SPM Forecast Results - A clear case of over legislation

In the matter of the Ministry of Education's notice to private colleges to stop the practice of relying on SPM forecast results to assessing student applicants, it is abundantly clear that the Ministry has overreached.

This is a clear case of over legislation. Let me be categorical about this-

Firstly, when a private college - emphasis on the word "PRIVATE" - chooses to rely on a student applicant's SPM forecast results that private college is taking a risk. It is, if you will, a BUSINESS RISK. It is a risk in the sense that if that student applicant's actual SPM results falls below the minimum requirements set by the private college the private college will have a vacant position.

It is a BUSINESS RISK in the sense that the number of places available with each intake is, theoretically, finite. So, if a student applicant proves to be below par and, therefore, needs to be ejected, there is a vacancy. Proportionate fees collected by the private college will need to be refunded causing a loss of revenue.

Secondly, when a student applies to a private college using the SPM forecast results, that student is also taking a FINANCIAL RISK and OPPORTUNITY RISK in the sense that if the actual SPM result falls below the private college's minimum entry requirements that student may NOT receive a full refund of the fees paid because time has elapsed and he or she has consumed the teaching services provided by the private college.

The opportunity risk comes in the form of having lost the time and opportunity to have done something else - like join Raleigh International to enrich the student's life through charitable and welfare work...for instance.

This type of transactional relationship is rooted in a private contract between the private college and the student applicant.

It is a free market exchange in the PRIVATE SECTOR that eases the burden on the PUBLIC SECTOR public universities.

All Malaysians understand the need fore private colleges to be licensed and regulated to ensure that there are no scam colleges and, that all academic curriculum offered is in line with Malaysian academic requirements.

But, in the matter of the MOE's notice to private colleges to disregard SPM forecast results the MOE has clearly over legislated.

It is very odd that to date, the MOE has not offered any reasons at all on the basis and intent behind the notice.

Will the Ministers (it is plural because there are apparently 2 Ministers in charge of the education portfolio) or any one of them step up to explain this odd decision on SPM forecast results?

Or, will they abdicate their responsibility and push forward a nameless official with an impassive expression who will drone inanities and irrelevancies on this matter in the vain hope that journalists and parents of students will just tear their hair out and just curl up and shrivel themselves to death - a death caused by exasperation with the Malaysian Ministry of Education which, in recent times, has started to resemble Monthy Python's Ministry of Silly Walks?

DBKL and the proposed rates hike

Like every other property owner in the great metropolis of Kuala Lumpur I, too, have received the dreaded Notice for revision of the Valuation List for the City of Kuala Lumpur.

I believe it is very important to write the objection and send it to DBKL. You should not leave it to the politicians and media to do the work for you.

The reason is that underlying this rate hike exercise is a formal legal and bureaucratic procedure that is likely to be used as a basis for selective exemptions or partial exemptions from the general rate hike, i.e. where a property owner has stated specific and relevant reasons in the objection.

Please note that to ensure that you get a fair review, the objection in writing/bantahan secara bertulis must be underpinned by reasons that fall within any of the 5 categories below.

Local Government Act 1976
Objections
142. (1) Any person aggrieved on any of the following grounds:

(a) that any holding for which he is rateable is valued beyond
      its rateable value;
(b) that any holding valued is not rateable;
(c) that any person who, or any holding which, ought to be
      included in the Valuation List is omitted therefrom;
(d) that any holding is valued below its rateable value; or
(e) that any holding or holdings which have been jointly or
     separately valued ought to be valued otherwise,

may make objection in writing to the local authority at any time
not less than fourteen days before the time fixed for the revision
of the Valuation List.

Since neither the Datuk Bandar nor any of his cohorts hold an elective office, property owners do not have much hope against the juggernaut of DBKL.

Kuala Lumpur mayor Datuk Seri Ahmad Phesal Talib has confirmed that from January 1, property owners in the city will have to fork out higher property assessment fees.

In this era of feudalism in Malaysia, all we can do is to prostrate ourselves to the gods of government and appeal for benevolence and beseech these gods to rein in on their abuse of power and corrupt excesses...all in the name of controlling costs so that DBKL will not see the need for any further rate increases in the near future.
__________________________________________

Here is fz.com's highly relevant analysis and debunking of the purported reasons for the rate hike.

KUALA LUMPUR (Nov 21): So is Kuala Lumpur City Hall’s (DBKL) proposed hike in assessment rates justified?

Fz.com has taken a closer look at DBKL’s accounts from the last five years and find that the city is loaded with reserves, tax income, federal and private funding.

Skimming through past reports, speeches and accounts, it seems that the current proposal to raise assessment by up to 300% is unjustified, as the authority has enough avenues of income generation.

DBKL’s main source of income is assessment which typically makes up 40-60% of its total income. And since 2009, DBKL’s tax revenue steadily increased by 2-4%.

However, last year, when Kuala Lumpur mayor Datuk Ahmad Phesal Talib, announced the city’s 2013 budget, he said income from assessment alone was expected to double to RM880.5mil -- an 8.6% jump from 2012. 

In his speech, he said the hike was due to many upcoming property developments, which would translate into more assessment.

Hence it does not gel with the recent proposed tax hike of 100-300% which sent shock waves to KL folks as rates have remained the same for the past 21 years.

The most damning evidence that DBKL is merely taking the easy way out by taxing ratepayers, come from Ahmad Phesal himself. His 2013 budget speech boasts of its prosperous accounts in 2012:

“Even though there is no increase in assessment tax and rates have not been revised since 1992, tax revenue continues to rise because the number of properties that are taxable has increased as well. Rapid property development has also improved revenue from development charges. Rate hikes of those charges and the change of calculation method had also increase tax revenue.

“On top of that, DBKL managed to recover assessment arrears, raking in another RM100mil into their accounts,” he said.

From 2009 to 2013, DBKL has received plenty of funding federal government to carry out projects under the 9th and 10th Malaysia Plan and also from private sector and sometimes from Petronas.

DBKL hardly ever spends every single cent allocated to the financial year. For instance, development cost in 2011 was budgeted at RM1.017mil, but only RM789.6bil were spent. Hence RM227.4mil was carried forward to the next year.

By merely looking at general accounts of DBKL, cost cutting effort by former mayor Tan Sri Ahmad Fuad Ismail has made the city rather well-off.

In 2010, Ahmad Fuad, who was mayor from 2008 to July 2012, had indicated that while assessment that had not been revised for so long, he would not push for a rate hike. 

In fact, due to DBKL’s financial standing, it could even afford to reduce assessment tax by 2% for service apartments and apartments in commercial buildings, sustaining a shortfall of RM4 mil in revenue. 

To maintain the city’s revenue, there were special task forces established to collect arrears, amounting to RM4 million especially by low cost apartment dwellers.

Read more: http://www.fz.com/content/mayor-contradicts-own-need-assessment#ixzz2lGbmW0fW

Boycotting nonsense

The new Minister of Domestic Trade and Consumer Affairs has made a major misstep when he merely said that the federal government did not approve of the boycott of Chinese goods and services but proceeded to defend the right to boycott.

Sometimes you can be legally correct but wrong on the economics.

Usually it is not a big deal because everyone knows that political motivations are usually irrational exuberance.

But...when you are a Minister responsible for an economic portfolio as important as Domestic Trade and Consumer Affairs you have to be a big picture person. 

You are running the entire Malaysian economy.

You cannot be pandering to petty politicking even if it is just a fortnight since your party won by a whisker. 

You have to check that tribal, petty, parochialism.

You are the Minister in the Malaysian Cabinet with a portfolio to manage Domestic Trade and Consumer Affairs.

Malaysia holds itself out as an open economy. Malaysia measures itself by trade competitiveness. Malaysia aspires to obtain foreign direct investments.

For instance, how would the Minister reconcile his defence of racial boycotting to investors and businesses from mainland China or Taiwan? 

Would he say via an interpreter, "Sorry, this boycott of Chinese goods and services apply only to Malaysian citizens of Chinese ethnicity and descent. It definitely does not apply to you people because you are from mainland China/Taiwan".

How lame is that?

Do I need to remind everyone that Cabinet Ministers hold a federal portfolio? 

Do I also need to remind everyone that people cannot be fooled all the time?

You cannot have the Prime Minister himself, Husni, Mustapha, Idris Jala and Wahid running around telling all and sundry that the Economic Transformation Plan is still on foot when your fella in charge of Domestic Trade and Consumer Affairs cannot send the correct signals out as a Federal Minister and, he is still labouring under the misapprehension that the stupid General Elections is still on.

As I said before, GET TO WORK!

What ails the GLCs?

I have been reading all the chatter about GLCs (both Malaysian and elsewhere) and their travails. Many who take a macro view are peeved that GLCs, being large corporations with the backing of sovereign governments, have an inside track to plum projects and deals. These inside tracks and opportunities have a perceived cost because they are done at the expense of depriving privately held corporations (as opposed to those that have government or statutory shareholding ownership) of the opportunity to bid for the plum projects and deals.

Another peeve is that GLCs are often in serious and earnest asset-shuffling mode. Often, these asset-shuffles aka "mergers and acquisitions", result in 1+1=1 instead of 1+1=3 or more in value creation. In other words, there are seldom any true synergistic benefits arising post-merger or acquisition.

Truth be told, this applies not just to GLCs, but also to many large corporations.

There are many examples of these disastrous corporate exercises. The Time Warner and AOL deal is probably the all-time classic example. Closer to home, the example would be the great Sime Darby merger.

So, here we have 2 basic issues-

First, the allegation that GLCs "crowd out" the private sector.

Second, GLCs are merely shuffling assets and playing a game of stacking numbers i.e. shuffling assets and cashflows between and amongst different corporate entities to produce a financial result that shows higher profits and greater valuations.

The first issue is obvious. So, I'll just leave it there.

The second issue is more interesting to me. Let's try to taxonomise them.

I see 2 types of large publicly-listed corporations, GLC or privately-held.

Type A is a corporation that thrives on asset-shuffling and, mergers and acquisitions.

There are 2 kinds of Type A corporations.

Type A-1, are corporations that conduct asset-shuffling, mergers and acquisitions within a clearly defined core business. These corporations try not to stray outside their field of expertise. Rupert Murdoch's News Corp is a good example of this. That said, News Corp screwed up big time with Myspace, acquiring Myspace's parent company, Intermix Media for USD500 million in 2005 and recently selling it for a paltry USD35 million. Nevertheless, the constant asset-shuffling, mergers and acquisitions give market investors paroxysms of orgasmic highs and cold turkey lows. It's a combination of thrills and fear. Like riding on a roller-coaster.

Type A-2, are corporations that conduct asset-shuffling, mergers and acquisitions with an assortment of businesses. There are many Malaysian privately-held corporate groups that do this. I shall not name them. And, then, there are the institutions that own the GLCs such as Khazanah Nasional and PNB.

Type B corporations are more honest-to-goodness, stick-to-what-you-know-and-grow types. Apple is, of course, the sexy example.  Another is IBM. 

Most of the criticism is levelled at Type A-2. 

The key issue is how well the drivers of corporate deals understand the core business of these corporations.

Throughout the world, not just in Malaysia - many, many large corporations, not just GLCs - are now led by finance men. These are numbers-crunchers. These are people who only look at numbers and how they stack together. These people do not see businesses, business history or people. They only see numbers. They are like the evil twin of Neo in the Matrix Trilogy.

Why is this a concern?

Well, the concern is that these finance men do not know how to manage core operations. Many of them don't believe that it is necessary for them to learn business operations. Many of them believe that the numbers are all that matter.

What is the market share today? How does it compare with the last quarter? What is the projected market share in the next quarter?

What is the pre-tax profit today? How does it compare with the last quarter? What is the projected pre-tax earnings in the next quarter?

What are the trade receivables today? How does it compare with the last quarter? What is the projected collections in the next quarter?

What is the inventory today? How does it compare with the last quarter? What is the projected inventory in the next quarter?

Reams of excel spreadsheets are generated. Lots of score cards are prepared. Numbers. Digits. Plus. Minus. Percentages.

To be fair, the same questions that the finance men ask are equally asked by business leaders who worked their way up from operational ranks. 

But...

But, the comprehension and insight offered by these numbers differ markedly between the finance men and the business leaders who were involved in the core business - whether from the production side or the sales department.

I have nothing against finance men. Some turn out to be great business leaders. Many others turn out to be the investors' greatest nightmare.

It may be that the excessive presence of finance men - who have no clue about the core business, the human capital in these businesses and the future potential of the businesses - is the factor that ails the GLCs.

I may be wrong. 

But, I don't think I am.

The remedy?

Don't discard willy-nilly the homegrown career managers. Give them a fair shake at leading the core businesses.

Merdeka

To all Malaysians near and far, I wish you SELAMAT MENYAMBUT HARI KEMERDEKAAN.

Machiavellian Economics

This is a thoroughly interesting piece by Harold James. It highlights a feature of government behaviour that is inconsistent with the rules of conduct that is hammered home against corporations. 

The question is where do we draw the line? Where corporations are required by corporate governance principles to disclose as much of the truth about their financial, management and business affairs, why do governments live by different standards? 

Do political leaders in office have higher order rights and privileges than corporations? 

Food for thought....

PRINCETON – When is it legitimate to lie? Can lying ever be virtuous? In the Machiavellian tradition, lying is sometimes justified by reference to the higher needs of political statecraft, and sometimes by the claim that the state, as an embodiment of the public good, represents a higher level of morality. That tradition is once again in the spotlight, as the question of political untruth has recently resurfaced in many bitter disputes.

Did German Defense Minister Karl-Theodor zu Guttenberg have to tell the truth about the massive plagiarism that pervaded his doctoral thesis, or could a lie be justified because he was performing an important government job? Was the 2003 United States-led invasion of Saddam Hussein’s Iraq illegitimate because it was predicated on a falsehood about the existence of weapons of mass destruction? Or were conservative US anti-abortionists justified in sending actors with a false story into the offices of Planned Parenthood in order to discredit their opponents?

The economic variant of Machiavellianism is as powerful as the claim that political untruth can be virtuous. Lying or hiding the truth in some circumstances can, it appears, make people better off. Deception might be a source of comfort. We might find ourselves warm and contented in a cocoon of untruth.

One of the most famous examples concerns the Great Depression – an epoch that policymakers frequently drew upon in trying to come to terms with the post-2007 financial crisis. Many countries in the early 1930’s had terrible bank runs, which inflicted immense and immediate damage, decimating employment by bringing down businesses that were fundamentally creditworthy.

Time for IPPs to help the rakyat

Kudos are due to Business Times for this op-ed piece. This blog has hammered the IPPs for the lop-sided Power Purchase Agreements (PPA). The BT's op-ed reminder is timely. I implore the government to pay heed to this perspective that come the time to renegotiate the PPAs, the government must support Tenaga Nasional's position and pay heed to the massive burden that the Malaysian consumer has to endure with this example of dodgy privatisation model.

Here's the BT op-ed piece:

Sweetheart deals that the first-generation independent power producers (IPPs) secured in the early 1990s will expire in stages from end-2014 or 2015.

It is often highlighted that these IPPs have collected billions of ringgit from lopsided power purchase agreements (PPAs) that put them in very minimal or an almost zero-risk environment.

The IPPs are YTL Power Generation Sdn Bhd, Genting Sanyen Power Sdn Bhd, Segari Energy Ventures Sdn Bhd, Powertek Bhd and Port Dickson Power Sdn Bhd. They are controlled by some of the country's richest families and individuals.

HAPPY NEW YEAR 2011

It is tempting to gaze into the crystal to see what one hopes 2011 will be like. Well, less racial nonsense will be a very good thing. 

No prayer in the world will prevent excessive politicking from occurring in Malaysia. But, unlike straightjacketed places like Singapore or China, Malaysia has a vibrant democratic ethos. So, politics or, even the excess of it, is something we will all have to accept.

That is not a bad thing if there is sufficient civility and a large dollop of good sense.

pix from here.

I, for one, am very proud of our great nation.

No, it's not just because I cheered myself hoarse in both legs of the Suzuki AFF finals where our young Harimaus broke valiant Indonesian hearts.

And, it's not just because my firm's order book for 2011 looks damn promising.

It's because Malaysia has weathered the results of the 2008 General Elections very well in spite of the sea-change from BN's loss of it's two-thirds majority.

Yes, there has been a lot of unsatisfactory tactics and blatant cheating. Yes, corruption still needs to be tackled even more firmly. Yes, street crime is still a source of great concern for all Malaysians.

These are challenges that we shall have to face.

It is the job of the Loyal Opposition to throw brickbats. Equally, it is the job of the Party in Government to counter the brickbats and swing some of its own. That's democracy. 

As citizens, it will be for each of us to dutifully support any leader who argues for stronger audits of the governance of the Federal Centre and each of the States.

Above all else, to my mind, we must be the most vigilant about the Local Governments whose incompetence, bad planning and sheer abuse and neglect, has caused each and every one of us to suffer from traffic jams, poor road maintenance, non-functioning traffic lights, unlit street lights and the list goes on. We, the ratepayers, must hold those buggers running the Local Governments to account.

For, in the final analysis, the average citizen's most frequent contact with the GOVERNMENT is at the Local Government level.

Have a good New Year celebration, Malaysia.

Bloggers For Malaysia

Okay, here's the deal. There are some SoPo bloggers who have a nose for scoops. They are sniffers. Their exposes have helped to democratise and level the field of information dissemination.

Most of the stuff is raw. And, that's why we love it.

There are other SoPo bloggers (like me) who are plodders. We like to scratch our private parts and take our time to stare at scenery. And, when we do write, it is often prolix and painful to read.

But, being bloggers, we are collectively seen as an alternative medium to the conventional media.

I was pretty gobsmacked when I heard from Syed OutSyedTheBox that Rais was on the warpath against Rocky, Big Dog and Taikors & Taikuns for having the temerity to raise questions about his Ministry.

The first thought was, naturally, that I thought these bloggers were UMNO-BN-leaning types. Weren't they on the same side?

Upon reflection, these bloggers do have the "bad habit" of regularly questioning matters of poor governance in UMNO, BN and the Government.

How's that different from my blogging? Not much, actually. It's only a matter of the "hardness" of the bite (I wanted to say "degree of acerbity of vitriol". But, that would have put you to sleep).

So, my blogger buddies are being put through the wringer by Rais.

Rais has said that as a citizen, he has the right to lodge a police report against a perceived wrong against him.

That is true. All citizens have that right.

But, this is where Rais gets it wrong. Unlike us mere mortals Rais is a currently serving Federal Minister. Rais is a significant UMNO leader. Rais is part of the BN government. Rais is a politician. Rais has the power of the government.

That power has been used against Rocky and Big Dog.

Just by having the MCMC require these hapless bloggers to attend at the MCMC offices in Putrajaya already causes great distress. Having Rocky's "tool of trade", his beloved Ferrari, seized is equally distressing.

Over and above that, there is the threat of a charge to be framed against them. This will be costly at a personal and financial level.

Being in possession of a Ph.D in Law, Rais may recall the legal expression nemo judex in re causa sua which roughly translates into "a man may not be the judge of his own cause".

The MCMC being in his Ministry, Rais should have actively instructed the MCMC to refrain from investigating his own complaint.

He should have let the Police conduct the investigation.

But, if I were ever asked for any advice by Rais, his Ministry, the MCMC, UMNO or, BN (not that it will ever happen) on whether or not to lodge a complaint on the impugned blog postings, my reply would be the negative of the Nike tagline.

I would have said, "Just DON'T do it".

And, so, I will record here that I intend to register this blog as a willing participant in Bloggers for Malaysia.

Pee Pee Pee Budget Issues

I found Budget 2011 to be a strange document. It is strange at many levels.

For one, there was really only one big expenditure item. That was the allocation for Operating Expenditure. No austerity measures there. There was, in fact, a marginal increase in allocation.

Another, is the great store put on the so-called Public-Private Partnership (PPP) formula. At a cursory level, PPP seems to mean that the private sector will foot most of the developmental bill. At another level, PPP seems to mean projects for private sector parties with access to the political masters.

The third feature is that this is a largely a budget for large scale (some say "mega", others say "grandiose") construction and property development.

The fourth matter that struck me, going back to the concept of PPP, is that the Government recognises that it is cash-strapped. The "innovative idea" is to take developmental matters to, what I will term, "off-balance sheet" transactions.

What do I mean by "off-balance sheet"? Well, I have deliberately put the expression in inverted commas (just like the way Dr. Evil did with his fingers in Austin Powers) because I don't mean it in the way that accounting standards mean it.

The "off-balance sheet" that I allude to is that PPP arrangements has less transparency than a basic, garden variety budgetary allocation that is open to Parliamentary and public scrutiny.

Take the case of the 100-storey Warisan Merdeka Tower. I was puzzled that the matter was even included in a Budget speech. Essentially, the RM5 billion outlay will be borne by Permodalan Nasional Berhad (PNB), not the Government. I imagine that the only involvement of the Government would be at the Economic Planning Unit level - to approve the project for its perceived salutary economic "high-impact".

In a sense, the Warisan Merdeka Tower project is more akin to the proposed Sungei Besi Airport project the land ownership of which is in the process of being transferred from the Government to 1MDB. That is "off-balance sheet". Not open to direct Parliamentary and public scrutiny.

In this sense also, there is a precedent in the KLCC Project. It was also "off-balance sheet". It was not open to Parliamentary and public scrutiny.

But, this is where the similarity starts and ends.

The KLCC Project was destined never to fail. It could never have failed because it had the financial clout of Petronas behind it. That the KLCC District has become the success that it has is due, in my humble opinion, to the benefit of a central location in the heart of Kuala Lumpur. It also had the benefit of Petronas, which is a Fortune International 500 company, occupying one whole tower block effortlessly. By the way, Petronas was also instrumental in keeping Dayabumi alive in terns of occupancy during Dayabumi's first decade of existence.

In contrast, new-fangled PPP projects such as Warisan Merdeka Tower will rely on PNB's finite resources. What is PNB? Unlike Petronas, which is a commercial going concern in the substantial oil and gas industry that generates significant revenue streams, PNB is at best a fund management entity and a passive asset owner.

How will PNB be able to acquire the skill sets and the commercial gravitas to fill up the floor spaces in the 100-storey Warisan Merdeka Tower? RM5 billion is a substantial outlay. And, lest we forget, PNB is the trustee of Malaysia's institutional wealth - especially for Bumiputras. Failure is not an option.

As for the Sungei Besi Airport project, I have touched on it previously. But, the analysis is substantially similar with one worse addendum - 1MDB is based on an RM5 billion bond issue. 1MDB is in the process of raising yet another RM5 billion bond issue.

A bond is a debenture instrument. It is a hypothecation. A debenture is a debt. A debt must be repaid.

Therefore, it is obvious even to the untrained mind that 1MDB's financial feasibility relies in large measure in its hoped-for ability to parlay the Sungei Besi Airport land into a valuable piece of real estate. This is something real estate developers do. Any member of REHDA could have done the job. Why is there a need for 1MDB? I'm just asking....

Finally, I just want to make an observation that, in recent decades, we have placed great store on Corporate Governance.

The International Financial Reporting Standards (IFRS) on mark-to-market valuations, property development sales revenue accounting treatment and, recently, leasing arrangements demonstrate a great concern for off-balance sheet transactions.

The IFRS Exposure Drafts on these and many other business practises are intended to ensure transparency so that investors and stakeholders that have dealings with corporations have a clear idea of the financial health of corporations as going concerns.

In this context, PPPs may not be a march forwards. History may see it as a troglodytic concept.

So, I leave you with this question: Should governments have a different accounting standard from corporations?

Sime Buffeting

No, it's not about Warren taking any interest in Sime Darby.

Rather, it's about the swirls and eddies surrounding the Malaysian Insider "scoop" on Sime's purported RM2.5 billion prospective loss provisioning.

Sime quickly came up with an official statement that it expects to close its current financial year in the black.

As Rocky's Bru pointed out here, the carnage on Sime's market capitalisation had already happened by the time Sime responded.

I have two things to say.

Reportage carnage

The capital market lives by rules. Though many market players live on edge on a testosterone-fueled hubris by skirting the grey areas of regulation, the rules are there nonetheless.

Were it otherwise the level of trading violence in capital markets would have killed the modern economy aeons ago.

So, here we have an Internet-based news portal who jumped the proverbial gun with the resulting effect that RM1,000,000,000 of wealth disappeared from those who had standing investments in Sime at Bursa Malaysia.

Inasmuch as shocking management ineptitude and corrupt practices may have caused Sime's current financial malaise and, needs to be brought to book, so too, should unedifying "scoops" that may not be supported by cold hard facts be held to account by the relevant authorities.

I would go further to say that even if the "scoop" is supported by cold hard facts it may still transgress the capital market rules and other laws of Malaysia that are designed to guard against precisely this type of mischief, where disclosure of "price sensitive information" is required to be made on a timely basis and, with proper procedures.

Losses kills bosses

Sime is a publicly-listed company. It is a Government-linked Company. It is an ancient company. It is a multinational company, one of the few in Malaysia.

Sime's current problems finds a good metaphor in the wonderful Selangan Batu, tropical timber tree that has lived for a glorious 100 years to achieve and straight and unbent height of 50 metres with a girth of 20 metres only to find itself at the mercy of a logger. Snuffed out with nary a blink of an eye.

I am fond of the Latin phrase, quis custodes ipsos custodes (who will guard the guards themselves).

The Malay equivalent is more rustic and appealing, pagar makan padi, which pretty much carry the same connotation.

Seppuku and falling on one's own sword

A Voice has renewed his call for the Chairman of Sime to resign. The call is extended to the entire Sime board. The call, if you read his previous posts on the matter, is categorically extended to specific managers within Sime.

Perhaps it is time that A Voice's voice be heard (pun intended).

For, if you have watched David Attenborough's seminal documentary, A Private Life of Plants, you will have seen one chapter where Attenborough showed in time-delayed fashion how a raging fire decimated forests and fields as Nature's way to regenerate.

The fire is now raging in Sime. Let a new group of directors and, selected managers tend to the charred grounds and tend to the young shoots that will, as surely as the Sun will rise, grow and thrive.

That is as Nature and good corporate governance and ethical conduct (and A Voice) demands.

How To Unmask A Liar

In these heady days where exposes are de riguer, particularly in the rarefied world of GLCs, it is useful to be reminded of some behaviourial traits that tells us more than the stuff that comes out of the mouths of the person in the spotlight.

pix from here.

Here's what Helen Coster and Melanie Lindner has listed as a loose guide on the art of lying:

Tricky Tilt. Truthful people more likely to face questioners head on. Liars are "likely to lack frontal alignment and will often sit with both their arms and legs crossed as if frozen," says Joseph Buckley, president of John E. Reid and Associates, which provides interview and interrogation training to law enforcement agents.

Imprecise Pronouns. To psychologically distance themselves from the lie, deceptive people often pepper their tales with second- and third-person pronouns like "you," "we," and "they."

Heavy Hands. When people tell the truth, they often make hand gestures that coincide with the rhythm of their speech. Hands emphasize points or phrases--a natural and compelling technique when they actually believe the points they're making. People who are less certain will keep gesticulations in check.

Tongues Like Telephone Wires. The phone tends to bring out the liar in people. In one week-long study of 30 college students, Hancock observed that the phone was the most popular weapon of choice, enabling 37% of the lies told in this time, versus 27% during face-to-face exchanges, 21% using Web-based messaging, and just 14% via e-mail. Little surprise, perhaps: Most phone conversations don't leave a trail, unlike email and instant messages.

Need to Be Right. When honest people tell stories, they may realize they left out some details and backtrack to fill in holes. They also may realize a previous statement wasn't quite right, and go back and explain it further. Liars, says DePaulo, "are worried that someone might catch them in a lie and are reluctant to admit to such ordinary imperfections."

Behavioral Blip. "You're always looking for change from the person's usual baseline," says Paul Ekman, professor emeritus at University of California San Francisco School of Medicine, and manager of Paul Ekman Group, which does training in the area of deception and emotional skills. "Some people always hesitate when they speak. If they speak without hesitation, that's a hot spot."

Detached Smile. People who are telling the truth tend to use many facial muscles. Liars just smile with their mouths--their eyes don't reflect their emotions.

The Parliament

Certain things need to be cherished and upheld as immutable and, yes, even sacred.

Even after 53 years of Merdeka, Malaysia is still a young country. We are still learning how to conduct ourselves as a parliamentary democracy. We are still growing and developing our multiracial and multireligious culture.

Iconoclastic subversion of constitutional institutions

Over the past two decades iconoclastic behaviour by previous leaders have led to a younger generation of political leaders who have no understanding, appreciation or respect of the importance of constitutional institutions.

In 1987, the Malaysian Judiciary was assaulted. The head of the Judiciary, then known as the Lord President, was unceremoniously sacked. This was followed by the sacking of three Judges of the apex Malaysian court, then known as the Supreme Court.

The Malaysian Judiciary has yet to recover from that shock. The quality of the Malaysian Judges has declined since 1987. Of course, we have some fine brains still in the Malaysian Bench. But the average judicial and legal intellect has dropped. That is a fact.

The Malaysian Civil Service has also been compromised during the same period. Intelligent civil servants of integrity have been supplanted by those who exhibit sycophantic behaviour; the colloquial term for them is kaki ampu.

Dilution of quality of political leaders

Within the rank and file of political parties strong characters have been actively marginalised and removed in place of more kaki ampu. Quantity, that is to say, the size of the membership prevailed over the quality of members.

This is a clear attempt at dilution. The Merdeka parties like UMNO, MCA and MIC are good examples. This is the trend and state of affairs that prominent bloggers like Sakmongkol has consistently railed against.

There is a clear inverse proportional effect between the size of a political party and the quality of its leadership and policy goals.

Patronage in the purest feudal sense has pervaded Barisan Nasional parties. This is a bad thing.

Over the past two decades, people who joined BN parties did so to gain economic advantage. They did not join for ideals. Now these people are in the majority. That is why it is impossible for BN component parties to institute reforms.

The importance of the Parliament Building

So, where does the Parliament fit into all of this, you may ask?

I hate to say this because it is not 100% accurate. But, in many ways the Parliament is well and truly the last bastion for Malaysia as nation.

Of course, a nation is a sum of its peoples. That is true.

But, peoples are an amorphous mass. It is shapeless and has no fixed direction.

The shape and direction is given by the Federal Constitution.

It is the Federal Constitution that legitimately creates the constitutional institutions such as the:

• Yang Di Pertuan Agung;

• Federation of eleven Peninsular States, Sabah and Sarawak;

• Conference of Rulers;

• Parliament (Dewan Rakyat and Dewan Negara);

• Prime Minister;

• Cabinet;

• Civil Service;

• Armed Forces;

• Police;

• Election Commission and so on.

Almost every one of the constitutional institutions enumerated above has been compromised over the past two decades, possibly with the sole exception of the Dewan Rakyat.

pix from here

The ONLY reason why the Dewan Rakyat has stood out immune against the subversion is because it is the ONLY institution that requires a renewal of mandate every 5 years or less.

And, the Parliament Building, is the home of the Dewan Rakyat.

To ordinary Malaysians the Parliament Building is the symbol of their right to send a message to the great power that is known as the Malaysian Government.

Take away the Parliament Building and, Malaysians will further lose our bearing.

I am not exaggerating.

Do not allow any attempt to move Parliament away from the Parliament Building. It is hallowed and sacred property.

In its hallways walk the ghosts and aura of the greatest Malaysians.

Please have some respect for them and for Malaysia's brief but meaningful history.

Nazri Aziz: Dumbing down Malaysia

Dumb...Dumber...Dumberer...

pix from here.

I know Nazri has been getting many brickbats. Frankly I haven't bothered to check if the brickbats were deserved.

I do know, however, that his head should be whacked very hard for coming out with the type of statement shown below.

I don't believe any further editorialising is necessary. The Latin phrase (which Nazri be familiar with, being an ex-lawyer and all, is res ipsa loquitor i.e. "the matter speaks for itself", because it is so obvious).

pix from here.

As reported, Datuk Seri Nazri Aziz has defended the government’s plans to redeploy bright students to study locally instead of overseas, arguing that this could prevent a further “brain-drain” of talent.

“Sending overseas students causes brain-drain where some of them won’t want to come back".

"If you keep sending students overseas, when are we going to improve our standards (locally)?”

Lesen & Kedai Runcit

To the best of my amnesiac recollection, Malaysia hasn't had a decent Minister for Domestic Trade & Consumer Affairs since the late Tan Sri Megat Junid in 1997.

In recent years we have been inflicted with Ministers who said they were binggung about controlling prices of consumer goods and dealing with "unexpected" negative reactions from wholesalers, retailers and consumers.

The current Minister has done worse than his predecessors. He wanted Malaysians to flash their identity cards to Bangladeshi workers at petrol stations to get subsidised petrol at one point. Thank goodness the Malaysian public reacted with loud disgust.

Now he wants to issue more licensing papers to kedai runcit operators. These poor fellows are already fighting a losing battle against Cash & Carry operators and super-duper hypermarts.

Some of the actions of the Ministry of Domestic Trade and Consumer Affairs are examples of a government without common sense or intelligence or both.

Just to be clear, the issue is NOT about regulating the kedai runcit operators.

The issue is subsidies and, how to remove them without hurting the lower-income groups.

And, just to be clear, many kedai runcit operators can be classified as lower-income Malaysians.

Think more clearly. Use more common sense.

Regulations must improve the situation, NOT worsen it.

Betting on gambling in Malaysia

The rancour over the Ascot sports betting saga needs a better context.

First, the Malaysian government has consistently demonstrated a level of pragmatism that should rightly be held up as a model of sensible governance in a multi-racial and multi-faith community. This cannot be disputed. This should be applauded.

Second, the propensity to gamble will always be there, particularly within the Chinese Malaysian community. We can argue till the cows come home. The fact will remain that gambling activity will remain significant in the Chinese Malaysian community. A good government will not ignore this social reality.

Third, if the Malaysian government chooses to be cowed by moralistic shouting by certain quarters it will have failed to act responsibly to deal with an obvious activity that fertilises the criminal elements in Malaysia. There is a trade-off between being moralistic in a crime-infested community and to practice hardnosed governance by regulating a hitherto "black economic activity".

(Yes, naysayers can cleverly point to prostitution and drugs as other examples of the "black economy" but such arguments can be said to being too clever by half. This is not a luxury that a responsible government can afford to indulge in).

Why not an open tender?
That said, the point raised by detractors who asked why an open tender was not made does require a straight answer from the Malaysian government.

If there was, indeed, a "first right of refusal" given to Ascot, then, can the rakyat have a look at the document?

If not, why not?

This has to be answered. If no answers are forthcoming, this Malaysian government can expect strong cries of cronyism.

If there are sound legal reasons which will give Ascot a sure-win in the Courts over the Malaysian government, then, the rakyat would want to know whether the Attorney-General has rendered a legal opinion on the matter.

Poor spin control
As I have said in a previous short post on sports betting, the ineptitude in handling the matter is astounding.

The sensible playbook should have been as follows:

First, get the law enforcement people to seriously clamp down on illegal gambling activities. Arrests must be made. Charges must be written up. Books must be thrown at gambling syndicates.

Second, get the media to trumpet these arrests and charges.

Third, get the law enforcement people to provide fresh estimates on the incidence of illegal gambling. (Yes, it's been done umpteen times. But, hell, the public has a short memory and attention span. Do it again and again.)

Fourth, get the politicians and NGOs to decry the incidence of illegal gambling activities. Link it to criminal activities (which is obvious).

Fifth, repeat steps one to four several times over the span of at least one month.

Sixth, then, announce the grant of the sports betting franchise.

But, wait, the idiot who stands to receive the franchise needs to be grabbed by the collar and told in no uncertain terms that he must not, at all cost, strut his stuff in the public arena. He must call in the professional spinners (aka media and public relations people) to disseminate public statements in an orderly and controlled manner.

No off-the-cuff verbatim remarks are permitted.

Seven, make sure that the recipient establishes a major effort, no expenses spared, for round-the-clock gambling addiction counselling services.

Eight, highlight the gambling addiction counselling services. Get expert psychologists to write about or, be interviewed, on how the modality of gambling addiction counselling will be provided.

And, of course, even with all that there will be no stopping brickbats from being thrown.

But, at least, you will have been better prepared than to lamely answer questions in Parliament by replying that the sports betting licence has not been given ... yet.

Why no open tender?
All eight steps will not answer why no open tender was conducted.

That question needs to be answered by the Malaysian government.

Sports betting

I am astounded by how inept this whole matter of granting a sports betting licence has been handled by both the issuing authority and the recipient.

From the speed at which the approval (or approval-in-principle or grant or bequest or conditional approval or whatever it will be called) was given to the bravado and in-your-face machismo displayed by the recipient, it has all the characteristics of a fiasco from the get-go.

What a joke.

So, what we have is this. Imagine it being sung by the relevant persons:

This one will never sell,

they'll never understand,

I don't even sing it well,

I try, but I just can't.

-Barry Manilow: This One's For You-

Slashing Subsidies 2: walla perspectives

I will post here 3 interesting sequential comments by the inverterate commentator walla first. As always, walla gives some context and texture to the firmament that has enveloped us. walla's curling observations is a welcome relief that allows me to make a steaming cup of Java and just read before I get back to stroking the keyboard:

Part 1

Unfortunately for Idris Jala, sugar might be one of the subsidies to be removed so he can't be the Mary Poppins with her spoonful of sugar to help the medicine go down.

......................................

Idris is just the messenger and deliverer of bad tidings not of his doing.

In the first place, he must have had nerves of steel and a sense of corporate nationalism to have accepted the MAS job when he could have been cushier living on his reputation at Shell, knowing full well that the only way to improve the airline's bottomline was to liquidate some assets in order to sweeten the outlook to shore investor confidence and so save the rating for future financing without having to depend on government support which would not have been forthcoming under present circumstances.

And other airlines have floundered in the maelstrom of the roller-coaster rides of fuel prices. Thus, hard lesson learned notwithstanding, no one should be expected to score perfect hits on fuel hedging in the first round.

After all, if someone can, he would only need to do it once and be set for life, considering aviation fuel contributes thirty percent to the cost of running an airline.
.......................................

Since it is a notable fact that decision-makers and eminences read this blog, one should therefore add more confusion in order to supersaturate the matter and thus crystallize the situation.

So it remains to say what one should be concerned going forward are these points:

one, the assumptions qualifying the assertion of bankruptcy are doable. Cough:

the economy can achieve three percent year-on-year;

the deficit will continue to balloon, and,

government debt will continue to rise at twelve percent a year.

Why do we say these assumptions are achievable?

The whole purpose of the exercise is to remove subsidies. Once subsidies are removed, cost of living will rise about forty percent by the incantation of sticky price multipliers.

This negative effect will only be nullified if the people can live on less or make more to cover the loss. If they have to live on less, the government will have to be very brave to continue maintaining the same tax rate. If the government reduces tax, it will reduce its own revenue, not that this government having lots of money has been entirely without grievances to the people.

And if the people make more, why haven't they by now?

So they can't make more or live on less. Both motivation and ability will be missing, and more importantly - simultaneously. That's the real crux of the matter. If one were to precede the other, there's elbow room to nudge the problems one way or the other. But since both stand side by side, they magnify each other instead.

In the words of Voltaire's Candide's Dr Pangloss, we are exactly where we are in this best of all possible worlds.

Continuing the confusion, the government may decide not to remove subsidies because it calculates that the savings from removing the subsidies cannot be parlayed fast enough by new taxable income from a workforce that will be down and out completely. And that's not because we are not in the Caribbeans.

Therefore and unless new revenue comes its way quickly, its deficit will balloon and its debt will continue at the current rate.

-------------------

Part 2

So we have cunningly reduced everything away from the rakyat and private sector, and towards the government sector.

Which is immediately presented with two options: reduce fat and/or increase income-generating activities.

If we look at the performance of one of its major holdings, that going by the name of Sime, we will have to be reticent with our confidence the others in the same stable will be doing spectacularly better. If it can bleed in oil even while having plantations, what will the other holdings in infrastructure, gaming and so forth be capable of?

And since the government is the biggest employer in the country without whom the economy may nosedive further if its employees as customers of the private sector be out of jobs, the same problem will have to be retained.

The only way around this continuing confusion is to reengineer and transform both.

Given that Cuepacs have just said forty one percent are suspect of being on the take, that will take some doing. Given that the government have had to borrow an executive from a petroleum company to shape-charge its transformation program, the other aspect about re-enginnering government-held semi-private management will also present insuperable challenges.

After fifty three years of nation-building, we find ourselves without adequate quality management for critical positions across the land while the country remains mired in a financial situation whose alarm bell has been sounded so loudly it would probably explain the twenty percent drop in crime rate.

Except that a certain group of MPs have thicker tympanic membranes. They are adamant the government will not be bankrupt.

If that be the case, why the need for the four strategic pillars then, one asks timidly?

Why the need for labs, even?
......................................

That crux mentioned above points to the matter of competitiveness. We are said to have risen by eight notches to be last year's tenth most competitive nation. But how can that be when we are one of the most subsidized economies on earth? One therefore suspects if we remove the subsidy element from the Swiss equation, the ranking will fall. Would the same group of MPs be then saying the same thing?

......................................

It takes years to become an innovative economy. First, first-class brains are needed extensively. Second, the environment in which they thrive must already be present and thriving. Third, the soft factor of policies and how farsighted, pro-industry and globally-encompassing their implementation has taken root must be routinely actuated without the slightest shred of counter-productive moves that will cause a fall in confidence. Fourth, the governmental, business and physical ecosystem must be clean, green and efficient. And fifthly, there must already exist a globally-tested genius factor in the market. In other words, killer applications and blue-ocean products already well-accepted and earning good dough from the rest of the world.

---------------------------------

Part 3

These are the challenges for the government sector to address in its moves to trigger higher value output from the private sector.

And it has less than ten years to do so.
......................................

Meanwhile there is an NGO movement going around. It is moving ahead of the NEM-10MP formulation to position itself strategically so as to have better bargaining power with the government vis-a-vis retention of status quo.

There are some nettlesome points.

One, the dilemma might have been a fact but its solution has been a fiction the size of the financial abyss that is the stark reality before us.

Two, forty percent of the government's revenue comes from oil. No new oilfields within sovereign waters have been announced. Ergo, the government will have to depend on Petronas striking deals with other oil-rich countries. Unless some oil-strikes are already in place, the prospects are only so-so. If not, why the whole rigmarolly exercise?

Three, the government has not delivered a single record of financial prudence. A short stretch of highway has a three hundred percent price overrun. Tolls whose rates should have been diminished permanently by twenty percent by now are still collected at blasting rates with the specter of another increase. The Auditor-General's report has been a nightmare of leakages and siphoning galore, and those are just the ones caught in its radar by its small-staffed teams. The public sector remuneration bill is ballooning even as its levels will soon not be even adequate for the livelihood of the public servants. Meanwhile money is thrown into all manners of projects whose returns are suspect. Take F1. Take the annual billion for KLIA. In fact take any damn project that one can recall. Any. All. Which can be said to be a model of financial prudence and eclectic success?

So, if there is going to be a trillion ringgit debt in nine years time, what is there to bargain about now? If the assumptions turn true, the government will be in a corner where it cannot even afford to pay salaries let alone run services. Under such a circumstance, it would be foolhardy to load the private sector because if it falls, the country falls.

A high sovereign debt debilitates everything. We may have some savings. Subject to the absence of a distortive W-shape from the Eurozone, our recent ten percent quarterly growth may be signaling a recovery - but - do.we.have.fundamentals.on.hand in the first place to be confident enough to negate the arrival of such a high sovereign debt that will cause financing costs to spin all into a vicious cycle, so that all future effort will be just to pay the interest charges and not the principal sums of a loan? If our ratings fall, things will cost more because sellers will insert a risk cost into the prices and buyers will see opportunity to press for discounts. Our foundation for competitiveness will then erode before it can even be laid.

......................................

This post, for that little baby in the crib just now, such a cherubic innocent smile. Whither its future?

......................................

Summary

Subsidies removed, government restructured, industry and business supported to the zenith, globalization assimilated completely, brain-cultivation the primary target, procurements rationalized completely, market completely opened up, and bloggers given fiscal incentives to carry on.

.....................................

Postscript

We are in this dilemma because things that should have been done long ago weren't and things that must not be done were and people whose mindsets should have been recultivated weren't and those who should have been supported more didn't get the support and denials which should have been nipped weren't and.....

The end.

Slashing Subsidies: Lessons from Mary Poppins

It is not easy to govern a country.

It is even less easy to deliver bad news to a restless population that has reduced the mandate to govern.

And so, when Najib delegated the extremely difficult task of driving the urgent matter of reviewing and forward-planning Malaysia's socio-economic future to Idris Jala, any Malaysian who bothered to turn his or her mind to the matter would have assumed that Najib had given the matter a lot of thought and, chose the best person available.

Idris, as Minister in the PM's Department in charge of the driving Pemandu, has done a sterling job so far.

He and his team has dissected, sliced, diced and reconstituted many knotty bottlenecks that has yielded fairly immediate results.

One of the more visible ones is the Crime Lab. We can see Najib's visible support for this in today's MSM report on his walkabout in SS2, Petaling Jaya. Of course, Hishamuddin and Koh Tsu Koon are in tow in the walkabout.

But, to be sure, it was Idris Jala's Crime Lab that zoomed in on the 50 crime hotspots in Peninsular Malaysia and, sorted the Police out on their unthinking policy on allocating manpower based on Police Districts rather than channelling more manpower to the 50 hotspots. This is why the crime rate has declined by 20% in 2010.

pix from here.

Hishamuddin and Tsu Koon can do the photo-ops. But, some of us know better. Lembu punya susu sapi punya nama!

That said, it appears that Idris Jala has recently been accused of being infected with the foot-in-the-mouth-disease (to continue the bovine analogy) when he was recently quoted as saying that Malaysia may become bankrupt by 2019.

His clarification is carried in full here. But, to be fair to the man, here is the salient part from the horse's mouth (to move from the bovine to the equine):

Why did you say that Malaysia will go bankrupt in 2019? Have you misled us?

During the Open Day, I presented some salient facts about the economy. For the last 10 years, we have been running a fiscal deficit which has been growing progressively from RM5 billion in 1998, to a record high of RM47 billion in 2009. This was due to the fact that government expenditure, including subsidies, has been escalating, whereas government revenue has not kept pace as our economy – the gross domestic product (GDP) grew at only 3% a year. Consequently, the government has to borrow a lot of money to cover for the shortfall. Our government debt in 1997 was RM90 billion and has grown at a rate of 12% a year to reach a record of RM362 billion in 2009.

In addition, as a proportion to GDP, Malaysia is one of the world’s highest subsidised countries with 4.7% of GDP compared to Indonesia 2.7% , Philippines 0.2% and Organisation for Economic Co-operation and Development (OECD) countries at 1.5% on average. (See first graphic below.)
To be clear, I said we could go bankrupt IF, and I repeat the word IF we continue with the same trends as in the past 10 over years; based on an annual increase of 12%, our debt will reach 100% of GDP in 2019 (a staggering RM1.158 trillion) and we could potentially go bankrupt then.

Together with escalating fiscal deficit exceeding 10%, we could end up in a similar economic situation like Greece and other similar countries. (See second and third graphics.)

All economists make assumptions and I did not say Malaysia will go bankrupt without qualifying it with certain assumptions. Theseare:

> The economy/GDP continues at a rate of 3% a year;

> Our deficit continues to balloon; and

> Government debt continues to increase at rate of 12% a year;

Unfortunately, some of the reports about the bankruptcy projections did not state these assumptions and, therefore, can be taken out of context. These assumptions are used by us to make forecast about the future. In reality, as a country, we will have to do everything we can to prevent this from happening. The prime minister has laid out four strategic pillars which make up the country’s roadmap to achieving Vision 2020:

> 1 Malaysia, People First, Performance Now;

> Government Transformation Programme;

> New Economic Model; and

> 10th Malaysia Plan.

The future is clearly in our hands. And if all of us Malaysians work together, we can achieve Vision 2020. This involves concerted effort to grow our economy and be prudent in our spending.

In an effort to douse the spiralling flames of indignance arising from his "Greek tragedy", Idris met with some bloggers last night.

My takeaway from the generous 4-hour session between Idris and the bloggers is that the Malaysian Government sincerely wants to put some important economic course corrections. These course corrections will put Malaysia on a sound economic footing.

None of the bloggers were against the consumption subsidy cuts...in principle.

The Mary Poppins lesson will come shortly.