King Rats of the NEP – William Leong
August 17, 2010
Tan Sri Liew Kee Sin, chairman of SP Setia Bhd provided statistics to show that Malaysian Chinese businessmen have prospered and fared well under the pro-bumiputra New Economic Policy.
He said Chinese individuals controlled 73% of the wealth owned by the top 40 richest Malaysians and make up eight of the top 10 richest Malaysians. The people know who these persons are. Some of them are not only among the richest in Malaysia but in the world.
The people also know how they made their fortunes in the past 40 years. The complaint is not that there is no Malaysian Chinese, Indian, Sikh, Kadazan, Dusun, Iban or other non-bumiputra who has found fame and fortune under the NEP. There will always be those who will thrive even in the most brutal and oppressive regimes.
The complaint is that due to the abuses of the NEP, Malaysians have been deprived of their inalienable right to seek a livelihood with dignity.
Malaysians irrespective of race or religion is entitled to the inherent dignity and inalienable equal right to a livelihood and a standard of living adequate for the well being of himself and his family.
Malaysians are entitled to seek a livelihood with dignity. They need not in the struggle for survival have to be like the King Rat in James Clavell’s novel who engaged in bribery, corruption and black market activities to survive in a Japanese POW camp.
The King Rat, an enlisted man without distinction in civilian life becomes a major power in the prison camp by being the most successful trader through bribery and corruption and black marketeer.
The Japanese gave the prisoners nothing other than filthy huts to live in and the bare minimum of food. Officers were reduced to wearing rags and were closed to losing their humanity. Even the senior officers had to come to the King Rat for help in selling their valuables to buy food.
The King Rat thrived in the brutal environment of deprivation of a prison camp. The abuses of the NEP or its bastardization as described by Datuk Seri Nazir Razak, have created an environment that has spawned King Rats.
The implementation of the NEP required the government to grant wide discretionary powers to officers in approving licenses, permits and other instruments to intervene in economic activities.
By wielding such powers, it allowed such officers opportunities to seek payments from business tycoons to street vendors to obtain licences or approvals. Hawkers and street vendors have to make under counter payments before they are granted licences to eke out their meager earnings.
Business tycoons have to pay much more for their projects to move. This has given rise to both petty corruption and grand corruption. How else can you make a living in a country ranked 56 in the Transparency International Corruption Perception Index?
Malaysians should not be subjected to such indignities.
Tan Sri Liew called on the Chinese businessmen to work with their Malay counterparts. This has been done from the outset of the NEP. The disingenuous did not wait for Tan Sri Liew’s call. Many contracts given to the Malays were subcontracted to Chinese contractors.
Class F contracts are only given to bumiputra contractors selected according to the personal discretion of government officers or local council mayors and not by open tenders. The Ali Baba system has put paid to the noble objective of granting contracts, licenses and permits to Malay businessmen to uplift their economic status.
After 40 years and billions of ringgit in contracts 82 per cent of the rural poor and 67 per cent of the urban poor are still Malays. So long as the majority of Malays remain in poverty, Perkasa and the extremists will claim that the NEP must be continued. The NEP will then stand for the Never Ending Policy.
One cannot blame the Chinese and non-bumiputra contractors taking on the jobs as second, third or even fourth hand sub-contractors. They also have to survive. They also have needs. Many of these sub-sub contractors end up not being paid for the work they have done.
In many instances, the contractors at the top have taken payments upfront leaving nothing for the sub-contractors.
I know of many Chinese and non-bumiputra subcontractors who end up being bankrupts in this way. Why should these sub-subcontractors be forced to earn a living in this way? If Class F contracts are awarded based on needs and not race, much grief and suffering would be avoided for all involved.
Tan Sri Liew pointed out examples of the spectacular gains made by Chinese businessmen under the NEP. It must however be noted that due to the restrictions imposed by the NEP especially under the Industrial Co-ordination Act and key economic areas, Chinese businesses are not a force in manufacturing and they are no longer owners of the number of banks and finance companies they had before the 1970’s.
During the 1980’s the Associated Chinese Chambers of Commerce and Industry have repeatedly complained that if foreign investors were exempted from the obligatory Bumiputra equity participation requirements in their Malaysian enterprises, why were Chinese enterprise forced to bear the same obligation. The complaints fell on deaf ears. The consequential result was the tie up between the Chinese entrepreneurs and Malays who were influential politicians or former top level bureaucrats (including military).
This was not the objective of the NEP. The NEP was intended to be the catalyst for mutually equal tie-ups between Chinese and Malay entrepreneurs to strengthen Malaysian companies’ economic resilience. Instead it became a mix between business and politics.
In the long run this did not portend well for a healthy business or social–economic environment.
Tan Sri Liew said business was all about profits and not politics. Businessmen are in the business to make money. The King Rat when asked by the British captain who liberated the prison why the King Rat was in a far better health and condition than the other ragged, emaciated and sickly prisoners, he replied that there was no harm in looking out for number one.
The British captain retorted it was no harm provided it was not at others’ expense. Similarly there is no harm to continue the NEP provided it is not at others’ expense. In reality the costs and expense is too high and disproportionate to the gains.
A brief example is more than sufficient to illustrate the point. Under the NEP between 1995 and 2000, the Seventh Malaysia Plan for primary education development allocated 96.5 per cent to the national primary schools which had a total environment of only 75 per cent.
The Chinese primary schools which had a total enrollment of 21 per cent was allocated with only 2.4 per cent while Tamil schools with 3.6 per cent of the total enrollment was allocated one per cent of the budget.
Despite announcements by the government on a reduction of reliance on racial quotas for admission to public universities in 2004, 128 students who obtained the best possible grade of 5A’s were denied their first choice of course in medicine. The only thing they have in common is that they are not bumiputras.
Deputy International Trade and Industry Minister Datuk Mukhriz Tun Dr Mahathir informed the Dewan Negara on July 27 2010 that SME Bank from 2006 to June this year approved a total of RM9.8 billion loans involving 5,447 applications and other programmes of which 90 per cent of the beneficiaries are bumiputra SMI’s.
According to the Federation of Chinese Malaysia Youth Section Strategy Research Committee Head Professor Dr Chin Yew Sin there are about 519,000 SMEs in Malaysia and they have not received loans from the SME Bank.
The costs of the NEP to Malaysia among others, is the thousands of primary school children who have to do with less, the lost to the nation of the hundreds of brilliant and talented scholars who cannot realise their full potential and hundreds of thousands of small and medium enterprises who face financial difficulties because of race.
The whole world has recognised that inequality within a nation and between nations leads to poverty and generally poorer living conditions. A socially equal system should achieve fairness in distribution and opportunity among everyone. The NEP cannot drive Malaysia out of its present social-economic quagmire.
Just as in the novel, where the King Rat becomes the strongest in an environment that rewards cunning, luck and strength, he in the end becomes food for someone stronger, Malaysia cannot sustain its development in an environment where the bastardization of the NEP rewards the cunning and the disingenuous.
The nation can only prosper where integrity, ethics and good governance are practised. The few Malaysian Chinese businessmen who have thrived under this restricted environment cannot justify the continuance of the NEP and the social and economic losses suffered by all the others.
William Leong Jee Keen is the Member of Parliament for Selayang
* This is the personal opinion of the writer or the publication. The Malaysian Insider does not endorse the view unless specified.
http://www.themalaysianinsider.com/breakingviews/article/king-rats-of-the-nep-william-leong/
Wednesday 18 August 2010
Tuesday 17 August 2010
Your best Investment Method
What is Your best Investment Method?
Stocks Market
Bonds
Gold
Forex
Real Estates
Gold and Stocks Market
Stock and Bond
All of the Above!
None
Stocks Market
Bonds
Gold
Forex
Real Estates
Gold and Stocks Market
Stock and Bond
All of the Above!
None
Classic example of herd mentality: Buying into small and micro-cap companies just because they have rallied on the bourses.
Ignore the herd, be your own master
Nikhil Walavalkar, ET Bureau
A teacher once asked a student, “If there are 10 sheep in a field and one escapes through a hole in the fence, how many are left?” Student answers, “None.” When the teacher berated the student for his poor maths, the student replied, “I know my maths, but you do not know about sheep.”
Some investors find it difficult to invest gainfully in equities because of behavioural issues. Here are some of the factors that investors should be careful about while investing in equities.
Herd mentality
Herd mentality means the sheep-like tendency to mimic others. “ Herd mentality can adversely impact an individual. When there is a scarcity of resources, it can be fatal,” says Om Ahuja, head – wealth management & strategy, Emkay Global Financial Services.
Most of the time, it leads to bad investment decisions as an individual ends up buying something unsuitable for his needs. Buying into small and micro-cap companies just because they have rallied on the bourses is a classic example of herd mentality. In most cases, followers fail to notice a change in the trend and incur losses. Unfortunately, blind followers return when they spot a herd to follow.
One can look at this from another angle. People tend to purchase a financial product when they get a call from a distributor who also tells that your best friend or neighbour has also bought it.
Anchoring
We tend to value our assets using certain reference points which may have no relevance to the present market condition. For instance, many assume that when a stock hits a 52-week high, it is time to book profits. Since listing, HDFC has hit 52-week highs several times.
Had you sold because the stock has hit a 52-week high, you would have lost heavily on opportunity. “The price point that an investor gets anchored to is the cost price, and if the stock goes down and the investor does not book loss, he aggravates his loss,” says Jayant Pai, vice-president, Parag Parikh Financial Advisory Services.
A similar example of anchoring can be seen in other day-to-day decisions like sales. Buyers may travel an hour to throng a sale offering 50% discount, even if the value of the purchase is a few hundred rupees, but he may ignore a 0.5% discount on something that costs tens of thousands of rupees.
Overweighing what can be counted
Albert Einstein got it right when he remarked, “Not everything that counts can be counted and not everything that can be counted, counts.” Many a time investors come across a stock that seems to be ignored by market forces. Such stocks represent a business with sustained rise in profits, return ratios higher than industry norms and a fantastic looking business model. For years the market has not given the stock its due and it quotes at bizarre valuations.
In heady markets such as the one we are living in, such hidden gems come forth and naive investors fall for them. Barring stray instances, they land on the wrong side. The reasons remain in the not measurable segment of analysis.
Endowment effect
It is the ‘endowment effect’ that blindfolds many investors when the stocks they hold start their downward journey. Individuals believe that the things they own are worth more than their real worth. Investors are no different. The stocks owned by them are seen to be more valuable than their actual worth. Investors find reasons to substantiate why they bought a stock and why they were holding on to a particular stock.
Theme junkies
To a man with a hammer, everything looks like a nail. When investors have only one idea, it can be a very dangerous situation. Especially, if the idea is a borrowed one, it can be fatal. When investors hear themes such as ‘India consumption’, there is a tendency to go for it and scenario starts worsening when investors try to look at ‘consumption’ in each and every stock they come across. Instead of being objective, investors try to rationalise and incur losses in the long term.
Incentive-caused bias
“Never ask a barber whether you need a haircut,” goes the old saying. Some lawyers induce clients to litigate when it is in the clients’ interest to settle and some doctors prescribe high-cost treatment when they could have treated the patients with a cheaper solution. These are classic instances of incentive-caused bias. In financial markets, we come across many such barbers – read intermediaries with vested interests. Sell-side analysts – analysts who recommend stocks to others – are a classic case in point. Typically, a sell-side analyst has more of ‘buy’ recommendations than ‘sell’ recommendations. They are to be watched out more carefully in boom phases.
On the other hand, there are some distributors offering investors products that offer the distributors higher fees or commissions and are not in the best interest of the investors.
http://economictimes.indiatimes.com/quickiearticleshow/6317492.cms
Nikhil Walavalkar, ET Bureau
A teacher once asked a student, “If there are 10 sheep in a field and one escapes through a hole in the fence, how many are left?” Student answers, “None.” When the teacher berated the student for his poor maths, the student replied, “I know my maths, but you do not know about sheep.”
Some investors find it difficult to invest gainfully in equities because of behavioural issues. Here are some of the factors that investors should be careful about while investing in equities.
Herd mentality
Herd mentality means the sheep-like tendency to mimic others. “ Herd mentality can adversely impact an individual. When there is a scarcity of resources, it can be fatal,” says Om Ahuja, head – wealth management & strategy, Emkay Global Financial Services.
Most of the time, it leads to bad investment decisions as an individual ends up buying something unsuitable for his needs. Buying into small and micro-cap companies just because they have rallied on the bourses is a classic example of herd mentality. In most cases, followers fail to notice a change in the trend and incur losses. Unfortunately, blind followers return when they spot a herd to follow.
One can look at this from another angle. People tend to purchase a financial product when they get a call from a distributor who also tells that your best friend or neighbour has also bought it.
Anchoring
We tend to value our assets using certain reference points which may have no relevance to the present market condition. For instance, many assume that when a stock hits a 52-week high, it is time to book profits. Since listing, HDFC has hit 52-week highs several times.
Had you sold because the stock has hit a 52-week high, you would have lost heavily on opportunity. “The price point that an investor gets anchored to is the cost price, and if the stock goes down and the investor does not book loss, he aggravates his loss,” says Jayant Pai, vice-president, Parag Parikh Financial Advisory Services.
A similar example of anchoring can be seen in other day-to-day decisions like sales. Buyers may travel an hour to throng a sale offering 50% discount, even if the value of the purchase is a few hundred rupees, but he may ignore a 0.5% discount on something that costs tens of thousands of rupees.
Overweighing what can be counted
Albert Einstein got it right when he remarked, “Not everything that counts can be counted and not everything that can be counted, counts.” Many a time investors come across a stock that seems to be ignored by market forces. Such stocks represent a business with sustained rise in profits, return ratios higher than industry norms and a fantastic looking business model. For years the market has not given the stock its due and it quotes at bizarre valuations.
In heady markets such as the one we are living in, such hidden gems come forth and naive investors fall for them. Barring stray instances, they land on the wrong side. The reasons remain in the not measurable segment of analysis.
Endowment effect
It is the ‘endowment effect’ that blindfolds many investors when the stocks they hold start their downward journey. Individuals believe that the things they own are worth more than their real worth. Investors are no different. The stocks owned by them are seen to be more valuable than their actual worth. Investors find reasons to substantiate why they bought a stock and why they were holding on to a particular stock.
Theme junkies
To a man with a hammer, everything looks like a nail. When investors have only one idea, it can be a very dangerous situation. Especially, if the idea is a borrowed one, it can be fatal. When investors hear themes such as ‘India consumption’, there is a tendency to go for it and scenario starts worsening when investors try to look at ‘consumption’ in each and every stock they come across. Instead of being objective, investors try to rationalise and incur losses in the long term.
Incentive-caused bias
“Never ask a barber whether you need a haircut,” goes the old saying. Some lawyers induce clients to litigate when it is in the clients’ interest to settle and some doctors prescribe high-cost treatment when they could have treated the patients with a cheaper solution. These are classic instances of incentive-caused bias. In financial markets, we come across many such barbers – read intermediaries with vested interests. Sell-side analysts – analysts who recommend stocks to others – are a classic case in point. Typically, a sell-side analyst has more of ‘buy’ recommendations than ‘sell’ recommendations. They are to be watched out more carefully in boom phases.
On the other hand, there are some distributors offering investors products that offer the distributors higher fees or commissions and are not in the best interest of the investors.
http://economictimes.indiatimes.com/quickiearticleshow/6317492.cms
Monday 16 August 2010
“What is Value Investing” : Invest using a business-like approach
Invest using a business-like approach
Tags: Capital Dynamics | invest | Tan Teng Boo
Written by Surin Murugiah
Monday, 16 August 2010 11:31
KUALA LUMPUR: People who intend to invest in the equity markets must use a business-like approach to derive the best returns from their investments.
“Investors should invest in shares using the same process that they would apply if they were to buy the entire business,” said Capital Dynamics managing director Tan Teng Boo.
“They should buy or sell based on valuations.”
Citing Benjamin Graham, the founder of the value investing theory, Tan said investing was most intelligent when it was business-like.
Speaking at the inaugural investor day of icapital.biz Bhd, Tan’s presentation entitled “What is Value Investing” focused on how it was crucial for investors to be patient to reap the highest returns.
Using the analogy of buying a business concern, Tan said investors should analyse the business of a company before deciding to buy its shares.
He said they must get a general idea of the nature of the business by reading its annual reports, as well as understand the long-term economics of the business.
Quoting Warren Buffett, he said if a business was doing well, the stock eventually followed suit.
“For example, if they want to buy the shares of a newspaper, they should look at advertising revenue patterns.
“They must also look at the increasing trend of internet advertising and how these could affect newspapers,” he said.
Tan said it was also important to assess the calibre of the people managing the business.
“You should go over the financial numbers of the company, derive its intrinsic value and compare it with the market price.
“A stock is undervalued if the intrinsic value is more than the share price, overvalued if the former is lower than the share price and fairly valued when the two are equal,” he said.
He said it was also important in valuing a company to look at its free cash flow, meaning cash that was available after excluding capital expenditure and working capital requirements.
Tan said investors should buy only when the stock price was lower than the intrinsic value, adding that intrinsic value was long-term in nature.
He said value investing did not require high IQ, but patience and discipline.
“These are the two most difficult qualities. A value investor is not interested in being right temporarily, but more on a sustained manner,” he said.
Tan concluded by citing a statement from Buffett: “If you have to go through too much investigation, something is wrong.”
This article appeared in The Edge Financial Daily, August 16, 2010.
Capital Dynamics: Leading indicators have peaked
Capital Dynamics: Leading indicators have peaked
Tags: Capital Dynamics | FBM KLCI | iCapital.Biz Bhd | Malaysian economy
Written by Surin Murugiah
Monday, 16 August 2010 11:42
KUALA LUMPUR: Capital Dynamics forecasts the Malaysian economy to grow between 6.3% and 6.7% this year and between 5% and 5.5% in 2011.
It said the leading indicators had peaked, meaning growth was high in the first half of 2010 (due to a low base last year) and was expected to moderate next year. It said manufacturing and exports played an important role to support the economy.
“But, we still must look out for developments in the US, Europe and Japan, should demand taper down,” it said.
The fund management company also expects a correction on Bursa Malaysia Securities in the short term (seven to eight months), with immediate support for the FBM KLCI at 1,250 points. It maintains a bearish outlook in the medium term, adding that over the last six months, the local stock market had been volatile, with the technical charts showing bearish indicators.
“The 100- and 200-day moving averages have shown a worrying trend,” it said at the inaugural investor day of icapital.biz Bhd. “We need to look out for confirmation signals.”
On the Malaysian economy, Capital Dynamics said the country had been lagging its regional peers in recent years. “In terms of income per capita, Indonesia overtook Malaysia in 2009. In 1968, Malaysian per capita income was double that of Singapore. Now, Singapore is more than four times higher,” it said.
In terms of budget deficit and government debt, the country was looking more like Greece, it said. “Indonesia, which has outperformed Malaysia since 2005, is still lowering its government debt. Malaysia’s investing spending, on the other hand, has been on the decline,” it said.
On foreign direct investments (FDI), it said Malaysia suffered the worst dip in 2009 compared with its regional neighbours, all of which had attracted at least double or triple the FDI into Malaysia.
Former prime minister Tun Dr Mahathir Mohamed had recently said that FDI into the country was low because foreign countries lacked funds. “If that were the case, why then are the others still getting FDI?” Capital Dynamics asked. “If we look at US corporate earnings, it is still strong.”
The fund manager also said Malaysia needed to up the ante to create a competitive work environment to improve productivity. “About 83% of those employed by Malaysian manufacturers have Sijil Pelajaran Malaysia or lower qualifications. In terms of productivity growth, from 2000 to 2009, we are still lagging Thailand and Indonesia.”
No double dip for China
Capital Dynamics forecasts China’s economy to grow between 9.5% and 10.5% this year, while in 2011, real GDP growth would be at 8% to 9%, driven by consumption growth.
It said there was no danger of a double dip for China, and the Chinese authorities’ fiscal stimulus plans had boosted economic activities. “In 1H2010, real GDP was 11.1%, investments were up 25%. Investments and private consumption are still the biggest contributors,” it said.
It said while Beijing had taken steps to arrest the overheating of its property market, the measures would not cause a collapse of the demand for houses, because while the authorities had curbed speculative activity, they did not raise interest rates.
“The measures were aimed at purchases of second or third homes, so demand from first-time house buyers will still be there,” it said.
It also said, as the Chinese tended to purchase homes using about 50% from their personal savings, there was less danger to the banking system. “Mortgage loans work out to only about 10% to 15% of GDP versus 70% in the US. Household incomes also rose faster than the rise of house prices, so there is no issue of affordability,” it said.
US on the mend
The US economy has been on the mend, with improvements in the demand for durable goods as well as retail sales, while its external trade was also increasing, Capital Dynamics said. It forecasts US GDP to grow 3.7% in 1H2010 and 2.5% to 3% in 2H.
“For the full year, we forecast 2010 growth at between 2.7% and 3.2%, while for next year it will be 2.5% to 3%.”
It said there were five challenges for the US —the fading effects of the temporary stimulus packages; an impaired housing market; high unemployment; unusually uncertain global outlook; and managing the exit from its extraordinary policies.
Capital Dynamics said it did not foresee a double dip for the US economy. “But, there has to be sustained growth over the broad areas of the economy.” Addressing the challenges for the US, it said the world’s biggest economy was turning towards more sustainable sources of growth, which was a positive sign.
On housing, it said the market had bottomed out, so it was bound to move up, and added that mortgage delinquencies had peaked. “US house prices are now more affordable and mortgage rates are at record low,” it said.
On unemployment, Capital Dynamics said recent corporate earnings indicated that companies had the cash, but much of it went towards capital spending.
“Also, due to market uncertainty, many companies want to retain cash in case they have to face another financial downturn.
“Furthermore, the Obama administration is pushing for several Bills, so employers might want to wait out and see the implications of these laws, on whether it would be more expensive to hire,” it said.
However, it said employers would soon have to start hiring, when demand increases for their products.
A more pressing issue for the US were the external factors, especially the overhanging eurozone debt worries.
“But so far, the European authorities have demonstrated the political will to carry on with the measures, to ensure that Europe does not suffer the same fate as Lehman Brothers in the US,” it said.
This article appeared in The Edge Financial Daily, August 16, 2010.
Tags: Capital Dynamics | FBM KLCI | iCapital.Biz Bhd | Malaysian economy
Written by Surin Murugiah
Monday, 16 August 2010 11:42
KUALA LUMPUR: Capital Dynamics forecasts the Malaysian economy to grow between 6.3% and 6.7% this year and between 5% and 5.5% in 2011.
It said the leading indicators had peaked, meaning growth was high in the first half of 2010 (due to a low base last year) and was expected to moderate next year. It said manufacturing and exports played an important role to support the economy.
“But, we still must look out for developments in the US, Europe and Japan, should demand taper down,” it said.
The fund management company also expects a correction on Bursa Malaysia Securities in the short term (seven to eight months), with immediate support for the FBM KLCI at 1,250 points. It maintains a bearish outlook in the medium term, adding that over the last six months, the local stock market had been volatile, with the technical charts showing bearish indicators.
“The 100- and 200-day moving averages have shown a worrying trend,” it said at the inaugural investor day of icapital.biz Bhd. “We need to look out for confirmation signals.”
On the Malaysian economy, Capital Dynamics said the country had been lagging its regional peers in recent years. “In terms of income per capita, Indonesia overtook Malaysia in 2009. In 1968, Malaysian per capita income was double that of Singapore. Now, Singapore is more than four times higher,” it said.
In terms of budget deficit and government debt, the country was looking more like Greece, it said. “Indonesia, which has outperformed Malaysia since 2005, is still lowering its government debt. Malaysia’s investing spending, on the other hand, has been on the decline,” it said.
On foreign direct investments (FDI), it said Malaysia suffered the worst dip in 2009 compared with its regional neighbours, all of which had attracted at least double or triple the FDI into Malaysia.
Former prime minister Tun Dr Mahathir Mohamed had recently said that FDI into the country was low because foreign countries lacked funds. “If that were the case, why then are the others still getting FDI?” Capital Dynamics asked. “If we look at US corporate earnings, it is still strong.”
The fund manager also said Malaysia needed to up the ante to create a competitive work environment to improve productivity. “About 83% of those employed by Malaysian manufacturers have Sijil Pelajaran Malaysia or lower qualifications. In terms of productivity growth, from 2000 to 2009, we are still lagging Thailand and Indonesia.”
No double dip for China
Capital Dynamics forecasts China’s economy to grow between 9.5% and 10.5% this year, while in 2011, real GDP growth would be at 8% to 9%, driven by consumption growth.
It said there was no danger of a double dip for China, and the Chinese authorities’ fiscal stimulus plans had boosted economic activities. “In 1H2010, real GDP was 11.1%, investments were up 25%. Investments and private consumption are still the biggest contributors,” it said.
It said while Beijing had taken steps to arrest the overheating of its property market, the measures would not cause a collapse of the demand for houses, because while the authorities had curbed speculative activity, they did not raise interest rates.
“The measures were aimed at purchases of second or third homes, so demand from first-time house buyers will still be there,” it said.
It also said, as the Chinese tended to purchase homes using about 50% from their personal savings, there was less danger to the banking system. “Mortgage loans work out to only about 10% to 15% of GDP versus 70% in the US. Household incomes also rose faster than the rise of house prices, so there is no issue of affordability,” it said.
US on the mend
The US economy has been on the mend, with improvements in the demand for durable goods as well as retail sales, while its external trade was also increasing, Capital Dynamics said. It forecasts US GDP to grow 3.7% in 1H2010 and 2.5% to 3% in 2H.
“For the full year, we forecast 2010 growth at between 2.7% and 3.2%, while for next year it will be 2.5% to 3%.”
It said there were five challenges for the US —the fading effects of the temporary stimulus packages; an impaired housing market; high unemployment; unusually uncertain global outlook; and managing the exit from its extraordinary policies.
Capital Dynamics said it did not foresee a double dip for the US economy. “But, there has to be sustained growth over the broad areas of the economy.” Addressing the challenges for the US, it said the world’s biggest economy was turning towards more sustainable sources of growth, which was a positive sign.
On housing, it said the market had bottomed out, so it was bound to move up, and added that mortgage delinquencies had peaked. “US house prices are now more affordable and mortgage rates are at record low,” it said.
On unemployment, Capital Dynamics said recent corporate earnings indicated that companies had the cash, but much of it went towards capital spending.
“Also, due to market uncertainty, many companies want to retain cash in case they have to face another financial downturn.
“Furthermore, the Obama administration is pushing for several Bills, so employers might want to wait out and see the implications of these laws, on whether it would be more expensive to hire,” it said.
However, it said employers would soon have to start hiring, when demand increases for their products.
A more pressing issue for the US were the external factors, especially the overhanging eurozone debt worries.
“But so far, the European authorities have demonstrated the political will to carry on with the measures, to ensure that Europe does not suffer the same fate as Lehman Brothers in the US,” it said.
This article appeared in The Edge Financial Daily, August 16, 2010.
Bank fraud: know your rights
Bank fraud: know your rights
Adam Courtenay
August 10, 2010
Short of being physically held up by thieves, one of the more disquieting modern day experiences is being pilfered electronically.
Anyone who has had an account stripped clean of cash, either online, through credit card fraud or by card skimming, will know all about the panic and fear that ensues.
These were the emotions that overcame Peter Westhuyzen* when he discovered on a Monday morning earlier this year that his cheque account at St George had been plundered of $4000.
He immediately phoned St George, who asked him to report the theft to his branch in central Sydney. He knew one thing – he only ever used a single ATM in Sydney’s CBD. When he arrived early at the branch, Westhuyzen discovered about 30 other people waiting outside who had been similarly hit over the weekend.
All had used the same ATM and all had had money stripped via another ATM based in Canberra. Some had even been double-fleeced, once from the Canberra ATM and a second time from another in London.
It is believed a skimming device had been fitted at the “mouth” of the machine to copy the person’s card details. A micro-camera would then have been installed by the thieves to capture the pin number as the person keyed it in. The gang would have then transferred the skimmed data to a counterfeit card and the robberies were easily perpetrated remotely.
Most new machines have shields placed onto their key pads, or are chip and pin “capable”. That is, they use computer chips to store information rather than the more easily-cloned magnetic stripes. All Australian ATMs must be chip and pin “capable” by January 1, 2011. Westhuyzen was swiftly reimbursed as it was clear the fraud had occurred on a large scale. Generally, in obvious cases such as the above, banks refund quickly.
What basic protections do customers have? Banks, credit unions and building societies must subscribe to the Electronic Funds Transfer Code, which protects consumers who use electronic banking such as ATMs and Eftpos, or telephone and internet banking, to transfer funds.
The Australian Securities and Investment Commission has a detailed “Fido” page on its website, which clearly details the rights of customers – and the obligations of banks – when fraud occurs.
Customers are only liable if they are said to have acted with “extreme carelessness”. This may mean that they had given their pin number or online contact details to a friend or family member, but questions may also arise if a theft has not been promptly or accurately reported.
ANZ has a Fraud Money-Back Guarantee which will fully re-credit a customer’s account “as long as they have not contributed to the loss and have notified the bank promptly”. The bank will reimburse claims of up to $10,000 within five business days of receiving completed documentation.
In most cases customers are sent out dispute forms and asked to indicate which transactions were fraudulent. “We send this through to customer repatriation and people generally get their money back within a week," says Brett Small, head of financial crime at National Australia Bank.
Online, things are less clear. Is responding to a convincing “phishing” email tantamount to “extreme carelessness”? In these cases customers are sent an email, and from there induced by a fake website to give out account details. If a bank site has been cloned, is it the fault of the bank or personal negligence on the customer’s part?
Gary Schwartz, an IT expert who runs the website jargonfreehelp.com, says it is worth having up-to-date security software on personal computers to help disprove any possible charge of negligence. All the same, he agrees software plays only a small part in protecting bank, credit card details and other accounts like PayPal, where money is moved.
"Common sense plays the biggest part in all this," Schwartz says. "If you get an email with links to your bank, PayPal or any other website that requires a login to an account, do not click on the link, go to your browser and type in the website address to see if it is the real thing."
Banks claim their protective technology is now more proactive than reactive. Small says NAB can now detect 90 per cent of fraud cases “within minutes or seconds”. The big four banks use technology that throws up red flags when transactions fall outside the customer’s normal usage patterns – patterns based on geography, amount and time.
“It would ask why a transaction is happening at 2.00 am, and why in the UK? We can see hundreds of anomalies in real time and stop it in real time if necessary,” Small explains.
There are now also extra layers of security such as tokens which display changing numbers that must be punched in to complete an online transfer, as well as SMS alerts to inform customers of any large money movements.
There are times when the bank will question the validity of a fraud, and in these situations, things may not go so smoothly. Small says a bank has to protect itself from false “victims” and the bank has a highly trained team of fraud examiners which will question customers – politely, of course.
“We ask the customer to fill out a statutory declaration and also a police report. These are measures designed to make them think twice [about committing a fraud],” he says.
*Not his real name.
http://www.smh.com.au/money/on-the-money/bank-fraud-know-your-rights-20100810-11ums.html
Adam Courtenay
August 10, 2010
Short of being physically held up by thieves, one of the more disquieting modern day experiences is being pilfered electronically.
Anyone who has had an account stripped clean of cash, either online, through credit card fraud or by card skimming, will know all about the panic and fear that ensues.
These were the emotions that overcame Peter Westhuyzen* when he discovered on a Monday morning earlier this year that his cheque account at St George had been plundered of $4000.
He immediately phoned St George, who asked him to report the theft to his branch in central Sydney. He knew one thing – he only ever used a single ATM in Sydney’s CBD. When he arrived early at the branch, Westhuyzen discovered about 30 other people waiting outside who had been similarly hit over the weekend.
All had used the same ATM and all had had money stripped via another ATM based in Canberra. Some had even been double-fleeced, once from the Canberra ATM and a second time from another in London.
It is believed a skimming device had been fitted at the “mouth” of the machine to copy the person’s card details. A micro-camera would then have been installed by the thieves to capture the pin number as the person keyed it in. The gang would have then transferred the skimmed data to a counterfeit card and the robberies were easily perpetrated remotely.
Most new machines have shields placed onto their key pads, or are chip and pin “capable”. That is, they use computer chips to store information rather than the more easily-cloned magnetic stripes. All Australian ATMs must be chip and pin “capable” by January 1, 2011. Westhuyzen was swiftly reimbursed as it was clear the fraud had occurred on a large scale. Generally, in obvious cases such as the above, banks refund quickly.
What basic protections do customers have? Banks, credit unions and building societies must subscribe to the Electronic Funds Transfer Code, which protects consumers who use electronic banking such as ATMs and Eftpos, or telephone and internet banking, to transfer funds.
The Australian Securities and Investment Commission has a detailed “Fido” page on its website, which clearly details the rights of customers – and the obligations of banks – when fraud occurs.
Customers are only liable if they are said to have acted with “extreme carelessness”. This may mean that they had given their pin number or online contact details to a friend or family member, but questions may also arise if a theft has not been promptly or accurately reported.
ANZ has a Fraud Money-Back Guarantee which will fully re-credit a customer’s account “as long as they have not contributed to the loss and have notified the bank promptly”. The bank will reimburse claims of up to $10,000 within five business days of receiving completed documentation.
In most cases customers are sent out dispute forms and asked to indicate which transactions were fraudulent. “We send this through to customer repatriation and people generally get their money back within a week," says Brett Small, head of financial crime at National Australia Bank.
Online, things are less clear. Is responding to a convincing “phishing” email tantamount to “extreme carelessness”? In these cases customers are sent an email, and from there induced by a fake website to give out account details. If a bank site has been cloned, is it the fault of the bank or personal negligence on the customer’s part?
Gary Schwartz, an IT expert who runs the website jargonfreehelp.com, says it is worth having up-to-date security software on personal computers to help disprove any possible charge of negligence. All the same, he agrees software plays only a small part in protecting bank, credit card details and other accounts like PayPal, where money is moved.
"Common sense plays the biggest part in all this," Schwartz says. "If you get an email with links to your bank, PayPal or any other website that requires a login to an account, do not click on the link, go to your browser and type in the website address to see if it is the real thing."
Banks claim their protective technology is now more proactive than reactive. Small says NAB can now detect 90 per cent of fraud cases “within minutes or seconds”. The big four banks use technology that throws up red flags when transactions fall outside the customer’s normal usage patterns – patterns based on geography, amount and time.
“It would ask why a transaction is happening at 2.00 am, and why in the UK? We can see hundreds of anomalies in real time and stop it in real time if necessary,” Small explains.
There are now also extra layers of security such as tokens which display changing numbers that must be punched in to complete an online transfer, as well as SMS alerts to inform customers of any large money movements.
There are times when the bank will question the validity of a fraud, and in these situations, things may not go so smoothly. Small says a bank has to protect itself from false “victims” and the bank has a highly trained team of fraud examiners which will question customers – politely, of course.
“We ask the customer to fill out a statutory declaration and also a police report. These are measures designed to make them think twice [about committing a fraud],” he says.
*Not his real name.
http://www.smh.com.au/money/on-the-money/bank-fraud-know-your-rights-20100810-11ums.html
Beware a trillion dollars lying under Chinese mattress
Beware a trillion dollars lying under Chinese mattress
William Pesek
August 16, 2010 - 7:51AM
Now that's one big mattress.
Last week, we learned China's households hide as much as 9.3 trillion yuan ($US1.4 trillion) of income not reported in official figures - 80 per cent of it by the nation's wealthiest. This massive pile of stashed cash is equal to about 30 per cent of gross domestic product.
There may be both good and bad news in the above study conducted for Credit Suisse Group AG. The good: it lends credence to the domestic-demand story for Chinese growth. It turns out, the average urban disposable household income is 32,154 yuan, or 90 per cent more than official figures. The bad: China's rich-poor gap may be much bigger than we realise.
China's "Gini coefficient," a statistical measure of wealth equality, has long been too high. In May, the Economic Information Daily, a government-affiliated newspaper, said the figure reached 0.47, higher than the recognised "warning level" of 0.4.
Things may be far worse in the most populous nation. A widening wealth disparity will lead to trouble down the road for 1.3 billion Chinese and investors betting on stability in an economy that may already be the second-largest.
Nothing spooks the Communist Party like social unrest. Its conviction to snuff it out whenever and wherever it occurs was behind the 4 trillion-yuan stimulus package in 2008. Reducing income disparities is a top goal of President Hu Jintao and Premier Wen Jiabao to stave off riots, strikes and other unrest that might threaten the party's six-decade rule.
Harder, Faster
They need to work much harder and much faster. The risk is that they may start believing their own press.
The story getting the most mileage is China's economic brawn. Its $US2.5 trillion of currency reserves is viewed as a nice insurance policy against trouble in markets. News that China bought $US20 billion more Japanese bonds than it sold in the first half of 2010, the fastest pace of purchases in at least five years, is seen as a passing of the torch in Asia.
In a way, it is. Japanese officials have done a poor job of disguising their glee over China supporting their debt. Government and Bank of Japan officials are concerned about their own nation's ability to finance a widening budget deficit. The desperation was fairly clear in a recent advertising campaign that suggested Japanese women are attracted to guys who invest in government bonds.
China's Fragilities
Investors haven't gotten rich betting against China. Yet China's fragilities need tending to, and now, if its development is to be sustainable.
The condition of China's state-owned banks is a concern for investors, and rightfully so. China plans to stress-test banks to assess how a big drop in property prices would affect the financial system. Officials should make sure the process is more thorough and transparent than in the US, Europe or Japan.
Social unrest is a bigger risk. Much of China's hidden income may be "illegal or quasi-illegal," according to the Credit Suisse study, published by the China Reform Foundation.
It should be no surprise that a nation growing 10 per cent has a healthy gray economy running in parallel. That's what happens when an all-powerful, top-down government mixes with vast supplies of capital. Crony capital thrives, be it kickbacks from construction projects, gifts to officials at weddings, payoffs from state monopolies such as the tobacco industry or spreading profits from land transfers.
Corruption's Price
This corruption comes at a huge price. The inefficiencies it breeds feed disparities in economic opportunities, income and the distribution of assets, such as property. The degree of social conflict inherent in China's rise is becoming more apparent. Just ask the folks at Toyota Motor Corp and Honda Motor Co dealing with strikes and demands for higher wages.
The most dangerous aspect of China's trajectory is how, well, American it looks. The concentration of wealth among the richest Chinese helps explain a surge in spending on luxury goods. As Japanese sales wane, posh brands can't open Chinese stores fast enough. Last year, Gucci opened one in Shijiazhuang, the capital of Hebei province, selling $US4000 snakeskin purses. That's about twice the city's official annual per-capita income.
China's social fabric is under pressure. This year's employee suicides at Foxconn Technology Group are a case in point. So is the spate of deadly attacks on schoolchildren, which press reports suggest are related to grievances with local governments. Last week, the New York Times reported on growing violence against doctors in the northeastern city of Shenyang.
China has done a remarkable job raising living standards for millions. The reason it sucks up so much attention and investment is genuine progress. While its challenges are many, China is leaving India far behind in tackling poverty. Now, its wealth balance is heading in the wrong direction.
You can censor Google Inc.'s search engine. You can't hide the fact that a handful of Chinese are getting very rich from the billion-plus workers being left behind. Anger will rise, tempers will flare and things could get out of control. Try stuffing that under a mattress.
Bloomberg
William Pesek
August 16, 2010 - 7:51AM
Now that's one big mattress.
Last week, we learned China's households hide as much as 9.3 trillion yuan ($US1.4 trillion) of income not reported in official figures - 80 per cent of it by the nation's wealthiest. This massive pile of stashed cash is equal to about 30 per cent of gross domestic product.
There may be both good and bad news in the above study conducted for Credit Suisse Group AG. The good: it lends credence to the domestic-demand story for Chinese growth. It turns out, the average urban disposable household income is 32,154 yuan, or 90 per cent more than official figures. The bad: China's rich-poor gap may be much bigger than we realise.
China's "Gini coefficient," a statistical measure of wealth equality, has long been too high. In May, the Economic Information Daily, a government-affiliated newspaper, said the figure reached 0.47, higher than the recognised "warning level" of 0.4.
Things may be far worse in the most populous nation. A widening wealth disparity will lead to trouble down the road for 1.3 billion Chinese and investors betting on stability in an economy that may already be the second-largest.
Nothing spooks the Communist Party like social unrest. Its conviction to snuff it out whenever and wherever it occurs was behind the 4 trillion-yuan stimulus package in 2008. Reducing income disparities is a top goal of President Hu Jintao and Premier Wen Jiabao to stave off riots, strikes and other unrest that might threaten the party's six-decade rule.
Harder, Faster
They need to work much harder and much faster. The risk is that they may start believing their own press.
The story getting the most mileage is China's economic brawn. Its $US2.5 trillion of currency reserves is viewed as a nice insurance policy against trouble in markets. News that China bought $US20 billion more Japanese bonds than it sold in the first half of 2010, the fastest pace of purchases in at least five years, is seen as a passing of the torch in Asia.
In a way, it is. Japanese officials have done a poor job of disguising their glee over China supporting their debt. Government and Bank of Japan officials are concerned about their own nation's ability to finance a widening budget deficit. The desperation was fairly clear in a recent advertising campaign that suggested Japanese women are attracted to guys who invest in government bonds.
China's Fragilities
Investors haven't gotten rich betting against China. Yet China's fragilities need tending to, and now, if its development is to be sustainable.
The condition of China's state-owned banks is a concern for investors, and rightfully so. China plans to stress-test banks to assess how a big drop in property prices would affect the financial system. Officials should make sure the process is more thorough and transparent than in the US, Europe or Japan.
Social unrest is a bigger risk. Much of China's hidden income may be "illegal or quasi-illegal," according to the Credit Suisse study, published by the China Reform Foundation.
It should be no surprise that a nation growing 10 per cent has a healthy gray economy running in parallel. That's what happens when an all-powerful, top-down government mixes with vast supplies of capital. Crony capital thrives, be it kickbacks from construction projects, gifts to officials at weddings, payoffs from state monopolies such as the tobacco industry or spreading profits from land transfers.
Corruption's Price
This corruption comes at a huge price. The inefficiencies it breeds feed disparities in economic opportunities, income and the distribution of assets, such as property. The degree of social conflict inherent in China's rise is becoming more apparent. Just ask the folks at Toyota Motor Corp and Honda Motor Co dealing with strikes and demands for higher wages.
The most dangerous aspect of China's trajectory is how, well, American it looks. The concentration of wealth among the richest Chinese helps explain a surge in spending on luxury goods. As Japanese sales wane, posh brands can't open Chinese stores fast enough. Last year, Gucci opened one in Shijiazhuang, the capital of Hebei province, selling $US4000 snakeskin purses. That's about twice the city's official annual per-capita income.
China's social fabric is under pressure. This year's employee suicides at Foxconn Technology Group are a case in point. So is the spate of deadly attacks on schoolchildren, which press reports suggest are related to grievances with local governments. Last week, the New York Times reported on growing violence against doctors in the northeastern city of Shenyang.
China has done a remarkable job raising living standards for millions. The reason it sucks up so much attention and investment is genuine progress. While its challenges are many, China is leaving India far behind in tackling poverty. Now, its wealth balance is heading in the wrong direction.
You can censor Google Inc.'s search engine. You can't hide the fact that a handful of Chinese are getting very rich from the billion-plus workers being left behind. Anger will rise, tempers will flare and things could get out of control. Try stuffing that under a mattress.
Bloomberg
Tan Teng Boo of iCap said there are a lot of undervalued stocks on Bursa Malaysia.
iCapital.biz sees 7pc GDP growth
By Azlan Abu BakarPublished: 2010/08/16
MALAYSIA could record a positive gross domestic growth (GDP) for 2010 although almost all major economies including the US and China have suffered a growth slowdown since a couple of weeks ago.
Icapital.biz Bhd (5108) managing director Tan Teng Boo said the global market outlook for the next six months will continue to be uncertain.
Key data released in the US showed hints of possible economic softness, which could trigger another round of cautious sentiment among investors.
"However, despite the current situation Malaysia could still record up to 7 per cent GDP growth this year given the strong growth it achieved in the first and second quarter of the year," he told reporters when met at the company's Investors Day in Kuala Lumpur over the weekend.
The event was held to educate investors on investments. It also held talks, exhibition booths and presentations from companies which icapital.biz had invested in.
Tan said although the equity market has somewhat lagged behind a bit compared to others in the region, foreign investors are nevertheless excited with the New Economic Model (NEM) introduced by the government.
"They (foreign investors) are waiting to see how fast and how broad the reforms will be able to take place," he said.
He said if the NEM can be implemented fast, it could also transform and take Malaysia's economy into a new level.
"When that happens, we can expect to see a boom on the local stock market," Tan said, noting there a lot of undervalued stocks on Bursa Malaysia.
He said the Malaysian economy has the potential to surpass the performance of other markets including Singapore and Taiwan.
"We can succeed as we have the people, necessary support and skills to further build up the economy and attract direct foreign investments into the country," Tan said.
He said Malaysia's growth at present will continue to be driven by the resilient domestic market.
Icapital.biz, the country's only listed closed-end fund, recorded a net profit of RM36.4 million on the back of a RM42.2 million revenue for the financial year ended May 31 2010 compared with a revenue of only RM11.4 million a year before. Net profit in 2009 stood at RM6.2 million.
Its net asset value for the financial year recently ended rose 19 per cent to RM2.10 per share from RM1.77 previously.
"We hope to double our assets in the next five years," Tan said, noting the company posted growth of more than 130 per cent since it was listed in 2005.
Read more: iCapital.biz sees 7pc GDP growth http://www.btimes.com.my/Current_News/BTIMES/articles/ibix15/Article/#ixzz0wiSOWKeN
By Azlan Abu BakarPublished: 2010/08/16
MALAYSIA could record a positive gross domestic growth (GDP) for 2010 although almost all major economies including the US and China have suffered a growth slowdown since a couple of weeks ago.
Icapital.biz Bhd (5108) managing director Tan Teng Boo said the global market outlook for the next six months will continue to be uncertain.
Key data released in the US showed hints of possible economic softness, which could trigger another round of cautious sentiment among investors.
"However, despite the current situation Malaysia could still record up to 7 per cent GDP growth this year given the strong growth it achieved in the first and second quarter of the year," he told reporters when met at the company's Investors Day in Kuala Lumpur over the weekend.
The event was held to educate investors on investments. It also held talks, exhibition booths and presentations from companies which icapital.biz had invested in.
Tan said although the equity market has somewhat lagged behind a bit compared to others in the region, foreign investors are nevertheless excited with the New Economic Model (NEM) introduced by the government.
"They (foreign investors) are waiting to see how fast and how broad the reforms will be able to take place," he said.
He said if the NEM can be implemented fast, it could also transform and take Malaysia's economy into a new level.
"When that happens, we can expect to see a boom on the local stock market," Tan said, noting there a lot of undervalued stocks on Bursa Malaysia.
He said the Malaysian economy has the potential to surpass the performance of other markets including Singapore and Taiwan.
"We can succeed as we have the people, necessary support and skills to further build up the economy and attract direct foreign investments into the country," Tan said.
He said Malaysia's growth at present will continue to be driven by the resilient domestic market.
Icapital.biz, the country's only listed closed-end fund, recorded a net profit of RM36.4 million on the back of a RM42.2 million revenue for the financial year ended May 31 2010 compared with a revenue of only RM11.4 million a year before. Net profit in 2009 stood at RM6.2 million.
Its net asset value for the financial year recently ended rose 19 per cent to RM2.10 per share from RM1.77 previously.
"We hope to double our assets in the next five years," Tan said, noting the company posted growth of more than 130 per cent since it was listed in 2005.
Read more: iCapital.biz sees 7pc GDP growth http://www.btimes.com.my/Current_News/BTIMES/articles/ibix15/Article/#ixzz0wiSOWKeN
Malaysia's new economic model: Making choices
Malaysia's new economic model: Making choices
By Professor Dr Danny Quah Published: 2010/04/14
In June 2009, Malaysia's Prime Minister Datuk Seri Najib Razak asked if I would serve on his council of economic advisers, the National Economic Advisory Council (NEAC). This council was to come up with a New Economic Model for the country.
It would not be a group that got together every month to fine-tune the economy. This council was not to sift through the entrails of inventory reports, and propose economic policies to lean against the wind.
No, the task assigned by the NEAC was to put Malaysia back on a high-growth path, reinstating Vision 2020 that Malaysia would within these next 10 years achieve the status of a developed nation.
The council was to do this against a post-1997 background of annual economic growth having nearly halved; investment as a fraction of GDP having plummeted to 50 per cent of what it used to be (private investment, to one third); with the economy relying on a workforce of which four-fifths were educated only up to high-school level while over one quarter of the local public university graduates remained unemployed six months after graduation, and with the human capital brain-drain becoming freshly re-energised (350,000 Malaysians in 2008 lived and worked abroad, half of them with university education).
By 2007, Malaysia seemed as far from the World Bank's notion of a high-income economy as a decade earlier, in contrast to economies such as Slovakia, the Czech Republic, and Poland, all of whom had by 2008 broken through that high-income boundary but had earlier been roughly at level with Malaysia.
Yet, Malaysia had been previously identified by the Spence Commission on Growth and Development as one of only 13 countries in the world that had for more than 25 years grown at rates exceeding 7 per cent annually.
At different times since the 1960s, despite having a population not even one-third of the UK's, Malaysia had been the world's largest producer of tin, rubber, and palm oil.
Today, 40 per cent of Malaysia's households earn less than US$15 a day (RM1500 a month), two thirds the World Bank's low-income threshold.
With Malaysia's domestic income distribution what it is, only one million people pay income tax at the highest rate of 26 per cent; there is no goods and services tax.
Oil and gas revenues have, on occasion, provided up to nearly half the government's total revenues; although by 2014 Malaysia is expected to become a net importer of oil. As much as 20 per cent of the nation's public expenditures routinely get spent on subsidies that keep prices of basic goods low but distort reality for Malaysia's citizens.
Certain policy questions - for instance, monetary control and inflation; financial markets oversight, regulation, and development - are outside the NEAC's remit, and rightly so.
In Malaysia, all those issues were taken care of by others, and already attain world-class standards of performance.
The large facts I have just described seemed to me (and many other observers) precisely the ones raising the critical, first-order challenges for economic policy in Malaysia. The problem was how to organise them coherently and understand their resolution.
But there is, further, the other critical, first-order challenge unmentioned so far: namely, Malaysia's 40-year-old programme of affirmative action.
I say unmentioned but of course that is not how the outside world viewed this. The international press emphasised most of all this dimension to Malaysia's policy framework; I will bring this out further in the discussion that follows.
For now, however, I just note that some foreign financial houses I spoke to about NEAC work downplayed the significance of all the other problems I have mentioned. They said to me, "Malaysia needs to fix its affirmative-action programme; everything else follows."
That proposition, by itself, is almost surely demonstrably false. On the other hand, the perception is obviously one that colours the views of many market participants who actually shift significant financial resources.
Article 153 of Malaysia's Constitution, ratified in 1957, requires that the king protect the special position in Malaysia of the Bumiputeras (ethnic Malays and a small number of other indigenous groups). The Article allows the federal government to protect Bumiputera interests by establishing quotas for public scholarships, public education, and the civil service.
In 1971, following racial riots, declaration of a state of national emergency, and suspension of the parliament, the then-Prime Minister Tun Abdul Razak - father of the current Prime Minister - introduced the New Economic Policy (NEP). This policy sought to eradicate poverty regardless of race and to eliminate the identification of ethnicity with economic function.
The enabler for both these goals would be rapid economic growth, the speedy expansion of the economic pie to divide across all Malaysians, so that no subgroup would feel absolutely disadvantaged.
A key feature of the NEP was its effort to raise Bumiputera equity ownership from 2.4 per cent in 1971 up to 30 per cent within two decades.
What has the NEP's progress been? At a fixed absolute income threshold (its exact value holding no significance as long as it's fixed and applies across the board), poverty rates for Bumiputeras declined from 65 per cent in 1970 to 5 per cent in 2007, while that for Malaysians overall, from 49 per cent to 4 per cent; Chinese, 26 per cent to 1 per cent; Indians, 39 per cent to 2 per cent.
Wealth figures are widely disputed but most sources give Bumiputera equity ownership of 2-4 per cent in 1971; official KL Stock Exchange statistics suggest Bumiputera shares of 29 per cent by 1990 and 37 per cent by 1996.
That was the background when in August 2009 Najib delivered his keynote speech at the NEAC's inaugural meeting, asking the council for ideas and direction to transform Malaysia into a developed nation by 2020.
Malaysia, having successfully drawn foreign investment as a low-cost producer was populated with businesses that, at the margin, had neither incentive nor vision to climb the quality ladder.
Infrastructure and expertise in key areas remained under-developed. For Malaysia as a small open economy, the global trading environment has already shown time and again how it could change suddenly, as it had just done during the 2008 global financial crisis, and further looked set to change even more dramatically but less suddenly from longer-term global carbon considerations.
Reforms started in Malaysia by the Central Bank, the Securities Commission, and others were already liberalising capital markets and taking forward expertise and comparative advantage in Islamic Finance. Government transformation work had already begun to introduce meritocracy and performance measurement in the public sector itself.
What could the council do to help Malaysia relocate its strategic position in the global economy?
The New Economic Model
In the ensuing six months, the council met four times in Kuala Lumpur. At these meetings, council members listened to presentations, mapped strategic visions, and debated subtle differences in emphases. Now and then, we would as a group takes such a big-picture perspective that we would form a collective blind spot over the single largest difficulty in whatever we were discussing, completely missing the key concern.
Now and then, we would micro-drill down and heatedly argue over whether the appropriate punctuation should be a comma or a semi-colon. But all of us remained energetic and enthusiastic and committed, and sometime during the 15 hours of meeting each day, or in seemingly interminable rounds of emails 24/7, we would correct course and converge on the right balance.
We agreed our report had to be in two steps: First, to identify, propose, and persuade on the over-arching framework and strategic vision; Second, to steer from that vision, its delivery to be led by the executive branch and implemented by the civil service.
Without successfully convincing on the first, the second would never be executed. Without successfully executing the second, the first would have been in vain.
The single big-picture vision was that Malaysia had to become an advanced economy by 2020. Sure that included the Malaysian economy generating sufficiently high income. But that vision also included a subtext of inclusiveness - so that the poorest and most vulnerable in society would be taken care of and one of sustainability, so that higher economic growth would continue into the future, not at the expense of degrading the environment for generations to follow.
The council concluded many of Malaysia's malperforming situations were inter-linked. Underperformance in one setting was the rational response to underperformance in the next: Why work hard in school if you're convinced it doesn't benefit you afterwards? Why work hard in your job if your productivity is held back by so many unskilled people around you? In these circumstances, what is needed is a big push to break out of that vicious circle of under-performance.
But disruption would be needed not just in your own circle of school-mates and colleagues, but everywhere in the economy. Hence, we emphasised the big push of economic transformation needed to break the logjam of entrenched, special interests. We sought to build momentum and confidence in the mindset of citizens that more positive changes would continue to emerge but all of us needed to keep pushing.
This economic transformation would come with reform along eight strategic initiatives - slightly more concrete but only slightly:
* Re-energise the private sector so it could lead the process of economic growth;
* Re-energise the private sector so it could lead the process of economic growth;* Develop a high-quality workforce;
* Develop a high-quality workforce;* Create a competitive domestic economy;
* Create a competitive domestic economy;* Streamline and make efficient the public sector as facilitator for private enterprise, when in the past large government-linked corporations (GLCs) had been viewed as competitors instead;
* Streamline and make efficient the public sector as facilitator for private enterprise, when in the past large government-linked corporations (GLCs) had been viewed as competitors instead;* Move to affirmative action that is (a) transparent, (b) market-friendly, (c) merit-based, and (d) conditioned on need ;
* Move to affirmative action that is (a) transparent, (b) market-friendly, (c) merit-based, and (d) conditioned on need ;* Build infrastructure for a knowledge base;
* Build infrastructure for a knowledge base;* Enhance the sources of growth; and
* Enhance the sources of growth; and * Ensure the sustainability of growth.
* Ensure the sustainability of growth. Early on, the council decided it couldn't be swayed by arguments about whether it was doing something truly novel or new or different. The only thing that mattered should be whether a proposal for implementation was likely to succeed and whether it would bring the highest benefits to the greatest number. Good ideas are hard enough to come by generally; why straitjacket oneself to not look at certain of them? This isn't an exam: why not copy good ideas however and wherever you find them?
Nonetheless, having come to the end of putting in place the over-arching vision, we nonetheless could see several ways where our approach differed from earlier ones.
First, we focused on growth through enhancements in productivity, not the sheer brute force of capital accumulation. It's not that we ignored the latter - if we had, we wouldn't have expressed concern about the sharp fall off in Malaysia's investment.
Instead, it is that we figured it would be innovative processes and cutting-edge technologies that would provide the surest platform for Malaysia's producing high value-added goods and services in the future.
Second, we envisioned economic growth being private sector-led and market-driven, no longer dominated by large public investment through GLCs in selected economic sectors.
Third, we described the benefits of the government moving towards local autonomy in decision-making. State and local authorities needed to be empowered to develop and support more of their own growth initiatives - without unnecessarily duplicating function or project. While flat-out competition to produce identical public goods, over and over, would be obviously wasteful, a little competition between local authorities is healthy.
Fourth, we wanted to encourage local geographies to emerge - whether in clusters or corridors - as long as they exploited economies of scale and concentration, and thus raised productivity over the long term.
Fifth, we saw the need for continuing government support of private industry, as long as that support was geared towards innovation, entrepreneurial risk-taking, and high value-added goods and services. It would be those general principles that guided support, not past principles of picking winners.
Sixth, we welcomed talent and skills from everywhere: as long as anyone, local or foreign, is able to contribute to Malaysia's transformation to an innovative, high-value added economy, they would be accepted and welcomed.
Finally, we emphasised how the global economy was changing, and we figured Malaysia's strategic position within it needed to re-orient as well. For the entire 20th century, the world's strongest economic powers have been the US, Western Europe, and Japan.
Malaysia, like many others, tuned production and supply networks to service those markets. While we weren't arguing that policy should be based on the economic centre of the world suddenly shifting tens of thousands of kilometers east, we felt that it was reasonable to acknowledge the change in that global landscape, and to develop further new regional networks centred on the fast-growing, Asia-focused emerging economies.
In a nutshell, that's it. That's the New Economic Model (NEM).
After, for now
For a relatively technocratic problem and solution, the NEM announcement on March 30 by Najib attracted unexpectedly heavy attention from the international press. All the major world press worked in discussion of Malaysia's affirmative action programme, both historical and prospective.
The New York Times (March 30 2010) described the revision of Malaysia's policy to focus on need, not race.
The Wall Street Journal ran articles on two successive days (March 30 and April 1 2010), talking about the recalibration of Malaysia's decades-old affirmative action and asserting how "the New Economic Policy has hindered Malaysia's competitiveness in recent years. The US and European Union have singled out Malaysia's insistence on maintaining preferences for ethnic Malay-owned businesses in government procurement contracts for stalling the development of free-trade pacts".
The Journal's Opinion Asia column (April 1 2010) contextualised Najib's speech by observing how "A few years ago it was inconceivable that a Malaysian premier would express dissatisfaction with the 'rent-seeking and patronage' inherent in the country's four-decade-old affirmative action policies and call for a more 'transparent' system based on merit and need. Former Prime Minister Tun Mahathir Mohamad used to label people with such ideas 'extremists'."
Great cynicism continues to be expressed by some of my friends, Malaysian and otherwise, who say they have seen over the years many politician promises made only to be broken subsequently.
Personally, however, I see great optimism instead. Why? I contrast Najib's March 30 speech with what I imagine someone wanting an easy ride through life might have said, in light of both the general scepticism and fervent fear-mongering in the run-up to the event.
Two days before the NEM announcement, Kevin Brown wrote in the Financial Times (March 28 2010) how there was "widespread doubt" that Najib would take any political risk at all of dismantling Bumiputera special privileges, not least in a new economic model that might greatly dilute that historical affirmative action.
James Hookway's Wall Street Journal article of March 22 2010 gave considerable space to Datuk Ibrahim Ali, a right-wing Malay MP, and to Perkasa, the NGO that he founded devoted to defending Malay rights, reporting how "Ibrahim reckons Najib is misreading the depth of anger many Malays feel towards any change in a policy that has given many a leg up and helped to build a large middle class."
The Economist (March 11 2010) extrapolated from their interview with Najib and with others to sub-lead their article, "Najib wavers over undoing affirmative-action policies".
Not least, of course, there is the now-infamous interview Ibrahim Ali granted Al-Jazeera on March 29 2010, the eve of the launch of the NEM, where he gets bleeped three times speaking, with some vitriol, on the position of other races in Malaysia.
Domestic reporting too emphasised the emerging political tensions.
Now, contrast what Najib actually said with what all these observers predicted he would say. Think of the political onslaught, the wavering, the self-protection going on around him.
If Najib had wanted an easy way out, he could have taken it and no one would have been surprised. He didn't. He continues along that difficult but worthwhile path.
One final comment. In this international reporting, by far the greatest attention has gone towards Malaysia's New Economic Policy and its possible adjustment. In the council's work, we knew this was important, but so too were all other seven strategic initiatives.
Affirmative action matters. No significant advanced country in the world gets by without affirmative action programmes of some kind - it is in human nature to take care of the weakest and most vulnerable in our society.
So too for the members of council, where that bottom 40 per cent of the Malaysian population is targeted to receive significant help and attention. But fixing all the other problems matters too: it's one big push for all of them.
The council has now finished Step 1. Step 2 starts. Everyone likes to say, Now the hard work begins - as if I've never heard that one before. But I am energised. I continue to do this work (and, for the record, for practically no pay compared to outside options) because I think things actually are looking up in Malaysia.
The writer is an NEAC council member & professor of Economics at Department Of Economics, London School Of Economics & Political Science.
Read more: Malaysia's new economic model: Making choices http://www.btimes.com.my/Current_News/BTIMES/articles/quah/Article/index_html#ixzz0wiV5vMIT
By Professor Dr Danny Quah Published: 2010/04/14
In June 2009, Malaysia's Prime Minister Datuk Seri Najib Razak asked if I would serve on his council of economic advisers, the National Economic Advisory Council (NEAC). This council was to come up with a New Economic Model for the country.
It would not be a group that got together every month to fine-tune the economy. This council was not to sift through the entrails of inventory reports, and propose economic policies to lean against the wind.
No, the task assigned by the NEAC was to put Malaysia back on a high-growth path, reinstating Vision 2020 that Malaysia would within these next 10 years achieve the status of a developed nation.
The council was to do this against a post-1997 background of annual economic growth having nearly halved; investment as a fraction of GDP having plummeted to 50 per cent of what it used to be (private investment, to one third); with the economy relying on a workforce of which four-fifths were educated only up to high-school level while over one quarter of the local public university graduates remained unemployed six months after graduation, and with the human capital brain-drain becoming freshly re-energised (350,000 Malaysians in 2008 lived and worked abroad, half of them with university education).
By 2007, Malaysia seemed as far from the World Bank's notion of a high-income economy as a decade earlier, in contrast to economies such as Slovakia, the Czech Republic, and Poland, all of whom had by 2008 broken through that high-income boundary but had earlier been roughly at level with Malaysia.
Yet, Malaysia had been previously identified by the Spence Commission on Growth and Development as one of only 13 countries in the world that had for more than 25 years grown at rates exceeding 7 per cent annually.
At different times since the 1960s, despite having a population not even one-third of the UK's, Malaysia had been the world's largest producer of tin, rubber, and palm oil.
Today, 40 per cent of Malaysia's households earn less than US$15 a day (RM1500 a month), two thirds the World Bank's low-income threshold.
With Malaysia's domestic income distribution what it is, only one million people pay income tax at the highest rate of 26 per cent; there is no goods and services tax.
Oil and gas revenues have, on occasion, provided up to nearly half the government's total revenues; although by 2014 Malaysia is expected to become a net importer of oil. As much as 20 per cent of the nation's public expenditures routinely get spent on subsidies that keep prices of basic goods low but distort reality for Malaysia's citizens.
Certain policy questions - for instance, monetary control and inflation; financial markets oversight, regulation, and development - are outside the NEAC's remit, and rightly so.
In Malaysia, all those issues were taken care of by others, and already attain world-class standards of performance.
The large facts I have just described seemed to me (and many other observers) precisely the ones raising the critical, first-order challenges for economic policy in Malaysia. The problem was how to organise them coherently and understand their resolution.
But there is, further, the other critical, first-order challenge unmentioned so far: namely, Malaysia's 40-year-old programme of affirmative action.
I say unmentioned but of course that is not how the outside world viewed this. The international press emphasised most of all this dimension to Malaysia's policy framework; I will bring this out further in the discussion that follows.
For now, however, I just note that some foreign financial houses I spoke to about NEAC work downplayed the significance of all the other problems I have mentioned. They said to me, "Malaysia needs to fix its affirmative-action programme; everything else follows."
That proposition, by itself, is almost surely demonstrably false. On the other hand, the perception is obviously one that colours the views of many market participants who actually shift significant financial resources.
Article 153 of Malaysia's Constitution, ratified in 1957, requires that the king protect the special position in Malaysia of the Bumiputeras (ethnic Malays and a small number of other indigenous groups). The Article allows the federal government to protect Bumiputera interests by establishing quotas for public scholarships, public education, and the civil service.
In 1971, following racial riots, declaration of a state of national emergency, and suspension of the parliament, the then-Prime Minister Tun Abdul Razak - father of the current Prime Minister - introduced the New Economic Policy (NEP). This policy sought to eradicate poverty regardless of race and to eliminate the identification of ethnicity with economic function.
The enabler for both these goals would be rapid economic growth, the speedy expansion of the economic pie to divide across all Malaysians, so that no subgroup would feel absolutely disadvantaged.
A key feature of the NEP was its effort to raise Bumiputera equity ownership from 2.4 per cent in 1971 up to 30 per cent within two decades.
What has the NEP's progress been? At a fixed absolute income threshold (its exact value holding no significance as long as it's fixed and applies across the board), poverty rates for Bumiputeras declined from 65 per cent in 1970 to 5 per cent in 2007, while that for Malaysians overall, from 49 per cent to 4 per cent; Chinese, 26 per cent to 1 per cent; Indians, 39 per cent to 2 per cent.
Wealth figures are widely disputed but most sources give Bumiputera equity ownership of 2-4 per cent in 1971; official KL Stock Exchange statistics suggest Bumiputera shares of 29 per cent by 1990 and 37 per cent by 1996.
That was the background when in August 2009 Najib delivered his keynote speech at the NEAC's inaugural meeting, asking the council for ideas and direction to transform Malaysia into a developed nation by 2020.
Malaysia, having successfully drawn foreign investment as a low-cost producer was populated with businesses that, at the margin, had neither incentive nor vision to climb the quality ladder.
Infrastructure and expertise in key areas remained under-developed. For Malaysia as a small open economy, the global trading environment has already shown time and again how it could change suddenly, as it had just done during the 2008 global financial crisis, and further looked set to change even more dramatically but less suddenly from longer-term global carbon considerations.
Reforms started in Malaysia by the Central Bank, the Securities Commission, and others were already liberalising capital markets and taking forward expertise and comparative advantage in Islamic Finance. Government transformation work had already begun to introduce meritocracy and performance measurement in the public sector itself.
What could the council do to help Malaysia relocate its strategic position in the global economy?
The New Economic Model
In the ensuing six months, the council met four times in Kuala Lumpur. At these meetings, council members listened to presentations, mapped strategic visions, and debated subtle differences in emphases. Now and then, we would as a group takes such a big-picture perspective that we would form a collective blind spot over the single largest difficulty in whatever we were discussing, completely missing the key concern.
Now and then, we would micro-drill down and heatedly argue over whether the appropriate punctuation should be a comma or a semi-colon. But all of us remained energetic and enthusiastic and committed, and sometime during the 15 hours of meeting each day, or in seemingly interminable rounds of emails 24/7, we would correct course and converge on the right balance.
We agreed our report had to be in two steps: First, to identify, propose, and persuade on the over-arching framework and strategic vision; Second, to steer from that vision, its delivery to be led by the executive branch and implemented by the civil service.
Without successfully convincing on the first, the second would never be executed. Without successfully executing the second, the first would have been in vain.
The single big-picture vision was that Malaysia had to become an advanced economy by 2020. Sure that included the Malaysian economy generating sufficiently high income. But that vision also included a subtext of inclusiveness - so that the poorest and most vulnerable in society would be taken care of and one of sustainability, so that higher economic growth would continue into the future, not at the expense of degrading the environment for generations to follow.
The council concluded many of Malaysia's malperforming situations were inter-linked. Underperformance in one setting was the rational response to underperformance in the next: Why work hard in school if you're convinced it doesn't benefit you afterwards? Why work hard in your job if your productivity is held back by so many unskilled people around you? In these circumstances, what is needed is a big push to break out of that vicious circle of under-performance.
But disruption would be needed not just in your own circle of school-mates and colleagues, but everywhere in the economy. Hence, we emphasised the big push of economic transformation needed to break the logjam of entrenched, special interests. We sought to build momentum and confidence in the mindset of citizens that more positive changes would continue to emerge but all of us needed to keep pushing.
This economic transformation would come with reform along eight strategic initiatives - slightly more concrete but only slightly:
* Re-energise the private sector so it could lead the process of economic growth;
* Re-energise the private sector so it could lead the process of economic growth;* Develop a high-quality workforce;
* Develop a high-quality workforce;* Create a competitive domestic economy;
* Create a competitive domestic economy;* Streamline and make efficient the public sector as facilitator for private enterprise, when in the past large government-linked corporations (GLCs) had been viewed as competitors instead;
* Streamline and make efficient the public sector as facilitator for private enterprise, when in the past large government-linked corporations (GLCs) had been viewed as competitors instead;* Move to affirmative action that is (a) transparent, (b) market-friendly, (c) merit-based, and (d) conditioned on need ;
* Move to affirmative action that is (a) transparent, (b) market-friendly, (c) merit-based, and (d) conditioned on need ;* Build infrastructure for a knowledge base;
* Build infrastructure for a knowledge base;* Enhance the sources of growth; and
* Enhance the sources of growth; and * Ensure the sustainability of growth.
* Ensure the sustainability of growth. Early on, the council decided it couldn't be swayed by arguments about whether it was doing something truly novel or new or different. The only thing that mattered should be whether a proposal for implementation was likely to succeed and whether it would bring the highest benefits to the greatest number. Good ideas are hard enough to come by generally; why straitjacket oneself to not look at certain of them? This isn't an exam: why not copy good ideas however and wherever you find them?
Nonetheless, having come to the end of putting in place the over-arching vision, we nonetheless could see several ways where our approach differed from earlier ones.
First, we focused on growth through enhancements in productivity, not the sheer brute force of capital accumulation. It's not that we ignored the latter - if we had, we wouldn't have expressed concern about the sharp fall off in Malaysia's investment.
Instead, it is that we figured it would be innovative processes and cutting-edge technologies that would provide the surest platform for Malaysia's producing high value-added goods and services in the future.
Second, we envisioned economic growth being private sector-led and market-driven, no longer dominated by large public investment through GLCs in selected economic sectors.
Third, we described the benefits of the government moving towards local autonomy in decision-making. State and local authorities needed to be empowered to develop and support more of their own growth initiatives - without unnecessarily duplicating function or project. While flat-out competition to produce identical public goods, over and over, would be obviously wasteful, a little competition between local authorities is healthy.
Fourth, we wanted to encourage local geographies to emerge - whether in clusters or corridors - as long as they exploited economies of scale and concentration, and thus raised productivity over the long term.
Fifth, we saw the need for continuing government support of private industry, as long as that support was geared towards innovation, entrepreneurial risk-taking, and high value-added goods and services. It would be those general principles that guided support, not past principles of picking winners.
Sixth, we welcomed talent and skills from everywhere: as long as anyone, local or foreign, is able to contribute to Malaysia's transformation to an innovative, high-value added economy, they would be accepted and welcomed.
Finally, we emphasised how the global economy was changing, and we figured Malaysia's strategic position within it needed to re-orient as well. For the entire 20th century, the world's strongest economic powers have been the US, Western Europe, and Japan.
Malaysia, like many others, tuned production and supply networks to service those markets. While we weren't arguing that policy should be based on the economic centre of the world suddenly shifting tens of thousands of kilometers east, we felt that it was reasonable to acknowledge the change in that global landscape, and to develop further new regional networks centred on the fast-growing, Asia-focused emerging economies.
In a nutshell, that's it. That's the New Economic Model (NEM).
After, for now
For a relatively technocratic problem and solution, the NEM announcement on March 30 by Najib attracted unexpectedly heavy attention from the international press. All the major world press worked in discussion of Malaysia's affirmative action programme, both historical and prospective.
The New York Times (March 30 2010) described the revision of Malaysia's policy to focus on need, not race.
The Wall Street Journal ran articles on two successive days (March 30 and April 1 2010), talking about the recalibration of Malaysia's decades-old affirmative action and asserting how "the New Economic Policy has hindered Malaysia's competitiveness in recent years. The US and European Union have singled out Malaysia's insistence on maintaining preferences for ethnic Malay-owned businesses in government procurement contracts for stalling the development of free-trade pacts".
The Journal's Opinion Asia column (April 1 2010) contextualised Najib's speech by observing how "A few years ago it was inconceivable that a Malaysian premier would express dissatisfaction with the 'rent-seeking and patronage' inherent in the country's four-decade-old affirmative action policies and call for a more 'transparent' system based on merit and need. Former Prime Minister Tun Mahathir Mohamad used to label people with such ideas 'extremists'."
Great cynicism continues to be expressed by some of my friends, Malaysian and otherwise, who say they have seen over the years many politician promises made only to be broken subsequently.
Personally, however, I see great optimism instead. Why? I contrast Najib's March 30 speech with what I imagine someone wanting an easy ride through life might have said, in light of both the general scepticism and fervent fear-mongering in the run-up to the event.
Two days before the NEM announcement, Kevin Brown wrote in the Financial Times (March 28 2010) how there was "widespread doubt" that Najib would take any political risk at all of dismantling Bumiputera special privileges, not least in a new economic model that might greatly dilute that historical affirmative action.
James Hookway's Wall Street Journal article of March 22 2010 gave considerable space to Datuk Ibrahim Ali, a right-wing Malay MP, and to Perkasa, the NGO that he founded devoted to defending Malay rights, reporting how "Ibrahim reckons Najib is misreading the depth of anger many Malays feel towards any change in a policy that has given many a leg up and helped to build a large middle class."
The Economist (March 11 2010) extrapolated from their interview with Najib and with others to sub-lead their article, "Najib wavers over undoing affirmative-action policies".
Not least, of course, there is the now-infamous interview Ibrahim Ali granted Al-Jazeera on March 29 2010, the eve of the launch of the NEM, where he gets bleeped three times speaking, with some vitriol, on the position of other races in Malaysia.
Domestic reporting too emphasised the emerging political tensions.
Now, contrast what Najib actually said with what all these observers predicted he would say. Think of the political onslaught, the wavering, the self-protection going on around him.
If Najib had wanted an easy way out, he could have taken it and no one would have been surprised. He didn't. He continues along that difficult but worthwhile path.
One final comment. In this international reporting, by far the greatest attention has gone towards Malaysia's New Economic Policy and its possible adjustment. In the council's work, we knew this was important, but so too were all other seven strategic initiatives.
Affirmative action matters. No significant advanced country in the world gets by without affirmative action programmes of some kind - it is in human nature to take care of the weakest and most vulnerable in our society.
So too for the members of council, where that bottom 40 per cent of the Malaysian population is targeted to receive significant help and attention. But fixing all the other problems matters too: it's one big push for all of them.
The council has now finished Step 1. Step 2 starts. Everyone likes to say, Now the hard work begins - as if I've never heard that one before. But I am energised. I continue to do this work (and, for the record, for practically no pay compared to outside options) because I think things actually are looking up in Malaysia.
The writer is an NEAC council member & professor of Economics at Department Of Economics, London School Of Economics & Political Science.
Read more: Malaysia's new economic model: Making choices http://www.btimes.com.my/Current_News/BTIMES/articles/quah/Article/index_html#ixzz0wiV5vMIT
Sunday 15 August 2010
An exclusive conversation with the CEO of Berkshire Hathaway, Warren Buffett
Charlie Rose - Warren Buffett
54:48 - 1 year ago
Warren Buffett on Charlie Rosehttp://video.google.com/videoplay?docid=515260011274566220&hl=en&emb=1#docid=4537231419795681197
Charlie Rose - Warren Buffett
56:40 - 3 years ago
An exclusive conversation with the CEO of Berkshire Hathaway, Warren Buffetthttp://video.google.com/videoplay?docid=-4116868880636414751&hl=en&emb=1#
Warren Buffett Talks Business
http://video.google.com/videoplay?docid=79141131942029098&hl=en&emb=1#
Warren Buffett Talks Business
56:03 - 2 years ago
Amazing video of the Oracle of Omaha
Saturday 14 August 2010
MBA - Managerial Economics
MBA - Managerial Economics 01
54:37 - 1 year ago
MBA Course in Managerial Economics at Prince Sultan University. Lecture 1 covers introductory overview to economics - choice, economic decisions, scarcity, trade-offs, opprtunity cost, marginal analysis, efficiency, resources, utility, modeling.http://video.google.com/videoplay?docid=3236390700554076825#docid=-408690692811744650
MBA - Managerial Economics 02
30:40 - 1 year ago
Lecture 2 of MBA course in Managerial Economics at Prince Sultan University. Discusses some fallacies and myths on global issues related to the U.S dollar, US economy, gold, oil, and other important and current global economic issueshttp://video.google.com/videoplay?docid=-3712587726439038583#
MBA - Managerial Economics 03
02:31 - 1 year ago
Lecture 3 from an MBA course in Managerial Economics.http://video.google.com/videoplay?docid=-3712587726439038583#docid=-3524750524862699535
MBA - Managerial Economics 04
33:06 - 1 year ago
Covers the first half of the first chapter of the textbook "Managerial Economics" by Maurice & Thomas.http://video.google.com/videoplay?docid=-3712587726439038583#docid=8361401330998686750
MBA - Managerial Economics 22
1:11:56 - 1 year ago
Long run cost and production. Isoquant curves. Marginal rate of technical substitution. Isocost curves. Optimal combination of inputs. Cost optimization. Expansion path. Returns to scale; economies of scale; economies of scope.http://video.google.com/videoplay?docid=-3712587726439038583#docid=6029229602533143315
Thursday 12 August 2010
Investment In Gold Seminar by Krassimir Petrov
Krassimir Petrov - Investment Analysis (part 1)
29:14 - 2 years ago
Tavex Investment Gold Seminar in Stockholm April 9, 2008http://video.google.com/videoplay?docid=3236390700554076825#docid=-4020393826410739752
Krassimir Petrov - Investment Analysis (part 2)
28:52 - 2 years ago
Tavex Investment Gold Seminar in Stockholm April 9, 2008http://video.google.com/videoplay?docid=3227070987190450403#
Krassimir Petrov - Investment Analysis (part 3)
32:33 - 2 years ago
Tavex Investment Gold Seminar in Stockholm April 9, 2008http://video.google.com/videoplay?docid=976700141486118374#
Krassimir Petrov - Investment Analysis (part 4)
13:30 - 2 years ago
Tavex Investment Gold Seminar in Stockholm April 9, 2008http://video.google.com/videoplay?docid=1383332369012611726#
21 Evils of Inflation (Video)
http://video.google.com/videoplay?docid=-6484061137769305763&hl=en&emb=1#
21 Evils of Inflation - Prof. Krassimir Petrov
59:42 - 3 years ago
A 60 minute lecture by Prof. Krassimir Petrov at the American University in Bulgaria explaining 21 negative effects from inflation.
Exotic plays for brave investors
Tired of considering the same old investments? We look at some of the more unconventional choices.
Vietnam is 'one of the most promising countries in the world', according to one analyst
Investors who are fed up with dismal returns from traditional markets are making steps to invest in more adventurous areas. Popular funds include those that invest in Latin America, Russia, India, gold and commodities.
Rebecca O'Keeffe, at Interactive Investor, said: "Our investors continue to look for more aggressive growth opportunities."
Selftrade, the broker, said its clients were now investing more "adventurously" in gold and silver exchange-traded funds (ETFs).
So if you are in an adventurous mood and are prepared to lose the shirt off your back if it all goes pear-shaped, then check out these four areas attracting interest from seasoned investors. Wealth warning: the usual caveats of getting advice apply.
VIETNAM
Three years ago, Vietnam was one of the best-performing stock markets in the world and numerous funds were launched to provide access for foreign investors.
However, the euphoria proved short-lived and in 2008 Vietnam was hit by a double crisis. Firstly, it was forced to raise interest rates sharply to choke off a surge in inflation and this was followed by the global credit crunch, which hit exports and foreign investment. Unsurprisingly, the country's stock market fell sharply and investors suffered.
Charles Cade, an analyst at Numis, said: "There was a bounce-back during 2009, helped by a domestic economic stimulus package. However, foreign investors have been reluctant to venture back into the market and have focused their attention on China instead. In our view, though, it is time to take another look. Vietnam remains one of the most promising countries in the world."
Mr Cade sites low labour costs and a young, growing workforce, a growing entrepreneurial culture, and significant natural resources – including agriculture, timber and oil – as reasons to be bullish.
While Vietnam is not on the radar of many financial advisers, Mick Gilligan, from stockbroker Killik, is a fan. He reckons that Vietnam is like a smaller version of China in that it has a centralist government keen to embrace a capital market approach.
"The equity market is still in its early stages of maturity, but it has exciting prospects. Our favoured routes would be FTSE Vietnam ETF [db-X Tracker] for those looking for market exposure and liquidity. VinaCapital Vietnam Opportunity fund also looks interesting and it currently trades on a 40pc discount to net asset value," he said.
MIDDLE EAST
These so-called frontier markets are the BRICs of the future, with burgeoning industry and a population with a thirst to better themselves through education and Western-style material acquisitions.
Sam Vecht, co-manager of BlackRock's Global Emerging Markets fund, considers Panama, Saudi Arabia and Qatar to have just as much investment potential as their better-known peers. "These countries are often ignored, but this is because of a lack of analyst and media coverage, rather than a lack of opportunities," he said.
However, before you rush to sign on the dotted line for a frontier fund, be warned. With great returns come great risks. Three years ago, New Star launched its Heart of Africa fund with the hope of making the most of the untapped potential of the likes of Zimbabwe and the Democratic Republic of Congo. Liquidity issues forced the fund to close in 2008 with investors losing 66pc of their money.
Many frontier markets are fraught with political unrest, while corporate governance, although it is improving, is another concern.
In March, Barings launched its Middle East and North Africa (MENA) fund to tap into its resource-rich economy.
But Hugo Shaw at Bestinvest, the financial adviser, issued a word of warning. "Returns may be high, but you should only invest in frontier markets if you are able to stomach a roller-coaster ride in price movements," he said.
Mr Shaw advised investors to consider investment trusts as a safer way to get exposure to frontier markets. They are better suited to less-liquid markets because the manager is not a forced seller or buyer. "Closed-ended investments, such as investment trusts, are better placed to deal with such issues, and Advance Developing Markets and Genesis Emerging Markets are two good examples," he said.
PLATINUM AND PALLADIUM
All talk of metal investing in recent months has focused on the haven and inflation hedge of gold. Yet other metals, notably platinum and palladium, are gaining interest from investors.
Two main factors drive these metals to premium prices: demand from the Asian market and their use in catalytic converters. Half of all cars need these converters, ensuring that demand remains strong.
Prices of these white metals has been falling of late, leaving analysts wondering whether a buying opportunity is around the corner. The reason for falling prices is the slowdown in the auto industry. Car sales in the US are down 11pc and plunged 25pc in Japan, while car production in China is down 6.9pc.
However, many analysts anticipate a strong resurgence in platinum and palladium prices towards the end of the year – buoyed by an anticipated recovery in sales in China.
"Prices have recovered from the 2008 trough, but by no means as far as they could rise as the wheels of the global economy begin to turn again and I think platinum has a greater upside potential than gold," said James Cook, product manager at Fidelity International.
"Long-term demand is assured by developing nations who will become the biggest new car buyers in the world, 2009 marked the sales of new cars in China outstripping those in the US. The now unstoppable drive to cleaner technology in cars means whatever size the Chinese car fleet grows to, it will need to be powered by cleaner cars with platinum a key raw material."
Adventurous investors can get exposure to platinum via an exchange-traded fund.
AGRICULTURE
Several fund groups are beginning to promote agriculture as an alternative to traditional equity funds.
One of the most notable recent launches is BlackRock's BGF World Agriculture fund, managed by Desmond Cheung and Richard Davis. The company outlines investment opportunities in the move in emerging markets farming away from pastoral to arable and a growing global population.
The sector has delivered positive returns over the past year. The average return for agriculture funds, based on £1,000 invested 12 months ago, is £1,150. The best performer is Allianz RCM Global Agricultural Trends, which has risen 20pc in the past year. The fund is almost entirely invested, having less than 1pc in cash, with the majority of the fund in North America. The fund is also invested in Singapore, Malaysia and Chile.
Meera Patel, of Hargreaves Lansdown, recommended investors do their homework when investing in agriculture, as one fund can differ very much from the next. Sarasin's AgriSar fund invests in the entire agricultural supply chain, from grain to supermarkets. This means that although you may miss out on large surges, there will be a much smoother growth.
"We would recommend Sarasin's fund to someone just looking to invest in agriculture for the first time," she said.
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