F R I D A Y, O C T O B E R 1 9 ,

2012

Malaysian Asian Robert Kuok

By Andrew Tanzer
IN 1993 THE COCA-COLA CO. was ready to invade part of China in a big way,
but this is tricky turf. Coke understood that China could be a gold mine or a
disaster. It needed a savvy local partner.At stake was the right to bottle Coke
in an area stretching across north and southwest China and inhabited by 450
million people. But pushing that quintessentially American product into the
depths of China took careful handling.Lets put this in perspective: The license
to bottle Coke in the Philippines, population 70 million, recently sold for $2.6
billion. By this standard, the China deal could in time be worth $8 billion.
Every capitalist in Asia coveted the deal.
Coke chose Robert Kuok. I thought, My God, this is a gift from Heaven,
Kuok recalls. Kuok is being modest. It was no gift. Coke knew what it was
doing.
Soft drinks were not Kuoks business, but Coke didnt need expertise in soft
drinks. It needed a smart guy with contacts. And thats Kuok, a 73-year-old
hotel owner, commodities trader, investor, cosmopolite.
Keeping 12.5% of the bottling venture, Coke granted 87.5% to Kerry Group,
Kuoks Hong Kong-based conglomerate.
Rarely interviewed, stubbornly shunning publicity (the Chinese have a
saying, Kuok explains, Tall trees experience strong winds), Robert Kuok
was at first reluctant, but finally agreed to talk with Forbes. When he did, he
opened up and gave us remarkable insight into a remarkable mind nd a
remarkable career. Our photographs of him are among the very few in public
hands.
He is a perfect businessman, says Randolph Guthrie, chief executive of the
Singapore-based Beaufort Hotels chain. Guthrie now competes with Kuoks
Shangri-La hotels, but he once worked for Kuok.

Perfect is a peculiar word to apply to a businessperson, but in the sense of

being well-rounded it surely applies here. Speaking impeccable English, fluent
in Malay and five Chinese dialects, cultured and yet personally unassuming,
KuokR.K. to his executivesay not be the biggest player in Asia. We
estimate his familys net worth to be at least $7 billion. But for sheer
versatility, imagination and ability to get things done he has no peer.
What could take us 18 to 24 months [in China], they [Kuok's Kerry Group]
could do in 2 months, says John Farrell, president of Coca-Cola China Ltd.
His whole life has been built around building networks with overseas Chinese
and in China. [Kerry's] ability to do things fast is incredible.
I adapt like a chameleon to the particular society where I am operating at the
moment, Kuok says. Robert Riley, managing director of Mandarin Oriental
Hotel Group, a fierce Kuok competitor, says: Hes a local everywhere he
goes.
Its hard to find a business or an East Asian country where Kuok isnt
involved: food, luxury and middle-market hotels, real estate, sugar and oil
palm plantations, newspapers; including the worlds most profitable, South
China Morning Post. He has large investments in Indonesia, Hong Kong,
China proper, Australia, Malaysia, Singapore, the Philippines and Thailand.
He owns a piece of Citic Pacific, the Beijing-controlled conglomerate. On that
investment alone he has made some $1 billion in six years.At the epicenter of
all this activity is Kuok himself. The nearest equivalent we can think of, where
a single person holds in his hands the ultimate reins of so many businesses,
would have to be Rupert Murdoch. But Murdochs business is of a piece in
that it is mostly in communications media. Not so, Kuok. The only thing
binding his interests is the acumen of the man himself. Im the little string
that ties the rings together, is how Kuok describes his role.R.K. focuses on
strategy and relationship-building and makes most of the final decisions, with
help from executive committees in Hong Kong, Singapore and Kuala Lumpur.
But he leaves day-to-day management of the businesses in the hands of 35
trusted senior executives (including half a dozen relatives) who report directly
to him and network among themselves.
Heres a key to how his mind works: Khor Chin Poey, an engineer who runs
the Malaysian and Indonesian agribusinesses, says that when Kuok phones he

is less interested in profits than in sales volume. His logic is production

equals money, explains Khor. He assumes you know how to run your
business, and he knows prices and your margins.
Obviously he takes for granted that the margins will be maintained. Heaven
help the executive who does not watch those margins. He himself has a
prodigious head for numbers. In talking with Forbes, Kuok recalled 1940s
foreign-exchange rates to the hundredth and 1960s per-square-foot property
prices in Singapore to the penny.
Heres another key to his character: He is prejudiced against M.B.A.s. When I
hear somebodys got an M.B.A., he says, raising his voice a bit, I have a
feeling of dread, because normally they come to me with an overpompous
sense of their own importance. And no way are you going to prick that bubble,
with the result that one day there will be a cave-in in their department. So they
learn painful lessons at my expense!
Kuok says he prefers people with an inner humility. He recalls his mothers
Buddhist outlook and its emphasis on that virtue. A highly successful man
invites many problems and miseries, Kuok says. Why multiply enemies with
a high profile or by boasting about accomplishments?
Robert Kuok was born in 1923 and raised in Johore Bahru, a mixed Chinese,
Malay and Indian town just across the causeway from Singapore in what was
then British Malaya. His father, an immigrant from Chinas Fujian province,
prospered in businesses ranging from a general merchandise store to trading
and cold storage. But the elder Kuoks horizons were limited by colonialism
and a lack of familiarity with Western ways.
Kuok says his father was much closer to the Malay community than to his
fellow Chinese. It was Malay friends, for example, who lured his father onto a
slow boat to Europe in 1928 to kick an opium habit.
Unable to speak English himself, Kuoks father saw that learning the language
and manners of Malayas colonial rulers was crucial if the second generation
was to expand the family business. So he sent Robert and his two older
brothers, Philip and William, to fine British-run schools in Malaya. Roberts
classmates

included

the

second

and

third

prime

ministers

of

postindependence Malaysia, and Lee Kuan Yew, the first prime minister of
Singapore.
Kuok was a student at Singapores Raffles College when, on Dec. 8, 1941, the
Japanese bombed the island and declared war. Retreating to Johore Bahru, he
went to work in the local office of Mitsubishi Corp., the Japanese trading
company. He was then 18.
The Chinese have a saying: Tall trees experience strong winds.
Mitsubishi had a monopoly on rice imports into the state of Johore, and young
Robert soon headed the rice department. Kuok Senior obtained a license as a
wholesaler from the local food controller.Shortly after the Japanese
surrendered, Kuok and his father won a contract from the British military to
supply fresh produce to 50,000 Japanese prisoners of war interned at a
rubber estate. This led to the Kuoks appointment as distributors of essential
foodstuffs for all of South Johore classic case of Chinese middlemen serving
as liaison between colonial masters and the locals. Robert ran the godowns,
the waterfront warehouses that stored the commodities, mostly brought in
from Singapore. Kuok is now a large Hong Kong godown owner.After Kuoks
father died suddenly, in December 1948, Robert, then 25, joined his mother,
brother Philip and two cousins in a new family business. Robert soon
dominated the company, and his brother Philip eventually left to become a
Malaysian diplomat who served as ambassador to several European countries.
Middle brother William took a third path. After WWII he became a senior
figure in the Malayan Communist Party, and was killed by British troops in
the Malayan jungle in 1952.
In the early 1950s rice was a competitive business. Searching for an advantage
over competitors, Kuok switched his emphasis from rice to sugar and in 1953
moved his base to Singapore. The sugar trade was conducted in English,
which put me in a stronger position, he explains. I was reading Reuters.
In 1963 Kuok made a killing, trading sugar physicals and futures out of a room
at Londons Grosvenor House hotel. He cleaned up, speculating in the
commodity from 1963 to the mid-1970s, years of high volatility and price
peaks in sugar.

Im still shuddering when I think of some of my exploits of the 1960s, of how

narrow were my escapes, he recalls. I risked everything without realizing it.
It was all rhythm. Have you ever seen Michael Jordan play when hes on a
rhythm run? It was exactly like that.
Malaysian independence in 1957 was a boon for Kuok. With the presence of a
British colonial administration, the best cakes went to the British houses, he
recalls. When colonialism ended, I was there to capitalize on the
opportunities.
With close ties to the Malay political elite, Kuok soon secured a license to
build the countrys first sugar refinery, with tariff protection. By the mid1960s he dominated the Malaysian sugar industry. He still does. Except for his
period of commodity speculation, Kuok generally follows a policy of buying
and holding.
With his keen diplomatic skills, he built local businesses in the 1960s and
1970s, when relations between the Malay and minority Chinese communities
were often uneasy. While other local Chinese felt discriminated against, Kuok
worked out who needed him, says Hugh Peyman, managing director of
Kleinwort Benson Securities (Singapore) and a keen observer of Southeast
Asian politics and business. He knew where the power was and that he had to
prove he was a better Malaysian than anyone else.
Early on he was fortunate to win the backing of Chin Sophonpanich, the
legendary founder of Bangkok Bank who backed many of the great overseas
Chinese entrepreneurs.
He [Chin] didnt wait for you to go see him, says Kuok, recalling how Chin
came to his trading office in Singapore in the late 1950s. Do you know why?
He wanted to see how you operated, how you placed your desk, the sense of
drive in the office. Chin was soon financing Kuoks enterprises.
Kuok traded sugar and rice with China as early as 1960. As a measure of his
ability to navigate politically tricky waters, he was able to continue doing
business with China through Hong Kong even during the Cultural Revolution.
One of his early contacts, the state-owned foodstuffs agency Ceroils, is today a
small investor in Kuoks oil palm plantations in East Malaysia and a partner in
some of his vegetable oil, flour milling and Coke plants in China.

What brought a sugar and rice trader into the hotel business? Like many
wealthy people, Kuok understands that well planned and located luxury hotels
are timeless investments, growing with their communities and splendid
hedges against inflation. (Kuok estimates that the land under his Shangri-La
Singapore has appreciated about 300-fold since it was purchased in the late
1960s.)
I spent a lot of time in some excellent hotels in Europe, says Kuok. I knew
what I wanted in a good hotel.
Kuoks partners in his Shangri-La properties are usually the local businessmen
he deals with in sugar, cooking oil or other items, or owners of choice real
estate. A partner in Thai sugar mills became his partner in the Shangri-La
Bangkok. His partners in Shangri-La Singapore, which opened in 1971, were
rice traders.
In the late 1960s Kuok met Indonesian billionaire Liem Sioe Liong through
the sugar trade. Today the two tycoons jointly operate massive and rapidly
expanding sugar plantations with mills and refineries in southern Sumatra.
Liem invested in Kuoks Shangri-La hotel in Jakarta and in one in Hong Kong.
With 17,000 rooms, the Shangri-La chain is now Asias largest luxury hotel
group. Its probably worth $4 billion. Although he is not primarily a real estate
person, Kuok has made huge investments in properties, accumulating
beachfront in Penang, shopping malls and apartment buildings in Singapore
and Shanghai, office towers in Manila and Beijing. In 1988 he bought a
portfolio of luxury apartment buildings in Hong Kongs Midlevels district for
$175 million from Australias Alan Bond, who was on the verge of bankruptcy.
The capital gain on that investment alone is already more than $1 billion.
In 1974, with three aides, Kuok moved headquarters from Singapore/Malaysia
to Hong Kong. Motive: taxes. If you made a dollar, you kept only 50 cents of
it in Malaysia and 60 cents in Singapore. Hong Kong, on the other hand,
allowed him to keep 84 cents.
As the Coca-Cola deal suggests, the current thrust of Kuoks deals is China
proper, where consumption of edible oils like palm oil expanded 50% from
1992 to 1996 as more and more Chinese gained disposable income. The most

important [food] market is always China, but its still early days there, says
Kuok. A natural market, of course, for Coke.
Kuok met Warren Buffett at a Coca-Cola shareholders meeting in
Wilmington, Del. in April lovely man, says Kuok. He likes Buffetts
concept of picking smart people, backing them to the hilt and then getting out
of the way so long as they dont screw up. You think youre a smart
businessman, but you must realize that many people are smarter than you. If
there are smarter peopletronger, better horses runninghen why arent you
putting some of your money on them and not all of it on yourself?
The same attitudehat willingness to learn from othersurfaced when we
asked Kuok how he makes tough decisions. When Im in doubt, he replied, I
chat. One of the best ways is to offer a cleverer man than yourself a joint
venture deal, and if its poison hell say its an awful thing. Then youre seeing
the deal through other peoples eyes.
Theres that old humility again. But in Kuoks case, humility does not translate
into conventional thinking. Kuoks success owes much to a strong contrarian
streaknd a strong stomach to go with it. He stayed the course in Malaysia
after the 1969 ethnic riots. He plunged into racially turbulent Indonesia in the
early 1970s, when few overseas Chinese dared to.
After Philippine dictator Ferdinand Marcos fled the country in 1986, Manila
was shunned by investors and tourists. Kuok, who says hed never been able to
do much commodities business under Marcos, now moved in. Everybody said
that nations gone to the dogs, but the intensity of the music was gradually
dying down, if you could listen carefully, he recalls.
So he began building two Shangri-La hotels, the first hotels built in nearly 20
years in Manila. Somewhere along the line the nation would recover, and if
youre putting up a nice building in a super location, wheres the risk? he
reasons.
He continued to invest heavily in China through the volatile cycles of the
1980s, when many wealthy overseas Chinese were making charitable
donations to their ancestral villages but otherwise keeping their capital safe in
Hong Kong or elsewhere.

In China, says Adrian Fu, chairman of Hong Kongs Furama Hotel

Enterprises Ltd., its important that you can prove to the leaders that you do
not abandon them when they are in trouble. Kuok has done that.
When the Tiananmen incident occurred in June 1989, Kuok was in the middle
of building his massive, $530 million China World Trade Center, a showcase
joint venture with the Chinese government in downtown Beijing. Banks and
contractors panicked, but Kuok stuck it out. Construction was delayed, and
Kuok had to pump in more equity. Today the project, which includes two
hotels, nets $80 million to $90 million a year, after taxes.
It may shock some Americans, but Kuok has never hesitated to get into bed
with the Beijing bosses. Nor does he apologize for that. He believes the
Tiananmen crackdown prevented anarchy, and he professes admiration for
the countrys current leadershiphich, he says, is committed to economic
development.
Like most ethnic Chinese, Kuok has a powerful sense of family. He has eight
children from two marriages. Two sons are in the business, and his daughter
Ruth helps him manage the groups charitable foundations. Eldest son, Beau,
oversees hotels, real estate and Coke-bottling; second son, Ean, recently
moved

to

Hong

Kong

from

Singapore

and

keeps

an

eye

on

Singapore/Malaysia and will soon take charge of the edible oils business. Two
nephews and a nephew-in-law hold important positions.
But unlike many other ethnic Chinese magnates, Kuok is not afraid of putting
trust in outside senior management, often including Westerners like Paul
Bush, Owen Jonathan and David Hayden. Old China hand Robert Theleen,
chairman of Hong Kongs ChinaVest Ltd., thinks Kuok is way ahead of other
ethnic Chinese businesspeople in adapting to a changing world.The next
decade will be about whether the multinational corporation can be extended
to the Chinese environment, says Theleen. Kuoks already moved from
entrepreneurship to multinationalism.
Nor is Kuok afraid to part with equity. More than 30% of the shares in the
three main family holding companies are held by nonrelatives. You cant take
[wealth] with you. As for leaving it all to your kids, is it necessary, is it wise, do
you want to drip acid on their heads constantly?

Interestingly, Kuok has done little in the U.S. He has apparently felt he had
more opportunities than he could handle in his own backyard. He hinted to
Forbes, however, he wouldnt be averse to investing in hotels in the U.S.
Keep your eye on the man. Coke knew what it was doing when it picked Kuok
from all the magnates in Asia to be its guide and partner in China.
A tasteful host
AS HIS MOST visible business, the Shangri-La hotel and resort chain reflects
Robert Kuoks tastes and personality. Kuok loves crystal, so his Island
Shangri-La hotel in Hong Kong has more than 700 crystal chandeliers that
cost from $600 to $11,000 each. From a standing start a quarter of a century
back, Kuok has built Shangri-La (from the James Hilton novel Lost Horizon)
into Asias premier luxury hotel chain. Kuok knew nothing about hotel
management, so he did what is for him a typical thing: He partnered with a
first-class foreign operation, in this case the U.S. hotel group Westin Hotels &
Resorts, to operate his first two large five-star properties in Singapore and
Hong Kong. When he founded his Shangri-La Hotels & Resorts management
company in 1983, he staffed it partly with ex-Westin managers.
Today Shangri-La Hotels & Resorts operates 36 properties across the region
and is set to expand to 50 within five years, much of the expansion in China,
where Shangri-La has 12 hotels and 8 under construction. Now 90% of the
clientele in China consists of foreigners, but the domestic market is the real
growth area as China industrializes and prosperity spreads into new regions.
But the expansion is measured and deliberate. We dont want to cookiecutter the chain, says David Hayden, managing director of Shangri-La Hotels
& Resorts.
A well-run luxury hotel in Asia achieves gross operating profit margins of 35%
to 45%, compared with 20% to 25% in the West. The biggest of Kuoks public
hotel companies, Shangri-La Asia Ltd., last year earned $141 million on
revenues of $390 million impressive net profit margin of 36%. The
management company is all in the Kuok family, but Hong Kong-listed
Shangri-La Asia Ltd. owns 20 of the hotels. The stock sells for 12.7 times 1996
earnings.