Business

Saturday June 20, 2009

Worthwhile trip to Madagascar

By EUGENE MAHALINGAM


DESPITE the political turmoil in Madagascar, Ho Hup Construction Co Bhd deputy executive chairman Datuk Vincent Lye travelled thousands of kilometres to the African island nation last month to meet its president to resolve a dispute over a construction project gone awry.

Nearly an hour into the discussion, the young, newly sworn-in president Andry Rajoelina apparently had heard enough. He sat up in his chair and prepared to bid his guests farewell.

Datuk Vincent Lye ... Madagascar has a lot of natural resources and we feel that there are a lot of opportunities there.

Lye, not knowing what else to do, declared in desperation: “Your Excellency, I challenge you to put me in jail if I’m here without proper mandate!”

That remark, Lye recalls, finally got the president’s attention. “I had to prove to him that I was genuine and serious about our meeting,” he says. It was a hopeful turning point in Ho Hup’s bid to salvage its business venture in Madagascar.

In 2004, the Madagascar government awarded Ho Hup construction contracts worth US$60mil for a 400km road project, which was largely funded by the World Bank. However, the project was unilaterally terminated in February 2006 and machinery worth RM40mil was confiscated.

In September that year, Ho Hup commenced an arbitration claim to recover damages for loss of profits and unlawful termination amounting to US$40mil (RM140mil).

This is inclusive of a reimbursement of US$13mil paid to the Madagascar government last July by Ho Hup’s banker, CIMB Bank.

The Madagascar government submitted a counterclaim amounting to US$42mil (RM147mil) and the suit is pending decision at the International Court of Arbitration under the Rules of the International Chamber of Commerce, in Paris.

Lye says the company has written to the Foreign Affairs Ministry here for assistance. However, given that there was no Malaysian embassy in Madagascar – the nearest was in South Africa – the Malaysian Government could not effectively mediate in the matter.

“We also could not engage any legal representative from Madagascar to represent us because no one dared to take on the Government,” he says.

A long-drawn legal tussle with Madagascar has had serious consequences for Ho Hup. In fact, the uncertain outcome of the arbitration had resulted in a qualified audit opinion, which in turn resulted in Ho Hup being designated a PN17 company on July 31 last year.

Lye, who was elected deputy executive chairman in December 2008, was authorised by the board of Ho Hup to travel to Madagascar to settle the matter.

“The best thing was to negotiate a settlement out of court because we felt that it would be a win-win solution for both parties. We had planned to travel to Madagascar earlier but there was a coup and we had to delay the trip,” he says.

Early in the year, Rajoelina led a wave of protests that forced former president Marc Ravalomanana out of power. Over 100 people were killed during the unrest.

Upon resigning, Ravalomanana handed over power to the military, which picked 34-year-old Rajoelina, a former disc jockey, to become the country’s new leader although under Madagascar’s constitution, the country’s president must be at least 40.

In May, Lye and Ho Hup director Amran Ibrahim finally made the trip to Madagascar. “The company had a new management and Madagascar had a new government. The dispute was between the old government and the former management. We wanted to end the dispute and start a new business relationship with the new government,” says Lye.

Still, walking into Madagascar proved risky. According to Lye, the previous government had issued warrants of arrest against Ho Hup employees.

“We were prepared to go to jail. But we needed to settle the dispute for the company’s sake and we took the risk of travelling there. My wife refused to talk to me as she was worried of the consequences. But it was something I had to do,” he says.

To avoid the possibility of getting caught, Lye and Amran had to change hotels everyday.

“Needless to say, we feared for our lives. You never know when there might be another coup. We did not want to be identified by anyone. So we did not stay in one place for too long.”

When they managed to meet the new president, it did not help that there was a communication problem.

“We spoke English and he spoke French, and we had a ‘half-past-six’ interpreter,” Lye says with a laugh. “After speaking to him for about 45 minutes, he appeared confused and didn’t want to hear any more. He was already getting up to leave, and I had no choice but to tell him that I was risking jail just to step into the country!”

Madagascar, an island in the Indian Ocean off the south eastern coast of Africa, is probably more famously known because of the animated movie of the same name. However, life there is not quite like the cartoon. Lye says his short trip to the impoverished country really opened his eyes.

“It was quite sad to see that some of the children there don’t even have shoes when they walk to school,” he says.

However, he remains optimistic about the prospects in Madagascar. “The country has a lot of natural resources and we feel that there are a lot of opportunities there,” he says.

Ho Hup has pledged to donate six trucks to the Madagascar government as a gesture of goodwill. “I told the president that we would like to re-establish business on a new note and become friends.”

Attempting to resolve the construction project has no doubt been a roller-coaster ride for Lye. However, he feels that the meeting was fruitful and is hopeful of a prosperous future in Madagascar.

“I will be making another trip to Madagascar later this month and I hope to bring back good news for the company’s shareholders in time for our AGM on June 25.”

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