Know-how vs know-who: Malaysia’s crony capitalism quagmire

• Making connections or networking is important in business
• Making sure it’s the right, ethical, kind of connections is even more important

AT the GIST Startup Boot Camp Malaysia in April, one of the keynote speakers was HealthCare California president and founder Dr Harry G. Harris, who had ventured into the startup scene after a long career in the US public sector.
 
Amongst other points, his inspiring and no-holds-barred address was aimed at prompting entrepreneurs to make the right kind of connections, and meet the right kind of people – people who could open doors, who could plug you into their networks.
 
His own examples were above-board: He knew the processes and procedures of state governments and healthcare. He knew which departments were responsible for this, and which ones in charge of that. His connections opened doors and sped up processes.
 
On the sidelines of the boot camp, a few of us – including officials from government and quasi-government agencies, as well as those involved in the startup scene here -- fell to talking about some of the points he raised.
 
A senior executive vented his frustration at how so many young entrepreneurs did not seem to know the value of networking, and with hooking up with the right people.
 
Then he paused. “The problem is that when I bring up this point of connecting with the right people, they always seem to think I am referring to this,” he said, making the gesture of a hand dispensing cash below table level – Malaysian sign lingo for “under-the-table-money,” or kickbacks.
 
Or let’s call this spade what it is: Bribery and corruption.
 
There is an unhealthy confluence of business and politics in Malaysia. And it’s not just big business – who gets a contract to re-tar roads, which company gets the town council deal to plant shrubbery by the roadside (and of course, a contract renewal every year, in perpetuity, to trim said shrubbery), which outlet gets a license to serve this or that. Everything, it seems, depends on connections.
 
It’s not always that obvious of course. Money doesn’t even have to change hands, nor do funds have to be transferred from one account to another, leaving only a digital trail.
 
Remember, we live in a country where you can be a twenty-something graduate with little or no business experience and yet be appointed a director of an RM250-million (US$79-million) company in charge of a strategic national initiative, if only you know the right kind of people … you know, like your father and mother.
 
There is something wrong in a system where this doesn’t ring alarm bells or get the klaxons blaring, when some senior ministers can even attempt to justify such a practice. It’s a quagmire that strips us of any sense of an ethical framework in the business world, where corporate governance is some foreign concept.
 
Too many people-in-the-know shrug it off as business as usual. They should know better.
 
In the startup scene here, we keep hearing about the need for angel investors and people with disposable incomes to come in and fund promising young companies. Since this is Malaysia, many people with these kinds of funds are connected.
 
Given that they have some sort of safety net – for one, it’s money being poured into their bank accounts with no real need for effort on their part, since they have connections – they will start looking into some of these promising young companies. It’s only pocket money to them, after all.
 
We’re already hearing about how startups with similar ideas are differentiated because one got some minister involved, while the other did not. The need to make political connections does not have to be dirty, of course – as the Dr Harris example above illustrates – but because this is opaque old Malaysia, one has to wonder.
 
Startups need funds – I know because I am in one. It’s so easy to take the path of least resistance and do the business-as-usual thing. It’s so tempting to play, and too easy to say “yes” to, that old, 20^th-century game of connections.
 
Sure, I have been watching too much of the Sleep Now in the Fire video, but as a startup, you can help truly make a difference. There is a breeze of change blowing softly through Malaysia; fan it up. You’re going to disrupt the business landscape, I urge you to dismantle the business-as-usual landscape too.