The Monday Interview

November 4, 2012 2:23 pm

Patient seeker of the best deal

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Choo Chiau Beng©Munshi Ahmed

Diplomacy at work: Choo Chiau Beng has a long experience of building relationships

In 1966 – a year of Beatles mania, of that iconic image of a doe-eyed Twiggy – a young Singa­porean stepped off a train in the northern English city of Newcastle upon Tyne. His name was Choo Chiau Beng and he had arrived to study naval architecture at the city’s university. It was his first time abroad and, for a 19-year-old from southeast Asia, the weather was a shock. “The cold just goes through your overcoat in Newcastle,” Mr Choo says.

At least there were distractions. “There were all sorts of concerts going on in those days. The Animals were from Newcastle,” he says, name-checking one of the big bands from those years. “ ‘The House of the Rising Sun’!” he adds enthusiastically, suddenly recalling one of their hits.

Listening to his story years later in his office in Singapore, it is hard to imagine the chief executive of Keppel Corporation, one of the world’s largest makers of offshore oil rigs, as a young man in the thick of “Swinging Sixties” Britain. He has a quiet, deliberate manner that seems out of step with the image of a hard-driving oil exploration business. Off-duty, he plays golf and reads.

The company he runs is a sprawling conglomerate employing 40,000 staff. Its biggest business is building offshore rigs: semisubmersibles that float in deep water – with mooring lines strung out to the seabed – and smaller “jackup” rigs for shallower water, perched on the sea floor on legs.

A lot of them are being built. Oil and gas companies have been budgeting for more exploration off the coast of Brazil and in the Caspian Sea. Stricter regulations after the Deepwater Horizon disaster in the Gulf of Mexico in 2010 have spurred demand for rigs with more safety features.

Singapore accounts for about 70 per cent of the global production of jackups, with orders shared between Keppel and local rival SembCorp Marine. In Brazil alone the two groups have won orders worth S$17bn (US$14bn) so far this year, with more expected.

The CV

­Born: 1947, in Singapore

Career: 1971 joins Keppel Shipyard

1975 Moves to the Philippines to set up and head a greenfield shipyard, in Keppel’s first overseas foray

1980-1997 Returns to Singapore and turns rig-builder Keppel FELS round

2002 Heads the restructuring of Keppel’s shipyards; is appointed chairman and chief executive of the new entity Keppel Offshore & Marine

2004 Appointed Singapore’s non-resident ambassador to Brazil

2009 Appointed CEO of Keppel Corporation

Family: Married to Eileen, a doctor, and has a son, Daniel

Interests: Reading, golf

Mr Choo’s career trajectory offers a case study in how Singapore, with no economic hinterland of its own, has managed to produce global companies such as Keppel. Others include Singapore Airlines and CapitaLand, one of southeast Asia’s largest property dev­elopers and a big investor in China’s property market.

“It was never predictable,” Mr Choo says of Singapore’s position in the
oil-rig industry. The withdrawal of British naval power east of Suez in the late 1960s dealt a blow to Singapore, which had relied on the Royal Navy to employ thousands of citizens. The military shipyards were converted rapidly into repair facilities, from which Keppel grew.

Nor did Mr Choo expect to be studying abroad. When Singapore won in­dependence from Britain, the year before he arrived in Newcastle, most Singaporeans were struggling to get by. His father was an unskilled work­er in the public health department, repairing vehicles. Mr Choo was able to head abroad only thanks to a Commonwealth-funded scholarship.

His first break came when he was sent to the Philippines in 1975 to build Keppel’s first overseas shipyard, on a strip of rice paddies. “It was a very good experience for me. First, I was
28 years old, I was representing Singapore and Keppel; you had to deal with ministers all the way down to unions and workers and the local mayor and police constables.”

Those skills helped later as the company expanded into new markets – the conglomerate’s activities now include property development, telecommunications data centres and conversion of urban waste into energy in China, Europe, the Middle East and Singapore. One week it was a case of dealing with Texan oilmen, the next Russian shipyard managers and government officials in Azerbaijan.

“Each country wants to keep jobs within their own territory, especially for extractive industries. You have to be very sensitive to each of your host country’s particularities, desires and strengths and weaknesses. If you get the right people in charge on the ground, half your job is done.”

So, what about different business cultures? We run through a list, Russians first.

“Individually, they are very nice people, but they have a process. When we repair ships they need a signature from every member of the crew before you can satisfy anything.”

And Americans? Mr Choo recalls a three-month stint at Harvard Business School in 1982, where he was in a team with some Japanese in mock negotiating situations.

He says: “In negotiation, everyone looks at ‘batna’ ” – the best alternative to a negotiated agreement, or the next best deal possible if one cannot be agreed initially. “There’s a band where you are willing to settle and the other side is willing to settle,” Mr Choo explains. “Very often the Americans were willing to give you a lot in that band because they were impatient to settle. The Japanese guys and me and another guy from Singapore, we were very patient and we always got the best deal.”

Which is better if you are a chief executive? “I think you must be both,” Mr Choo says without a pause. “You must be impatient because you want to get things done but you must be patient enough to allow the fruit to ripen.”

Another lesson Mr Choo has learnt is to ensure that a business so heavily exposed to the cyclicality of the oil price is run with enough cash reserves to ride out the troughs.

Being inventive is crucial too. In 1984 the rig and ship-repair industry was in a slump that forced the closure of most of the world’s rig-building yards. The city of New York, short of sewerage facilities on land, would transport the waste out into the Atlantic to dump it there. But it needed vessels for the job. So Keppel built “sludge barges” for New York.

Mr Choo’s rise to chief executive has revealed similar adaptability. In the Philippines he taught himself how to read financial statements since his Newcastle training left him barely equipped for a corporate career. The skills he acquired running Keppel’s various businesses were clearly enough to qualify him for a wider diplomatic role as Singapore’s non-resident ambassador to Brazil, a post he has held since 2004.

Ultimately, Keppel is set to face the looming challenge of China’s ambitions in the shipbuilding and offshore business. Mr Choo remembers attending a conference in 1981 at which
Chinese officials boasted that the country aimed to replace the Japanese and South Koreans as the world’s shipping nation. That still has not happened

“Why haven’t they done it? They have been successful in many things,” he says, offering one last observation on business culture. “But I think in our business they are not as disciplined as the Koreans or Japanese. Because of the Cultural Revolution, I would say, a lot of the ethics that Confucianism has, they’ve lost. They’re trying to get that back.

“I think China will have to regain her ethics before they can be successful in everything they want to do.”

That will surely help Keppel – and Singapore – for some time to come? “It gives us an advantage, yes,” Mr Choo says. “But I don’t know for how long.”

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