Malaysia Boleh! Malaysia We Can!

By Tan Thai Soon

Little birds do not need assistance, yet its survive;
Many individuals received assistance, yet they failed;

We need courage, not privilege;
We need challenge, not reliance;

From personal finance to corporate finance;
From local finance to global finance;

Malaysia Boleh!, Malaysia We Can!

Poverty eradication - An economic and social needs for national transformation

By Tan Thai Soon

1. Poverty eradication should be based on economic and social needs, rather than based on ethnicity (majority or minority) or political power (national or states).

2. Poverty eradication that based on ethnicity and political factors always lead to inefficiency and ineffectiveness. This could results in some poor ethnic groups and some states become less develops.

3. "Ethnicity plays an ambiguous role in the great transformation" (Bates, 1999)

4. Poverty eradication through education systems and social reforms helps to transform the economic resources into human capital resources; for national transformation we need to maximize all possible human capital resources.

5. Malaysian economy urgently need a new model (policy) and new concept (implementation).

The 3 elements of Proactive Economic Policy

By Tan Thai Soon

The 3 elements of proactive economic policy require an integrated roles of 3 important economic structures includes government, people and corporation. Each structures are responsible to perform an independent but integrated roles as follows:

a) Policy is the responsibility of the Government;
b) Implementation is the responsibility of People; and
c) Society is the responsibility of Corporate citizen.

The independent, but integrated roles are proactive, forward looking, and sustainable.

A Strategic Proactive Economic Policy In Challenging Times - Malaysian Perspective

By Tan Thai Soon

Introduction

The implementation of New Economic Policy (NEP) in Malaysia in the 1970s and 1980s have brought many success stories and it has been a policy to be emulated by many developing countries . The policy have to certain extent help to re-distribute the low and middle income group.

However, with the rapid development of globalised economy. These self-restrictive policy have posed much constraint on our economic growth, hinded Malaysian effort to become a develop country and slow down our income per capital. The situation is even more critical in 2000s, with the emergent of new markets, likes China as a manufacturing power house, India as a ICT hub, and Vietnam as a new international investment destination. It is now more competitive, harder and more difficult in drawing FDI into Malaysia.

Malaysia needs a new "Strategic Proactive" Economic Policy (Datuk Nazir Tun Razak, 4 February 2009) and a "new route to economic sustainability".

Malaysian Prime Minister Datuk Seri Najib Razak has announced some major changes to the NEP as follows.

Foreign Investment Committee (FIC) Guidelines

1. FIC guidelines covering the acquisition of equity stakes, mergers and takeovers is repealed.

Comment
FIC guidelines have long been regarded as hinded effort to attract foreign investors. In this current globalise economic environment, a self-restrictive policies will reduce our competitiveness.Malaysian need a strategic proactive policies to move forward; to actively involve in strategic mergers and acquisition; to form a strategic partnership; and to joint a strategic business alliance.

The abolishment of FIC guideline will help to attact foreign investors to Malaysia. The foreign direct investment in Malaysia will bring in monetary resources, manufacturing skills, information technology, ICT outsourcing industry, bio-technology, human resource and better education systems.

2. FIC requirement, for companies going for IPO, for bumiputra equity requirement (30%) is removed.

Comment
FIC requirement of bumiputra (30%) in public companies did not help bumiputra to become more entrepreneur, rather they prefer to cash out for quick gains or become speculators in share trading. Some select to increase their shares financing during good time, however during financial crisis, they got into financial dificulty.

The mere ownership of sharehoding does not made a holders to be an entrepreneur, but the actual business skills do.

3. As for acquisition of properties, FIC will only process transactions involving dilution of bumiputra interests (i.e. by sale of property by bumiputra to non-bumiputra) and government interest in property. However, FIC approval is only required for properties above RM20 million whether bought directly or indirectly. All other transactions will no longer require the approval of FIC.

4. The treshold for purchase of properties by foreigners is increased in general to RM500,000. Above the treshold, foreigners will no longer need to refer to FIC for the purchase of properties.

Conclusion

Malaysian Prime Minister Datuk Seri Najib Razak has make a difficult policy decision. As he has puts it " policies not in line with international practice will constrain growth" (The Star, 1 July 2009). He emphasized further that Malaysian need to " escape from the middle-income trap" (New Straits Times, 1 July 2009).

Malaysian Stimulus Packages

Malaysian Stimulus Packages

A special website to monitor the implementation of the economic stimulus packages. The website covers the implementation programmes, includes:-

a) The number of projects
b) The allocations and the amount spent
c) The progress of the projects

To visit the official website on Malaysian stimulus packages,
please click at http://www.rangsanganekonomi.treasury.gov.my/index.php?lang=en

Malaysia Economy In The Global Environment - An economic landscape

By Tan Thai Soon

The intention of this site is to provides some insights and the contrasting views on the economic policies and measures, and to highlight issues that would affect local and foreign investors in Malaysia. The following are some interesting topics and challenging issues that related to Malaysia economy:

• The rise and fall of the Keynesian fiscal policy and the Friedman monetary policy;
• The see-saw views of nationalization and privatization;
• The understanding of deflation and inflation;
• The equation of rate of interest, saving and reinvestment.
  
• The issues of capital control, free flotation or currency manipulation;
• The short term financial assistance and long term wealth creation and preservation;
• The issues on global competition and international co-operation through joint-venture and strategic alliances;
• The post independent New Economic Policy and Strategic Proactive Economic Policy in the global environment;
• The development of traditional argro-industry and new bio technology;
• The development of industrialize economy and knowledge economy, particularly the creativity and innovation;
• The current rate of unemployment and the long term human capital management, in term of education, training, skill and professional development.

The globalization of the world economy, together with the current world economic crisis, give the policy makers a challenging tasks in this challenging times. There are many issues need to be resolved and discussed, particularly the Malaysia economy landscape need a structural change to ensure economic sustainability. Many leaders know there is a "need to change" to be competitive in the global environment:

• Datuk Seri nazir Razak calls for more strategic proactive response to crisis by "review the New Economic Policy" (New Straits Times, Feb 4, 2009)
• Tan Sri Muhyiddin Yassin agrees to gradually liberalise policies to "provide new avenues for foreign and local investors" to come and invest in Malaysia, but insisted this would not revamp the mainstay of the NEP (New Straits Times, Feb 11, 2009)
• Steven Wong, the assistant director of ISIS Malaysia argued that "one cannot afford to subscribe to economic policies that merely cater to the moment, we must think about tomorrow" (The Star, Feb 9, 2009)
• I believe the present or future leadership will have the "courage to change" to ensure economic sustainability. The role of the government is to create a "strategic proactive policy". On the other hand, government link companies and non-government link companies should play a more active roles to help the society through corporate social responsibility.
  

As a final notes, the success of any economy will depend on a good economic structure and policy. However, other factors such as social and political factors are equally important.

Managing Business In Good Times and Bad Times - Malaysian Experience (Part 2)

By Tan Thai Soon

Super Cash Payout Vs Reinvestment

1.Introduction
The recent issues on super cash payout on "Wall Street bonus" provide a good lesson for many organizations in managing business during good times and bad times.

2. Super Cash Payout
2.1. Financial companies in New York city paid cash bonuses of US$18.4 billion in 2008 despite of record losses suffered by many financial institution.

2.2. U.S. president Barack Obama refers the hug bonuses payout by the banks represent "the height of irresponsibility"

2.3. Some observers argued that such payment system during good times and in turbulent times is not helping the institutions in the short run and long run.

2.4. Some argue the "need of change" in compensation system. I believe "Yes They Can" under the leadership of U.S. president Barack Obama.

3. Reinvestment Model-Malaysian Experience
3.1. Public Bank Berhad (PBB), one of the largest listed non-government linked corporation on Bursa Malaysia. Its financial performance on profit after tax ranging from RM330 million (1995) to RM1,450 million (2005), including a profit after tax of RM51 million in 1998 during Asia financial crisis (Datuk Paddy Bowie, 2006, p.265). In 2008 financial year end, an unaudited , PBB posted a pre-tax profit of RM3.38 billion (Business Times, Jan 20, 2009).

3.2. PBB claim to be "one of the best capitalised" bank in Malaysian, from 1980 (RM 20 million) to 2006 (RM 3.42 billion), this was done via regular bonus issues to shareholders and through the exercise of the employees' share options (Datuk Paddy Bowie, 2006, pp254-255). If a sharehoder invest RM1,000 in 1000 shares in PBB in 1967, " to-date it would have yield close to RM1.2 million for you" (Datuk Paddy Bowie, 2006, p.181).

3.3. PBB's reinvestment model benefits the bank and its stakehoders, particularly the sharehoders and employees. The bank is able to increase its market capitalisation through bonus issues, while preserve its cash reserve for expansion. As for shareholders and employees, their shareholding in PBB increased, they may decide to keep the additional shares or to liquid it in some other date through stock market.

4. Conclusion
The success story of PBB came with many contributing factors. However, the strategy of reinvestment model is a critical factor. The experience of PBB provides a good lesson to many local institutions in managing business during good times for the bad times. It is not so fortunate for some institutions in Malaysia, they need constant government assistance and restructuring during both good times and bad times.


Reference
Datuk Paddy Bowie (2006) Teh Hong Piow, A Banking Thoroughbred, Public Bank Berhad, Kuala Lumpur.