“Have you considered running for office with your family background?” Nazir Razak chose his words carefully as he answered with some hesitation, “Um… no…” and rejected the possibility of a political future. “It is a conscious decision that there can only be 1 family member in politics, and so I went down the route of investment banking.”
The Cambridge University Southeast Asian Society invited Dato’ Sri Mohamed Nazir bin Tun Abdul Razak, Chairman of CIMB Group, and founding partner of private equity fund manager, Ikhlas Capital.
Throughout his tenure as CEO and subsequently, Chairman of CIMB Group, CIMB has grown to become the fifth largest universal bank in ASEAN, the largest Asia Pacific-based investment bank and one of the world’s largest Islamic banks. Perhaps the lesser known of the Razak siblings — his elder brother Najib Razak being the recently ousted sixth Prime Minister of Malaysia — Nazir Razak offered an interesting take on ASEAN regionalism, the political economy of ASEAN, and his new private equity venture.
Razak first established the role and significance of ASEAN: “Countries in Southeast Asia wanted to gang up and gain strength in numbers to stand against external influences and set up a platform for intra-regional diplomacy”. Southeast Asia used to be characterised by instability and turbulence but the countries gradually realised the potential of working together for the greater regional good. The setting up of the ASEAN Free Trade Area was started in 1992 and has evolved into the ASEAN Economic Community in 2015, a major milestone that “envisions ASEAN as a single market and production base, a highly competitive region with equitable economic development, and fully integrated into the global economy.” In the global economy, this has allowed ASEAN do things the “ASEAN way”, an informal and personal approach that focusses on negotiation and the promotion of mutual interests.
However, Razak pointed out the sobering reality of a fractured political landscape glued together through ASEAN. “It is easier to send goods to the UK than Indonesia due to red tape at the border; travel has dropped; ASEAN Open Skies agreement doesn’t mean much because each airport has their own individual regulations…” Razak rattled off a list of examples that proved a fundamental disconnect between the ideals espoused by the ASEAN vision and the political reality. “I don’t want to put down the efforts of ASEAN and their initiatives, but it is difficult to see progress.” While Razak continues to display optimism in ASEAN’s role of economic integration and cooperation, it is clear that the processes mediating ASEAN’s rise and development have not been smooth-sailing, and are unlikely to be in the near future. Government rhetoric and reality often turn out very differently and ASEAN has to sensitively navigate a political landscape dictated by domestic politics, where the interests of the nation-state undoubtedly comes before that of the region’s.
“I don’t want to put down the efforts of ASEAN and their initiatives, but it is difficult to see progress.”
Here, Razak drew attention to ASEAN’s incredible diversity, “We have ten countries and ten political systems: monarchy, dictatorship, presidential-style democracy, and one or two that I can’t even describe!”
Razak chuckled, as he argued that the inherent differences between ASEAN countries in terms of religion, language, ethnicity, economic prosperity and culture, makes it unrealistic for countries to transcend national interests. “Nationalism is strong in ASEAN and there is neighbourhood rivalry too.” In fact, business deals could fall through simply due to such inter-country competition. “Only the locals will understand the nuances. In each market, they hire the best locals to interface with the government and give feedback on local politics.”
ASEAN has long put forth a framework for multilateral economic integration, yet Razak laughed at the irony of how “central banks would negotiate bilaterally with one another. It’s a joke right?” Exchanging licenses and establishing trade agreements are administratively easier in bilateral terms as countries ultimately have their own unique positions and interests that can be negotiated more effectively with fewer stakeholders involved, yet it poses a significant obstacle to integration. He reflected that “the essence of integration is sharing human resources, information and outsourcing to achieve cross-border synergies”, and banks should not be too protective of their own markets if the ASEAN way was to succeed and sustain.
Given his acuity and experience of ASEAN operations, why not contribute to ASEAN’s development through a political role?
Razak maintained that politics is not the only channel that one could effect constructive influence in ASEAN, and that he could “give opinions” from a clearer, external position outside the political system. To him, venture capital is more relevant as it facilitates and encourages cross-country collaboration — “the more venture capital is invested, the easier companies can cross borders” — and Razak prizes this economic integration and collaboration as the foundation of ASEAN expansion. The primary motivation for founding Ikhlas Capital was his hope of offering indigenous banks the opportunity to expand to new markets in ASEAN and bringing existing barriers, such as the restrictions to outsourcing in Indonesia and data sharing in Thailand. “ASEAN is one of the fastest growing regions in the world — it enjoys lots of synergies in the ecosystem, like an IT system and cost synergies.” This is what Razak wants to tap into, and he sees his private equity venture as a continuation of his journey in promoting ASEAN ideals.
“The more venture capital is invested, the easier companies can cross borders…”
Do you possibly see a significant event or initiative that could bridge these differences and allow countries to set aside their obsessions with sovereignty?
Razak proudly raised the fact that ASEAN nations are currently making a joint bid to host the World Cup in 2034, a symbol of regional strength, unity and cooperation. At the same time that the political elites are working together to promote ASEAN on the global arena, Razak also suggested that on the ground, the young generation “desires more integration” and are constantly surprising him with their knowledge about ASEAN. In fact, when Razak was a student at Cambridge in 1989 (MPhil in Development Economics), there was no society representing the Southeast Asian community in Cambridge and he expressed delight that one has finally been established, a testament to Southeast Asia’s growing influence, identity and solidarity.
I asked how ASEAN regionalism would work out when member countries not only have different cultures, but fundamentally different interests with varying priorities.
Pointing out that “the Chinese chequebook is humongous,” Razak insisted on the importance of “reminding each other to stay together”. There, of course, will always be contentious issues between ASEAN nations, but clear communication and negotiation will help to resolve them. “In the long-term, the best position to take is being neutral” — seeing the larger goals of a cohesive cultural diversity promotes, not hinders, economic cooperation. But this is, after all, a very top-down approach to encourage the notion that “we are all in this together”. How about getting an authentic integration across various fronts from the bottom-up?
Razak nodded, “This hit the nail on the head. Don’t forget we are all relatively new nations and our governments have spent a lot of time trying to create a sense of national identity. It’s quite difficult to try to promote a national identity and at the same time, a separate ASEAN identity.” Being young nations, Southeast Asian countries have just moved on from the formative years of identity formation. Hence, while the government’s priority is to foster national identity, it has to “create some space to recognise the importance of ASEAN”. Razak suggests making a differentiation between national identity and affiliation to ASEAN. “Rather than going around to say ‘I belong to ASEAN, it is better to say that “I’m Malaysian and also an affiliation to ASEAN.” It is a more realistic agenda and he reaffirms the need to “cascade [the significance and value of ASEAN] to the masses because at the moment, it is still a very high-level, top-down notion, which requires buy-in from people. If people don’t buy-in, then politicians wouldn’t either.”
“It’s quite difficult to try to promote a national identity and at the same time, a separate ASEAN identity.”
ASEAN is very much a practical, economy-driven narrative that Southeast Asian countries have internalised to different extents. My biggest takeaway from speaking to Razak and his sharing was his keen understanding of the political economy in ASEAN: “Politics is always more powerful than economics as a driving force. To operate ASEAN, you need to understand politics — senior management must always be a local to adequately navigate local politics”. This relationship, however, potentially flips. “If ASEAN does not deliver economically, its political legitimacy will start to ebb away. In the end, economics becomes politics.”
“Politics is always more powerful than economics as a driving force. To operate ASEAN, you need to understand politics — senior management must always be a local to adequately navigate local politics.”