CNBC Transcript: Jeffrey Cheah, Founder and Chairman, Sunway Group

Below is the transcript of a CNBC exclusive interview with Sunway Group Chairman and founder, Jeffrey Cheah. The interview will play out in CNBC's latest episode of Managing Asia on 6 September 2019, 5.30PM SG/HK (in APAC) and 11.00PM BST time (in EMEA). If you choose to use anything, please attribute to CNBC and Christine Tan.

Christine Tan (CT): Tan Sri, this township here in Ipoh, how much work was involved developing it in a sustainable way?

Jeffrey Cheah (JC): When I got hold of this piece of land, in the front it was mined out, by tin mining in the old days. But I saw the jungle, the hills and the gem of the place - the hot springs coming out from the ground at more than 300 litres a day, at more than 70 degrees centigrade. And I remember when I was a child and a teenager, I used to come here to boil eggs in the little pool, and so did the late Sultan. He would come here very often when he was a young man. With all this nature and beauty, I can add on to make it more exciting.

CT: How much of a challenge was it to build around nature?

JC: Well, I think if compared to the Sunway City Kuala Lumpur township, this is a much easier work to do because everything was growing here. But in Sunway City Kuala Lumpur where Mr. Lee Kuan Yew called it a wasteland, there was nothing. It was washed out twice - mined for sand, mined for stone, mined for tin. So, how do we recapture, bring back the eco-system? That was the biggest challenge that we had. In fact, all the people whom I showed it to, that I was going to do it, they said that, "Jeffrey, you are a crazy fellow. Why don't you find a better piece of land? How are you going to do it? It is a big, big hole, mud everywhere, nothing is growing, no trees, everything is taken out, mined out and washed out." I knew it was a challenge but it's a very good location. The site was difficult, and I took on the challenge.

CT: This particular site here in Ipoh, what's special about it? What's unique about it to you? What have you tried to keep?

JC: Of course the hills, I can't do much. The hills are beautiful and I have visitors (saying), "Wow. This is two hundred and seventy million years old." I saw the forest and I knew that cutting the forest was ridiculous. I added on more local plants - local Malaysian plants that are helpful to beautify the place, that will attract foreign tourists here. That was what we did.

CT: So, this water lily pond here, was it originally here?

JC: Yes. Yes, it was already here.

CT: So, you just enhanced it?

JC: Just enhanced it. Put lily, clear the water, take away the mud because when heavy rain comes, all these (become) a collection pond for all the mud. But now, we have kept it fairly well, I must say. You can see the water is very clean and fishes thrive in it. This is what I call an eco-system. The ecosystem is back to normal.

CT: It's sustainable?

JC: Yes, it's sustainable, and it's not threatening.

CT: Since then, you've gone on to develop more townships – In Iskandar. Why is that important to you?

JC: Well, after developing Sunway City Kuala Lumpur, I felt that there were lots of opportunities to do the same, and make it even better. We came to Ipoh, where this was also an ex-mining site. But when I saw the site with the beautiful limestone hills, the forest and the gem of the place -- the hot springs, I fell in love with it. Although it was a sleepy hollow, I knew it would take a bit of time to bring vibrancy, to get the foot falls. It was a challenge and I spent a lot of time here. We have done it. Of course, it's not completed. There are a lot more components to come in yet. As far as Iskandar is concerned, I was offered this piece of land, 1800 acres in a joint venture with our sovereign wealth fund Khazanah - they own the land. They came to me and asked whether I'm interested to do a joint venture with them. Of course, I asked that if you want to have a township development, I would have to drive the project. (They said) "Oh, you have the power to do so." That was how we started Iskandar. The three townships I hope will be my legacy as a sustainable developer. Hopefully, other people will emulate to bring their eco-system into wastelands like what I've done.

CT: You think if tin prices didn't collapse in 1985, and you still had your tin quarry business, you would still be where you are today?

JC: If tin prices didn't collapse, it would have run out of reserves anyway. The British had mined it, and then I did some mining down there. You could not continue to mine because it was a wasting asset, so to speak. You know, when the tin runs out, what do you do? That's why I aimed to develop that site into a township. Of course, I got a lot of criticisms, a lot of negative comments from friends and bankers especially so, but I was quite determined to do what I wanted to do. Today, it has become a showpiece I would say.

CT: What were some of the challenges you faced in the early days as a businessman? Were you taken seriously?

JC: No, of course. I had no brand, no name. I was just... I'm just Jeffrey Cheah, being an accountant, having worked as an accountant for a few years and then coming out to do business. I had to adopt good values and I strongly believed in that. You know, business is about trust. It's about confidence in each other. When you shake hands, you honor. This is a good integrity that we must have. These are the things that I have always been very conscious of, especially the integrity. When I tell the young people -- especially my children -- integrity (is something) we can't compromise. The other thing that I tell my children is humility. I have to walk the talk. I have to lead the way, to show humility. When I walk into my hotel, I've seen rich people. The door man just opened (the door), they'd just walk in and don't even greet them. I greet my staff and they're all very happy. I say, good morning and be nice to them because they are doing a job. I mean, it's not degrading just to say, "Good morning, how are you?" That makes them very happy for the day.

CT: When you started Sunway City, your vision for your first project, what did your friends and businesses say?

JC: The first business is on that piece of land which Mr. Lee Kuan Yew called a "wasteland". Of course, he congratulated me at the time for transforming a wasteland into a wonderland which saw the integration of all the components. (But) it was negativity all along, right from the start.

CT: How negative?

JC: Some of them were very negative, including bankers. I had to drive them down into the mine hole and give some artist's impression of what I wanted to do. They asked me," Who are you, Jeffrey? You are just an accountant. You are not an engineer. You are not this..." Well, I said, "That's where leadership comes in." You don't need to be an engineer or a rocket scientist to go up the moon. You provide the facility and you lead people, good people with knowledge, with experience, with skill to help you.

CT: But you were confident you could pull it off?

JC: Well, I wouldn't say I was 100 percent confident but I knew I had to work my guts out to do it, and it is worth it! Of course when building that township, I went through two very bad times: in 1986 when there was a very bad recession in Malaysia; and in 1997 which everybody knows was the financial crisis. It was a very, very good lesson for me. I made a lot of mistakes but I didn't cheat people. It was all business decisions. There was euphoria and everybody thought that bad times would not come. But I learnt my lesson that when there's sunshine, there's also storm. That's what I have learnt.

CT: Looking at your townships, you've succeeded in managing and operating an entire ecosystem. You found a way to do good as well as make money at the same time.

JC: Yes.

CT: What's your secret?

JC: We use this model quite frequently: we build, own and operate. It's not as easy to train people to give their best, to manage the center like Sunway Lagoon. I had no experience. So the whole thing is to get the right people who have the passion to give back, to give their best to me. When I interviewed people who wanted to work in a theme park, I said, "Do you have a passion to make the family happy, to see fun and give smiles? But it's hard work, because at theme parks, you have to go under the sun. These are the things that you must tell yourself that you have to go through, and you will enjoy it. You need the passion to make people happy. You are selling fun." So, I think it works! I have got a very good team now. All the components that we have put in place – to build, own and operate from scratch, organic growth so to speak. All of these components are profitable and they are all run very well. This is a good integrated township, a green township now. I mean the ground was washed twice, all the rocks were taken out, sand was taken out and it left a few big holes. What do I do? An easy way out was to just flooding, but I decided that these are very valuable real estate. If I can maintain the water level down a hundred and fifty feet – that's 15 stories down which is what has happened. I had to bring back all big trees and it wasn't easy. When Mr. Lee Kuan Yew came here, he saw my big trees. "So, how do you angle those trees?" I just said, "Sir, it's not easy but we do a lot of recycling and putting the mud to dry out. We mixed it with sand, made it with earth and put them back. So now, the ecosystem is fully restored."

CT: So, does being sustainable also mean more investments and less profit as a result?

JC: Well, I think if you do a good job like in anything else… like in The Banjaran (Hotsprings Retreat) here, you can charge a little bit higher. You can charge a little bit higher, then you make back what you spend… the extra, so to speak, to make it so nice. Teeming costs money. We tie the ropes on the walk track, (put) a bit of artificial rock here and there to make it look real, and then landscaped it very well. But you know, these are extra, extra things. But when people come, they say, "Wow." When you charge them a higher price, they say, "OK, it's fine."

CT: But is the payback period a lot longer?

JC: Sometimes, yes. Like in Sunway Lagoon theme park, because you have to continuously re-invest. You won't like to go back to a theme park when you've seen and played with everything. So, we need to upgrade and put new rides and attractions, and that's what we are doing. Sometimes, what we do in business is affected by the external environment. Right now, there's a trade war. Trade war is one thing but then business confidence is not there. Business people or fund managers don't like uncertainty. There's uncertainty out there. For the world, there's the trade war. You don't know all this geopolitics is going to cause a lot of headache. As far as Malaysia is concerned, we had a change of government a year ago and businesses are looking at what is the new Government there promising in their manifesto. We like to see things happen, but unfortunately, it's slowly happening.

CT: What sort of returns do you normally look at?

JC: When I started property development, it gave over 20 percent sometimes. But now, 10 percent, 12 percent, if you can get (that), it's not too bad. It's not too bad.

CT: As a businessman, you've made education a key pillar of Sunway strategy. You set up your own Sunway University, and you've tied up with world renowned Economics Professor Jeffrey Sachs to set up a Centre on Sustainable Development. Is it all about building the next group of leaders in sustainable development?

JC: That's what I hope, but it will take a bit of time, Christine, because you know it is a new buzzword -- sustainable development.

CT: Do people actually understand what it means?

JC: Now, they are beginning to understand. When people talk about sustainable development, they always think that is just climate change. It is more than that. You have to look at the 17 SDGs developed by the U.N.. So it's much more than that. We are talking about real good values for the future generation, for humanity, like no poverty, quality education, quality healthcare and well-being - all these are all part and parcel of sustainable development. We start with being a good example and hopefully, other people will follow. The young people will like it, and today I can feel that the young people are all very charged up to do a lot of charitable work outside their schoolwork. They are very passionate about it which is very good for us.

CT: You want to build Sunway University into a "Harvard of the East". It's a tall ambition especially when you have to compete with many universities here in the region. Do you think you can do it?

JC: Well, I always set very high benchmarks. If I don't set high benchmarks, my people may think that we are so good. So, I say "Harvard of the East". Now, of course, we are linked with Cambridge and Harvard, and of course, universities always compete. I tell my friends, competition is always good and it's always there. You can't stop it and it brings out the best of all of us. But I know I want to set the foundation now. It may not happen. I don't think it will happen during my lifetime.

CT: How long do you think it will take?

JC: I hope Sunway University will become a Top 100 university in the world in 10 to 15 years from now. I believe we can get there because I have engaged these good people who are very helpful and they like me. If you go to Harvard and Cambridge, a lot of people asked me, "How do you get to link up with these people?" We have to do what we have to do. They will check you left, right and center: your integrity, your reputation, who are we and who are we tying up with. They are all now very satisfied with the relationship, and I know we can develop a much, much stronger relationship and they will help us. They're happy to impart knowledge to our people. I tell my people that I want to learn from the best.

CT: You're the visionary behind Sunway City, Malaysia's first sustainable development. Since then, you've gone on to build two more - Ipoh and Iskandar. How many more townships could you build in Malaysia?

JC: Well, we have been offered one in Kota Bahru, Kelantan. Of course, Kelantan is a laid back state, ruled by the the Islamic Party. But when I saw that piece of land, I said, "Well, it (would) take a bit of time." The infrastructure there is very poor. A lot of the top business people are from Kelantan. They work very hard but they don't have proper housing.

CT: You think you can make a difference there?

JC: Oh yes, I will make a difference. If not, I wouldn't go. But like I said, it will not happen overnight. It takes a bit of time. We will have the first medical centre there in Kota Bahru because they are very short of good hospitals. With our brand, our knowledge and our tie ups with the top university, people will come. I am confident that our people are excited. Maybe next day in Sabah, Sarawak, you know?

CT: So, how many townships can you have overall under your leadership?

JC: Well, hopefully three or four more, hopefully. Like in China, they offered me. They came to us. No, I didn't go to them. I was surprised they called for lunch - the Zhuhai government, they wanted to build a township. They said that they'd quietly observed with the Chinese ambassador here what we have done and what we are doing. So, when they had lunch with me, they said, "What you built, a lot of people can do, but I like your management and your style of leadership, you make it work." So, that was why they wanted us to go there.

CT: Property development is pretty much your core business. You've been doing well because of your guarantee of 95% financing. With the local property market looking soft and lackluster, you see a strong pick up anytime soon?

JC: There is an overbuild situation. I wouldn't say it's a glut, but the policy of the government is important. I always say that if I were... if I were to be in charge, I would have changed certain policy, to make it more attractive especially to get foreigners to come. It will be a competition to Singapore. Singapore is very nice, I know. You know you have good leadership, you have good government, you have good law, but it's a tiny island and it's too expensive. Over here, we have everything, but if we organize ourselves well, there will be a lot of multinationals.

CT: So, where do you see the property market in Malaysia?

JC: Fortunately, for us, we do have a different site that we've bought and we are building. They are selling very well. We are still selling very well. When other people sell 10 percent, we sell 60 percent. One that we did near our shopping in Cheras in KL, three kilometers from KLCC, when we launched (Sunway Velocity), 500 units were sold out at this time! So that proved my point, that we put branding, good delivery, put promises and walk the talk. Maybe it's because of me. I've heard some other people say, "It's Jeffrey Cheah, he's walking in there over the weekend, making sure things are all under control and well developed." So those may be some of the points that let me attract buyers. But bankers are bankers, you know, when it's good times, they give you all the money. During bad times, they will be very, very difficult. It's the financing - the end financing that may cause the purchaser to walk away.

CT: But you're confident the local property market will actually go higher from here?

JC: In good locations… in good locations and (dependent on) property price. You cannot price very high in certain areas. But like us in in the one I talked - the Velocity, we priced it very high and yet it's sold out because the whole component of the integration and the management -- the way Sunway is managing -- they are very comfortable.

CT: Over the years, you've actually moved outside of Malaysia, into Singapore, China. You've got some investments in the U.K. as well as Australia. Overall, overseas projects make up about 60 percent of your property sales. What projects are you exploring overseas?

JC: We are always on the lookout for opportunities like U.K. now, Brexit. I feel that it is a good time to go in. The U.K. has been a world financial center for a long time.

CT: Are you eyeing any potential sites there?

JC: We are. So we are still looking. We have already bought, through a fund that we have a big say, 97 properties where the tenants are all from the British government. It gives a reasonable return. We are also going into buying three buildings in Bristol and Sheffield -- student accommodation. Student accommodations are the way to go. You just imagine - Donald Trump doesn't like the Chinese in the U.S. They have about 500,000 of these students. If they are not welcomed, they will go elsewhere. Where else do they go? It's U.K. In terms of education, the U.K. gives some of the best education.

CT: So you see the shift in trend?

JC: Oh yes, it will.

CT: And you're gearing up for it?

JC: We are gearing up for that, hopefully. But I don't have a crystal ball but if we work hard, we will succeed.

CT: China -- will it be your biggest market one day?

JC: I believe so because I tell a lot of friends that we have to send our children to Chinese school to take at least six years of Chinese. I have not been. During my days, my father said, if you don't go to English school, you will not get a job. So no Chinese school, you go to English school. So I went to an English school but now I feel a loss with the Chinese. If I spent six years in a Chinese school, today my investment in China would be much, much bigger because I went there in the 1990s…

CT: So you were handicapped?

JC: Handicapped especially if you don't understand the language. People talked to you to invest in this and that, you felt a little bit uncomfortable. That was why I did not do it. Now 30 years later, now what has happened? China has brought 700 million people out of poverty. That has never happened in the world. No one has done it and they have done it. So I have great confidence that under their system, good leadership and all this, China will be number one in the world, in all forms.

CT: So it will be your biggest market one day.

JC: I hope so, but this is not easy.

CT: So Tan Sri, you're 74 years old, grew up in poverty in the small town of Pusing in Perak, you're the sixth in a family of 10. Your father was a lorry driver. How has your humble background shaped the businessman that you are today?

JC: The value system sometimes in in-born. Skills can be learnt, but values we have to continue to cultivate. I always believe that one must be humble, because if you think you are good, there are lots of people who are better than you. So, why, why, why the need to be cocky? You know, we don't need to be cocky. Just relate to people as they are, and be kind and humane. I told my children that. I teach them about humility. I say, I have seen a lot of young people who are just starting to be successful, and they become carried away. If you are cocky, even if you are walking into a deep hole, they'd say, "It's OK. Go, go. There is no hole there. You go." You know what I mean? That is not what we want. Being humble, people will help you. Even when you're down, people will say, "Oh, my goodness, he is a good man."

CT: So, that's the life lesson learnt for you?

JC: Yes, for sure! If I didn't have that kind of behavior, I would have gone bankrupt, to be honest, because the stakeholders would not help me. When you are down, you need people to bring you up, and they must believe in you that you are worth helping.

CT: You have about 16,000 employees working for you in Malaysia and overseas. How would you describe your leadership style and the way you influence and manage today?

JC: I lead by example, and I also empower a lot. Of course, selecting the right person is often not easy but fortunately my people -- the top people in my organization -- are all very long term. Some of them (have spent) even thirty eight years with me, and they are still there. They are still happy. But some of them you know even 60 plus, 70 years old, I say, you can still fight a lion, why do you want to retire? So, I need their experience but I think most important is that we must be conscious to groom younger successors. The succession place must be put in place, if something happened to them. We are mortal men, we are not immortal - anything can happen to us.

CT: You're one of Malaysia's richest men, a self-made billionaire. What advice would you give others on how to build a successful sustainable business?

JC: I don't know, maybe I was a little bit lucky here. You need a little bit of luck in business some times. But like I said, the core value is very important. There's no compromise: hardworking, being very passionate on what do you want to do, lead your people well, and also inculcate good values in them. There are lots of smart people out there, but if they're put on the right track, given the right motivation and incentives, I think they will give their best. You know if you have 50 locations like what we have, how can I oversee everything? You can't. So I have to empower these people but we monitor their performance every year. I also I think is fair.

CT: Both your son and daughter work with you in the same company, do you think they have what it takes to continue your journey in sustainability? What do you tell them?

JC: I told them that we have to look long term in a lot of things, and I always do. I am a trained accountant, I don't look at the P&L for twelve months and then say this is the decision I make. I make very long term (decisions). And so far, my children are very good. They don't give me any problems at all. I've been telling them - I empower you, but don't forget Daddy's watching. (Christine laughs) So I think that's fair. So, I think so far, so good... so far, so good.

CT: So, you do have a next generation who will take over you when you retire?

JC: Oh yes. You see when I founded the Jeffrey Cheah Foundation, I know it is a very long term thing. I told my daughter, "You structure that Foundation, you get the lawyers and accountants to do it." And she did it, and it's structured very well through very top lawyers in Singapore. Now the foundation is a trust anyway. It's all documented in perpetuity. When you form a foundation, you have to be very genuine. My family and myself, we are normal shareholders. The foundation owns all the institutions. Sunway University, Sunway College, Sunway International School are all owned by the foundation. It takes a long time to build a reputable institution. So we continue to make sure that we have the right ingredients like financing, the motivation structure, how to take in the best, and collaborate with various people to learn from. Never, never be shy to learn.

CT: Besides education which your daughter is in charge of, is there a second generation when you step down?

JC: Hopefully, hopefully… maybe the daughter and the sons. Hopefully, they are able to work together. It's how I tell them now -- if your sister has more or your brother has more… a little bit more than you… $100 million more or $10 million more, it's not the money, it's the family that's most important. Keep it together. They are doing what I have been saying, and I've been watching. I think I'm quite happy, so far.

CT: So Daddy is watching?

JC: Yes. Yes. You have to. (Laughs)

CT: And finally, as the founder of Sunway and as a pioneer in sustainable development here in Malaysia, what sort of legacy do you want to leave behind?

JC: My motto has always been "I aspire to inspire before I expire." Now, before I expire in that form, I hope to be able to do a lot of good for mankind. Climate change is a real thing that is happening. If we don't address that, all of us will have a problem in the future. I sometimes tell the younger people that it will be you people who will have to suffer. Maybe I may not be around but if we don't do something now, it is definitely going to happen. The SDGs, Sunway can't do all of them but we pick certain goals that we can help to develop it better for mankind. Hopefully, when people who want to practice (sustainability), they will come and see what Sunway has done and do the same. And it is good! These are good values and good policy to have, to help bring better prospects, better future, better health, better well-being, (eradicate) poverty and all these things. That's my hope, as my legacy.

CT: Tan Sri, thank you so much for talking to me.

JC: Thank you.

END

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