The civil servant turned CEO

Business Times - 05 Apr 2008


The civil servant turned CEO

CapitaLand's Liew Mun Leong talks to VIKRAM KHANNA about his journey to the corporate world and the new dynamics of S'pore's property market

'I SPENT 22 years in the civil service, but people never believed I was a civil servant,' says CapitaLand's CEO, Liew Mun Leong, winner of the outstanding CEO award at the 2006 Singapore Business Awards.

'I remember when I was leaving for the private sector, I was walking to the lift with Ngiam Tong Dow who was the first permanent secretary I worked for. I said to him, thank you for your help all these years in the civil service. And Mr Ngiam looked at me and said, 'but you have never really been a civil servant'.'

Certainly, Mr Liew does not fit the stereotype. If you were to meet him without knowing his background, you would more likely think he'd been in business than in government. And you would not be totally wrong; even while in government, he displayed an entrepreneurial streak.

His style as a CEO is also un-civil servant like. For instance, he's not a believer in hierarchy or protocol - something he learned from working with one of Singapore's founding fathers, Dr Goh Keng Swee. 'If I go to a city in China and I want to see a site, I won't necessarily go through the CEO. I'll just go straight to the site and have the person down there show it to me.'

To engage in a conversation with Mr Liew is to be 'edutained'. A natural and vivid communicator, he is a repository of stories, anecdotes, jokes and above all, lessons. He conveys the impression of someone who learns something from everything he does and observes, who is constantly in learning mode - and who remembers it all - names, places, dates, incidents going back decades, even prices on restaurant menus.

Emails to staff

Read his recently released book, 'Building People: Sunday Emails from a CEO' and you get the idea. These were emails he wrote to his staff on Sunday afternoons, in his characteristically direct and casual style. They are about anything he might have learned from someone he has met, a book he has read, an experience he has had.

He is a great believer in the power of communication. 'CEOs and leaders could do well to make known their thought, ideas, concerns and encounters,' he writes in his preface, 'so that the people they lead can be closer to them mentally and emotionally.'

Sixty-two year old Mr Liew's long professional journey which has taken him to the top of South-east Asia's largest property development company, began as a civil engineer in the Ministry of Defence, building military camps, barracks and airbases. He later joined the public works department, where he helped construct, first Paya Lebar airport, and then Changi airport during the 1970s.

'Changi was the largest project in Singapore, it was huge,' he recalls. But I remember, when we were building it, all we were focused on was making sure it would be ready for the official opening on July 1, 1981. We never thought we were building the best airport in the world. It never even crossed our minds.'

Later, Mr Liew was to go back to build Changi's terminal two in the mid-1980s.

After that, he had his first opportunity as a CEO. 'I was approached by the government. They said SISIR (the Singapore Institute of Standards and Industrial Research) is in trouble, can you help?

'SISIR was started in the 1970s to test Singapore-made goods and to help SMEs meet technological standards. I was originally meant to spend two years there, but I ended up spending five-and-a-half years.'

'If you ask me where the turning point was in my thinking as a leader, it was at SISIR,' he says. 'Because in PWD and Mindef I played technical and functional roles, but now for the first time, I had to take total responsibility and answer to a board.'

When Mr Liew took over at SISIR, it was troubled. 'The first thing I did was interview all the scientists and engineers there, one by one, to find out what's bothering them.

'What I found was that they were doing their own work. They were motivated, but they didn't know where the organisation was going. Nobody had pulled them together and said to them 'this is our mission, this is where we are going.'

'One thing I told them was that I don't want SISIR to do academic research. I want to do industrial research that I can commercialise. We are serving industry, we are not doing something esoteric.

'I realised that as a leader and CEO, I needed to formulate a vision for them. A direction had to be defined. Because otherwise, we only had a fragmented bunch of laboratories in which people were doing their own thing. I also realised I had to communicate a lot with them. So I started holding town hall meetings for all the staff every quarter. I also learned the importance of doing Q&A with staff.'

And then, Mr Liew saw an entrepreneurial opportunity for SISIR. 'It struck me that SISIR had a pot of gold in the form of expertise - scientists and engineers. But their work was not commercialised. And because of that, SISIR had to keep going back to the government for grants. And that meant we were controlled by the Ministry of Finance, even when it came to recruitment of people.

'So I thought, we should be self-financed. Once we were not subsidised, the government would not interfere.

'So, I went to the Minister staff meeting, chaired by Lee Hsien Loong, who was then the Minister for Trade and Industry. I said, Minister, I've got good news for you, I don't need a government grant anymore. I will be self financed, but I need to be liberalised in terms of my practices and processes.

'He looked at me and said, are you sure you can survive? I said, sure, I will do marketing. But if the government wants me to set standards, I will treat the government as my client and I will charge for it. I will also do contract R&D and testing and I will buy my own equipment for that. He said ok, you give me a programme and I'll give you three years to be self financed. And in the end, we succeeded.'

Having proven himself as a CEO at SISIR, Mr Liew was persuaded to take up his first job in the private sector. In 1992, he became CEO of the construction company L&M.

The immediate priority there was to clean up a financial mess; the company had overexpanded and its share price was languishing. Mr Liew found himself having to retrench staff and tighten financial controls. In 1995, L&M was bought over by an Indonesian consortium led by Johannes Kotjo, former CEO of the Salim Group, with Bambang Suharto - the elder son of Indonesia's then president - also being one of the shareholders. They persuaded Mr Liew to stay on as CEO.

'They said they would give L&M this pan-Jakarta highway project. It was sure to make a lot of money. So I stayed on for a while.'

'I remember every Friday I had to go to Jakarta for meetings. But I found that the meetings were about distribution of money. Someone from public works would say he needs to get various approvals, so he needs $2 million. Someone else would say he will do a survey for us, it'll cost US$3 million. Some general would say he needs $3 million for another task. I thought, by the time I finish distributing all this money, what will be left for the company? It was a scam.'

Mr Liew chose to resign, although by then L&M had been turned around and its share price had more than doubled.

There was another challenging job waiting for him, at Pidemco Land, the government-linked property company, which he joined in 1996.

'At that time, the government had already started the 'second wing' policy,' he recalls, referring to the government's strategy of encouraging local companies to venture overseas. 'But Pidemco was not able to handle its overseas projects. They had projects in Suzhou, Shanghai, Vietnam, Malaysia and Auckland but didn't have the expertise to develop or run these projects. So I brought in the whole chain of expertise, many of my PWD kakis.'

Gradually, Pidemco was stabilised. But the biggest turning point for the company came in November 2000, when it acquired DBS Bank's stake in DBS Land, the bank having already announced its intention to exit the property business. Mr Liew had four days to make the decision, as other suitors were also interested.

'There was no way we could do thorough due diligence. All we had to go on was publicly available information. We had had no dialogue with DBS Bank.'

Ho Ching, who was then CEO of the Singapore Technologies Group, Pidemco's parent, set up a meeting between Mr Liew and Jackson Tai, who was then DBS Bank's chief financial officer.

'I remember I met Jackson Tai at the Empire Cafe at 6.30. We exchanged prices for five rounds before we settled at S$2.92 a share for DBS Land. Then we shook hands.'

The effective merger of DBS Land and Pidemco led to the creation of CapitaLand, Singapore's largest listed property company.

'The acquisition of DBS Land gave us scale,' says Mr Liew. At last, CapitaLand could become a significant international player. And over the next seven years, that is what it became. It now has a footprint that spans more than 100 cities in over 20 countries. It is Asia's largest owner/operator of retail malls and the global leader in service residences, as well as a leading REIT and property fund manager.

'Over the seven years, we have generated $19 billion in total shareholder return and have accumulated profits of $4.9 billion,' says Mr Liew.

Tough calls

But along the way, he had to make some tough calls. One of them was the sale of the Raffles Hotel in September 2005 for $1.7 billion to the private equity firm, Colony Capital.

'I remember, at the press conference to announce the deal, the first question I was asked was, 'Mr Liew, how would you like to be known as the man who sold The Raffles?'

'I said, I don't think it's wrong. First, we would need $2 billion to be in the world's top 10 in terms of the number of rooms, which we can't justify to our shareholders. Second, even if we do that, the return on equity would be low, around 4 per cent. Third, it is not a business we thought we could run in parallel with Ascott. I have two hospitality arms. I think Ascott is better in the sense that it's in the top league in the world. So, why not take the $2 billion and invest in Ascott instead? And then of course, I got a gain of $600 million for our shareholders.

'The people who objected to the sale were talking on the basis of sentiment and emotion. But I said, shareholders have put money in me. I can't give them returns in the form of emotional payback. I have to give them returns in cash.

'And anyway, at the end of the day, ok we sold the Raffles, but the Raffles is still in Beach Road!'

Apart from triggering a jump in CapitaLand's share price, the Raffles deal marked a turning point in the perception of the company, says Mr Liew. 'Investors no longer saw us as just a GLC; they saw us as a very commercial player.'

This perception was reinforced when CapitaLand became the first Singapore property company to launch a real estate investment trust (REIT), the CapitaMall Trust, in July 2002. The process had taken six years.

Mr Liew explains: 'When I took over Pidemco Land in 1996, we were very heavily laden with bank borrowings. The problem was, how do we relieve this burden. Then came the Asian crisis in 1997. The excesses in the real estate had made banks reluctant to lend. So we had no choice but to tap the capital markets.'

'But the REITS we created were not done as a monetisation exercise. We created them as a second income stream, a second purse, unlike some people who treat Reits as an opportunity to sell their assets.'

Private equity is another area into which CapitaLand has ventured. It has 15 private equity funds, but with a difference: 'In all our property funds, we have a sponsor's stake of up to 30 per cent, our own skin is inside' Mr Liew points out. 'And we show investors our projects. So we're not an ordinary fund manager, we are also the investor and the developer. Because of that, we were able to create 15 funds so quickly, in China, Japan, India and Vietnam.'

As an engineer, Mr. Liew is convinced that his work helps to build not just physical structures, but people. 'One reason Singapore has been very successful is because of how we have provided infrastructure and housing,' he says. 'Because we have built an environment that is effective. And when you build such an environment, the people are also built. So, if you can build for people, you can build people. That's the mission of the company. We want to build for people so that people can be built.'

http://www.businesstimes.com.sg/mnt/media/image/launched/2008-04-05/BT_WEEKEND_1_CURRENT_VKLIEW2.jpg

'The people who objected to the sale were talking on the basis of sentiment and emotion. But I said, shareholders have put money in me. I can't give them returns in the form of emotional payback. I have to give them returns in cash.'
- Liew Mun Leong on the sale of Raffles Hotel



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