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)

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@

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

Amid Search for Plane, Malaysian Leaders Face Rare Scrutiny


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.


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@

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? 

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/

Book Review: ‘The Firm’ by Duff McDonald

November 16, 2013


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.

Budget 2014:No More Free Lunches for Malaysians

October 27, 2013

Budget 2014:No More Free Lunches for Malaysians

by Lim Sue

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.


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) @

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).


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


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.

Tussle over Renong

October 18, 2013

Tussle over Renong : Halim Saad takes on Nor Mohamed Yakcop, Khazanah and Malaysian Government

By Eileen

halim-saad-3An on-going legal tussle over UMNO’s business assets, between Putrajaya and tycoon Tan Sri Halim Saad (pic), is set to get messier, The Edge Review reported.

The digital weekly news publication reported that Halim, a former controlling shareholder of troubled conglomerate Renong Berhad, had filed a suit in mid-April to seek an order from the High Court to direct Putrajaya to honour a settlement agreement valued at roughly RM2 billion (US$629.7 million) for his takeover of the Renong group.

The filings also made public correspondence between him and former prime minister Tun Dr Mahathir Mohamad, which The Edge Review described as offering a “rare peek into behind-the-scenes manoeuvrings during some of the most dramatic days in corporate Malaysia” as the country struggled to boost investor confidence after the 1997 Asian financial crisis.

The report noted that recently, Halim has moved to back up his legal claims with sworn statements from key individuals, including his lawyer and a former UMNO Treasurer.

A senior Kuala Lumpur-based lawyer, Abdul Rashid Manaf, who had accompanied Halim to meetings with top government officials on the Renong takeover, claimed he was a witness to negotiations that culminated in an agreement on a financial settlement for Halim.

The report said Abdul Rashid recalled a meeting in April 2010 he attended between Dr Mahathir (pic) and Halim over protracted issues surrounding compensation for the former Renong boss.

“Dr Mahathir’s response was startling. According to him, there was never any reason to pay Halim all along,” he was quoted as saying.

The report also noted that in a separate sworn statement, UMNO’s former treasurer, Datuk Seri Abdul Azim Mohd Zabidi, recalled discussions he had with Tan Sri Nor Mohamed Yakcop who implied that the Renong assets belonged to UMNO.

“When I took over as UMNO treasurer, I received a substantial amount of cash and shares belonging to UMNO. Whether the cash portion was part of any settlement from the Renong deal, I don’t know and I never asked,” he was quoted as saying.

Halim is suing the government, the state-owned strategic investment fund nor mohamed-yakcopKhazanah Nasional Bhd  and former economic affairs minister Tan Sri Nor Mohamed Yakcop, who acted as the government’s agent in the negotiations for the Renong takeover in 2001.

The three defendants in the suit have applied to strike out Halim’s claims on grounds that there was never any agreement over compensation.T he defendants also argued that the suit was filed out of time.

Under Section 6 of the Limitation Act 1953, a litigant should act within six years once a cause of action arose.In this instance, Halim’s clock started ticking from August 2002, when he was told that his claim for the lump sum payment would not be entertained by Khazanah.

The report said when UMNO was declared illegal in April 1987, its business assets were in limbo. It said through a series complex transactions, Halim acquired UMNO’s former assets and regrouped them under Renong through personal finances and bank borrowings – not on behalf of the political party.

Reincarnated as an independent operator, Halim went on to build Renong and UEM, one of Malaysia’s largest companies.To recap, the Asian financial crisis of 1997 led to the fall in Renong’s share prices and exposed the conglomerate’s poor cash flow and large debt burdens.

A business manoeuvre that year in UEM’s purchase of a 32.5% block of shares in Renong did not go down well with the investing public. To appease the market, Halim, in 1998, offered to buy the Renong shares from UEM through a put option.

The option price was RM3.2 billion, which was to be paid in four instalments, the first three of which was RM100 million each, and the balance with interest on February 14, 2001, when the option was due.

Halim paid the first RM100 million but could not pay the second when it was due, as a result of which Khazanah took over.The sovereign wealth fund took UEM private in 2001 and later cancelled the option. – October 18, 2013.

McKinsey looks set to stay top of the heap in management consulting

September 26, 2013


The future of the Firm

McKinsey looks set to stay top of the heap in management consulting

Let’s Sober Up, Malaysia (Important Posting)

September 16, 2013


Let’s Sober Up, Malaysia (Important Posting)(September 13, 2013)

Finally, someone who can provide clarity to the foreign funds moving in and out Asia. It does not mean we should not be wary but need to put things in its proper perspective. I have added my take on the market capitalisation growth of the world’s top ten markets as another viewpoint that should further lend credence to the long term trend. Need to distinguish short term noise from long term concerto.

  Economics – Markets – Strategy” for Asia and the G3.    
Three steps forward…

Capital flows have always been a two-way affair.  When sentiment is strong, inflows push you up the mountain.  When it’s weak, they drag you out to sea. The fact that Western central banks put interest rates on the floor five years ago and kept them there has only amplified the action – first inward, as Asia’s V-shaped recovery took off in 2009 and 2010 and then outward, as the EU debt crisis erupted in 2011 and, more recently, as fears over Fed tapering have grown.  

We estimate that in the two quarters ending June, some US$138bn flowed out of the Asia-8.  Is that a lot?  Surprisingly, no.  Two years ago, $152bn flowed out when the European debt crisis erupted.  When Lehman collapsed five years ago, $350bn left the region, 2.5x more than the current ‘exodus’.  QE and its tapering make a sexy story but the fact is today’s outflows rank only third in the standings, and that’s just in the past five years.  

If all of this money is flowing out of the region, when does Asia run dry?  It doesn’t.  Today’s outflows underscore the fact that there have always been two types of inflow: short-run ‘hot’ money flows arbitraging differential rates and returns, and longer-term inflows seeking to profit from Asia’s strong growth.  The hot money is now going home – or at least this week it is.  The long-term money is staying put.  And the long-term money is the bigger force.  

Since the dotcom / hi-tech downturn ended in 2001, some $2.4 trillion of capital has flowed into the Asia-10.  About $500bn flowed out temporarily in 2008/09 and another $300bn has flowed out since September 2011.  Net, net, that’s $1.6trn of long-term capital that has stayed in Asia, riding out the various global crises of the past 12 years.  Three steps forward, one step back – for every dollar that comes in, 66 cents stay for the long haul.  As capital flows go, that’s a pretty good signal-to-noise ratio.  

Why is so much money coming to Asia?  That’s easy.  Asia is where the world’s growth is being generated.  And businesses want to be where the growth is. Think about it: Asia and the US are now about the same size – GDP in both regions is roughly $16 trn.  If the US grows at a 2.5% rate, it generates $400bn of new demand each year.  But Asia grows at a 6.25% pace, maybe a bit faster.  It generates $1000bn of new demand every year.  If you’re a businessman, do you want to invest where demand is growing by 4 cents per year or where it’s growing by 10 cents per year?  

Extend the thought to Europe.  Many are encouraged by the fact that Germany returned to positive growth in the second quarter.  That’s good news and a good reason to invest there.  But put it in perspective.  If Germany grew at a 1.5% rate for the next 47 years – a feat few think it will accomplish – it would double in size.  It would ‘add’ a new Germany to Europe’s economic map by 2060.  Asia, by contrast, ‘adds’ a new Germany every 4 years, right here in Asia.  Five years hence, it will take only 3.5 years for Asia to add a Germany.  By 2060, Asia will have put about 25 Germanys on the economic map.  Pretty staggering.

This is why long-term capital will continue to flow to Asia.  Businesses and investors want to be where the growth is.  Inflows will continue to flip-flop in the short-run and yes, Asia will make plenty of mistakes – the West has no monopoly on that.  But the shift in economic gravity is the biggest structural change underway in the global economy today.  Structural inflows will remain, and grow, long after today’s hot and sexy but ultimately short-term outflows have become a footnote to the bigger picture.  

David Carbon, for
DBS Group Research
September 12, 2013

10 biggest stock markets in the World by domestic market capitalization in 2005(USD bn)

1NYSE Group 13,632.3
2Tokyo Stock Exchange 4,572.9
3Nasdaq Stock Market 3,604
4London Stock Exchange 3,058.2
5Euronext 2,706.8
6Canadian TSX Group 1,482.2
7Deutsche Börse 1,221.1
8Hong Kong Exchanges 1,055
9BME Spanish Exchanges 959.9
10SWX Swiss Exchange 935.4

As of June 2013

1.  NYSE – Remember that it merged with American Stock Exchange and more critically Euronext after 2005. Hence their 2005 base should be 13,632.3 + 2,706.8 =  16,339.1. As of June 2013, its 14,000 which is 85.6%, a loss of 14.4%, largely due to European stocks devastating performance in recent years. (-14.4%)

2.  Nasdaq – June 2013 figure was 4,500 compared to 2005 figure of 3,604 … more reflective of the resilience of the US markets despite the 2008 sub prime debacle. (+24.8%)

3.  Tokyo Stock Exchange – Current 3,300 compared to 2005 figure of 4,572.9. Despite the massive surge over the last 12 months, it is still not enough to wipe out the debilitating balance sheet recession from the excesses in the 80s and early 90s. Abe still has to be more aggressive to reverse the course for Japanese stocks. (-28%)

4. London Stock Exchange – Current 3,396 compared to 2005 figure of 3,058.2. Safe to say, Thatcher’s insistence not to join the Eurozone has helped in a large way to allow them to rebuild faster than their neighbours. The government over the last 10 years have done sufficiently enough to propel London as a major and viable exchange for the world’s biggest companies, thus drawing a large number of international companies to their shores, hence the real figure for UK may be inflated but still significant to compare. (+11%)

5. HK Stock Exchange – Current figure 2,831 compared to 2005 figure of 1,055. Naturally HKSE also continued to benefit from continued listings of red chips from China, still a significant development and trend. (+168%)

6. Shanghai SE – It was not even in the top ten back in 2005 with just 295 bn. Now its at 2,547 bn. Seen in this light, it makes the HKSE figure even more credible. (+763%)

7. Toronto SE – Again, another that was nowhere back in 2005 with 1,144. Its current figure is just over 2,058 bn. Largely they have stayed strong thanks to almost none of their banks participating in the subprime mess. (+80%)

8. Deutsche Bourse – 2005 figure 1,221 and the current figure is 1,486 bn. Germany is already the most resilient among the EU countries so you can imagine how bad it was for the rest. More significantly, even Toronto has overtaken the German bourse in market cap. (+21.7%)

9. Australia SE – Current figure 1,386 bn while the 2005 was around 720. Benefited from huge China investments in commodities and mines, and they were shielded from the subprime mess. (+92%)

10. Bombay SE – 2005 figure was 380 bn and the current is 1,263 bn. Despite the massive correction for India over the last 6 months, it is still in pretty good shape overall. (+232%)

Now the REALLY INTERESTING PART, we should compare apples to apples …. since 2005 how has Bursa Malaysia fared compared to our neighbours, bring out the tissues.

2005 Market Cap                        2013 June Market Cap

Malaysia  184 bn       490 bn  (+166%)
Singapore  227 bn                  752 bn  (+231%)
Indonesia 77.6 bn     477 bn  (+514%)
Taiwan  433 bn                      754 bn  (+74%)
Shenzhen  125bn                    1,190 bn  (+852%)
Philippines  32.4bn    230 bn  (+609%)
Korea  459 bn                       3,051  (+564%)
Thailand  122 bn       408 bn  (+234%)

The way its going … the 3 highlighted countries lagged Bursa substantially in 2005. Indonesia looks likely to surge past Malaysia by end 2014 despite the recent massive correction there. Thailand has come up by leaps and bounds despite numerous vicious street protests, disquiet down south of Thailand and changes in government. Thailand looks set to over take Malaysia by sometime end 2015. Now the Philippines … soon Malaysia will be sending maids to the Philippines … fcukers!!! Maybe not now but look at the trend, I predict by 2018 the Philippines will bypass Malaysia if nothing changes.

Indonesia has really surged, you cannot just argue that it was from a low base because we are not really using figures from 20 years back. its only 8 years back. We have to look at why we lagged behind, has our growth stunted, have we maxed out? I mean, not just Indonesia, look at Thailand beating us by a comfortable 68%. Singapore is Singapore, fair enough. But just watch the Philippines.

We also cannot use the argument that we are maxed out, or that the best days are behind us, look at fucking Korea, they continued to post enormous productivity gains. I mean just Samsung stock alone, its market cap is 190 bn or 38% of Bursa Malaysia all stocks.

Something went very wrong over the last 10 years. We had no sub-prime crisis to speak of, and now we are talking of maybe even being part of the emerging markets sell down? We OBVIOUSLY did not invest well, we OBVIOUSLY had too much leakages.

You can either pooh-pooh these statistics as another angry commentator going ballistic or take the reality and DO SOMETHING CONCRETE about it because if we stay roughly the same, we will have the same end result over the next 8 years. Fuck the sloganeering … the problems are so much more deep seated.

p/s  some of our problems:

Malaysia's Debt to GDP Ratio

Ratio of public servants to total country’s population

Hong Kong

Happy (?) Malaysia Day and NEP2 for Malays

September 16, 2013

Happy (?) Malaysia Day and NEP2 for Malays

MY COMMENT: Why Happy with a Q mark? Well, I know we celebrate the malaysiaday1350th Year of the formation of Malaysia. It should be a time to rejoice. Unfortunately, it is for me an unhappy occasion this year. For two reasons.

One, the NEP2 that was announced on Saturday September 14 is for Malays only. Maybe for those who support UMNO. Even then, not all. After 40 years of affirmative action to deal with poverty irrespective of race and promote national unity through social engineering, the government has to go back to taxpayers (the people who pay taxes are mainly non-Malays) to support NEP2.

It is an open admission by the Prime Minister that NEP1 has failed to achieve its objectives. It needs to be replaced. So the focus of NEP2 is the economic advancement of the Malays, not the plight of the poor and low income Malaysians. Malaysians now have to give the government more money via taxes and time (perhaps another 40 years) to help the Malays.

Second, it is the state of our economy. It is slowing down at a time whenDM latest our fiscal position has weakened considerably because of wasteful spending for political ends by the Najib administration. Not much is heard about our national budget 2013-2014. NEP2 and the ensuing bipartisan debate will divert our attention away from the real problems that have emerged as a result of our mismanagement of our economy.

Slow growth, unemployment, inflation and corruption must be dealt with as a matter of top priority. Until  we can have concrete plans to deal with, and act on these issues, what is there to celebrate? For me, September 16, 2013 is a day for sober reflection. Why have we as a nation come to this state of affairs?–Din Merican

September 15, 2013
Latest Update: September 15, 2013 08:26 pm

A New Plan for All, or still just for Cronies

by The Malaysian Insider

Najib announcing a slew of new programmes to boost the Bumiputera economic agenda at UiTM in Shah Alam yesterday. The Malaysian Insider pic by Afif Abd Halim, September 15, 2013.The party never ends for UMNOputras. Never. It is one continuous gorge at the buffet table, funded by Malaysian taxpayers.

Sure, it is couched in the language of a national agenda; to help Malaysia achieve the target of becoming a developed nation by 2020; to help Malays obtain jobs, houses and narrow the income gap between the have and the have-nots. Blah, blah, blah.

Whenever the government splashes money on programmes and projects, it is the rich and connected who benefit most. The rest feed on scraps.

The New Economic Policy made millionaires of some pretty pedestrian UMNO politicians and their cronies. The continuation of the NEP under the name of the National Development Policy turned the millionaires into multi-millionaires and we can be sure that the RM9.2 billion to be spent by Datuk Seri Najib Razak under the latest Malay-only initiative or NEP2 will make the plunderers into the super-rich class.

Yes, some Malays will be able to own houses under the affordable housing scheme but the interest-free loan or subsidised repayment scheme will be nothing compared to the obscene profits the politician and his property developer nominee will make from taking part in the housing project.

Similarly, some Malay graduates will become more employable after attending a crash course in English but their happiness will be outdone by the select few who will make millions from delivering the training modules and building training facilities.

There are so many things wrong about the government’s decision to reward its loyal voters and constituents with this new Malay agenda. One, the funds to be used by Najib and gang are from all taxpayers, not from the UMNO endowment fund or from the annual Perkasa subscription. Chinese, Indians, Punjabis and others pay taxes and are entitled to reap the benefits when taxpayer funds are used for government projects.

It is dishonest for the government to say that non-Malays will not lose out under this new affirmative action programme. Of course, they will. You are essentially taking what Samy and Chua contributed into the common pool and only rewarding Abdul.

Two, the affirmative action plan for Malays and Bumiputras assumes wrongly that Chinese and Indians and Punjabis and Eurasians are all living in the lap of luxury.

Just take a stroll around Kampung Medan on the outskirts of Kuala Lumpur and you will find Indians in abject poverty.Go into Salak South and Jinjang and you will find Chinese families struggling to make ends meet.

Three, mediocrity should never be rewarded or excused so easily. And this is what the government is doing by cobbling together another Bumiputra-first policy.

Dr MLet us take the issue of making Malays employable. Who dumbed down the Education system? Who threw out English as the medium of instruction? Who chose the easy path and set up more universities, turning tertiary institutions into nothing more than degree mills? Who scrapped the policy of teaching Maths and Science in English?

And now, after a catalogue of mistakes and mediocre decisions, the government says it has a problem on its hands: Malay graduates who are unemployable. The troubling fact: the government that put the Malay community in this mess is now saying it has got the silver bullet.

Nothing irks intelligent people more than when government practises deceit. Yesterday was all about loading up the gravy train for the UMNOputras once again.

Along the way, the people really in need of help will feast on the crumbs.

Al- Jazeera TV– Interview with Hussain Najadi

August 2, 2013

Al- Jazeera TV– Interview with Hussain Najadi

The show goes on, says Pascal Najadi in an e-mail to me:

Listen to this interview with Hussain Najadi by Al-Jazeera.

The late Hussain was a man of vision and true grit. I am confident that Pascal will carry on where his father left off. I wish him all the best in his endeavour.–Din Merican

It’s Time for Ostrich Najib to get real: Pay Attention to Our Finances

August 1, 2013

MY COMMENT: What does it take for Najib as Finance Minister to realise that heOstrich Head in the Sand has mismanaged our Treasury. The problem is that our Finance Minister was born with a silver spoon and cannot connect with ordinary Malaysia who will suffer the most when the country is in financial crisis. Maybe he will wake up when a serious fiscal crisis hits our country. Even then I am not sure since he does not know hardship as everything was handed to down to him on a platter.

Our civil servants, especially those in the Ministry of Finance, will only react when the government is unable to pay their salaries and other perks. Otherwise, they wont care. Truth be told. We cannot continue to spend and spend to the nth power as if there is no tomorrow. Payback time is not far and we will have the bear the burden of lax financial management soon enough.

Najib is the worst Finance Minister since Independence. He has no clue about being prudent and responsible with our money. Under his watch over the Ministry of Finance, the Malaysian ringgit  has hit a 15-year low against the Singapore dollar and weakened noticeably against the greenback. When Tun Tan Siew Sin was Minister of Finance and Tun Ismail Mohamed Ali was Bank Negara Governor, the two currencies were at par with each other. –Din Merican

It’s  Time for Ostrich Najib to get real: Pay Attention to Our Finances

NajibPrime Minister Najib Abdul Razak has been accused of pretending that his administration had maintained a “healthy debt-GDP ratio” in view of the latest Fitch Rating’s downgrade of Malaysia’s economic outlook from “stable” to “negative”.

In a press release today, PKR de facto leader and Parliamentary Opposition Leader Anwar Ibrahim said that facts show that the Federal government’s guaranteed debt under the Najib-administration had rose to nearly RM150 billion in 2012 from RM96.9 billion in 2010, which would definitely hurt the economy.

“How much longer does Najib want to be the proverbial ostrich in the sand by pretending that his administration’s mismanagement of public finances has no significant impact on the economic outlook?

“No amount of creative accounting practices can change our financial red to black,” DSAIsaid Anwar.  Fitch Ratings had noted that federal government debt had rose to 53.3 percent of GDP by end-2012, up from 51.6 percent a year before and 39.8 percent by end-2008.

A 19 percent rise in spending on civil servant wages due to the general election had also contributed to the widening budget deficit, it noted.

Hidden debt

Anwar said Pakatan Rakyat had consistently maintained that the federal government does not practice financial prudence, accountability and transparency, to which the Najib Administration responded by calling critics traitors.


National Debt

“Instead of taking cognisance of the legitimate concerns and rectifying the situation, Najib has plunged the country into greater fiscal deficit, eating into our current account surplus and ignoring the clear signs of structural weaknesses,” he said.

Instead, he said the Najib administration had been sweeping “financial dirt” under the “off-balance sheet carpet”. Unless urgent remedial action is taken, Anwar warned that the culture of reckless spending, opaque government procurement and privatisation processes will remains the hallmark of Najib Abdul Razak’s “transformation” government.

“Let the government be warned that this cannot be allowed to continue. As the management of the nation’s public finances is not a game of one-upmanship. We urge Najib to stop grandstanding and immediately step up to the plate to put the nation’s and the people’s interest above self and partisan interests,” he said.


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