Strategic diversification overseas

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MHB - pic

MHB - pic

Malaysia Marine & Heavy Engineering (MHB) had in the past saw little need to venture abroad but as the domestic oil and gas market slows down amid low global oil prices, it is now keen to expand its global footprint outside of its traditional PETRONAS-supporting role.

Since CEO Abu Fitri Abdul Jalil took over the helm in March, MHB has been looking at various opportunities overseas.

“I don’t see any way that we can just focus on the domestic market. Although the original intent of setting up MHB was purely to support the Malaysian oil and gas industry, there just aren’t enough jobs, especially with the price of oil down and all the projects deferred. On top of that, there are about eight licensed fabricators in Malaysia… Therefore now, the compelling reason is to survive; we have to go out and look for jobs,” he shares in an interview for Talking Heads, a series on Malaysians who have successfully ventured overseas produced by the Economic Transformation Programme (ETP).

MHB, which can trace its history back to the incorporation of Malaysia Shipyard and Engineering Sdn Bhd (MSE) in May 1973, was established by the government to advance Malaysia’s maritime industrialisation programme. Even as it was privatised and in 2006 became a wholly-owned subsidiary of MISC Bhd, its primary role remains to support Malaysia’s oil and gas industry for national oil company PETRONAS. It had intermittently bid for and won overseas jobs but the only times it had a presence abroad were in support of PETRONAS projects, such as when it set up a yard in Turkmenistan for a project for Petronas Carigali (Turkmenistan) Sdn Bhd.

Abu Fitri sees the low oil price era as a blessing in disguise. “It has given us, and especially me being new in MHB, the opportunity to really look at what our weaknesses… and how do I then position MHB to compete in the overseas market with the big boys,” he says.

“We’re looking at collaborations with other yards, with other engineering companies. Because in order to be successful overseas, you’d have to come up with a complete solution. The business world today looks for a complete total solution. People don’t just look at products or services. People want a complete solution. And if you want to be successful overseas in whatever business, you have to think of a complete total solution. Which means that you have to be customer focus, you have to be service oriented, and your product has got to be good, whatever the product it, whether it’s material, invention, technology, or merely services,” he says.

Scomi Energy’s President of Oilfield Services Wan Ruzlan Iskandar Wan Salaidin concurs. He said Scomi, through collaboration with its partners, have come up with its own innovative products to differentiate itself. “We need that differentiator when we go overseas because our business is almost like a commodity,” he says.

It is a challenge for a Malaysian company holding its own against the big boys. “We would have problems trying to convince even our local companies to accept our products but thankfully, we have these products. Our marketing in certain countries is quite aggressive and we’ve gained the trust of big national oil companies overseas with our products.”

Wan Ruzlan notes that notwithstanding today’s challenging global environment, there are still opportunities out there. Rig count in the Middle East, for example, is still increasing. “Of course they are taking advantage of the lower cost environment but if your processes, people and products are good, you’ll be able to offer a good value proposition which hopefully will be a win-win.”

Both Abu Fitri and Wan Ruzlan caution those who want to expand overseas to thoroughly evaluate the local rules and requirements, and to have an exit plan.

Abu Fitri notes that many Malaysian companies venturing overseas have gotten their fingers burnt and did not know when to retreat. “It’s alarming, especially for listed companies that are comparatively small… They are too quick to venture overseas, just for the sake of going overseas. At the end of the day, all their business in Malaysia goes into subsidising their ventures overseas.”

Those wanting to venture overseas need to determine what strengths they have that they want to market, how they will complement those strengths, and whether they want to get into a niche or low-cost market, Abu Fitri advises.

“Going low cost is not always a war one wants to get into,” he says, adding that many Malaysian companies lose at the low-cost battlefield.

Wan Ruzlan concurs, adding that some Malaysian companies like to project themselves as competitive in the low-cost sense when venturing overseas without truly understanding the market first. “Suddenly they find out they are not low-cost anymore. And worse still, once you’re already in there, you can’t just simply pull out from a contract or project,” he says.

“No organisation will be free of mistakes, but the advice is: Make brilliant mistakes!” he stresses.

One brilliant way to learn is via the mistakes of others but alas, “people have gone to those countries and they have burnt their fingers and yet you have different groups of people coming to the same countries, making the same mistakes!” laments Abu Fitri.

He sees the lack of collaborative spirit among Malaysian companies. “Everybody seems to want to strike out on their own, not wanting to do enough homework. Everybody’s just too eager to pack their bags and jet set. And the saddest part is many find it so easy to pour money abroad, especially when it’s not their own equity – that’s the biggest worry,” he says.

MHB has ample funds of its own and is more than ready to strike out. But it is in no hurry – its aggressiveness is tempered with caution.  “Despite the fact that we have good backing financially, I’m not about ready to just dump money here and there and start burning my fingers before learning the lessons,” says Abu Fitri.

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