Malaysia can’t afford a botched handling of MH17


July 20, 2014

MY COMMENTWe have been hit by two tragedies, MH 370 and MH 17 a few days ago,Din Merican both within a space of four months. MH370 is still shrouded in secrecy and  it is a public relations disaster; our leaders and public and security officials handled the foreign media poorly. MH17 was brought down by Russian made missiles in the hands of Ukrainian rebels backed by  Prime Minister Putin’s government. Our political leaders and officials are again in the eyes of media. Let them handle the situation better this time.

Those who are behind this dastardly violence must be brought to account. Our diplomats and those of countries which lost their citizens and the United Nations Secretary General Ban Ki-Moon must act in concert to ascertain the facts about the downing of this ill-fated 777 aircraft. At home, the new Transport Minister has to ensure that there are no cover-ups, blame games, excuses, and conflicting or contradictory statements. Please provide facts as they come to light, and do it well and ensure that there are no fumbles.

I am glad that our Prime Minister has allowed debate in our Parliament on MH37. I hope Parliamentarians on both sides of Dewan Rakyat can be rational and constructive in their deliberations so that we can achieve consensus on what we should do to restore national self confidence and pride in our national flag carrier, Malaysian Airlines.

No shouting matches please. Bung Mokhtar types must not be allowed to disrupt the debate or make fools of themselves. In this time of national crisis, UMNO-BN and Pakatan Rakyat must stand together. The debate should result in a plan of action for the government. To nudge the debate along orderly lines, there should be a White Paper to Parliament on MH17 in which the government can present its views on what it has its mind to deal with the aftermath of MH 17.Din Merican

http://www.bloombergview.com/articles/2014-07-18/malaysia-can-t-botch-another-air-tragedy

Malaysia can’t afford a botched handling of MH17

by William Pesek (07-18-14)

There’s nothing funny about Malaysia Airlines losing two Boeing 777s and more than 500 lives in the space of four months. That hasn’t kept the humor mills from churning out dark humor and lighting up cyberspace.

Liow_Tiong_Lai-MH17_PC

Actor Jason Biggs, for example, got in trouble for tweeting: “Anyone wanna buy my Malaysia Airlines frequent flier miles?” A passenger supposedly among the 298 people aboard Flight 17 that was shot down over eastern Ukraine yesterday uploaded a photo of the doomed plane on Facebook just before takeoff in Amsterdam, captioning it: “Should it disappear, this is what it looks like.”

That reference, by a man reportedly named Cor Pan, was to Malaysia Airlines Flight 370, whose disappearance in March continues to provide fodder for satirists, conspiracy theorists and average airplane passengers with a taste for the absurd. On my own Malaysia Air flight last month, I was struck by all the fatalistic quips around me — conversations I overheard and in those with my fellow passengers. One guy deadpanned: “First time I ever bought flight insurance.”

MH17 CrashThere is, of course, no room for humor after this disaster or the prospect that the money-losing airline might not survive — at least not without a government rescue. This company had already become a macabre punch line, something no business can afford in the Internet and social-media age. It’s one thing to have a perception problem; it’s quite another to have folks around the world swearing never to fly Malaysia Air.

Nor is no margin for mistakes by Malaysia or the airline this time, even though all signs indicate that there is no fault on the part of the carrier. The same can’t be said for the bumbling and opacity that surrounded the unexplained loss of Flight 370. Even if there was no negligence on the part of Malaysia Air this week, the credibility of the probe and the willingness of Prime Minister Najib Razak’s government to cooperate with outside investigators — tests it failed with Flight 370 — will be enormously important.

As I have written before, the botched response to Flight 370 was a case study in government incompetence and insularity. After six decades in power, Najib’s party isn’t used to being held accountable by voters, never mind foreign reporters demanding answers. Rather than understand that transparency would enhance its credibility, Malaysia’s government chose to blame the international press for impugning the country’s good name.

The world needs to be patient, of course. If Flight 370′s loss was puzzling, even surreal, Flight 17 is just MH 17plain tragic. It’s doubtful Najib ever expected to be thrown into the middle of Russian-Ukraine-European politics. Although there are still so many unanswered questions — who exactly did the shooting and why? — it’s depressing to feel like we’re revisiting the Cold War of the early 1980s, when Korean Air Flight 007 was shot down by a Soviet fighter jet.

More frightening is how vulnerable civilian aviation has become. Even if this is the work of pro-Russian rebels, yesterday’s attack comes a month after a deadly assault on a commercial jetliner in Pakistan. One passenger was killed and two flight attendants were injured as at least 12 gunshots hit Pakistan International Airlines Flight PK-756 as it landed in the northwestern city of Peshawar. It was the first known attack of its kind and raises the risk of copycats. The low-tech nature of such assaults — available to anyone with a gripe, a high-powered rifle and decent marksmanship — is reason for the entire world to worry.

The days ahead will be filled with post-mortems and assigning blame. That includes aviation experts questioning why Malaysia Air took a route over a war zone being avoided by Qantas, Cathay Pacific and several other carriers. The key is for Malaysian authorities to be open, competent and expeditious as the investigation gains momentum. Anything less probably won’t pass muster.

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.

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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Malaysia’s Top Economist and Mr.Transformer speaks


June 24, 2014

Malaysia’s Top Economist and Mr. Transformer speaks

I missed this one dated June 20, 2014, posted in Malaysiakini because Dr. Kamsiah and I were away in Taipei. Reading it, I thought the authorities in Taiwan should have appointed Dato Seri Idris Jala as their chief propagandist.  So here it is:

idris guitarSenator Dato’ Seri Idris Jala is a Minister in the Prime Minister’s Department and CEO of Malaysia’s Performance Management and Delivery Unit (PEMANDU), an organization tasked with ensuring Malaysia meets the goals set forth under the National Transformation Programme (NTP).

He spoke with The Prospect Group about the Economic Transformation Programme’s (ETP) goals for 2014, which includes Gross National Income (GNI), investment, and job creation, and ensuring Malaysia’s economy is resilient in the face of global uncertainty.

Q: What are the ETP’s main focal points for 2014?

JALA:

Our focal point for 2014 is to make sure we implement. We have to implement what we promised under the ETP as well as the GTP. The public wants results and the way in which we have to fulfill those results is to execute the initiatives within the 12 National Key Economic Areas (NKEAs) that will achieve big results fast.

Q: What are your 2020 GNI, investment, and job creation goals?

JALA:
By the year 2020, we would like to have become a high-income economy that fulfills the GNI targets of $15,000 per capita. That is our long-term goal. To do that will require a lot of investment; something like $444bn is needed to propel the Malaysian economy to grow. We also need to create 3.3m jobs; you have to create a lot more high-paying jobs so that the citizens can benefit. So those are the three true-North targets: gross national income per capita, private investments that will drive it, and jobs that are created. The good news today is that, from when we first began, in four years, we have been able to grow our total GNI per capita by 50%. We are at the halfway mark today. So we are very pleased with the progress made on the GNI target. With regard to job creation, we are supposed to create 3.3m jobs, and we have created 1.3m jobs in the four-year period. So that is really very good.

We have met more than 60% of the investment targets, signifying we are well on the way to achieving this as well. My view today is that we would like this coming year to continue in the same way as we have experienced over the last three years. That means that everything is on the right trajectory. If things continue the way that they are, we will fulfill our targets before 2020.

 

Q: In terms of time frame and the trajectory you are on today, when do you anticipate these goals will be achieved?

JALA:
I think we should reach our targets by the year 2018. But, as you know, the world is not linear. If you look back over the last four years, it has been a good run for us, but we are subject to what happens in the global economy. We have to build in a lot more resilience within the Malaysian economy to face any global crisis or any global slowdown to ensure we can weather storms that happen between now and the year 2020. It has been a very good run for the last four years.
Q: In a world of constantly changing economic realities, how can Malaysia’s Economic Transformation Programme (ETP) and National Key Economic Areas (NKEAs) adapt?
JALA:

Adaptation is a very important requirement moving forward for Malaysia. So what we want to do in Malaysia moving forward is to ensure we build enough resilience in our economy.Let me begin by saying we must implement proper fiscal reforms. Public debt in our case should not exceed 55% of our GDP. Now there are many countries that have gone to 80%, 90%, 100%, and even 190% public debt to GDP. So if you make sure that you grow the economy and make sure the government debt is below the 55% threshold, we believe that is the way to go. You cannot and should not over leverage, so we are really focusing on that.The second thing about being resilient as an economy and being able to face any un-foretold difficulties with the global economy is to make sure we do not have a fiscal deficit that exceeds 6%. We have been steadily reducing our fiscal deficit. When we first started, our fiscal deficit was 6.6%. We have since cut that down to 5.8%, and then to 4.8%, and last year we reached 3.9%.

The other aspect of making sure we can adapt is obviously to make sure we have the right competent talent. A competent talent pool means that whatever structural changes take place in the economy, people are able to be mobile and will do what is needed to produce products and services that can compete in the world outside.

The other is that we made changes in the way the civil service operates. We have become a lot more efficient and the good news today is that we have been able to improve the ease of doing business. It is very easy to do business in Malaysia. The World Bank assessed Malaysia in 2009 at number 23. We then moved to number 18, and then to 12, and last year, for the first time, we moved to number 6 overall in the world in terms of the ease of doing business. So if it is easy for investors to put money and investment in Malaysia, and at the same time the government is fiscally prudent and we bring in all the fiscal reforms, and we have a talent pool in the country, then we can adapt very quickly to changes that are happening.

Q: How does this philosophy play into the ideology that Malaysia should move away from being a primary resource based economy and into a higher value added service based economy?

JALA:
If you look at the history of Malaysia, we were an agrarian economy during independence in 1957 and then we moved into a more commodities play. So what we are now doing is making sure that our manufacturing arm grows a lot bigger and we have started doing that. In fact, when it gets down to palm oil, we are now telling the industry it is fine and good for us to do a lot more primary products and selling that as crude, but it is much more important for us to start producing downstream products such as oleo chemicals and we gave a lot of incentives to allow this to happen as evidenced by the establishment of more refineries. That is happening as we speak today, the downstream component has to come in. At the same time, between now and 2020, we wanted to see that we increase the services sector of the GDP to become more than 60% and we have been growing that rapidly. You can see today that tourism is big for us, financial services are big, the health sector as a part of the economy is also growing, and the education sector. So all of these all together, they will become, by the year 2020, at least 60% of our GDP. So I think for the first time doing this, we will have to diversify the economy so that we do not rely entirely on the commodities play, but we get into the downstream part of the same sectors and at the same time we grow the services sector. I think if you add the two together, the Malaysian economy becomes more resilient.

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

Attracting Malaysian Talent Home is tough for Johan Merican


April 9, 2014

Malaysia struggles to woo Malaysian experts home due to ‘better life’ abroad–A Tough Job for Johan Merican

 by MD Izwan (04-08-14) @www.themalaysianinsider.com

TalentCorp CEO Johan Mahmood Merican says the agency has several incentives to make it easier for overseas Malaysians to come home, including tax exemptions on their cars. – The Malaysian Insider pic by Najjua Zulkefli, April 8, 2014.

TalentCorp CEO Johan Mahmood Merican says the agency has several incentives to make it easier for overseas Malaysians to come home, including tax exemptions on their cars.–  pic by Najjua Zulkefli, April 8, 2014.

Higher salaries, better professional opportunities and a comfortable life – these are the main reasons Malaysian professionals living abroad are reluctant to return to Malaysia, TalentCorp said.

According to its statistics, TalentCorp managed to bring back 2,500 Malaysians working abroad, but the figure is small when compared with a 2011 World Bank estimate that almost a million Malaysians are working outside the country.

TalentCorp has received almost 4,000 applications in the three years since it was established in 2011 to address the brain drain in the country.

“It is a combination of several factors. First, the quality of life is related to salaries, second, professional opportunities and third, a comfortable life, ” TalentCorp Chief Executive Officer Johan Mahmood Merican told The Malaysian Insider recently. However, the gap in quality of life is not too big when Malaysia is compared with other countries, he said.

“For example, the salaries in London are definitely high but we must increase their awareness about the quality of life after living costs are taken into account. Sometimes, the gap is not that big,” he added.

In terms of professional opportunities, Johan said Malaysia was still capable of offering the best opportunities as the country’s economic position was still good.

“In many other developing countries in the world, their economies are relatively slow but Malaysia’s is steadily progressing,” he said.

“The third factor, there are a lot of reasons for that. It’s true that there are some Malaysians who are worried about education, crime and the political scenario in the country,” he added.

The country which has the highest number of Malaysians wanting to come home is Singapore, followed by the United Kingdom, China, Australia and the Middle East.

According to a World Bank report, Malaysia’s Gross Domestic Product (GDP) was US$303.53 billion (RM995.43 billion) in 2012. Malaysia’s GDP represents 0.49% of the world’s economy.

“When they have been out of the country for too long, it will be hard for them to come home. At least, we appreciate their efforts by giving them incentives.”

The administration of Prime Minister Datuk Seri Najib Razak has targetted Malaysia to become a high-income nation by 2020 through Vision 2020, which was introduced by former Prime Minister Tun Dr Mahathir Mohamad.

As part of efforts to achieve the goal, Najib also introduced fiscal steps to reduce the country’s deficit, but that have affected the inflation rate.

Up till 2013, TalentCorp was allocated RM65 million, but it has received criticism over the huge allocation as it did not reflect in the number of talents brought home.

“TalentCorp is not only about bringing workers from overseas, we also have other programmes such as graduate employability and helping foreign talents,” Johan said.

The area in which most talents have decided to come back to is the business service sector, followed by oil and gas, finance, electronics, information technology and health.

“We support the Economic Transformational Programme (ETP) and not just overseas programmes. We help drive the ETP,” he said, adding that TalentCorp was in line with the government’s goal of achieving a high-income nation by 2020.

Johan also said that TalentCorp does not take on the role of a “recruitment agency” for the talents brought home.

“We do not operate like a recruitment agency because we are a government agency. We do not look for jobs for them; it is up to them to find jobs.However, we realise that Malaysians who have worked overseas for too long will not necessarily be used to the local professional culture so we are prepared to help them to get in touch with recruitment agencies or executives,” he said.

Realising that the move to bring back talent is not easy, Johan said TalentCorp has prepared several incentives to make it easier for them to return to Malaysia.

“When they have been out of the country for too long, it will be hard for them to come home. At least, we appreciate their efforts by giving them incentives.”

Among the incentives are tax exemptions on cars the applicants would like to bring back to Malaysia under the Return Expertise Programme (REP).Johan said it was not fair for others to judge TalentCorp’s work just based on allocations to the agency, as there were other activities that they take on.

“You cannot take a whole amount of allocation and divide it by one activity… we have other different activities.Maybe our activities hardly get any coverage, but we are managing talents in a different aspect,” he said.

In 2011, a World Bank Report revealed that Malaysia was experiencing a huge brain drain to other countries, with almost a million of the country’s professional workforce reported to be working overseas.

According to the report, the migration is caused by the imbalances of the New Economic Policy (NEP), with Indians and Chinese making the highest numbers.

The World Bank warned that if the situation was not addressed as soon as possible, it would slow down the economy and halt the country’s development.

Following the report, Putrajaya set up TalentCorp and introduced programmes to lure Malaysian talents from overseas. – April 8, 2014.

Is Hishammuddin Hussein headed for the top?


March 31, 2014

Is Hishammuddin Hussein, voice of Malaysia on flight MH370, headed for the top?

After a brush with death and addressing world’s media on flight MH370, Hishammuddin Hussein’s personal journey may yet take a dramatic turn

by Satish Cheney in Kuala Lumpur

 PUBLISHED : Sunday, 30 March, 2014, 6:08am
UPDATED : Sunday, 30 March, 2014, 7:21am

 

Urgent questions for Malaysian Prime Minister


March 25,2014

Urgent questions for Malaysian Prime Minister

by RK Anand@ http://www.malaysiakini.com

NajiboSince the onset of this crisis, I have disagreed with the speculation that Malaysian authorities have been deliberately withholding or concealing information regarding the status of MH370.

The conflicting and often contradictory details stemmed from incompetence, as opposed to a diabolical plot. Our authorities just lack the experience and expertise in dealing with a misadventure of this magnitude. And to believe that Malaysia has the ability to hoodwink the world is giving our leaders too much credit.

But I strongly feel that satellite “pings” and some form of “analysis never before used” are required to locate the brains of our officials. And the absence of a functioning cerebrum was evident in the events that unravelled last night.

In a hastily organised news conference, a grim-faced Prime Minister Najib Abdul Razak announced that the Boeing 777 had gone down in the Indian Ocean, and that all 239 on board were lost.

The revelation even caught China by surprise. Were the other nations involved in the search and rescue mission notified or were they kept in the dark as well?

The next question is: why the rush?

Najib made a brief statement on the fate of the plane and those on it without divulging specific information or fielding questions from journalists. Instead the media was told that a briefing would be held this morning. Perhaps the Prime Minister was worried that if he did not break the news, the foreign media might beat him to it and steal the limelight.

The relatives of the passengers and crew were shell-shocked and understandably so. In Beijing, tears flowed, tempers flared, chairs flew and walls were punched. Imagine. After 17 days of trepidation as investigators landed at one dead end after another in search of a plane that simply vanished, the Malaysian Prime Minister tells the relatives that all hope is lost.

And this devastating blow comes after days of keeping their hopes alive with the oft repeated “looking into all possibilities” remark. Indeed, since the Beijing-bound flight went missing on March 8, a slew of speculations – some bordering on the bizarre and supernatural – had emerged.

But what actually transpired would only be known once the black box is discovered, which could take days, weeks, months or even years. However, one thing is for certain. The credibility of the Malaysian government has suffered a major dent as a result of this disaster.

Amid Search for Plane, Malaysian Leaders Face Rare Scrutiny


Asia Pacific

http://www.nytimes.com/2014/03/13/world/asia/missing-jet-exposes-a-dysfunctional-malaysian-elite.html?_r=0

Amid Search for Plane, Malaysian Leaders Face Rare Scrutiny

afif_the_malaysian_insider_dca_hishammuddin_hussein_radars_540_360_100

SEPANG, Malaysia — Malaysia’s governing elite has clung to power without interruption since independence from Britain almost six decades ago through a combination of tight control of information, intimidation of the opposition and, until recently, robust economic growth.

But worldwide bafflement at the disappearance of Malaysia Airlines Flight 370 has challenged the country’s paternalistic political culture and exposed its coddled leaders to the withering judgments of critics from around the world.

Civilian and military leaders on Wednesday revealed that they had known for the past four days, but did not publicly disclose, that military radar had picked up signals of what may have been the missing aircraft. It appeared to be flying on a westerly course sharply off its intended flight path to Beijing.

If the radar readings were from the missing plane, it could mean a radical reinterpretation of where it ended up. And it was only under a barrage of intense questioning on Wednesday from a room packed with reporters who had arrived from many countries that officials acknowledged that the last recorded radar plot point showed the jet flying in the direction of the Indian Ocean — and at a cruising altitude, suggesting it could have flown much farther.

Continue reading the main story

Detecting a Plane

Two kinds of radar are used to keep track of air traffic from the ground.

Primary radar

Sends out radio signals and listens for echoes that bounce back from objects in the sky.

Transponder

Secondary radar

Sends signals that request information from the plane’s transponder. The plane sends back information including its identification and altitude. The radar repeatedly sweeps the sky and interrogates the transponder. Other planes in flight can also receive the transponder signals.

That raised the question of why the information had not been released earlier.

“The world is finally feeling the frustration that we’ve been experiencing for years,” said Lee Ee May, a management consultant and a former aide to a Malaysian opposition politician.

Ms. Lee said she was embarrassed when the country’s Defense Minister, Hishammuddin Hussein, the scion of a powerful political family, rejected a reporter’s assertion on Wednesday that the search for the airplane had been disordered.

“It’s only confusion if you want it to be seen to be confusion,” Mr. Hishammuddin said at a news conference that unfolded before an international audience.

Relatively free from natural disasters and other calamities, Malaysia has had little experience with handling a crisis on this scale. It is also an ethnically polarized society where talent often does not rise to the top of government because of patronage politics within the ruling party and a system of ethnic preferences that discourages or blocks the country’s minorities, mainly ethnic Chinese and Indians, from government service.

Ethnic Malays, who make up about half of the population, hold nearly all top government positions and receive a host of government preferences because of their status as “sons of the soil.”

Authoritarian laws have helped keep the governing party, the United Malays National Organization, in power — and an ascendant opposition in check.

The day before Flight 370 disappeared, the leader of the opposition, Anwar Ibrahim, was sentenced to five years under a sodomy law that is almost never enforced. Critics called the case an effort to block the opposition’s rise at a time when the governing party’s popularity is waning.

Then on Tuesday, a court convicted Karpal Singh, another opposition politician, of sedition, a law enacted in colonial times.

“We call it persecution, not prosecution,” said Ambiga Sreenevasan, a lawyer and the former head of the Malaysian Bar Council.

The government is accustomed to getting its way, and the crisis surrounding the missing plane is holding officials accountable in ways unfamiliar to them, Ms. Ambiga said.

“Malaysians have come to accept that their leaders don’t answer questions,” she said. “When you are not seriously challenged in any meaningful way, of course you get complacent and comfortable.”

For a relatively prosperous country of 30 million people that is less well known internationally than neighboring countries like Thailand and Singapore, the government’s confused efforts at finding the missing jetliner are an awkward and undesired appearance on the world stage.

The crisis has led to introspection about why the government has appeared uncoordinated and unable to pin down seemingly basic facts about the missing flight.

Officials insisted for three days that baggage was removed from the flight before takeoff when five passengers did not board. But the country’s chief of police on Tuesday said that was false: Everyone who checked in boarded the plane, he said. No explanation was given for the conflicting accounts.

Ibrahim Suffian, the Director of the Merdeka Center, an independent polling company, said the response to the crisis had underlined a lack of precision both in government and in the society over all.

“There’s a tolerance for a lack of attentiveness to detail,” he said. “You have a tendency of not asking so much and not expecting so much.”

The crisis also highlighted a lack of competence in government that Mr. Ibrahim said was related to a deference to authority and reluctance to take initiative. “There’s always been a kind of wait-for-instructions-from-the-top attitude,” he said.

Yet amid the criticism of the rescue efforts there was also an acknowledgment that the plane’s disappearance was so unusual that perhaps no government would be fully prepared for it.

“This is almost a unique situation,” said Ramon Navaratnam, a Harvard-trained economist and a former Malaysian senior civil servant. “Anyone would be caught off guard.”

For now, the Malaysian authorities are stuck in the unenviable position of hearing many questions but having few answers.

“They have never faced pressure to perform like this,” said Ms. Lee, the management consultant. “But now international eyes are on them, and they have nowhere to hide.”

A version of this article appears in print on March 13, 2014, on page A11 of the New York edition with the headline: Leaders in Malaysia Face Unusual Scrutiny.

Anwar Ibrahim for Selangor: Let the people of Kajang decide.


January 31, 2013

NOTE: My close friend, who calls himself Horse when commenting on this blogDin MericanX and whose political insights I value, told me that Anwar Ibrahim’s decision to contest in Kajang and then with the consent of his Pakatan partners he becomes the Menteri Besar, Selangor upon his electoral victory was a stroke of political brilliance with serious implications for  Selangor under Pakatan Rakyat.

As Menteri Besar, Anwar will be able to participate all policy discussions at the national level. As Leader of the Opposition, he is denied that opportunity since unlike in the UK and the US, the Leader of Opposition and the US Senate Majority Leader and Speaker of the House, he is shut out of policy deliberations and issues of national importance. Here is his vast experience as a legislator, former Cabinet Minister, and Deputy Prime Minister cum Minister of Finance, will prove invaluable in his role as Menteri Besar, Selangor.

It is true that Khalid Ibrahim has  done a good job as Menteri Besar and we must acknowledge and thank him for that. But given the present difficult circumstances for PKR, he has agreed to step down as Menteri Besar, once the people of Kajang have spoken. It would save PKR from further agony if the tussle between Azmin Ali and him were to drag on. Anwar knows both Azmin and Khalid well and recognises their respective contributions to the party and their deliberations in Parliament and Dewan Negeri.

I for one suspend my judgement on this issue. I look forward in the ensuing days to hear what Anwar Ibrahim and his Pakatan colleagues have to say on the state of Selangor politics, and his decision to contest in Kajang. But looking back the Permatang Pauh situation in 2008 when Dato Seri Wan Azizah made way for him to contest for her seat, I can say that it was a very strategic move for PKR and Pakatan Rakyat. Without discounting Wan Azizah’s contributions as Member of Parliament, Anwar’s role as Leader of the Opposition since that time was effective and constructive. His speeches, which are now part of the Hansard, provide ample evidence of the quality of his thinking and policy and legislative proposals. –Din Merican

Anwar Ibrahim for Selangor: Let the people of Kajang decide.

by M. Manogaran@http://www.malaysiakini.com

OPINION: There is a lot of talk and debate on this issue. There are many views opposing Anwar Ibrahim as the next Menteri Besar of Selangor. And, many are reluctant to even try and understand the reason behind such a strategy.

One must understand that any political party is entitled to strategise. In fact, it must, for its survival and for the betterment of the party and the coalition it represents. What is so wrong in Anwar becoming the next Menteri Besar of Selangor? This must be looked into from several angles.

Besides the fact that any party having its right to strategise, several other problems can also be resolved by Anwar (left) becoming the Menteri Besar, with the immediate settlement of the Abdul Khalid Ibrahim-Azmin Ali being one.

Selangor will also have the advantage of getting the PKR supremo as its head of government.Furthermore, Anwar is already the Economic Adviser to Selangor. This shift in political position will only help him steer Selangor to greater heights and Selangorians will enjoy being led by the top leader of Pakatan Rakyat.

What could be a better opportunity to showcase to the people of Malaysia how a state should be run? The people of Malaysia can look to Selangor as a model of how the country can be governed in future.

As to the view that the Sultan of Selangor may not agree, I think this is presumptuous. His Royal Highness will surely know that ours is a constitutional monarchy, where the leader of the party which commands the majority support in the legislative assembly will have the right to lead and form his cabinet, or executive council, as the case may be.

Anwar has much more experience

Comparatively, Anwar comes with much more experience than Khalid. No doubt that KhalidAzmin-Khalid has performed remarkably well, for Selangor has grown to be a prosperous state under his leadership. Good governance and integrity were instilled rightly and the overhaul in governance has resulted in doubling revenue collections. No doubt about this.

But if the party wishes to change leadership, democratically there is nothing to stop it. It does not mean a candidate vying to be the Prime Minister of the country cannot be the Chief Minister of a state as well.

Instead of taking the narrow view, this issue should be seen from a wider perspective. Just look at examples around the world. In India, for instance, the Chief Minister of Gujarat state, Narendra Modi, has already been announced by his party to be the presidential candidate.

India is the largest democracy in the world and Indians accept that the BJP party in India has got the right to nominate a state Chief Minister to be their presidential candidate. Drawing an analogy, the effective leader of DAP, Lim Guan Eng, is the Chief Minister of Penang. So what’s wrong with Anwar, the de facto leader of PKR, becoming the Menteri Besar of Selangor?

On the political point of view, and this is I think is the most important, Anwar becoming the Menteri Besar  of Selangor will have serious implications on the BN. Rest assured that Selangor will be under Pakatan for a long, long time to come if Anwar becomes the next Menteri Besar. Selangor will be forever lost to BN, and this is what BN is afraid of. Isn’t that wonderful?

We must not forget the bigger picture. Do not zoom in on the trivial issues like how it is being done but rather why and how are we going to benefit from it. Let us not lose sight of our common enemy. Let us educate ourselves to be a little more visionary.

*M MANOGARAN is the former Member of Parliament for Teluk Intan.

When America Becomes Number Two


January 27, 2014

When America Becomes Number Two

by Kishore Mahbubani(01-21-14)

professor-kishore-mahbubaniKishore Mahbubani is Dean of the Lee Kuan Yew School of Public Policy and author of “The Great Convergence: Asia, the West and the Logic of One World.” 

In 2019, barely five years away, the world will pass one of its most significant historical milestones. For the first time in 200 years, a non-Western power, China, will become the number one economy in purchasing power parity (PPP) terms. America will become number two. Yes, it will take longer for China’s economy to overtake America’s in nominal terms but the trend line is irresistible. And in PPP terms, China’s economy could be twice that of America’s by 2020.

The big question for our time therefore is this: is America ready to become number two? Sadly, it is not, even though Bill Clinton wisely tried to wake up his fellow Americans as far back as 2003. In a very subtle speech at Yale, he asked whether “we should be trying to create a world with rules and partnerships and habits of behavior that we would like to live in when we’re no longer the military political economic superpower in the world.”

Unfortunately, Bill Clinton was too subtle. He was trying to hint to his fellow Americans that America should create a model of rules-based behavior that would then serve as a model for China when it emerged as the number one power in the world. His hint was ignored. Hence, few Americans today are aware that America’s national interests change dramatically when it becomes number two in the world. When it is number one, it is in America’s interests to see that the number one power has complete freedom to do whatever it wants to do. When it is number two, it is not in America’s interests to see that the number one power has complete freedom to do whatever it wants to do. Catch the difference?

Why have American leaders failed to prepare the American population for this significant change of interests? There are at least three reasons. Firstly, it is political suicide for any American politician in office to speak on America as number two. As I document in The Great Convergence, no serving American politician can use the words, “If America is number two…” or “When America becomes number two…” In the land of free speech, there is no effective freedom for serving politicians to speak undeniable truths.

Secondly, most American intellectuals continue to indulge in wishful thinking. In their minds, there is a deep ideological conviction that democracy represents the future and Communism represents the past. Since China is still run by the Chinese Communist Party, it can only represent the past, not the future. Many American intellectuals also believe that since they live in the world’s freest society, they cannot possibly be prisoners of any ideology. This is massive self-deception. When it comes to understanding China, Americans have allowed ideology to trump mountains of empirical data. This is why they cannot even conceive of China becoming number one.

Thirdly, and very sadly, China’s emergence is taking place at a moment of great political paralysis and disunity in the American body politic. If Nixon and Kissinger were managing American foreign policy today, they would have focused on the most critical challenge that America faces and found ingenious ways and means of implementing the wise advice that Bill Clinton offered in 2003 and prepared for a new geopolitical environment. The days of wise foreign policy management are long gone in Washington, DC. Furthermore, with Washington, DC being completely divided and polarized, the challenge of dealing with becoming number two is the last thing on the minds of American policymakers.

Sadly, the last thing on the minds of American policymakers will come true in five years. Will America wake up to this new reality before or after it happens?

http://www.huffingtonpost.com/kishore-mahbubani/when-america-becomes-numb_b_4603125.html 

Respect the Girl


January 7, 2014

Respect the Girl for Talent and Ability

by Naomi Wolf

wolfCLICHED: Language is used to deny women credit, power and agency when it comes to attributing their success

WHEN Mary Barra was named Chief Executive Officer of General Motors  early last month –  the first woman to head a major American automaker — it seemed to many to be a milestone in women’s struggle for equal rights and opportunities. But, in a climate in which, as Catalyst, the feminist glass-ceiling watchdog, points out, only 4.2 per cent of US Fortune 500 CEOs are women, is Barra’s promotion really a victory?

One way to answer that question is to consider who is doing the judging. In the United States, by one count, two-thirds of professional journalists are men, and men account for almost 90 per cent of bylines in economics and business reporting in traditional media. In fact, the reflexive worldview of male-dominated business-news coverage invalidates all talk of a victory, whether for Barra or for the rest of us, including impressionable 15-year-old girls seeking role models and a message of empowerment.

GM's Mary BarraGeneral Motors’ Mary Barra

Feminist analysts of language and media in the 1970s, notably the critic Dale Spender, examined how language is used to deny women credit, power and agency when their successes are noted. That critique remains valid today.

Many news stories about female CEOs and other high-achieving women are coded with a set of reliable clichés: they lucked into their new roles (and thus do not deserve them), inherited them from male relatives or spouses (and thus do not really hold the reins of power) or will not be there for long. If all else fails, coverage concentrates so narrowly on gender that a woman’s very leadership is weakened.

These clichés not only undermine successful women’s reputations; in the case of CEOs, they also reduce their value to their companies. And, all of these clichés were reproduced in the coverage of Barra’s appointment at GM.

For example, CNN covered the story by referring to Barra’s “knack for climbing the corporate ladder” — a phrase with some suggestive undertones and one that would never be used with a man at the top, for whom, presumably, hard work, talent, ambition and dedication constitute more than a “knack”. It concluded by suggesting that Barra will have succeeded when people no longer call her “car girl” but “boss” — though the report offers no evidence that anyone is in fact calling Barra “car girl” rather than “boss”.

Likewise, the New York Times led with Barra’s father, and its headline suggested that she was “born to” her role, as if ambition and hard work had nothing to do with her ascent. It notes the car her husband drives and describes her as “soft-spoken”. And, it includes an excruciating quote from her predecessor, Daniel F. Akerson: “Mary was picked for her talent, not her gender.” Promoting Barra, he goes on to say, “was almost like watching your daughter graduate from college.”

It is difficult to imagine a black male middle-aged CEO (Barra is 51) being introduced to reporters with the assurance that “he was not picked for his race”. And, it is difficult to imagine his white colleague telling the national press that watching this 51-year-old man lead is like watching a 22-year-old “son” receive his BA.

Then, there is the “Potemkin CEO” approach, which implicitly assumes that powerful men would never really choose a woman to lead an important institution. According to this cliché, Barra’s promotion must be a public relations ploy, with men retaining the real power behind the façade.

So, we get this headline from Fortune magazine: “Is GM’s board setting up Mary Barra to fail as new CEO?” The article goes on to explain that being surrounded by male rivals for her job may fatally weaken Barra, as if male CEOs were not also surrounded by would-be rivals.

Perhaps that is because she really is just a lady first, not a manager. An interview in The New York Times’ business section manages to focus the entire discussion on how things have changed for women at GM rather than on what Barra intends to change at GM as CEO, or even on how things have changed in the car industry — surely an important question.

The interviewer even asks at the end whether her husband is a GM employee. With coverage like this, news becomes more than news; it becomes a real-world outcome that negatively affects a company’s bottom-line.

Why would a major corporation, especially one like GM, which suffered a serious crisis that led to a massive government bailout in 2008, risk appointing leaders, no matter how talented, who are bound to generate devaluing news coverage such as this?

I cannot fathom why serious journalists commit such egregious breaches of basic professional norms of fairness and impartiality. When they do, they are performing the role of guard dogs of an endangered patriarchy, defending, and thus strengthening, the glass ceiling.– Project Syndicate/www.nst.com.my

Book Review: ‘The Firm’ by Duff McDonald


November 16, 2013

Bookshelf

Book Review: ‘The Firm’ by Duff McDonald

McKinsey remains the gold standard of consulting. What does it do to earn those hefty fee

Sept. 6, 2013 4:10 p.m. ET

McKinsey-logo1Midway through “The Firm,” financial reporter Duff McDonald’s book about McKinsey & Co., the author recounts a hypothetical scenario once described to a new client by one of the consulting firm’s partners: “Let’s say a client asks us what time it is. . . . If you ask Booz Allen, their response will be ‘What time do you want it to be?’ If you ask A.D. Little . . . they will tell you ‘It’s 9:45:20, Greenwich Mean Time.’ But if you ask McKinsey, we will say ‘Why do you want to know? What decisions are you trying to make for which knowing the time would be helpful?’ “

Not a bad characterization of the way McKinsey thinks of itself and its approach to its work. The firm has been compared to the Jesuits and the U.S. Marines for its rigorous mind-set and disciplined work ethic. A ruthless “up or out” policy for new hires ensures that only those who do outstanding work survive; that’s one out of five.

There have been other books about this American icon, but “The Firm” is an up-to-date, full-blown history, told with wit and clarity, about a remarkable enterprise that has had a profound effect on the way businesses operate and has staffed corner offices and boardrooms around the world—but has also made its share of mistakes.

Mr. McDonald (right) nicely decodes the elusive mystique thatDuff McDonald McKinsey has so marketed over the years—the idea that it sees things in much better focus than its clients. Or, for that matter, its rivals. Some McKinsey partners have long sniffed that The Firm has no competition.

Not quite true. Boston Consulting Group and Bain & Co. have their own impressive accomplishments and distinctive toolboxes. Unlike McKinsey, Bain made inroads by representing only one client in an industry group, staying with that client right through the implementation of its proposals, and by making stock-price appreciation a top priority. Carving out its own niche, BCG focused on selling “products” like the “experience curve,” a way of demonstrating how economies of scale and innovation drive costs down over time. In the 1970s, both firms rattled McKinsey’s cage loudly. “BCG and Bain were the Apple to McKinsey’s Microsoft,” Mr. McDonald notes.

Whatever McKinsey is selling, it has certainly been able to get away with charging a teeth-chattering premium above what others do. In a 1989 competition with Booz Allen for a lucrative deal with a financial-services firm, Booz said it could take up to 4½ months to deliver its analysis, at a cost of about $675,000. McKinsey said it needed up to six months and would require $1.2 million. The low bidder didn’t win.

AT&T paid McKinsey $96 million for five years of hand-holding in the 1990s. Tanzania shelled out so much to McKinsey in the early 1970s to help plan its future that the fees became a line item in the country’s budget. Initially stunned by the proposal, Julius Nyerere, Tanzania’s president, eventually gave in: “If you offer peanuts, you get monkeys,” he said. Never mind that while McKinsey was cashing the checks, tyrant Nyerere was running the country into the ground.

But what exactly does McKinsey do to justify numbers like that? To oversimplify, it sends in a team of supersmart, driven young M.B.A.s to break down the stated problem—say, “we need to increase market share”—into key issues like product quality, sales practice and pricing. Then, after an intensive fact-gathering exercise, the team does its analysis, and constructs a list of actionable options, sometimes relying in part on what the firm has done for other clients with similar needs.

The proposed actions might be just what the client wanted to do to begin with—raise prices or cut costs—but McKinsey’s seal of approval, backed up by a heavily fact-based argument, gives management validation for whatever it wants to do: “de-layer” its management structure, lay off 10% of its workforce, close half its widget plants. To some McKinsey clients, that validation alone—helping to placate board members, shareholders and employees—is worth the hefty fee.

The FirmAnother key to McKinsey’s success: 85% of the firm’s roughly $7 billion in annual revenues comes from repeat customers, with whom it has what McKinsey calls “transformational relationships.” In the 1990s, American Express had so many McKinsey teams at work over an extended period that the consultants were listed in the Amex phone book. “God, we were sucking off that teat for so long,” one McKinseyite is quoted saying.

Mr. McDonald is generally more critical here than he was in “Last Man Standing,” his 2009 book that came perilously close to bestowing sainthood upon James Dimon—he of J.P. Morgan Chase and a man whose halo and wings had to be recently recalled after that unpleasantness about a $6 billion rounding error in trading losses.

The author walks us through many McKinsey achievements. General Electric, for instance, hired the firm in 1968 to study its strategic planning. The recommendation was to transform the conglomerate’s 360 departments into 50 “strategic business units” and make each of them focus “outwardly” on external market forces rather just fret about the cost of paper clips. There is a strong argument that the reorganization enabled future CEO Jack Welch to accomplish all that he did later. And McKinsey effectively launched the consolidation of the banking industry when it walked Wells Fargo through its acquisition of Crocker bank in 1986.

But Mr. McDonald doesn’t flinch from examining McKinsey’s missteps, including its bad advice to General Motors in the 1980s, when the auto maker was reeling from Japanese competition. Instead of dealing with things that could directly address the threat—increasing productivity, using fewer parts in each car, improving quality—McKinsey focused on structure. It reorganized GM into units by type of vehicle (large, small, trucks) instead of by brand. The result was a lot of people-shuffling. No bump in output, efficiency or profits, just more money down the drain—up to $2 million a month in McKinsey fees.

“The Firm” offers a good dissection of the collapse of McKinsey’s most notorious client, Enron, vaporized by the company’s CEO (and McKinsey alumnus) Jeffrey Skilling, now a guest of the U.S. government. McKinsey emerged largely unscathed from that disaster but took a reputational hit a few years later, in 2010, after one of its directors, Anil Kumar, pleaded guilty to securities fraud in the Raj Rajaratnam insider-trading scandal. Even worse, the firm’s former managing director, the respected Rajat Gupta, was convicted of leaking secrets to Rajaratnam as a Goldman Sachs director.

All that is well known, but readers may not be familiar with a major speed bump from the firm’s early days. In 1935, founder James O. “Mac” McKinsey, an accountant by training, landed Marshall Field & Co. as a client. The retailer was awash in red ink and faced a big loan payment. McKinsey’s solution was for the company to shed a wholesale business and some textile mills, then slash costs.

Marshall Field’s directors liked the plan so much that they persuaded Mac McKinsey to come over and wield the ax himself. What he failed to anticipate was the human cost—to the 1,200 laid-off workers and those remaining who were dismayed to realize that management, as Mark Twain might say, “don’t give a dead rat” about them as people. McKinsey himself received death threats, became depressed and, in a weakened state, succumbed to pneumonia in 1937.

Known thereafter as the “McKinsey Purge,” the bloodbath set the precedent for many more “downsizings” to come. Even now, news that “McKinsey is coming” provokes a flurry of fear and apprehension. And the managers who retain McKinsey know it. Condé Nast hired the firm in 2009 in part to send a message that it was serious about cost cutting.

The man who molded McKinsey into what it resembles today wasn’t Mac McKinsey but Marvin Bower, a lawyer by training who wanted to use the law-firm model to make consulting into a “practice,” not a business like selling used cars. Consultants were to put client interests ahead of the firm’s.

As head of the firm in the 1950s, Bower insisted on recruiting only the top graduates from Harvard Business School and wanted his hires to radiate confidence. No bow ties or argyle socks, please. One hapless young recruit who wore the latter triggered a “proper sock wear” memo to the staff.

Today, although the firm can certainly offer nimble, sector-specific advice to a client needing help on a highly focused project, there is still what Mr. McDonald refers to as the “intellectual masturbation” of the “typical McKinsey schmooze fest.” He quotes a McKinsey alumnus, now the head of a financial-services firm, who fumes when McKinsey partners ask, “How are you feeling about progress?” What he really wants is someone to tell him “how to knock five basis points” off his cost base.

Mr. McDonald raises some concerns about how McKinsey will fare going forward. He wonders whether the firm has become too commercial and strayed too far from Bower’s original value system. And whether it’s now so big that it’s hard to manage and can no longer maintain the quality of its consultants or its work. No longer the friendly local banker that Bower wanted the firm to be regarded as, it is now more like an international banking conglomerate.

Time will tell whether these worries are justified and what impact they may have on the firm’s fate. McKinsey has always engaged in its own navel-gazing. But maybe it should just hire itself full-time to find out what it should do.

—Mr. Pinkerton is a former managing editor of Forbes and a former deputy managing editor of The Wall Street Journal.

http://online.wsj.com/news/articles/SB10001424127887323906804579036654158755022

Budget 2014:No More Free Lunches for Malaysians


October 27, 2013

Budget 2014:No More Free Lunches for Malaysians

by Lim Sue Goan@www.themalaysianinsider.com

There could be possibly some brief sessions of free lunches in politics, but they won’t last forever. The national Budget that comes after so many years of generous handouts, it’s now time for Malaysians to pay foot the bill.

From Mahathir, Abdullah to Najib, they have all tabled “painless” budgets during their tenures as Finance Ministers.The size of handouts could vary, it is nevertheless invariable truth that some form of goodies could be expected from them year after year. For example, bonuses for the country’s civil servants.

DATUK SERI NAJIB TUN RAZAK

To please the public, the budgets have remained in the red for the past 17 years, culminating in sky-high public debts. We can no longer be this generous any more. If the government fails to stay prudent in managing its expenses in a bid to lower public debts, our sovereign ratings will be slashed. As a consequence, we have trimmed deficits, zero sugar subsidies and imposition of 6% GST, among others.

Najib has attempted to cut down on expenses ever after he assumed office. For instance, the total allocation for 2010 Budget was 11.2% lower than the previous year at RM191.5 billion. Unfortunately because of overdraft, the government still needs to seek parliamentary consent for supplementary bills every year.

To improve its chances of re-election, the BN government has been offering generous aids, resulting in uncurbed expenses. Administrative expenses have reached the level of 80% of total government allocations.

From the themes of budgets tabled over the past five years, we could see that Najib has strived to pursue economic prosperity.In 2010 we had “1Malaysia, shared prosperity,” in 2011 “Transformation into a high-income nation, ” 2012 “National transformation program to preserve economic prosperity,” 2013 ” and for 2014 “Strengthening economic resilience, accelerating transformation and fulfilling promises.”

But, from the developed status advocated by Mahathir to Najib’s high-income country, despite the fact that the government has been handing out so much of subsidies and assistance over the years, many Malaysians remain financially strapped. Why?

If we can achieve the goal of developed nation status two years ahead of our deadline in 2018, i.e. with a per capita income of US$15,000, why do our household debts remain at a staggering RM784 billion?

Judging from the ratio of household debts to disposable income of 194% in 2012, we are at a more alarming level than that of the United States during the 2008 subprime crisis (130%).

Although we have accumulated more and more wealth at the same time, our credit growth has expanded faster than our GDP at about 83% of GDP, anticipated to expand further to 97% by 2018.

Which means, if we are not going to cut down on household dents, even if we make it to the ranks of high-income nations, we will be hard pressed under mounting debts.

The minimum salary scale and generous distribution of money by the government will only increase the superficial income of the people, as their disposable income has been largely eroded by skyrocketing living costs, debts and property prices. Subsidies and handouts can no longer fix our problems.

According to the survey conducted by Kelly Services, the salaries of Malaysians only grew by a meager 2%-6% over the last ten years, with 34% of employed Malaysians living under the RM720 national poverty
line. The Statistics Department pointed out that the average monthly expenses of Malaysian families rose from RM1,953 in 2004/05 to RM2,190 in 2009/10, up 12.1% at a rate apparently much faster than income growth.

Unless we are able to drastically enhance our productivity, or there is no way for us to see bigger growth in income. Depressingly, the government has allowed unchecked entry of foreign workers into the country, suppressing further the magnitude of upward income adjustments.

On the other hand, high inflation has sent living expenses sky high, and this could be attributed to the failure of self-sufficiency in food supply that makes us vulnerable to staggering international food prices. The weakening ringgit has increased the prices of imported raw materials and manufactured products.

Unless we can truly transform our national economy, from being labor-intensive to knowledge-intensive, we cannot expect faster growth in our incomes, and lower- and medium-income Malaysians will continue to suffer.

Even though the GST is seen as a more equitable form of taxation–as the more a person spends, the more taxes he or she will have to pay–and that many essential items and services are in the exclusion list, poor people still have to pay the taxes as they need to buy clothes and shoes for themselves of their children.

Moreover, the 6% GST rate to be imposed is a little too high, and this will aggravate the inflationary rate and dampen domestic demands. Perhaps the government can consider imposing taxes on the wealthy to fund its social welfare programs.

The 2014 Budget will not address the plight of Malaysian families.The government needs to modify its policies and implement the New Economic Model in order to effectively fix our problems. – October 27, 2013

 

Financial Status of GLCs and Statutory Bodies: A Cause for Concern


October 27, 2013

Financial Status of GLCs and Statutory Bodies: A Cause for Concern

by Dr. Ong Kian Ming (10-25-13) @ http://www.malaysia-chronicle.com

Dr. Ong Kian MingThe Barisan Nasional government will surely play up the fact that it is a prudent government that is managing its finances well resulting as demonstrated by the reduction in the projected budget deficit to RM37billion or 3.5% of GDP in 2014.

But this ignores an extremely worrying problem of a huge increase in the deficit position of the companies which are owned or controlled by the government and statutory bodies – or Non-Financial Public Enterprises (NFPEs). For 2013, the projected deficit is RM93 billion or a massive 9.4% of the GDP. This represents a six-fold increase from the R15.6 billion deficit recorded in 2012.

The NFPEs refer to thirty “government-owned and / or government controlled companies and agencies owned by the government” whereby “ownership and control refer to Government or a public sector agency controlling more than 50 percent of total equity”. They would include companies such as Petronas, Tenaga, Telekom, Axiata, Malaysia Airlines, UEM Group as well as more recent additions such as 1MDB, Prasarana and MRT Co.

The financial position of these companies affect the fiscal position of the government directly and indirectly. These companies contributes directly to government coffers by paying corporate taxes (and the Petroleum tax for Petronas) as well as dividends. They (or via special purpose vehicles related to them) also issue bonds which carry an explicit as well as an implicit government guarantee i.e. the government has to pay for these bonds if these companies run into financial trouble (think PKFZ).

NFEs

What is shocking is that the deficit position of the NFPEs, which had been in surplus for 2010 and 2011, is projected to reach RM93 billion in 2013! This huge growth in the deficit has been driven by a massive spending spree in development expenditure which increased by 70% from RM49.5 billion in 2011 to RM84.0 billion in 2012 and is projected to increase by another 50% to RM126.2 billion in 2013. The NFPEs, in 2013, spent three times as much on development expenditure compared to the federal government.

It will be many years before some of this development expenditure that is being spent can start generating revenue e.g. the MRT project. Some projects may never generate enough revenue to cover operating costs – Prasarana which runs the LRT as well as the RAPID bus systems in KL, Penang and Kuantan is still making losses. Some projects may very well turn out to be very expensive white elephants e.g. 1MDB’s Tun Razak Exchange.

The massive increase in the deficit position of these NFPEs also means that the government’s exposure to these development expenditures have increased. If some of these projects do no bear fruit, the corporate taxes and dividends paid to the government by these NFPEs will decreased. In some cases, the government may be forced to step in to bail out these companies.

What is even more worrying is that the statistics and information pertaining to the development expenditure and financial standing of some of these NFPEs are not publicly available. In a paper presented at the MyStats 2012 forum, the Chief Economist of Maybank Investment Bank, Suhaimi Illias highlighted the ‘black box’ nature of development expenditure in NFPEs and GLCs:

“Despite the significance of NFPEs and GLCs/GLICs in the Malaysian economy, end-users in the private sector has somewhat limited access to their capital expenditure data, other than the information available from major entities like PETRONAS and the large public-listed NFPEs/GLCs (e.g. Telekom Malaysia, Tenaga, Malaysia Airlines) that are used as proxies to impute public sector investment, in addition to the Federal Government’s development spending.

Even then, this NFPEs’ development spending number reflects only the biggest 30 NFPEs with minimum annual sales of MYR100m.”[1]

The government cannot continue to ignore the potential impact of the deficit position of the NFPEs. What is needed now is for the disclosure of the full accounts of all the NFPEs which are not publicly listed including Petronas, 1MDB, Prasarana and MRT Co so that there is full transparency on the development expenditure of these companies.

What is needed now is for a full evaluation on the government’s ability to absorb potential losses arising from their exposure to these NFPEs, perhaps in the form of a Stress Test that has been conducted by organizations such as the IMF for the banking system in the country.[2]

Without concrete actions taken, the continued growth of the deficit position of the NFPEs is a ticking time bomb that may explode unexpectedly with disastrous consequences for the government’s fiscal position and the  economy.

Dr. Ong Kian Ming is the MP for Serdang

[2] http://www.imf.org/external/pubs/ft/scr/2013/cr1352.pdf

http://www.malaysia-chronicle.com/index.php?option=com_k2&view=item&id=179462:glcs-statutory-bodies-a-ticking-time-bomb-for-malaysia-kian-ming&Itemid=2#axzz2iqegLI3H

Najib looks set to trim the Budget


October 23, 2013

MY COMMENT: Finding new ways to raising taxes efficiently is fine, butDato Din Merican we have to ensure that we strenghten our system of governance and see that public expenditure is prudently managed. Yes, budget deficits are getting out of control and the national debt has reached worrying levels. There must be political will to deal with them. We cannot bring the debt level down overnight, but there must be clear signs that the Najib administration is serious about it. Failure to heed investor and lender concerns can, therefore, be costly in terms of our credit rating and public confidence.

Let us hope Prime Minister Najib can wind down his populist economic policies and as Finance Minister, he must be  very serious about keeping our finance and economic house in order.Najib’s Santa Klausian handouts must cease and it is time we start living within our means even if that means slower growth in the ensuing years. -Din Merican

Najib looks set to trim the Budget

by Abhrajit Gangopadhyay

Malaysian Prime Minister Najib Razak will unveil a federal budget on Friday that is expected to further cut back costly fuel subsidies.

Najib RazakKUALA LUMPUR, Malaysia –  Prime Minister Najib Razak will unveil a federal budget on Friday that is expected to further cut back costly fuel subsidies and at least spell out the timing on when a long-delayed consumption-based tax will be introduced.

The budget reflects two challenges for the Prime Minister: He needs to get tackle deficits that have resulted in Malaysia’s credit outlook taking a hit, while not outraging his core voters who returned his ruling coalition to power in May.

Analysts expect Mr. Najib to bet on higher tax revenue and more-efficient tax collection to shrink a fiscal deficit that has plagued the country since the Asian financial crisis in the late 1990s. His proposal would reduce the deficit to 3.5% of gross domestic product in 2014, down from an estimated 4% this year. He will be building off a budget that totaled 251.6 billion ringgit ($79.3 billion) for this year.

The budget announcement, which will be broadcast live on state television, is closely watched every year as a barometer of the government’s perceived confidence. Mr. Najib is fresh from consolidating his leadership this past weekend in the United Malays Nationalist Organization party polls.

Irvin Seah, a Singapore-based economist at DBS Group expects the government to announce a 4% goods and service tax that would be implemented in 2015 and eventually replace the existing sales tax and service tax. Such a tax would generate about 20.5 billion ringgit ($6.5 billion) in government revenue in its first year, topping the combined proceeds from sales and services tax, says Mr. Seah.

“The introduction of the (goods and service tax) will no doubt help to alleviate the strain on the fiscal balance and provide a more efficient tax regime compared to the current consumption taxes,” Mr. Seah said.

Analysts are worried about Malaysia’s fiscal health.Malaysia’s government debt – which was 54% of gross domestic product as of the end of June — is hovering near the self-imposed limit of 55% of GDP. The Southeast Asian country may edge past South Korea early next year as the economy with highest household debt ratio by early next year, predicts Bank of America Merrill Lynch. Household debt, or money including consumer loans and mortgages that families owe to financial institutions, rose to 86% of GDP as of the end of June from 80.5% as on 2012-end.

Credit rating agencies have routinely flagged Malaysia’s weak public finances. In July, Fitch Ratings cut Malaysia’s credit outlook to “negative” from “stable,” citing a lack of economic reforms, but retained its investment grade rating at A-minus.

Mr. Najib, who is also finance minister in the National Front coalition that has ruled Malaysia since independence from Britain in 1957, has responded to the credit downgrade with a minor cut in fuel subsidies in September that would help the government save 3.3 billion ringgit ($1 billion) annually from next year. Analysts expect further cuts in fuel subsidies in this budget.

But Mr. Najib will look to cement key constituencies by widening cash payouts to low-income people, in part to cushion them from higher prices of food and fuel due to subsidy cuts and a forthcoming goods and service tax. The step would appeal mostly to the majority ethnic Malay Muslims, his party’s traditional support base that voted back his coalition to power in the multi-ethnic democracy. The economically better-off ethnic Chinese deserted the ruling coalition in the last election, blaming it for policies that favor the ethnic Malays in everything from government jobs to higher education.

Such cash payouts “may help avert the sharp slowdown in private consumption that has been typically witnessed in the quarters following past elections,” said Citigroup in a report. Private consumption has steadily emerged as a strong growth driver in Malaysia’s economy which, in past, relied heavily on external trade.

Analysts widely expect Mr. Najib will also raise tax rates on tobacco and alcohol.  Still, he must keep government spending on a leash to avoid widening of a persistent deficit that has refused to fade for past 15 years. He is also likely to raise capital gains tax rates on real estate to curb speculation as housing prices soar in cities such as capital Kuala Lumpur.

Though no sweeping measures are expected as tight finances leave little room for largess, the government may allocate higher funds toward education, health care and other social welfare projects. It is likely to defer or even scrap some public projects that rely heavily on importing large machineries so as to protect Malaysia’s current account – a broad measure of trade in goods and services – from slipping into deficit.

“Budget 2014 will be a test of [Mr.] Najib’s resolve to narrow the multi-year fiscal deficit and avert a credit rating downgrade,” said Weiwen Ng, an economist at ANZ Group.

 http://blogs.wsj.com/searealtime/2013/10/22/malaysian-leader-looks-to-trim-budget-deficit/?mod=wsj_streaming_stream

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