No Longer Carrefour in Malaysia, now Aeon from Japan

November 1, 2012

No Longer Carrefour in Malaysia, now Aeon from Japan

by AFP

PARIS — French retail giant Carrefour said Wednesday it had sold its network of stores in Malaysia to Japan’s Aeon for for an enterprise value of 250 million euros ($324 million).

“The transaction is part of Carrefour?s strategy of refocusing on its core activities and allocating its resources to mature countries where it occupies strong and established positions and emerging markets where it has strong growth potential,” the French retailer said in a statement.

An enterprise value usually includes the value of the debt of the company being acquired minus cash in the business.Carrefour said Aeon would gain a leading position in the Malaysian market with the sale.

With 26 hypermarkets, Carrefour was the fourth largest retailer in Malaysia with net sales of 400 million euros in the year to June.A major retailer in Japan, Aeon already has 29 stores in Malaysia.

Carrefour, the world’s second-biggest retailer by sales after Walmart, has been seeking to rejuvenate its performance which has been held back by the slowdown in its core European markets.

The shakeup and refocus of its operations helped generate a 2.1 percent-increase in third-quarter sales.Earlier this month sold off its operations in Colombia for an enterprise value of 2 billion euros.


Koon Swan honored

October 31, 2012

Koon Swan honored for Contributions to Politics and Business

by Teoh El Sen@

Former MCA Chief Tan Koon Swan will be awarded a “Lifetime Achievement Award” for his contributions to politics and business at the 4th World Chinese Economic Forum (WCEF) next month, announced MCA President Dr Chua Soi Lek today.

Tan will be among seven others to be conferred the award at WCEF which will be held in Melbourne, Australia starting November 12.

Congratulating Tan, Chua said:”It is time for what we call redemption. He has gone through a very difficult time and he deserves the award. The prosecutor in his case has admitted to being wrong and has exonerated him… time has proven that he (Tan) is innocent.”

Chua added that it was high time that Tan, who he described as a “well-known corporate figure”, have his hard work and contributions recognised.

The Singapore Commercial Affairs Department (CAD) in 1985 slapped Tan with 15 charges, including criminal breach of trust (CBT) and share manipulation following the collapse of Pan-Electric

Industries, which temporarily halted the Malaysia and Singapore stock exchanges. Tan, who had a stake in Pan-Electric, was found guilty and jailed two years. He was MCA President between November 1985 and September 1986, before quitting after the scandal.

Glenn Knight, then Director of CAD, in his recently-launched book, “Glenn Knight: The Prosecutor”, apologised to Tan for the “wrongful prosecution”. In his words, Tan was “technically an innocent man”.

Knight’s book was disputed by Singapore’s Attorney-General’s Chambers (AGC), which said that Tan’s conviction stood and he remains guilty of the crime that he had admitted to.

Others receiving the lifetime awards are Dr Jonathan Choi– Chairman of the Chinese General Chamber of Commerce (for Community Leadership); Jannie Chan – Vice Chairman of The Hour Glass Ltd & President, ASEAN Business Forum(for Women Leadership);Councillor Ken Ong – Melbourne City Council (for Community Leadership); Jenny McGregor – Founding Chief

Executive Officer, Asialink Centre, Australia (for Leadership in Asian Studies in Australia); Vincent Lee Fook Long – Executive Deputy Chairman, The Star Publications (Malaysia) Berhad(for Media and Communications); Vincent Lo – Chairman, Shui On Group (for Leadership in Property Sector); Liew Kee Sin – President/Chief Executive Officer, SP Setia Berhad Group (for Property Development Leadership).

Meanwhile, Chua said the WCEF, being the first time held outside of Malaysia, was a very significant event for both Asians and Western countries.

“The way to go, as Australia has identified, is to maximise and tap into the growing economy of Asia, China, India, Japan, and South Korea. It is often said that the centre of gravity of the economy has shifted from the West to the East.

“The economic growth in the next few years is very positive about this part of the world, rather than America and European Union, who have not put their house in order. Whereas in Asia, growth has remained uninterrupted,” he said.

The Last of the Malaysian Newspaper Mohicans

October 30, 2012

My Friend Syed Nadzri: The Last of the Malaysian Newspaper Mohicans


Syed Nadzri Syed Harun, Group Editor of the New Straits Times, said farewell to the editorial staff this evening, at a sombre tea party on the 2nd Floor.

His impending departure had been talked about for the past month and word was that he would be taking up a directorship at a large corporation, but for the moment that is just shop talk.

The newsroom focus is more about who might replace him: next in rank is Managing Editor Nuraina Samad.

For the past year, however, it has been Group Managing Editor Jalil Hamid, former Press Secretary to the Prime Minister, who has been calling the shots in the newsroom, as Ahmad Talib did before him and occasionally still does.

Syed Nadzri’s departure comes against a backdrop of constant sniping from pro-UMNO bloggers, especially those allied to Mahathir Mohamad as well as Najib Razak, determined to root out anyone still at Balai Berita seen to be allied with former Deputy Chairman Kalimullah Hassan.

Syed Nadzri rose through the ranks, beginning as a sports reporter with The Star before he moved to Balai Berita on the News Desk. Even as group editor, he would often be at a terminal near the desk in the afternoons, going through copy, rather than in his office.

Last month he was honoured by the National Press Club with its Lifetime Achievement award for his contributions to the industry.

With his departure, the NST has probably seen the last of the professional journalists holding the position, although the appointment of NST editors has always been subject to approval by UMNO Presidents.

Political appointees as group editor-in-chief, responsible for both the NST and Berita Harian, have been the NST editor de jure for many years, with the NST Group Editor (editorially responsible for the New Straits Times and New Sunday Times) reduced to a figurehead position responsible for day-to-day affairs.

Now with the New Straits Times Press swallowed up into the bowels of Media Prima, with television revenues covering for NST losses, and the politicisation of the group media in preparation for the coming general election, it remains to be seen whether there will still be a group editor’s position to be filled.But they do say nature abhors a vacuum.

Ali Hamsa touts Malaysia’s PPP Model in India

October 26, 2012

Ali Hamsa touts Malaysia’s PPP Model in India

Bernama reports:

The public-private partnerships (PPP) initiative,  one of the major transformational approaches in the public sector in Malaysia, has worked well for the country’s development, says Chief Secretary to the Government Dato’ Seri Dr. Ali Hamsa.

The PPP model allows government allocation for development projects to be reduced and it can shift its attention to projects that will be implemented and funded by the private sector.

“The PPP experience has shown that truly business is no longer usual. It has also enriched both the public and the private sector, especially by sharing of best practices,” he said at the biennial conference of the Commonwealth Association for Public Administration and Management. His presentation was titled “Reaffirming the Public Service Ethos: The Malaysian Experience”.

“Within a short period of time PPP has become a major mode of private sector driven financing for development projects,” said Ali. In just two years, it has attracted RM65 billion in private investment.

He said while government contracting with the private sector is not new, the emergence of public-private partnership as a form of policy implementation and service delivery was a new development for Malaysia.

“PPPs present new challenges in terms of contract specification, accountability arrangements and governance mechanisms,” he said.

Ali also said the Public-Private Partnership Unit (UKAS), which leads PPP implementation, has taken proactive steps to enhance integrity within its organisation.

Among the major functions of UKAS is to manage the Facilitation Fund, negotiating concession terms and conditions for PPP and the Facilitation Fund and implementing value management process.

UKAS has put in place specific measures to ensure that its function, roles and activities are implemented transparently and with integrity and, adhered to all specified regulations, he added. — Bernama

Keeping Economies Ticking

October 4, 2012

Keeping Economies Ticking

by Dr. Zeti A.Aziz, Governor, Bank Negara Malaysia

The global economy has now entered into a period of slower economic growth despite the significant and wide-ranging pro-growth policies that have been implemented across the world. Why then has the world not been able to achieve a sustained long-lasting recovery? What has been holding back this prospect?

In addition, rapid and significant changes in the global environment have also brought with them new demands and new challenges. Our understanding of the factors that are containing the global growth prospects and the consequence of the new environment will better position us to face a fundamentally new landscape and to manage its challenges.

The topic on the big shift that is being experienced in the world today is indeed relevant. While the international and national attention is currently focused on the immediate challenges of the global environment, equally important, however, is to recognise the long-term changes that will reshape our future.

My remarks today will focus on the immediate challenges of the global economy, taking into account fundamental factors that are likely to affect the growth outlook. The second part of my remarks will touch on the key imperatives to best prepare us for the new global landscape, so as to be better positioned to succeed and survive in this new environment.

Policymakers in the world economy have continued to be confronted with policy challenges since the onset of the global financial crisis. While the policy responses have focused on addressing the origins of the crisis — on the extensive build-up of excesses, over-leverage and over-indebtedness of the private and public sectors, breakdown in the functioning of financial markets, loss of competitiveness, and loss of confidence in the financial system and the economy, the concern now is on achieving a sustained economic recovery that is accompanied by job creation.

Half a decade into the crisis, and this has yet to be achieved. In recent months, the global economy has again experienced a broad-based moderation in growth from an already modest pace. This has stemmed largely from renewed weakness of recovery in several of the major advanced economies.

In the United States, the significant monetary accommodation, reinforced by the large-scale financial market interventions and the significant fiscal stimulus during the early stage of the crisis, has averted an economic depression, but it has not, however, brought about a sustained recovery.

In Europe, an economic contraction is being experienced, resulting from the combination of fiscal austerity, tight credit conditions, and continued uncertainty and volatility in the financial markets. While important progress has been made recently in Europe on the arrangements that will contribute to containing significant high-risk events, and in paving the way towards a more sustainable and integrated European region, its immediate-term effects on economic recovery is likely to be limited.

 There are several factors that are containing the potential for sustained growth in these economies. This can be classified into seven categories.

First is the gradual process of unwinding the excesses that had been built up over several years. These include the high degree of indebtedness by households, the financial sector and public sector.

Second is the significant long-term structural adjustments that are needed to regain relative competitiveness. This will involve greater efficiency and innovation within existing industries, and the shifting of resources out of industries in which these economies no longer have comparative advantage into new industries which have comparative advantage.

While the former may result in economic gains, these may not necessarily be accompanied by increased employment, and the latter may result in temporary economic dislocation and increased unemployment. Thus, even if such policies were to yield results, they may not produce a robust recovery of economic activity and a reduction in unemployment in the short and medium term.

The third is the need for the introduction of new institutions and the transformation of existing institutions to render them relevant to the changed environment. While existing institutions may need to be transformed, merged or even dissolved, new institutions may need to be established to facilitate management of the new environment. The same will hold true for businesses if they are to remain competitive and, in particular, if they should venture into new areas and across borders.

The fourth category of factors concerns economic and financial management. Macroeconomic policies in most of these economies have been pursued to the limit, rendering limited policy flexibility. Monetary policy accommodation has resulted in substantially low interest rates which have been brought down to near zero levels, while the cumulative fiscal expansion during the period 2007-2009 has amounted to an average of four per cent of gross domestic product.

In addition are the potential intended or unintended consequences of the international regulatory reforms. The reforms have focused on building a stronger global regulatory framework and raising the resilience of the banking system. While still in their early stage of implementation, concerns have been raised on their implications for the cost to both the financial intermediation process and to the real economy.

An important change in our environment both at the national and international levels is the increased interconnectedness within the financial system and the global economy. This greater interconnectedness, and hence the greater interdependence, requires having in place the governance arrangements for greater coordination.

Fifth is that these arrangements have not been put in place  at the national and international levels.  In addition, corporations or organisations in this new environment can no longer function by departments or sections, but as an integrated organisation.  This also requires new governance arrangements.

For an economy or a financial system, we have seen how a crisis in one segment was thought to be confined, but it had pervasive consequences on the entire financial system and the economy.

Sixth, is that despite the increased connectivity of the world, as exemplified by the swift spread of the financial crisis and economic shocks throughout the global economy and international financial system in 2008, the institutional arrangements for the cross-border dimension of policy-making have yet to reach the levels commensurate with the degree of economic and financial integration in the world.

Finally, seventh, the response to the crisis needs to be comprehensive. While addressing weaknesses and lapses is important, equally important is the enabling environment for the measures to yield results. Pro-growth policies are vital for this.During the Asian financial crisis, Malaysia gave equal attention to financial sector resolution to restore the financial intermediation process and thus credit supply. Equally, emphasis was placed on addressing the problems of borrowers.

Debt restructuring and mechanisms for support were put in place for the corporate sector, small and medium-scale enterprises and the household sector. This supported growth of the economy and at a fraction of the cost of the financial sector resolution.

In this current environment, the emerging economies are challenged by both the weakening global growth and the spillovers arising from the policy actions in the major advanced economies. While continuing to register reasonable economic growth, the momentum of the growth has moderated in most emerging economies, affected by slowing external demand and uncertainty in the financial markets.

Nevertheless, ongoing shifts in the emerging economies have contributed to sustaining our econo-mies. It is the growing importance of domestic demand in most of Asia’s emerging economies that is creating a huge cumulative domestic market, and this is resulting in greater regional integration with an increase in inter-regional trade.

Greater regional and inter-regional integration of the emerging economies through the proliferation of interlocking networks of trade, investment and finance, has contributed to provide mutually reinforcing support to economic activity in the emerging economies.

In Malaysia, the decline in external demand while affecting overall growth, has been partially offset by stronger domestic demand, following the robust resumption of private consumption and investment activities, and the diversification of exports to the regional economies. In addition, the wide-ranging reforms since the Asian financial crisis have resulted in strengthened financial intermediaries and a more developed financial system. This has allowed for the economy to better intermediate the volatile cross-border flows without disruption to the financial system.

Also, Malaysia’s economic flexibility has allowed us to shift resources from industries in which we no longer have comparative advantage to new areas of growth. It is these factors that will continue to underpin the positive growth outlook of the Malaysian economy into the near to medium term.

The changing global landscape presents significant new challenges for both the developed and emerging economies. Important is to be well-positioned to manage the new risks and to build the necessary capability and capacity to have the agility and flexibility to adjust to the rapidly changing conditions. As the emerging economies aspire towards achieving higher levels of income and living standards, a different path from that which led the way for the advanced economies will now need to be considered.

The current global financial crisis and the Asian financial crisis have provided us with many important lessons that should form the underpinnings for our business models and our policies for growth and development. A key priority of policy should be to balance the need of ensuring sustained stability while having in place the necessary foundations to secure long-term development.

Avoiding and preventing the build-up of excesses is a critical imperative. The recent crisis has forcefully shown that markets cannot be exclusively relied on to rein in excesses. Market discipline needs to be complemented by policy interventions to effectively manage the build-up of imbalances in the financial sector and in the economy.

In the financial system, this involves putting in place more comprehensive regulatory frameworks, complemented by enhanced surveillance arrangements and relatively more intrusive supervisory oversight. It also involves having wide-ranging policy tools, including macro-prudential policies, to mitigate and manage risks emanating from excesses in the system.

As the experience in advanced economies has shown, the source of imbalances can arise in a number in segments of the economy, including from the household, the financial and the public sectors. This underscores the importance of prudence; to ensure that growth is underpinned by sustainability and not excesses. A further lesson is to build buffers during the good times to better position us to withstand future shocks.

Equally important for policy in the emerging economies is to put in place the necessary foundations for long-term growth. The first is to create a competitive environment that allows for greater economic flexibility. This includes reforms for a sequenced and gradual removal of distortions prevailing in the economy, lowering the costs of doing business, and to streamline the involvement of the public sector in businesses.

The second is to accord importance to investments in modern infrastructure, and to enhance technological readiness that will enable the economy to prepare for the changing economic and financial landscape.

Another area of significance is to ensure balanced and inclusive development. Indeed, in the emerging economies, this is becoming increasingly urgent as the benefits of rapid development have not been evenly distributed, and income inequality has risen further even in the developed economies. Going forward, economic empowerment will increasingly depend on access to technology, high quality education, healthcare and social security systems.

Equally important is greater financial inclusion. Without policy intervention, the trend towards greater inequality could potentially intensify. In Malaysia, many of the necessary policy strategies for long-term growth in these areas of significance are already at various stages of implementation, with considerable progress in certain areas.

As the technological gap between the emerging and advanced econo-mies converges, it will become increasingly critical for an emerging economy like Malaysia to transition from growth based on capital accumulation, to growth based on productivity improvements. In addition, the rising global inter-connectedness characterised by the emergence of highly intricate networks such as the increase of global manufacturing supply chains, increases the susceptibility of industries to both cascading failures, as well as to the rapid re-orientation of business competitiveness through disruptive innovations such as in the mobile computing industry or the possible rise of additive manufacturing.

To advance forward in this direction, human capital development is pivotal. It leads to greater value creation, enhanced technological readiness and the capacity to innovate and adapt — all of which are key for firms to operate in the new landscape. Productivity is thus not only a function of physical technology, but of talent development, given the increasing dynamic and complex environment.

In the area of regional collaboration and cooperation, the Asian region is well ahead in the areas of surveillance arrangements, financial safety nets and crisis management. These frameworks and arrangements were established in the period of relative stability since the Asian financial crisis. The establishment of regional arrangements and platforms, including the building of regional financial infrastructures and markets, is not only aimed at facilitating the efficient intermediation of financial resources in the region, but also at safeguarding financial stability in the region.

This trend paves the way for coordinated policy actions to manage and mitigate the risks and vulnerabilities to the region. Given our diversities, there is also tremendous opportunity for the private sector, in particular in Asean, to integrate further in the areas of trade, investment and finance, and to leverage on the respective comparative advantage that exists in the region.

While we could best prepare for the future using all the knowledge that we have, the transition towards the new landscape will continue to be paved with uncertainty and new challenges. Further, there will be increasing complexity in the functioning of the global economy and international financial system.

In this environment, perhaps the best compass for policy-makers and businesses is one that is centred on principles; in particular, on ethics and integrity. Recent experiences in the advanced economies have put this into question. This needs to be restored.

The next generation of policy-makers and leaders in business will be defined not by the power they hold and the amount of wealth they amass, but by the stewardship they exercise in serving the people and the responsibility they demonstrate to their communities

*Governor Zeti’s Address at the Khazanah Megatrends Forum 2012 on  October 2, 2012

Reckless Government Spending no longer affordable

September 28, 2012

BUDGET DAY: Reckless Government Spending no longer affordable

by Koh Jun Lin(00-27-12)

The country’s growth has been driven by “goodies” and infrastructure projects, both of which are bad news for Malaysians because it increases government debt, said Kuala Selangor MP Dr. Dzulkefly Ahmad.

NONEHe said last night that on top of the government debt of RM477 billion (or 53 percent of the gross domestic product, out of the statutory limit of 55 percent), the government has also assumed RM116 billion in liabilities from statutory bodies and government-linked corporations.

This, combined with widening income disparities and over-dependence on oil and gas revenues would not allow for reckless spending, said Dzulkefly, who is also PAS Research Centre Head.

“Even when it is close to the elections, it would not allow them to be recklessly giving goodies and handouts, as free as they would like to. But of course, it goes both ways and Pakatan Rakyat should not also do that,” he said, before detailing the coalition’s alternative budget, which aims to achieve 5.2 percent growth while also slashing the budget deficit by 3.5 percent.

Dzulkefly was speaking as a panellist during a pre-budget forum organised by Parti Sosialis Malaysia (PSM) at the Kuala Lumpur and Selangor Chinese Assembly Hall.

He also told the 50-odd members of the audience that an economic boom-and-bust cycle normally last about ten years, but Malaysia has been having budget deficits for 14 consecutive years, which he described as “strange”.

“We have seen the boom and the bust times, while others – even Indonesia, Thailand and Australia – are having good times and enjoying not just a balanced, but a surplus budget…That tells a lot about how reckless and unscrupulous (we are) in terms of fiscal discipline in the development that we all choose,” he said.

Issues of competitiveness, sustainability and the poor

NONEEarlier in the forum, political scientist Dr. Ong Kian Ming (right) gave the audience a run-down of the statistics to paint a grave picture of the economy.

This included a relatively high income inequalities, “pockets” of poverty especially in rural areas, a drop in the Global Competitiveness Report rankings and the Corruption Index and poor achievements in education.

All these take place while the government debt increases from RM267 billion (47 percent of the GDP) to the current RM477 billion, as well as increasing pollution.

“From these three issue of uplifting the poor, competitiveness and sustainability, they are actually very serious concerns. It has to be addressed not just by the budget, but also by larger government policies,” said the academician, who had recently joined DAP as an election strategist.

NONEMeanwhile, Sungai Siput MP Dr Michael Jeyakumar Devaraj (left) told the audience not to expect a good budget from the government because “the ruling elite in the BN (Barisan National) has not got clue there is a problem,” he said.

He said this could be seen from the government’s talk of liberalisation, privatisation, and lowering corporate taxes to draw investors, and questioned whether such measures are still viable.

The PSM politician said measures to protect workers rather than capitalist, such as a retrenchment fund, are needed instead in order to fuel domestic consumption.

This would in turn encourage investors and entrepreneurs to produce goods and services to meet demand, rather than investing excess funds in financial speculation.

No plans to deal with depletion of oil and gas reserves

The last speaker, Malaysiakini chief executive officer Premesh Chandran, said that Pakatan Rakyat’s policies thus “had done well, but could do better”. Some areas of improvement include coming up with concrete plans for improving public transportation, making the spending of constituency allocations transparent and address healthcare issues, particularly in Pakatan Rakyat-led states.

Premesh also warned that a “perfect storm” is forming, because Malaysia’s population is ageing and does not have the wealth (mainly oil and gas) to support them, and there are no plans to deal with the eventual depletion of oil and gas reserves.

Prior to the start of the forum, a 30-minute candlelight vigil was also held outside the venue in solidarity with Suaram. The human rights NGO is the subject of several ongoing investigations, which it claims to be politically motivated.

It is Time to Hold Our Sports Officials to Account

August 13, 2012

It is Time to Hold Our Sports Officials to Account

by Tan Siok Choo@

IF officials involved in Malaysian sports were bonds, far too many are likely to be classified as junk. Only a handful could conceivably qualify for a top notch rating of AAA.

In recent months, some notable decisions were irrational, if not ludicrous. One example was allowing our strongest Olympic gold medal contender, Dato’ Lee Chong Wei, to take part in the Thomas Cup.

Given that the Thomas Cup is a team event and Malaysia’s chances of winning this year were poor, was it worth jeopardising Chong Wei’s bid to win the country’s first gold medal in the Olympics for a non-achievable victory?

He seriously injured his ankle at the event held in late May. Despite a shortened training period, Chong Wei won the first game against gold medallist Lin Dan and lost by just two points in the third deciding game in the finals.

This raises one poignant question: could Chong Wei have won a gold medal if he hadn’t been injured?That 29-year-old Chong Wei is now being asked to consider competing at the next Olympics in 2016 also highlights another issue – the near-total lack of succession planning in sports.

In contrast, China’s Chen Long who won the bronze medal and has often been touted as Lin Dan’s successor is only 20 years old.

Malaysia’s lack of a pipeline of world-class sports individuals is due to officials’ over-emphasis on short-term gains at the expense of long-term growth.

For example, instead of awarding wild cards to promising individuals for the London Olympics, less credible criteria appear to have been used. As Head of Mission Tun Ahmad Sarji said “there is no point sending an athlete who is almost at the end of his or her career.”

Another example of misplaced priorities was the refusal by state officials from Kedah, Negri Sembilan, Penang, Selangor and Terengganu to allow their athletes to take part at the World Junior championships in Barcelona.

Their refusal stemmed from the fact the date of the global under-19 meet clashed with that of Sukan Malaysia (Sukma) held in Kuantan last month.

What is the rationale for giving priority to a national event held every year over a global event that would have provided excellent exposure for young athletes?

That America’s 17-year-old Missy Franklin and China’s 16-year-old Ye Shiwen won gold medals in swimming in the Olympics emphasises the fact that youth is increasingly an asset in global sporting achievement.

Admittedly, not all officials deserve to be rated below investment grade. In London, Pandelela Rinong won a bronze in diving – the first Olympic medal for the sport and the first won by a Malaysian woman. That she is only 19 years old means she can be a contender for the 2016 Olympics.

Like Chong Wei, Pandelela exhibited steely determination to fight and win the bronze medal after her first dive relegated her to 10th position among 12 contenders.

Pandelela’s success also suggests the official tendency to often short-change women in terms of funding, foreign coaching and participation in overseas meets is both myopic and self-defeating.

That Malaysia’s divers also won medals at the Commonwealth Games, Asian Games and world championships is due to the decision by the Amateur Swimming Union of Malaysia and the National Sports Council to hire a foreigner as coach – Yang Zhuliang from China.

Yang’s success in diving’s prompts the question whether badminton – where coaches like Morten Frost Hansen (left), Fang Kaixiang and Rexy Mainaky left in unhappy circumstances – would have done significantly better if foreign coaches had been given the same clout over players as Manchester United’s manager, Sir Alex Ferguson rather than treated like disposable cutlery.

Although squash isn’t an Olympic event, Dato’ Nicol David has dominated the sports. Her longevity as the world number one is a tribute to her undeniable talent and single-mindedness in achieving global success.

However, even gifted individuals require good coaching and early exposure in the international arena. Nicol was a double world junior champion. At 23, she became the youngest world number one in January 2006.

Going forward, top sports officials should undertake a cost-benefit analysis of their financial support for sports associations. Future allocations should be based on results achieved per capita.

If 10 divers, trained by one foreign coach, won one bronze in the Olympics, then diving deserves a bigger allocation than other sports.

After the badminton final in London, Chong Wei apologised for his failure to win a gold medal. Chong Wei’s apology wasn’t necessary. It is Malaysia which owes Chong Wei and other sports personalities an apology – for allowing officials unfettered discretion to mismanage their charges and their sports.

Opinions expressed in this article are the personal views of the writer and should not be attributed to any other organisation she is connected with. She can be contacted at

Scare Tactics Won’t Work with Malaysian Voters

July 25, 2012

Scare Tactics Won’t Work with Malaysian Voters

by Oon Yeoh (07-25-12)

WHEN will elections be? The latest murmurings are that it could be in September. Who knows whether there’s any truth to that. But there are signs that elections are near. Lately, there has been a lot of talk about communist infiltrations and warnings of May 13.

I find it amazing that some politicians still think such issues resonate with today’s voters. Let’s deal with the first issue: Communism. Seriously, is there still a single person in Malaysia today who’s afraid of communism?

Let’s look at the communist countries. I can only think of two that are still sticking to that discredited political system: Cuba and North Korea. Is there any chance of Malaysia becoming like Cuba and North Korea? It’s ridiculous even to ask such a question.

OK, what about China? It’s a communist country right? From a political standpoint, yes. But from an economic perspective they’ve opened up so much, Mao Zedong wouldn’t recognise it. Hey, that iPad you’re using was made in China.

But some political elements obviously think that the Red Scare is still relevant. First, you have the allegation that communists have infiltrated BERSIH. Next, you have accusations that those same communists (from Cuba or North Korea, I’m not sure) have infiltrated Pakatan Rakyat. Can somebody tell these guys it’s 2012?

I’m not scared of communistic elements in our midst any more than I’m scared of ghosts. Why? Because I’m not convinced they exist.

Second issue: May 13. Yes, those racial riots were real and bloody. But they happened in 1969. Its ghost was exorcised a long time ago. Any remnants of it were dispelled after March 8, 2008.

Yes, there are voters old enough to remember May 13. But they have seen how Malaysia has changed, grown and matured over more than four decades since.These people know full well that the situation today is nothing like that of 1969.

As for the youth of today, even the Reformasi movement of the late 90s is too far back for them to relate to it. Operasi Lallang in the late 80s? They probably think it was a gotong-royong exercise. May 13, 1969 – that’s so far back that Lim Kit Siang was then an up-and-coming politician who had just been elected to Parliament.

What relevance does May 13 have to today’s political scene? Former Prime Minister Tun Dr Mahathir Mohamad put it best when he said that back in 1969, if you were to damage a fancy car, you could be sure you’re destroying a non-Malay’s vehicle. But today, if you throw rocks at a Mercedes-Benz, a BMW or a Ferrari, for that matter, you could very well be destroying a Malay person’s car.

The same applies to a house. If you torch a fancy bungalow today, you can’t be sure whether it’s a Malay, Chinese or Indian home. Economic inequality might still exist, but the disparity in wealth among communities has been greatly reduced compared to four decades ago.

But it’s not just that everyone’s better off financially today. People are also more rational and less likely to react to provocative acts.

Remember the cow head incident? And what about those pig heads thrown in front of a mosque? And then there was arson at a church. None of these potentially incendiary acts led to riots.

Middle Malaysia realises that these are the desperate acts of a few extreme elements in our society. People today are more educated, more aware and more enlightened. They will not fall for such machinations.

The legendary Sir Gerald Templer, who fought real communists in the early 1950s, famouslyremarked that the answer lies in “winning the hearts and minds” of the people. And Templer, who was the British High Commissioner in Malaya at the time, achieved that by instituting political reforms that captured the imagination of the people.

There’s something to be gleaned from Templer’s strategy although the war today is no longer fought in the jungle but through the ballot box. You don’t win the hearts and minds of people by scaring them with threats of a potentially bleak future. You do so by giving them hope for a better tomorrow. The coalition that does that best will be the one that wins over today’s electorate.

Oon Yeoh is a new media consultant. Comments:

Water in Selangor: A Crisis of Corruption and Cronyism

July 23, 2012

Water in Selangor: A Crisis of Corruption and Cronyism

by Nathaniel Tan(07-21-12)@

Water, water, every where,
And all the boards did shrink;
Water, water, every where,
Nor any drop to drink.

- Samuel Taylor Coleridge, The Rime of the Ancient Mariner

COMMENT: Have you ever been made to buy something you didn’t need? Or worse, have you been deceived, intimidated and bullied into making an entirely unnecessary, overpriced purchase?

It would appear that this is what we are facing with Syabas, this “water crisis” it keeps getting excited about. However, if we examine the hard facts closely, we will see that the only crisis we are facing is an all too familiar crisis of corruption and cronyism – centred tightly around the RM8.65 billion Langat 2 Water Treatment Plant.

Do we really need the Langat 2 plant?

We all know politicians use taxpayer-funded mega projects to make money. The bigger the mega project, the bigger the kickbacks – and RM8.65 billion is plenty big.

With that much money at stake, the last thing ‘well-connected’ individuals care about is whether the project is actually needed, or whether it truly benefits the rakyat or not.

NONEThe Selangor government is all for preventing this RM8.65 billion gravy train from riding out, and its position is simple: there is plenty of water in Selangor, and if there is any shortage at all, it is due to failure, or worse, failure on the part of Syabas.

Here’s what Syabas doesn’t want you to know about this water “crisis”: it’s not about how much raw water there is (since the dams in Selangor are all clearly full); it’s about how Syabas is failing dramatically to efficiently convert enough of that raw water into potable water.

(Technically speaking, the main company responsible for treatment of water is Puncak Niaga Bhd, which in turn owns 70 percent of Syabas. Both companies are in essence run by the same people. For the purpose of this article, ‘Syabas’ refers to both Puncak Niaga and Syabas.)

Not all the raw water that goes into a water treatment plant becomes potable water – that is, water deemed fit to run in our taps at home. The technical term for the amount of raw water that is wasted due to inefficiencies in the water treatment plant is called “non-revenue water” or NRW.

32pct of water produced by Syabas is wasted

Syabas’ level of NRW is 32 percent. This means that a whopping one-third of the raw water that enters a Syabas water treatment plant goes entirely to waste.

Syabas must be congratulated here, for succeeding in wasting more water than Dhaka, Bangladesh, where the NRW is only 29 percent. Eastern Manila managed to bring down its NRW from 63 percent in 1997 to 11 percent in 2010.

pulau ketam klang water shortage 051108 01More developed nations have even lower levels of NRW – Germany’s NRW is only seven percent, while the Netherlands and Denmark have achieved NRW levels of six percent.

Perhaps this can be attributed to the fact that they are advanced, developed Western democracies? Oh, wait a minute, Singapore’s NRW is five percent.

It looks like under Syabas’ brilliant management, we have managed to waste six times more water than our neighbour to the south whom we like so much to make fun of. Thank you, Syabas!

There is also talk that Syabas is not given enough money to improve its services. However, the question is, would you give more money to a company that demonstrates zero ability to put that money to good use, and in fact has wasted away all the money that has already been given to it?

Quite simply put, all we need to do to ensure a sufficient water supply for the Klang Valley is to drastically reduce the amount of NRW. For that, we don’t need a RM8.65 billion water treatment plant, or to throw money at the problem – we just need cleaner, better managers.

Is Syabas turning off the taps?

It’s little wonder that Syabas has never had much incentive to improve its efficiency or quality of its service – for it does not have any competition. This simple fact has rendered many an industry in Malaysia completely defunct. Automobiles, airlines, telecommunications and power generation are all industries where cronies get rich, and Malaysians pay high prices for crap quality.

melaka pig farm demolition 050907 waste waterA monopoly like Syabas is able to take this game one step further. When you have complete monopoly over the water industry, you don’t have to wait for an actual water crisis to justify an RM8.65 billion white elephant mega project. Even in the midst of heavy rain every single day, all you need to do is turn off the taps, and voila – “water crisis”.

I think we’ve all noticed the increased frequency of water cuts in the Klang Valley recently. A simple question remains: are the taps turned off because of a water shortage? Or because some people want you to think there’s a water shortage?

Is this all to justify a RM8.65 billion water treatment plant that no one needs – a plant that might make a few lucky people extremely rich, while impoverishing the rest of the nation?

Is Syabas threatening us?

One of the ‘best’ quotes I have read throughout this saga comes from Syabas Technical Services Executive Director V Subramaniam, perhaps a minor pawn sent forth to spew such brilliant statements as:

“The water crisis at present is the result of a shortfall in treated water for distribution caused by the refusal of the state government to issue the development order for construction of the Langat 2 treatment plant.”

Does Syabas take us for dummies?

According to this logic, if the Selangor government approves the construction of Langat 2 today (a project that will take years to complete), then the water crisis will disappear tomorrow.

Sounds a little suspicious? Perhaps Subramaniam’s statement is technically correct, in that the state government’s refusal has indeed precipitated a ‘water shortage’ – except that he is silent on whether the said water shortage is natural – or manufactured by unscrupulous people to achieve even more unscrupulous ends.

Who is politicising the water problem? There should be a law against this sort of thing. Oh, wait. There is this thing called the Water Services Industry Act (WSIA), which was passed by the BN-dominated Parliament in 2006.

This law provided for the de-privatisation of the water industry and its return to the respective state governments, for privatisation had clearly proven to be a disastrous failure across the board.

The water industries of BN-led (for now) Malacca and Johor were successfully deprivatised following the gazetting of the WSIA. But what happened to Selangor post-2008?

Both sides like to accuse each other of ‘politicising’ the water problem, but when the facts show that the federal government had allowed deprivatisation in BN-held states while preventing it in Selangor, the truth becomes clear to all.

Let’s not forget that Syabas is run by Rozali Ismail, the ready-to-run-for-Parliament Selangor UMNO treasurer who, despite creating a spectacular failure of Syabas and being accused of using millions of Syabas’ funds to buy pipes from his own company in Indonesia, is still paid a salary of RM425,000 a month as CEO.

The Selangor government has openly stated that it plans to slash the monthly salary for this post by 90 percent. While Syabas is dead set on exponential increases of up to 75 percent on water tariffs, Selangor has pledged to cap any tariff increases to 12 percent. So, who is looking out for the rakyat, and who is looking out for themselves?

BN plundering before an inevitable defeat?

NONEMenteri Besar Abdul Khalid Ibrahim is the man most keen on the de-privatisation of the Selangor water industry and the takeover of Syabas by the state government.

This is the man who increased the cash reserves of the Selangor government five-fold from RM400 million in 2008 to RM2.1 billion in 2012.

Under UMNO and Najib Abdul Razak, the federal debt – a debt our children and grandchildren will have to pay – has since the year 2007 nearly doubled to RM421 billion this year.

Who do you think is better suited to run our water industry? Are we going to allow people who are bringing the nation to the edge of a real – not manufactured – economic crisis to bully us into footing the bill for a RM8.65 billion megaproject that nobody needs?

Are these high jinks the latest attempt – along with FGV, George Kent and the innumerable new spending initiatives the Prime Minister has recently announced – to bleed the nation’s coffers completely dry for personal gain before finishing a full term in office in 2013?

It seems the BN has serious fears of losing power, and is trying to take out as much as it can before having to face an angry electorate next year. If the BN was confident of a victory, surely the general election would have been held by now.In any case, the unscrupulous among us are welcome to play their games.

Turning off the taps and replacing the flow of water with the flow of painfully illogical arguments is less likely to pressure the state government to forsake the interests of the rakyat, and more likely to point the finger back at those truly responsible for scaremongering and criminal mismanagement.

Nazir Razak: Hardworking, Smart and Professional

July 2, 2012

The Financial Times Monday Interview: Nazir Razak

Nazir Razak: Hardworking, Smart and Professional

By Paul J. Davies (July 1, 2012)

Nazir Razak does not seem the “princeling” type, but then that is an accident of birth.

The 45-year-old Chief Executive of CIMB, Malaysia’s second largest banking group, is part of the country’s near “royalty” in the words of one investor.

Inside Malaysia, he is seen by some as an unofficial Finance Minister to the Prime Minister – his eldest brother, Najib Razak. Their father was Tun Abdul Razak, Malaysia’s second Prime Minister after independence from Britain.

Outside South-East Asia, however, many people may never have heard of him or CIMB. While he draws himself humbly as a small player getting his chance on a bigger stage, he has got there through an aggressive acquisition-fuelled expansion across the region.

The latest deal was to cherry pick a handful of investment banking businesses from Royal Bank of Scotland, the UK lender majority-owned by the government, in a cut-price deal. “I never thought this moment would come, where CIMB could get its hands on an asset like this at that value and have a good go,” he says of the RBS deal.

Mr Razak’s growing regional clout is winning him admirers among clients and rivals. Investment bankers in Hong Kong and Singapore say he is one to watch and CIMB the most likely Asian bank to become a true regional rainmaker.

But his proximity to power at home, in a country that ranked 60th in Transparency International’s corruption perception index, raises inevitable questions. Malaysians who are aligned with opposition groups or who have lost out on business to CIMB point to his government links as instrumental in his success.

Mr Razak does not deny that as head of a large company he holds some sway with political leaders, but only in so far as others in similar positions do. “We are a successful business that doesn’t get involved in that stuff [corruption],” he says. “But I’m not going to deny the fact that it is a problem.”

Pushed on his influence with the country’s Prime Minister, it is difficult to tell whether the family tie is a benefit or an irritant. His voice for once is slightly strained in reply: “I do have family occasions, but I wouldn’t say that I have more influence with the present PM than I did with previous PMs, if you like. Therefore, the relationship is more derivative of my position running the bank rather than family.” With a touch of pique, he adds that his brother has been leader only since 2009, while he has led CIMB’s investment bank since 1999. “But I suppose people forget that,” he says.

Mr Razak is soft-spoken and affable and he has a relaxed, natural smile. But the bank’s expansion, which since 2004 has taken its staff from 1,000 to 40,000 and its balance sheet from $4bn to $95bn, highlights a ferocious ambition.

In the small, careworn room in CIMB’s modest offices in a suburb of Kuala Lumpur where he is talking to the Financial Times, there hangs a large black and white photo montage commemorating the original formation of the bank in 1974. It was a venture between the national agricultural bank and the local Sanwa Bank with Baring Brothers and London Multinational Bank.

The attendees at the launch event were a mix of Malays, Sikhs, Hindus and moustachioed Englishmen in stiff suits, illustrating the cultural heritage of Malaysia and CIMB. Somewhat awkwardly, the man presiding over this ceremony, Mr Razak’s father as Prime Minister, was responsible for starting the positive discimination policies in favour of ethnic Malays that still provoke controversy in Malaysia today.

But Nazir Razak himself, whose part-British, part-Malaysian accent would not sound out-of-place in any of the countries represented in the photo, is proud of the bank’s diverse staff and management. It is one reason why he thinks cultural differences between his business and, for example, the Australian parts of RBS he now owns, should not prove problematic.

“Diversity is our second nature,” he says. “You look at the make-up of our community here and . . . the vast majority of my leadership team; they’re all very international people.”

Peers and rivals admire him for his equal comfort in south-east Asian and more Anglo-Saxon cultures. As a 13-year-old Mr Razak was sent to study at Oundle School in Northamptonshire. His choice of Bristol University over the London School of Economics, highlights a sober nature. “From Oundle, everything was very disciplined from what time you wake up to what you do the whole day and suddenly the full freedom of London . . . I couldn’t trust myself,” he says.

Across Asia, he is seen as very hard working, smart and professional, according to about 20 clients, bankers, and investors spoken to for this article, none of whom questioned his propriety.

Hugo Young at Aberdeen Asset Management, the UK fund manager that is CIMB’s biggest private shareholder with a 10 per cent stake, says that while Mr Razak may be high-born, he has worked his way up from the bottom at CIMB. “He has earned his position and he has professionalised the business in a way that few other Malaysian businesses have been,” he says.

Aside from his high-profile brother and father, Nazir Razak’s uncle was also a Prime Minister, he is also very close to Azman Mokhtar, who runs Khazanah, Malaysia’s sovereign wealth fund which in effect controls CIMB along with the country’s national pension scheme. And Mr Razak’s wife is the daughter of a former central bank governor.

Ironically, perhaps, these tight links with the rest of the establishment pose the greatest threat to his own future if the upcoming elections result in a regime change, kicking out the political party that has ruled Malaysia since independence.

“It is obviously a vulnerability [for him],” says Mr Young. “It is not so much political or connected to his brother, it is more that he is a part of that almost royalty, that power in Malaysia.”

Mr Razak says that he runs a large company for his shareholders and from that perspective does not give politics much thought. He has certainly steered clear from any public involvement, but he remains realistic about the pace and difficulty of domestic reform. “Najib’s got a hell of a task . . . but I think he’s giving it a very good go.”

He says the country must combat corruption, give more free rein to market forces and roll back government ownership of business – through privatisations such as this month’s multibillion-dollar part listing of Felda, an agri-business group.

This is the only way that Malaysia can hope to progress beyond middle income status, which would bring much greater recognition to the country and some of its leading companies, like AirAsia, Axiata and CIMB.

Mr Razak jokes that there was a bit of a muddle when he hosted David Cameron, the UK Prime Minister, at a dinner this year. “We had a good laugh because he got a bit confused as to who was buying what when I introduced him to the [Royal Bank of Scotland] Asia head,” says Mr Razak. “His final remark was: ‘I’ve got some more of that if you want it’.”

It will have been quite apparent to Mr Cameron, however, that this “princeling” wasn’t born yesterday.

Dr. Hamsa Ali makes a Wrong Start

July 1, 2012

Dr. Hamsa Ali  makes a Wrong Start

by Dr. Lim Teck Ghee

COMMENT: In his first public interview since assuming the position of  Chief Secretary, Dr. Hamsa Ali, said all the politically correct and bland things that one expects from someone eager to show Malaysians that he is up to the challenge of a big job.

From being a cheerleader attempting to rouse the morale of his troops (according to him, the performance of the civil service has been “excellent”) to sounding patriotic and humble (“We need to continuously raise the bar to be among the best…”; “we can’t treat what we do as a job as what we do must benefit all Malaysians”), the orchestrated and carefully calibrated interview with the New Straits Times was clearly meant to impress and get Malaysians on his side.

Corruption in the Civil Service

Unfortunately, it failed to address the two most important failings of the civil service. The endemic and systemic corruption that Malaysia is suffering from could not have taken place without the collusion of the country’s civil servants. Closing one eye or acting as facilitators to businessmen and political leaders is standard operating procedure for more than a few in the upper reaches of the bureaucracy.

Everyone knows that doing business in the country has to pass through a thicket of civil servants. This includes big ticket multi-million dollar projects often given out under the pretext of so-called ‘national interest’ where the opportunities for massive corruption and kickbacks are especially prevalent.

Besides grand corruption, there is also low level and petty corruption by enforcement and other officers preying on ordinary citizens including the poor or marginalised. Whether it is getting a licence to operate a restaurant or securing a multi-million dollar contact for the ongoing ‘Cowgate’ scandal, the public is fully aware that knowing the right jalan (road) can hasten the path to approval or delay or doom a business proposition. It appears that the businessmen and political leaders engaged in activities that have brought windfall and undeserved gains know who the ‘right’ civil servants are.

The fact is that few high-level corruption cases ever see the light of day. Government officials living beyond their means and official income are not hauled up to answer for their unexplained wealth. This inertia has encouraged a culture of corruption to be deeply embedded within the bureaucracy.

Ethical and clean civil servants have suffered in silence fearing that their opposition to hanky-panky would result in setback to their career advancement prospects. It must be disappointing to them that the Chief Secretary did not say a single word in his interview about reforms to clean the civil service of corrupt and unethical practices, especially at the highest levels of the civil service.

In bed with Barisan

Another major failing of the civil service is that it has been successfully co-opted by Barisan Nasional (BN) to act as the tool of the ruling party. Far from being a politically neutral actor, the civil service has failed to observe strict administrative impartiality. Especially in developments related to the political life of the country, key bodies such as the Judiciary, the Attorney-General’s Chambers, the Police, the Election Commission (EC), and the official media have helped to strengthen BN’s political grip. They have also been instruments used to undermine democratic rights and freedoms of Malaysians.

Instead of untying the umbilical cord between the BN and the civil service, the Chief Secretary gave a pointed hint that he is likely to reinforce it. In response to a leading question whether “some civil servants are being influenced by promises made by the opposition”, his reply was that “They should know better. Don’t be taken in by empty promises.”

Although he qualified this reply by stating that “[a]s civil servants we must be loyal to the king and serve the government of the day”, the intent of his reply was clear.

A string of lacklustre Chief Secretaries

Hamsa Ali may prove to be the latest in a series of lacklustre and mediocre Chief Secretaries in the country. Mediocrity breeds mediocrity. Because of their poor leadership, the civil service has seen few reforms. Today, we have a  bloated 1.4 million-strong body that has been a victim of  as well as an  accessory and beneficiary to the abuses and misrule of the country.

The new Chief Secretary has the opportunity to begin the difficult process of cleansing the civil service and making it efficient and trustworthy. For this to happen, he must focus on removing the two principal obstacles which stand in the way of a rejuvenated and clean civil service. Can he do it or is he like many others before him having his eye on his post-retirement benefits?

The MAS Story: Malaysian Hospitality or Malaysian Humbug

June 30, 2012

The MAS Story: Malaysian Hospitality or Malaysian Humbug

by Mariam Mokhtar (received via e-mail)

In MAS, MH stands for Malaysian hospitality which many of us know is highly overrated; MH might as well stand for Malaysian humbug. Or Malaysian hanky-panky.

A once proud airline is now a shadow of its former self. It is run by the corrupt and the incompetent – all puppets of the government. If the MACC were a responsible outfit, MAS would not be in the position it is today and many MAS senior managers, and government ministers, past and present would be languishing in jail.

The new MAS-AirAsia merger is shrouded in secrecy. Tony Fernandes is just a public front and assumes the rôle of pilot in this move.Someone else has charted the route for him. Who is that person?

One thing is certain. There is talk about solving the operational issues in MAS. Will Tony be able to alter an UMNO-BN culture that has been allowed to corrupt all levels of the airline’s hierarchy? This UMNO-BN culture is mired in controversy. MAS, like other GLCs, is haemorrhaging money. Attempts to stem this outflow have been unsuccessful.

Would any CEO of MAS be as daring as Peter Hill, the British CEO of Sri Lankan Airlines, who stood up against the Sri Lankan President Mahinda Rajapaksa in 2007?

President Rajapaksa, together with his family and several officials, was in the United Kingdom to witness the passing out parade of Rajapaksa’s son from the Royal Naval College, Dartmouth. When Rajapaksa demanded that 35 seats be reserved for his entourage to return to Colombo, Hill refused to bump passengers off the flight from London. Hill may have been the passengers’ hero but his work permit was rescinded.

Unfortunately, the work culture that exists in MAS is symptomatic of our government’s performance. Some dishonest MAS staff allegedly “steal” from the airline.

Perhaps they are taking their cue from the government officials or from previous chairmen. Perhaps they see this as part of their perks and benefits.

Cost cutting has reduced many allowances which they once enjoyed.One stewardess who declined to be named, said that she had lost track of all the items she took from the plane and according to her, “everyone did it”. In an attempt to justify her actions, she blurted, “What about the millions the chairmen have ‘stolen’?” She is wrong. It is billions. Not millions.

How many politicians and their spouses have used their influence to obtain free flights or bullied airline staff for upgrades for themselves, their officials, friends or relatives? How many times have we heard of a spouse of a leading politician wasting taxpayers’ money on transporting her shopping via MAS and MAS Air Cargo?

How many genuine passengers have been victims of alleged over-booking by MAS when it is well known that government officials were offered preferential seats over normal fare-paying passengers?

It is also well known that MAS practices two sets of rules: one for Malaysians and another for westerners. One Malaysian mother and child were bumped off one flight to the UK. Under EU rules, cancellation of the flight meant they were due compensation. Only her teenage son was offered compensation because he had an English name. The mother was refused compensation despite pointing out the discrepancy to the senior managers in London.

In one European airport, it is alleged that some members of staff have protected their long-term positions by fraternizing with senior politicians and VVIPs. In most companies, employees would not be allowed to remain in one posting indefinitely, but not, apparently, in this location.

Another person alleges that it is common knowledge that a member of staff would use influence to perform “dodgy” upgrades for friends or people of influence and later be rewarded with “gifts”. Others allege, too, that this person removes items from the aircraft on a regular basis. Cheese, toilet rolls, toiletry bags, duvets and blankets from First and Business Class may not be classed as the crime of the century, but it is theft all the same.

The modus operandi appears to be to wait till the flight and cabin crew, have left the aircraft. The security staff must be complicit in these thefts. Could there be hanky-panky with food and fine wines from the Golden lounge?

One wonders why work colleagues have remained silent about the alleged petty theft. Are the senior station managers in these postings incompetent or in collusion? Perhaps theses managers don’t want to deal with the problem.

Co-workers are probably afraid of whistleblowing because they fear they will be known as troublemakers. They wonder, “Can the system be trusted or will they will be identified and crucified?” Like the Malaysian public and corrupt politicians, employees are reluctant to report irregularities because they do not see much hope of redress.

Perhaps the worst sort sycophancy is the one which is ignored by all because it involves VVIPs. In one European airport, it is alleged by many that some MAS employees turn up, even when they are not officially on duty, to attend to the VVIPs. This is no charitable act or selfless dedication to duty. The rewards are high. Cash and expensive, small personal electrical items are the norm but the most prized of all is a title.

When even the bodyguards of the VVIPs proudly display their designer labels, which lowly worker can fail to be impressed?Which junior employee would refuse a title in exchange for making sure personal baggage and the truckloads of luxury goods are safely loaded onto the plane? Who dares ensure that the customs at KLIA will tax these items?

It wouldn’t take a genius to trace the titles that are dished out to MAS employees at some of the overseas airports which are frequented by VVIPs. And it would surprise no-one that even those in menial positions in the airline, can acquire Datukships.

The equilibrium at work must be disturbed as it is alleged that those conferred titles are known to be generally work-shy, are late for work, despite occasionally reporting for extra duty for VVIPs.

It is baffling that these employees are allowed, allegedly, to have a stake, either directly or indirectly, in companies which provide airline services which are in conflict with MAS cargo services.

Will Tony address the staff, who only attend to VVIPs and celebrities who give them benefit in kind? This is a form of bribery and theft from the airline, reminiscent of UMNO political tactics.

Will he put pressure on those in charge of complaints? VIPs get their complaints seen to promptly. Others may take months. The truly unlucky customers have theirs swept under the carpet by lazy station managers.

So what else is going on? Tony should whip the corrupt and inefficient MAS work-culture back into shape and the MACC should investigate these irregularities. Then again, pigs might fly.

The MAS-AirAsia deal has been aborted. Agitated Tony Fernandes has decided to relocate the airline’s regional hub to Jakarta, Indonesia. But the problems of MAS remain. This is because the MAS culture is rotten to the core, and it is also trite to say that the culture has to change. Mana Ada Sistem is the reputation MAS enjoys.

We need a Peter Hill, or Jan Carlzon who changed SAS (Scandinavian Airlines System) in MAS so that real transformation can take place. If the MAS Union is an obstacle to change fix it.

To operate an airline profitably every seat must generate revenue and every flight is  making money.  That is basic in management. It is, therefore, the duty of the sales people in our national airline to do their job. And they are not.

Have you tried booking a flight to London? It is always full. But when you are finally given a seat and board the aircraft, you will find there are still plenty of seats available. The problem of overbooking must be solved and ticketing agents should be penalised for blocking more seats than they can sell . You can deal firmly with erring ticketing agents, if they are your cronies, friends or relatives.

I myself cannot understand why certain number of Business class seats on domestic routes, for example, must be reserved for Royalty and Politicians. Can’t these VVIPs plan their trips? What are the private and political secretaries doing if they do not know the travel schedules of their bosses. It is that simple, yet it is not done.

There is no such a thing as a free lunch. MAS has to bear the burden of serving privileged customers. Furthermore, first and business class passengers must be treated in the same manner, irrespective of their social class or political office. No double standards, please. Will MAS top management answer me?–Din Merican

Lim Guan Eng on Development and Clean Governance

June 25, 2012

Penang’s Popular Chief Minister, Lim Guan Eng talks* about Development and Clean Governance

The ASEAN Coalition Of Clean Governance seeks to establish a system that ensures policies are made for public interest through the essential mechanism that establishes institutions which builds integrity in leadership and decision making, effective internal controls to check and punish corruption as well as rewarding  whistle-blowers.

On behalf of Penang Institute as well as the state government of Penang, allow me to start by wishing everyone a warm welcome both to Penang as well as to the inaugural conference of the ASEAN Coalition for Clean Governance. Organising a conference in the midst of the month-long internationally renowned GeorgeTown Heritage Fest with the theme “What enables clean governance in democracies? ASEAN perspectives.”, is appropriate. After all GeorgeTown’s future as a UNESCO World Heritage City is inextricably intertwined with its survival linked to clean governance.

Clean governance is an issue that is very close to my heart. It is one of the reasons why I am here as the new Penang Chief Minister and one of the critical reforms in my administration which will decide whether I will still be around. Therefore, it is important to understand the correlation between development and clean governance.

History is rife with numerous examples throughout the world where weak governance, corruption and abuse of power have resulted in grinding poverty and the widening wealth inequality and income disparity. When a government is corrupt and inefficient, it is almost a certainty that its economic development will be unbalanced, inequitable and even unfair; with its socio-economic distribution skewed in favour of the cronies.

Clean governance can be broadly defined as a system that ensures policies are made for public interest through the essential mechanism that establishes institutions which builds integrity in leadership and decision making, an effective internal control to check and punish corruption as well as rewarding whistle-blowers. More specifically, we need to understand whether clean  governance is relevant in the ASEAN context to engender social, political, economic and sustainable development.

It is for this reason that the Penang Institute has organised this conference today by bringing together leading proponents of clean governance from around the region with the aim of raising awareness of clean governance, discussing its enabling factors, setting up institutions, exchanging experience and more importantly establishing a culture of clean governance throughout ASEAN.

In extraordinary times we should not forget the importance of a return to the basic Principle, Of Doing Not Only The Right Thing But Also Doing It Right. We are gathered here in extraordinary times. The global picture today is one that would have been unrecognisable just a decade ago.

Today we see totalitarian governments and once-untouchable dictatorships being toppled one after another like dominos. Meanwhile, the Western economies are teetering on the edge of a meltdown, consumed by the weight of a crunching debt crisis that offers little room for optimism.

We are now living in extraordinary times. The effects of the global economic crisis are already obvious. ASEAN economies will not be spared and is expected to face weakening exports and a slowdown in FDI. As a result, economic management has become an increasingly challenging effort. In these extraordinary times, some say we require extraordinary ideas and extraordinary efforts. However, we should not forget a return to the basic principle of not just doing the right thing but also doing it right.

ASEAN countries are bound together not only by geography and economy, but also by cultural and political values. In that sense, this great economic challenge that we are facing is a collective dilemma, and must therefore be met by collective leadership and collective action.

Need for clean public institutions

When I talk about leadership, I am not only talking about economic leadership. While that is important, I would like to suggest that there is also a need for ethical leadership. In other words, in such dire times, the only way to ensure protection for the people is to ensure that public institutions are strong, resilient and most importantly, clean.

The pillar of a society is its public institutions, which can be defined as the “rules of the game” which govern the interaction within and between governments, markets and society. Now, imagine if the rules of the game were not firm, or if the enforcement of the rules were lax. You would have irresponsible parties taking advantage of the system in order to enrich themselves and worse, to suppress the rights of others. This is how a corrupt and oppressive society is formed.

Former World Bank President James Wolfensohn summarised it well by saying, “The causes of financial crises and poverty are one and the same… If countries do not have good governance, if they do not confront the issue of corruption, if they do not have a complete legal system which protects human rights, property rights and contracts… their development is fundamentally flawed and will not last.”

In other words, the relationship between public institutions and the socio-economic development of a society is a symbiotic one. Good and clean governance will result in positive socio-economic development. Conversely, ineffective public institutions and weak governance will facilitate corruption, misguided allocation of resources, arbitrary justice and excessive government intervention. This will in turn reduce economic competitiveness, deter private sector investment and prejudice the distribution of wealth.

Freedom is Empowerment

True development is not merely material but must also refer to the accessibility and availability of opportunity to a society. In other words, a truly developed society is one where its people are empowered with the freedom to fulfil their aspirations and capabilities.

In this, I am guided by the great economist for the poor and Nobel Laureate Amartya Sen, who questions the fundamental assumption of development economics by arguing that development should not be measured primarily by wealth or income. According to Sen, poverty is not merely material but should also be seen as the “deprivation of basic capabilities”, which he defines as human freedoms.

In other words, development is a process of expanding the instrumental freedoms of individuals, which he encapsulates in five elemental forms:

1. Political freedoms,
2. Economic facilities,
3. Social opportunities,
4. Transparency guarantees,
5. Protective security.

Political freedoms encompass basic human rights, such as freedom of expression, freedom of the press and freedom of information. It also significantly refers to public participation, checks and balances, the need for democratically-elected bodies at all levels as well as institutional respect for the Rule of Law.

Economic facilities are defined as the availability of access to economic resources, markets and female participation in the workforce, while social opportunities refer to education, health and other community facilities that allow individuals to gain better agency.

Transparency guarantees are meant to ensure a mechanism for seeking justice, the prevention of corruption, abuse of power and conflict of interest through public disclosure of information. Lastly, protective security talks about the need for the state to provide a social safety net to mitigate deprivation and poverty caused by epidemics, natural disasters and war.

These five forms of human freedoms as described by Sen are complementary and interrelated concepts that encompass processes as well as opportunities. They are both a fundamental aspect, as well as an enabler to achieving development. In other words, they are not only the means but also the ends.

More importantly, we must understand that Sen’s hypothesis is centred on the idea that freedom is empowerment. By providing the instruments of freedom to an individual, we will enhance the ability of individuals to fulfil their own potential and capabilities. It is this collective empowerment of individuals that will in turn lead our societies to true development.

Institutionalising Freedom through Clean Governance

If we make development our objective, and we recognise that freedom is both the means and the ends to development, then it follows that we must build public institutions that embrace the universal of truth, accountability and transparency. After all, Sen’s parameters of human freedom entail the fulfilment of basic human rights, political equality, socio-economic justice, equitable access to opportunity, fairer distribution of wealth, integrity in leadership and commitment to the rule of law.

Thus, the only way to crystallise these parameters of freedom is to institutionalise them through the instruments of democracy. In other words, freedom can only be guaranteed and protected by clean, efficient, accountable and transparent public institutions.

I would hence like to suggest that public institutions should conform to a universal framework of good governance as described by the United Nations Development Programme (UNDP). This framework contains five principles, which are:

1. Legitimacy and Voice
2. Direction
3. Performance
4. Accountability
5. Fairness

It is critical to recognise that public institutions must be democratically legitimate and participatory in nature. All men and women should have a voice in decision-making, either directly or indirectly. Such participation can only be built by honouring basic rights such as freedom of association and speech.

At the same time, governance must be guided by a strategic vision that is both forward-looking and cognisant of the complexities of its local history and society. Institutions and processes must also be robust and responsive in order to serve its stakeholders effectively. Very importantly, they must also be accountable and transparent. Decision-makers are ultimately responsible to the public, and must therefore ensure that the public have direct access to sufficient information.

Lastly, governance of public institutions must be fair and provide equality regardless of gender or skin colour. Above all, it is imperative that institutions are guided by the rule of law. However, we must also ensure that the law is responsive to freedom, justice and the tenets of human rights.

These five UNDP principles of good and clean governance must act as our guide if we wish to achieve development without compromising on freedom and democracy.

CAT Governance: The Penang Experience

Penang’s commitment towards clean governance is exemplified by CAT of competency, accountability and transparent administration. CAT has managed to arrest the graceful decline of Penang over the 18 years prior to 2008.

Based on CAT principles, we became the first state in Malaysia to introduce open competitive tenders for all public procurements and supplies. To the outside world, this is normal practice. However, it was ground-shattering in our country. We were immediately subject to a barrage of criticisms from various quarters who felt that their rice bowls were threatened.

By implementing open competitive tenders, we effectively eliminated the opportunity for corruption. Previously, contractors had to seek out “middlemen” for projects. Now, everything is done online through our e-Procurement system. Where previously the road to a government contract required political connections, it now only requires an internet connection.

In addition, we disclose fully the contents of government contracts signed with the private sector. We have also passed the Freedom of Information Enactment which allows disclosure of government contracts for public scrutiny. What’s more, we have also taken steps to engage the public on the state government’s proposed projects and plans.

To top it off, we have also become the first state in Malaysia to have the entire state executive council (EXCO) including the Chief Minister make a full public declaration of assets. And more recently, we have sought to empower more decentralised decision-making by passing the Local Government Elections Enactment, as part of our commitment towards participatory governance.

Our efforts are bearing fruit. In the last four years, we have turned the state’s finances around with surplus budgets for every single year since we took over. More importantly in an era of high debts, we have successfully reduced state government debt by 95 per cent, from RM630 million when we took over to just RM30 million today.

For all our efforts, we have garnered accolades not only from the Auditor-General’s annual reports, but we have also become the only state government in Malaysia to be praised by global anti-corruption watchdog Transparency International.

However, praise alone does not mean anything if it is not translated into real achievements. For the first time in Penang’s history, we managed to become the number one investment location of the country in 2010. Over the last 2 years, Penang contributed towards nearly 30 per cent of Malaysia’s total foreign direct investment (FDI). For a state with only 6 per cent of the country’s population, we are certainly punching way above our weight.

GeorgeTown is now the most livable city in Malaysia in 2011. And to prove that it was no fluke, we followed up by repeating this feat this year. Last but not least, CAT governance is not only about clean governance but also about providing democratic space and fostering a culture of freedom. For example, we established the first Speaker’s Corner in Malaysia, where one can not only enjoy freedom of speech, but also freedom after speech. We allow people to speak their minds, even when it is often used to speak out against us.

More importantly, we also believe that it is incumbent upon the state to provide economic facilities and social opportunities for the people. As such, we embarked on a string of people-centric social welfare programmes that have seen Penang become the first state in Malaysia to eradicate hardcore poverty and on our way to wipe out poverty completely by 2015.

In addition, we also go to great lengths to ensure that the downtrodden are taken care of by giving cash aid to senior citizens, single mothers, the disabled, schoolchildren, newborn babies, subsidised dialysis treatments and even free bus services in the inner city and across our famous Penang Bridge. This is all part of our commitment to ensure that our people enjoy freedom from want.

The Penang Declaration Of Clean Governance: Laying Future Foundations

It is my hope that our conference today will mark the beginning of a strong movement for clean governance in ASEAN. It is especially important in current times to ensure clean governance of our public institutions and freedom of our people. To do this, we must be aware of the collective aspirations of our people. We must be responsive to their needs and engage them on their wants. Above all, freedom must be institutionalised.

And so, at the end of today’s proceedings, we hope to launch an important document, titled “The Penang Declaration”. It is a document that symbolises the commitment of the participants here today in acknowledging the principles of clean, accountable and transparent governance, and the universal values of truth, freedom and democracy. It also recognises the need for clean governance and the rule of law in order to attain socio-economic development and progress, as well as the necessity of building public institutions.

The Penang Declaration will reaffirm the five principles of good governance as described by the UNDP, as well as to encourage the implementation of public declaration of assets, open competitive tenders and the disclosure of government contracts.

Perhaps significantly, the document will also call for an important element of the anti-corruption process, which is the need for whistle-blower protection. In addition, our coalition will also bear no tolerance for corruption and abuse of power by insisting that powers of prosecution in corruption cases must be independently-wielded.

Finally, the Penang Declaration is a pledge to embrace cultural and social transformation in governance and integrity to engender inclusive, equitable and participatory social, political, economic and sustainable development for the people of ASEAN.


The Penang Institute would like to thank everyone for attending the day’s proceedings, especially our distinguished speakers who are great leaders in their own countries. We have guests from Thailand, Indonesia, Singapore, Philippines and Laos. It is indeed a proud day for Penang and the Penang Institute.

I am certain that everyone here today shares our desire for improvement in governance, and I hope that the establishment of this ASEAN Coalition for Clean Governance will be the first step of a collective journey towards this ideal. As such, I thank you all once again for taking this important step together with us.

Together, we will face the scourge of corruption and abuse of power by advocating, encouraging and implementing clean governance. We do this because it is our responsibility to. In the words of Edmund Burke, “the only thing necessary for the triumph of evil is for good men to do nothing.” And remind ourselves that cleanliness is next to holiness!

No Bailout for Syed Mokhtar, says Tony Pua

June 21, 2012

Government “must guarantee” no bailout for Syed Mokhtar, says Tony Pua

by S Pathmawathy (06-20-12)@

The government “must guarantee” that public funds are not used to bail out tycoon Syed Mokhtar Al-Bukhary if he is unable to settle his RM34.3 billion debt accumulated in building his business empire.

NONETony Pua (DAP-PJ Utara), who raised the issue in the Dewan Rakyat today, also questioned the wisdom of privatising the Penang Port to Syed Mokhtar’s company, which would expand both his “empire and debt holdings”.

He cited examples of corporate debt that had contributed to the stock-market crash during the Asian financial crisis in 1998, including the RM20 billion debts accumulated by Renong Bhd.

“The government must explain the measures being taken to ensure that a repeat of the 1998 financial crisis will be avoided at all costs,” he said.

Debating the RM13.7 billion Supplementary Supply Bill, he said the Penang Port privatisation project could put Syed Mohktar (right) “several more billions in additional debt”.

“Syed Mohktar’s group of companies has a combined debt of RM34.3 billion or more than 10 percent of all local currency outstanding corporate bonds as atf 2011.

“These companies have an estimated total cash and cash equivalent of RM7.8 billion as at May 2012.

“Hence the debt far exceeds that of Renong’s, causing genuine fear of a repeat of a crisis requiring monster bailouts with taxpayers’ funds. This fear is real in light of the global economic slowdown and fallout from the Eurozone financial crisis,” he said.

Major shareholdings and debts

Pua later told reporters that Syed Mohtar has a 51.8 percent stake in MMC Corporation which has an outstanding debt of RM24.2 billion. He owns 55.9 percent of DRB-Hicom, which has a debt of RM5.7 billion.

Tradewinds (M) Bhd, which has a monopoly on rice purchase, import and distribution, has a debt of RM3.48 billion and Tradewinds Corporation Bhd, which runs several five-star hotels in the country owes RM890 million, Pua said.

“The Finance Ministry must make available data on how much our financial institutions and statutory bodies – Employees Provident Fund, Civil Service Retirement Fund, Tabung Haji Fund and Armed Forces Fund – have invested in these debts,” he added.

Lord Acton’s Ghost returns

June 4, 2012

Lord Acton’s Ghost returns

by Terence Netto via e-mail

A squirreled-away scandal of two decades ago begins to unravel in the light of Pakatan Rakyat’s ascendancy.  

Kuala Lumpur (06-03-12)–“Power tends to corrupt; absolutely power corrupts absolutely,” is one of the more renowned sayings of Lord Acton that deserves its fame for its perspicuity.

Much has happened in the last century’s political history that enables this insight of the 19th century British historian to gain for itself the immortality the Delphic oracle – “Know thyself” – attained to from the Hellenic times.

 Something comparably penetrating that Lord Acton said about nature of public affairs is set to gain a relevance to Malaysia that would not only showcase its perceptiveness but also its applicability as a political truism.

“Nothing is safe that does not show it can bear discussion and publicity,” may lack the lilt of Acton’s aphorism on power, but the force of its truth can hit you four square. That, at least, must have been the reaction of a packed audience to the revelations unveiled at the public forum organized by the Penang Institute in Georgetown yesterday that was themed ‘Bank Negara Forex Scandal: When Government becomes Speculator’.

Chief Minister Lim Guan Eng opened the forum, at which the speakers were Opposition Leader Anwar Ibrahim and Dr Rosli Yaakop, a former Bank Negara official, by highlighting the Freedom of Information bill the Penang legislature passed last year.

Its passage displays to advantage the merits of the DAP-led Pakatan Rakyat government of Penang with its emphasis on openness and transparency, derided as a sham by its BN critics but lauded by admirers as exemplary governance for both state and nation.

Presumably, a comparable bill, had it been promulgated by the Federal government, would not have left unexposed for so long one of the more damaging scandals to beset the country which occurred nearly two decades ago.

This was the Bank Negara foreign currency trading scam in which a mind-boggling sum was conjectured (its precise amount, until yesterday, was a figment of public speculation than of authoritative disclosure) to have been lost and was, at the time of its initial revelation, officially dismissed, in what must now be viewed as a staggering euphemism, as “paper losses.”

“They were real, not paper losses,” said Anwar, who revealed that he first came to know of Bank Negara’s speculative forays on the forex markets from a friend in Zurich in 1991 and, later, from the editor of the now defunct Far Eastern Economic Review.  

 At that time the losses were incurred, as the first gleanings of the disaster reverberated across the political arena, these were disclosed as amounting to RM10.16 billion until 1992, and as RM5.76 billion, in 1992 alone.

Rosli Yaacop, in his presentation yesterday, held that losses suffered were closer to a stupefying RM30 billion. What Rosli, a deputy manager in Bank Negara at the time the scandal ran its course (between the late 1980s to the early 1990s) and what Anwar, the Finance Minister on whose watch it came to light, revealed to the 400-plus people at yesterday’s forum reinforced the truth of Acton’s insight on the futility of camouflaging what democracies, including Malaysia’s makeshift version, would inevitably engender over time: the outing of the truth about tawdry goings-on.

The Bank Negara foreign currency trading scandal was, in yesterday’s sketches by Rosli and Anwar, conceived in secrecy and conducted by subterfuge between the then central bank’s Governor, Jaffar Hussein, and its foreign currency arbitrageur and rougue trader, Nor Mohamed Yaacop, with the knowledge, if not connivance, of then Finance Minister, Daim Zainuddin, and Prime Minister Mahathir Mohamed.

Anwar, who replaced Daim as Finance Minister in early 1991, did not know about the machinations of Nor Mohamed who apparently enjoyed a free hand; Governor Jaffar was not obliged, on account of the central bank’s statutory independence of the Treasury, to brief the Finance Minister.

After Alan Greenspan, the chairman of the US Federal Reserve, raised the alarm in 1991 that Malaysia’s exposure on forex trading was alarmingly high — drawing a typically combative rebuke from Prime Minister Mahathir — the qualms about Bank Negara’s speculative forays, viewed as reckless gambling by finance moguls in the know, burgeoned to the point where Anwar demanded in 1994 that Jaffar come clean on the matter.

By then, when the stupendous losses suffered had escalated beyond the point where the huge profits garnered in earlier years had become a tantalizing mirage that paved the way to disaster, Anwar raised the matter with Mahathir.

Mahathir allowed that the forays had brought huge gains in the initial stages but that subsequent losses had made the exercise no longer sustainable. He publicly maintained that the losses were only on paper to a public to which DAP’s Lim Kit Siang strenuously raised the alarm that a numerically feeble opposition could not sustain above nuisance-level.  This scenario has now changed with the Opposition’s beefed up numbers and pretensions to take over Putrajaya.

The half-buried financial and corruption scandals of past decades in Malaysia, scams that would have brought down most democratic governments, are now on course for disinterment by a fortified opposition and a newly sensitized public.

But Anwar’s take on the whole gamut is that the public has a right to know but that the imperative of understanding must overcome the impulse for vengeance.He said the country must have its own version of South Africa’s truth and reconciliation commission whose purpose was to expose the enormities of the apartheid era with a view to sedating the torments of that oppressive period.

In that Anwar said he was moved by what Nelson Mandela told him when the father of that nation invited him, wife Azizah and children to Johannesburg to be his guests shortly after Anwar’s release from jail, after serving six years on corruption and sodomy convictions, in 2004.

Mandela was apologetic for not doing enough to free Anwar. He had seen Mahathir personally to plead in Anwar’s cause. But Mahathir was reportedly silent and unmoved. “I told Mandela ‘Never mind, yours was a 27 years march to freedom, mine was a short six year walk’ ” recalled Anwar.

In other words, life is too short to be small but scandals must see the light of an Actonian reckoning.

MAS-AirAsia Share Swap Deal in Doubt

May 2,2012

MAS-AirAsia Share Swap Deal in Doubt: Trading of MAS and AirAsia Shares Suspended

Shares of Malaysia Airlines (MAS) and AirAsia are suspended from trading at 9am today due to a pending corporate announcement.According to sources, MAS was expected to announce the cancellation of plans for a share swap with budget carrier AirAsia.

The proposed US$364 million (RM1.1 billion) tie-up has encountered strong resistance from the 20,000-strong MAS union, which voiced concern that the deal resembled a takeover by AirAsia Founder Tony Fernandes and his brand of aggressive cost cutting.  Under the deal, Khazanah would get a stake in AirAsia, while Tune Air, which owns 26 percent of AirAsia, would get a stake in Malaysia Airlines.

- Reuters

More on MAS-AirAsia Deal

MAS and AirAsia abandon share-swap deal

by Reuters @

Malaysia Airlines (MAS) and AirAsia announced late this evening the cancellation of plans for a share swap between the two carriers.However, despite that the termination of the share swap, the agreement to work together stay.

AirAsia said in a statement to Bursa Malaysia that it has separately entered into memorandums of understanding with MAS in respect of the following:

a) to jointly explore the setting up of the joint-venture company by AirAsia, MAS and AAX (AirAsiaX) to provide aircraft component maintenance support and repair services;

b) to establish the broad set of business principles for the proposed establishment of a special purpose vehicle by AirAsia, MAS and AAX to improve value for money and increase competitiveness and benefits to customers through procurement synergies by outsourcing to the SPV (special purpose vehicle) the procurement processes for identified goods and services in agreed categories.

The shares of both airlines were suspended from trading earlier today pending the corporate announcement.

The proposed US$364 million (RM1.1 billion) tie-up has encountered strong resistance from the 20,000-strong MAS union, which voiced concern that the deal resembled a takeover by AirAsia founder Tony Fernandes and his brand of aggressive cost cutting.

Nominee directors to resign

Under the deal, Khazanah would get a stake in AirAsia, while Tune Air, which owns 26 percent of AirAsia, would get a stake in Malaysia Airlines.The aim of the deal was for the two airlines “to cooperate on a broad range of areas so as to leverage on their respective core competencies and optimise efficiencies”.

The unwinding of the share swap will see Tune Air transfer its 20.5% stake in MAS back to Khazanah, while Khazanah will transfer its 10% stake in AirAsia back to Tune Air, said Tune Air director Kamarudin Meranun.

“We continue to believe in the ability of the collaboration to create value for all shareholders and ultimately to benefit passengers,” he said in a statement.

“Furthermore, we feel that the collaboration will enable all three companies to be better prepared in facing in a more competitive environment following the implementation of the Asean Open Skies framework.”

He said that the nominee directors of Tune Air on MAS’ Board of Directors and Khazanah’s nominee director on AirAsia’s Board will resign immediately.

The Challenge of Islamic Finance

April 16, 2012

Project Syndicate: Andrew Sheng

The Challenge of Islamic Finance

by Andrew Sheng

Andrew Sheng, the chief adviser to China’s Bank Regulatory Commission, is a Professor at Tsinghua University’s Graduate School of Economics and Management and at the University of Malaya, Kuala Lumpur. Previously, he served as Chairman of Hong Kong’s Securities and Futures Commission, and was Deputy Chief Executive of the Hong Kong Monetary Authority. In the late 1990’s, he chaired the Financial Stability Forum’s Task Force on Implementation of Standards. His latest book is From Asian to Global Financial Crisis.

With Britain now in talks to sell part of the government’s 82% stake in the Royal Bank of Scotland to Abu Dhabi sovereign-wealth funds, the Islamic world’s growing financial clout is once again on display. That clout also poses a systemic challenge to the dominant way that finance is now practiced around the world.

From humble beginnings in the 1990’s, Islamic finance has become a trillion-dollar industry. The market consensus is that Islamic finance has a bright future, owing to favorable demographics and rising incomes in Muslim communities.

Despite skepticism regarding accommodation between Islamic and global finance, leading banks are buying Islamic bonds and forming subsidiaries specifically to conduct Islamic finance. Special laws have been enacted in non-Muslim financial centers – London, Singapore, and Hong Kong – to facilitate the operation of Islamic banks and associated financial institutions.

How should these developments be viewed from the perspective of Western finance and mainstream economic analysis? Does Islamic finance really constitute a viable alternative financial system?

The very fact that such a question is asked nowadays is significant. Not so long ago, Islamic finance was superficially dubbed a zero-interest-rate system that would lead to inadequate and inefficient resource mobilization and utilization. Ironically, mainstream central bankers today routinely use precisely such policies when pursuing massive “quantitative easing.”

There are two central precepts of Islamic finance: absolute prohibition on charging interest on financial transactions, and high moral standards on the part of lenders and borrowers. Interestingly, the best economic rationale for a zero-interest-rate system is provided in John Maynard Keynes’s The General Theory:

Provisions against usury are amongst the most ancient economic practices of which we have record….In a world, therefore, which no one reckoned to be safe, it was almost inevitable that the rate of interest, unless it was curbed by every instrument at the disposal of society, would rise too high to permit of an adequate inducement to invest.”

Keynes suggested that only a very low or zero interest rate could ensure continuous full employment and distributional equity. Keynes’s endorsement of such a policy does not necessarily make it right, but his analysis does suggest that it should be regarded as a serious proposition.

Importantly, although interest is prohibited under Islamic finance, profit is not; the latter is derived from various arrangements that combine finance and enterprise. In essence, this is a profit-sharing and risk-sharing system that is based entirely on equity finance.

Islamic finance thus contrasts with the current dominant system based on interest-bearing debt, in which risks are theoretically transferred to debt holders, but in practice are socialized during crises. Other things being equal, most economists will agree that debt finance leads to greater instability than equity finance.

It follows from the second major tenet of Islamic finance that if people adhered strictly to its ethical requirements, there would be fewer moral-hazard problems in Islamic banking. Moral hazard exists in all systems in which the state ultimately absorbs the risks of private citizens.

But, whether any particular system is efficient in avoiding moral hazard is a matter of practice, rather than of theory. Many would agree that, historically, Christian morality played an important role in the rise of Western capitalism. Secular capitalism, however, has experienced an erosion of values, whereby the financial sector has put its own interests above those of the rest of society.  If the ethical values in Islamic finance – grounded in sharia religious law – can further deter moral hazard and the abuse of fiduciary duties by financial institutions, Islamic finance could prove to be a serious alternative to current models of derivative finance.

Moreover, the basic tenets of Islamic finance force us to re-think the ethical basis of modern monetary arrangements, which have evolved into a global reserve-currency system founded on fiat money. In the past, gold had been the anchor of monetary stability and financial discipline, even if it was deflationary.

The test of any alternative financial system depends ultimately on whether it is – or can be – more efficient, ethical, stable, and adaptable than the prevailing system. For now, there is no Islamic global reserve currency and no lender of last resort. But the Islamic world is the custodian of huge natural resources that back its trading and financial activities.

As the Islamic world grows in stature and influence, Islamic finance will become a formidable competitor to the current financial system. The world would have much to gain if the two systems were to compete fairly and constructively to meet people’s needs for different types of finance.