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PKT’s Michael Tio tells JOY LEE businesses must be creative in the current economic climate by hedging against the dollar, localising products and diversifying their target markets.

THESE are undoubtedly challenging times for businesses, especially small and medium enterprises (SMEs), given the sluggish economic environment, stiffer competition and depreciating ringgit.

PKT Logistics Group Sdn Bhd managing director Datuk Michael Tio shares his experience of going through a similar challenge back in the late 1990s and talks about how SMEs can ride out the choppy waters today.

What are some of the main challenges that SMEs face?

I get this a lot during my talks. Malaysian SMEs already find it hard to grow their business with the limitation of resources and business knowledge in facing competition from the larger corporations. Now they are also faced with new business challenges like currency crisis and the Asean Free Trade Area (Afta).

Afta will open up borders and lift tariff barriers. Instead of facing competition only locally, now they will also have to face Asean corporations.

What can they do to overcome these challenges?

The most immediate challenge that Malaysian SMEs are facing is currency depreciation. This makes it hard for them to buy imported goods, if they do not know how to hedge against currency risk. Localisation of their products is good in the long-term to hedge against foreign currency. Moreover, after they localise their products, they can then export it.

This ensures that they do not depend too much on local consumption.

With Afta, it means bigger market opportunities for SMEs. They need to find the market for their products in these countries. Earning US dollars through exports will help write-off the risks of US dollar-denominated imports.

What has been one of your own biggest challenges running PKT?

Coincidentally, the Asian currency crisis in 1998 was my biggest challenge. We overcame it by coming out with several strategies such as diversifying our business out of Malaysia and moving into recession-proof sectors like the fast-moving consumer goods segment. Besides moving our business away into other region, we also decided to set up a Labuan outfit to cater for businesses that has nothing to do with the ringgit or Malaysia. As a result, the payments made to us are in US dollar and we pay our suppliers in US dollar.

What are some of the lessons you have learnt from overcoming these challenges?

Don’t put your eggs in a segment of business. You should have recession-proof products too. Always move up the value chain to stay competitive. Secondly, don’t put all your eggs in a Malaysian basket. Diversify your business geographically. You don’t have to go very far. Just focus on the Asean + 6 countries.

Do you have a philosophy in tackling challenges?

My personal philosophy is to “Dream of it, talk about it, plan for it, work on it and get it”. I follow it step by step as I don’t believe in just having a philosophy. In order to sustain your business, you must continuously move up the value chain in your business. Invest in your people by providing them with a happy, healthy and honest working environment.

And finally, my business philosophy is “Thou shall not be jealous of others’ success”. You should learn from them and be appreciative. And you should give back to society when you are successful without asking for anything in return.

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