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Malaysian Elections coming!

Thu, 11 Apr 2013 04:34:00 +0100

April 10, 2013

Malaysia Sets Elections in Big Test for Ruling Party

By GERRY MULLANY

HONG KONG — Malaysia scheduled national elections for May 5 on Wednesday, setting the stage for the biggest test of the governing party’s dominance since the country gained independence from Britain more than five decades ago.

The country’s elections chairman, Abdul Aziz Yusof, said candidates would be nominated April 20, allowing for a two-week campaign.

The elections come as Prime Minister Najib Razak has been struggling to hold together the multiethnic coalition, known as the National Front, that has long governed the country. That coalition is composed of three parties that define themselves along racial lines: one for Malays, the country’s largest ethnic group; one for Chinese; and one for Indians.

Recent opinion polls have suggested that Mr. Najib holds a slim majority, with the National Front losing its once-powerful edge as ethnic Chinese have abandoned the coalition. Ethnic Chinese voters who have long supported the governing coalition have shown dissatisfaction with the longstanding preferences given to ethnic Malays in land purchases and bank loans, as well as in university admissions.

Mr. Najib’s most formidable opponent is Anwar Ibrahim, a former deputy prime minister running with the People’s Alliance, which in 2008 balloting captured 5 of Malaysia’s 13 states.

In a statement issued Wednesday, the Malaysian government said Mr. Najib welcomed the elections and the chance to make his case to voters.

“This election is a choice between sticking with a competent, reform-minded government and risking our prosperity on a fractious, inexperienced opposition, whose manifesto doesn’t add up,” the statement said.

The announcement of a date for the elections came one week after Mr. Najib announced that he was dissolving Parliament in a speech on national television in which he sounded defensive.

“Don’t gamble the future of your children and Malaysia,” he said in the address. “Think and contemplate as much as you can before making a decision, because that will determine the direction of the country and also your grandchildren’s future.”

The two-week campaign period is shorter than the 21-day period that an electoral reform group, Bersih, had recommended. But political parties have already begun campaigning.

Mr. Najib has one major advantage: the governing coalition’s longstanding influence over major media outlets. On Wednesday, the Web site of The New Straits Times, a leading English-language newspaper, prominently featured an article suggesting that Mr. Anwar, the opposition candidate, “did not have a firm stand on matters pertaining to Islam” despite the fact that he “portrayed himself as an Islamic figure.”

Managing succession in Asian family firms

Thu, 23 Feb 2012 07:52:44 +0100

Managing succession in Asian family firms

Reseach shows such firms have had significant wealth loss during their succession processes

By KATHRYN YAP

FAMILY businesses in Singapore command a prominent role in the domestic economy and capital market.

They account for 63 per cent of listed companies in Singapore and a combined total market capitalisation that is 140 per cent of the country's nominal GDP, according to the Asian Family Businesses Report 2011 by the Credit Suisse Emerging Markets Research Institute. And as employers, family businesses account for 57 per cent and 32 per cent of all employees hired by listed companies in South Asia and North Asia respectively.

While it is admirable that family businesses have been the backbone of growth in the Asia-Pacific region, their prevalence should also inspire Asia's bourses and shareholders to ensure that succession planning is managed well.

Research conducted by Joseph Fan, a professor at the Chinese University of Hong Kong, shows that publicly listed family-controlled Asian companies have had significant wealth loss during their succession processes. As much as 60 per cent has been lost in accumulated stock returns from five years before succession to the three years after succession at 250 family firms in Singapore, Hong Kong and Taiwan.

The ability to manage wealth transfer (and succession planning) is more challenging in the Asia-Pacific where many founders are still actively involved in their businesses, than in the US, Europe or even the Middle East, where businesses may have gone through the test of surviving two or more generations.

Moreover, lingering cultural and patriarchal sensitivities make discussions of death, handover and succession planning a taboo subject for many Asian families and professional executives within Asian family-controlled companies. Sibling conflicts over inter-generational wealth or management control, complex corporate structures, as well as unique networks belonging to the founders only complicate the handover process.

While most would prefer to 'keep things within the family', listed family businesses in Singapore may be hard pressed to convince shareholders that the founder's son, daughter or relative will be as successful a CEO or chairman as the original founder. This doubt may even exist within the family circle itself.

In a separate study from Merrill Lynch Global Wealth Management and Capgemini, the 2011 Asia-Pacific Wealth Report, a majority of Asia-Pacific's wealthy families excluding Japan (88 per cent) doubt the ability of the next generation to manage their family's wealth.

Many large and listed family firms in the West, such as Wal-Mart Stores, Inc (NYSE), Ford Motor Company (NYSE), The Gap, Inc (NYSE), The New York Times Company (NYSE), BMW (FWB), HermÃƒÂ¨s International SA (Euronext) and Salvatore Ferragamo SpA (Milan Stock Exchange), have all tackled succession planning in spite of wars, natural catastrophes, family tragedies and other challenges. Often, this has been through the input of both professional managers as well as family members, though research seems to suggest that professional managers may be more effective.

The study by Prof Fan showed that wealth loss during succession was least in Singapore's family firms and most acute among Hong Kong family firms. This could be due to the fact that significantly more Singaporean company founders have been inclined to bring in outsiders as their next generation CEOs.

Choosing a CEO is not a simple, straightforward exercise for any company. On top of the usual considerations are some distinctive success factors for listed family controlled companies.

Firstly, a structured and business focused approach to succession planning needs to be set in place by the board of directors, in order to prevent confusion, misdirection and limited or poor choices for next generation CEOs. Directors may be intimidated by founding family members who hold the management reins tightly but they cannot ignore the risks of poor succession planning. Board discussions should focus on the company's major sources of long-term growth and value creation, optimal timing for the next leadership transition, and meaningful criteria with which to evaluate potential candidates and define future CEO success. Often it helps to bring in external consultants, so that the process can be made more impartial and less emotionally charged.

Secondly, it is important to identify what has been and will continue to be the leadership qualities that make Asia's listed family businesses great. Many times, family businesses in Asia have been built on the unique qualities, connections and skills of their founders, and it is important to ensure that such 'corporate value' is not lost during the transition to new leaders.

Thirdly, founding members need to accept that not all their children will inherit the genes for success. Some are more driven and keen to succeed than others. The succession planning procedure should include a formal process to identify those who are most likely to succeed as leaders, and encourage open transparency and accountability throughout. Should a search for an external or an internal (non-family) candidate be needed, it will be critical that potential successors understand the company itself, its corporate culture, as well as the founding values that have made the company great in the first place. The professional assessment methods used by experienced executive search consultants can come in very useful here.

Where family members are ambitious and want to continue to be involved with the corporation, it will be helpful to divide the businesses clearly with subsets of the overall profit and loss accounts. That way, different family members can manage and grow the different business divisions and be directly answerable to shareholders.

This ensures 'ownership' is not only retained by means of equity but also by means of having a personal vested interest in the success of the business.

Infrastructure theme may be sound play

Tue, 19 Apr 2011 09:08:46 +0100

Business Times - 16 Apr 2011

SHOW ME THE MONEY
Infrastructure theme may be sound play

Timing may be just right given projections of heavy investments in the sector in Asia over the next decade

By TEH HOOI LING
SENIOR CORRESPONDENT

BETWEEN 2001 and last year, India's gross national product in local currency at current market prices grew by an average 12.7 per cent a year, according to data from the International Monetary Fund. Despite the rapid economic growth and continued bright prospects, investments in infrastructure has lagged significantly behind.

Hence, electricity generation in India is 16 per cent to 20 per cent short of what is needed to meet peak demand, due to persistent underinvestment and poor maintenance. This can be seen in most emerging Asian countries, perhaps with the exception of China.

In Indonesia, infrastructure investments dropped from 5 per cent to 6 per cent of GDP in the early 1990s to 2 per cent to 3 per cent of GDP for much of the last 10 years. According to global consulting firm McKinsey, the consequent deterioration in energy, transport, housing, communications, and water facilities has restrained economic growth by 3-4 percentage points of GDP.

But things are about to change, it said in a recent report. 'Across the Asian region as a whole, we calculate that around US$8 trillion will be committed to infrastructure projects over the next decade to remedy historical underinvestment and accommodate the explosion in demand.'

Traditionally, most Asian infrastructure projects have been funded by governments or domestic banks. Foreign investors were mostly excluded. Those that were allowed to participate faced severe restrictions, including complex regulatory and legal regimes, uneven workforce quality, and occasional political interference, the consultancy noted.

'In the wake of the financial crisis, however, we have started to see signs that global private capital is increasingly welcome. The combined effects of increased stimulus spending and reduced tax receipts have increased deficits, with the result that restrictions on foreign investment are easing and a growing number of projects are being carried out under public-private partnerships (PPP). We estimate that over the next 10 years, fully US$1 trillion of the US$8 trillion of projected infrastructure projects will be open to private investors under PPPs.'

The questions for owners of global capital are how to identify the opportunities, how to mitigate the main risks, and how to develop appropriate entry strategies, said McKinsey.

It added that more than 80 per cent of the demand for infrastructure investment in emerging Asia over the next 10 years will come from energy and transport, the sectors most critical to supporting heightened economic activity.

Much of this new investment will be in advanced technologies. For example, Asia may leapfrog developed economies in its adoption of clean-energy technologies, thanks to falling costs and improving effectiveness.

So there is this huge upcoming opportunity for international investors to fund the infrastructure developments in emerging Asia. But my question is: Is there money to be made by private investors in investing in infrastructure projects?

A few of the infrastructure-related stocks or funds listed on the Singapore Exchange have less than stellar performance. For example, the infrastructure play of the 1990s, Ipco, crashed spectacularly. And more recently, CitySpring Infrastructure Trust has seen its value shrink by 10.7 per cent a year between February 2007 and March 2011.

Macquarie International Infrastructure Fund, on the other hand, rewarded investors with a -0.33 per cent return a year in the five years to March 2011.

Is such poor performance just a Singapore phenomenon, or do infrastructure plays in other countries exhibit similar returns?

I did a quick study of the returns of infrastructure-related stocks or funds around the world. I surveyed about 20 of them. Included in the crop were India's Reliance Infrastructure, Hong Kong's Hopewell Highway Infrastructure, and the S&P Global Infrastructure Index.

I tabulated the annual equivalent of these securities' return in the last five years. And for those with less than five years' track record, return is calculated for the period that they are listed.

All returns are converted into Singapore dollar terms. From the table, you can see that only six out of the 21 securities listed registered positive annual return in the five or less years to March 2011.

The best performer is India's Infrastructure Development Finance Co which has rewarded investors with 13.9 per cent a year since 2006. The company offers infrastructure project financing services. It primarily finances energy, telecommunications and transportation projects.

The second best performer is Australia's Spark Infrastructure Group which invests in utility infrastructure assets in Australia. It returned 13.4 per cent a year.

Hong Kong's Cheung Kong Infrastructure Holdings - which develops, invests in, and operates infrastructure projects such as power plants, toll roads, and toll bridges in Hong Kong, China and other countries, in addition to manufacturing infrastructure materials such as cement, concrete, asphalt and aggregates - turned in a decent 7.1 per cent a year.

Most, however, registered negative returns. On average, the return is -2.6 per cent. This compared with the Straits Times Index's 4.7 per cent return, and S&P 500's -2.4 per cent return. Bombay's Sensex, meanwhile, rewarded investors with 7.5 per cent a year in the last five years.

However, for those with longer track records, when measured over a longer period - say 10 years - their returns improved significantly. India's SREI Infrastructure Finance which provides financing for infrastructure equipment, and for infrastructure projects and renewable energy products is the star. It has returned a whopping 38.4 per cent a year in the last 10 years. IVRCL Infrastructure Projects, an Indian construction company that builds bridges and power plant pipelines, and does site levelling, canal modernisation and road works, came in second with a return of 32.7 per cent a year.

The average return is 16.5 per cent. This compared with STI's 6.3 per cent, the S&P 500's -0.35 per cent and Sensex's 16.7 per cent.

As can be seen, all the outstanding performers above are companies directly involved in the infrastructure development or which finances infrastructure projects. Meanwhile, the professionally managed infrastructure funds have all chalked up poor performance.

One takeaway perhaps is that locally run infrastructure firms are more in tune with the local conditions and therefore may be run more successfully.

Investments projects by foreign funds meanwhile may encounter political pressures, environmental considerations, and local issues, which may result in disruptions or delays. Or the funds may be overly eager to get the projects and overpay.

Also, the infrastructure theme does blow hot and cold over time. In mid-2000, it was hot, which resulted in the poor performance in the following five years. Back in early 2000, everybody was too obsessed with the dotcom world to pay much attention to the bricks and mortar of roads and bridges. That explained the outsize returns in the following 10 years.

As for now, the fever for infrastructure has not quite yet picked up. So this may present a good window of opportunity to get in.

Portugal stokes fears, sending S$ soaring

Tue, 11 Jan 2011 01:56:08 +0100

Business Times - 11 Jan 2011

European debts back in focus; good odds for more MAS tightening this year

By EMILYN YAP

(SINGAPORE) The Singapore dollar hit a year-high against the euro yesterday as markets grew increasingly anxious over the ability of some European nations to raise funds this week.

Worries about upcoming bond sales by Portugal, Spain and Italy sank the euro to S$1.68 at 8pm yesterday. It has fallen significantly from its high of S$2.02 at the start of last year.

The euro also weakened against several other major currencies yesterday. One euro bought US$1.29, touching a low in close to four months.

The debt problem in Europe has drawn fresh attention with speculation that France and Germany are pressuring Portugal to seek help from a European bailout fund to prevent the debt crisis from spreading to Spain. Yields on 10-year government debt of Portugal and Spain surged soon after.

'People are fairly fearful that there is going to be a second round of sovereign debt crisis,' said OCBC economist Selena Ling, who expects the euro to drop further to S$1.55 by the end of the year.

London-based data provider CMA last week listed Greece, Ireland, Portugal and Spain as some of the 10 countries with the highest sovereign debt credit risks in the world. Ireland, ranked third in Q4 2010, climbed from sixth spot in Q3. Spain was a new entry in the top-10 list.

To put the direness of the eurozone debt situation in context, all four countries named above were deemed to have a higher credit risk than war-torn Iraq, which was in 10th place.

Results of bond auctions by Portugal, Spain and Italy will provide a crucial gauge of investor confidence in the region. Portugal aims to raise up to 1.25 billion euros (S$2 billion) by selling three-year and 10-year bonds tomorrow; Spain and Italy will sell bonds on Thursday.

'Failure to attract enough investor interest would signal that Portugal has effectively lost access to capital markets, forcing the country to seek aid,' said UOB economists in a report yesterday.

For the Sing dollar, its new high against the euro provided yet another show of its strength. Last week, less than S$2 bought a British pound.

Some market watchers believe there is a high chance that the Monetary Authority of Singapore (MAS) will let the Sing dollar appreciate further this year to combat inflation, driven by rising wages, food prices, energy costs and other factors.

Citi economist Kit Wei Zheng expects inflation this year to cross the upper end of MAS's full-year forecast of 2-3 per cent.

'The likelihood of further MAS tightening in 2011 remains high,' he said. 'Inflation pressures will likely be the single biggest concern for policymakers in 2011, not least because the looming general election heightens policymakers' sensitivity to rising costs of living.'

Further tightening by MAS is warranted, said Barclays economist Leong Wai Ho, who expects as little as S$1.26 to be worth the same as a US dollar by the end of the year. The dollar went for S$1.30 yesterday.

A stronger Sing dollar will come as bad news to companies with businesses overseas, but good news to travel-happy Singaporeans.

CTC Travels senior vice-president for marketing Alicia Seah said that the number of visitors to Europe, including the UK, already rose 30 per cent last year partly because of the strong Sing dollar. Another 20-30 per cent increase in traveller volume this year is possible, she said.

Singapore rebounds in spectacular fashion

Thu, 06 Jan 2011 07:06:19 +0100

Economists predict this is Singapore's year. -The Brunei Times/ANN

Thu, Sep 16, 2010
The Brunei Times/ANN

This is Singapore's year, predicts economists as Singapore "upgraded its 2010 forecast to a blistering 13 to 15 per cent expansion", which is a steep rise from an earlier estimate of 7-9 per cent growth, AFP reported in mid-July.

Despite worries over the US economy and the European debt crisis, the island state is set to overtake China's growth of 10 per cent.

Having the world's fastest growing economy in 2010 will be hard to sustain, said Singapore's Prime Minister, adding that growth in the second half of this year will be slower than the first half.

When the growth is so fast, the economy gets tight and labour shortage begins, said Lee Hsien Loong at a press conference held in conjunction with the fifth Asean Journalist Visit Programme hosted by Singapore in August.

"But, whatever it is, if the opportunity is there, we are happy to take it. I think this is from the rebound last year when we had a very bad year. Also, during last year, we set ourselves in a position so we will be ready to grow when the wind came and sun shines again," he said.

However, Lee said he did not think the current situation will continue indefinitely.

The PM said that next year, will not be like the current year.

"It's a good progress and we have to make the most of it. For the longer term, a sustainable growth rate will be three to five per cent and that's what we are aiming for. It will require a lot of work because you cannot grow by having to rely on more foreign workers or labourers. You must grow by qualitative improvement of work force, of our investments, on our companies, of the way they are organised and that's a lot of work," said Lee.

When asked about the global power shift to Asia, Lee said that he would not put it so strongly.

"Asia is developing and growing, but Asia is not the centre of the world, nor is it the only source of economic vibrancy, technology or military. It is growing and therefore its weight in the world will increase and the centre of gravity for the world's economy will shift towards Asia," he said.

But, Lee warned that Asia is not going to be the only region which has an advanced or developing community, nor will it be a super power in the world for a long time to come.

"We have an important role to aid economies like Europe which has a big economy although they are not growing as vibrantly. But Europe's economy is bigger than America's and they are a developed economy although with variations in different places. I think the model is not that we have arrived, but that we are part of an inter-connected world and have to work together in order to prosper," said Lee.

As for China, whose economy has slowed down slightly but remains a strong military and political influence, the Prime Minister did not express any worry as he explained that Southeast Asia's interest with China are about improving prosperity and achieving stability, as well as being friendly with its neighbours.

"At the same time Southeast Asia has got significant interests and links with other partners, particularly India, which also is growing well and the United States, which has historically played a strategic role in ensuring the security of the region," he said.

"We also have links with Japan, even though their economy has slowed and has been facing difficulty for a number of years, it still has considerable economic power, strength and technology with the capability to invest and influence the economy of Asia for the better," he added.

Singapore's Foreign Affairs Minister, George Yeo, earlier last week also touched on the region's economy. "The river will never stop flowing and the philosophy is night follows day and day follows night. We take a cautious approach towards good and bad tidings. The economy is strong now, so be happy while it stays up," he said.

High-end condos can't keep pace with mass-market hikes

Thu, 06 Jan 2011 07:05:05 +0100

Prices in Non-Central region top pre-crisis high, Central region 3.7% below peak.

Fri, Dec 31, 2010
The Business Times

By Kalpana Rashiwala

SINGAPORE - The latest flash estimates for November from the National University of Singapore (NUS) show that prices of non-landed private homes in Singapore's Central region (districts 1-4 and 9-11) have appreciated 7.9 per cent in the first 11 months of this year from end-2009.

Over the same period, the Singapore Residential Price Index (SRPI) sub-index for the Non-Central region rose at a faster clip of 12.9 per cent. As a result, the overall SRPI increased 10.7 per cent year to date.

SRPI, compiled by the NUS Institute of Real Estate Studies, covers only completed properties. The Central region sub-index for November is still 3.7 per cent shy of its pre-Global Financial Crisis peak in November 2007. On the other hand, the sub-index for the Non-Central region in November has already surpassed its January 2008 pre-crisis peak by 15 per cent. As a result, the overall November 2010 index is about 7.6 per cent above its November 2007 pre-crisis high.

The latest indices from NUS tally with what property agents have been reporting from the ground - that mass-market condo prices have scaled fresh records this year while prices of prime and luxury condos have yet to touch their 2007 records.

DTZ executive director (consulting) Ong Choon Fah said that entry-level suburban condos have enjoyed strong demand this year, riding on upgrader demand amid a buoyant HDB resale market.

'In addition, the trend of developing a higher proportion of smaller units in private residential projects has spread from the prime districts (where rental demand is stronger) to the suburbs - and this has also helped to boost sales of mass-market projects by making the lump sum investment more palatable to buyers.'

Mrs Ong also pointed out that these days, developers of suburban projects are offering some of the innovative features which in the past were available only in prime district projects - such as sky gardens.

Knight Frank chairman Tan Tiong Cheng said that the increase in high-end condo prices had not been so sparkling this year due to more subdued foreign buying compared with the previous bull run in 2007.

'The foreign buying back then was from a wider spectrum. These days, buyers from the West, Middle East and Russia seem to be out of the equation. Also Western bankers were a significant buying contingent in 2007 but post-crisis, banks are less generous with remuneration.'

Month on month, the overall SRPI dipped 0.2 per cent in November. The sub-index for the Non-Central region too eased 0.3 per cent but the Central region sub-index was flat.

Since the last round of property cooling measures on Aug 30, the Central region sub-index has eased 0.4 per cent while the non-Central index has strengthened 0.9 per cent. As a result, the overall index in November was 0.4 per cent ahead of the August level.

Despite being proven wrong with their earlier forecast of stronger price appreciation for high-end condos compared to mass-market ones for 2010, analysts continue to predict the same trend in 2011, pointing to the already substantial price hikes posted in the mass-market segment. And if the government succeeds in taming HDB resale prices, that will also have an impact on upgrader demand for entry-level condos. Also, any interest rate hike, as well as further property cooling measures, is likely to make a bigger dent on demand in the mass-market segment than on upmarket condos.

This article was first published in The Business Times.

S'pore economy blazes to the top

Thu, 15 Jul 2010 09:41:15 +0100

Surprisingly good performance of the biomedical manufacturing cluster gave economy a boost.

Thu, Jul 15, 2010
my paper

SINGAPORE expects its economy to soar as much as 15 per cent this year after record expansion in the second quarter, making it possibly the world's fastest-growing economy this year.

The Ministry of Trade and Industry (MTI) yesterday sharply revised the country's annual economic- growth forecast to a sizzling 13-15 per cent.

This new estimate - adjusted upwards for the third time this year - is double MTI's previous prediction of 7-9 per cent year-on-year expansion, and would mean that the country would beat even regional powerhouses China and India in growth.

China is expected to post 10 per cent growth this year, while it is predicted that India will grow by 8.5 per cent.

Advance estimates for the second quarter have also indicated that Singapore's economy continued to expand strongly. Real gross domestic product (GDP) is expected to grow by a new all-time high of 19.3 per cent, compared to the same period last year.

In its report, the MTI pointed to two specific reasons for the updated growth forecast - better-than-predicted economic performance in the first quarter of the year, and stronger-than-expected growth in the second quarter. MTI said that, according to the latest official data, Singapore's economy in the first quarter actually expanded by 16.9 per cent on a year-on-year basis - a record-high rate.

This was 1.4 percentage point higher than the growth rate initially estimated in May.

The boost was specifically due to the surprisingly grand performance of the biomedical manufacturing cluster.

Once again, the manufacturing sector looks set to be the backbone for the high growth, with an estimated outstanding 45.5 per cent year-on-year surge.

Meanwhile, a rise in public sector construction activities has given the sector a boost, with an estimated 13.5 per cent year-on-year growth in the second quarter.

The services-producing industries are expected to have expanded by 11.4 per cent year-on-year, compared to an increase of 11.2 per cent in the first quarter.

Still, MTI cautioned that it anticipated a slowdown in Singapore's growth momentum during the rest of the year.

It highlighted that the pace of the global economy recovery has ebbed.

"The sluggish final demand in the United States and European Union has moderated industrial activities and lowered expectations for manufacturing output in the Asian economies," it said.

However, Singapore's non-oil domestic exports (NODX) for last month surprised positively.

The figures, which were released yesterday as well, showed that NODX accelerated to 29 per cent year-on-year.

Nonetheless, this momentum is predicted to slow.

Said UOB economist Chow Penn Nee: "We are still forecasting weakness in exports, which will likely show up in the later months."

MTI added: "There will also be industry-specific factors, such as plant-maintenance shutdowns in the biomedical-manufacturing cluster, which will drag down growth.

"Thus, while year-on-year growth rates in the second half will be healthy, sequential growth from current levels of economic activity will be low."

One notable lack of mention in the latest official GDP report, however, was that of inflation.

This is despite MTI's earlier warning in May on continual concerns over excessive asset price inflation in emerging Asia.

Economists hence speculate that the inflation concerns may have been temporarily put on the backburner.

"The generally benign inflationary environment has to be perceived in the context of the two-speed global economy today, split between the fiscally challenged developed economies and the resilient emerging economies," said OCBC's head of Treasury Research and Strategy, Ms Selena Ling.

"Crude-oil prices remain contained below US$80 (S$111) per barrel today on lingering double- dip growth fears, and there is little impetus for commodity prices to re-test the pre-crisis highs that we saw earlier."

On the monetary-policy front, economists said they are maintaining their view that the Monetary Authority of Singapore will not change its current policy stance in the upcoming October review.

The Singapore dollar is expected to strengthen further.

"This is especially in the light of the domestic growth momentum, although there will still be volatility interspersed as the euro- zone sovereign issues remain unresolved," said Ms Chow.

"We see the USD/SGD going to around 1.36 by year-end, as the economic fundamentals in this region give rise to further inflows here."

As for economists' growth forecasts, Citibank has upgraded its estimate to 15.5 per cent, OCBC to 14 per cent, and UOB to 13.8 per cent.

reicow@sph.com.sg

Najib tries to balance growth with politics

Mon, 14 Jun 2010 10:14:40 +0100

Business Times - 11 Jun 2010

M'sia spells out 5-year plan but takes care not to offend Malays with policy reversal

By S JAYASANKARAN
IN KUALA LUMPUR

MALAYSIA plans to cut its budget deficit to less than half the current levels over the next five years while spending handsomely and growing the incomes of its citizens. But its leaders will not pull the plug on the New Economic Policy (NEP) and some perks traditionally enjoyed by bumiputras.

The country's next five-year plan envisages a RM230 billion (S$97.8 billion) spending package to attain a 15 per cent rise in per capita incomes to US$8,600 and annual growth of 6 per cent.

The budget deficit will be cut to 2.9 per cent of gross domestic product (GDP) from 7.6 per cent last year.

Prime Minister Najib Razak announced these ambitious targets during the tabling of the Tenth Malaysia Plan (2011-2015) in Parliament yesterday.

'I would hesitate to comment right away,' said Manokaran Mottain, an economist with the Arab Malaysian Bank, 'but 6 per cent over the near term is gettable.'

Even so, Malaysia is expected to average only 4.2 per cent growth during the Ninth Malaysia Plan (2006-2010), a period when growth was supposed to be 7 per cent on average. And the 2009 recession - minus 1.7 per cent - wasn't the only reason for the low figure because the figure hardly topped 6 per cent in any one year during that period.

Getting the plan to succeed will be crucial to Mr Najib's objective of pulling Malaysia out of a middle-income trap that has steadily become apparent over the last five years. It will also be key to Malaysia's plans to become a developed country by 2020 - a stated goal of Kuala Lumpur since 1990.

For all that, however, Mr Najib's speech was as much political as it was economic. He carefully avoided mentioning how he intended to cut subsidies except to say that it would be 'gradual'.

Nor did he pull the plug on the NEP, reiterating that the 30 per cent bumiputra equity target - a cornerstone goal since 1971 and a key to the Malay agenda - 'remains'.

The NEP began in 1971 to help the country's majority bumiputra population - indigenes and mainly Malays - to achieve economic parity with their richer non-Malay countrymen. However, criticism that it distorted the economy, eroded competitiveness and raised costs resulted in a proposal in Mr Najib's New Economic Model - unveiled in March - that it be diluted.

It caused much unhappiness among the more right-wing elements in Mr Najib's ruling United Malays National Organisation which insisted that the Tenth Plan honour its obligations under the NEP. Clearly, the premier listened.

Mr Najib will have his work cut out for him as some of the targets he set were ambitious. He estimated that Malaysia would need an average of RM115 billion worth of private investment a year to achieve its target of growing private investment by 12.8 per cent annually.

That will be easier said than done. Private investment grew only by 2 per cent on average during the Ninth Plan. It is expected to grow 10 per cent this year but grew 30 per cent before the Asian financial crisis.

Mr Najib seems to be pinning his hopes on both private investment and domestic demand to maintain growth. The latter factor is actually more promising: It accounted for 5.4 per cent of GDP in the first quarter of 2010.

Ultimately, buoyant growth will be crucial to seeing through Mr Najib's plans. He aims to cut the deficit down to 5.3 per cent of GDP this year and bring it all the way down to 2.8 per cent of GDP by 2015.

By doing so, it will reduce government debt as a proportion of GDP to 49.9 per cent in 2015 compared to 52.9 per cent this year.

Mr Najib said that the government would cut its subsidy bill to RM15.7 billion in 2015 from the current RM18.3 billion, but he didn't say how.

The plan also said that Malaysia's tax base would be widened but, again, there were few details. It's likely to be through goods and services tax although the government baulked at introducing it last year after it was greeted with strong public opposition.

MAHB Q1 profit down despite revenue jump

Tue, 18 May 2010 05:03:17 +0100

Published May 18, 2010 BT Singapore

Adoption of new accounting standard, last year's high base cited as reasons

By PAULINE NG
IN KUALA LUMPUR

MALAYSIA Airports Holdings Bhd (MAHB) lifted revenue 12 per cent to RM436.4 million (S$189.3 million) for the first quarter ended March as passenger movements rose about a fifth from a year back.

International passenger numbers improved 31.4 per cent and domestic numbers almost 13 per cent as recession fears eased.

Profit was lower at RM72.6 million versus RM92 million previously. This was due to the adoption of the FRS139 financial reporting standard and high base in Q1 2009 when profit was swelled by a RM52 million government lease reversal and a RM45.8 million backdated user-fee payment.

Stripping out the effect of these items, the airport operator said that it performed better operationally, with pre-tax profit 12 per cent higher year on year at RM140 million.

Basic earnings per share dipped to 6.6 sen from 8.37 sen previously, according to unaudited results.

MAHB expects its business segment - especially retail - to continue to contribute positively after it expanded by a quarter in Q1.

In the aeronautical segment, the passenger service charge contributed 26 per cent more at RM123.7 million, up from RM98.5 million.

However, total revenue per passenger movement was lower, as was aeronautical revenue per passenger movement.

The former slipped 7 per cent to RM31.83 from RM34.26, while the latter fell 13.4 per cent to RM15.25 from RM17.61.

Aircraft movements improved 4 per cent at Kuala Lumpur International Airport's main terminal and 17 per cent at the low-cost carrier terminal (LCCT). Passenger movements rose 22.26 per cent at the main terminal to 4.4 million and 25.5 per cent at the LCCT to 3.5 million. Other airports saw a 17 per cent rise to 5.5 million passengers.

MAHB has unveiled plans to grow its non-aeronautical business, with the emphasis on commercial revenue from its new LCCT. Scheduled to be completed in the first quarter of 2012, it is seen as a 'huge opportunity'.

The completion of upgrading works at the existing LCCT and a retail optimisation plan at the KLIA satellite building are expected to provide a fillip in the meantime.

On the volcanic ash problem that has disrupted air travel in Europe, MAHB said that Malaysian airports have little exposure and the impact on traffic growth is expected to be minimal.

Saving capitalism from itself

Sun, 02 May 2010 15:26:55 +0100

Published May 1, 2010

Economist Roger Bootle dishes on the fundamental flaws in economic and market theory. By Anna Teo

WHEN his book The Death of Inflation first hit the streets in 1996, Roger Bootle strode proudly into his local bookstore, expecting to see it prominently displayed. To his dismay, it was nowhere around, though he later found it - in the fiction section, under 'murder mystery'. No such confusion greeted the British economist's next two books, with just a touch of intrigue for The Trouble with Markets, his latest, in the form of the midwife who helped in the delivery of his son, Alexander, 10 years ago.

Mr Bootle, 58, who was then group chief economist at HSBC in London, had gone from a meeting about bonus awards straight to the hospital where his wife was about to give birth, his mind still swirling with the extraordinary sums bandied about.

As he tells BT during a recent visit: 'When you work in the financial markets, I think you get a very warped idea of human nature, and this is epitomised, really, by the whole business of bonuses. Having worked in the markets all this time, for the better part of 30 years, I was very familiar with the bonus culture. I've also seen the effect of bonuses all around me in the bank, and I came to regard bonuses as a sort of drug, really. And the effect wears off pretty quickly.

'In my experience, the beneficial effects of a big bonus lasted no more than a day and, in some cases, not even more than an hour, because when you find out what the Bloggins on the special derivatives desk are earning, you find some reason why your number isn't big enough, and if you set yourself these monetary objectives, there is literally no limit; there is always another nought you can add. It is a form of disease, I think, the obsession with these figures. And looking around at all these people, mostly doing pretty boring jobs - I mean, if you are, as I like to put it, trading options on their volatility in a dingbat, you've got to be a very strange individual to think that this is actually of essential value for the future of humanity. And most of the people who are doing these things do it only, only, only for the money.

'So, anyway, my son was due to be born, and I was in a meeting where all these issues as to what certain people should be earning were being discussed, and these were fabulous sums that were just beyond the imaginings of most ordinary people.

'It's not that liquidity is bad, but it's not the only thing, and we've got a system dominated by financial markets which, in my view, overstresses liquidity. And liquidity's sort of a form of magic, really, that's produced by the financial system. Because if you think about the real world, things aren't liquid. But the system sort of manufactures a way in which, for individuals, that can be done. And in the process, the minds, the focus of business management, is excessively on short-term issues.

'So then I jumped on the train, went to the hospital where my wife was due to give birth later that day, and suddenly, amidst all these, I came across this nice midwife who was extremely helpful and dedicated. And the contrast struck me very strongly because what she was doing was extremely important in some human sense, and there was a woman who was completely in her hands, namely my wife giving birth to a child, and of course there was a child. What could be more joyful than that?

'And of course she was earning a mere fraction of what people in the City were earning. I got interested in this business of motivation, because I thought to myself, if you're a midwife, obviously it'd be quite nice if someone came along and gave you a big bonus, but what actually motivated you, where did you get your satisfaction from? At the end of the day when you went home, did you think to yourself, you know, I've earned another couple of thousands of pounds today. I thought the answer was no, and it really alerted me to questions of motivation, purpose and reward, and I came to think then that there's something profoundly sick about the financial markets.'

Individuals vs markets

Those thoughts, as he wrote, planted a seed that led to the birth of The Trouble with Markets - 'albeit rather more than nine months later'. Published amid a slew of works on the financial crisis, the book (with the sub-head Saving Capitalism From Itself) is not just a provocative critique of the free-market mindset, it questions the basic premises of economic theory, particularly the notion that society is best served when totally self-interested individuals each make rational decisions, and also suggests what might, or should, emerge in the global financial order of the far future - all issues that he digs into with gusto during the interview. He's in town to give a talk on the market outlook, and also to mark the opening of the Singapore office of Capital Economics, the consultancy he set up in 1999 upon leaving HSBC because of his firm conviction - 'one of my big beefs'- that economic research must be independant.

While some bankers profess to be doing God's work, Mr Bootle declares that much of the activity in financial markets 'achieve no good for society at all and, in some cases, may actually harm it'. Obviously, financial activity has its place and worth, but 'if you look, for instance, at the sheer volume of trading that's done in shares by institutional shareholders, who are supposedly acting in the interests of their members, you have to ask yourself whether that actually achieves a great deal', he says.

And one fundamental assumption of economics and economic accounting is that 'if transactions take place between freely consenting adults in a market environment where people aren't being compelled to do something, then the activity must be generating human welfare', he points out. 'And I've come to believe, more and more, that as far as the financial sector is concerned, that's simply not true; a lot of what's going on is just moving stuff from one place to another, one pocket to another.'

But society is obsessed by the business of measurability: 'If it's measured and it's called GDP, then we tend to assume it will be good, and so society is devoted to increasing this thing called GDP but that may not actually have that much connection with fundamental human wellbeing.'

Likewise, basic financial market theory assumes or asserts that if a new market springs up and trading takes place, something 'good' is taking place as the activity is meeting some market need.

'But what I think is becoming increasingly obvious is sometimes new markets emerge, so there is something that's traded, and because it's traded, then other people have to monitor what's happening to the price. Because the price is changing, then other people - mainly executives and companies - get concerned about what's happening to the market price, which makes the need for activity.

'Now if the market wasn't there, probably you would be no worse off than you'd be better off, and there wouldn't be all this activity and the resources would have gone to other things. So the market itself creates a demand which wouldn't have been there otherwise, and the process distracts people from thinking long-term.'

Mr Bootle, who doesn't seem to pause for breath between sentences at times, adds: 'I guess the abiding contrast between Western capitalism and Asian capitalism is time horizons. In the West, typically, business time horizons are very short.' And all this, he says, is intimately connected with the idea of liquidity - one concept he hits out at in particular in his book, noting that institutional shareholders suffer from what John Keynes called 'liquidity fetishism', or an over-emphasis on the ability to access invested capital at short notice.

'It's not that liquidity is bad - it boasts its advantages - but it's not the only thing, and we've got a system dominated by financial markets which, in my view, overstresses liquidity,' he says.

'And liquidity's sort of a form of magic, really, that's produced by the financial system. Because if you think about the real world, things aren't liquid. As I said in the book, resources that have been invested in factories and bridges can't be turned into haircuts and holidays. Can't be done! But the system sort of manufactures a way in which, for individuals, that can be done.

'And in the process, the minds, the focus of business management, is, I think, excessively on short-term issues. They're being measured against short-term performance, they have their own shares, they think short-term in relation to business payoffs.'

In the real world, liquidity is all about flexibility and options, and there are circumstances when it has its value, he says.

'But there are times when you can go too far in keeping your options open and you end up losing things. You might, to put it in personal terms, want to keep your options open with regard to what you're doing on Saturday night, right up until 7 o'clock on Saturday evening, and then it's too late - you end up going nowhere, doing nothing, staying in on your own.'

The contrast to liquidity, he says, is commitment. 'And most things in the real world need commitment. So there's a balance between keeping your options open and making a commitment, and I think in Western society, driven by their own development of financial markets, there's too much emphasis on liquidity and not enough on commitment.'

Asked why the idea that markets are efficient all the time has thrived, Mr Bootle pauses before saying: 'I think that some economists have a great attraction for simple, beautiful ideas. They're not alone. And I've come to think, by the way, that the way you should consider economic theory is as a form of religion.

'There are different denominations and each has its strong adherents. They have profound theological convictions and because they are theological convictions, they are very difficult to argue with and shape by empirical evidence. But the efficient markets hypothesis or theorem is very seductive because it brings a purity to the way that you look on things, and of course it has a profound result - namely, that you leave markets alone, which, for people brought up in that whole tradition, is very important.

'You see, if you don't believe that, what do you believe instead? Now, there's been another religion, which seems to me to again correspond to economists' desires to have intellectually neat solutions - and that religion is called communism. They're both forms of fundamentalism - market fundamentalism and, if you like, community fundamentalism. I mean, that thought - that the individual is actually bad - that's the theology, and of course it collapsed.

'Now, if you don't adopt either of these two extremes and, dare I say, you take an Asian view, or the Singapore view, that markets are good, in all sorts of ways, but actually they're not the be-all-and-end-all, and you need some sort of organising authority ... the problem with that is it's quite difficult to theorise about actually, because, what should you intervene in, who should do it, when, how, to what degree?

'All these economic policy (issues) become a matter of judgement and circumstance, and it becomes not science anymore but an applied practice. It's a bit like medicine - you look at the patient, listen to him, see what's required. It's more like medicine than it's like nuclear physics, shall we say.'

Group psychology

Plus, one must also see the historical context, he says. 'You know, the end of the Cold War, the disasters of the 1970s, leading to that period of American market triumphalism of the 1990s - it's understandable in those circumstances that people should believe all this. Because the danger is, you don't want to move then to the opposite. I don't think 'markets are always stupid', or whatever; I don't believe that either. As many people have said, markets usually do get things pretty much right; it's just that you can't depend upon them always getting things right.'

That said, economics is simply 'a very, very funny subject, very odd indeed', he declares. 'It's psychologically extremely weak. You've got, after all, a whole academic subject called psychology which is all about human motivations, how humans behave in groups, a huge subject and with practical issues on how to deal with people. Then you've got another academic subject called economics that basically says that human beings are quite simple - they're interested (only) in themselves and they just want more and more of this thing called enjoyment or well-being or money or utility, whatever, and they're like a machine, and they just do and do, and of course they're rational in the process of all these.

'It's very odd, really. It's almost like the insides of that other academic subject are just worthless, just thrown away! And now, economists are realising what behavioural finance is all about - the psychological dimension to human beings. Related to that is also the issue of groups. Economists and economics don't really have an understanding about groups - the only concession economists make to groups is they recognise they exist but assume they behave just like individuals and firms. In the process, of course, they're throwing away another academic discipline called sociology!'

The mission of saving capitalism from itself is, in many ways, work in progress, he says. 'But there are several elements where I can point to clear things that got to be done, and within Western societies, I think there has to be a fundamental change with regard to the profit motive and motivation in general.

'That's to say, it has to be broadly recognised that although business is ultimately in the business of maximising profits, the way you do that is by doing something that's socially useful, doing it well and taking pride in what you're doing. And from that, profit flows. Now, for most good businesses, that's actually true. And that naturally brings long-term thinking as a consequence. Once you accept that general principle, then that has consequences for the way company boards are structured, what their legal responsibilities are, and I think we've got to do something about the structure and behaviour of institutional shareholders.'

He adds: 'I think we need a system which quite consciously has a sense of public purpose. I've talked quite a lot to older bankers - you want to talk to them, get their wisdom before they die - and what these people tell you is they had a sense of purpose in the organisation, the sense that the organisations were doing something for the benefit of society.

'If you talk to older merchant bankers in London, for instance, people who worked in London before the Americanisation of the city, again, they had more of a sense of purpose - that the justification for what they were doing was something outside the world of finance. The financial activity was there in order to achieve some purpose outside the financial world. It was that that gave justification to what they did, it was from that they derived their pride and self-respect, whereas we've moved into a system where people derived pride and self-respect from their bonuses. That's not to say that people who do well shouldn't be well rewarded, but it's about values.'

anna@sph.com.sg

ROGER BOOTLE
Economist and author, 57
Managing director,
Capital Economics

1952 Born in England

1975 Graduated from Oxford University

Current positions
Economic Adviser to Deloitte UK
Specialist Adviser to the UK House of Commons Treasury Committee
Honorary Fellow of the Institute of Actuaries

Previous appointments
Lecturer in Economics at St Anne's College, Oxford University
Group Chief Economist, HSBC
Member of the Chancellor's Panel of Independent Economic Forecasters ("The Wise Men")

Author of
The Trouble with Markets (2009)
Money for Nothing (2003)
The Death of Inflation (1996)
Index-Linked Gilts (1985)