MH 370 and MH 17 taught us never to take things for granted


July 20, 2014

MH 370 and MH 17 taught us never to take things for granted

by Neil Khor (07-19-14)@http://www.malaysiakini.com

MASPride of Malaysia dented by Tragedy

COMMENT: The loss of 298 lives as MH 17 was shot down over Ukraine has come too soon on the heels of the loss of MH 370. An airline that had a near perfect record for the past 30 years since its inception is now suddenly the most blighted in the aviation industry.

Crying for Loss of Loved OnesThe manner in which we recover, and there is no doubt that we will, shall determine our collective destiny as a nation. Like many Malaysians, I was in shock and disbelief at midnight on Thursday as news of the loss of MH17 filtered through social media. Since the loss of MH 370, I have made it a point to fly MAS whenever possible come what may.

I have grown up with MAS, as a toddler traveling from Penang to Singapore in the 1970s right through my student days at UM, when the airline was kind enough to extend to students with AYTB (Asian Youth Travel Bureau) cards tremendous discounts allowing us to go home on the cheap.

In those days, it was a grueling nine-hour bus ride down Malaysia’s trunk roads from Kuala Lumpur to Penang. A MAS flight not only provided comfort and speed, it assured that students got home safely.

Like the airline, those of us born in the 1970s, have come of age to find a world changed beyond all recognition. It is not that we cannot adapt to change but the changes have come so rapidly and so brutally that nobody has had the time to make sense of it all. We may have been brought up to believe in God and Country (Rukunegara) but globalisation have altered our allegiances.

Similarly, the aviation industry, too. has not fared too well in this globalised world. The pacific period, from the 1960s to 2000, is over.

In those days, emerging nations like Malaysia personified themselves through national airlines. We broke away from Singapore to form MAS, which not only flew the flag but also assumed the burden of unprofitable but necessary domestic routes. The growing up years was characterised by good service, which by the 1980s, was amongst the best in the world.

Flying on MAS was a privileged and entire families would go to the airport to receive or send relatives off. It was definitely not the era of “everybody can fly” but rather “now you have arrived”. Cheap fossil fuels and better-designed plans made flying cheaper and more accessible. By the time the budget airlines appeared in the sky, the entire attitude towards aviation had changed as well.

MH17 Crash Site2 National carriers had to compete like any other in the industry resulting in spectacular bankruptcies, including that of Japan Airlines! With this fundamental change, attitudes towards flying also transformed. Malaysian society changed the most in the last 15 years. The Internet continues to be a great leveler. No single Prime Minister, no matter how powerful, can decide with impunity or set the tone of discussion on national issues like Dr Mahathir Mohamad.In short, MAS like many other “national” organisations has continued to come up short, never meeting the rising tide of expectations. Since September 11, 2002 when two planes slammed into New York’s Twin Towers, air travel has never been the same. I remember traveling from Minneapolis to Louisville in Kentucky with a guide dog as a fellow passenger.

There was hardly any security with checkpoints that were no more stringent than at a bus stop.  That was in 1999 but today the US is imposing full body scans, check-ups on laptops and security scanning of mobile phones. Soon security procedures will take as long as inter-continental flights in all major airports.

From the sad and painful experience of losing MH370, we have learned that the aviation industry itself has not kept up with technological change, with planes entering blind spots and much dependent on 1940s radar technology. There is also very little improvement on how to track planes to ensure better monitoring. Till this day, black box technology still relies on batteries that only last a maximum of 30 days.Now four months onwards, we have lost MH17, which was shot down by a surface-to-air missile over a route that was deemed officially safe by the IATA. Yes, some airlines have avoided this route over the Ukraine but many airlines flying from Europe to Asia were using this prescribed route.

Political maturity in short supply

How high an airplane fly is also dictated by the air traffic controller of the country whose territory one is flying across presumably they know what other flying objects will be flying over their airspace at the same time. As someone who flies on MAS, Emirates and SIA regularly from Malaysia to Europe, this route above the Ukraine is very familiar.

I have also flown frequently to neighbouring Georgia, crossing the Caspian and Black seas. There was really no way to have anticipated that a civilian plane would be shot down. If the European authorities had red-flagged the area as two other Ukrainian military aircraft had been shot down, they should have banned all commercial flights over Ukraine airspace.

Having lost two aircraft involving the loss of more than 500 souls is a very bitter pill for Malaysians to accept. For the longest time we have developed and made giant progressive strides forward. Yes, political maturity is still an on-going battle.

Religious and racial extremism is on the rise but most of us have enough to eat, some even able to share with the less fortunate by supporting soup kitchens.

Never take things for grantedMalaysia is still a great country, blessed with natural resources and a cultural diversity that is the envy ofMH17 Crash site 2 the world. But the loss of our two MAS flights has taught us never to take things for granted. Whilst we can plan and make the best preparations, we cannot foresee how these plans will unfold.

In the case of MAS, some hard decisions may have to be taken to make it viable again. There is no loss of face if we have to start again from scratch. To all those who have lost friends, families and loved ones in MH370 and MH17, my most heartfelt and sincere condolences.

Malaysians the world over are united in grief and sorrow. But I am sure we will emerge stronger and better, at least strive to be better people to ensure a stronger nation going forward.

NEIL KHOR completed his PhD at Cambridge University and now writes occasionally on matters that he thinks require better historical treatment. He is quietly optimistic about Malaysia’s future.
 

 

 

Can Malaysia Airlines survive after MH17?


July 19, 2014

COMMENT: Of course, our national airline can. With a bailout by Khazanah and thedinmerican Malaysian Government. There is too much pride and dignity for Malaysians not to have a national carrier to fly the Jalur Gemilang (our Flag). It will need large amounts of money to save it.

And we have little choice as far as I can see it. But this funding should only be made at the cost of a total revamp of the airline including a corporate culture change, new competent and accountable Board and management, the dismantling of the MAS Employees Union that has been an albatross to MAS management, and renegotiation of all contracts with UMNO crony companies and other parties.

The question is whether the Najib administration has the stomach to proceed with such drastic measures. Tan Sri Azman Mokhtar, CEO of Khazanah Nasional, who I know well, can be very tough this time around.–Din Merican

Can Malaysia Airlines survive after MH17?

by in Beijing @theguardian.com(07-18-14)

http://www.theguardian.com/world/2014/jul/18/malaysia-airlines-survive-mh17-disaster-mh370-disappearance

MH17 Crash site 2

 Malaysia Airlines was still reeling from the impact of flight MH370’s March disappearance when news of MH17’s crash in Ukraine broke on Thursday. Now many question whether the carrier can survive a second disaster in such a short time.

“It is a tragedy with no comparison. In the history of aviation, no airline has gone through two tragedies of this magnitude in a span of four months,” said Mohsin Aziz, an aviation analyst at Maybank. “Even before the second incident, I have been very sceptical over the company’s ability to survive beyond the second half of 2015. They are making huge losses … This is probably going to hasten that.  It doesn’t matter who is at fault. The perception to the customer is ‘I don’t want to fly Malaysia Airlines any more’, and to battle that is not easy.”

Shares in the carrier fell sharply on Friday, down 11% by the midday break in trading in Kuala Lumpur, as already negative investor sentiment deepened. In all, it has dropped by 35% this year.

Questions were also raised about the airline’s choice of route, after it emerged that some other carriers had avoided the area for months – though many companies were flying in the same area, rerouting only after Thursday’s disaster.

The carrier, and the Malaysian government, came under heavy criticism for its handling of MH370’s disappearance – particularly in China, which lost more than 150 nationals in that disaster. While any airline and any nation would have struggled with the extraordinary twists and turns in a mystery that remains unresolved, relatives complained of confused and contradictory information and insensitivity on the part of the government and company.

At Kuala Lumpur International airport on Thursday night, angry relatives demanded to see the passenger manifest, but could not find a Malaysia Airlines official, Reuters reported.

“We have been waiting for four hours. We found out the news from international media. Facebook is more efficient than MAS. It’s so funny, they are a laughing stock,” one young man told reporters angrily.

While the two Malaysia Airlines flight disasters are clearly very different, the uncanny coincidences are likely to resonate.

“This comes very close [in time]; it was the same airline; the same aeroplane type. It happened outside the more common way of crashing for big airlines; most accidents happen close to landing or just after takeoff. They both have an element of mystery and perhaps unlawful and external interference,” noted Sidney Dekker, an expert on aviation safety at Griffith University.

“If the public is willing to keep them separate and say they really have little to do with each other, and any common link is not Malaysia Airlines, you can probably survive with the brand relatively intact,” he said.

But that is a big if. Five years after Trans World Airlines flight 800 crashed into the ocean near New York in 1996 with the loss of 230 lives, the carrier filed for bankruptcy and was acquired by American Airlines. For an already troubled company, the disaster was the straw that broke the camel’s back, said Dekker. For others, a disaster may well mean “rebranding, rebadging, a new air operator’s certificate”.

The Malaysian Transport Minister, Liow Tiong Lai, declined to comment on the airline’s future at a press conference about the disaster on Friday, describing that as a separate issue.

Prior to MH370’s disappearance, Malaysia Airlines was making losses but seemed to be improving, said Mohsin; it was reducing operating costs and selling more tickets. But while its flights were increasingly full, it had not managed to bump up its fares.

Now the airline’s previously strong safety record has effectively been erased for passengers by two such losses. According to the International Air Transport Association, there were an average of 517 deaths annually in commercial aviation incidents between 2009 and 2013. Now a single airline appears to have surpassed that death toll in a single year.

“People are only willing to fly with Malaysia Airlines if the ticket price is really, really cheap,” said Mohsin. The airline has also faced additional costs, such as supporting the families of victims and increasing its spending on marketing.

Reuters reported earlier this month that Malaysian state investor Khazanah Nasional Bhd planned to take MAS private as the first step towards restructuring the company, citing two unnamed sources.

“For it to completely disappear would be too much of a loss of pride for Malaysia,” said the Maybank analyst. “It is more realistic or probable for the government to intervene directly or via Khazanah.”

One key question is whether the airline should have chosen another course for the Boeing-777, given that two aircraft had been downed in the region that week.

Malaysia Airlines said early on Friday: “The usual flight route was earlier declared safe by the International Civil Aviation Organisation. International Air Transport Association has stated that the airspace the aircraft was traversing was not subject to restrictions.”

Cathay Pacific, Australia’s Qantas and Korea’s two major carriers are among airlines that stopped flying over Ukrainian airspace months ago due to concerns.

“Although the detour adds to flight time and cost, we have been making the detour for safety, and until the Ukrainian situation is over we will continue to take the detour route for our cargo flight out of Brussels,” an Asiana Airlines Inc spokeswoman told Reuters.

But many major players were still flying through the area, though Malaysia Airlines, Singapore Airlines and others, such as China Eastern, have stopped using that airspace in the wake of the disaster.

“‘What’s wrong with Malaysia Airlines?’ is completely the wrong question to ask and will lead us down a rabbit hole of entirely useless thinking,” said aviation expert Dekker. “It is pure chance. I flew through Ukrainian airspace on Monday with my daughter. It could have been us.”

While pilots ultimately have the discretion to refuse to fly along a particular course if they have concerns, they do not make the routes. Those are based on a multitude of factors, including airspace charges and wind speeds that affect journey times, but also, of course, safety.

While the US Federal Aviation Authority had cautioned American carriers not to fly over the Crimean peninsula, there was no such warning for the area where MH17 came down. Ukrainian officials had closed airspace to 32,000ft (9,750 metres), but MH17 was flying 1,000ft above that.

“What I have heard raised in various guises is the broader question: can we come to more efficient international agreements about where to avoid flying and where to fly?” said Dekker.

Distasteful and Crass Language part of UMNO Culture (?)


July 15,2014

Distasteful and Crass Language part of UMNO Culture (?)

COMMENTARY by The Malaysian Insider

Why should anyone be surprised anymore by the distasteful and crass speech of UMNO politicians or those associated with the ruling party? If it is not a sexist remark, it is usually something so inappropriate on race, religion and even world history (Long Live Hitler!). No UMNO assembly is complete without a catalogue of tasteless jokes on sex.

This is the language UMNO politicians speak everyday, to their political comrades, business cronies, wives, mistresses and even children – individuals or groups of people so beholden to them that no one dare chastise them for the rubbish that escapes their lips.

Dato-Mohd-HafarizamAn UMNO Infected Mind

So on they go, infecting public discourse with their uncouth language and infected minds.The latest to join the long and not-so-illustrious list of UMNO duffers is party lawyer Datuk Mohd Hafarizam Harun (pic above).

He was quoted by the New Straits Times as saying that a woman may not be a suitable candidate as the Menteri Besar of Selangor because while having her menses, she may not be able to accompany the Sultan of Selangor to religious functions.

“Hence, the article under the Selangor constitution, for example, may not hinder a woman from becoming a Mentri Besar, but by convention, there could be problems because of the said circumstances,” the lawyer was quoted as saying by the English-language daily.

It is hardly surprising that this individual, well-known as a lawyer only in UMNO circles but hardly a name to remember in the Malaysian Bar, has been slammed on social media. His statement is that of a misogynist.

As he himself pointed out, there is nothing in the state constitution that is remotely sexist or that would disqualify a woman from being the chief executive officer but he had to scrape the bottom of the barrel and come up with some rubbish.

The lawyer’s remarks were aimed at Datin Seri Dr Wan Azizah Wan Ismail, who is the chief candidate to replace Tan Sri Abdul Khalid Ibrahim as Selangor MB from the time PKR decided on their Kajang Move.

Hafarizam now joins a list of UMNO politicians who have emerged as strong supporters of Khalid. Makeswan azizah 1 you wonder why? In the UMNO lawyer’s case, it should be noted that he is a shareholder in the company awarded the controversial Kidex highway. He and the family of former Chief Justice Tun Zaki Azmi were given this project by the Najib administration ostensibly because they have some talent as builders, talent as yet unseen by the public.

Khalid, is the only Pakatan Rakyat (PR) elected representative who supports Kidex. He has yet to persuade his coalition members on the soundness of the highway contract, whose objection to the project lies on its disagreement with the concept of toll concessions. Not helping matters has been the opaque manner in which the contract was awarded.

Khalid IbCapable Man but a Bad Politician

So with the knowledge that a change of Menteri Besar could delay the Kidex project indefinitely, it is understandable for Hafarizam to try his darndest to scuttle the chances of Khalid being forced out his office. After all, billions of ringgit is at stake. And Prime Minister Datuk Seri Najib Razak, UMNO’s Datuk Syed Ali Habshee and Hafarizam have all in the past days tried to promote Khalid as the MB.

You know the apocalypse is around the corner when UMNO leaders start trumpeting the qualities of an MB belonging to their political rivals.You also know that UMNO is nervous about change, that it has to trot out its lawyer to deliver a tasteless statement about a classy and capable woman.

 

 

New Dean for The George Washington School of Business


July 15, 2013

New Dean for The George Washington School of Business, The George Washington University, w.e.f  August 1, 2014

June 01, 2014
Dean Linda LivingstoneDean Dr. Linda Livingstone

The university announced in May that Linda A. Livingstone has been selected as the next dean of the GW School of Business. For the past 12 years Dr. Livingstone has served as dean of the Graziadio School of Business and Management at Pepperdine University, and is the incoming chair of the board of directors of the Association to Advance Collegiate Schools of Business, the leading international accreditation body for business schools.

She begins her service at GW on August 1, 2014.

“Linda Livingstone has been a highly successful dean, respected not only within her current institution but also by her peers in business schools around the world, who have elected her to lead their accrediting body,” GW President Steven Knapp says. “Her proven skill in managing a complex organization and recognized leadership in business education will make her a tremendous asset to our School of Business and our university as a whole.”

At Pepperdine, in California, Dr. Livingstone led a business school with approximately 1,600 students on six campuses and more than 35,000 alumni worldwide. She oversaw a $200 million expansion of the business school’s regional campuses, increased the school’s international partnerships to 40 business schools around the world, and led the school to membership in the Globally Responsible Leadership Initiative and as a signatory to the Principles for Responsible Management Education.

Under her leadership, the Graziadio School established the Education to Business Live Case Program, which was recognized by U.S. News & World Report as “one of the top 10 college courses in the country that will pay off at work.” She also launched the Dean’s Executive Leadership Series, a high-profile lecture program that brings to campus leading business innovators; introduced a student business plan competition; and added new degree programs in management and leadership, applied finance, and global business.

“I look forward, with enthusiasm, to the opportunity to serve as dean of the School of Business at the George Washington University,” she says. “Working with the faculty and staff to build on a strong foundation of programs and research to continue to enhance the quality and reputation of the school will be a privilege.”

Dr. Livingstone earned a Bachelor of Science in economics and management, a Master of Business Administration, and a PhD in management, with an emphasis in organizational behavior, all from Oklahoma State University.

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The Story Behind CIMB’s Mega Islamic Bank Deal


July 13, 2014

The Story Behind CIMB’s Mega Islamic Bank Deal

by Yvonne Tan@www.thestar.com.my (07-12-14)

cimbmontagenazirzetishahril1207With Islamic finance gaining global acceptance, it’s only natural to set up the biggest Islamic bank in Malaysia.

INDIRECTLY, the seeds of the proposed merger between CIMB Group Holdings Bhd, RHB Capital Bhd (RHB Cap) and Malaysia Building Society Bhd (MBSB) were sown not in Kuala Lumpur but in the world’s financial centre – London.

When CIMB got the mandate to be one of the book runners for the first Islamic finance sukuk raised by a sovereign in the Western world, it was a sure sign that Islamic finance was gaining wider acceptance. Upon returning to Kuala Lumpur, CIMB’s Chairman Datuk Seri Nazir Razak spoke to a group of journalists during Invest Malaysia about how Islamic finance was at the tipping point for growth, considering that the Western world was embracing it.

 Malaysia has the cutting edge in Islamic finance but there have been no takers for a proposal by Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz to establish a mega Islamic bank with a capitalisation of US$1bil (RM3.2bil).

It’s easy to fathom why.

No bank would want to fork out US$1bil to establish a mega-Islamic bank as the returns are not there.But the landscape is fast changing and Nazir seized the moment.

On Thursday, he proposed the setting up of a mega-Islamic bank as part of a merger with RHB Cap and MBSB that would possibly create the largest bank in the country and one of the largest in the region. “The merger fulfils Bank Negara’s objective of the creation of a mega Islamic bank,” says an investment banker.

RHB Cap’s decision last month to call off its Indonesian PT Bank Mestika Dharma proposed buy, which it had been pursuing since 2009, as well as Nazir taking over as chairman effective September 1, were the telling signs of a much bigger plan that was brewing.

The three financial institutions announced this week that they had received the green light from Bank Negara to start exclusive talks for the proposed merger, which includes the formation of a mega-Islamic bank.

In this respect, MBSB, an Islamic financial institution, is slated to fill that role in the merger.Nazir says Islamic finance is at the tipping point for growth, considering that the Western world is embracing it. The parties have 90 days to decide on the pricing, structure and other relevant terms and conditions. Bank Negara’s approval is valid for six months from Thursday.

Amidst this, questions are being raised as to why there is an exclusivity clause in the 90-day agreement, which essentially means that there will not be any competing bids for RHB Cap during this period, suggesting that shareholders may be missing out on more competitive bids.

“There are two reasons for this. One is that RHB Cap is not being sold; it is a merger candidate, and secondly, it is to minimise disruptions,” says an official close to the Employees Provident Fund (EPF).

CIMB Deal

The fact that Bank Negara gave the three institutions approval in less than 24 hours after they wrote to it is a sure sign that it is not against the merger.If the mega-bank materialises, then it will not be difficult to see why it will easily give the country’s current largest bank – Malayan Banking Bhd (Maybank) – a run for its money.

Based on latest figures, the merged entity’s asset size is expected to be more than RM600bil, market value close to RM90bil and combined profits exceeding RM7bil.It will surpass Maybank, which had an asset size of RM578bil as of March 31.

CIMB has a strong commercial presence in Indonesia which is a major contributor to the group’s earnings. Operationally, RHB Cap and CIMB’s resources combined will give a boost to the merged entity’s regional presence.

For one, RHB Cap, which has a full banking licence in Singapore enabling it to venture into diverse businesses – consumer banking, business banking, corporate banking, treasury and investment banking – intends to grow this aggressively over the next few years. This will complement CIMB’s Singapore operations.

CIMB, meanwhile, has a strong commercial presence in Indonesia – something which RHB Cap is lacking – via its PT Bank CIMB Niaga Tbk, which is a major contributor to the group’s overall earnings.

Valuations

There is no doubt that the merged entity will be huge.Its market capitalisation will be more thanOctopus RM90bil, assuming the deal is concluded at about 1.70 to 1.75 times book value.

According to a source, the deal is likely to be done at 1.75 times book value based on CIMB’s current valuation of almost 1.70 times book and unlikely to be transacted at anything less.Recall, in 2012, RHB Cap had paid 1.77 times book value for OSK Investment Bank, lower than the 1.9 times book value Maybank had paid for Kim Eng Securities.

In this current merger deal, the EPF is said to be the main driver because it has significant stakes in all three entities.It is the major shareholder in RHB Cap with a 40.76% stake. The other major shareholders of RHB Cap are Aabar Investments PJSC with a 21.43% stake and OSK Holdings Bhd with a 9.91% stake.

The EPF has a 64.73% stake in MBSB and is the second-largest shareholder in CIMB with 14.46% after Khazanah Nasional Bhd.

It has been learned that the exercise would possibly involve a share swap between CIMB and RHB Cap at a book value of 1.75 times and an outright buyout of MBSB. The eventual merger will see the EPF emerge as the largest shareholder in the mega-bank, with a stake estimated to be more than 25%.

RHB Cap had been a takeover target as far back as three years ago, with both CIMB and Maybank being its suitors. However, the deal fell through because Aabar wanted a higher valuation. Nevertheless, RHB Cap has always been viewed as a takeover target even with the entry of OSK two years ago. This is because the block in RHB Cap that belongs to Aabar from Abu Dhabi has always been viewed as being up for sale and could be used as a launch pad to take over the bank.

Even in May, Taiwanese financial group Mega Financial Holding Co Ltd was reportedly in talks to buy into RHB Cap, leading to speculation that the interested seller was Aabar.

Aabar acquired its stake in RHB Cap from its sister company, Abu Dhabi Commercial Bank PJSC, for RM5.9bil or RM10.80 apiece in 2011, valuing RHB Cap at a hefty 2.25 times its book value then. The transaction between the two related companies was done to set the price for RHB Cap, should there be a takeover.

However, RHB Cap’s share price has never reached that price over the past few years.The counter was traded at RM8.72 on Wednesday before suspension.

Assuming the deal is concluded at 1.70 times, RHB Cap’s share will be worth RM11.40 per share, a 5.6 % premium to Aabar’s cost of RM10.80. But would Aabar be agreeable, or would it seek higher valuations?

Past Deals

RHB Cap, currently the fourth-largest banking group, is no stranger to banking deals.The latest is its merger with OSK Investment Bank that was completed about two years ago. However, its merger and acquisiton history goes back much further than this.

The RHB Banking group assumed its current name only in 1997.It came about via a merger between Kwong Yik Bank Bhd and DCB Bank Bhd (formerly known as Development and Commercial Bank Bhd) in 1997. That year saw entrepreneur Tan Sri Abdul Rashid Hussain emerge as the group’s executive chairman. The bank’s current initials are based on his name.

Kwong Yik Bank was founded by the Chinese community led by Wong Loke Yew, or better known as Loke Yew, in July 1913, while DCB Bank was established in 1966 by the-then Finance Minister Tun Sir Henry H S Lee.

In the aftermath of the 1997/98 Asian financial crisis, the troubled Sime Bank Bhd (formerly known as UMBC Bank) was merged into the RHB Banking group in 1999.Four years later, when Kuching-based Bank Utama Bhd, the banking arm of Cahya Mata Sarawak Bhd, became the latest bank to be merged into the RHB Banking group, Rashid made his exit from the group.

CIMB is also the result of a merger between CIMB, Bumiputra-Commerce Bank and Southern Bank Bhd which was completed in 2006. Both the RHB and CIMB groups have gone through more than their fair share of mergers. But this merger, if it happens, will probably be the last stop for RHB Cap, a bank founded by Rashid Hussain.

Between the two, CIMB Group has a bigger franchise in the region, a larger pool of tested managers and is likely to take the lead.This is something the EPF is not likely to object because it will enable the pension fund to go back to its role as a passive investor in financial institutions.

ASEAN political-security community challenges


July 13, 2014

ASEAN political-security community challenges

Munir Majidby Tan Sri Dr. Munir Majid@www.thestar.com.my (07-12-14)

 THE People’s ASEAN would not be a reality if the politics is not right – both the domestic political systems in which the people live and the wider regional order that underpins the peace, stability and prosperity of their lives.

Economic Growth and Political Rights

As ASEAN member states are increasingly discovering, the previous contention that economic growth andASEAN_logo_1 benefit will satisfy citizens without need to be over-excited about political rights, is wearing thin. That model does not work any more, if it ever did. Certainly, if nothing else, the ICT revolution and social media have provided a shared marketplace of experiences in political societies across the globe. It is no longer possible to pull the wool over people’s eyes. So state authorities have to get smart to it, whatever political system they profess.

In this connection, the notion of an ASEAN political-security community (APSC) is apposite. The APSC blueprint actually is hard to be faulted. Whoever writes these things, and those who adopt them, must really know what’s happening around them, even if they do not quite come along in action against their profession in words.

Read this: The APSC… ”will ensure that the peoples and member states of ASEAN live in peace with one another and with the world at large in a just, democratic and harmonious environment.” Some more: “The ASEAN states will offer democracy, rule of law and good governance, and will ensure respect for the promotion and protection of human rights and fundamental freedom”.

All good intention. However, even if this is all aspiration, it stretches credulity when it is observed how some states in ASEAN have stagnated as communist regimes, others have regressed into persecution and murder of minorities and workers, and yet another has introduced draconian religious laws.

APSC and Human Rights

Little wonder then that there is so much cynicism about, for example, the ASEAN Inter-Governmental Commission on Human Rights (AICHR) set up in 2009 under the auspices of the APSC “to promote and protect human rights.” Where in ASEAN, through the AICHR, are human rights being protected on their violation?

It is in their promotion that refuge is taken. Even so, the promotion is gentle. Go to the AICHR web-site and you will see many pictures celebrating numerous workshops to promote human rights. More ASEAN meetings while religious minorities are being persecuted and put to the sword in enough ASEAN member states.

These are all difficult situations to handle no doubt. ASEAN Foreign Ministers try to discuss the Rohingyas issue but Myanmar would not have it, and will only do so on a bilateral basis with states facing refugee problems as a consequence of its human rights violations. And it comes to pass.

Well, the UN Universal Declaration of Human Rights was adopted in 1948, and where has the world been? Rwanda-Burundi, Bosnia, Syria, Palestine… the list is endless and the suffering never-ending. So why pick on ASEAN? But, shall we say, ASEAN is talking about community-building and higher standards of commitments to good governance? Therefore, there is every reason to hold ASEAN to a better protection on human rights and treatment of citizens.

The laudable objectives of the APSC, and in the setting up of the AICHR, should not be left on the shelf as we approach the end of 2014. The blueprint itself provides for biennial review. This review process should be reported and be held in a more open fashion, with the participation of representatives of civil society, who must however appreciate the issues of state sovereignty and ASEAN cohesion.

The hard question is not how to put aspiration down in words but how to implement it in difficult situations and circumstances. That review process should come up with creative ideas of making the words turn into at least some action, at least in respect of protection of human rights, and not just kick the matter to long grass by having more workshops and meetings to study it.

ASEAN, China and South China Sea

South China Sea

When it comes to international relations and the wider regional order, the gap between verbal exhortation and actual action is just as wide. For the longest time, ASEAN behaved as if there was no serious situation arising from the South China Sea disputes. And when ASEAN got real about it, emboldened China would suggest, it was only after US intercession. This was not good for relations with China or for the resolution of the dispute.

While no doubt there is a grave threat of the outbreak of conflict, especially from various stand-offs between China and Vietnam, China with the Philippines, the damage already done is to China-ASEAN relations. These have been extremely beneficial economically for the region. Their further development could be retarded by this “spoiler”, not to mention the threat it poses to existing economic links.

Of course, if there was actual conflict, it is something else again. We will be in new territory of uncertainty, suspicion and fear which, as we know, are bad bedfellows for investment and economic activity.

Against these near existential threats, ASEAN has been reticent and not united in addressing the South China Sea disputes. Whereas, in the APSC blueprint, it is clearly stated ASEAN will seek full implementation of the Declaration of Conduct (DOC) of States of 2002 and the establishment of a binding code of conduct under the declaration in the South China Sea.

Has there been any urgency to achieve all this before matters came to a head, before America got more involved again in regional affairs and, yes, before China got more assertive with its claims? It could be charged that ASEAN’s desultory approach has carried a cost to the stability of the regional order.

ASEAN is, of course, not one unit, it is only inter-governmental, but it makes claims for itself and gives false hope of its effectiveness by proclaiming all sorts of things in so many words, including this blessed thing about ASEAN centrality in the regional architecture. These last six exact words are to be found word for word in the blueprint and, indeed, have been repeated countless times at diplomatic convocations where those who know very well this is not the case repeat it for ASEAN’s happiness.

The APSC blueprint has been too extravagant, especially measured against ASEAN inaction. Not just on the South China Sea, but also in other pronounced areas such as conflict resolution mechanisms and the pacific settlement of disputes in the broader context.

ASEAN-a great economic prospect but...

ASEAN is a great prospect, especially its economies. But the market does not buy on prospective earnings indefinitely. If that was the case, it would be buying Latin America which, in terms of total economic size (against ASEAN’s combined much touted 7th largest in the world) is three times the Indian or Russian economy, and almost as large as China or Japan.

The point is ASEAN does have great prospect, but it will not come of itself. There has to be a more realistic mission statement, better structure and management – and better managers. Then the prospective earnings ratio might even rise.

So there has to be a reset and a rethink about how ASEAN can improve performance against all its limitations. But not just among government leaders and officials. And not to be assigned to some council of elders who would come back some years later with a document even older. It has to be fresh and dynamic involving people with ideas from all levels of society.

Yes, ultimately the political leaders of the region would decide – based however on a good and realistic plan for the future of the People’s ASEAN.

 Tan Sri Dr Munir Majid, chairman of Bank Muamalat and visiting senior fellow at LSE Ideas (Centre for International Affairs, Diplomacy and Strategy), is also chairman of CIMB ASEAN Research Institute. The views expressed are entirely the writer’s own.

 

“Friendly” Advice to Najib on Leadership


July 12, 2014

“Friendly” Advice to Najib on Leadership

by Nigel Aw@www.malaysiakini.com (07-11-14)

Taking a shot at Prime Minister Najib Abdul Razak’s comparison between Brazil’s devastating defeat in the World Cup semifinals and the need for strong leadership, Tun Dr Mahathir Mohamad offered some pointers.The former premier said a strong leader would reject the Trans-Pacific Partnership Agreement (TPPA).

“I think it is Najib himself who said we need strong leaders. What is the qualification of a strong leader? It is the ability and willingness to stand up against foreign pressure and protect the interest of this country. If you don’t do that then you cannot be considered a strong leader,” he told a press conference in Shah Alam.

Tun Dr. MahathirMahathir was speaking to reporters after launching a book entitled ‘TPPA: Malaysia is not for sale’ by the Malay Economic Action Council (Mtem). Asked if he thought Najib was a strong leader, Mahathir, who celebrated his 89th birthday yesterday, replied: “I don’t know.” “Because it all depends on the test or challenges he faces and how he handles it,” he said.

Asked if Najib’s stance last Friday that Putrajaya intends to go ahead with the TPPA but on Malaysia’s terms was assurance enough, Mahathir insisted the agreement should be scrapped altogether.

“In the first place, why is it (TPPA) done in secret if it is not to cheat people? I think the mark of a goodThe Silent One leader is the ability to reject what is not good for this country,” he said.

Earlier in his speech, Mahathir repeatedly made references to Najib’s statement on the need of strong leaders in making his case against the TPPA. He added that the country had been able to develop well even without free trade agreements in the past.

Mahathir was also asked about Pakatan Rakyat’s leadership in Selangor but he appeared to have mis-heard the question and instead commented on BN’s leadership in the state.

“I’m sorry to say, we should have done better in the last election but we did worse in 2008.There is a lack of leadership there or the system we used was all wrong and we should not continue to do wrong things,” he said.

Abide by the Constitution

On another matter, Mahathir said the country should abide by the constitution which provides for a constitutional monarchy and parliamentary democracy.

“If you break that, people will break other parts of the constitution then there will be chaos,” he added. He was asked to respond to readers’ comments in his latest blog posting which raised concerns about the Johor royal family’s involvement in the Iskandar region.

In the blog posting, Mahathir had weighed into the rapid development in southern Johor but expressed concern that it might become a region of foreigners like Singapore.

Asked what he thought about the comments to his posting on the royalty’s involvement in business, he replied: “If people feel we are a free country, we are very liberal, people can speak their mind, no more ISA so people can say what they like.

The Regional Octopus to merge with rivals to create mega Islamic bank


July 11, 2014

The Regional Octopus to merge with rivals to create mega Islamic bank

by Reuters-www.themalaysianinsider.com

OctopusCIMB Group Holdings Bhd is seeking to acquire two lenders to create the country’s biggest bank in a move that is likely to push larger rival Maybank and others in the region to bulk up too.

CIMB, the nation’s second-largest bank, is likely to offer an all-stock deal to buy RHB Capital Bhd and Malaysia Building Society Bhd although details have yet to be hammered out, a source familiar with the matter said

The three banks confirmed today they had obtained approval from Bank Negara Malaysia to begin merger talks.

The “three parties have entered into a 90-day exclusivity agreement to negotiate and finalise pricing, structure, and other relevant terms and conditions for a proposed merger of the three entities and the creation of a mega Islamic bank,” the three banks said in a statement.

The statement came after shares in all three banks were suspended on Thursday pending an announcement. Shares will resume trade on Friday. The proposal comes ahead of a planned partial integration of Southeast Asian economies that is due to begin by the end of next year, with countries in the 10-nation alliance keen to build national champions to bolster their banking systems.

CIMB has been the most acquisitive of Malaysia’s banks and a deal would be the last major move by CEO Datuk Seri Nazir Razak, brother to the Prime Minister, before he relinquishes the helm in September after 15 years.

A successful deal would see CIMB’s assets climb to RM614 billion, 6% bigger than Malayan Banking Bhd (Maybank), and could help with pricing power in an intensely competitive domestic market.

“We believe that we can structure a value creating combination between our three groups and that is worth taking the next steps,” Nazir told employees according to an internal memo.

“I would urge everyone to look forward to the possibility of a significant scale change for us overall, but specially in Malaysia and Singapore, with the caveat that we have only just begun negotiations.”

But some analysts warned CIMB may pay too much and that there could be too much overlap between CIMB and RHB – the nation’s No. 4 bank, as they have similar portfolio mixes and strengths. RHB and Malaysia Building Society have a combined market capitalisation of around US$9 billion (RM28.5 billion), almost half of CIMB’s US$19 billion market value.

“We opine that such a merger could be value destructive to the merged entity given the degree of operational and revenue duplications between CIMB and RHB Capital,” brokerage UOB KayHian said in a client note.

Representatives for CIMB did not respond to requests for comment while RHB said there was no further update at this stage. Representatives for Malaysia Building Society were not immediately available for comment.

A deal would make CIMB the fourth-largest bank in the Association of Southeast Asian Nations (ASEAN) after Singapore’s three biggest lenders. By comparison, the largest, DBS Group Holdings, has assets of US$337 billion.

CIMB's Nazir3Malaysia’s Top Banker in ASEAN

Nazir is the architect of the bank’s expansion over the past decade that saw it buy domestic rival Southern Bank, the Asia equities and investment banking business of RBS as well as lenders in Indonesia and Thailand.

A new deal is bound to heap pressure on Maybank to acquire a rival too, analysts said, with some speculating that Public Bank Bhd could fall within its sights.

“Maybank might want to take over Public Bank, which compared to RHB Capital, is much better in terms of asset quality, and is well-managed and well-capitalised. This makes Public Bank a vulnerable target,” said Ei Leen Tan, an analyst with Affin Investment.

A key player in any acquisition by CIMB of its two smaller rivals will be the Malaysian state pension fund, Octo2the Employees Provident Fund (EPF). It owns 41.3% of RHB and 65% of Malaysia Building Society. The fund also owns a 14.5% stake in CIMB, according to Thomson Reuters data.

Another will be Abu Dhabi-based Aabar Investment which bought a 25% stake in RHB for RM10.80 per share in 2011 – regarded as a particularly high valuation.

Both CIMB and Maybank walked away from a deal to buy RHB in 2011 after failing to secure support from Aabar. The state fund currently owns nearly 22% of RHB. The EPF said in an email it would not be able to comment on the matter as it is very preliminary in nature and specific details are still pending.

A spokesman for Aabar said it doesn’t comment on any of its investments.While plans for ASEAN integration are widely expected to suffer delays, bankers and analysts expect more deals done as the banks from Singapore, Malaysia and Indonesia prepare for a more competitive landscape.”This will give impetus to other countries in the region to think of something similar,” said a M&A banker who advises on bank deals. – Reuters, July 10, 2014.

IMD (Switzerland) World Competitiveness Survey: Malaysia moves up to 12th position


July 8, 2014

IMD (Switzerland) World Competitiveness Survey: Malaysia moves up to 12th position

img_enewletter-issue7-01Malaysia  ranked 12 in List of 60 economies

Malaysia moved up the world competitiveness ranking again, securing a spot in the enviable top dozen and improving the country’s attractiveness to investors.

The International Institute for Management Development (IMD), a Switzerland-based top-ranked business school, lifted Malaysia to 12th position from 15th last year in a list of 60 economies.

“The improved rankings will renew interest and attract investments to the country,” IMD World Competitiveness Center director Professor Arturo Bris told the New Straits Times. The country also continues to be ahead of the United Kingdom (16th), Australia (@17th), Finland (18th), New Zealand (20th), Japan (21st) and South Korea (26th).

Malaysia, Bris said, improved its openness to foreign markets and attracted capital and investment at increasing rates.

In a separate statement, International Trade and Industry Minister Datuk Seri Mustapa Mohamed saidMiti's Mustapa 12th position was Malaysia’s best performance in the past four years and reflected the progress of the Government Transformation Programme and the Economic Transformation Programme.

“Malaysia expects a much better performance in the next three to five years as more of its initiatives begin to bear fruit,” he said.

The Survey

The World Competitiveness Yearbook 2014 is the 26th publication since 1989.The findings are compiled each year by IMD’s World Competitiveness Center in a survey of 60 economies called the World Competitiveness Yearbook.

The yearbook analyses and ranks the ability of each nation to create and maintain an environment that sustains the competitiveness of enterprises.The survey rates at the availability of fixed telephone lines, broadband, railroad network, part-time employment market, illiteracy, medical assistance and other criteria.

The report is based on statistical data and perception data obtained through a survey that reviews 338 criteria in four categories:

  1. Economic Performance covers the domestic economy, international trade, international investment, employment and price.
  2. Government Efficiency looks into public finance, fiscal policy, institutional framework, business legislation and societal framework.
  3. Business efficiency looks at productivity and efficiency, the labour market, finance, management practices, attitudes and values.
  4. Infrastructure rates technological, scientific, health, environmental and educational infrastructure.

In the category of countries with gross domestic per capita of less than US$20,000 (RM64,300), Malaysia remained at the top among 29 economies. Among countries with populations above 20 million, Malaysia climbed up to 4th position from 5th last year.

In ASEAN, Malaysia remains number two after Singapore and ranked third in the Asia Pacific region compared with fourth last year, while Thailand, Indonesia and the Philippines are fourth, fifth and seventh respectively.

Malaysia has consistently performed well in other international surveys, including being ranked 6th by the World Bank in Ease of Doing Business 2014, 24th in the World Economic Forum’s Global Competitiveness Report 2013-2014 and 32nd in the Global Innovation Index 2013 by INSEAD Business School.

Monetary Policy and Financial Stability by Fed Chair Janet Yellen


July 7, 2014

Chair Janet L. Yellen

At the 2014 Michel Camdessus Central Banking Lecture, International Monetary Fund, Washington, D.C.

July 2, 2014

Monetary Policy and Financial Stability

Janet_Yellen_FEDIt is an honor to deliver the inaugural Michel Camdessus Central Banking Lecture. Michel Camdessus served with distinction as governor of the Banque de France and was one of the longest-serving managing directors of the International Monetary Fund (IMF).

In these roles, he was well aware of the challenges central banks face in their pursuit of price stability and full employment, and of the interconnections between macroeconomic stability and financial stability. Those interconnections were apparent in the Latin American debt crisis, the Mexican peso crisis, and the East Asian financial crisis, to which the IMF responded under Camdessus’s leadership. These episodes took place in emerging market economies, but since then, the global financial crisis and, more recently, the euro crisis have reminded us that no economy is immune from financial instability and the adverse effects on employment, economic activity, and price stability that financial crises cause.

The recent crises have appropriately increased the focus on financial stability at central banks around the world. At the Federal Reserve, we have devoted substantially increased resources to monitoring financial stability and have refocused our regulatory and supervisory efforts to limit the buildup of systemic risk. There have also been calls, from some quarters, for a fundamental reconsideration of the goals and strategy of monetary policy. Today I will focus on a key question spurred by this debate: How should monetary and other policymakers balance macroprudential approaches and monetary policy in the pursuit of financial stability?

In my remarks, I will argue that monetary policy faces significant limitations as a tool to promote financial stability: Its effects on financial vulnerabilities, such as excessive leverage and maturity transformation, are not well understood and are less direct than a regulatory or supervisory approach; in addition, efforts to promote financial stability through adjustments in interest rates would increase the volatility of inflation and employment. As a result, I believe a macroprudential approach to supervision and regulation needs to play the primary role. Such an approach should focus on “through the cycle” standards that increase the resilience of the financial system to adverse shocks and on efforts to ensure that the regulatory umbrella will cover previously uncovered systemically important institutions and activities. These efforts should be complemented by the use of countercyclical macroprudential tools, a few of which I will describe. But experience with such tools remains limited, and we have much to learn to use these measures effectively.

I am also mindful of the potential for low interest rates to heighten the incentives of financial market participants to reach for yield and take on risk, and of the limits of macroprudential measures to address these and other financial stability concerns. Accordingly, there may be times when an adjustment in monetary policy may be appropriate to ameliorate emerging risks to financial stability. Because of this possibility, and because transparency enhances the effectiveness of monetary policy, it is crucial that policymakers communicate their views clearly on the risks to financial stability and how such risks influence the appropriate monetary policy stance. I will conclude by briefly laying out how financial stability concerns affect my current assessment of the appropriate stance of monetary policy.

Balancing Financial Stability with Price Stability: Lessons from the Recent Past

When considering the connections between financial stability, price stability, and full employment, the discussion often focuses on the potential for conflicts among these objectives. Such situations are important, since it is only when conflicts arise that policymakers need to weigh the tradeoffs among multiple objectives. But it is important to note that, in many ways, the pursuit of financial stability is complementary to the goals of price stability and full employment. A smoothly operating financial system promotes the efficient allocation of saving and investment, facilitating economic growth and employment. A strong labor market contributes to healthy household and business balance sheets, thereby contributing to financial stability. And price stability contributes not only to the efficient allocation of resources in the real economy, but also to reduced uncertainty and efficient pricing in financial markets, which in turn supports financial stability.

Despite these complementarities, monetary policy has powerful effects on risk taking. Indeed, the accommodative policy stance of recent years has supported the recovery, in part, by providing increased incentives for households and businesses to take on the risk of potentially productive investments. But such risk-taking can go too far, thereby contributing to fragility in the financial system.1 This possibility does not obviate the need for monetary policy to focus primarily on price stability and full employment–the costs to society in terms of deviations from price stability and full employment that would arise would likely be significant. I will highlight these potential costs and the clear need for a macroprudential policy approach by looking back at the vulnerabilities in the U.S. economy before the crisis. I will also discuss how these vulnerabilities might have been affected had the Federal Reserve tightened monetary policy in the mid-2000s to promote financial stability.

Looking Back at the Mid-2000s

Although it was not recognized at the time, risks to financial stability within the United States escalated to a dangerous level in the mid-2000s. During that period, policymakers–myself included–were aware that homes seemed overvalued by a number of sensible metrics and that home prices might decline, although there was disagreement about how likely such a decline was and how large it might be. What was not appreciated was how serious the fallout from such a decline would be for the financial sector and the macroeconomy. Policymakers failed to anticipate that the reversal of the house price bubble would trigger the most significant financial crisis in the United States since the Great Depression because that reversal interacted with critical vulnerabilities in the financial system and in government regulation.

In the private sector, key vulnerabilities included high levels of leverage, excessive dependence on unstable short-term funding, weak underwriting of loans, deficiencies in risk measurement and risk management, and the use of exotic financial instruments that redistributed risk in nontransparent ways.

In the public sector, vulnerabilities included gaps in the regulatory structure that allowed some systemically important financial institutions (SIFIs) and markets to escape comprehensive supervision, failures of supervisors to effectively use their existing powers, and insufficient attention to threats to the stability of the system as a whole.

It is not uncommon to hear it suggested that the crisis could have been prevented or significantly mitigated by substantially tighter monetary policy in the mid-2000s. At the very least, however, such an approach would have been insufficient to address the full range of critical vulnerabilities I have just described. A tighter monetary policy would not have closed the gaps in the regulatory structure that allowed some SIFIs and markets to escape comprehensive supervision; a tighter monetary policy would not have shifted supervisory attention to a macroprudential perspective; and a tighter monetary policy would not have increased the transparency of exotic financial instruments or ameliorated deficiencies in risk measurement and risk management within the private sector.

Some advocates of the view that a substantially tighter monetary policy may have helped prevent the crisis might acknowledge these points, but they might also argue that a tighter monetary policy could have limited the rise in house prices, the use of leverage within the private sector, and the excessive reliance on short-term funding, and that each of these channels would have contained–or perhaps even prevented–the worst effects of the crisis.

A review of the empirical evidence suggests that the level of interest rates does influence house prices, leverage, and maturity transformation, but it is also clear that a tighter monetary policy would have been a very blunt tool: Substantially mitigating the emerging financial vulnerabilities through higher interest rates would have had sizable adverse effects in terms of higher unemployment. In particular, a range of studies conclude that tighter monetary policy during the mid-2000s might have contributed to a slower rate of house price appreciation. But the magnitude of this effect would likely have been modest relative to the substantial momentum in these prices over the period; hence, a very significant tightening, with large increases in unemployment, would have been necessary to halt the housing bubble.2 Such a slowing in the housing market might have constrained the rise in household leverage, as mortgage debt growth would have been slower. But the job losses and higher interest payments associated with higher interest rates would have directly weakened households’ ability to repay previous debts, suggesting that a sizable tightening may have mitigated vulnerabilities in household balance sheets only modestly.3

Similar mixed results would have been likely with regard to the effects of tighter monetary policy on leverage and reliance on short-term financing within the financial sector. In particular, the evidence that low interest rates contribute to increased leverage and reliance on short-term funding points toward some ability of higher interest rates to lessen these vulnerabilities, but that evidence is typically consistent with a sizable range of quantitative effects or alternative views regarding the causal channels at work.4 Furthermore, vulnerabilities from excessive leverage and reliance on short-term funding in the financial sector grew rapidly through the middle of 2007, well after monetary policy had already tightened significantly relative to the accommodative policy stance of 2003 and early 2004. In my assessment, macroprudential policies, such as regulatory limits on leverage and short-term funding, as well as stronger underwriting standards, represent far more direct and likely more effective methods to address these vulnerabilities.5

Recent International Experience

Turning to recent experience outside the United States, a number of foreign economies have seen rapidly rising real estate prices, which has raised financial stability concerns despite, in some cases, high unemployment and shortfalls in inflation relative to the central bank’s inflation target.6 These developments have prompted debate on how to best balance the use of monetary policy and macroprudential tools in promoting financial stability.

For example, Canada, Switzerland, and the United Kingdom have expressed a willingness to use monetary policy to address financial stability concerns in unusual circumstances, but they have similarly concluded that macroprudential policies should serve as the primary tool to pursue financial stability. In Canada, with inflation below target and output growth quite subdued, the Bank of Canada has kept the policy rate at or below 1 percent, but limits on mortgage lending were tightened in each of the years from 2009 through 2012, including changes in loan-to-value and debt-to-income caps, among other measures.7 In contrast, in Norway and Sweden, monetary policy decisions have been influenced somewhat by financial stability concerns, but the steps taken have been limited. In Norway, policymakers increased the policy interest rate in mid-2010 when they were facing escalating household debt despite inflation below target and output below capacity, in part as a way of “guarding against the risk of future imbalances.”8 Similarly, Sweden’s Riksbank held its policy rate “slightly higher than we would have done otherwise” because of financial stability concerns.9 In both cases, macroprudential actions were also either taken or under consideration.

In reviewing these experiences, it seems clear that monetary policymakers have perceived significant hurdles to using sizable adjustments in monetary policy to contain financial stability risks. Some proponents of a larger monetary policy response to financial stability concerns might argue that these perceived hurdles have been overblown and that financial stability concerns should be elevated significantly in monetary policy discussions. A more balanced assessment, in my view, would be that increased focus on financial stability risks is appropriate in monetary policy discussions, but the potential cost, in terms of diminished macroeconomic performance, is likely to be too great to give financial stability risks a central role in monetary policy decisions, at least most of the time.

If monetary policy is not to play a central role in addressing financial stability issues, this task must rely on macroprudential policies. In this regard, I would note that here, too, policymakers abroad have made important strides, and not just those in the advanced economies. Emerging market economies have in many ways been leaders in applying macroprudential policy tools, employing in recent years a variety of restrictions on real estate lending or other activities that were perceived to create vulnerabilities.10 Although it is probably too soon to draw clear conclusions, these experiences will help inform our understanding of these policies and their efficacy.

Promoting Financial Stability through a Macroprudential Approach

If macroprudential tools are to play the primary role in the pursuit of financial stability, questions remain on which macroprudential tools are likely to be most effective, what the limits of such tools may be, and when, because of such limits, it may be appropriate to adjust monetary policy to “get in the cracks” that persist in the macroprudential framework.11

In weighing these questions, I find it helpful to distinguish between tools that primarily build through-the-cycle resilience against adverse financial developments and those primarily intended to lean against financial excesses.12

Building Resilience

Tools that build resilience aim to make the financial system better able to withstand unexpected adverse developments. For example, requirements to hold sufficient loss-absorbing capital make financial institutions more resilient in the face of unexpected losses. Such requirements take on a macroprudential dimension when they are most stringent for the largest, most systemically important firms, thereby minimizing the risk that losses at such firms will reverberate through the financial system. Resilience against runs can be enhanced both by stronger capital positions and requirements for sufficient liquidity buffers among the most interconnected firms. An effective resolution regime for SIFIs can also enhance resilience by better protecting the financial system from contagion in the event of a SIFI collapse. Further, the stability of the financial system can be enhanced through measures that address interconnectedness between financial firms, such as margin and central clearing requirements for derivatives transactions. Finally, a regulatory umbrella wide enough to cover previous gaps in the regulation and supervision of systemically important firms and markets can help prevent risks from migrating to areas where they are difficult to detect or address.

In the United States, considerable progress has been made on each of these fronts. Changes in bank capital regulations, which will include a surcharge for systemically important institutions, have significantly increased requirements for loss-absorbing capital at the largest banking firms. The Federal Reserve’s stress tests and Comprehensive Capital Analysis and Review process require that large financial institutions maintain sufficient capital to weather severe shocks, and that they demonstrate that their internal capital planning processes are effective, while providing perspective on the loss-absorbing capacity across a large swath of the financial system. The Basel III framework also includes liquidity requirements designed to mitigate excessive reliance by global banks on short-term wholesale funding.

Oversight of the U.S. shadow banking system also has been strengthened. The new Financial Stability Oversight Council has designated some nonbank financial firms as systemically important institutions that are subject to consolidated supervision by the Federal Reserve. In addition, measures are being undertaken to address some of the potential sources of instability in short-term wholesale funding markets, including reforms to the triparty repo market and money market mutual funds–although progress in these areas has, at times, been frustratingly slow.

Additional measures should be taken to address residual risks in the short-term wholesale funding markets. Some of these measures–such as requiring firms to hold larger amounts of capital, stable funding, or highly liquid assets based on use of short-term wholesale funding–would likely apply only to the largest, most complex organizations. Other measures–such as minimum margin requirements for repurchase agreements and other securities financing transactions–could, at least in principle, apply on a marketwide basis. To the extent that minimum margin requirements lead to more conservative margin levels during normal and exuberant times, they could help avoid potentially destabilizing procyclical margin increases in short-term wholesale funding markets during times of stress.

Leaning Against the Wind

At this point, it should be clear that I think efforts to build resilience in the financial system are critical to minimizing the chance of financial instability and the potential damage from it. This focus on resilience differs from much of the public discussion, which often concerns whether some particular asset class is experiencing a “bubble” and whether policymakers should attempt to pop the bubble. Because a resilient financial system can withstand unexpected developments, identification of bubbles is less critical.

Nonetheless, some macroprudential tools can be adjusted in a manner that may further enhance resilience as risks emerge. In addition, macroprudential tools can, in some cases, be targeted at areas of concern. For example, the new Basel III regulatory capital framework includes a countercyclical capital buffer, which may help build additional loss-absorbing capacity within the financial sector during periods of rapid credit creation while also leaning against emerging excesses. The stress tests include a scenario design process in which the macroeconomic stresses in the scenario become more severe during buoyant economic expansions and incorporate the possibility of highlighting salient risk scenarios, both of which may contribute to increasing resilience during periods in which risks are rising.13 Similarly, minimum margin requirements for securities financing transactions could potentially vary on a countercyclical basis so that they are higher in normal times than in times of stress.

Implications for Monetary Policy, Now and in the Future

In light of the considerable efforts under way to implement a macroprudential approach to enhance financial stability and the increased focus of policymakers on monitoring emerging financial stability risks, I see three key principles that should guide the interaction of monetary policy and macroprudential policy in the United States.

First, it is critical for regulators to complete their efforts at implementing a macroprudential approach to enhance resilience within the financial system, which will minimize the likelihood that monetary policy will need to focus on financial stability issues rather than on price stability and full employment. Key steps along this path include completion of the transition to full implementation of Basel III, including new liquidity requirements; enhanced prudential standards for systemically important firms, including risk-based capital requirements, a leverage ratio, and tighter prudential buffers for firms heavily reliant on short-term wholesale funding; expansion of the regulatory umbrella to incorporate all systemically important firms; the institution of an effective, cross-border resolution regime for systemically important financial institutions; and consideration of regulations, such as minimum margin requirements for securities financing transactions, to limit leverage in sectors beyond the banking sector and SIFIs.

Second, policymakers must carefully monitor evolving risks to the financial system and be realistic about the ability of macroprudential tools to influence these developments. The limitations of macroprudential policies reflect the potential for risks to emerge outside sectors subject to regulation, the potential for supervision and regulation to miss emerging risks, the uncertain efficacy of new macroprudential tools such as a countercyclical capital buffer, and the potential for such policy steps to be delayed or to lack public support.14 Given such limitations, adjustments in monetary policy may, at times, be needed to curb risks to financial stability.15

These first two principles will be more effective in helping to address financial stability risks when the public understands how monetary policymakers are weighing such risks in the setting of monetary policy. Because these issues are both new and complex, there is no simple rule that can prescribe, even in a general sense, how monetary policy should adjust in response to shifts in the outlook for financial stability. As a result, policymakers should clearly and consistently communicate their views on the stability of the financial system and how those views are influencing the stance of monetary policy.

To that end, I will briefly lay out my current assessment of financial stability risks and their relevance, at this time, to the stance of monetary policy in the United States. In recent years, accommodative monetary policy has contributed to low interest rates, a flat yield curve, improved financial conditions more broadly, and a stronger labor market. These effects have contributed to balance sheet repair among households, improved financial conditions among businesses, and hence a strengthening in the health of the financial sector. Moreover, the improvements in household and business balance sheets have been accompanied by the increased safety of the financial sector associated with the macroprudential efforts I have outlined. Overall, nonfinancial credit growth remains moderate, while leverage in the financial system, on balance, is much reduced. Reliance on short-term wholesale funding is also significantly lower than immediately before the crisis, although important structural vulnerabilities remain in short-term funding markets.

Taking all of these factors into consideration, I do not presently see a need for monetary policy to deviate from a primary focus on attaining price stability and maximum employment, in order to address financial stability concerns. That said, I do see pockets of increased risk-taking across the financial system, and an acceleration or broadening of these concerns could necessitate a more robust macroprudential approach. For example, corporate bond spreads, as well as indicators of expected volatility in some asset markets, have fallen to low levels, suggesting that some investors may underappreciate the potential for losses and volatility going forward. In addition, terms and conditions in the leveraged-loan market, which provides credit to lower-rated companies, have eased significantly, reportedly as a result of a “reach for yield” in the face of persistently low interest rates. The Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation issued guidance regarding leveraged lending practices in early 2013 and followed up on this guidance late last year. To date, we do not see a systemic threat from leveraged lending, since broad measures of credit outstanding do not suggest that nonfinancial borrowers, in the aggregate, are taking on excessive debt and the improved capital and liquidity positions at lending institutions should ensure resilience against potential losses due to their exposures. But we are mindful of the possibility that credit provision could accelerate, borrower losses could rise unexpectedly sharply, and that leverage and liquidity in the financial system could deteriorate. It is therefore important that we monitor the degree to which the macroprudential steps we have taken have built sufficient resilience, and that we consider the deployment of other tools, including adjustments to the stance of monetary policy, as conditions change in potentially unexpected ways.

Conclusion

In closing, the policy approach to promoting financial stability has changed dramatically in the wake of the global financial crisis. We have made considerable progress in implementing a macroprudential approach in the United States, and these changes have also had a significant effect on our monetary policy discussions. An important contributor to the progress made in the United States has been the lessons we learned from the experience gained by central banks and regulatory authorities all around the world. The IMF plays an important role in this evolving process as a forum for representatives from the world’s economies and as an institution charged with promoting financial and economic stability globally. I expect to both contribute to and learn from ongoing discussions on these issues.


1. The possibility that periods of relative economic stability may contribute to risk-taking and the buildup of imbalances that may unwind in a painful manner is often linked to the ideas of Hyman Minsky (see Hyman P. Minsky (1992), “The Financial Instability Hypothesis (PDF),” Leaving the Board Working Paper 74 (Annandale-on-Hudson, N.Y.: Jerome Levy Economics Institute of Bard College, May)). For a recent example of an economic model that tries to explore these ideas, see, for example, Markus K. Brunnermeier and Yuliy Sannikov (2014), “A Macroeconomic Model with a Financial Sector,” Leaving the Board American Economic Review, vol. 104 (February), pp. 379-421. Return to text

2. For a discussion of this issue encompassing experience across a broad range of advanced economies in the 2000s, including the United States, see Jane Dokko, Brian M. Doyle, Michael T. Kiley, Jinill Kim, Shane Sherlund, Jae Sim, and Skander Van Den Heuvel (2011), “Monetary Policy and the Global Housing Bubble,” Leaving the Board Economic Policy, vol. 26 (April), pp. 233-83. Igan and Loungani (2012) highlight how interest rates are an important, but far from the most important, determinant of housing cycles across countries (see Deniz Igan and Prakash Loungani (2012), “Global Housing Cycles,” Leaving the Board IMF Working Paper Series WP/12/217 (Washington: International Monetary Fund, August)). Bean and others (2010), examining the tradeoffs between unemployment, inflation, and stabilization of the housing market in the United Kingdom, imply that reliance on monetary policy to contain a housing boom may be too costly in terms of other monetary policy goals (see Charles Bean, Matthias Paustian, Adrian Penalver, and Tim Taylor (2010), “Monetary Policy after the Fall (PDF),” Leaving the Board paper presented at “Macroeconomic Challenges: The Decade Ahead,” a symposium sponsored by the Federal Reserve Bank of Kansas City, held in Jackson Hole, Wyo., August 26-28). Saiz (2014) suggests that about 50 percent of the variation in house prices during the 2000s boom can be explained by low interest rates, and finds that it was the remaining, “non-fundamental” component that subsequently collapsed–that is, the interest rate component was not a primary factor in what Saiz terms “the bust” (see Albert Saiz (2014), “Interest Rates and Fundamental Fluctuations in Home Values (PDF),” Leaving the Board paper presented at the Public Policy and Economics Spring 2014 Workshops, hosted by the Harris School of Public Policy, University of Chicago, April 8). Return to text

3. The notion that tighter monetary policy may have ambiguous effects on leverage or repayment capacity is illustrated in, for example, Anton Korinek and Alp Simsek (2014), “Liquidity Trap and Excessive Leverage (PDF),” Leaving the Board NBER Working Paper Series 19970 (Cambridge, Mass.: National Bureau of Economic Research, March). Return to text

4. See, for example, Tobias Adrian and Hyun Song Shin (2010), “Liquidity and Leverage,” Leaving the Board Journal of Financial Intermediation, vol. 19 (July), pp. 418-37; and Tobias Adrian and Hyun Song Shin (2011), “Financial Intermediaries and Monetary Economics,” in Benjamin Friedman and Michael Woodford, eds., Handbook of Monetary Economics, vol. 3A (San Diego, Ca.: Elsevier), pp. 601-50. For a study emphasizing how changes in the response of monetary policy to financial vulnerabilities would likely change the relationship between monetary policy and financial vulnerabilities, see Oliver de Groot (2014), “The Risk Channel of Monetary Policy (PDF),” Leaving the Board International Journal of Central Banking, vol. 10 (June), pp. 115-60. Return to text

5. This evidence and experience suggest that a reliance on monetary policy as a primary tool to address the broad range of vulnerabilities that emerged in the mid-2000s would have had uncertain and limited effects on risks to financial stability. Such uncertainty does not imply that a modestly tighter monetary policy may not have been marginally helpful. For example, some research suggests that financial imbalances that became apparent in the mid-2000s may have signaled a tighter labor market and more inflationary pressure than would have been perceived solely from labor market conditions and overall economic activity. Hence, such financial imbalances may have called for a modestly tighter monetary policy through the traditional policy lens focused on inflationary pressure and economic slack. See, for example, David M. Arseneau and Michael Kiley (2014), “The Role of Financial Imbalances in Assessing the State of the Economy,” FEDS Notes (Washington: Board of Governors of the Federal Reserve System, April 18). Return to text

6. For a summary of house price developments across a range of countries through 2013, see International Monetary Fund (2014), “Global Housing Watch.” Leaving the Board Return to text

7. For a discussion of macroprudential steps taken in Canada, see Ivo Krznar and James Morsink (2014), “With Great Power Comes Great Responsibility: Macroprudential Tools at Work in Canada,” Leaving the Board IMF Working Paper Series 14/83 (Washington: International Monetary Fund, May). Return to text

8. See Norges Bank (2010), “The Executive Board’s Monetary Policy Decision–Background and General Assessment,” Leaving the Board press release, May 5, paragraph 28. Return to text

9. See Per Jansson (2013), “How Do We Stop the Trend in Household Debt? Work on Several Fronts,” Leaving the Board speech delivered at the SvD Bank Summit, Berns Salonger, Stockholm, December 3, p. 2. Return to text

10. For a discussion, see Min Zhu (2014), “Era of Benign Neglect of House Price Booms Is Over,” Leaving the Board IMF Direct (blog), June 11. Return to text

11. These questions have been explored in, for example, International Monetary Fund (2013), The Interaction of Monetary and Macroprudential Policies (PDF) Leaving the Board (Washington: IMF, January 29). Return to text

12. The IMF recently discussed tools to build resilience and lean against excesses (and provided a broad overview of macroprudential tools and their interaction with other policies, including monetary policy); see International Monetary Fund (2013), Key Aspects of Macroprudential Policy (PDF) Leaving the Board (Washington: IMF, June 10). Return to text

13. See the Policy Statement on the Scenario Design Framework for Stress Testing at Regulation YY–Enhanced Prudential Standards and Early Remediation Requirements for Covered Companies (PDF), 12 C.F.R. pt. 252 (2013), Policy Statement on the Scenario Design Framework for Stress Testing. Return to text

14. For a related discussion, see Elliott, Feldberg, and Lehnert, “The History of Cyclical Macroprudential Policy in the United States.” Return to text

15. Adam and Woodford (2013) present a model in which macroprudential policies are not present and housing prices experience swings for reasons not driven by “fundamentals.” In this context, adjustments in monetary policy in response to house price booms–even if such adjustments lead to undesirable inflation or employment outcomes–are a component of optimal monetary policy. See Klaus Adam and Michael Woodford (2013), “Housing Prices and Robustly Optimal Monetary Policy (PDF),” Leaving the Board working paper, June 29.

http://www.federalreserve.gov/newsevents/speech/yellen20140702a.htm

Thanks to Matthew Goldman. For reaction to Chair Janet’s Speech read this:

http://www.acting-man.com/?p=31577

Malaysia in 2014–a perspective from Singapore


June 30, 2014

Malaysia in 2014–a perspective from Singapore

MALAYSIA-SINGAPORE-DIPLOMACYFor Singapore, due to history, geography, demography, economy and recent political experiences, Malaysia has perpetually been its lynchpin concern and preoccupation. In the past, S Rajaratnam, the Republic’s first foreign minister, had described Singapore’s relations with Malaysia as ‘special’ and there is nothing to suggest that this has changed in anyway.

If anything, the ‘specialness’ has been intensified and further reinforced due to a whole array of factors, not least being the imperatives of national, regional and international economics. A weakening United States, an assertive China, an unstable Thailand and a new nationalistic leader in Indonesia can change the political and security architecture in the region to the detriment of both states and hence, their bilateral ties.

In the 1950s and 1960s, culminating in Singapore’s expulsion from Malaysia in August 1965, the emotive dimension of Singapore’s view of Malaysia was dominant. Even though this has largely dissipated, it is not totally absent. Still, the pragmatism with which both states have moved forward is definitely a milestone achievement in bilateral ties in Southeast Asia.

For Singapore, continuity rather than change remains its key perspective on Malaysia. This was especially true after the May 2013 general elections where the Barisan Nasional (BN: National Front) was returned to power albeit with a weaker majority. Still, Prime Minister Najib, the United Malays National Organisation (UMNO) and the BN are in power and that is what matters even though the winds of change must also be disconcerting. The disquiet would be more, not so much from the economic aspect as it would be from the rising racial and religious polarisation of Malaysia in the last few years that was brought to the forefront during the last general elections. The ‘Allah’ issue has not been helpful and the recent firebombing of a church in Penang has merely raised the ante of what this will mean for Malaysia and possibly, even multiracial and multi-religious Singapore.

All that aside, the single most important development of late has been the rising warmth in Singapore-Malaysia bilateral ties under Lee Hsien Loong and Najib Tun Razak. While past imperatives of history, geography and demography remain relevant, most dominant in the new narrative has been the personal warmth of the two prime ministers and the strategic nature of their bilateral ties.

Most of the past issues have been addressed or settled such as relocation of Customs and Immigration Complex, land reclamation and even water. Most importantly, has been the breakthroughs that both leaders have made vis-à-vis two issues, namely, the resolution of the Tanjong Pagar Railway Station and the land exchange deal as well as Singapore’s support for the Iskandar Development Project in Johor. Other positive developments in ties include the holding of annual leader’s retreats, re-establishment of links between both countries’ stock exchanges, Malaysia’s agreement to sell electricity to Singapore, the agreement to build high speed train link from Kuala Lumpur to Singapore, the amicable post-Pedra Branca technical talks to resolve legacy issues over the islands’ dispute and finally, the establishment of a Singapore consulate in Johor Baru.

ST-Iskandar

If there is one key factor that has brought bilateral ties to a new height, it is the cooperation in the Iskandar Project. Not only is the Singapore Government supporting investments in the project through Government-linked companies such as Temasek Holding but also playing an important role in encouraging the private sector to invest in the project. Additionally, thousands of Singaporeans are expected to be permanently based in the Iskandar region and Johor as a whole, bringing interdependence to a level that was never seen before. To that extent, Iskandar has been the key game changer in Singapore-Malaysia bilateral ties of late.

The breakthrough in bilateral ties was a function of a number of factors. First, the decision by both sides to adopt a new approach to bilateral ties in order to garner win-win results. Second, the personal warmth of the top leaders was extremely helpful. Third, the calculation of the mutual benefits that would be gained by both sides in view of the increasing regional and global competition. Fourth, over the years, there has also been increasing economic interdependence with Singapore as one of the top investors in Malaysia over the last two decades or so. Two-way trade and investments are among the highest between the two states. Fifth, there is also the realisation of increasing security indivisibility of both states. Finally, the ideological pragmatism of both sides has also helped in boosting bilateral ties.

While Singapore expects Malaysia in 2014 to have a largely ‘normal’ year barring any unexpected events – all the more to be the case as the UMNO annual assembly has opted for status quo – the Republic is also mindful of the many uncertainties that can unexpectedly crop up to affect bilateral ties. While 2014 can expect the warming of ties to continue, this cannot be taken for granted. First, the warm ties of two prime minister, both of whom are sons of two former prime ministers  who were not close, may not survive personalities if a more nationalistic prime minister takes over in Singapore or Malaysia. Second, tensions could surface if the promised cooperation proves futile or produces one-sided benefits, say in Iskandar Project. Finally, growing domestic tensions in Malaysia, especially among the Malay and Chinese communities in Johor or in Malaysia could spill over into Singapore-Malaysia relations.

Hence, for Singapore, while Malaysia in 2014 is expected to continue ‘good business as normal’, there are also potential minefields that might explode, and hence, the need for caution. ‘Special relations’ are important but can never be taken for granted, and this also holds true of Singapore’s view of Malaysia in 2014.

Bilveer Singh is associate professor at the Department of Political Science, National University of Singapore, adjunct senior fellow at the S Rajaratnam School of International Studies and President of the Political Science Association of Singapore. 

Halim Saad- Plus Deal


June 28, 2014

Halim Saad- Plus Deal

by P. Gunasegaran & Khairie Hisyam

Issues  |  MARCH 27, 2014 3:36 PM

Halim Saad-Plus Deal

Sources tell KiniBiz the deal is unlikely to be approved by the government because of a number of factors, including non-viability of the project. We then outline the major obstacles Halim faces to make his deal a success.

____________________________________________________________________

The government is unlikely to approve a bid by former United Engineers Malaysia (UEM)-Renong chief Halim Saad for Plus Malaysia Bhd, the concessionaire for the North-South Expressway and several other highways.Halim Saad

Sources say that this is because the numbers in Halim’s proposal, presented by PwC Capital, a unit of audit firm PwC, are not likely to lead to a viable proposal, they said.  Halim is working with Lembaga Tabung Haji on this deal. However, Halim Saad told KiniBiz earlier today that he has not heard so far that the government has turned down the deal. In his presentation, Halim had sought government approval to do a due diligence on PLUS before he makes an offer. Halim declined to give any further comment.

Analysts say that shareholders’ funds or equity of PLUS currently amount to some RM3.4 billion while total debt, basically sukuk bonds issued in January 2012, amount to some RM30.6 billion, making in all a total value currently of about RM34 billion.

READ ON: http://www.kinibiz.com/story/issues/78289/halim-unlikely-to-get-green-light-for-plus-bid.html

When principled men speak and frogs croak


June 27, 2017

When principled men speak and frogs croak

By The Malaysian Insider

Shamsul of Petronas

Honesty. Candour. Fearlessness.

These qualities are so refreshing about Petronas chief executive officer Tan Sri Shamsul Azhar Abbas. He speaks the language of a man who cares more deeply about doing the right thing by his company, and ultimately, by his country, than clinging to the coveted position as the boss of the national oil company.

He calls a spade a spade and not because sharp words are going to grab him a share of headlines, but because he knows that endemic rent-seeking is leading the country’s piggy-bank and financier of all our excesses to a bad place. He has to wave the red flag, shout at the top of his voice and be the bearer of bad news because everyone else is in denial. Because UMNO politicians and their supporters in Perkasa like Datuk Ibrahim Ali believe that the country’s one, constant source of revenue is theirs to pillage.

So it was expected that Shamsul’s candour in an interview with the Edge Weekly would provoke a response from the country’s instigator-in-chief, the purveyor of all nonsense and defender of the rent-seeking culture, Datuk Ibrahim Ali.

Among other things, Shamsul said that Petronas resources belonged to all Malaysians, and not just Malays. He was spot on saying that because the Petroleum Development Act 1974 does not mention Bumiputeras. Shamsul lamented the fact that Petronas was under pressure to back inexperienced businesses, while he was more interested in stressing the importance of meritocracy.

“In 2010, we structured the whole organisation, including the composition of the board…I brought in new capable people. The talk was that I got rid of all the government servants, brought in the non-Malays, opened up Petronas, which belongs to the Malays, to the non-Malays.

“Are we not interested in competence? This is a predicament I am facing at this point of time…I am being pulled back by politics, by interested parties, by parties with vested interests, by agendas that are outdated…I am a Malay too. I am proud to be one. You think I don’t want to help my own people. Of course, I want to help them but in the proper way. Not through handouts and spoon-feeding, ” said in the interview published on June 21.

Ib AliIbrahim, who finds any discussion on meritocracy and competence offensive, has found much wrong with what Shamsul said and now is calling for his head. Ibrahim represents all that is wrong with this blessed and resource-rich country. He claims he is fighting for Malays when he is in fact trying to perpetuate a system where a small group of Malays have benefited tremendously from government contracts, approved permits and the like.

He adores the current political patronage system because it provides the perfect eco-system for Perkasa, Isma and other right-wing groups to thrive.To hell with what is good for Petronas or Malaysia.

You can bet that there will be a steady drum beat from now on for Shamsul to step down as Petronas CEO.But you can bet your last ringgit that Shamsul will not be cowed, especially by a politician who failed to win a seat in what was supposed to be his stronghold.

If Shamsul has to go, he will but on his terms and by speaking honestly about Malaysia’s most prized asset.We used to have an abundance of men like the Petronas CEO in the Malaysia of old; men who did not decide matters based on colour or creed; men who put principle before self. Ibrahim would not understand these concepts.

 

Mustapa Mohamed:Malaysia’s Productivity grew by 2.3% in 2013


June 26, 2014

Mustapa Mohamed: Malaysia’s Productivity  grew by 2.3% in 2013

Report by BERNAMA dated June 25, 2014

Malaysia Productivity Report 2013-2014Malaysia registered a productivity growth of 2.3% last year to a productivity level of RM60,437 from RM59,064 in 2012

Based on the Productivity Report 2013/2014 which was launched today by the Minister of International Trade and Industry (Miti), Mustapa Mohamed, the growth has helped Malaysia’s Gross Domestic Product (GDP) to expand 4.7% to RM786.69 billion in 2013, supported by a growth in employment of 2.3%.

MUSTAPA MOHAMAD 02In his speech at the launch, Mustapa (left) said the 2.3% growth in labour productivity compared to two per cent in 2012 could be attributed to the performance of key sectors of the economy, as well as technological progress, capital deepening and widening and the quality of labour.

“The launching of the Productivity Report for 2013/2014, in its 21 years running, strengthens the government’s agenda to enhancing the nation’s productivity. In this report, Malaysia Productivity Corporation (MPC) has emphasised the productivity framework which is based on shared Malaysian values of collaboration, coordination, communication and competency that drives national development agendas such as the Economic Transformation Programme, the Government Transformation Plan and the Malaysia Plans,” he said.

According to the Productivity Report, the services and construction sectors performed well in 2013, with labour productivity growing by 4.8% and 5.2% respectively. However, labour productivity in the agriculture sector declined by 3.5%.

The reported added that MPC made a few recommendations to address the issues facing Malaysia’s productivity goals such as how to nurture a competitive and productive mindset, promote incentives within targeted industries and strengthen regulatory review to boost national productivity.

Mustapa said Malaysia’s productivity growth surpassed that of many advanced economies, including Australia (1.4%), Japan (1.3%), Singapore (1.6%), South Korea (1.7%) and the United States (0.9%).

On another note, Mustapa said in the first three years of the Tenth Malaysia Plan (10MP) implementation, the average contribution of Total Factor Productivity (TFP) to the country’s GDP was 19.7%. He said in terms of labour’s contribution, the country needed to improve the quality of labour by strengthening policies and offer firms the right incentives to create modern jobs that will attract higher wages and increase productivity through the application of technology.

“Thus, all of us, including those in the government and representatives in trade unions and associations, must make a concerted effort to ensure higher growth with improvements in technology, research and development as well as investment in human capital,” he added.

Time running out to save the ailing Malaysian Airline System (MAS)


June 23, 2014

Time running out to save the ailing Malaysian Airline System (MAS)

Story by

Stephanie Jacob stephanie@www.kinibiz.com

Maybank KE has advised Malaysia Airlines Bhd (MAS) investors to sell, saying that time is running out to save the ailing airline and that Khazanah Nasional Bhd’s plans to take six to twelve months to come up with a restructuring plan is too long. The research house’s aviation analyst Mohshin Aziz noted that while MAS’ counter had reacted positively to Khazanah statements on restructuring, Maybank KE had been disappointed as it had hoped a plan would be introduced sooner.

In its report, Maybank KE said according to calculations, “MAS is experiencing a cash burn rate of RM5 million a day and could exhaust its entire free cash resources…by 2015.” Furthermore at this rate, its gearing could hit 5x by the end of 2015, it added.

Noting that MAS’ had a cash burn of RM494 million in the first quarter of financial year 2014 (1Q14), Maybank KE said that it expects the trend to continue on to 2Q14. The ongoing quarter is expected to be the worst so far for MAS, as together with being seasonally its weakest quarter, it is also expected to suffer from industry wide weak yields and flight cancellations.

MAS-cash-balance-movement-230614

Mohshin said that MAS’ cash balance is expected to fall to RM2.1 billion by the end of financial year 2014 (FY14) and to RM1.1 billion by the end of FY15. He added that this trend was not sustainable. READ on :

http://www.kinibiz.com/story/corporate/91927/time-seen-running-out-for-mas-restructuring.html

Wajarkah Tengku Adnan Rob Malay Businesses ?


June 22, 2012

WAJARKAH TENGKU ADNAN ROB MALAY BUSINESSES?

dinmericanby Din Merican

On  June 6, 2014, Utusan Malaysia exploded a story about Sultan Johor’s interference in the Johor State Assembly (Dewan Undangan Negeri) by seeking to have executive control over the Johor Housing Board. The headline was a simple “WAJARKAH?”:

Utusan Malaysia then unfolded the real story. The real disaffection with Sultan Johor was that His Highness was seen as getting involved in businesses including selling large valuable parcels of lands in Johor to Singaporeans and lately to developers from China. This was further incensed by the fact that Malaysian billionaire tycoon Tan Sri Francis Yeoh of the YTL Group had made very damaging and insulting statements against the Malay leadership in the government accusing it of crony capitalism whereas it was a public secret that the YTL Group was the biggest beneficiary of Dr Mahathir’s privatisation policy. The TNB Employees Union then exposed that Sultan Johor’s power company SIPP was the JV partner of the YTL Group in the Pengerang IPP (independent power producer) project.

The Sultan of Johore's sale of 116-acres of prime land in Johor Bahru last December to China developers Guangzhou R&F last year as a major turning point. BN upset with royal housing bill too 01 The deal pocketed the Sultan RM4.5 billion.  The Sultan of Johore's sale of 116-acres of prime land in Johor Bahru last December to China developers Guangzhou R&F last year as a major turning point. BN upset with royal housing bill too 01 The deal pocketed the Sultan RM4.5 billion.

The Sultan of Johore’s sale of 116-acres of prime land in Johor Bahru last December to China developers Guangzhou R&F last year as a major turning point.
BN upset with royal housing bill too.
The deal pocketed the Sultan RM4.5 billion. 

So, the whole thing was really about UMNO’s anger towards Sultan Johor’s perceived betrayal by selling out on Malay rights. UMNO may be justified to come out strongly against Sultan Johor. UMNO is justified to chide any Malay Ruler and any GLC that disregards Malay rights. UMNO can do that because it perceives itself as the protector and guardian of Malay rights as guaranteed by the Federal Constitution. That’s what UMNO’s existence is for, and that is what most Malays expect of UMNO. But, is UMNO really the champion of Malays and Malay rights? Or, must the Malays also be protected from the rogues in UMNO?

Beside Johor Sultan, UMNO via Khazanah Nasional Berhad owns one of the largest development land in Johor. And UMNO is selling land at equally crasy rate to foreigners, disguised under the name of “joint development”.

Beside Johor Sultan, UMNO via Khazanah Nasional Berhad owns one of the largest development land in Johor. And UMNO is selling land at equally crasy rate to foreigners, disguised under the name of “joint development”.

For UMNO to regard itself as the Champion of Malay rights, UMNO must also not allow its politicians, its leaders especially the UMNO Ministers to betray and rob legitimate Malay businesses. UMNO must not allow Ministers like Tengku Adnan Mansor who is the Federal Territories Minister to do what is reported in MKini in the story below.

Damai Kiaramas was set up in early 2009 to provide a long-term solution for the former estate workers living on prime land of currently TTDI after their estate was closed down 32 years ago.

Damai Kiaramas was set up in early 2009 to provide a long-term solution for the former estate workers living on prime land of currently TTDI after their estate was closed down 32 years ago.

So, just as Utusan Malaysia had rebuked Sultan Johor by that simple phrase – “WAJARKAH?”, these Malay businessmen would equally be entitled to rebuke Tengku Adnan and ask him : “ WAJARKAH TENGKU ADNAN ROB MALAY BUSINESSES?”

I think it is time that UMNO admonish Tengku Adnan before UMNO loses Malay support in GE14!Now read what Malaysia kini reported below:

UMNO men’s firm gets injunction against Ku Nan

By Hafiz Yatim@www.malaysiakini.com

 A group of bumiputera entrepreneurs today obtained an injunction against Federal Territories Minister and UMNO Secretary-General Tengku Adnan Tengku Mansor and two others from being involved in a joint venture project involving a five-hectare plot of land in Bukit Kiara.

Last week, Damai Kiaramas Sdn Bhd, owned by UMNO members, filed a suit in the High Court in Kuala

WAJARKAH TENGKU ADNAN ROB MALAY BUSINESSES?

WAJARKAH TENGKU ADNAN ROB MALAY BUSINESSES?

Lumpur against Tengku Adnan, also known as Ku Nan, for breach of contract. The company claimed it had fulfilled all the conditions set by the ministry to develop the land, including getting the agreement of those living in longhouses in the vicinity for 32 years, to be placed in a mixed development project on the land.

However, the company claimed, Tengku Adnan had favoured a company owned by the Pavilion group to be given the project. Today’s ex-parte injunction was granted by judicial commissioner Kamaluddin Md Said.

Damai Kiaramas named its joint-venture partner Yayasan Wilayah Persekutuan, Tengku Adnan and the Pavilion group-owned Memang Perkasa Sdn Bhd as defendants in the suit. They had since 2008 proposed to redevelop the five-hectare land, which was then part of the Bukit Kiara estate, large portions of which have become the Kuala Lumpur Golf Club and Kelab Golf Perkhidmatan Awam.

The displaced estate workers are staying in dilapidated longhouses on the five-hectare plot and pay monthly rental to the Kuala Lumpur City Hall.Damai Kiaramas claimed it had obtained the backing of the then federal territories minister Raja Nong Chik Raja Zainal Abidin and got the cabinet’s support.

Yayasan Wilayah Persekutuan agreed to appoint Damai Kiaramas as a joint-venture partner on December 17, 2012, after it obtained signatures from all the longhouse residents to support the project, in which they would be placed in their new houses there.

A draft of the joint-venture company was produced several weeks later stating the terms that included the company having to pay RM60.702 million in land premium to Yayasan Wilayah Persekutuan.

A meeting was held between Raja Nong Chik, Yayasan Wilayah Persekutuan and Damai Kiaramas on Feb 22, 2013, at which they all agreed to the terms of the agreement and also agreed to the signing of the formal agreement only after the 13th general election.

Several declarations, general damages sought

However, with Raja Nong Chik having lost in the last general election, Damai Kiaramas had to deal with Tengku Adnan, the new minister in charge of the Federal Territories, and they held several meetings, last year and this year.

At subsequent meetings, the statement of claim from the firm states, Tengku Adnan requested that the land premium and return to be paid to Yayasan Wilayah Persekutuan, be increased from RM60.702 million to RM96 million. Tengku Adnan allegedly asked that the amount be increased further to RM140 million and then to RM160 million, to which Damai Kiaramas is said to have reluctantly agreed.

The joint-venture agreement between Damai Kiaramas and Yayasan Wilayah Persekutuan was formally signed and a copy was sent to the foundation on Sept 17 last year. However, on December 5 last year, Damai Kiaramas obtained a termination notice from Yayasan Wilayah Persekutuan, which stated that there was never an agreement between them, that Damai Kiaramas failed to comply with the foundation’s demand and had not presented a detailed development plan.

Damai Kiaramas maintained that it briefed Tengku Adnan and the foundation representative on this on Sept 25 last year. The company claimed the reasons for the termination of the joint-venture agreement came as an after thought, and that it tried to revive the project by agreeing to pay the RM160 million that Tengku Adnan sought for the foundation.

The company also demanded, in April this year, that Yayasan Wilayah Persekutuan reveals whether it had entered into an agreement with other companies to develop the project.Damai Kiaramas claimed that all the defendants had hidded from its knowledge that secret negotiations had been carried out with Memang Perkasa and further claimed that there was interference from the firm.

Damai Kiaramas further claimed that because it had agreed to pay the RM160 million as demanded, the joint-venture agreement stands and that the action of the other party amounted to breach of agreement.

Hence, the company is seeking a declaration that the joint-venture agreement dated September 17 last year is constituted and continues, and wants another declaration that the termination notice is set-aside.

Damai Kiaramas also wants Yayasan Wilayah Persekutuan to continue with the joint venture and an order that any agreement that the foundation has with Memang Perkasa should be declared null and void. It is also seeking general damages and any amount the court deems fit for loss of profit and exemplary damages.

READ HERE: by Ida Lim@www.themalaymailonline.com

June 21, 2014

http://www.themalaymailonline.com/malaysia/article/developer-insists-has-funds-for-ttdi-project-labels-ku-nans-claims-prematur

June 19, 2014

http://www.themalaymailonline.com/malaysia/article/ku-nan-shrugs-off-court-injunction-by-developer-says-firm-could-not-perform

Weathering the storm in Johor


June 15, 2014

Weathering the storm in Johor

by Jocelyn Tan@www.thestar.com.my

For a while it looked like Johor was heading into a constitutional crisis but the storm has passed thanks to a daring Malay newspaper, the groundswell of public opinion and a Mentri Besar who was willing to listen.

Sultan of JohoreIT was one of the biggest political storms to have blown over Johor and it all began with the stunning frontpage report in Utusan Malaysia. The paper’s bold headline “Wajarkah?” alongside a prominent photograph of the Sultan of Johor in his ceremonial uniform sent shock waves through the country, especially among Malay circles.

Utusan Malaysia, long seen as the champion of all things Malay, had taken the daring step of questioning the Sultan’s role in the administrative affairs of the state or as stated in the paper’s headline: “Is it proper?”

 The issue in question was the Real Property and Housing Board Enactment that would have given the Sultan the final say over the operations and composition of the body that will oversee the state’s housing development.

In the following days, people up and down the country voiced their opinion on the issue and, for a while, it looked like Johor was headed for a constitutional crisis.But the state government reacted quickly and the storm passed together with the tabling of an amended version of the enactment that excluded any direct role for the Ruler. All 38 Barisan Nasional assemblymen voted for the Bill while the opposition bench, which had demanded a deferment, voted against it.

Everyone heaved a sigh of relief. Any issue involving the Malay Rulers is regarded as ultra-sensitive. Very few people want to be on the wrong side of the Rulers even though a 1993 amendment to the Federal Constitution has eased some of the dos and don’ts of commentary about the royals.

The Malay politicians in Johor shrank back from commenting on the enactment and some of them were petrified. One Johor-based Malay journalist said he had goose pimples when he saw the Utusan Malaysia headline.The Chinese vernacular papers were the first to report on the controversial Bill and this was picked up by a pro-Pakatan Rakyat news portal.

Everyone was tip-toeing on eggshells until Utusan Malaysia stepped up to the plate. The game changed after that and the other media took the cue. From then on, the issue snowballed and acquired a life of its own.

The amended enactment was a compromise of sorts – the people sent the right signals, the powers-that-be read the signals and acted on it.“It ended appropriately,” said one corporate figure with Johor ties.

Johor Palace officials have been at pains to explain that the Sultan had no role in the drafting of the Bill. Datuk Abdul Rahim Ramli, President of the State Royal Court Council, insisted that the Sultan did not ask for the word “ruler” to be added to the enactment nor did he interfere in the state administration.

The Sultan himself has personally quashed rumours that he would not give royal assent to the Bill. At a late evening meeting with representatives from The Star and another English daily on Wednesday, the Tuanku said he was ready to sign the Bill at any time. He also stressed that he had agreed to the amendments and has asked the state government to go on a roadshow to explain to his subjects and clear the confusion.

The controversy has been a baptism of fire for Mentri Besar Datuk Seri Khaled Nordin.The Johor Mentri Besar’s job has never been easy even from back then. The Johor royals are known for their big and outspoken personalities, they have clear views about the state and they are also rather business-minded.

For instance, former Mentri Besar Tan Sri Ghani Othman’s ties with the Palace were quite tense towards the end of his term and that was a chief reason why he could not continue on. Ghani’s relations with the late Sultan Iskandar Sultan Ismail was also quite choppy in the beginning and only warmed up as time went by. Ghani was not the typical politician and did not play political games, but his respect for and loyalty to the Sultan were beyond question and he would sit for hours by the hospital bed when the late Tuanku was often unwell.

The present Mentri Besar appeared to have settled into his job without many hiccups and the Sultan had even praised him during the opening of the State Legislative Assembly.

Khaled and the Sultan were classmates in secondary school although that should not be taken to mean that they are friends because the royals move in their own rarefied world.

The perception is that Khaled misread the ground when he tried to rush the Bill through.“The opinion out there was that the enactment was not consistent with the principles of constitutional monarchy. There was a sense that a line has been crossed,” said the above corporate figure.

Everyone agrees that the enactment was needed to facilitate Johor’s housing needs, especially in the area of affordable housing.And, as some have pointed out, the original enactment that gave the Sultan a big role was no different from the rules governing Johor Corporation, the state development arm better known as JCorp. The parallels are there except that JCorp deals with commercial development whereas the current enactment involved state land and also Malay Reserve Land which can be a sensitive issue.

But more than that, Khaled had overlooked the undercurrent of misgivings about land and development issues in Johor arising from the impact of the Iskandar Malaysia regional scheme.

Gossip about multi-billion ringgit land transactions have been the stuff of kopitiam chatter. Khaled did not seem to realise that the land deals in Johor were being discussed and dissected on the Internet. Almost every Tom, Dick and Harry in the state was aware of what is going on, they were talking about it in a very critical tone.

Among many nationalistic Malays, there was concern about land falling into the hands of Singaporeans and China nationals. Land carries quite a bit of emotion for many Malays – after all their national bumiputra status comes from the word itself.

The Malay blogs had been abuzz about a Singaporean billionaire owning a piece of land along a strategic stretch of the Causeway that has national security implications. All this provided the backdrop to the groundswell of opinion over the problematic enactment. Rightly or wrongly, many people inside and outside Johor were already uneasy about what was happening and the enactment sort of tipped the scale of public opinion, the straw that broke the camel’s back.

Some have unfairly blamed Utusan Malaysia for instigating the uproar. One Barisan assemblyman has even demanded that the paper apologise to the Palace.aziz-ishak Utusan Malaysia group editor-in-chief Datuk Aziz Ishak is an intense and serious-minded journalist but he is at heart a Malay nationalist.

There is little doubt that his paper got the greenlight from “up there” to pursue the issue. But the paper has earned renewed respect for rising to the occasion – to defend national interests and also to protect the good name of the constitutional monarchy.

Some have even blamed Tun Dr Mahathir Mohamad for fuelling the issue. The former premier had penned a cryptic piece entitled “Jual Tanah” in his Che Det blog on May 30. He did not name names but everyone knew where he was coming from.

A week later, he wrote a more forthcoming piece on the Federal Constitution where he said: “There is already a feeling of disrespect for the royals. This may lead to other forms of disrespect. Although, by and large, the Malays are for the institution of the monarch, when their ability to defend is eroded, they might forego their adat (customary norm).”

TDMMany more said they would have been shocked if Dr Mahathir had kept quiet. After all, this man had dared to bell the cat, so to speak. He had clipped the wings of the monarchy in 1983 when he was struggling to make his mark, and again in 1993 when he was at the height of his power and popularity.

“Tun Mahathir wanted to make the concept of constitutional monarchy very clear. He was not against any particular sultan. His argument was that if the royals respect their own role, the people will respect them,” said publisher Juhaidi Yean Abdullah.

Every monarch wants to be loved and to be known as the people’s sovereign. It was easier in the old days before the era of the Internet where almost everything and every one is regarded as fair game. It is something that those who hold public office have to note.

Khaled was very stressed out and taken aback by the uproar. At a war room meeting a night before the Bill was tabled, the Mentri Besar had insisted that even if there were no revisions, it did not mean that the Sultan would be in charge.

Johor is a modern state but Johoreans have a very strong sense of the powers of the monarch. What happened was a test of the Malay psyche of Johor. There has always been this tension between the concept of daulat (royal sanctity) and derhaka (treason) in Malay society and the contestation between the two concepts was put to the test when Utusan Malaysia took up the issue. But these age-old concepts are also being challenged by public opinion on the role of a constitutional monarchy and the desire for transparency and accountability in the affairs of state.

There is a much more informed and sophisticated society out there which is not afraid to be heard. And that was why it responded to Utusan Malaysia’s daring move.