The Star Online: Business
The Star Online: Business |
- Up Close & Personal with Michael Andrew
- Malaysian economy in stable phase
- 'Cooling off' measures choke supply
| Up Close & Personal with Michael Andrew Posted: MICHAEL Andrew never once thought that he would one day be jet-setting around the world, experiencing different cultures and tantalising his taste buds with the array of food native to the countries he tarried at. Since his entry into Big-Four accounting firm KPMG in 1984, now global chairman Andrew has travelled to 104 countries. "It is a fantastic experience for a boy from Melbourne who never thought he'd travel," he tells StarBizWeek. "My poor wife doesn't know where I am half the time," he laughs. Branding himself as the world's expert on travel, Andrew believes that his life is much akin to George Clooney's character in the movie Up In The Air. The movie is about Ryan Bingham, who travels around the United States to inform workers about their dismissals in place of their employers, and has an ambition to earn 10 million frequent flyer miles. "It's scary, its so much like my life," he says. He adds that he probably spends 85% of his time travelling. The remaining 15% is spent in Hong Kong, where he is currently based. "Last year, I did 210 flights and went to 63 countries," he reveals. Andrew now lives in Hong Kong with his wife Mardi, while his elder daughter lives in Melbourne, and his younger daughter has set up base in New York. Although most of his time is taken up by work travel, he and his family have at least one vacation together each year. KPMG's brand, Andrew says, is all about being independent and objective because the firm and its employees has a public interest of responsibility to the broader community. "We have to ensure that we uphold the governance standards in every country for our multi-national clients. They expect the same standards in Kuala Lumpur as they do in Johannesburg, Frankfurt or New York," he says. He adds that corporate governance defines the KPMG brand. "If we don't meet the governance standards, then people won't have confidence in our business. Integrity is at the heart of everything we do. "This is ensuring that we understand that our duty is to the broader community than just to any particular client or particular transaction. Because if we do some work, which turns out to be incorrect, it'll affect our global brand," he says. Every three months, KPMG employees are required to sign a declaration to maintain their independence around their audit clients. Prior to his promotion to global chairman of KPMG in 2011, Andrew served the firm as KPMG chairman of Asia-Pacific and Australia from 2007. He started at the firm in 1984 as a tax accountant, due to his background in commerce and law. Known as KMG then, which was in the midst of completing the merger deal with Peat Marwick, it sent Andrews to Amsterdam "because it wanted a lawyer to do all the governance and controls". A handicap he says was the fact that he was from Asia. "In the 80s and 90s, Asia was still quite small. Europeans and Americans didn't think a lot about Asia," he says. However, his experience dealing with Japanese clients among other Asian clients provided him with the understanding of the culture, as well as the potential for the Asian region. In 1992, KPMG sent him back to Amsterdam to open the firm's offices in Central East Europe, and to write the first Asia-Pacific strategy. KPMG told him: "Well, if you wrote the strategy, you might as well go and do it." So he went back to Melbourne and soon after became managing partner there in 1997, where his work involved dealing with issues in corporate governance, risk management and audit committees. When his predecessor vacated the global chairman role, the board looked for someone with experience in emerging markets, Europe, and Asia. "It was quite surreal because I never had any impression when I first joined KPMG that I would one day become the global chairman. When I look back, it was sort of serendipitous to have the overseas experience, that I was able to build relationships, understand the Asian business culture, and have had opened offices in Europe," he says. The first decision he made as global chairman was to move the office to Hong Kong as the country represents a large capital market and is a large investment place. "As much as I love Melbourne, it was too far, and the time zone is wrong. The people I want to meet, the global CEOs, they all come to Hong Kong to talk to their investors," he says. Hong Kong, Andrew says, is where he spends is time looking at markets in the region, and making sure that KPMG has the right business strategy because he believes the firm's future growth will come from those markets. Andrew's parents decided to move from the countryside in Victoria to bustling Melbourne when Andrew was just five years old. It was when he was attending Year Eight at age 13 or 14 that his parents pushed him to sit for a scholarship exam for Melbourne High School. Melbourne High is a selective-entry state school for boys in Years Nine to 12, and is known for its strong academic reputation. "I had not heard about it before, but I sat for the exam anyway and won the scholarship," he says. When he left Melbourne High to go to university, Andrew applied for a law degree. "I applied to go into law but I didn't pass the law mark. Instead, I got the commerce and law mark, which is the best thing that happened to me." Andrew spent five years at Melbourne University majoring in accounting and economics. "I actually loved economic history. More importantly, university is where I met my wife," he says. He was standing behind an attractive lady in the pie and chips queue at the university's canteen during lunchtime one day. "We started talking, and that's how I finished up getting married," he laughs. His wife, Mardi, is a language teacher. After university, she planned to go to Europe for some overseas exposure. However, Andrew managed to convince her to stay in Australia. Ironically, since joining KPMG in 1984, Andrew has not stopped travelling. Andrew and Mardi have now been married for 33 years. "She was not my first girlfriend, but she was most definitely the important girlfriend," he cheekily says. Andrew reveals that when he was younger, he aspired to become a professional tennis player. He says he ranked quite highly, in terms of his age group. "I was a very good player in Australia, which is quite a high standard," he says. So, when he was around the age of 15 or 16, he faced a tough decision: devote his time to become a full-time tennis player, or concentrate on his studies. I got the best advice from my mother, he says. She told him: "You'll never make money being a professional tennis player. You might be number eight in Australia, but that's not an economic proposition. You have to focus on your studies." He took his mother's advice and focused on his studies, while tennis merely ranked as his hobby or preferred sport rather than a career choice. |
| Malaysian economy in stable phase Posted: DESPITE the stiff headwind from a lacklustre global economic environment, major indicators seem to suggest that Malaysia's economy has entered a stabilised phase. Growth is expected to have rebounded in the second quarter of the year, as the recently released industrial production data suggest, but we will only know for sure when the country's gross domestic product (GDP) data is released in the coming weeks. According to data released by the Department of Statistics, Malaysia's industrial production index (IPI) had expanded 3.7% year-on-year (y-o-y) during the three months to June 2013. This compared with an IPI contraction of 0.1% (y-o-y) in the preceding quarter. As the IPI - which measures output in manufacturing, electricity, and mining - represents close to 40% of Malaysia's total economy, the index is a good proxy of the country's economic growth. "The rebound in industrial activities in the second quarter points to an improvement in economic activities, on account of a sustained increase in domestic demand, while external demand for the country's exports remained soft amid uncertainties of the global economy," RHB Research Institute Sdn Bhd economist Peck Boon Soon writes in his report. And given the latest encouraging data, RHB Research says it expects Malaysia's GDP growth for the second quarter to accelerate to 5.1% y-o-y from 4.1% in the first quarter of the year. CIMB Investment Bank Bhd and Alliance Investment Bank Bhd also expect Malaysia's GDP growth to accelerate in the second quarter, but both brokerages have a lower target rate at 4.7%, compared with that of RHB Research. Resilient domestic demand As it stands, the improvement in the country's industrial output during the three months to June was broad-based, led by a surge in electricity output as well as a strong turnaround in the mining sector. During the quarter in review, electricity output expanded 6.3% y-o-y, suggesting stronger economic activities. This compared with an increase of 4.7% y-o-y in the first quarter. Mining output, on the other hand, grew 4% y-o-y in the second quarter, after experiencing a contraction of 2.1% y-o-y in the preceding quarter. The turnaround in mining output was driven by increased production in crude oil. And despite the volatility in manufacturing output on account of sluggish exports, the sector also picked up pace during the second quarter by expanding 3.4% y-o-y, compared with a mere growth of 0.2% y-o-y in the preceding quarter. CIMB Investment Bank chief economist Lee Heng Guie argues in his note: "Despite the export retrenchment drag, we think that GDP growth weakness has bottomed out in the first quarter of the year." Lee attributes Malaysia's economic growth to continued expansion in consumer spending and investments, especially those in relation to the public-driven Economic Transformation Programme projects. He notes that the two salary increments – once in January and another round in July - for the country's 1.4 million civil servants that had cost the Government RM3.9bil would also help sustain consumer spending in the latter part of the year. On another positive note, Alliance Research says it believes the rebound in Malaysia's economic recovery is taking place sooner-than-expected based on the recent economic releases that have shown that the external environment could already be improving. Its chief economist Manokaran Mottain notes that, for one, the Purchasing Managers Index (PMI) for July have shown signals of stronger recovery in the global economies. In the United States, the benchmark Institute for Supply Management (ISM) index rose to 55.4 in July from 50.9 in the preceding month. And for the first time in 18 months, the 17-nation eurozone economy saw its PMI exceeding the 50-point threshold that demarcates expansion from contraction. The Markit's eurozone composite PMI increased to 50.5 last month from 48.7 in June, in a sign that the economically troubled region could be on the cusp of recovery. Manokaran argues that improvement in key economic data from major economies such as the United States and eurozone, as well as the relatively cheaper exports on account of the weaker ringgit vis-à-vis the US dollar, would benefit Malaysia's exports. RHB Research, on the other hand, argues that even though the global economy has been showing signs of stabilisation and momentum is building for growth to gather pace in the later part of 2013 through 2014, there are still risks. These risks include a sharper-than-expected slowdown of China's economy, and those that pertain to the effects of the tapering of US quantitative easing and resurgence of the eurozone debt problems. Economists concede that Malaysia's external demand will likely show modest improvement despite the risks. But they maintain the view that it will still be domestic demand that will be driving the country's economy over the medium term. RHB Research, for one, expects domestic demand growth to outpace that of the country's overall GDP growth in the second half of this year. It says domestic demand growth will be underpinned by the implementation of projects under the various economic programmes of the country, while rising consumerism, high savings and favourable labour market conditions will continue to support consumer spending. |
| 'Cooling off' measures choke supply Posted: Imagine if a regulatory body decided to limit the number of durians purchased by each individual in order to lower the price of durians so that everyone would have the chance to taste the King of Fruits. What would happen? If this campaign was successful to the point that prices fell to close to or below production costs, durian planters and sellers would rather walk away from their plantations and let the fruits rot on trees than to harvest the fruits, transport them to towns and sell them at a lost. Economics 101 tell us that when supply reduces, price increases. This is what's happening in the property industry especially in Asian countries today. As a developing and booming region, Asia has seen lots of activities in the property industry in the past 10 years. The housing price increase in this region is also more significant due to rising input costs, strong economic conditions and growing populations. To prevent the property prices from surging further due to growing demand and worldwide quantitative easing (money printing) government policies, several governments in this region have introduced various "cooling off" measures with the most insistent being China, Hong Kong and Singapore. In China, the State Council stepped up a three-year campaign to "cool off" home prices in March. Measures included raising first-time buyers' down payments from 20% to 30%, and second-home buyers' down payments from 50% to 60%, and ordering stricter enforcement of a 20% capital gains tax on sales. The government also limited home purchases in certain areas, tightened credit-quota limits and raised benchmark lending rates. However, according to a recent report by the National Bureau of Statistics (NBS) China, residential and commercial property sales totalled 3.34 trillion yuan (RM1.77 trillion) in the first six months, jumping 43.2% compared to a year earlier. The pace of China's year-on-year home price rises in April, May and June was also the strongest this year in spite of the March initiatives. Average new home prices in 70 major Chinese cities climbed 0.8% in June from the previous month based on data released by NBS. New home prices rose 6.8% in June compared to a year ago, the sixth consecutive rise and the fastest pace since January 2011. In Hong Kong, the government introduced a series of steps to curb prices since 2009. Its measures included a 15% property tax on foreign buyers, mortgage restrictions and taxes on quick resale. The government also limited the maximum term of all new mortgages to 30 years, and mortgage payments for investment properties could not be more than 40% of the buyers' monthly incomes, compared to 50% previously. According to a Knight Frank report for the first quarter of 2013, property prices in Hong Kong were 28% higher on average, compared to one year ago despite measures to "cool off" escalating prices. As for our neighbouring country Singapore, the government just unveiled its eighth round of "cooling off" measures in June. The new rule states that home loans should not exceed a borrower's total debt servicing ratio of 60%. Lenders will also be required to deduct at least 30% from all variable sources of earnings, such as bonuses, and rental revenue when determining an applicant's income streams. Prior to this, the Singapore government made seven attempts to cool off the residential real estate market since 2009. In January 2013, the government implemented an extensive round of tightening measures by imposing higher stamp duties, lowering loan-to-valuations for mortgages, and implementing stricter rules on permanent residents (PRs) buying their first home. Nevertheless, despite a series of "cooling off" measures, Singapore private home sales in January 2013 continue to hit a high note, with a 42.8% increase from December 2012, and a 7.5% increase year-on- year. In our home country, the Government has also introduced a number of "cooling off" measures. These include the 70% loan policy for third property purchases, requiring the housing loan limits calculated based on net income instead of gross, and the loan tenure reduced from 45 years to 35 years previously, etc. The "cooling off" measures introduced in various countries are believed to have some impact when they were first implemented, however the overall effectiveness has yet to materialise. While we understand the good intentions behind these measures, they result in further heating up of the market because the fundamental issue of the shortage of affordable housing is not addressed. There is fine line between "cooling off" and heating up the market, when the market is having a strong, genuine demand. "Cooling off" measures will constraint supply, and when demand is higher than supply, the prices will eventually increase. In Malaysia, according to NAPIC, there is only a supply of about 100,000 new houses a year throughout Malaysia, while the demand in Greater KL alone is projected to be an additional one million units if Pemandu achieves its target of increasing the population from six million to 10 million by 2020. Therefore, if our authorities are pondering further "cooling off" measures, it is beneficial to look at the real experience from other countries and not just the "short term" effects, the different environment of property development in our country should also be taken into account. The original intention of controlling the price of durians in my earlier story is to allow more people the chance to taste this unique fruit at an affordable price. However, such good intentions often backfire and worsen the current conditions. "Cooling off" could eventually lead to heating up! FIABCI Asia-Pacific regional secretariat chairman Datuk Alan Tong has over 50 years of experience in property development. He is also the group chairman of Bukit Kiara Properties. For feedback, please email feedback@fiabci-asiapacific.com. |
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