The Star Online: Business
The Star Online: Business |
| Buying a car or a house first? Posted: 10 Jun 2011 10:06 PM PDT Alan Tong justifies putting a house before a car but admits this is only possible when a comprehensive public transportation system is in place. AFTER you have graduated and secured your first job, what would be the first big ticket item that would appear in your purchase list? Many would think of a car before any other item. Owning a car has become the first priority for many young people in Malaysia. However, in China, their youths have a different thought. They would prefer to own a house instead of a car as their first asset. This is an interesting difference in mindset between the youths in Malaysia and China. What makes our young people decide to purchase a vehicle which will depreciate in value over the years instead of a house which has the possibility of gaining capital appreciation over time? There are many reasons influencing this mindset. Chief amongst them is the macro development of the country and in particular of our public transportation. Regrettably, although our current public transportation system has improved, it has not reached the level of that of a developed country. Waiting in a queue to board a bus or train which may not arrive on time has become a hassle to many who have to depend on them for their daily transportation. Therefore, in order to move around in the most convenient and comfortable manner, Malaysians in general have little choice but to acquire their own vehicle as their first asset. The situation is different when compared to that in cities with a comprehensive public transportation system. Let's look at China for example. As one of the fastest growing nations in the world, China is an inspiring example for us to study. For the past 15 years, I have been travelling frequently to China and have witnessed the vast changes in its transportation system. Its government had envisaged the need to have an efficient transportation system to support its fast paced economy and was bold enough to implement and develop a transportation network ahead of demand. Fifteen years ago, I hardly saw vehicles throughout a 100 km journey on well constructed highways in China (and even at that time some highways came with 14 lanes). Those highways are now supporting high traffic flow with millions travelling from one province to another every day. In addition, many cities in China are now well connected with an efficient network of public transportation. This comprehensive public transportation service has allowed its people to travel around easily. Owning a private vehicle is therefore not a necessity but a prestige. With its people moving to the big cities for jobs or business opportunities, the priority is to own a property for accommodation or business if possible. If not, renting a property would be the next best option. This explains the divergence in mindset between the youths in Malaysian and those in China when it comes to the question of wheather to own a car or a house first. To address this situation, the government should take initiatives in developing an extensive public transportation system and subsidising the relevant projects, such as the latest Mass Rapid Transit plan. Public transportation is an avenue where the government could channel resources to good use and benefit the lower income groups as a whole. Comprehensive public transportation at affordable fares would reduce the burden of travelling, and people could consider more capital investment tools, such as properties. Although buying a house is also a major financial decision and there are a lot of factors to be considered, proper financial planning would help our young people to start saving towards their goal of owning a property at an early age. We look forward to the day when our local public transportation system is well established. That day will also be the day where our Malaysian youths have the foresight and drive to own a house first before anything else. Datuk Alan Tong is the group chairman of Bukit Kiara Properties. He was the FIABCI world president from 2005 to 2006 and was recently named Property Man of The Year 2010 by FIABCI Malaysia. Full Feed Generated by Get Full RSS, sponsored by USA Best Price. |
| Posted: 10 Jun 2011 10:05 PM PDT LED by Asia, the share of the global economy held by emerging markets has risen steadily over recent decades. For the countries of Asia especially its rising giants, China and India sustainable growth is no longer part of a global challenge. Instead, it has become a national growth-strategy issue. This marks a sea change in the global structure of incentives with respect to achieving sustainability. Over the next few decades, almost all of the world's growth in energy consumption, urbanisation, automobile usage, airline travel, and carbon emissions will come from emerging economies. By mid-century, the number of people living in what will be (by then) high income economies will rise to 4.5 billion, from one billion today. Global GDP, which currently stands at about US$60 trillion, will at least triple in the next 30 years. If emerging economies try to reach advanced-country income levels by following roughly the same pattern as their predecessors, the impact on natural resources and the environment would be enormous, risky, and probably disastrous. One or several tipping points would most likely bring the process to a screeching halt. Energy security and cost, water and air quality, climate, ecosystems on land and in the oceans, food security, and much more would be threatened. At present, almost any standard measure of the concentration of global economic power would show a declining trend. If that were to continue, the result would be a world in which each country's contribution to pressure on natural resources and the environment would make sustainability a major global challenge, as the free-rider problem in its most extreme form would prevail. To change course, global agreements that impinge on growth would be needed, along with systems that ensure compliance. But the trend in concentration will reverse about a decade from now, owing to the size and growth rates of India and China, which together account for almost 40% of the world's population. Although their current combined GDP is still a relatively small fraction of global output (about 15%), that share is rising rapidly. By mid-century, India and China will account for 2.5 billion of the 3.5 billion additional people with advanced-country incomes. By themselves, they will cause global GDP to at least double in the next three decades, even in the absence of growth anywhere else. For India and China separately, and certainly together, sustainability is no longer mainly a global issue; it is a domestic challenge to long term growth. Their growth patterns and strategies, and the tradeoffs and choices they make with respect to lifestyle, urbanisation, transportation, the environment, and energy efficiency, will largely determine whether their economies can complete the long transition to advanced-income levels. Moreover, both countries know it. There is a growing awareness among policymakers, businesses, and citizens in China and India (and in Asia more broadly) that the historical growth paths that all of their predecessors followed simply will not work, because they do not "scale" to a world economy that is triple its current size. As a result, these countries will have to invent new growth patterns to reach advanced-country levels of development. They are too big to be free riders, so the incentives relating to sustainability are becoming internalised as national priorities. Perceptions are rapidly coming into line with the reality that sustainability must become a critical ingredient of growth. The old model won't work. Of course, no one currently knows how to achieve sustainability at three (or more) times the size of the current global economy. That objective will be determined by a process of discovery, experimentation, innovation, and creativity, with tradeoffs along the way. But the incentive to ignore these issues is gone, independent of what other countries choose to do and whatever global agreements may be reached. The large, high growth emerging economies have certain advantages. Integrating sustainability into growth strategies and policies is in their self-interest, and it is consistent with their long term time horizons. The legacy assets that one finds in advanced countries the way cities are configured, for example don't have to be replaced to the same extent. China's 12th Five-Year Plan lowers the growth forecast (to 7%) to create "space" to deal with issues like equity, sustainability, and the environment. The process of discovering a new growth path has started. The emergence of sustainability as a critical element in growth strategies in the worlds' future largest economies is an extraordinarily positive development, because national needs, goals, and priorities remain much more powerful incentives than international agreements. This all may seem to be at variance with common wisdom. How could a tripling of global GDP and a four-fold expansion of the world's high income population be good news, given all that goes with it? Well, it depends on what one thinks the alternative is. Slow global growth would benefit natural resources and the environment. But that will not happen unless the world's resource supplies and environmental underpinnings collapse. So the baseline is high emerging-market growth, the key to which is innovation and adjustment of the growth path. As Asians drive growth toward more sustainable patterns, they will increase the incentives for others to do so by generating new technology, lowering the environmental cost of growth, and undercutting the argument that leadership incurs competitive and other economic costs, but few benefits. To say that free-rider problems are gone, or that multinational agreements are no longer desirable, would be incorrect. But real parallel progress, driven by necessity and self-interest, is becoming the most likely medium term path. - Project Syndicate Michael Spence, a Nobel laureate in economics, is Professor of Economics at New York University's Stern School of Business, Distinguished Visiting Fellow at the Council on Foreign Relations, and Senior Fellow at the Hoover Institution, Stanford University. His latest book is The Next Convergence The Future of Economic Growth in a Multispeed World (www.thenextconvergence.com). Full Feed Generated by Get Full RSS, sponsored by USA Best Price. |
| Posted: 10 Jun 2011 09:51 PM PDT Talk of being No. 1 in Asia is premature, returning to and sustaining profit must be priority. ALL is not well with Malaysia Airlines (MAS) (see MAS: On a wing and prayer). While the situation is dire, it is not impossible for the airline to recover its fortunes but it needs some nifty strategic changes and deft execution. While key officials say they want the airline to be Asia's top one by 2015, they don't say clearly in terms of what. MAS is already among the best in the world in terms of service but that does not spell profit with the airline slipping into an operating loss of RM267mil for the first quarter of this year. This airline has been through tough times, slipping into massive losses at several points during its history. With help it has come back from the brink of failure but it has not been able to show the kind of sustained profitability that other airlines such as Singapore Airlines have exhibited. MAS' fortunes have deteriorated so much that low-cost carrier AirAsia overtook it in terms of market value earlier this year (see chart) and seems set to widen its lead as it made a profit in the latest quarter while MAS reported a substantial loss. MAS has a good product going by the continuing rave reviews for its cabin services. That alone is not enough to make it profitable. As with any business, you arrive at a profit or loss after subtracting costs from revenue. For an airline, the revenue is dependent on capacity and how much it grows or reduces its routes, the load factor which is a measure of capacity utilisation, and the crucial pricing through which you maximise revenues. This is to be juxtaposed with costs, of which the major and most volatile one is oil prices on which the jet fuel price depends. Sometimes, your cost savings justify a cutback in routes but a prudent airline will also consider the long-term impact of such a move because you don't want to constrain future growth. Because airlines are so dependent on oil costs, they try to hedge their positions to cap their costs but when wrongly or improperly done, this can wipe out airlines. In fact in 2009 MAS had to provide a massive RM3.95bil in provisions for it's hedging which nearly oblitereated its shareholders' funds, requiring it to ask an exemption from de-listing procedures under Bursa Malaysia's Practice Note 17. In that episode, MAS had hedged at an oil price of US$100 per barrel but what it failed to do was to structure the hedge so as to benefit fully from any fall in the oil price below US$100. Paradoxically, as the oil price collapsed, MAS' profits collapsed too. For the subsequent quarters, MAS made enormous profits because the oil price rose again, reversing some of the earlier provisions but there were massive operational losses nevertheless. For the latest quarter, MAS again blames rising oil prices for the losses but there is no explanation as to how many other airlines still manage to make profits, albeit at lower levels. One has to suspect that this lies in revenue management. Perhaps it does not have enough business class or first class seats. Perhaps it has got its pricing wrong and is cannibalising some of its own market via cheap offerings and through its low-cost airline, Firefly. Perhaps it has given up too many routes to be able to grow rapidly. Perhaps, MAS has become so obsessed with cutting fares and offering value comparable to low-cost airlines that it is losing its own high yielding market by people who book earlier to take advantage of lower fares. Perhaps the airline is not very clear about where it should stand in terms of the kind of strategy it must adopt to maximise its revenue. You don't leverage great service by offering value (read low-cost) fares. In fact you do the exact opposite. Yes, one must agree that new airplanes are more cost efficient and that could make the difference between profit and loss, but does that imply that MAS has been negligent in its fleet planning? In terms of broad strategy, MAS should just focus on being an excellent full-service carrier, market it as such and leave low-cost operations to subsidiary Firefly. It should get the best people and systems to manage its fleet and price its fares. It should focus on continued cost reduction in other areas without seriously undermining its service standards, its promotional efforts and its brand reputation and positioning. And it should engage in prudent hedging policies which allow it to take advantage of falling oil prices instead of being locked into high-cost oil when the price of oil is falling. Once it has sorted all this out and is back on the firm path of profit, then it can talk about being Asia's number one airline in every respect, not just service. Managing editor P Gunasegaram is willing to bet that Malaysia Airlines will not meet its own target of becoming Asia's top airline by 2015. Any takers? Full Feed Generated by Get Full RSS, sponsored by USA Best Price. |
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