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November 30, 2000

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AsiaweekTimeAsia NowAsiaweek story

FEBRUARY 11, 2000 VOL. 26 NO. 5

Change Is in the Air
Sun Hung Kai's Raymond Kwok has spent months educating himself on how the Internet is transforming business. Now it's time to act

Kwok believes he can transform a property company into a tech powerhouse David G. McIntire - Black Star for Asiaweek
On Christmas Eve, Hilda Wong was enjoying a rare opportunity to shop while on a four-day vacation in Australia. The 26-year-old co-founder of a Hong Kong Internet auction site called was seriously in need of personal time. Her relentless schedule working 24/7 - dotcom verbiage meaning all the time (24 hours a day, seven days a week) - had been her life since she and two business partners founded the venture in June. But even at 5 p.m. on the day before Christmas, 7,400 km from Hong Kong, Wong could not get away. Her Nokia phone sang its digitized tune. Raymond Kwok Ping-luen's secretary was on the line from Hong Kong passing on the message to please call Mr. Kwok as soon as possible? Wong snapped out of her holiday reverie and dialed the personal number of the managing director of Sun Hung Kai, one of Hong Kong's premier property developers. "Hello," said the 46-year-old Kwok, "I have some ideas for the website." He began to toss out ways to expand the red-dots business.

Cover: Change Is in the Air
The Internet education of Raymond Kwok
Extended online interview
Why property mogul Raymond Kwok is eyeing the Internet
Spreading the Risk
It's either bricks to clicks or the deep six

Selling with Style
How Japan's Egoist fashion outlets popped to the top in the retailing business

Already at record highs, Singaporean stocks may still surge

Until Gus Dur reforms immigration, battle the Indonesian system

South Korea: Revolt of the Citizens
A blacklisting campaign shocks lawmakers

Pakistan: Of Rhetoric and Reality
Why Pakistan is not declared a terrorist state

India: 'Pakistan Unpredictable'
But India can hold its ground, says Fernandes

Indonesia: Washington on Wahid
America's top man on East Asia applauds Indonesia's president

Thailand: The Enemy on the Border
More than anyone else, it's Myanmar United Wa State Army that threatens Thailand's security

Confronted with the story today, the youngest of three brothers who run the Sun Hung Kai empire looks sheepish. "I was calling a mobile phone," he says in his defense. "I didn't know it was in Australia." But the embarrassment disappears soon enough, replaced by something closer to righteousness: "In fact, I encourage all my key people to bring their mobiles when they travel." This is a new Raymond Kwok. In years past, before the Internet became all-consuming and before e-commerce was a hackneyed buzzword and before what he calls a business transformation "as big as the Industrial Revolution" had gained a toehold, the 46-year-old Kwok was a family man who didn't work weekends and could plan to be home for a regular suppertime. But now there is work to do.

Judging by the activity of recent weeks and months, Kwok is demanding no more of his team than of himself. Sun Hung Kai's first e-commerce initiative,, held its inaugural online auction in October. There have been less-bold creations as well. Since November, the company has been running a data center leasing business called iAdvantage that provides modified, computer-friendly spaces (with gas-emitting fire suppression nozzles, for example, as opposed to water sprinklers) for Internet-related hardware and services. is a website that provides detail on real estate for sale in the secondary market. A special service called iHon aims to provide residential apartment dwellers with fast fiber-optic data connections and video conferencing facilities. At the end of January, the company officially spun off an entire information technology (IT) unit called Sunevision filled with about a dozen Internet projects - including all of the ones mentioned above. Most were announced only in the waning weeks of 1999. Herbert Hui Ho-ming, who until recently was managing director of debt-ridden Guangdong Investment, was appointed to run Sunevision. As Asiaweek went to press, Sun Hung Kai was announcing its intention to list Sunevision on Hong Kong's new stock exchange, the Growth Enterprise Market.

The transformation from property company to property-hybrid-Internet conglomerate has been quick but hardly effortless for Sun Hung Kai and the Kwok brothers who run it - Chairman Walter, 48, and middle sibling Thomas, 47, in addition to Raymond. What sets the company apart is its almost frenzied approach to e-commerce initiatives. Hong Kong companies are renowned for being able to transform themselves quickly and decisively. But rarely in modern times has such a successful and profitable Asian company embraced fundamental change as zealously and quickly. Sun Hung Kai is "not some new kid on the block boosting share prices by talking up technology," says Otto Wong, property analyst with Salomon Smith Barney in Hong Kong. "Most of the Internet ventures they have announced have some synergy with their existing core business of property."

Sun Hung Kai's cyber activity represents a culmination of Kwok's Internet education - or at least matriculation with a basic degree. An avid reader of business periodicals, he especially seeks technology stories. Because of persistent queries, the company information systems department assigned a "personal IT manager" to Kwok. Eric Leung often answers Kwok's questions on exactly how new gadgets work and tutors his boss on using the latest software and buying technology. Says Alex Tam, chief executive at iAdvantage, "Raymond is always eager to understand. He learns from everybody else." Kwok likes to use his mobile phone and a Palm V (Hong Kong's mobile phone standards don't support newer versions). Having been an Internet surfer for four years, he now spends most of his daily online time keeping up with news and occasionally visiting chatrooms. He recently installed a high-speed data connection line to his computer at home, which he uses to browse his favorite sites (see box above) after work - sometimes until the wee hours of the morning. He has made pilgrimages to Silicon Valley and counts among his friends Yahoo! founder Jerry Yang and Sun Microsystems' Scott McNealy. Kwok had been attending technology conferences and seminars in Hong Kong, the U.S. and Europe as a way to learn more. Now that he feels sufficiently backgrounded, he says, "It is time for execution."

Where Raymond Kwok Goes
Anchor site of New York Internet entrepreneur Alan Meckler's empire. It offers real-time industry news and links to the group's newsletters, websites and discussion forums
Latest news on computers, IT companies and deals from CNET. Recently ran a special report on "Top Tech Predictions for 2000" - No. 6: "The dot-com frenzy dies down"
Online version of the edgy San Francisco-based technology bible Red Herring Magazine. As they see themselves: "a crucial conduit of information, analysis and opinion, between the vision of Silicon Valley and the power of corporate America."
One of the oldest online technology news sites - since 1994. Includes a useful encyclopedia with 13,000 tech-industry terms and acronyms.

Kwok is not quite ready to trade his handmade dress shirts for Silicon Valley-casual work garb like denims - an Asian tycoon will go only so far. He also won't abandon the fiscal probity that befits a bottom-line developer. A Sun Hung Kai staffer says Kwok bought a Dell laptop not primarily because of speed or techie features but because he "got a good deal on it." One significant personal change: The intensely private Kwok has become much more visible as an Internet convert than he ever was before as a property company executive. In an exclusive interview with Asiaweek recently (see story page 61), he peppered his pronouncements with phrases like "web-enabled business" and "first-mover advantage." Kwok used the phrase "new world" seven times in a 70-minute conversation to characterize the way the Internet is changing business.

How successful will the Kwok brothers and Sun Hung Kai be in managing the makeover? In Hong Kong, skepticism of companies that say they are remaking themselves as e-commerce plays abounds. Twenty-two out of 39 listed companies that changed their names last year picked new appellations that included e-this or cyber-that or somethingdotcom. "I'm not sold [on Sun Hung Kai's transformation]. Everyone is doing it," says one foreign fund manager, who asked not to be named. "I'm not looking at Sun Hung Kai as a technology play. Right now it just seems like it is jumping on the bandwagon." Of the slick, brushed-aluminum look of iAdvantage's offices, another asset manager says: "The hyper-cyber décor is the most impressive part of Sun Hung Kai's Internet strategy. It's still not clear to me how they will maintain their competitive advantage in technology."

The shortage of qualified tech talent in Hong Kong and throughout Asia is a potential hindrance to Sun Hung Kai's Internet dreams. However, local analysts say the company's management skills are among the strongest of any large Hong Kong company. Says Matei Mihalca, head of Asia-Pacific new-media sector research at Merrill Lynch: "We view [Sun Hung Kai] as the best-positioned Hong Kong property company moving into the Internet." Also, the company is proving adept at using the connections it already has with tenants and clients to morph into something different. These customer connections could prove to be the company's greatest asset.

Raymond Kwok has demonstrated the willingness to learn new subjects when he needs to. He earned a law degree from Cambridge University and a master's in business administration from Harvard before joining the family company in 1980. Kwok's IT personal trainer, Leung, says the boss is a "fast learner who is very curious." He and his wife Helen have two young children.

Kwok's late father, Kwok Tak-seng, started a foodstuffs trading company after World War II. Sun Hung Kai emerged in 1972 as a consortium that included Lee Shau Kee, the fabulously wealthy owner of another Hong Kong developer, Henderson Land. Lee remains a significant shareholder in Sun Hung Kai and acts as a mentor to the Kwok sons, who call him "uncle" and remember how he helped their father. Today, Sun Hung Kai is Hong Kong's second-most valuable property play (Li Ka-shing's Cheung Kong is No. 1) with a capitalization of $23 billion. The Kwoks own more than half of the company, which has gained a reputation for quality construction and has built Hong Kong landmarks like Central Plaza, the Special Administrative Region's tallest building.

The property business has changed in Hong Kong. Tycoons like Lee and Li remain powerful, of course, but land development is no longer Hong Kong's leading wealth-creator. In the last four years, profits from property development have fallen. Some analysts doubt that even after the property market recovers from the downturn of the last couple of years, profit margins will ever be as strong as they once were. In 1999, a year of stagnation in the Hong Kong property market, Sun Hung Kai still managed to book revenues of $3 billion and profits equal to 33% of sales. It sounds healthy, but that margin is still about half what it has been in the salad days of rocketing real estate values.

"I would look at it from a 'push-and-pull' perspective," says University of Hong Kong School of Business associate professor Patrick Chau. The declining profitability of Hong Kong property is pushing local property developers to find new businesses - productive ways to use financial strength. He adds: "Externally, the world is changing and moving towards an electronic-commerce era. The prospect of $3.2 trillion in e-commerce spending worldwide is definitely pulling a lot of conglomerates into the Internet business."

Kwok is a disciple of Intel's Andy Grove, who wrote in Only the Paranoid Survive that businesses would do well to operate as if they are under attack. "We have to be a paranoid company," says Kwok. "We change not because we want to change. But because if we stay [the same], the [future] is dark. These IT guys want to come into my business." Kwok notes that newly rich technology companies, bolstered by sky-high stock market valuations, are suddenly powerful enough to snap up established players. An outside buyout of Sun Hung Kai is unlikely, however, because the brothers own more than half of the company.

More likely in the short run are announcements of alliances and deals with global conglomerates. "We have become the potential partner of choice," says Stephen Tung, one of Kwok's primary lieutenants on technology matters. Microsoft chief executive Steve Balmer made an appearance at a Hong Kong press conference in October to announce a partnership to sell software and services. Sun Microsystems' McNealy also came in to talk about, a venture to bring the Internet to the day-to-day running of a home. Said Sun's founder: "[Our] vision is to ' the world' and with Sun Hung Kai Properties we have found a partner who shares our vision of the dot.commed home." Internet-activated consumer appliances is one of the features being planned for the venture.

In the longer run, opportunity beckons from the north. China is a market in which Sun Hung Kai now has moderate exposure and has had a modicum of success. But Kwok sees many of his company's current Internet initiatives as critical tests of future China plays. "The natural market for all Hong Kong Internet companies is China. We need a very strong mainland business." He plans to roll out in China and open at least four iAdvantage data centers there. Then there is the company's corporate guanxi (connections). Often, the breadth of Sun Hung Kai's business translates into valuable contacts in China, which may help when Kwok decides to take the e-initiatives north. In addition to property, the conglomerate includes ports management, ground services for private jets, waste management and a 26% stake in mobile operator SmarTone.

To "play by the new rules of the new game" and strike quickly when necessary, Kwok says he is working harder, longer days than ever. He tries to personally hear as many good business proposals as possible, grilling potential employees or partners about the viability of the business plan, size of the potential market and existing competition. On occasion Kwok likes to get away from the office and switch off the mobile phone for a couple of days. What if someone calls him while he's on holiday? Perhaps on Christmas Eve? "They will have to leave a message at the hotel front desk," he says. But if the call is about an Internet idea that seems doable, he'll probably call right back.

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