Peter Church | Tracking business tycoons
After having advised clients in Southeast Asia for three decades, AFG Venture’s Peter Church says India is the toughest place in Asia to do business
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Singapore: Australian lawyer Peter Church’s connections with India extend beyond advising on mergers and acquisitions (M&A) and helping clients set up businesses in the world’s largest democracy. His understanding is based on business lessons from the lives of India’s top entrepreneurs.
Church succeeded in getting 30 leading Indian entrepreneurs, including N.R. Narayana Murthy, Rahul Bajaj, C.P. Krishnan Nair, Kishore Biyani, Uday Kotak, Deepak Parekh, G.M. Rao, G.V.K. Reddy and B.N. Kalyani, to share the stories of their lives as well as interesting and unknown anecdotes for his book, Added Value: The Life Stories of Indian Business Leaders (2010). It was his second book on the same topic, with the earlier work profiling Southeast Asia’s leading business leaders.
Church, 64, says there is only one common thread between the 30 Indian entrepreneurs he has profiled and interacted with. “The key is that each and every one of them got their timing right. Most of the time, timing is luck, and to me what distinguishes most of these people is they were able to see the opportunity and take risks.”
Tracking business tycoons is a small part of Church’s career. He is the chairman of AFG Venture Group, an Asia and Australia based corporate advisory and consulting firm, and also special counsel to English law firm Stephenson Harwood from his base in Singapore.
For Church, too, it was timing that had him spending most of his career in Asia after completing his postgraduate in corporate law from the London School of Economics in 1976. In the late 1970s, a fellow student from law school in London, who specialized in shipping laws and had worked in China, ended up in Indonesia, and invited Church to join him.
“I had attended a lecture by a famous Indonesian lawyer and when I returned home, I found a letter from my friend saying he was working for the same lawyer in Indonesia, and he asked me if I wanted to work there,” he said. “At that time, I had been offered a partnership in a very large firm in Australia, but it took me less than a second to decide that I was going to do Indonesia.”
When he shifted to Indonesia in 1978, the country had only four foreign lawyers. “I’ve really never left Asia since, although I’ve gone back to live in Australia in stints.”
His first connection to India was in 1986, when he was a partner with Australia’s first national law firm, Freehills. Church, who was then running the firm’s Singapore office, decided to evaluate the prospects of expanding to India. “It was the time of the licence Raj. I was shocked at the state of the legal practice in India. The big firms all had English names. They were very antiquated and it was clear that it was too early for us to try India,” he said. “I decided that there was not much to be doing in India, but I still kept going back.”
After having advised clients across Southeast Asian countries for over three decades, Church says he has no doubt that India ranks as the toughest place in Asia to do business. “In Southeast Asia, doing business is a win-win, but many in India play win-lose. You need deep pockets to do business in India,” he said. “You’ve got to be there for the long haul. You can’t go there and say, we will turn it around in six months and start making money after three years.”
While acknowledging India to be “the greatest democracy on earth”, Church said both his country (Australia) and India face similar problems of “democracy stopping progress”.
Church is also managing Stephenson Harwood’s venture into Myanmar. Last year, the firm had entered into an association with Myanmar law firm U Tin Yu and Associates, making the first venture of a UK law firm into that country.
At the same time, he cautions companies and investors rushing to Myanmar. “People go there thinking it is a virgin market where you can make a fortune, but a lot of things have to change before that can happen,” he said. “You need power and infrastructure.”
Church said he was excited about the prospects for mining companies in Myanmar, but pointed out that the country would first have to overhaul its laws before its vast reserves can be tapped.
An interesting feature of Church’s book on India’s business leaders is that many of these entrepreneurs had been successful under the so-called licence raj. “It is beyond belief that Indian businessmen prospered during that period,” he says, adding that Deepak Puri of Moser Baer told him that the licence raj was best described as the “government wanting Indian entrepreneurs to go into a boxing match with their arms tied behind their backs and win the bout”.
To be sure, things have begun to change and Indian firms are beginning to follow the West and get professionals to manage their businesses, he said. “I remember Rahul Bajaj telling me that during the licence raj, you could just put any son or daughter to run the business, but it can no longer be done now as they were not just competing with Indians, but all global companies.”
Church is also the director of industry lobby Singapore International Chamber of Commerce, non-executive director at Elara Capital, a financial advisory, and chairman of the Singapore Committee of Australian Institute of Company Directors. In 1994, he was awarded the Medal of the Order of Australia for strengthening the country’s business relations with Asia.
Edited excerpts from an interview:
After having worked as a lawyer across Southeast Asia, what are your views on the legal profession in India? Firms that you have been partners with have tried expanding to India in the past with little success. In this regard, what is your view on foreign law firms being allowed in India?
In Asia, being a lawyer is still not good and they are seen as litigators who create trouble. The top end, big corporate lawyers are a different breed. They have grown since liberalization of India’s economy. Lawyers are also very protective about foreign professionals coming into India, particularly because India is so far behind in terms of the practice of law.
Indian lawyers know the law better than anyone. But the way modern law firms are run are completely different. Many Indian law firms are run by families and are autocratic even if they are not family-run, and the guy who founded the firm takes most of the money. He knows that because of supply and demand, if people get fed up and go to start their own firm, then there are more lawyers who will come in. In the West, this was the situation in the 1970s, but it is now largely merit-based. If law firms from US and Europe came to India, they would, by definition, attract the brightest and the best from the Indian firms.
In 2010, there was a case in Chennai high court on foreign law firms practising in India. Most foreign lawyers just fly-in, fly-out and advise their clients. Part of the reasons why it (the legal sector) has not opened up is that India has been having a weak central government that has not done much for business. Even if the central government says we will open it up, there will be litigations; the states may not allow it. I believe foreign investors in India do want it to be opened up so that they have quality services in India.
The funny thing is that the small- and middle-sized firms will be totally unaffected by the entry of foreign law firms. Foreign firms are not interested in doing small litigations, family law, real estate transactions. The clients they want to service are the ones handling M&As, takeovers or doing fund-raising in the US or London. Take Singapore as an example. It has opened up and there are over 140 foreign law firms practising here. Its experience has been that most of its domestic legal profession has been unaffected. Singapore’s large firms have had a number of years to prepare for the opening up and many of them are now regional firms themselves and have become very competitive. Will the BJP (Bharatiya Janata Party) open it up (if it wins the national election in April-May and forms the government)? I don’t know.
Do you think a change in government will help bring in much needed reforms in India? Can a new government undertake structural changes the country needs?
I believe big business in India has come to the conclusion that they no longer can be totally dependent on India because if you are, then they are in trouble. We’ve seen a lot of the bigger companies making acquisitions abroad, which is correct. In policy terms, we’ve seen the government’s policy of looking east. Traditionally, all businesses have gone to London or looked to the West, but we are now seeing a dramatic change.
Five years ago, Indonesia was never in the minds of Indians. Indian firms have gone into Indonesia as they have realized that 250 million people is a relevant market. There have been successive waves—first it was IT (information technology), then pharmaceuticals and now mining companies. We see Indian firms buying businesses in Southeast Asia. One of the people in an upcoming book, B.M. Khaitan, chairman of Williamson Magor and Co. Ltd, the holding company of the McLeod Russel Ltd, now owns tea estates in Vietnam.
It depends on the sector, too. Outsourcing will still look more at America. It still comes down to my thesis on family businesses in India. Virtually all the big groups are run by families and I believe that even the smaller ones are moving a son or a daughter to Singapore. That is a trend that is going to increase. The Mauritius (double taxation avoidance) treaty is going to stop and Singapore is going to be a beneficiary.
The big Indian corporates know they cannot be dependent on the Indian market alone. Take the case of opening up the retail sector; it opens up and its shuts. The mid-sized companies, the ones that don’t have the critical mass, either in people or money, to get beyond India, are in a difficult stage and are stuck. Take India’s IT sector. The reason it has grown is because it was not dependent on the government and also because they cater to markets in the West.
Foreign business needs a new government in India, and from a Singapore point of view, I believe that it is often just the atmosphere. Create that and foreign investors will start looking again. But in the last few years, with all the scandals, it has not happened. Investments into India are routed from here because people do trust the Singapore law. If you have a problem, arbitration can happen here. I’ve spoken to some Indian companies, and they all used to do arbitration in London and now they want to do it here. London is expensive and there is a perception from Indian firms that London favours foreigners, but Singapore is seen as more Asian and more independent.
Do you see the Asean grouping becoming an equivalent of an European Union in Asia?
I don’t see a common currency. The trade treaties will happen, but not the way they intended it to be. Can it be like an EU? The differences between Asean members are far greater than that of EU. It is an economic block now. But, if you compare Singapore to Laos, or the Philippines to Myanmar, there is a huge difference in their histories, cultures and their economies. There is a strategic reason for these countries to stick together, because by themselves, they are nothing, except for Indonesia, which is a giant here.
You have edited a book on the short history of Southeast Asia and have also lived and worked in this region for decades. The West has long lectured Asia on democracy and free markets. But do you think that successful Asian economies like China and Singapore are now coming up with an alternate model?
The genesis of the book, A Short History of South-East Asia, is based on a quote from Singapore’s former Prime Minister Lee Kuan Yew, who had said that to “understand the present and anticipate the future, one must know enough of the past, enough to have a sense of history of a people”. Many academics contributed to the book. When you do business with a person in another country, it is not if the person speaks English, but you got to understand their culture, their history, their background, and this is why the British and the Americans have difficulties because they are not used to the deep, rich cultures of these countries.
George Bush’s view on democracy has failed when it comes to the Middle East. But Asia does not offer an alternative yet—Singapore is a just a city-state and what you can do here, you cannot do it even in Indonesia. Then you look at Thailand. If you are a Westerner, how could you understand it? You have a democratic election; a party wins, but the opposition wants an appointed body because they cannot win elections.
They want to go more the Singapore way I would say. You’ve got Malaysia where the ruling party has been in control for so long. There are many existing models in these countries and these are all under huge stress and strain. Cambodia is also under a lot of stress.
The one country where it has worked until now is Indonesia. Democracy has worked really well and I don’t see the threat of a military dictatorship coming back. After the Haji Muhammad Suharto regime, Indonesia had a lot of debate on whether they will become like a USA or end up as the USSR.
India is a very complicated country with a billion people, many states, ethnic groups, religions. For running a country like that, you need a model that cannot be adopted from Singapore. Singapore’s population is less than that of even Delhi.
The existing models in South-East Asia are all under threat—there is tension in Malaysia over preferences to the Bumiputeras (ethnic Malays) and so their best talent is leaving. There are so many entrenched elements there who don’t want changes.
Thailand is in turmoil, which could end up in a military coup. I draw a parallel between Thailand and Egypt. Its former president Mohamed Morsi was an elected head, but there is a sizable amount of the middle class who did not like him and the Muslim Brotherhood.
Vietnam has seen no political change, but they are having to deal with the economic side of things. Everybody in this region is competitive for investments and want their citizens to be rich and well-off. I imagine they will soon change to be more attractive.
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