Emerging Markets Global Financial Power: Nazir Razak

Emerging Markets World Bank editions, October 2009

Nazir Razak – CEO, CIMB, Malaysia

Nazir Razak demonstrates what can be done with smart management and good governance in emerging markets. He joined Commerce International Merchant Bankers, then a moderately successful investment bank, aged 23 in 1989 and within a decade had become its chief executive. A decade further, with several mergers behind it, CIMB is a powerful universal bank, and one of the few Malaysian enterprises that can truly be seen as a regional player.

“I was an active participant in the Malaysian markets in the early 90s – active, but not a player,” he recalls. “And I didn’t like the corporate practices then. I said to myself that when I become a player, it’s going to be done with the highest level of governance and integrity I can possibly achieve.” When he first started piloting the group towards fixed income and market making after becoming deputy CEO in 1996 – aged 30 – he spent a year building the risk management infrastructure; today the head of risk reports directly into the board, something that is not required by regulation but “makes my board comfortable with the organisation.”

He also made a point of stressing the positives in confrontation. “You need to create a culture of debate, and of transparency within the organisation. That’s very important, especially in Asian society,” he says. “You encourage people to talk, to debate, to challenge. A lot of the failures and problems in other organizations happen because people hide.” Has he encountered resistance? “Not resistance. Reluctance. It’s uncomfortable, shouting at one another. But you do need to encourage it. I actually fuel it.”

CIMB is a notable and growing presence in Singapore and Indonesia, and has more modest operations in Thailand, Brunei and Vietnam; probably only Singapore’s DBS could have a similar claim to be a truly regional Asian bank. Few Malaysians have done this: asked about others, Nazir names Air Asia, and to an extent Sime Darby, Petronas and YTL. It’s a modest list but he feels more than follow. “It comes with Asean integration.”

When foreign brokers and analysts are asked about the health of the government-linked companies (GLCs), those with significant state holdings, they tend to start out by citing CIMB as an example of what can go right before then offering less flattering assessments of many of its peers. For his part Nazir says being a GLC “has been positive,” partly because it’s useful for a bank to have such a clear demonstration of its credit standing, and argues that across the board things have improved. “State ownership in the past has given rise to a lot of constraints and bureaucracy, but since GLC reform in 2004 there have been huge changes and a vast improvement. I have been advisor to many of these companies pre-reform and I see first-hand how much more responsive and efficient these companies are.”

Nazir says what he thinks, and asked about Malaysia’s economic performance during his time in senior corporate life he rates it “mediocre” because of “structural weaknesses that have proved difficult o overcome.” He is one of the few senior people in business who have publicly criticized the New Economic Policy, which sets affirmative action for Bumiputras in a variety of ways from government jobs to subsidized housing and enforced allocation of stock market floats. “It was hugely successful for its time but proved very difficult to undo, and in recent times it has proved a constraint on investment.”

Now, bits of the NEP are being repealed by the prime minister – Najib Razak, Nazir’s brother. (Their father, Tun Adbul Razak Hussein, was the man who implemented the NEP in the first place in 1971.) Nobody suggests Nazir has got where he is through anything other than ability, but it is widely discussed in Kuala Lumpur just how strong his influence is today: he is said to be a trusted adviser to his brother and some speak of him as an informal finance minister (Najib technically has two positions, as prime minister and finance minister). Nazir declines to comment on the relationship but he does say: “It is very brave of the prime minister to dare to undo parts of the NEP and already we are seeing a good response from investors.” At the heart of the banking industry and with the ear of the national leader, he is an example of a younger generation of connected but able executives building well-managed national champions in Asia.

To see the article as it ran, click here: GFPsupplement 1