The Star Online: Business
The Star Online: Business |
- Your 10 questions with Dr Yeah Kim Leng
- Need to keep politics out of Maxis-Aircel deal probe
- The global effect on property
| Your 10 questions with Dr Yeah Kim Leng Posted: 14 Oct 2011 05:49 PM PDT What should we do to enhance the regard for English at management and leadership levels? Marisa Demori, Ipoh That English is a global language and, in some instances, the required international language in certain fields, is hard to dispute. Leaders and managers may not be imperilled for ignoring it, but they would be missing opportunities or under-performing if they choose to ignore the universal language in an increasingly globalised and connected world. Fostering recognition and acceptance of the critical importance of a good command of the universal language would be the first step to enhance the regard for English at management and leadership levels. The second step is to encourage participation in national and international conferences, seminars, exhibitions, road shows and meetings, where the ability to communicate in English is both a strategic asset and a competitive tool. The third step would be to encourage managers and leaders to either mount or support efforts to enhance proficiency of the language among their staff or community, especially when this matters to the performance of the individual worker as well as the functioning and the image of the firm and the country. How do you find personal development in your work? Bulbir Singh, Seremban It is fulfilling as a large part of personal development and fulfilment is motivated by the challenge to acquire hard and soft skills when exposed to different formal and informal roles and challenges as a researcher, manager, consultant, and director. In economic research, the scope to develop one's interests and capabilities is virtually unlimited, save for the finite time and personal drive. Having a systematic career development and staff training programme, together with continuous two-way feedback, will be a key requirement for organisations to ensure that every employee takes ownership and pride in his personal development, thereby boosting staff loyalty and talent retention. Do you think the global economy will ever come out of this mess? Susan Lim, PJ When the good years seemed to roll on indefinitely, some economists and analysts hailed the end of business cycles. The reality is that "boom and bust" cycles are very much with us. Such cycles have varying causes, but the most prominent has been the frequent occurrences of financial crises. The epicentre of the current global crisis involves two of the world's three major advanced economies, Europe and the United States, while Japan is confronted not only by post-earthquake and tsunami reconstruction challenges but also a structurally weak economy. Expectations of a quick recovery in these crisis-hit economies therefore have been misplaced, with most prognosis pointing to an uneven and gradual recovery over the next three to five years on average, and five to 10 years or longer for the highly indebted economies within the Euro-zone. This pessimism, however, is tempered by a shift in global growth pole to Asia, in particular, and the other emerging countries in South America, Africa and the Middle East as well. Sustaining growth, employment and income increases in these economies will have to shift to domestic sources as well as increased trade and investment with each other to offset the reliance on exports to and capital flows from the advanced economies. This is the new landscape for crafting responses at the firm, industry and country level. What's so exciting about being an economist? Md Arshi, Penang It was partly accidental and partly a blossoming interest in economics. I started out as a forester after obtaining a forestry degree from a local university. After seven years, I was fortunate to be awarded an overseas scholarship to pursue advanced degrees in business and economics. Upon returning, I joined a leading policy think-tank that launched my career as an economist. It is a stimulating profession because of the wide-ranging knowledge, theorising and learning about motivation, causes and effects, relationships and behaviour relating to "what makes households, firms, markets, industries and economies tick". The challenge of getting economic analysis, strategy and policy prescriptions right and making better forecasts add to the excitement in the workplace. Finally, an economist is never bored as there are many avenues to express one's work or viewpoints, such as conferences, seminars, professional meetings, journals, and not forgetting, the media. Why is the rising household debt level in Malaysia such a big concern? Do you think there is a sub-prime problem of sorts forming here? Naza, Perak Most financial crises result from too much easy money, over-exuberance and unbridled borrowing by individuals, firms or governments. The concern over the rising household debt level in Malaysia is not so much that it may develop into a US subprime mortgage-like crisis, as they do not share the same characteristics, particularly the lax underwriting standards and the complex credit derivatives that are absent here. It is the increased vulnerabilities to financial distress of those who borrowed excessively. Hence, an early, pre-emptive flagging of a potential problem will ensure that loan delinquencies are kept well within the day-to-day ability of banks' balance sheets to absorb the losses without the need for capital injection or curtailing lending to other sectors, thus keeping the overall economy in good shape. Does the Malaysian economy really have such strong fundamentals as reported? Ronald, Banting It really depends on what fundamentals are referred to, how reliable are the measures and the benchmarking criteria and assumptions used. Since these can be fairly technical, a general guide is to give more weight to the reputation of the reporting institution and the extent to which the findings and interpretations are corroborated by other studies or institutions. Malaysia's upper middle income status, a high GDP growth averaging 6.0% per year and low annual inflation of 3% over the last three decades as well as its current low unemployment rate of 3.2% would qualify the country as having strong fundamentals compared to many developing countries. However, the underlying fundamentals and the performance so far have not been sufficient for the country to join the ranks of advanced or high income economies. More generally, strong fundamentals are associated with rapid and sustained increase in country's output or income and full employment with price stability; shift in the economic structure to higher value industries, driven by productivity increases, innovations and technological advancements; good quality infrastructure and skilled work force; sound institutions, policies and macroeconomic management, including the creation of competitive and well-functioning markets, and stable social and political systems that drive and change with the economic transformation. Key elements shaping these fundamentals include far-sighted policies, strong commitment and implementation capacity, visionary and competent leadership and effective execution at all levels of the economy. What are the things that Malaysia needs to do urgently to ensure the long-term sustainability of its economy? Melissa Lim, PJ These are well-articulated in the New Economic Model under the eight Strategic Reform Initiatives. The transformation agenda has correctly placed top priority on private sector-led growth and human capital development to drive the shift to a high-performing, innovation-led economy. Reforms to raise the quality of education must be carried out in a comprehensive and sustained manner. Universities must produce appropriately skilled graduates that meet industry needs as well as drive an innovation and knowledge-based economy. Policy reforms to unshackle the economy, lower barriers and regulatory burden, and make it more market centric and performance-driven will be needed to push the economy to a higher level of efficiency and competitiveness, thus ensuring long term sustainability. Who has been the biggest influence on you as a person and economist? Why? Nik Hassan, KL There is no one particular person but I have been fortunate to interact with and learn from several prominent economists and corporate leaders in the country. How vulnerable are we to the ongoing debt problems of the euro region? Can we learn anything from this experience? Wong Muin, Penang Just like the global financial meltdown caused by the US sub-prime mortgage market and its derivatives, the ongoing Euro sovereign debt crisis will impact Malaysia only indirectly through the financial contagion and trade transmission channels, and not so much through direct exposures to the distressed debts. We have to brace for roller-coaster rides in the stock and currency markets but Malaysia's well-regulated financial system should once again prove its resilience. The lesson is quite obvious: overspending and over-borrowing ultimately leads to a hard landing. Do you think US President Barack Obama's plan to create jobs can be successful, and why? Ranjit Singh, Malacca With the economy running close to "stall speed" and unemployment persisting above 9%, a fiscal tightening induced by government spending cuts, end of payroll-tax holiday and expiry of extended unemployment benefits would raise the probability of a recession in 2012 to more than 50%. US economists estimate that Obama's US$447bil plan would contribute between 0.6% and 1.2% to gross domestic product. It will add slightly more than a quarter million jobs and ease the unemployment rate by 0.2 percentage point in 2012. Getting it passed without being watered down by Congress and quick implementation will be critical to its success in adding jobs quickly while forestalling the economy from double-dipping. Full content generated by Get Full RSS. |
| Need to keep politics out of Maxis-Aircel deal probe Posted: 14 Oct 2011 04:48 PM PDT THE problems that tycoon T Ananda Krishnan's companies are facing in India may well be a reflection of India's political climate now, which has been rocked by a scandal over the awarding of the 2G telecommunications spectrum. The resolution of the issues facing Maxis Communications Bhd (MCB) and Astro All Asia Networks will be closely watched not just because of the serious allegations being made against Ananda, senior executive Ralph Marshall and the two companies but also as a gauge of the independence of Indian criminal investigation and the courts if it goes to that. If there is any hint of bias in the investigation and victimisation of a foreign investor, a Malaysian in this case, for nothing else but the fact that he was doing business in India under the best of circumstances a very difficult place to do business in then the ramifications for both India and all who do business there are serious and far-reaching. Businesses and investors must at all times be assured that they will get a fair deal for all the money that they have put in (MCB's investments in India amount to a huge RM24bil) and that any investigation will be done fairly and quickly and disputes are settled equitably by the courts. On hindsight, after his experiences in India recently, it certainly looks like Ananda was right in taking his telecommunications operations private in 2007 and subsequently re-listing only the Malaysian operations under Maxis. With the problems that he is facing in India, including a relentless investigation by the powerful Central Bureau of Investigation into a deal that the now private MCB made to purchase Aircel way back in Dec 2005, he must be thankful he does not face a spread of public shareholders and volatile share prices. Ananda had also privatised Astro All Asia Networks last year in a deal which valued the company at some RM8.5bil. Basically, the investigations allege that Indian entrepreneur and former owner of Aircel, C. Sivasankaran, was pressured to sell Aircel to MCB by then telecoms minister Dayanidhi Maran, and that Astro's purchase of a 20% stake in India's Sun TV owned by Maran's brother was quid pro quo for the alleged coercion. Both MCB and Astro, which are majority owned by Ananda's Usaha Tegas, have denied the allegations. Indian authorities are no doubt keen to show that they are pursuing any trangressions following the 2G spectrum allocation scandal in which the nation could have lost as much as an estimated US$40bil in revenues because of alleged corruption in the award of scores of licences in 2007-2008. The telecoms minister at that time A Raja was arrested earlier this year while some of India's billionaires including Anil Ambani of the Reliance group and Ratan Tata of the Tata group have been questioned. The investigations involving MCB dates back to 2-3 years before the 2G spectrum awards in 2007-2008 and is seen by the public almost as an extension of that even though there were different telecoms ministers then. But, any complaints made now, in the wake of the 2G scandal are likely to receive a lot of public attention and therefore pressure both from the public and politically for a "thorough" investigation and punishment. However, Indian authorities must not bow to such public, media and political pressure and be overzealous in their investigation for that would be unfair to those being investigated. There should be no tendency towards a witch-hunt and disputes about agreements must not be allowed to become something which is criminal in nature. In the specific case involving MCB and Astro, the question has to be asked why the complaint to the authorities from Sivasankaran only came soon after he lost arbitration proceedings with MCB and five years after the sale of Aircel. Also, while the controlling shareholder of both MCB and Astro are the same, both companies also have other strong and different shareholders and boards which are independent of each other. A conspiracy involving both companies with one company paying for the benefit received for another company may be stretching the facts too far because all relevant parties the shareholders and board members of both companies will have to conspire or all of them have to be deceived for such a deal to go through. India must not let political expediency rule even though it would be populist to hang a few big guys in the name of the 2G and related scandals. The overiding aim of investigations must be to uncover and punish wrongdoing nothing more and nothing less. The sooner they conclude the investigations the better for all concerned. For Ananda, Marshall, MCB and Astro, the reality is that whether they like it or not, they are going to face a potentially long and tough investigation. Cooperating with the authorities is of course the right thing. But, beyond that they need to keep their stakeholders, including the public, appropriately informed at every step, keep their noses to the grindstone and get on with the business. If they have done nothing wrong, they should be vindicated hopefully not too long from now. l Managing editor P Gunasegaram is still confused about spectrum, let alone 2, 3 and 4G as a Physics student, he was only dimly aware of it as a band of different colours. G stood for gravity then, not generation. Full content generated by Get Full RSS. |
| Posted: 14 Oct 2011 04:47 PM PDT THE signs of the times are here, and they are not unique to Malaysia. The concerns about the global economy are real. Whether one is an avid property watcher or a young person considering a downpayment on one's first home, there are certain things to take into account. Says property consultant and valuer Elvin Fernandez of the Khong & Jaafar group of companies: "It is clear and becoming clearer by the day that the growth will slow down because it cannot keep up with just continuous stimulus around the world. Whether this state of affairs will continue depends on how sales fare as we complete this year and move into next. It is also clear that volatility will continue into the new year, which explains why developers are revamping their plans and changing strategies." Analysts have downgraded the property sector or had a negative outlook on it after they noted that average take-up rates of launches by property developers dropped from 80%-90% a year ago to a forecast 50%-65% in the second half of this year. To understand what is going on in our current property market and to get some pointers about its future direction, we need to look back a little. When property prices began to inch upwards in the second half of 2009, in the wake of the fall of Lehman Brothers in September 2008, there was cheer all round. But as prices continue to escalate into the first half of 2010 and then the second half, property watchers and buyers began to take note of the ballooning values in the landed property sector. The momentum shifted to high-rise, although to a lesser degree. In response, developers fast-tracked their launch programmes. Some were quick enough to launch products in the second half of 2010, while many of the rest were able to do so this year. Housing Buyers Association vice-president Brig-Gen (R) Datuk Goh Seng Toh said: "People bought in anticipation of higher prices later on." This situation of "buying before price goes up further" is evident not only in the Klang Valley but was especially so on Penang island. Says Real Estate & Housing Developers' Association (Penang) chairman Datuk Jerry Chan: "Because of land scarcity and worries that prices will go even further, people bought. Why? Because it was anybody's guess what was the ceiling. Is it too much to pay? That was difficult to answer because prices seem to have gone beyond what people expected." It was this frenzy of buying in selected locations that fed the worries about a bubble, coupled with the easy credit and low interest-rate regime. This double whammy of easy credit and low interest was not just evident in Malaysia. It has also played out in China, Singapore and other countries in the region. Banking on property What is interesting is that the United States has gone through this situation a couple of times. Says Fernandez: "The United States in the 1950s and 1960s were idyllic. After World War II, there was a certain amount of stability but there was this belief that a little inflation will boost the economic engine in exchange for more jobs." It worked and the US economy flourished. Inflation inched up and as it did so, workers demanded wage increases to keep up with higher prices, companies raised prices to compensate for the rising wages, and it became an upward spiral. Recession was the only thing that can break the cycle, and it came in the mid-1980s. That, both Fernandez and Chan agrees, is what is happening in the United States and then Europe today. In the 1990s, the then US Fed chief Alan Greenspan also kept interest rates too low for too long, which led to a speculative bubble in real estate. "We are ignoring the dangers of the twin combination of easy credit-low interest and a speculative property market," warns Fernandez. The prices of stocks and homes are every bit as vulnerable to inflation as chicken and sawi. He adds: "This notion that one will always make money on property investments is made popular by people who have speculated and gained from such activities, and their success stories are told time and again. We are now seeing in Europe, the United States and previously in Japan, that one can lose with property investment." He says although the property market has some distinctive factors, like any other market, it still runs on demand and supply and underlying fundamentals. "Because it is a market that has no shorting mechanism, it has a tendecy to rise rather than fall, unless the fundamentals pulling it down are strong," Fernandez points out. In Malaysia, this enchantment with properties the last two years has intensified because of a lack of alternative investment options, the availability of easy credit and as an hedge against inflation. The government moves are a factor as well. Last year, the Government announced seven mega development projects to spur the economy. Two of these were mentioned in Budget 2012 the development of government-owned land around Sungai Buloh and the KL International Financial District (KLIFD). Both are expected to take off in the second half of next year. The Government has invited some developers to participate. The finance sector has also profited from the property boom, with property loans being the main driver of growth for the banking industry, accounting for 40.6% of the overall credit expansion. The residential segment accounted for 27% of total loans. Analysts expect property loans to remain the key driver of credit expansion this year and in the near future. Although there was a slowdown in loan applications for residential mortgages after the implementation of the 70% loan-to-value cap on the third and subsequent house financing, the momentum has picked up again since March. Making a mark in new territories The sovereign debt problems brewing in Europe and the United States can impact consumer sentiment in property purchases, said RAM Ratings head of financial institution ratings Promod Dass. "The fact is, property is a cornerstone of any economy, and there is a property angle in just about any major venture. Even the proposed my rapid transit (MRT) system is known as "a property-and-rail play." Says Fernandez: "Many of the country's plans are property-dependent. We may not be able to live up to that expectation. It is like a father having too many children, and all of them want to spend his salary." The demand for property is driven by many factors. In today's prevailing uncertainty, demand is driven by job security, sentiment and affordability, says Tan Sri Leong Hoy Kum, managing director and group chief executive of developer Mah Sing Group Bhd. "We have a relatively young population, which means there will be a demand for starter homes. Whether for landed units or condominiums, the demand for larger units and high-end housing will definitely be slow. So we are changing our strategy," he adds. "Instead of concentrating on high-end housing, we will do mid- to high-end on fast-turnaround basis. We will launch three to nine months from the day we buy the land. If semi-detached units, it will be RM1.4mil and below. If it is a landed strata, it will be priced lower, and if it is high-rise, the built-up area will be smaller. Our focus will be on affordability. "The high-end sector will definitely soften in terms of sales in the next 12 month or so. Houses in the RM5mil and above range will be difficult to sell. The same goes for big units. The European crisis may be prolonged but we are hoping for a soft landing." About two weeks ago, Mah Sing announced that it has purchased 90ha in Rawang. The move to less-prime locations will be another strategy to aid affordability and to overcome land scarcity in the popular areas. The company is the second top developer to recently signal this move to less-prime locations. SP Setia Bhd is the other; it bought 673 acres in Rinching, located mid-way between Semenyih and the Bangi old town. As the woes in Europe and United States cast a pall over global economy, what will be ahead for locations around the iconic Petronas Twin Towers in the Kuala Lumpur City Centre, often regarded as the pinnacle of Malaysian property? Signs of slowing? Henry Butcher Marketing Sdn Bhd chief operating officer Tang Chee Meng says developers have noted the signs of an imminent slowing of the market. "Developers are today revamping their sizes. They are taking their projects to Singapore, China and Britain to sell. Or they work with banks to provide innovate mortgage packages. Some developers are also having friend-bring-friend commission in order to move sales. In a buoyant market, this will not happen. The larger units completed a couple of years ago in the KLCC market may continue to remain vacant with pressure on rentals. "Today, the majority of the sales are from developers, the primary market. In the secondary market, property agents are not getting many calls. The situation with huge leaps in prices is not as serious as last year or in the first half of this year. It is only certain type of properties in selective locations." "The European woes are weighing on investors. In that sense, the market is correcting itself. Developers may say these external global situations do not impact us. But there are many discerning people out there and they take note of what is going on in the US and in Europe," says Tang. A real estate agent specialising in properties in Mont'Kiara, another location that is closely watched, says the Sunrise MK28 has reduced its original price of about RM680 to RM700 per sq ft to RM590 to RM600 per sq ft. In Desa ParkCity, where prices of landed units have gone up by as much 300% or even more, the larger units of some of its latest launches are still available. Comparing prices About a decade ago, especially when the interest in KLCC-Petronas Twin Towers began, and in tandem with the proliferation of high-end landed and high-rise residentials, developers and property professionals took great pride comparing property prices in Malaysia with regional countries and concluded that the prices of Malaysian properties were far below those of China, Hong Kong, Singapore and Thailand. Projects around the Petronas Twin Towers were compared with London's Hyde Park and New York's Central Park. Today, such comparison continues to be made. Says Fernandez: "This comparison has not stood the test of time. This suggests that our properties are not open to such comparisons and that such comparisons are not an appropriate measure. The drop in prices of between 20% and 25% soon after the 2008 crisis show that the market is mainly driven by our own governing fundamentals. "The KLCC market, until today, has not rebounded to their original levels. The second point is that location is driven by a large expatriate community, which we do not have." Which is another sign of the times we are living in today. Related Stories: |
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