An ASEAN business force in the making

By webadmin on 10:55 pm Jan 03, 2012
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SK Zainuddin

The Siam Cement Group (SCG) is Thailand’s largest industrial conglomerate and, as SK Zainuddin reports, under the leadership of Kan Trakulhoon, it is fast growing into a regional business group.

If he succeeds in what he is setting out to do, Kan Trakulhoon could be the first head of a truly ASEAN conglomerate. The president and CEO of Thailand’s Siam Cement Group (SCG) is a strong supporter of economic integration and is willing to back that up with hard cash.

Already a significant player outside Thailand – the company has more than $650 million worth of investments in Indonesia – he is preparing a war chest of $5 billion over the next five years to further expand the company’s operations in the ASEAN region.

“Our vision is to be an ASEAN leader by 2015,” says Kan. “We want to be seen as an ASEAN company, not just a Thai company.” He adds that SCG has $1.6 billion in cash and very low debt, which allows it to invest aggressively in the region.

Thailand’s largest industrial conglomerate will celebrate its 100th anniversary in 2013 but age is not slowing it down. With total assets of about $12 billion and 24,000 employees across Southeast Asia, SCG is on the fast track to expansion. It is currently a dominant player in cement, ceramics, building materials, paper and petrochemicals.

“Outside of Thailand, we are focusing on three strategic countries, Indonesia, the Philippines and Vietnam,” he told GlobeAsia at the ASEAN Business and Investment Summit in Bali in November. “Today our biggest revenue outside Thailand is from Indonesia and we see this growing in the coming years.”

He revealed that SCG is currently in talks with a number of Indonesian partners about possible investments, both greenfield and acquisitions. The group is now in the final stages of negotiations to acquire a cement factory in Central Java, following its recent $200 million acquisition of ceramic producer Keramika Indonesia Asosiasi (KIA).

SCG now holds 93% in KIA, which makes it the second-largest ceramics maker in the world.  The Thai conglomerate also has a cocoa distributorship in Indonesia

Regional integration

Having worked in Indonesia from 1996 to 1998, Kan refers to the country as “my second home.” Although he did not succeed in a planned $2.5 billion investment in the country as a result of the 1998 financial crisis, neither he nor SCG lost faith in the country.

“We are very optimistic about Indonesia. Recently we spent $650 million in investments in Indonesia,” he says, referring to the purchase of a 30% stake in petrochemical company Chandra Asri to boost its presence in the Indonesian market.

“We believe in ASEAN integration as it is good for all of us,” he notes. “We see a lot of opportunities in cement, building materials and petrochemicals in the region.”

His words are backed by the fact that SCG has 7,000 employees outside Thailand.   He firmly believes that countries that embrace economic integration early – the ASEAN Economic Community (EAC) will start in 2015 – will benefit the most. This is because he thinks that the EAC will foster technology transfer and a degree of specialization amongst ASEAN member countries.

“In the future, ASEAN countries can develop expertise in specific industries,” he notes. “Indonesia, because of its rich natural resources and large domestic economy, will attract a lot of investments.” The country, he says, must create an efficient logistics system and supply chain system to boost manufacturing investments.

“We feel that we have to have a major presence in Indonesia because of the size of the economy,” Kan adds. “There are a lot of opportunities in petrochemicals and other industries.”

When asked if regional integration remains positive given the problems currently plaguing the European Union, Kan notes that ASEAN should not rush into having a common currency like the euro but he still firmly believes that integration will be more beneficial than harmful.

This is especially crucial given the rise of China, since trade flows between ASEAN and China are growing. So if ASEAN can integrate its economy, it will be able to compete on par with China, Japan and Korea.

Business and government, he adds, must also be on the same page so that the regulatory environment supports growth and development. But he adds that 80% of the companies in Thailand are not prepared for ASEAN integration and thus will have to work harder.

The biggest challenge for SCG, he notes, is not growth but sustaining its business operations. “In the past five years, we have prepared our people for expansion. In ASEAN in the next five years, we will look to build our brand, especially in the three strategic countries.”  GA