14 March 2020
Sarawakian companies with better access to capital have the edge in the age of globalisation, as good capital access empowers companies to go beyond domestic shores and become formidable global players. — AFP photo
KUCHING: Sarawakian companies need to increase their competitive advantage and become global using capital markets as leverage, as only a limited amount of companies in East Malaysia can claim to have good access to said markets.
“We observe that there are a lot of domestic champions, but only a handful of companies have marked significant success in the global arena comparable to the likes of Google and Samsung and one of the reasons would be the limited access to capital, as well as the cost of capital which remains relatively high compared to peer countries like Singapore,” said Chua Zhu Lian, partner in charge of group strategy at Vision Group in an interview with Borneo Post.
Chua Zhu Lian
“It would be fantastic to see more companies in Sarawak be empowered with better access to capital markets.”
Chua said a developed capital market marks a crucial element in the development of the nation’s economy.
“If companies and entrepreneurs are empowered with access to capital in an easy, matured and savvy manner, I believe we will see more global giants with worldwide impact being born in Malaysia,” he added.
“This will certainly help the country in building a modern nation that creates prosperity for the people.”
Companies with better access to capital have the edge in the age of globalisation, Chua added, as good capital access empowers companies to go beyond domestic shores and become formidable global players.
“We observe that several companies with the backing of huge capital providers have successfully maneouvred their peers out of the market and anchored a dominant market position in the space where “the last man standing seems to take it all”,” he added.
“Capital advantage is also very relevant in conventional industries like manufacturing and agriculture which remains fundamental to the Sarawakian economy. These sectors provide a lot of employment and upskill opportunities to the local people and have been a key agenda of the state via initiatives like Sarawak Corridor of Renewable Energy (SCORE).
“The state has done a great job in laying the foundation for the manufacturing economy through the Samalaju Industrial Park by providing energy at competitive prices.
“I believe these initiatives will open up new opportunities for the savvy entrepreneurs, especially to build secondary industries with a global market.”
With access to larger and cheaper capital, Chua observed that Sarawakian companies and entrepreneurs can kickstart new ventures, increase their investments to boost production capacity, upgrade their existing technology, upskill their workers, achieve greater economies of scale and eventually become cost competitive compared to their competitors to get a larger market share globally.
“There are a lot of opportunities for companies to expand organically and inorganically by considering capital market exercises like initial public offering/listing, private placements or bond issuance.
“Private equity is also an increasingly popular option companies can consider to have access to capital in a sustainable manner.”
Meanwhile, Chua also outlined a clear premium for integrity and transparency in Malaysian capital markets.
This comes as good companies are rewarded with higher valuations by the investment community, and that puts companies in an advantageous position to consolidate their market share by increasing production capacity, buying out their competitors or even pursue strategies to drive competition out of the market.
“Companies which are valued highly is also seen to have strong advantages in areas of procurement and customer confidence,” he explained. “Effective and active engagement strategies with the investment communities can help companies achieve this advantage within a shorter time frame.
“Some companies which have outsourced the function of investor engagement have since engagement, successfully unleashed the potential of capital market.
“In a nutshell, companies who understands how to utilise capital markets will certainly gain an edge in this increasingly competitive operating environment.”
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