Global Financial Power profiles: Industry and Trade

04/10/2009 | Thierry Ogier, Simon Pirani, Chris Wright, Sid Verma, Elliot Wilson, Digby Lidstone, Andrea Armeni

The rise of the EM corporate

Jose Sergio Gabrielli, CEO Petrobras

Jose Sergio Gabrielli has been the key figure in unleashing the enormous potential of Brazilian oil giant Petrobras

Brazil and its state-controlled company Petrobras have risen to prominence in the global oil industry in the last couple of years mainly thanks to the discovery of potentially huge reserves in ultra-deep waters – but this is not the whole story, says Jose Sergio Gabrielli, chief executive of Petrobras.

Gabrielli was appointed financial director of the Latin American oil giant in 2003, the same year that president Luiz Inacio Lula da Silva took office. In 2005 Gabrielli took over as chief executive and president of Petrobras.

“We had a clear vision then that Petrobras was strategically prevented from using its potential,” Gabrielli says in an interview with Emerging Markets. “One of the things we’ve done has been to unleash Petrobras’ growth potential. We increased the number of exploration areas; we strengthened the corporate vision of an integrated company; we managed to expand investment in refining activities; and we redefined investment in research and development.”

Petrobras is now a driving force behind the long-term shift in global economic and financial power, he reckons. “The gap between the US, the European Union on one side and the emerging markets is getting narrower,” says Gabrielli.

Petrobras, which operates in 26 countries, has achieved a giant leap forward in terms of capital expenditures, from some $5 billion in 2003 to $27 billion in 2008. “We should do more than $30 billion in 2009,” says Gabrielli. Its latest five-year investment plan amounts to $174 billion, including $28.9 billion in the new so-called pre-salt area, where new reserves have been found at more than 5,000 metres below sea level off the Brazilian coast.

Investments in the pre-salt area should gain pace in the following years, to reach an estimated $111 billion by 2020 – by then, the pre-salt output is due to reach 1.85 million barrels per day (which is equivalent to the current domestic production of Petrobras).

“We are very big thanks to the discovery of the pre-salt reserves. But we are much more than this,” he says. “Even before that, we had the vision that we would become one of the five largest integrated energy companies in the world.”

Thanks to its experience in deep water operations in previous decades, Petrobras has become the global leader in this operational area with a 23% market share, says Gabrielli (ahead of Exxon Mobil’s 14% and others such as Royal Dutch Shell and Statoil) and features “among the three largest oil companies in market capitalization”, he says.

Gabrielli’s diversified funding strategy has also helped Petrobras weather the global financial storm. “Raising $31 billion in the first half of 2009 in the midst of a global crisis, we managed to raise a level of debt that had never been achieved before in the history of Petrobras.” —Thierry Ogier

Jiang Jiemin, General Manager, CNPC

The state model is in the ascendancy the world over, and CNPC is leading the way

When China National Petroleum Corporation (CNPC) was formed in 1988, it was a step in the dark for Beijing’s leaders. Still a year away from the Tiananmen Square massacre, China’s economy was poorly formed and backward, a place where monopolies – decried by Adam Smith as the ‘great enemy to good management’ – ruled.

CNPC was created as an agile corporate vehicle, staffed by politicians, managers and engineers – followed by an overseas-listed division, PetroChina, Asia’s largest listed firm by market capitalization, founded in 1999. Other oil firms followed, notably Sinopec, formed in 2000, which with PetroChina shares a domestic Chinese duopoly on wholesale and retail oil products.

CNPC is the granddaddy of them all. The world’s second largest employer (after Wal-Mart) with 1.1 million staff, its proven reserves amount to 3.7 billion barrels of oil, sprawled across operations in central Asia, South America and Africa.

A $4.2 billion August 2005 deal to buy PetroKazakhstan was, at the time, the largest overseas foray by a Chinese corporate. This June, the company joined forces with BP to develop Rumaila, Iraq’s largest oil field; in September it tapped China Development Bank for a $30 billion loan to fund its continued search for oil.

CNPC is no normal company. It is probably the nation’s second-most important corporation, after International and Commercial Bank of China. Moreover, where it leads, other follow. Beijing’s creation of a clutch of vastly powerful state energy firms with listed divisions ultimately controlled by their political overlords, has become the global norm.

Where wholly listed firms with proto-national affiliations such as ExxonMobil, BP and Total once ruled the carbon-based world, now the state model is in ascendancy. CNPC’s model has been copied by Russia’s Gazprom, and is being mulled over by Brazil’s aggressive and fast-growing Petrobras.

One way of viewing these vast Chinese entities is through the prism of the European joint-stock companies that once boasted trading monopolies in India, China, and south Asia. Those purportedly commercial entities flew under various European flags, and their allegiance was to London, Amsterdam or Lisbon.

In much the same way Chinese energy giants compete – often with each other – on the open markets for carbon sources, yet their ultimate lords and masters reside within Beijing’s political headquarters at Zhongnanhai

CNPC’s role is to ensure China’s smooth rise by providing its populace with sufficient oil and gas to run their cars, homes and factories. Within this enormous, bureaucratic, nation-building process it may seem odd to highlight an individual, but someone has to stand on the top of the hill.

In this case, the man in question is Jiang Jiemin, general manager of CNPC and chairman of PetroChina. Jiang, 53, travels the world, sometimes alone – as in August, when he flew to London to meet senior executives at BP – sometimes with a delegation led by president Hu Jintao or premier Wen Jiabao. He’s been working in the oil industry for 35 years, and previously worked as vice governor of energy-rich Qinghai province.

Jiang is a metaphor for modern China: a highly qualified functionary who does what he is told, and does it very well. After he has gone, probably promoted upward into higher political office, CNPC will continue on its state-controlled expansionary path for years – perhaps decades or more – to come. — Elliot Wilson

Ali Al-Naimi, Minister of Petroleum & Mineral Resources, Saudi Arabia

Saudi Arabia sits at the helm of Opec, with Al-Naimi’s hand firmly on the tiller. But as guarantor of stability for world oil markets, he must balance the kingdom’s interests as a producer with those of its customers

Ali Al-Naimi is not known for his casual conversation, but then he rarely gets the chance. At Opec (Organization of the Petroleum Exporting Countries) summits in Vienna, the Saudi oil minister is invariably surrounded by a scrum of journalists, ready to report his slightest utterance on the news wires.

As the voice of the Saudi energy industry, and an unofficial figurehead for Arab oil and gas producers, Al-Naimi has an influence over world markets rivalled only by the chairman of the US Federal Reserve.

His global influence led to Al-Naimi being dubbed the “Greenspan of Energy” by Newsweek in 2006. “Naimi chooses his words carefully because he realizes the impact they have,” says Frank Verrastro, an energy expert at the Centre for Strategic and International Studies in Washington. “He knows the industry intimately; he knows whom to talk with to get things done.”

As the world’s central banker of oil, Ali Al-Naimi’s mission is to put Saudi Arabia at the centre of any debate on the world energy markets. His career spans the nationalization of the Gulf’s oil industries, the formation and rise of Opec, the oil price spikes of the 1980s and more recent concerns about peak oil and the environment – dramas in which Al-Naimi has been a lead actor.

As the first Saudi president of what is now Saudi Aramco, Al-Naimi oversaw the final stages of the nationalization of the world’s largest oil company as well as seeing Aramco open its first dedicated engineering centre, build the first pipelines linking the kingdom’s east and west coasts, acquire its first tankers and bring all oil refining in-house.

Since his appointment as oil minister in 1995, Saudi Arabia’s energy policy has been single-minded: making itself indispensable. “Stability in world oil markets depends on having adequate spare production capacity for maintaining balance in the market,” he said in 2004. “Saudi Arabia is committed to providing a major portion of the world’s spare capacity.”

As the only nation with enough capacity to act as a swing producer in times of high oil demand, Saudi Arabia sits at the helm of Opec, with Al-Naimi’s hand firmly on the tiller. This has been particularly evident in the past year, when Saudi Arabia has leaned hard on its fellow producers to toe the line and meet production cuts to shore up prices.

Conversely, at the start of the decade, when prices were starting to hurt most consumer nations, Saudi Arabia was the most obliging of the Opec producers, pushing its production close to full capacity and earning gratitude from western oil consumers for its attempts.

This relationship, which requires Saudi Arabia to balance its interests as a producer with those of its customers, has required delicate diplomacy. Al-Naimi must play off rowdier Opec members against Saudi allies such as the US.

Increasingly, however, Saudi Arabia has looked east to energy-hungry nations such as India and China, countries looking for a straightforward commercial relationship with none of the political preconditions that bother relations with Washington. —Digby Lidstone

Igor Sechin, Deputy prime minister, Russian Federation

Russia’s deputy prime minister represents the power behind Russia’s state-led economic growth model. He has helped redraw the rules of engagement between private capital and the state while clipping the wings of the billionaire oligarchs

Igor Sechin, deputy prime minister, personifies the siloviki (“power people”) who have shaped Russia’s state-led economic growth model and reined in the influence of the billionaire oligarchs.

Sechin, regarded as the most powerful man in Russia after its president and prime minister, oversees industry and chairs the government’s energy sub-committee. He is president of Rosneft, Russia’s largest oil company, and of the power generation company Inter RAO UES.

Russian government is effectively a duopoly of the siloviki – former security services officials who became a force during Vladimir Putin’s first term as president (2000–04) – and “market reformers”. Economic policy is shaped in constant tussles between them.

The siloviki were the driving force behind the break-up of Yukos oil company in 2003–05 and the jailing of its chairman Mikhail Khodorkovsky. The rules of engagement between private capital and the state were rewritten, and the oligarchs’ influence on government that had characterized Boris Yeltsin’s presidency was drastically curtailed.

Yukos’s oil production assets, among Russia’s richest, were hoovered up by state-owned Rosneft. Other oil and metals companies remained in private hands, but their tax payments soared and their owners henceforth cleared major strategical decisions with government. The hand of the siloviki was also seen in the creation during Putin’s second term (2004–08) of “state champions” such as the state development bank (Vneshekonombank) and Russian Technologies.

When the post-Lehman financial crisis hit Moscow, the siloviki and market reforms in many respects closed ranks, with little serious disagreement about the initial rescue operation – i.e. banking system recapitalization, the gradual (rather than at-a-stroke) rouble devaluation and the recovery impetus package.

Longer-term perspectives are divided, though. The siloviki see state corporations, state-controlled energy companies and industrial subsidies as key levers of policy; a suggestion by deputy prime minister Igor Shuvalov, a market reformer, that the crisis was a welcome opportunity to rid the economy of unprofitable firms, provoked hints of displeasure from the siloviki.

The siloviki keep a low public profile: Sechin was deputy head of the presidential administration for seven years before his first ever public appearance, at a Rosneft shareholders’ meeting in 2007. And his pronouncements on economic policy are few and far between. Over the summer he denounced the role of speculators in the international oil market (hardly controversial) and reiterated that Russia had no need for production sharing agreements to develop new hydrocarbons resources (standing policy for this decade).

Nevertheless, there are few doubts about his influence. The managers of companies – e.g. earlier this year, Norilsk Nickel, one of the world’s largest metals producers – shiver when he asks state agencies to check on aspects of their activity. Most journalists believe that he oversaw the state-orchestrated break-up of Mikhail Gutseriev’s Russneft oil company, the shares of which were seized by bailiffs in 2007. It was to Sechin that foreign minority shareholders in Timan Oil & Gas turned in August in a tussle over ownership with oligarch Aleksandr Lebedev.

Some Russia-watchers say the siloviki are motivated by hopes of building up personal fortunes. Moscow legend says that Sechin’s is one of the largest. But it seems fanciful to imagine that the strategic goal of a strong state is not the underlying principle.

The siloviki will continue to play a cardinal role in Russia’s economic policy-making and so a strong hand will stay on the tiller of the state. Whether the aim of breaking Russia’s heavy dependence on oil and gas can be accomplished this way remains to be seen. —Simon Pirani

Ratan Tata, Chairman, Tata Group

From a major Indian corporate to a fully-fledged global conglomerate with the world’s fifth largest steel company, Tata has revolutionized India’s corporate vision

Last November Ratan Tata circulated an email to senior managers at India’s largest industrial group. His message was stark. He ordered them to reduce operating costs drastically and put the brakes on expansion. “Some of our companies with substantial foreign operations – or those which have made substantial acquisitions – are facing major problems in raising capital,” he wrote.

“He was basically saying, run your business with cash until the storm passes,” says Ishaat Hussain, finance director at Tata Sons, the holding company of the conglomerate, in an interview with Emerging Markets at Bombay House, its head office in Mumbai.

This episode highlights some of the challenges facing Ratan Tata as he oversees a sprawling empire with 114 different companies across seven business sectors as well as presiding over aggressive, international acquisitions in recent years.

In June 2008, Tata Motors borrowed $3 billion to buy Ford’s Jaguar and Land Rover brands but was hit by a savage turn in the business cycle – the company only managed to refinance the loan this April, and that just days before the repayment deadline.

In January 2007, Tata bought Corus, the Anglo-Dutch steel group, for $13.7 billion, in India’s biggest foreign acquisition. It catapulted Tata Steel into the world’s fifth largest steel company.

Analysts praised Ratan Tata at the time for elevating India’s corporate ambitions by preying on western firms in western markets and reflecting the country’s global economic clout.

But can these deals now be seen as wrong-headed ventures at a time of inflated asset prices and abundant capital? Do they highlight the dangers for emerging market corporates as they play western firms at their own game? “In the context of the deepest recession in 70 years, we certainly did not stress test for this level of downturn and therefore, going forward when you take on this amount of leverage, you have to consider a black swan occurrence, which we didn’t,” Hussain says. That said, he claims that in the long run these gambles will pay off.

At a single stroke, these takeovers doubled the group’s annual revenues, with the majority now accumulated overseas. Three businesses account for most of sales and profits: Tata Steel, Tata Consultancy Services and Tata Motors. As of early September this year, the conglomerate accounted for 4.6% of total market capitalization of the Bombay Stock Exchange.

Under Tata’s leadership the group has long since diversified beyond heavy industry: with Tata tea, Tata phone networks, Tata computer systems and Tata air conditioners. The company’s diverse products form the backbone for the economic and social life of the ordinary Indian. Last year, the Tata Group contributed 3.6% of the government revenues.

Tata’s business approach is to be nimble, flexible and global. He capitalizes on low-cost production in emerging markets with the high margins in the West but also seeks to acquire companies in developed markets to gain their skills, knowledge and technology.

Nevertheless, Tata has remained focused on the group’s nation-building role when in March he personally launched the world’s cheapest car, the Tata Nano, to international acclaim.

The group’s success is a window into the rise of the modern Indian, and Ratan Tata remains a formidable role model for India Inc. So when Tata – who owns just 1% of the group – retires in December 2012, corporate India will be left with big boots to fill. Nevertheless, as an industrial firm established since 1868 and with two-thirds of the Tata Group’s shares owned by charitable trusts, it’s a unique business model to replicate. — Sid Verma

Carlos Slim, Chairman, Telmex and America Movil

While other firms in the region have slowed their overseas investments, Slim continues his aggressive expansion drive to diversify his business empire

Few think of Mexico as a big foreign investor. Yet, even amid the financial crisis, Mexican investments overseas amounted to $3 billion in the first quarter of 2009, more than any other Latin country.

The wizard of the Mexican transnational corporation is Carlos Slim, the man behind Telmex and America Movil. It is not Slim’s prominence in the Mexican economy as much as his remarkable foreign acquisitions that make him stand out in the international arena.

Even while other Mexican and Latin transnationals slowed overseas investments in the last year, Slim continued his aggressive expansion. In the middle of the financial crisis, he showed his clout by becoming one of the main shareholders of the New York Times and extending the paper a $250 million lifeline loan. His acquisition of a $134 million stake in Citigroup did not go unnoticed, either.

Slim’s portfolio is the model of the diversified emerging markets transnational. His roster, largely held through affiliates of Grupo Carso, has included stakes in Univision, WorldCom, Allis-Chalmers, Altria and such household names as Circuit City, Saks and CompUSA.

Slim’s empire is not without critics. Denise Dresser, a Mexican political scientist, suggests that, more than business savvy, Mexico’s “dysfunctional capitalism allowed him to reach his privileged position”.

The same factors behind Slim’s success contribute to the emerging economy’s laggard development and persistent income inequality. In a recent World Bank study, Rafael del Villar, a member of Mexico’s Federal Telecommunications Commission, points to the overall inequitable effects of a corporation such as Telmex that “has exercised its substantial market power unchecked”.

Slim defends his position to Emerging Markets by emphasizing a businessman’s limited mandate: “make expanding investments, create wealth, promote economic activity and generate jobs and tax contributions”.

This he has done, and many herald his contribution to Mexico’s GDP and outward investment. Less prominent in Slim’s stance is a concern for Mexico’s dismal income equality and distribution. He notes: “By 2015, our country must reach an income level that exceeds the less-developed country threshold of $12,000 per capita.” But his vision is rooted in absolute growth numbers, with little emphasis on distributive results.

Between Slim’s undeniable contribution and the price Mexico has paid in stunted growth and inequality, a thorough evaluation of the transnational corporation has to take into account Mexico’s economic timeline. Rossana Fuentes-Berain, a Mexican journalist, says the country is still “at a very immature stage in the process of capitalism” – which could, temporarily, have made less unacceptable the kind of anti-competitive behaviour through which the likes of Standard Oil and US Steel contributed to the growth burst of the US economy.

Latin America commentator Alvaro Vargas Llosa notes that the monopoly-friendly cronyism that facilitated Slim’s ascent is leading firms to seek profits elsewhere and, in the process, catalyze Mexico’s investment positions overseas. The shortcomings of the home economy that contributed to the rise of Mexico’s transnationals now spur them to become global players. In his wizardly way, Slim has positioned himself to benefit from Mexico’s unique political economy simultaneously at home and overseas. —Andrea Armeni

Jiang Jianqing, Chairman, Industrial and Commercial Bank of China

How achievable is Jiang Jianqing’s dream of making ICBC the world’s “most profitable, pre-eminent and respected bank”?

Is Jiang Jianqing the most powerful commercial banker in the world? Just two years ago, the question would have been naive, bordering on the ludicrous. But much has changed since then. Leading global lenders with the world at their feet in 2007 have been bailed out or part-nationalized; others stuttered badly or failed altogether.

But the woes of the global financial crisis have spawned opportunities for a rare few lenders, notably Beijing’s largest, Industrial and Commercial Bank of China (ICBC). ICBC has a modern tradition of breaking barriers. In late 2006, it completed the world’s largest-ever initial public offering (IPO), raising $21.9 billion by selling shares in Hong Kong and Shanghai.

The following October it became the first major Chinese bank to flex its financial muscle abroad, buying 20% of South Africa’s Standard Bank for $5.5 billion. That deal came with a board seat at Standard for ICBC and direct access to Africa’s vast reserves of carbon and commodities.

The bank has continued to fly in the face of the global recession, posting a 3% year-on-year rise in first half 2009 earnings and a 17.2% rise in assets. In 2008 ICBC became, if only for a time, the world’s largest listed corporation by market capitalization.

Founded in 1984, within a quarter of a century it was the world’s most profitable bank, boasting assets of $1.6 trillion held across 18,000 branches. Little wonder that this June chairman Jiang boasted that he wanted ICBC to become the world’s “most profitable, pre-eminent and respected bank”.

Jiang’s progression has been steady and unspectacular. He spent nine years toiling in the wheat fields of Jiangxi province and the coal mines of Henan during the Cultural Revolution. He survived the ordeal, returning to Shanghai to gain a financial degree before joining a local branch of ICBC in 1984, rising to president in 2000 and chairman of the board of directors in October 2005.

A technocrat with a political mind – he is an alternate member of the Party’s central committee – the 53-year-old Jiang is high on the wish list of any financial conference organizer, regularly speaking his mind at the World Economic Forum.

Yet if there is one cloud on the horizon it has come, ironically, in the form of the global financial crisis.

The 2008–09 global recession pushed major Chinese state banks to global prominence, revealing for the first time their vast underlying financial strength. Like rivals including Bank of China and China Construction Bank, ICBC draws its strength from the nature of the Chinese economy, which funnels business activity upward into the maw of a few favoured state corporates and banks.

But favouritism comes at a cost. Perturbed by slowing economic growth in late 2008, Beijing unveiled a vast stimulus package estimated at $600 billion, and directed its banks to hose the country with new lending – targeting major infrastructure and construction projects.

Chinese banks flooded the market with $1.1 trillion in new loans in the first half of 2009. More than $130 billion came from ICBC alone. In June 2009, BNP Paribas noted that it knew of no other economy to have created so much credit, so quickly and cheaply, in the six decades since the Second World War. Some believe Beijing is ordering its banks to extend loans as risky as those parcelled out by the likes of troubled Citi, UBS and RBS between 2004 and 2008.

This raises another set of problems. Aggressive lending may come at a cost. Earnings in the first half of 2009 showed a sharp corrosion in profit margins, and analysts believe non-performing loans at all Chinese banks are set to rise sharply.

Under chairman Jiang, Asia’s largest bank has thrived. ICBC completed the largest-ever IPO on his watch; in early 2009 it kept China’s – and perhaps the world’s – economy afloat by aggressively pumping capital into major state projects.

Yet questions are still unanswered. Jiang’s June 2009 boast remains only partially realized. ICBC’s domestic power has turned it into the world’s most profitable and pre-eminent bank – for now, at least.

Yet the most respected around the globe? That will only happen when ICBC starts acting like a real bank and not as a basic infrastructure lender at the whim of the state. — Elliot Wilson

Jacko Maree, Group Chief Executive, Standard Bank

Against a backdrop of the worst financial crisis in a century, Maree has boosted the financial muscle of Africa’s largest bank through ground-breaking partnerships

A global financial meltdown and South Africa’s worst recession in 25 years. It was against this hostile backdrop that Standard Bank further extended its franchise across the globe this year. While beleaguered western banks were shedding assets left, right and centre, Africa’s largest lender acquired 33% of Russia’s Troika Dialog in March.

The $300 million acquisition took guts given the bank had made a $100 million loss during Russia’s 1998 financial crisis, although that was later recouped. However, Standard’s status as an emerging markets lender has naturally fed its risk appetite, says Jacko Maree, who has been chief executive at Standard Bank for the past 10 years.

“The deal was perfect for us as it played to our competitive advantages of being emerging markets and commodities-focused, and Russia is the place to be,” he told Emerging Markets. The acquisition places Standard in a strategic position in the Russian market via a local player – at a time of depressed asset prices – to provide corporate and investment-banking services to connect African and Russia clients.

Equally important was the strategic partnership Standard created in October 2007 when Industrial and Commercial Bank of China (ICBC) became a 20% stakeholder. The deal seeks to capitalize on the strong flow of commodities traded between Africa and Asia, by providing Chinese firms access to foreign exchange, letters of credit and cash management services in Africa. Around 65 projects have been completed so far for a modest $10 million, but Maree predicts that once the global economy picks up, big-ticket infrastructure projects will resume.

Maree says the crisis has validated Standard Bank’s long-standing “business strategy to become a global, emerging markets financial services group”. This is down to the higher relative growth potential of developing economies as well as the strengthening financial and trade links between Africa and Asia, the Middle East and Latin America, he says.

The bank operates in 17 African countries and has 16 subsidiaries outside the continent, with South African operations contributing 77% to the group’s headline earnings in 2008.

The bank is focusing on expanding its commercial banking business outside South Africa rather than beefing up its consumer franchise or investment banking divisions. “We are increasingly trying to link Africa to the world and capitalize upon the increasing south to south trade and FDI flows, thanks to a sustained period of rapid industrialization in places such as India and China,” says Maree.

Standard will seek to increase its role as payment agent for business customers by providing regular bank accounts to small corporates in underbanked areas while offering cash management services, trade finance and loans to the larger firms.

Corporate and investment banking has recently grown in importance to the group’s bottom line. In 2008, it contributed 56% of the group’s headline earnings compared with 34% for its retail operations. But Maree warns that the emerging world’s thirst for commodities is not necessarily a blessing for Africa. “Learning from history, commodity booms can be good and bad for Africa – benefits only accrue if governments have the right policies in place and choose to spread the benefits,” he says. —Sid Verma

Nazir Razak, Chief Executive, Commerce International Merchant Bankers

CIMB went from middle-tier investment bank in Malaysia to being south-east Asia’s fastest growing universal bank

Nazir Razak demonstrates what can be done with smart management and good governance in emerging markets.

He joined Commerce International Merchant Bankers (CIMB), then a moderately successful investment bank, aged 23, in 1989. Within a decade he had become its chief executive.

A decade further, with several mergers behind it, CIMB has become a powerful universal bank – the fastest growing in south-east Asia – and one of the few Malaysian enterprises that can truly be seen as a regional player.

When he first started piloting the group towards fixed income and market making after becoming deputy CEO in 1996 – aged 30 – he spent a year building the risk management infrastructure; today the head of risk reports directly into the board, something that is not required by regulation but he says “makes my board comfortable with the organization”.He also made a point of stressing the positives of confrontation. “You need to create a culture of debate, and of transparency within the organization. That’s very important, especially in Asian society,” he says. “You encourage people to talk, to debate, to challenge. A lot of the failures and problems in other organizations happen because people hide.”

Has he encountered resistance? “Not resistance. Reluctance. It’s uncomfortable, shouting at one another. But you do need to encourage it. I actually fuel it.”

CIMB is a notable and growing presence in Singapore and Indonesia, and has more modest operations in Thailand, Brunei and Vietnam; probably only Singapore’s DBS could have a similar claim to being a truly regional Asian bank.

Few Malaysians have done this. Nazir names Air Asia, and to an extent Sime Darby, Petronas and YTL as other examples. It’s a modest list, but he feels more will follow. “It comes with Asean integration.”

When foreign brokers and analysts are asked about the health of the government-linked companies (GLCs), those with significant state holdings, they tend to start by citing CIMB as an example of what can go right before offering less flattering assessments of many of its peers.

For his part Nazir says being a GLC “has been positive”, partly because it’s useful for a bank to have such a clear demonstration of its credit standing. “State ownership in the past has given rise to a lot of constraints and bureaucracy, but since GLC reform in 2004 there have been huge changes and a vast improvement. I have been adviser to many of these companies pre-reform and I see first hand how much more responsive and efficient these companies are.”

Asked about Malaysia’s economic performance during his time in senior corporate life, he rates it “mediocre” because of “structural weaknesses that have proved difficult to overcome”.

At the heart of the banking industry and with the ear of the national leader, Nazir represents a younger generation of connected but able executives building well managed national champions across Asia. —Chris Wright

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