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   Volume 11 |Issue 21| May 25, 2012 |


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Cover Story

DOING BUSINESS
ETHICALLY

Ahmede Hussain

 
 
Latifur Rahman – an indomitable spirit.
Photo: Courtesy

Immediately after his country broke free in a bloody and ruthless war to snatch away freedom from Pakistan, a young man in Dhaka landed on a crisis no one of his age would have wanted to find himself in. W Rahman Jute Mills, the first of its kind to be owned by a Bengali in erstwhile Pakistan, and, more importantly, one of the two sources of bread and butter that his family had in the turbulent days of 1972, was nationalised along with other privately-owned industries.

The family owned some tea estates in the north-eastern Bangladesh. But all was not well on that front either. Even though tea did not fall under the guillotine of wholesale nationalisation, the locally produced brew, which was consumed only in the West Pakistan, was literally rotting in independent Bangladesh. The green leaves are hygroscopic: they quickly pick up moisture and become tainted. At the fag end of 1972, some foreign buyers showed interest in Bangladeshi tea, and there were some distressed sales. "It cost five taka to grow a pound of tea, but the selling price hovered between one and two. If you were lucky, it might cross the taka-three threshold," the businessman, 27 years old in those forlorn days, says.

To make matters even more complicated for him, the then government had confiscated all the tables and chairs from the jute-mills' part of his two-storied office in downtown Motijheel. "To run the office, I rented some furniture from a shop at the back of the court building in the old part of the city. I brought some ceiling fans from my home to use them in the office," he says. His father was not well, his sister was studying at the university and the young man, who only a few years ago was driving his own Fiat 500, had to worry about his family's day to day expenses. "I had my car and the house, but cash was hard to come by. Sometimes I didn't have even taka 100/200 at home. Yes, I was in a desperate situation," he says. From scratch, he has slowly but steadily built a business empire, which later became the first Bangladeshi business organisation to take over a multinational, and that too companies as big as Smith, Kline and French and Philips.

This is a tribute to the indomitable spirit of a Bangladeshi business organisation; this is the story of Latifur Rahman, chairman and the CEO of Transcom group, who, through perseverance and hard work, has single-handedly built one of the biggest business conglomerates in the country, reproving once again that ethical business is not an oxymoron, that a successful businessman is like a magician and two of his wands are his intelligence and entrepreneurial skill.

Rising from the Ashes
If you do not know him, at first glance you might mistake Latifur Rahman for a classical musician, one of those reticent artistes, who thinks his art alone should speak for himself. As he speaks, his voice is hardly raised: the tone remains soft, the syllables, like a long, caressing loop, gently invite you into the conversation, and you will find it difficult, impossible almost, not to be charmed.

For the head of a company, the turnover of which is $350 million, his office is a rather modest affair. A velvety off-white carpet takes you inside the brilliantly wood panelled room, where, flanked by his computer and some office stationery, Rahman sits at his desk in an upholstered chair. And you will not be mistaken if you smell history in that oval room, when the afternoon light, already touched with amber, sneaks through the white blinds and bathes the arabesque fretwork on the wood panels in a pure glow, further sharpening their downward tendril-like curves.


At a factory of Transcom Beverages Ltd. Professional training and taking care of its employees have been part of Transcom's business culture. Photo: Courtesy

Latifur Rahman is no stranger to business; his family has been dealing in tea since 1885. So, when things fell apart and the going got tough, Rahman never lost hope. "I occasionally played first division hockey for the Wari club, but that was never an option," he says, as a glint of smile plays over his deep, soulful eyes. He has seen his father doing business, and his going into business has been a natural progression. By the end of 1972, Rahman was looking to something to branch into, "to survive really," he says.

"I could have fallen into despair, thinking that everything was lost, and I thank Allah that I didn't take that path," Rahman says. Lady luck winked at him within a few months. "On a puja vacation in the early days of 1973, we took Mr Berner, a Swiss family friend to our tea estates, and he was appalled to see the state of the green leaves. There were stacks waiting in vain for the buyers, as we regularly had to pluck the leaves, otherwise the plants would have died," Rahman says.

A few days later, Rahman got a letter from him, which showed a glimmer of hope in those dark days. Berner was from the Swiss firm Andre & Cie, which had been one of the top grain traders of the world. "Bangladesh's foreign exchange situation was precarious to say the least, and Berner proposed that we do private barter. I didn't know what it was, but I broadly understood the concept. I knew that no one in Bangladesh had done private barter, or counter trade as it was later called, before. And Bangladesh had never done it before. But I was too desperate to ignore it," Rahman says.


At the ILO annual conference in Geneva as President of Bangladesh Employers Association (BEA)
(second from left).

The idea was simple. The government-owned Bangladesh Agricultural Development Corporation needed pesticides from Bayer, a German firm, and if Bangladesh entered into a private trade, Dolmar SA, Andre's parent company, would supply the pesticides from its German counterpart, in exchange of which his firm would take the tea from Bangladesh.

"I went to MR Siddiqui, the then Commerce Minister, with a letter in hand, and he quickly wrote on it that the Ministry might examine the proposal," Rahman says.

 
 
Maintaining international standards and having strict quality control have been part of the business strategy.
Photo: Courtesy

For him the last one and half years had been difficult though. Rahman had seen relative comfort a few years ago, and within a blink of an eye it was all gone. He was reduced to a one-man army; he was his own general manager, typist and peon--all rolled into one. "Government offices used to start at 8, and at 7.30 in the morning I would stand before the room of a deputy secretary or somebody coming in so that I could catch the person going into the office," he says.

It did take off soon. Pesticides and tea worth 6.5 million Deutsche Marks were exchanged, and the Tea Holdings Limited (THL), which Rahman owned, worked as the representative of Dolmar SA. The deal was done, and the transaction was successfully carried out; the THL got a commission. "That was really the first start," Rahman says. It was the middle of 1973, and he was able to buy his own desk and chair for 1,100 taka.

The following year, he set up an office in Chittagong and came across some European tea buyers. The THL bought pounds of tea on auctions and exported them to different continents. In the eighties, Rahman set up Transcom, a holding company, which owned the shares of its subsidiaries, a novel concept for a Bangladeshi business. Counter trade, on the other hand, reached as high as 15 million USD each way at that time.

A decisive but necessary breakthrough for Bangladeshi industries took place in the early eighties when the then government denationalised all Bangladeshi owned industries, and Rahman's family owned W Rahman Jute Mills were one of them. It was important for Rahman, as he says, "As I reflect on it now, I see that between 1972 and 1983, I stayed with some form of trading. I didn't go into any industrial investment. After the Jute Mills were returned I started veering more and more into industrial investment away from trading. Perhaps the nationalisation had left some kind of block at the back of my mind. Trading now consists not more than 20 per cent of our business."

The Consolidation
In the eighties, Rahman also became the sole importer and distributor of Nestlé products. There was no turning back after that. Around 10 years later, Smith, Kline and French, a US-based pharmaceuticals had just merged into Beecham, a British company, and was planning to sell off their small plant in Bangladesh. Rahman bought it and renamed it Eskayef, becoming the first Bangladeshi company to buy off a multinational. But in the first year, business was not good, as Rahman recalls, "The entire sales of Eskayef was Tk 1 crore 30 lakh and the loss was Tk 1 crore 29 lakh. For every lakh sold, there was an equal amount of loss."

Given our corporate environment, it might sound quite strange an idea, but after taking over the Eskayef, Rahman decided to keep the company's management intact. "Of course we lost money, and we kept losing money in the next few years, but I kept the management as it was, and I didn't change the management practises that Smith, Kline and French used to follow," Rahman says. Eskayef did not break even in the next five years. "We were incurring losses at that time, but they were reducing losses for the sales were going up," Rahman says. Slowly but surely his policy bore its fruit; and Eskayef's total turnover now stands at 689 crore taka.


Agreement signing ceremony of Transcom's takeover of Philips Bangladesh operations in Eindhoven
on May 15, 1992. The formal takeover was in March 1993. Photo: Courtesy

On January 14, 1991, The Daily Star (TDS), the largest circulated English newspaper in the country, where he is the majority stakeholder, was born. "After Eskayef, Ali bhai (Late SM Ali), my former colleague (AS) Mahmud and I had a talk about setting up the paper," he says, "The prime person was SM Ali and Mahfuz (Anam) was going to join him."

History, at times, comes full circle. Right from the design of the masthead to all the planning of the TDS, which would later become one of the most trusted papers in the country, was done in the two-storied building in 52 Motijheel, the very house from where Rahman had started afresh his business ventures in the dark days of 1972.

Meanwhile, Rahman had set up Nestlé Bangladesh Limited as a joint venture, and when Philips was going through hard times in the nineties, the company decided to sell off its operations in some countries. Rahman was approached by the Philips management in Dhaka, asking if he would be interested to buy the company's operations in the country. "It was quite an audacious move from my part, because in Bangladesh terms, Philips per se was larger than us. Nevertheless, I said yes, it was interesting. And by the end of May, 1993 we took over the entire Philips operation here," Rahman says. He talked to the then ANZ Grindlays Bank and struck a leverage buyout deal, according to which the bank had funded the large part of the payment that Rahman had to make to buy Philips. The rest is history.

The Philosophy
Those who do not know him well, sometimes mistake Mahbubur Rahman, chairman of International Chamber of Commerce-Bangladesh, for Latifur Rahman's brother. "Our ancestors hail from Comilla, and our father's name is also the same– Mujibur Rahman," he says.

They have never ventured into business together, but their friendship has been cemented over the last couple of decades. "I used to know him as a businessman, but I really got to know about Latifur Rahman in the early eighties when he became the president of the Metropolitan Chamber of Commerce and Industries and I was the President of Dhaka Chamber," Mahbubur Rahman says.

He says that he has always admired Latifur Rahman's human qualities and the values he gives to life and ethical standards. "He is really straightforward, he will tell you the truth whether it is to your liking or not," Mahbubur says. He says that Latifur Rahman is a living example that business and ethical practises can go hand in hand.

 
 
Early days. With his wife Shahnaz Rahman.
Photo: Courtesy

In fact, throughout his journey as a businessman, Latifur Rahman has never entertained unfair means, not even in the bleak days of early seventies when the country's atmosphere was not congenial for business. "The last army-backed caretaker government employed 10/15 army men and three audit companies to look into his 15 companies, and they did not find one single case of deception or avoidance of tax anywhere, including his retail outlets," Mahbubur Rahman, who has been honoured with Lifetime Achievement Award in this year's Bangladesh Business Award, says.

Latifur Rahman says running business ethically and managing it well are integral to success. "I have seen business go down the tubes, businesses collapse and people lose their jobs because of managerial stupidity," he says.

When a business goes bankrupt for bad management or unethical practises, people lose jobs and families are affected. Latifur Rahman says, "I have been saying this over the last 19/20 years that if we have management practises that are not sound or irresponsible, the company will go down the tubes."

Losing a job in Bangladesh, where there is no social safety net, spells disaster for an employee. "When people lose their jobs, their families are devastated. It is not only X losing a job. It might end in the daughter's marriage not happening, maybe the son's going to university will not be possible," Rahman says, "I believe that those of us who are privileged to be employers have some responsibilities."

In fact, workers' turnover in the group has remained enviably low. "I can say this with a certain amount of pride that by the grace of Allah our attrition of people is virtually none. Most of our senior level people have put in their 15/20/24/30 years, people who have grown with the companies," Rahman says.

After he took over the operations of two big multinationals, Eskayef and Philips, Latifur Rahman kept the old management intact. He believes that the professional management should be left to do what it can or is supposed to do. "It's true for all our companies," he says, "At the end of the day you can look at their yearly turnover, the targets and the objectives. That doesn't mean that you know nothing, you monitor the results, but on a day-to-day basis, I think the management should run the show."

Transcom is also the market leader in terms of salary and wage structures. "You need to pay, money is very important; no one is going to work here for altruistic reasons. At Transcom, by and large our compensation package is absolutely competitive with the multinationals," Rahman says.

Mahbubur Rahman jokingly says that he once warned foreign investors not to come to Bangladesh because whatever they were going to invest here, sooner or later Latifur Rahman would buy them off. "Multinationals don't have three eyes and four hands. My policy is, pay the best and you also take out the best from him (the employee)," Latifur Rahman says.

He says that his workers are important to him. If someone is giving his best there is no reason why someone working in GlaxoSmithKline will earn more than his Eskayef counterpart. "On the contrary, our local companies have an edge over the multinationals because not only is our senior management empowered, it also has entrepreneurial skills, whereas the people in the multinationals work in a box as their headquarters are 7000 miles away," he says.

Unlike many industrialists in the country, Rahman believes that all industries in the country should have labour unions. He thinks it is important that every industry has an elected Combined Bargaining Association (CBA). "All our factories and companies have unions, every alternate two years they elect the CBA, you sit with them, negotiate their demands, of course you cannot meet all of them," he says, "Then you come to an understanding. If there is an issue, the CBA discusses it with the management. That Unions and CBAs are an enemy of the people or an enemy of the businesses is utter and absolute nonsense. Unionisation of labours is there across the world: this is a basic tenet of the ILO."

AK Azad, president of Federation of Bangladesh Chamber of Commerce and Industries (FBCCI), calls Latifur Rahman his idol. "Ninety five per cent of our businesses are good. There are some bad apples in the business world, which are driving the good apples away from the market. We need more businessmen like Latifur Rahman in the country, who will teach us ethical business," he says.

What amazes Mahbubur Rahman is that he (Latifur Rahman) has never used any political influence to further his business. Despite the sorry state of the country's infrastructure and its squabbling, volatile politics, Latifur Rahman remains an incorrigible optimist. He says, "Of course I demand better infrastructure. But those who are succeeding are succeeding despite these. We also have to understand that there are better places than us, say Singapore, where everything works. So why don't you go off and work in Singapore? The answer: It's not my country and I don't know about it. And, even if I were successful, the returns would have been five per cent. Here in Bangladesh the returns are may be 15 or 20 percent."

The Family Man
Latifur Rahman started his career as a trainee at the end of 1966 in his family-owned jute mills in Chandpur. Then he worked as an executive in the jute mills right up to 1971.

His eldest daughter Simeen Hossain followed her father's footstep and started from the bottom. "When she started in our office at Toyenbee Circular road in 1991, there was hardly even a ceiling fan. After putting in 16/17 years she became General Manager," Rahman says, "She put around 19 years to become Managing Director of Transcom Distribution. Her colleagues show full respect to her because she knows what she is talking about as she has not been supplanted from the top. She knows the business."

 
 
Celebrating a birthday with his wife and four children.

Despite being called a workaholic Latifur Rahman has always been a family man. “His grandchildren, for instance, are a huge priority in life,” says Simeen, “He takes interest in their studies, personal interests, indulges them, constantly taking them on holidays abroad and will leave everything to attend major occasions such a grandson's high school graduation.”

One of his favourite escapes is to go to his ancestral home in Cheora with his family. “This is where he is the most relaxed," Simeen says, “He goes fishing with his grandsons and insists on cooking dinner every night for them. He and my mother spend a lot of time with neighbours and relatives there, inviting them over or visiting them.”

As a parent, says Simeen, he has been a tower of strength: “He never gets fazed, no matter how difficult the circumstances, he always keeps a logical, stoical front no matter how much he may be hurting inside, so that we don't become weak and can draw strength from him.” The brutal killing of his youngest daughter in 1998 has left a permanent burden of anguish for the whole family but Rahman has not let his life-long grief affect his work or his commitment to his family.

As a boss, says Simeen, now MD and CEO, Transcom Distribution Company Ltd, Rahman is an entirely different person. “When we first joined work he told us in very clear terms that we would not get any extra favours just because we were the chairman's children; we would get a salary and the ground rules would be the same as for any other employee of the company and be rewarded only if we deserved it.”

Over the years, says Simeen, also CEO of Eskayef Bangladesh Ltd, her father has become, from a disciplinarian, to more of a friend. “We can talk to him about anything, share our concerns and speak our minds frankly.”

When asked about their mother, Shahnaz Rahman, Simeen unequivocally states: “She has been the rock behind him. She has been supportive all throughout, morally, spiritually, as his partner and friend; he shares everything with her. Without her, he is incomplete.”

Rahman met his wife Shahnaz in Shillong where they both were studying in different boarding schools. It didn't take long for Rahman to decide that Shahnaz would be his partner for life and the two married very young. They had four children Arshad Waliur Rahman, Simeen Hossain, Shahzreh Huq and Shazneen Tasnim Rahman.

For Rahman, his parents were his ideal and when the family lost everything in the early seventies, he took responsibility of them and his brother and sisters to whom he is still very close.

The Shape of things to Come
"If you want long term success," says Latifur Rahman, "be socially responsible. In such a globalised world the practises and standards that you will hold, whether you are in Bangladesh or in Norway or in the States, will not be different. Standards cannot vary."

Rahman thinks in order to work on a global standard a business has to adopt certain ethics. "I don't believe the ethical values or moral standards of somebody in the west or a multinational are greater than yours or mine," Rahman says.

He believes that in the next decade Bangladesh's economy will grow considerably, and the country's businesses, once the embargo on overseas investment is lifted, will spread their wings over the region. "In 10/15 years time Bangladeshi companies should be playing roles not only in the country, but also beyond that. We need to get our act together, set our management practises right."

In the coming days, Rahman wants Transcom to grow into one of the biggest business conglomerates in the country, and also in the region. "Every country in the world is moving across their borders. Twenty five years from now on, I see global roads," he says.



Receiving the Oslo Business for Peace Award at the Oslo City Hall. Photo: Courtesy

A Global Recognition

On the 7th of this month, Latifur Rahman was awarded this year's Oslo Business for Peace Award for his outstanding contribution in the area of ethical business. The award, considered by many as the Nobel Prize for business, was presented as part of the "Oslo Summit on Peace through Trade" in Oslo City Hall in the Norwegian capital. Rahman was selected from out of 90 candidates from 60 countries by a panel of Nobel Laureates. The notable previous awardees include Ratan Tata (awarded in 2010) of Indian Tata Group and Jeffrey R Immelt (awarded in 2009), the CEO of General Electric in the US.

The citation read, "Other businesses in the region look up to Latifur Rahman for leadership and guidance for his integrity, ethical standards and business acumen – well illustrated by Mr Rahman's re-election as the chairman of the Metropolitan Chamber of Commerce and Industry for a total of seven terms."

Group of companies that Rahman owns include: Transcom Beverages Limited (sole franchisee of Pepsi), Transcom Foods Limited (sole franchisee of Pizza Hut and KFC), Transcom Electronics Limited (licensed manufacturers of Philips lighting products) Transcom Mobile Limited (exclusive National Distributor of Samsung mobile handsets), Eskayef Bangladesh Limited (leading pharmaceutical manufacturers – formerly SmithKline & French), Transcom Distribution Co. Ltd. (distribution of pharmaceuticals – Eskayef, Novo Nordisk, Servier, Allergan and consumer brands – Frito Lay, Heinz, Wrigley, Mars, Ferrero, Energizer, Schick, L'Oreál, Garnier, ConAgra Foods), Mediastar Limited (Publishers of Prothom Alo), Tea Holdings Limited (Tea Plantations). He is also a major stakeholder in Mediaworld Limited (Publishers of The Daily Star).

In a brief speech given at the Oslo Business for Peace Honourees dinner, Latifur Rahman said, "I do not wish to comment on the moral values, but I just want to say that there is no contradiction in being 'Businessworthy', and at the same time achieving success in business, rather it is the sensible thing to do."

This is a significant honour for a country, whose business world is yet to bloom fully. AK Azad, chairman of FBCCI, believes this is a big achievement for the country and its business. "Through this award, not only Latifur Rahman, but also our country and the culture of ethical business have been given a world-wide recognition," he says.

The award will surely give the country's business, which is yet to fully bloom, the much needed international exposure, industry leaders believe. "Success and ethical practises are not confrontational," says Mahbubur Rahman, president of ICC-Bangladesh, "and Latifur Rahman is a testimony to this."

 

 
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