What can we do to help Malaysia?

THE most difficult part of solving problems is not coming out with solutions; it is recognising and then identifying the problem.

Acknowledging there is a problem is always tough, especially if one is part of the problem; denial is a common human trait.

Even more challenging is the unwillingness to speaking out openly, even if one knows the real problems. Often, it is easier to point a finger at others – so the “blame game” ensues but naturally the real problem gets bigger.

That line of thought crossed my mind during the recent 1Malaysia Economic Conference organised by the Associated Chinese Chambers of Commerce and Industry Malaysia.

Many prominent speakers spoke openly during the conference, acknowledging and identifying many of the problems Malaysia face today. Some of the challenges I’d like to give prominence are:

·Middle-income trap: According to a World Bank survey, Malaysia has been a middle-income economy for over three decades whereas Hong Kong and Singapore have vaulted into high-income economies since the 1990s.

We are trapped in a low-cost, low-value economic structure; persistent low wages too are not attracting and retaining domestic and foreign talents, making it more difficult to move up the value chain.

·Malaysia’s education system: Substantial investment in education has not led to improvement in quality.

For example, Malaysia spends an average 5.9% of gross domestic product (GDP) annually on public education, substantially higher than Japan (3.9%), South Korea (3.9%) or Singapore (3.5%).

And yet, according to a Trends in International Mathematics and Sciences Score 2003-2007 survey, our secondary students’ maths scores had deteriorated (from 508 to 474 points) while Japan, South Korea and Singapore were able to maintain or improve on their performance (ranging from 570 to 605 points).

Unfortunately, our human capital is now lagging in global competitive skills where we used to excel, such as in language, math and general knowledge.

·Bad habits: We are too dependent on cheap foreign labour (19% of employment in 2008 compared with 9% in 2000), subsidies (over RM20bil annually to maintain price controls), oil as major source of revenue (about 40% of Government revenue in 2009) and energy. Can we wean ourselves of these addictions for a better future?

The Prime Minister, in his opening address, said if Malaysians do not recognise that time for change has come, we will be left behind.

He spoke about social capital, recreating a cohesive society and “no one should be marginalised” in a 1Malaysia society.

Tun Musa Hitam (former deputy prime minister) and Datuk Nicholas Zeffreys (president of American Malaysian Chamber of Commerce) pointed out that the rakyat are part of the problem because the present state of our nation is what we collectively did or failed to do over the years.

For instance, if we detest corruption, we should discourage it strongly. If we find there are fewer business opportunities in Malaysia, then compete around the world; if we find our politicians not up to standard, then exercise our votes diligently.

So, instead of assigning blame, we should be asking – what can we do to help our nation move to a progressive society and an economically vibrant country for our children?

There are many ways the rakyat can contribute. For a start, ponder on the few points below:

·Understand the real problem: First, stop the blame game and excuses; get on with how and what we, the rakyat, can do to contribute to a better civil society.

·Continuous improvements: All of us should think about improving ourselves, whether it is in technical education and training, moral and ethical education or the arts and so forth.

In commerce, we should all work harder to increase Malaysia’s efficiency and productivity and be globally competitive.

·Speak out: Do so peacefully, so that politicians and government officials recognise and hear the voices of the rakyat; and not the 10% or less of rent-seeking people with self interests, who are speaking louder than anyone else.

·Vote: Exercise your voting rights – there are an estimated five million unregistered voters today. If you do not exercise your rights to vote, we have lost your say on how to build a better society.

·Work with your fellow Malaysian of all races: Similarly, we should welcome talented people from all over the world regardless of race to work here. Living in a globalised world, we cannot afford to be narrow-minded and think along racial lines.

I am sure the vast majority of intelligent and sensible rakyat are more than willing to contribute and work hard for a progressive and civil Malaysia.


By Teoh Kok Pin ·The writer is the founder and chief investment officer of Singular Asset Management Sdn Bhd.

Business Culture Steers Flow of Ideas, Study Says

ScienceDaily (Feb. 23, 2010) — The business culture that companies emphasize has an effect on new product ideas that bubble back up from the workforce, a University of Illinois marketing study found.

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Groundbreaking ideas spring most from companies that stress technology, rather than customer needs or staying ahead of competitors, according to research that will appear in the Journal of Product Innovation Management.

Firms that focus on their competitors or customers generate more new product suggestions than technology-based companies, the study found. But the ideas typically net only subtle advances, such as the slow evolution of wireless reading devices, rather than breakthroughs similar to the shift from compact discs to music downloads.

"Customer- and competitor-oriented companies are more likely to come up with variations of existing products because they watch their markets closely and react to demands rather than building on breakthrough technology," said William Qualls, a U. of I. marketing professor who co-wrote the study.

He says the findings suggest that firms are best served by a balanced philosophy that includes all three cultures. While an emphasis on technology bolsters innovation, he said, market-driven firms are more attuned to what consumers want, giving them an edge in commercializing new products.

History is littered with technological leaps that sputtered for lack of effective marketing, said Qualls, who co-wrote the study with Jelena Spanjol, then a U. of I. doctoral student and now a marketing professor at the University of Illinois at Chicago, and Jose Antonio Rosa, a former U. of I. marketing professor who is now at the University of Wyoming.

AT&T developed its Picturephone in the 1960s, but not a market for it, Qualls said. Motorola is behind many advances in cell-phone technology, but failed to become an industry leader because the company focused on innovation at the expense of marketing.

"If innovation and marketing don't get equal attention, good ideas might never reach the marketplace or firms could sink millions of dollars into innovations that will ultimately have no appeal to consumers," he said.
The study is unique because past research has focused largely on the link between business culture and the success of launched products, rather than probing the idea stage, said Qualls, the interim head of the department of business administration.

Findings are based on an analysis of survey responses from nearly 200 marketing and research managers who work for companies that make household and personal products, from appliances to skin cream.
"Without good ideas, you can't come up with innovative new products," Qualls said. "Firms need to know how to generate as many new ideas as possible, and how to screen them so they have the best chance for success."

He says the findings lend support for a budding business theory known as open innovation, which encourages firms to use external as well as internal input to develop and launch new products.

Companies that lack resources to generate more ideas by instilling new technology or market-based cultures can instead partner with outside organizations, universities or even solicit suggestions from consumers, Qualls said.

Intel Corp. and Proctor & Gamble Co. are among firms that have bolstered product development through outside alliances, he said. Others are pulling consumers into the mix, including Netflix, which offered $1 million to anyone who comes up with a better system for delivering movies.

"The whole idea of open innovation is that firms need to be able to absorb knowledge from any source, and not just rely on the knowledge it has internally," Qualls said. "And the more ideas they get, the better the chance that one will click."

He says the study shows firms that fail to broaden their cultures or seek outside input will lag behind companies that do.

"It's not impossible, but companies are tying their hands behind their backs if they don't change," Qualls said. "Innovation can happen by accident. Post-It Notes and Velcro were accidents. But you can't run a company hoping for potentially successful accidents."

Electric bikes on a roll in China

February 21, 2010 by Joelle Garrus

A worker stands next to electromotive bicycles at the workshop in Tianjin Hanma Electromotive Bicycle Factory in China's northern city of Tianjin in January. Up to 120 million e-bikes are estimated to be on the roads in China, making them already the top alternative to cars and public transport, according to recent figures published by local media.

Chinese commuters in their millions are turning to electric bicycles -- hailed as the environmentally-friendly future of personal transport in the country's teeming cities. 
 

Up to 120 million e-bikes are estimated to be on the roads in China, making them already the top alternative to cars and public transport, according to recent figures published by local media.

"This is the future -- it's practical, it's clean and it's economical," said manufacturer Shi Zhongdong, whose company also exports electric bikes to Asia and Europe.

The bikes have been hailed as an ecologically-sound alternative in a country which is the world's top emitter of greenhouse gases, with their rechargeable batteries leaving a smaller carbon footprint than cars.

But some have expressed concerns about the pollution created by cheaper lead batteries, calling for better recycling and a quick shift to cleaner, though more expensive, lithium-ion battery technology.

More than 1,000 companies are already in the e-bike business in China, with many of them clustered in the eastern coastal provinces such as Jiangsu and Zhejiang, which both border Shanghai.

Another 1,000 firms are producing e-bikes on an ad hoc basis, Shi told AFP during a visit to his Hanma Electric Bicycles factory in the port city of Tianjin, about 120 kilometres (75 miles) north of Beijing.

"The business has exploded since 2006," Shi says, while admitting that the company took a hit last year due to the financial crisis.

Some e-bikes can reach speeds of more than 35 kilometres an hour (21 miles per hour), and a few manufacturers boast their models can last up to 50 kilometres on a single battery charge.

Battery chargers are simply plugged into an electricity socket at home. Most e-bikes also have pedals, except for the bigger, scooter-like models.

Shi was an electrical engineer who worked for a state-owned firm for most of his career, but as he turned 55 and retirement was beckoning he founded Hanma in 1999, investing about 500,000 yuan (75,000 dollars) of his own money.


He is wary of giving exact production figures, but says Hanma is churning out between 50,000 and 100,000 e-bikes a year.

In his company's icy, old-fashioned workshops, several models are lined up: from electric bikes with "green" lithium batteries, made especially for export, to some that look more like mini-scooters.

They are everywhere in the streets of Beijing -- no licence plates, no driver's licences needed. Enthusiasts say they are a godsend in a city where the number of scooter and motorcycle drivers is restricted.

"I get around traffic jams so easily," said one Beijinger before speeding off from an intersection in the capital, where more than four million vehicles are clogging the roads and polluting the already thick air.

But not everyone is on the e-bike bandwagon -- "real" cyclists have complained bitterly that their once peaceful lanes are now clogged with irresponsible, uncontrollable speedsters.

In December, authorities tried to re-impose a maximum speed limit of 20 kilometres (12 miles) per hour on e-bike riders, along with licence rules, but the plan caused such a public and industry uproar that it was suspended.

"The rules will never go through. Hundreds of factories would be forced to shut down. And what would those who already own e-bikes do?" Shi says.

In a report released last June, the Asian Development Bank said e-bikes could become "perhaps the most environmentally sustainable motorised mode available" in China.

But it called for the replacement of lead acid batteries and better regulations on the allowable weight and speed to keep accidents at a minimum.

Shi says nearly a third of his production goes abroad -- to Asia, notably India, to the European Union and even to the United States.

"There is a big future for electric bikes in Europe, where people are very concerned about saving the environment," he said, explaining that the models with safer but more costly lithium batteries are shipped to EU nations.

Shi says he sells the export models for 400 dollars, as opposed to just 240 dollars for those sold in China. But the bikes can sell for a whopping 1,200 dollars in France and Germany.

(c) 2010 AFP

US lunar pull-out leaves China shooting for moon

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February 21, 2010 by Francois Bougon
File photo shows visitors taking photos during an exhibition on "China's First Spacewalk Mission" at the Hong Kong Science Museum. China aims to land its first astronauts on the moon within a decade at the dawn of a new era of manned space exploration -- a race it now leads thanks to the US decision to drop its lunar programme.

China aims to land its first astronauts on the moon within a decade at the dawn of a new era of manned space exploration -- a race it now leads thanks to the US decision to drop its lunar programme.

US President Barack Obama earlier this month said he planned to drop the costly Constellation space programme, a budget move that would kill off future moon exploration if it is approved by Congress.

In contrast, China has a fast-growing human spaceflight project that has notched one success after another, including a spacewalk by astronauts in 2008, with plans for a manned lunar mission by around 2020.

The turnaround is viewed as yet another example of the Asian power's rising profile and technical prowess.

"Overall, China is behind the US in technology and in actual presence in space -- the US operates dozens of satellites, the Chinese only a few," said James Lewis, of the US-based Centre for Strategic and International Studies.

"The real concern is the trend: China's capacities are increasing while the US, despite spending billions of dollars, appears to be stuck in a rut."

The Americans have achieved the only manned lunar missions, making six trips from 1969 to 1972.
But China has been gaining in the space race after launching a manned programme in 1992, and sending its first astronaut into space in 2003.

Only Russia and the United States had previously put a man into space independently.

China aims to launch an unmanned rover on the moon's surface by 2012 ahead of the manned lunar mission a decade from now.

"It is not a very expensive space programme but it is relatively well worked out in terms of autonomy, efficiency and independence," said Isabelle Sourbes-Verger, a France-based specialist on the Chinese space programme.

Some experts have questioned Beijing's timeframe for landing a man on the moon, but Peter Cugley, a China specialist at the non-profit research centre CNA in the United States, says the actual timing is not that relevant.



"Even if a PRC (Chinese) manned lunar landing doesn't happen in the timeframe initially established, the technical expertise gained and boost in national prestige is what the Chinese Communist Party is most interested in," he said.

China sees its space programme as a symbol of its global stature, growing technical expertise, and the Communist Party's success in turning around the fortunes of the formerly poverty-stricken nation.

Experts see its push for the moon, while Washington backs off, as further confirmation of its emergence as a superpower.

"I see it as a confirmation of America's decline," said Lewis.
"Perhaps this decline is temporary, the product of many errors under (former US president George W.) Bush."

China also has pursued its space ambitions efficiently. The Constellation programme had already cost 10 billion dollars, or nearly 10 times more than the entire Chinese space programme, according to official data.

Fu Song, the vice dean of the School of Aerospace at Tsinghua University in Beijing, said Obama's decision was unlikely to spur China to ramp up its space programme, saying its development would remain on a steady course.

But Beijing has other significant Asian competitors to reckon with as it vies to become the second nation to put a man on the moon.

India landed a lunar probe in 2008, and a top official said last month it was targeting a manned space mission in 2016. Japan, meanwhile, launched its first lunar satellite in June last year.

Both developments marked dramatic steps forward for both countries.

But regardless of who gets to the moon next, the sight of Chinese astronauts treading the lunar surface would be a watershed moment for the country, Sourbes-Verger said.

(c) 2010 AFP

Waltzing around exchange rates

 Ultimately, they reflect the underlying strength or weakness of the real economy

AS the textbook says, money is a means of exchange, a unit of account and a store of value. When we discuss foreign exchange rates, we mean the value of the domestic currency against a foreign benchmark.

Since there are many such benchmarks or standards, we use the most common one, which is the US dollar. This is because the US dollar is the most widely used reserve currency, as it accounts for roughly two-thirds of global foreign exchange trading and official foreign exchange reserves.

Most people use the US dollar standard because not only is it the most convenient, it also by and large has been a good store of value, at least relative to other currencies.

If you travel as a tourist in most parts of the world, you will find that you cannot change your own currency easily, but you can easily change against the US dollar. The US dollar is the reserve currency standard because it meets all the conditions of international unit of account, means of payment and store of value.

But with the US running unsustainable current account deficits and a growing net foreign debt position, the US dollar faces structural depreciation, which creates growing uncertainty on a global scale.

The real problem stems from the fact that all foreign exchange rates are relative and not absolute values. Value is relative not only against real goods, but against other paper currencies.

If we use a metal as standard, such as gold, and the quantum of gold remains static as the global demand for liquidity increases, then prices will be deflationary. The gold standard was found to be too strict a disciplinarian, because if all currencies are linked to gold, you cannot run a fiscal or trade deficit without huge outflows of gold.

The advantage of using a paper currency is that the supply can be adjusted to the national or global needs. As monetarists claim, inflation is basically a monetary problem of printing too much money. Money can be printed through growing fiscal debt, growing bank credit or inflow of foreign funds.

You can print domestic money, but you can’t print foreign money. In other words, you can ask domestic people to bear the inflation tax by printing money, but the foreigner (and today locals) can run through capital outflow. They stop investing and lending money and you end up with a fiscal or currency crisis.

The bottom line is that in the long run, you cannot spend more than what you earn. Thus, when conventional economists say that flexible exchange rates help with monetary policy, they think that there is an easy way out of this problem.

Flexible exchange rates may help a little in day-to-day adjustment in prices, but ultimately, there is always the temptation to use the exchange rate to devalue your way out of the fundamental problem of spending more than you earn.

This is exactly the Greek tragedy. Greece is part of the eurozone, which uses the Maastricht Treaty rules to stop member countries from printing too much money to ensure that the euro will have stable value. The Maastricht rules draw the line of the annual fiscal deficit at not more than 3% of GDP (or gross domestic product) and total fiscal debt at 60% of GDP.

The Greeks ran a fiscal deficit of more than 12.7% deficit in 2009 and total fiscal debt is now at 120% of GDP. They hid the deficits for more than 10 years by various tricks, including using investment bankers to do swaps to hide the deficits.

In the 1990s, leading investment banks were fined in Japan for helping Japanese companies and banks hide their losses. Now they are bold enough to help governments hide their deficits.

To put it bluntly, neither fixed nor flexible exchange rates can hide the fact that if a borrower spends more than it earns, be it a company or a government, the day of reckoning will come soon.

Fixed exchange rates are a discipline – the profligacy will show up very fast. Flexible exchange rates use a weaker currency to try and earn more exports. But if the source of overspending is the government aided by loose monetary policy, then sooner or later the foreigner will stop lending or investing. You cannot jazz your way out of over-spending. Sooner or later the music must stop.

The Greeks thought that being part of the eurozone, the other Europeans would bail out Greece, so non-Greeks will help pay for their over-spending. Since Greece cannot devalue the euro by itself, then the pain of adjustment must be done on the fiscal or employment side. In other words, a fixed exchange rate ultimately forces the structural adjustment. The Europeans are asking Greece to make that adjustment as a condition for help.

We cannot think about exchange rates as only bilateral, that is, between currency A and currency B. We saw that before the Asian crisis, when East Asian currencies were mostly benchmarked against the US dollar, with some fixed and others floating. Nevertheless, each currency had some kind of parity against each other.

For example, before the crisis in 1997, the ringgit was roughly 2.5 to one US dollar, the Thai baht 25, the Filipino peso 25 and the Taiwan dollar also 25. In other words, they adjusted at roughly one or 10 to each other. This made it very convenient to do business across East Asian borders, mainly because of trade competitiveness.

Each central bank knew that if the rates moved out of line, not only against the US dollar but against the neighbours, there would be trade competitive issues.

This regional pattern of currencies “waltzing against each other” in a stable pattern unless disrupted by crisis was formed by the underlying Asian Global Supply Chain. After the Asian crisis, when most currencies floated, the same pattern emerged, because the underlying needs of the Asian Global Supply Chain forced some competitive stability between the linked exchange rates.

In sum, exchange rates ultimately reflect the underlying strength or weakness of the real economy. You can jazz up all you want through flexible rates, but ultimately if you overspend, you pay.

● Andrew Sheng is author of the book, From Asian to Global Financial Crisis.