Complacency Will Be Tested in 2018


December 15, 2015

Complacency Will Be Tested in 2018

by Stephen S. Roach@ http://www.project-syndicate.org

Despite seemingly robust indicators, the world economy may not be nearly as resilient to shocks and systemic challenges as the consensus view seems to believe. In particular, the absence of a classic vigorous rebound from the Great Recession means that the global economy never recouped the growth lost in the worst downturn of modern times.

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“World GDP growth is viewed as increasingly strong, synchronous, and inflation-free. Exuberant financial markets could hardly ask for more.I suspect that today’s consensus of complacency will be seriously tested in 2018”.–Stephen S. Roach

NEW HAVEN – After years of post-crisis despair, the broad consensus of forecasters is now quite upbeat about prospects for the global economy in 2018. World GDP growth is viewed as increasingly strong, synchronous, and inflation-free. Exuberant financial markets could hardly ask for more.

While I have great respect for the forecasting community and the collective wisdom of financial markets, I suspect that today’s consensus of complacency will be seriously tested in 2018. The test might come from a shock – especially in view of the rising risk of a hot war (with North Korea) or a trade war (between the US and China) or a collapsing asset bubble (think Bitcoin). But I have a hunch it will turn out to be something far more systemic.

The world is set up for the unwinding of three mega-trends: unconventional monetary policy, the real economy’s dependence on assets, and a potentially destabilizing global saving arbitrage. At risk are the very fundamentals that underpin current optimism. One or more of these pillars of complacency will, I suspect, crumble in 2018.

Unfortunately, the die has long been cast for this moment of reckoning. Afflicted by a profound sense of amnesia, central banks have repeated the same mistake they made in the pre-crisis froth of 2003-2007 – over staying excessively accommodative monetary policies. Misguided by inflation targeting in an inflationless world, monetary authorities have deferred policy normalization for far too long.

That now appears to be changing, but only grudgingly. If anything, central bankers are signaling that the coming normalization may even be more glacial than that of the mid-2000s. After all, with inflation still undershooting, goes the argument, what’s the rush?

Alas, there is an important twist today that wasn’t in play back then –central banks’ swollen balance sheets. From 2008 to 2017, the combined asset holdings of central banks in the major advanced economies (the United States, the eurozone, and Japan) expanded by $8.3 trillion, according to the Bank for International Settlements. With nominal GDP in these same economies increasing by just $2.1 trillion over the same period, the remaining $6.2 trillion of excess liquidity has distorted asset prices around the world.

Therein lies the crux of the problem. Real economies have been artificially propped up by these distorted asset prices, and glacial normalization will only prolong this dependency. Yet when central banks’ balance sheets finally start to shrink, asset-dependent economies will once again be in peril. And the risks are likely to be far more serious today than a decade ago, owing not only to the overhang of swollen central bank balance sheets, but also to the overvaluation of assets.

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Will the Republican Tax Plan work?

That is particularly true in the United States. According to Nobel laureate economist Robert J. Shiller, the cyclically adjusted price-earnings (CAPE) ratio of 31.3 is currently about 15% higher than it was in mid-2007, on the brink of the subprime crisis. In fact, the CAPE ratio has been higher than it is today only twice in its 135-plus year history – in 1929 and in 2000. Those are not comforting precedents.

As was evident in both 2000 and 2008, it doesn’t take much for overvalued asset markets to fall sharply. That’s where the third mega-trend could come into play – a wrenching adjustment in the global saving mix. In this case, it’s all about China and the US – the polar extremes of the world’s saving distribution.

China is now in a mode of saving absorption; its domestic saving rate has declined from a peak of 52% in 2010 to 46% in 2016, and appears headed to 42%, or lower, over the next five years. Chinese surplus saving is increasingly being directed inward to support emerging middle-class consumers – making less available to fund needy deficit savers elsewhere in the world.

By contrast, the US, the world’s neediest deficit country, with a domestic saving rate of just 17%, is opting for a fiscal stimulus. That will push total national saving even lower – notwithstanding the vacuous self-funding assurances of supply-siders. As shock absorbers, overvalued financial markets are likely to be squeezed by the arbitrage between the world’s largest surplus and deficit savers. And asset-dependent real economies won’t be too far behind.

In this context, it’s important to stress that the world economy may not be nearly as resilient as the consensus seems to believe – raising questions about whether it can withstand the challenges coming in 2018. IMF forecasts are typically a good proxy for the global consensus. The latest IMF projection looks encouraging on the surface – anticipating 3.7% global GDP growth over the 2017-18 period, an acceleration of 0.4 percentage points from the anemic 3.3% pace of the past two years.

However, it is a stretch to call this a vigorous global growth outcome. Not only is it little different from the post-1965 trend of 3.8% growth, but the expected gains over 2017-2018 follow an exceptionally weak recovery in the aftermath of the Great Recession. This takes on added significance for a global economy that slowed to just 1.4% average growth in 2008-2009 – an unprecedented shortfall from its longer-term trend.

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Trumpian Economics

The absence of a classic vigorous rebound means the global economy never recouped the growth lost in the worst downturn of modern times. Historically, such V-shaped recoveries have served the useful purpose of absorbing excess slack and providing a cushion to withstand the inevitable shocks that always seem to buffet the global economy. The absence of such a cushion highlights lingering vulnerability, rather than signaling newfound resilience – not exactly the rosy scenario embraced by today’s smug consensus.

A quote often attributed to the Nobel laureate physicist Niels Bohr says it best: “Prediction is very difficult, especially if it’s about the future.” The outlook for 2018 is far from certain. But with tectonic shifts looming in the global macroeconomic landscape, this is no time for complacency.

*Stephen S. Roach, former Chairman of Morgan Stanley Asia and the firm’s chief economist, is a senior fellow at Yale University’s Jackson Institute of Global Affairs and a senior lecturer at Yale’s School of Management. He is the author of Unbalanced: The Codependency of America and China.

 

Picture a Khazanah Nasional Berhad without Azman Mokhtar


December 8, 2017

Picture a Khazanah Nasional Berhad without the character,integrity and steady hand of Azman Mohktar

by P. Gunasegaram

http://www.malaysiakini.com

A QUESTION OF BUSINESS | Some one and half years before Azman Mokhtar steps down after a 15-year stint as managing director of Khazanah Nasional Bhd, the government’s wholly-owned strategic investment fund, it looks like the daggers are drawn to poke holes in what is by and large an impressive achievement.

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Unlike the other so-called strategic investment fund, the notorious 1MDB, which has already lost the country almost all the long-term money it borrowed with US$7 billion (some RM28 billion) unaccounted for, Khazanah has been transformed since 2004 into a solid entity which has strong controls, procedures, a chain of accountability, and a team of competent professionals managing over RM145 billion in investments.

It is not only extremely ironic but the height of ridiculousness that among the names being considered as Azman’s replacement is Arul Kanda Kandasamy, the chief executive of 1MDB since January 2015, who has done nothing to clarify the sad state of affairs at 1MDB or even to ensure the release of its long overdue annual report.

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Tengku Zafrul, 1MDB’s Arul Kanda Kandasamy –for Khazanah Nasional?

His appointment would make a mockery of Khazanah’s much stronger governance, good board representation, greater accountability, more transparency and much better performance than 1MDB which may be too much to make even for Prime Minister Najib Razak, who if he survives the elections, will make the final decision.

The major salvo against Khazanah, as with one or two other puzzling stories (see for instance, “Spinning 1MDB’s lopsided settlement”), came from across the Causeway from the Singapore Straits Times which made an unfair and ultimately wrong assessment of Khazanah’s performance over the years since 2004.

In a report titled “Khazanah feels the heat amid push to change its investment strategy”, the newspaper said: “Malaysia’s sovereign wealth fund Khazanah Nasional is under pressure to show higher returns to boost government coffers, with senior state officials lobbying for changes to its management and investment strategy.”

Then it went on to add: “The bulk of the government’s direct business investments is managed by Khazanah, which has returned an average of just RM825 million (S$270 million) in dividends annually over the past four years, from its RM145 billion worth of assets. This amounts to a less than 1 percent return a year between 2013 and last year.

“The Straits Times understands that there is a push by some within the Prime Minister Najib Razak’s vast circle of advisers to change Khazanah’s investment strategy, especially since the fund’s Managing Director, Tan Sri Azman Mokhtar, is due to leave in mid-2019, after a 15-year run at the helm.”

The best way to report a fund’s performance is its total return – this is accepted as the de facto measure of fund performance in investment analysis. This includes realised as well as unrealised gains on investments plus dividends. Khazanah calls this the net worth adjusted (NWA) value.

The other performance measure it uses is the realisable asset value (RAV), which is essentially the market value of all its investments. When you subtract the liabilities, mainly borrowings, from RAV, and make adjustments to account for dividends as well as realised investment gains through sales of investments, you obtain the NWA value.

Now, anyone who has the slightest knowledge of fund management should know that dividends alone is not the way to measure a fund’s return. You have to take into account the increase in the value of investments that it owns and gains from investments sold. And why choose just the period from 2013 to 2016? A fund is best assessed over a longer period.

Misleading analysis

The best way to report a fund’s performance is its total return – this is accepted as the de facto measure of fund performance in investment analysis. This includes realised as well as unrealised gains on investments plus dividends. Khazanah calls this the net worth adjusted (NWA) value.

The other performance measure it uses is the realisable asset value (RAV), which is essentially the market value of all its investments. When you subtract the liabilities, mainly borrowings, from RAV, and make adjustments to account for dividends as well as realised investment gains through sales of investments, you obtain the NWA value.

The Singapore Straits Times report pointed out that the NWA value actually declined eight percent over the last two years, but failed to point out that such fluctuations are normal and happen because of market and currency fluctuations amongst others.

Unlike many other sovereign wealth funds, Khazanah has many large core holdings such as Tenaga Nasional, Telekom Malaysia, Axiata, CIMB, IHH Healthcare, etc, which it holds through good and bad times and when the market rises or falls. Market volatility plays havoc with NWA.

In 2008 for instance, in the aftermath of the world financial crisis, its NWA value tanked nearly 50% as markets collapsed but recovered by 68% and 39% respectively in the following two years, 2009 and 2010, as markets recovered. It would be wrong to think that Khazanah did badly in 2008 and well in 2009 and 2010 – the events that led to the fall and rise were beyond its control.

To prevent that kind of misleading analysis, it is common to compare fund performance over a period of time and against a set benchmark – for Khazanah that benchmark, because most of its holdings are Malaysian, would be the Kuala Lumpur stock market which is measured by the FBM KLCI index.

As Khazanah pointed out in its retort to the Singapore Straits Times report, its NWA value increased annually by 9.3% on a compounded basis between 2004 and 2016 which is very much in line with the FBM KLCI index growth of 9.4% over the same period. During the period the NWA value of its investments rose over two times to RM102.1 billion from RM33.3 billion, creating value of RM68.9 billion. In contrast, 1MDB destroyed nearly half of the value Khazanah created over 12 years in less than a handful of years.

That 9.3% annual compounded growth of NWA over 2004-2016 – the best measure of Khazanah’s performance – was mentioned towards the end of the Singapore Straits Times article. And even then, the article mentioned it was lower than the performance of the broad market without actually giving the 9.4% figure.

This figure is pretty alright considering that many of Khazanah’s investments have long gestation periods such as the Iskandar corridor development and others may be historically making losses, for example, Proton, Malaysia Airlines and Silterra.

Erroneous comparison

Further, the article makes an erroneous comparison between Khazanah and the Employees Provident Fund.

It said: “The fund performs poorly when compared with the country’s Employees Provident Fund (EPF), which all private workers and employers must contribute to. Since Mr Azman took over Khazanah in 2004, it has returned a total of RM9 billion in dividends, which works out to an average annual return of below 1 percent of the fund size. Meanwhile, the EPF has added more than 5 percent annually to its members’ retirement savings.”

The EPF has a major part of its investments invested in government bonds, much of which give fixed returns over 4% per year. It supplements this by booking in realised profits from its equity trading and other businesses – it has no strategic holdings. Thus it can return close to 5% in dividends but the value of its funds don’t increase as much, if you take out increased contributions from members. The correct comparison should be between the 9.3% annual return and the EPF dividend rate of 5% plus any unrealised gains.

Also, the article makes a comparison, again erroneous, comparing pre-tax profit as a percentage of total asset size with other funds. It said: “Khazanah’s profit before tax – not including unrealised capital gains – also lags behind those of its peers, such as Singapore’s Temasek Holdings, China Investment Corporation (CIC), Alaska Permanent Fund Corporation (APFC) and the world’s largest sovereign fund, Norway’s Government Pension Fund Global (GPFG).”

But the key phrase there is “not including unrealised capital gains” – as a strategic investment fund, it holds stakes in sizeable companies that it does not sell off. The others play no such role and are free to take profits from their investments as and when they see fit.

Overall, the Singapore Straits Times article is rather unbalanced and lopsided, and looks very much like it was planted there via the provision of selective information by those who want to smear Khazanah’s name and have their own agendas in terms of lobbying for some people to take over when Azman’s term ends.

That article has been picked up and quoted widely among the press in Malaysia, both online and print, and has had its intended effect by those who may have planted it there. It is however lamentable that a respected publication in terms of reporting regional affairs has been so used.

Meantime, one hopes the powers-that-be don’t try to fix what isn’t broken and continue to give support for Khazanah to operate conservatively and competently with proper checks, balances and accountability, unlike what has happened at 1MDB.

To do anything otherwise is to rain down more suspicion and lack of confidence on a country already beleaguered by a plethora of governance ills and all that comes with it such as market and currency weakness. We simply can’t afford another fund debacle.

 

Coping with Foreign Direct Investment


December 6, 2017

Coping with Foreign Direct Investment

by Jomo Kwame Sundaram and Anis Chowdhury

http://www.networkideas.org/news-analysis/2017/11/coping-with-foreign-direct-investment/

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Malaysia has been named by Forbes as one of the top recipients of foreign direct investment, followed by Singapore, Vietnam, Indonesia and India.

Foreign direct investment (FDI) is increasingly touted as the elixir for economic growth. While not against FDI, the mid-2015 Addis Ababa Action Agenda (AAAA) for financing development also cautioned that it “is concentrated in a few sectors in many developing countries and often bypasses countries most in need, and international capital flows are often short-term oriented”.

FDI flows

UNCTAD’s 2017 World Investment Report (WIR) shows that FDI flows have remained the largest and has provided less volatile of all external financial flows to developing economies, despite declining by 14% in 2016. FDI flows to the least developed countries and ‘structurally weak’ economies remain low and volatile.

FDI inflows add to funds for investment, while providing foreign exchange for importing machinery and other needed inputs. FDI can enhance growth and structural transformation through various channels, notably via technological spill-overs, linkages and competition. Transnational corporations (TNCs) may also provide access to export markets and specialized expertise.

However, none of these beneficial growth-enhancing effects can be taken for granted as much depends on type of FDI. For instance, mergers and acquisitions (M&As) do not add new capacities or capabilities while typically concentrating market power, whereas green-field investments tend to be more beneficial. FDI in capital-intensive mining has limited linkage or employment effects.

Technological Capacities and Capabilities

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The National Bank of Cambodia’s decision in March, 2017 to raise the minimum capital requirements of financial institutions in order to strengthen and stabilise the financial sector has led to an increase in foreign capital flowing into the banking sector, according to industry experts. Underpinned by political stability  and business friendly policies, Cambodia is expected to register robust real economic growth in 2017 in excess of 7 per cent per annum.

Technological spill-overs occur when host country firms learn superior technology or management practices from TNCs. But intellectual property rights and other restrictions may effectively impede technology transfer.

Or the quality of human resources in the host country may be too poor to effectively use, let alone transfer technology introduced by foreign firms. Learning effects can be constrained by limited linkages or interactions between local suppliers and foreign affiliates.

Linkages between TNCs and local firms are also more likely in countries with strict local content requirements. But purely export oriented TNCs, especially in export processing zones (EPZs), are likely to have fewer and weaker linkages with local industry.

Foreign entry may reduce firm concentration in a national market, thereby increasing competition, which may force local firms to reduce organizational inefficiencies to stay competitive. But if host country firms are not yet internationally competitive, FDI may decimate local firms, giving market power and lucrative rents to foreign firms.

Contrasting Experiences

The South Korean government has long been cautious towards FDI. The share of FDI in gross capital formation was less than 2% during 1965-1984. The government did not depend on FDI for technology transfer, and preferred to ‘purchase and unbundle’ technology, encouraging ‘reverse engineering’. It favoured strict local content requirements, licensing, technical cooperation and joint ventures over wholly-owned FDI.

In contrast, post-colonial Malaysia has never been hostile to any kind of FDI. After FDI-led import-substituting industrialization petered out by the mid-1960s, export-orientation from the early 1970s generated hundreds of thousands of jobs for women. Electronics in Malaysia has been more than 80% FDI since the 1970s, with little scope for knowledge spill-overs and interactions with local firms. Although lacking many mature industries, Malaysia has been experiencing premature deindustrialization since the 1997-1998 Asian financial crises.

China and India

From the 1980s, China has been pro-active in encouraging both import-substituting and export-oriented FDI. However, it soon imposed strict requirements regarding local content, foreign exchange earnings, technology transfer as well as research and development, besides favouring joint ventures and cooperatives.

Solely foreign-owned enterprises were not permitted unless they brought advanced technology or exported most of their output. China only relaxed these restrictions in 2001 to comply with WTO entrance requirements. Nevertheless, it still prefers TNCs that bring advanced technology and boost exports, and green-field FDI over M&As.

Thus, more than 80% of FDI in China involves green-field investments, mostly in manufacturing, constituting 70% of total FDI in 2001. China has strictly controlled FDI inflows into services, only allowing FDI in real estate recently.

Although long cautious of FDI, India has recently changed its policies, seeking FDI to boost Indian manufacturing and create jobs. Thus, the current government has promised to “put more and more FDI proposals on automatic route instead of government route”.

Despite sharp rising FDI inflows, the share of FDI in manufacturing declined from 48% to 29% between October 2014 and September 2016, with few green-field investments. Newly incorporated companies’ share of inflows was 2.7% overall, and 1.6% for manufacturing, with the bulk of FDI going to M&As.

Policy Lessons

FDI policies need to be well complemented by effective industrial policies including efforts to enhance human resource development and technological capabilities through public investments in education, training and R&D.

Thus, South Korea industrialized rapidly without much FDI thanks to its well-educated workforce and efforts to enhance technological capabilities from 1966. Korean manufacturing developed with protection and other official support (e.g., subsidized credit from state-owned banks and government-guaranteed private firm borrowings from abroad) subject to strict performance criteria (e.g., export targets).

Indeed, FDI can make important contributions “to sustainable development, particularly when projects are aligned with national and regional sustainable development strategies. Government policies can strengthen positive spillovers …, such as know-how and technology, including through establishing linkages with domestic suppliers, as well as encouraging the integration of local enterprises… into regional and global value chains”.

(This article was originally published in Inter Press service (IPS) news on November 21, 2017)

Maybe Trump knows his base better than we do


December 3, 2017

Maybe Trump knows his base better than we do

by Dr. Fareed Zakaria

https://www.washingtonpost.com/opinions/maybe-trump-knows-his-base-better-than-we-do/2017/11/30/b4ca2164-d60e-11e7-b62d-d9345ced896d_story.html?utm_term=.227592e3afbc

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The most important revolution in economics in the past generation has been the rise of the behavioral scientists, trained in psychology, who are finding that people systematically make decisions that are against their own “interests.” This might be the tip of the iceberg in understanding human motivation. The real story might be that people see their own interests in much more emotional and tribal ways than scholars understand. What if, in the eyes of a large group of Americans, these other issues are the ones for which they will stand up, protest, support politicians and even pay an economic price? What if, for many people, in America and around the world, these are their true interests?—Dr. Fareed Zakaria

 

 

Watching the Republican tax plan race through Congress, one is reminded of a big apparent difference between President Trump’s program and other populist movements in the Western world. In the United States, Trump is leading something that is best described as plutocratic populism, a mixture of traditional populist causes with extreme libertarian ones.

Congress’s own think tanks — the Joint Committee on Taxation and the Congressional Budget Office — calculate that in 10 years, people making between $50,000 and $75,000 (around the median income in the United States) would effectively pay a whopping $4 billion more in taxes, while people making $1 million or more would pay $5.8 billion less under the Senate bill. And that doesn’t take into account the massive cuts in services, health care and other benefits that would likely result. Martin Wolf, the sober and fact-based chief economics commentator for the Financial Times, concludes, “This is a determined effort to shift resources from the bottom, middle and even upper middle of the U.S. income distribution toward the very top, combined with big increases in economic insecurity for the great majority.”

The puzzle, Wolf says, is why this is a politically successful strategy. The Republican Party is pursuing an economic agenda for the 0.1 percent, but it needs to win the votes of the majority. This is the issue that University of California at Berkeley political scientist Paul Pierson discusses in a recently published essay. Writing in the British Journal of Sociology, Pierson notes that Trump’s program does have strong populist aspects, especially on trade and immigration. But, he points out, “On the big economic issues of taxes, spending and regulation — ones that have animated conservative elites for a generation — he has pursued, or supported, an agenda that is extremely friendly to large corporations, wealthy families, and well-positioned rent-seekers. His budgetary policies (and those pursued by his Republican allies in Congress) will, if enacted, be devastating to the same rural and moderate-income communities that helped him win office.”

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Republican Party is cleverly and successfully hoodwinking its supporters, promising them populism and enacting plutocratic capitalism?  –Thomas Frank’s book “What’s the Matter with Kansas?

Pierson argues that Trump entered the White House with a set of inchoate ideas and no real organization. Thus, his administration was ripe for takeover by the most ardent, organized and well-funded elements of the Republican Party — its libertarian wing. Nurtured and built up over the years, this group of conservatives decided to ally with the Trump administration to enact its long-standing agenda. Pierson quotes Grover Norquist, the fiercely anti-statist GOP operative, explaining in 2012 his views on the selection of a Republican presidential nominee. “We are not auditioning for fearless leader. We don’t need a president to tell us in what direction to go. We know what direction to go. . . . We just need a president to sign this stuff.”

Image result for “The plutocrats are riding on a hungry tiger,” writes Wolf.

Is it that the Republican Party is cleverly and successfully hoodwinking its supporters, promising them populism and enacting plutocratic capitalism instead? This view has been a staple of liberal analysis for years, most prominently in Thomas Frank’s book “What’s the Matter with Kansas?” Frank argued that Republicans have been able to work this magic trick by dangling social issues in front of working-class voters, who fall for the bait and lose sight of the fact that they are voting against their own interests. Both Wolf and Pierson believe that this trickery will prove dangerous for Republicans. “The plutocrats are riding on a hungry tiger,” writes Wolf.

But what if people are not being fooled at all? What if people are actually motivated far more deeply by issues surrounding religion, race and culture than they are by economics? There is increasing evidence that Trump’s base supports him because they feel a deep emotional, cultural and class affinity for him. And while the tax bill is analyzed by economists, Trump picks fights with black athletes, retweets misleading anti-Muslim videos and promises not to yield on immigration. Perhaps he knows his base better than we do. In fact, Trump’s populism might not be as unique as it’s made out to be. Polling from Europe suggests that the core issues motivating people to support Brexit or the far-right parties in France and Germany, and even the populist parties of Eastern Europe, are cultural and social.

The most important revolution in economics in the past generation has been the rise of the behavioral scientists, trained in psychology, who are finding that people systematically make decisions that are against their own “interests.” This might be the tip of the iceberg in understanding human motivation. The real story might be that people see their own interests in much more emotional and tribal ways than scholars understand. What if, in the eyes of a large group of Americans, these other issues are the ones for which they will stand up, protest, support politicians and even pay an economic price? What if, for many people, in America and around the world, these are their true interests?

 

Why Denmark is a Special Place– It is not just the Mermaid of course


December 3, 2017

Why Denmark is a Special Place– It is not just the Mermaid of course

by Benedict Lopez*

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The Little Mermaid to Copenhagen– The mermaid statue was created in bronze by Edvard Eriksen, and was unveiled in August of 1913.

Eriksen was commissioned in January 1909 by Carl Jacobsen of Carlsberg Breweries to create the statue. Carl was fascinated by a ballet at the Copenhagen Royal Theatre based on the fairy tale about the mermaid, and asked the star of the ballet, Ellen Price de Plane, to model for the statue.  Price declined modeling in the nude for the sculpture, and Eriksen enlisted his wife Eline Eriksen (who modeled for several other of his works) to model for the mermaid statue.   A popular story has it that Price modeled for the face and Eline Eriksen for the body, but in actual fact Eline Eriksen was the model for the entire sculpture.  This is easily seen when comparing the statue’s face with photos of Eline Eriksen, and the faces of Eriksen’s other statues.

This mermaid statue is one of the top tourist attractions in Copenhagen, and has become an icon and a symbol of both Copenhagen and Denmark. While the story by Hans Christian Andersen was more than enough to make this mermaid statue known around the world, the Disney movies have only added to the fame and the appeal of this statue.

There are copies of the statue – with some differences – in a number of locations around the world, which in some cases are authorized by Eriksen’s heirs, and in other cases have been allowed to remain without specific authorization from the heirs.

The mermaid statue on display in Copenhagen is the actual original, but other copies and sizes were made as well – which is a good thing, as the original has been vandalized several times, and then lovingly restored using the copies.   Several sizes are available for purchase at the official website for this most famous of all mermaid statues.

While the statue is often seen as being smaller than expected, it is actually larger than it appears, about 25% larger than lifesize.  The spectacular location and the grand features of ocean, harbor and shoreline around the statue contribute to make it look small in comparison.  The original statue here is the only true copy of the statue in this size – according to sculptor Edvard Eriksen’s will, only smaller copies may be produced, with Copenhagen Harbor having the only full-size statue.

https://aliran.com/thinking-allowed-online/2017-ta-online/denmark-progressive-nation-deep-rooted-basic-values/

Benedict Lopez is drawn to the simplicity, integrity and passion for the environment on display in Denmark.

Although I have visited Denmark several times since 2010, I always look forward to my next visit.

I feel comfortable being in the home of Carlsberg, not for the beer alone (although I enjoy a pint or two occasionally) but also for the core values of this country of 5.5m people – values I cherish as a human being.

Like in Sweden, discrimination is prohibited on the grounds of race, colour, religion, gender, disability and sexual orientation in Denmark.

On each visit, I observed as many things as possible as to what makes Danes the happiest people in the world. I personally believe it is the sense of security given to the citizenry by the state.

Sharply in contrast to citizens in many other countries around the world, Danes need not worry about the basic necessities in life like healthcare, education and social security as Denmark is a welfare state. This is made possible because of high taxes, accountability in public expenditure, little wastage, checks and balances in the system and virtually non-existent corruption.

Having travelled the length and breadth of the land of Hans Christian Andersen, I have observed many facets of Danish life. The virtues of the Danes may be summarised as follows: integrity, simplicity and passion for the environment.

READ MORE:  https://aliran.com/thinking-allowed-online/2016-ta-online/accountability-integrity-backdrop-swedish-society/


Government ministers, civil servants and all public sector officials are held accountable for their actions. And when inefficiency, negligence and breach of fiduciary responsibility is highlighted, the minister or official concerned resigns immediately or is reprimanded. Transparency ensures that public expenditure is effectively scrutinised with any leaks in the system immediately plugged.

There is a high level of integrity among ordinary people too, and they seldom hoodwink or defraud others. Seldom does one read about any form of dishonesty, abuse of power or financial transgression.

Simplicity is a virtue the Danes are noted for. About a third of Copenhagen residents cycle to work and the rest take the train or drive to work. Most of those who drive have ordinary cars. In my six years traveling all over Denmark, I never once saw posh makes like Lamborghini, Aston Martin and Ferrari.

In sharp contrast to their Malaysian counterparts, chairmen, CEOs and managing directors of companies in Denmark usually drive to work on their own – without a personal driver. There are no special parking spaces reserved for them at their place of work. All staff park their cars in the same place. Meeting rooms are simple with ordinary tables and chairs; no expensive executive chairs even for the top brass in the company.

Just like in Sweden, simple dressing is the order of the day for the office and meetings, and most men wear a jacket without a tie. Their dress code contrasts conspicuously with many in the upper echelon in Malaysia, who have a passion for branded products and wait for the opportunity to display their opulence.

READ MORE:  https://aliran.com/aliran-csi/aliran-csi-2017/uncharted-waters-1mdbs-fourth-auditor-faces-formidable-task/

The offices of top management staff in companies are simple, quite unlike what you find in Malaysia. No posh office furniture. I have noticed this in many companies in Denmark over the years and this is something we Malaysians can emulate. In Denmark, people look down on you if you flaunt your wealth conspicuously.

I always take the flight to Billund, the home of Lego, via one of the European cities, and the one-hour drive to Julesminde is just awesome. I admire the beauty of the Danish countryside while passing through country towns along the way.

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Each time after arriving in Juelsminde, a small town of less than 5,000 people, I immediately check into the guesthouse. Without wasting any time, I go for a jog on the beach in front of the guesthouse for an hour. The clean fresh air, unpolluted environment and early morning sunrise keeps me rejuvenated as I jog in the mornings and evenings.

I subsequently laze about outdoors reading a book with, of course, a glass of good wine beside me in the evenings, before I go for a satisfying Danish dinner with colleagues.

Danes are passionate about their environment and are moving at an accelerated speed towards zero dependence on fossil fuels by 2050. Much of Denmark’s renewable energy requirements will be met through wind, and wind farms are conspicuous on land and sea all over the country.

All through my travels in Denmark and my dealings with the Danes, I have observed one of their traits, and that is if you are honest and sincere with them, they respect you. I too was always candid in my dealings with them, constantly being the “unsubtle diplomat”.

 

 

READ MORE:

https://aliran.com/newsletters/2017-newsletters/courting-elephant-room-1mdb/

After all, honesty is the mark of self-respect in any human being, and only those without this trait try and boost their self-esteem in other, less edifying, ways.

Benedict Lopez was director of the Malaysian Investment Development Authority in Stockholm and economics counsellor at the Malaysian embassy there in 2010-2014. During the course of his work, he covered all five Nordic countries. An eternal optimist, he believes Malaysia can provide its citizens with the same benefits and privileges found in the Nordic countries – not a far-fetched dream but one that he hopes will be realised in his lifetime.

Malaysia’s national shipping line: The Robert Kuok Memoirs


November 27, 2017

How I launched Malaysia’s national shipping line (and what Genghis Khan had to do with it): the Robert Kuok memoirs

In the fifth extract from Robert Kuok’s memoir, the Malaysian-born tycoon reveals how patriotism drove him to launch the country’s national shipping line and how he drew inspiration from the Mongol warrior.

By Robert Kuok

http://www.scmp.com/week-asia/opinion/article/2121108/how-i-launched-malaysias-national-shipping-line-and-what-genghis

CUT THE APRON STRINGS AND CAST OFF

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Shipping Magnate Frank  WK Tsao

In 1967, word reached my ears that the Blue Funnel Group was coming to set up the national shipping line of Malaysia. Blue Funnel was probably the largest shipping conglomerate in Britain at that time. It owned Blue Funnel, Glen Line, Straits Steamship Co in Singapore, and many other lines. The Executive Chairman, a man whom I recall walked with a bad limp, was making frequent lobbying trips from London to Kuala Lumpur. I was interested in applying for the licence, so I chatted with a few of my Malay civil-servant friends. They agreed that I should put in a similar application to be considered for the right to establish the national shipping line.

My interest was partly patriotism … to help Malaysia not be tied to the apron string of the ex-colonial government

My interest was partly patriotism – a desire to help Malaysia to launch its own independent shipping line and not be tied to the apron strings of the ex-colonial government of Britain through Blue Funnel. I had become interested in shipping from about 1964, due to our large-scale buying of sugar for our refinery, wheat for our flourmill and our international commodities-trading activities. For example, we bought free-on-board sugar from India and delivered it to the Government of Indonesia on a cost-and-freight basis (sellers only wanted to sell on the basis of delivery at their own ports; buyers wanted the sugar delivered to their ports. Thus, covering the span of the ocean was my risk).

Robert Kuok

In those days, shipping was quite volatile and freight rates could sometimes shoot up 25-30 per cent. Since margins on sugar trading were small, you could easily make money on your trade, but lose on the freight. There was one problem: I knew nothing about shipping. I did know that in any business, unless you know the tricks of the trade, you can be badly burnt. I couldn’t even submit a decent memo for the application. So I looked for a partner.

A FRANK ADMISSION

On one trip to Hong Kong, I had been introduced by a Malay civil-servant friend to a man called Frank WK Tsao. I remembered that Tsao was a shipping man, Chairman of International Maritime Carriers, so I telephoned him. I said I would like to come and see him to discuss a business proposal. He gave me an appointment and I flew to Hong Kong. When I went to his office, Tsao was only mildly friendly. I was quite humble in my approach. I told him that we had met. He said, “Oh yes, we have met, we have met.” In business life, you learn early on that you must swallow your pride. I told him that some Malay civil servants, who wanted to stir up competition, were encouraging me to submit an application to set up a national shipping line.

There was one problem: I knew nothing about shipping. I did know that in any business, unless you know the tricks of the trade, you can be badly burnt.

I said, “I can’t differentiate between the front and rear ends of a ship,” which was a bit of an exaggeration, “so why don’t you come and help me to set up the Malaysian national shipping line? You’re well known in the shipping business. Are you willing to become my partner?” Without thinking for a second, he retorted, “Do you know, so and so and so and so have also approached me. They are Tan Sris, and I turned them all down.”

He was virtually saying “And who are you? I’ve turned down people way ahead of you in the pecking order in Malaysia.” When I heard these remarks and saw his body language, I said, “I’m sorry then. I thought I would give you first crack. I am going to go at it.” I didn’t tell him what a determined man I am in life.

I concluded, “Never mind, nothing has been lost by this little chat we’ve had. Thank you for receiving me.” I got up and was walking out when he shouted, “Oh, no, no. Please, Mr Kuok. Don’t go! Don’t go! Sit down, sit down.”

To this day I don’t know what made Frank change his mind. I had one shipping expert on staff, Tony Goh, a Singaporean- Chinese who was running my plywood factory. Tony had been a manager at Ben Line, a Scottish liner, before he joined me in 1964. So I sent Tony Goh to draft the memo with Frank Tsao.

I rewrote certain parts to suit the reading style of the Malaysian civil servants, and we submitted the memo in the joint names of Kuok Brothers and Frank’s International Maritime Carriers. A little later, I heard that we were one of the leading contenders. I asked Frank to meet me in Kuala Lumpur. I had made up my mind that we should pick one day to call on as many important ministers as possible. From eight in the morning we whipped around Kuala Lumpur at a furious pace, such as you can’t do today due to the traffic, and saw seven ministers by lunchtime. Some of them gave us good time and good hearings, and we told them the same story. In the afternoon, we visited one or two more.

I remember calling on the Prime Minister, the Deputy Prime Minister, Home Minister Tun Dr Ismail, Finance Minister Tan Siew Sin, Minister of Works Sambanthan and Minister of Transport Sardon Jubir.

Tun Dr Ismail, the former Malaysian interior minister.

OUR SHIP COMES IN

Within two or three weeks, we were picked at a cabinet meeting to start the national shipping line, Malaysian International Shipping Corporation (MISC). We were like a dark horse coming from behind in the last furlong and pipping the favourite at the post!

I was Chairman of the Board and provided business management guidance. Frank Tsao’s side provided the shipping expertise. Just around the time of MISC’s formation in 1968, my dear friend Tun Dr Ismail resigned from government when he found that he had cancer. I immediately invited him to be the first Chairman of MISC.

I was inspired by the example of Genghis Khan, who, when he conquered cities, usually turned the spoils over to his generals and soldiers

Frank Tsao already knew Tun Dr Ismail through a textile-mill investment Frank had made in Johor (Dr Ismail resigned from MISC after the May 13, 1969, riots to return to the Cabinet. I then took over the chairmanship until the 1980s). Our first two ships came from the Japanese. Simultaneous with our moves to start the shipping line, there was an initiative by the Malayan Chinese Association (MCA) to demand war reparations from Japan.

The Chinese community was angry about the Japanese massacre of innocent Chinese and was seeking compensation for this blood debt. Tunku Abdul Rahman, the Malaysian Prime Minister, supported the demand and raised the issue during official trips to Japan. The Japanese finally agreed to give two blood-debt ships to Malaysia, which the Japanese called “goodwill ships”. MISC started with these two cargo ships and paid for them on a monthly bare-boat, hire-charter basis. Frank’s ship architects and engineers in Hong Kong supervised the design and construction in Japan. Tunku Abdul Rahman made some very cogent suggestions about the design of the flag for this new national flag carrier.

Malaysia’s first prime minister Tunku Abdul Rahman, left, and finance minister Tan Siew Sin in 1969.

MISC had an initial paid-up capital of 10 million ringgit. Since Kuok Brothers led the show, we took 20 per cent; Frank Tsao took 15 per cent. As the ships were reparation from the Japanese to the Malayan Chinese Association, not to the Malaysian nation, the vessels were assessed a reasonable value and the MCA was given MISC shares in lieu of payment.

MCA and other Chinese associations, combined, took 20-30 per cent, so in the beginning the holding of Kuok Brothers, Frank and the MCA group together was easily over 50 per cent. We had a fairly united board in the beginning. MISC started business in the second half of 1969 and quickly flourished. Much of the credit must go to Frank, the deputy chairman, who recommended capable managers such as Eddie Shih. Shih, another Shanghainese who had settled in Hong Kong, ran the show with Tony Goh. Very early on,

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MISC Managing Director Leslie Eu Peng Meng

Tony recommended his one-time colleague in Ben Line, Leslie Eu, who at the time was manager of Ben Line Bangkok. Leslie, the son of Burmese Chinese who had settled in Malaysia, quit Ben Line and came in as Managing Director of MISC.

YES, PRIME MINISTER

Within a year of our launching MISC, Tun Razak, who by then was prime minister, sent for me. Razak said, “I want you to make a fresh issue of 20 per cent of new shares. I’m under pressure because there is not a high enough Malay percentage of shareholding.” I said, “Tun, are you quite serious about this request?” He answered, “Yes, Robert.” So I replied that I would do it. I went back and, with a little bit of arm-twisting, persuaded the board to pass a resolution waiving the rights of existing shareholders to a rights issue (MISC was not yet a public company). Razak allocated all the new shares to government agencies. So, I was diluted to 20 upon 120 – the enlarged base – and Frank became 15 upon 120.

Tun Razak.

One or two years later, Razak again sent for me. He said, “I’m under a lot of pressure at Cabinet meetings. You know, Robert, it’s just the price of your success. MISC is doing well, people are getting envious. But now, instead of giving in to those factions, what I’ve decided is this: Issue another twenty per cent, five per cent to each of four port cities in Malaysia.”

I have always believed in some degree of socialism when you have made money

This entailed enlarging the capital base to 140 from the original 100, making the Malaysian Government the largest single shareholder and relegating Kuok Brothers to second position. And he again wanted the shares issued at par – the original issue price.

I said, “Tun, I have always cooperated with you, but it’s getting very difficult. Three, four years have elapsed from formation, but I would be loath to ask you for a premium since we are a growing company. So I will go back and ask the board again to issue shares at par to you. But Tun, can you please promise me that this is the last time?” He smiled and very gently signified his agreement, without saying the words.

GIVING LIKE GENGHIS

Then Frank and I decided that we should go public. Before we listed in 1987, I made quite a radical move, adopting a practice that I had used within Kuok Brothers. I explained to my Kuok Brothers senior directors that the MISC shares were now worth a lot of money, but only because of the great effort put in by other members of the board and many of the very deserving staff. I wanted to take about 15 per cent of our shareholding and sell the shares at par to deserving directors, staff and ship captains. Quite a number of people benefited from this move. I have always believed in some degree of socialism when you have made money. You know very well that you alone didn’t make it; it was a joint effort.

I was inspired by the example of Genghis Khan, who, when he conquered cities, usually turned the spoils over to his generals and soldiers. He was not selfish, and that is why he became the greatest general the world has ever seen.

Robert Kuok, A Memoir will be available in Hong Kong exclusively at Bookazine and in Singapore at all major bookshops from November 25. It will be released in Malaysia on Dec 1 and in Indonesia on Jan 1, 2018