Lawsuit threatens to break up Naza Group

Many may have already heard of this news that was first reported by The Malaysian Insider. Almost like taking an episode out of a soap opera, the second wife of the late Malaysian automotive magnate tycoon Tan Sri SM Nasimuddin is invoking a section of the Islamic Syariah inheritance law to claim a long list of assets, among them RM 350 million in cash, properties in London, LA and South Africa, control of subsidiary companies Naza Kia Sdn Bhd, Naza Automotif Manufacturing Sdn Bhd, Nasim Sdn Bhd, Naza Motor Trading Sdn Bhd, Naza TTDI Sdn Bhd and NZ Wheels Sdn Bhd.

Under the Islamic law, Muslim men are allowed to take up to 4 wives so long as they meet a long list of requirements ensuring that the families are treated fairly. The Islamic law also states very clearly on how should family inheritance be distributed, and depending the legal system adopted, it could take precedence over a will. More details in the linked article above.

The late Tan Sri SM Nasimuddin is a controversial figure who made his fortune on the back of government approved import permits, also known as APs. APs are in short meaningless pieces of paper and a layer of bureaucracy created not out of any business need but solely to lift the economic standing of ethnic Malay Malaysian entrepreneurs. At one time, they can be worth up to RM 50,000 a piece and even factory backed distributors have to purchase APs from these AP holders to import any car. In reality, APs were being manipulated and distributed only to ethnic Malay businessmen who are politically linked with the ruling UMNO party. The regular Malay folks benefited little from it.

APs are essentially a ticket for the politically connected few to rake huge profits without even lifting a finger, without investing in developing any human resource, technology nor contribute anything to the development of the industry as a whole.

Viewed from the perspective of a foreigner / investor or even a simple tax payer, the system represents everything that is wrong with the country and goes against every understanding of fairness and just policies. Proponents however, like ex-PM Dr. Mahatir who is a firm supporter of the system and would often cite the late Nasimmudin as the best example of his NEP and affirmative action policies to build ethnic Malay industry captains. Prior to this, the industry was dominated ethnic Chinese businessmen like the Tan Chong family (Datsun, then Nissan), Chia family (UMW, before it was taken over by the government), Foo Wan Kien (City Motors - Alfa Romeo and Asia Motors - Mazda), Chua brothers (Cycle and Carriage - Mercedes-Benz), Loh Boon Siew (Kah Motor - Honda). The government sees this as unequal distribution of wealth and decided to embark on a "social engineering" program. To debate on success of these affirmative action policies in achieving their goals is beyond the scope of this blog but readers can read further here.


From left : Second brother Nasarudin, PM Najib, youngest brother Faliq, eldest brother Faisal.

An acquittance at the Naza Group shared that the Nasimuddin family have been expecting this. It is a common family knowledge but there is little that they can do. Legally, there is nothing to stop them from claiming their share of the property. The fact that a will is not present further plays things to their advantage.

This is why some call it the resource curse, why work so hard when you can get rich by fighting to control the source of wealth. This why oil rich African and some Middle Eastern countries are often at the bottom of human development index. Other than the oil rich Norway that has a very prudent resource management policy, HDI is dominated largely by countries with very little natural resource. It's the same thing with families. Why work so hard to develop yourself when you can live off the wealth built by the hardworking previous generation? Which is why the Chinese have a proverb - "Family inheritance wealth rarely stretches pass the 3rd generation". There is also another Chinese proverb - "If you want 10 years of prosperity, grow trees. If you want 100 years of prosperity, grow people." And that last part, growing people, really is the key to sustainable success. And may I add, the "growing" here means education and not government hand outs. If there was any particularly major mistake made by the late Tan Sri Nasimuddin, it was that he failed to realise the wisdom of having one wife is enough, two is one too many. Get it?

The richest man in the world, Warren Buffett, willed for most of his wealth to be donated to charity, with only a very small portion left for his children. He believes that too much inherited wealth is bad for his children and would only make them stupid and lazy. He planned his children's trust fund in such a way that his children are left with just enough so that they don't need to work for money, but to be free to pursue their own interest. That they can work on something they truly enjoy and not just working for money. But they would still have to work. Wise thinking indeed.

Surely the principals of Kia Motors and Peugeot as well as GM will be watching this closely. Little is known about the children of Nasimuddin's second wife. At least, Nasarudin, the second son of the late Nasimuddin have brought both the Kia and Peugeot brand to greater heights. Insiders say that amongst all his 3 brothers, Nasarudin is said to be the most hardworking.