent and repatriating back Malaysians who live abroad. We have around 15% expatriates in our shared service center, comprising 30 different nationalities. Malaysia is an attractive destination for expats.

JS Malaysia is our regional corporate headquarters, and our global cyber security center is located here. The center develops advanced cyber security products and provides customer support for our global customers. The back office functions here are involved in high value adding technical elements. We have created a unique global capability here, and the availability of talent was the primary drive for our multimillion-ringgit investments. In cyber security we develop solutions to meet specific customer requirements and develop technologies here for our global customers. BAE Systems is perhaps better known for developing and producing complex systems and electronic engineering, so we are well placed to be a part of the rapidly growing cyber sector. We can find great talent here, though we cannot recruit fast enough. We are increasing our ties with universities and have started a graduate intake program as well. Furthermore, we are working in partnership with the National Defence University to deliver an MSc in cyber security management. We also have a joint venture with Malaysian firm Boustead, called BHIC-Bofors, where we supply and service naval guns to the Malaysian Defense Ministry. This joint venture has become a regional hub, and has the global rights for MRO and retrofit services to our legacy Bofors guns.

Is education improving the ecosystem of innovation? Is it something you need to get involved in with, for example, graduate programs?

MG There are several levels. We have an international graduate program with students from all over the globe and many Malaysians who have studied abroad. They train with us for a period of 12-18 months, with secondments to other parts of our group. At the end of this journey, they can choose to either work in Malaysia or join our international network. We encourage our graduates to take advantage of this international exposure. We have more than 400 Malaysians working abroad in our group, many of whom return to Malaysia to strengthen our franchise here. We do see a crunch between the demands of the industry and the supply of talent. Fortunately, the Malaysian government and regulators have been supportive in allowing us to fill those gaps with expatriate talent. This arrangement works for all the parties involved. TalentCorp has an attractive value proposition and does great work in repatriating Malaysians back to the nation—and we tap into these resources a great deal. It is a good sign that there is commitment from both the public and private sectors to improve talent and consider global dynamics.

MHBH Petrofac's mantra is that our greatest assets are our people. We continuously train and develop our staff and have localized many managerial positions. I myself am an example of this, starting with the company in 2004 and 10 years later leading the company here as its country general manager. We want to cement ourselves in Malaysia in the long term and are aware that we will need to groom our staff to grow with us. In the past two years, we implemented our Graduate Training Program (GTP), through which we have recruited 20 new engineers. Another program, on which we collaborate with PETRONAS, is called Prodigy and intends to combat the brain drain in the oil and gas sector. Due to lucrative positions in the Middle East, where there is a scarcity of talent in the fields of geoscience and petroleum engineering, many young Malaysian graduates have decided to emigrate. The Prodigy Program is intended to come up with a layer of new resource talent to replenish the industry in the future. We jointly identify with PETRONAS the spheres where we might have scarcity in the near future and retune our graduate programs accordingly. Training and development are key to the sustainability of our industry.

What is your outlook for the next five years?

JS Globally, around 90% of our business is in defense and 10% in commercial, which is reflected in Malaysia. On the cyber security side, we are pleased to see an increase in our commercial services; banks and other financial institutions increasingly look to protect their software and for tools to combat money laundering. Our largest prospects, however, are largely in the defense sector and are reflected by the opportunities we pursue here. As part of this we continue to strengthen existing partnerships and develop new relationships with Malaysian industry not only to localize our operations, but also to support the broader defense and security industrial development agenda. Our largest customer is the Malaysian Armed Forces and we are focused on maintaining strong relations with all the stakeholders involved here. Another key objective for us is to continue major campaigns, such as the Eurofighter Typhoon program that we are currently proposing to the Royal Malaysian Air Force, which if successful would create around 20,000 jobs in Malaysia and deliver MYR50 billion to the economy through our offset and industrial participation programs. Another major growth area is cyber security. Around the globe, commercial organizations, government departments, and other critical parts of the national infrastructure are waking up to cyber threats. Banks and other financial institutions have already been the targets of attack. With more of these organizations becoming aware of the potential threats, demand will increase. We have a great foothold in Malaysia to grow our business and serve our clients worldwide from here.

MHBH The oil and gas industry is going through an interesting phase. We want to develop ourselves to serve our clients with cost-effective solutions and help them recalibrate their costs. To implement this strategy, we have to create economies of scale for our offering of services, trying to tap into the lowest cost environments possible. Then, when the price goes up again, we can normalize and see the full effect of these new services that we have developed. Like any other company, we continue to support our customers' interests and because we have end-to-end product offerings we are able to provide a wide spectrum, ranging from wells and sub-surface all the way to production. We are in a fortunate position; the near future will see more collaboration between industry players in the oil and gas sector, which we greatly welcome. Furthermore, we are fortunate enough to have worked for many years in the North Sea, one of the toughest offshore areas to operate in. This has provided us with the capabilities and skillsets to survive in other geographical areas. We can capitalize on this experience, replicate these techniques, and have a head start with low-cost solutions in the Malaysian context—a win-win situation for everyone involved.

MG Standard Chartered, at 141 years, is the oldest bank in the country, which in itself is a feat because not many companies survive that long, let alone in emerging markets. We are absolutely committed to Malaysia. The challenge for us is to evolve and adapt quickly in an uncertain external environment. The financial infrastructure is changing rapidly and staying relevant to our customers is our primary objective. Our brand is well known; however, the taste and preferences of our customers are constantly evolving and we have to be nimble. We are committed to remaining a universal bank in Malaysia, both in retail and commercial banking, and to serving our institutional and corporate clients. We need to remain a part of the fabric of the financial service offerings that we have committed ourselves to. Innovation and investments in our services center are part of the design to stay relevant. As a foreign bank, we have limitations; however, within the given parameters, we are clear about how we can service our clients.

What do you envision to be the tasks and objectives for the British Malaysian Chamber of Commerce (BMCC)?

JS BMCC takes on a significant role in supporting business relationships and facilitating opportunities between Malaysian and UK businesses, and for us the number-one priority is to continue to support and grow this service. Promoting business is about promoting relationships and creating the environment in which commercial organizations can flourish, about creating and supporting the bedrock. Pursuing new trade deals, new agreements, and new relations are of pivotal interest for the UK today, and with the long-standing and strong Malaysia-UK relationship, the BMCC can play a valuable role in supporting this.

MG The chamber could do more on the advocacy side. We could present the British industry with a broader understanding of where the blockages are, and use the influence of the chamber to achieve more than an individual company would. Multinational firms have been active in the international arena for a long time and have taken much for granted. The chamber can be of great relevance as a credible source for British SMEs to provide honest information about the Malaysian market.

MHBH We are hoping that with the oil and gas chapter in BMCC this will create more opportunities and synergies between UK businesses and Malaysia. In order to weather the next couple of years, close cooperation and best practice exchange is essential, and there is a role for BMCC there. Opportunities can be created in this country; different and low-cost techniques can be deployed here for the purpose of making sure that the oil and gas business can flourish and thrive again. This includes the transfer of technology, experience, and personnel.