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A blueprint for the future? Or a one-off special case?

Uking Terbuka Signs Agreement with Xiamen Region

Straits Journal, Singapore, 9 August 2014, authored by our business correspondent

We are used to Chinese companies investing throughout the region. It may be overstatement, but one would be excused if one concluded that there was not a single large urban development, infrastructure project, energy generation or distribution initiative or new natural resource exploitation project that did not involve Chinese interest. Direct investment, partnerships with local companies or government agencies, or participation in conglomerates to share risk, all these arrangements and more are increasingly employed by Chinese players keen on extending their interests beyond their own borders. It has become a commonplace these days to say that those once nationally focused mainland interests are now eyeing multinational status.

But what about the opposite direction? How often do we hear about South-East Asian companies entering broad, strategic partnerships with mainland partners in the People’s Republic? Uking Terbuka, the Indonesian finance and property conglomerate, yesterday broke this mould of expectation by signing a memorandum of understanding with numerous bodies in Xiamen, including state-run organisations and private companies. Though no specific project is mentioned in the agreement, a company spokesman declared after the signing that several new initiatives, based on the provisions of the agreement, would be announced in the coming weeks.

In an interview with the Straits Journal, Sarnu Joyo, an Executive Director of Uking Terbuka outlined company thinking. “We have all assumed in recent years that the Chinese economy would grow both internally and externally in the future, but with the primary focus increasingly moving to projects outside of China’s borders. The internal market in China now forms the third largest single market in the world, after the European Union and the United States. Increasingly, however, we have also assumed that mainland Chinese interests would automatically seek to operate multi-nationally, given that their spectacular growth of recent years might be hard to sustain from local market involvement only. That is only to be expected. What we have only rarely considered is the possibility of corporations from outside China participating in that giant market as equal partners. Uking Terbuka, from today, is challenging those assumptions by signing our agreement with multiple partner agencies in Xiamen.”

Straits Journal asked what kind of projects were envisaged. Sarnu Joyo refused to offer specific details, saying that since the understanding had only just been signed, it would be inappropriate at this stage to announce anything other than general areas of mutual interest. “We envisage high-end residential developments,” he said, “and some significant retail parks in prestigious, high-profile locations.” He continued by stating that infrastructure projects would only come later, if at all. “That sector requires us to cooperate more deeply with the state, so that might be more difficult to manage in the short term, given that we remain primarily an Indonesian company,” he explained. “We are signing one agreement with mainland state agencies,” he clarified, “not becoming one. If, in the future, as a result of cooperation that is initially purely commercial, we manage to forge a strong relationship based on shared interests, then we may discuss broadening our agreements to include different areas.”

In what sounded like a fascinating, even ground-breaking initiative, Sarnu Joyo went on to describe a possible avenue of cooperation around education. “Uking Terbuka has long wanted to establish interests in European property, particularly in London. We are currently negotiating a partnership with a London university to construct rather specialized accommodation for foreign students, who always have significant difficulty in finding accommodation of the right standard in a competitive and expensive environment like the British capital. What we are planning is accommodation for students that could be flexible enough so that later it might also provide longer term accommodation for those students who wanted to stay on, perhaps to develop longer term professional commitments to the United Kingdom.

“We believe that this arrangement may prove to be a model for future development. We envision students initially renting accommodation on short-term contracts, but contracts that, from the start, have built-in the opportunity for extension into longer-term leasehold, long enough to sustain permanent or semi-permanent residence after graduation. We even anticipate that some residents might even want nine hundred and ninety-nine year leases, which would then allow their properties to be bought and sold on the open market. Uking Terbuka, of course, would retain ownership of the site, the buildings and the land, but effectively such units could then potentially transfer into the general property market, thus adding to the locally available housing stock.

“There are several parties in Xiamen province who are interested in accessing such a scheme. It would be a double win for our company, in that we could become established in UK real estate and at the same time facilitate educational opportunities for elite families.”

The possibility was raised that this cooperation might achieve something more political rather than purely commercial on behalf of the owners of Uking. The corporation still retains a high degree of influence from its founding family, who saw their company begin to grow exponentially from the seventies, though the bulk of its expansion has happened over the last two decades. The Sarnu family at the time of the company’s foundation were still identified with the ethnic Chinese community and thus, at that time in Indonesia, only loosely and perhaps resentfully linked to national interests. Indeed, there was a period when political leaders in Indonesia dismissed them as a set of ‘chindos’, a term that no member of the Indonesian government would be likely to use nowadays. Since then, of course, the family has adopted Indonesian nationality and its members have become Muslims. “I think that aspect of our initiative, even that aspect of our family’s past, is of interest only in the minds of certain Singaporean journalists,” Sarnu Joyo pointed out, dismissively. “In the Indonesia of today, the Sarnu family, along with its majority holding in Uking Terbuka, is not seen as anything apart from the mainstream of Indonesian society, business and commerce. We are completely integrated these days.”

As a result of separate investigations, however, the Straits Journal has learned that the project in the United Kingdom could not be pursued by a Chinese corporation independently, given that there exists specific political lobbying against Chinese corporate involvement in the UK’s higher education sector, though not, of course, opposition to fee-paying Chinese students enrolling on UK university courses. If such campaigning were to present a block to future initiatives, then this Uking initiative is crucial in realizing broader aims, both on behalf of the company and on behalf of Chinese interests that are essentially and eventually state interests.

Uking Terbuka promised more details would emerge of future cooperation between itself and Xiamen private and state bodies in the coming months. But, on the evidence of the joint press release from the company and its Chinese regional government partners, we are perhaps witnessing the dawn of a new era and new style of economic cooperation between two of our region’s giants