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Wednesday, November 30, 2011

Agung UMNO Watershed? Battle to win the warlords over!

Watershed assembly for Umno

THIS general assembly is certain to be Umno’s last before the 13th general election, and its leaders have taken great pains to ensure members put on a good show for the whole country.

The party bosses, in the run-up to the meetings which started last night, told the delegates that they were free to speak up on any subject.

And so they should, as Umno assemblies have been noted for the freedom politicians have to speak their minds.

However, the speakers must be aware that whatever they say will reverberate far beyond Merdeka Hall at the PWTC.

From party president Datuk Seri Najib Tun Razak to Youth chief Khairy Jamaluddin, the advice has come for speakers not to say or do anything that might offend other communities.

The leaders remember the Youth-keris incident as well as the fiery speeches of the past few years which the non-Malays had found unsettling, if not threatening.

This cannot happen again if Umno wants Putrajaya to remain under Barisan Nasional. National polls are imminent, and party members must remember that whatever they do will affect Barisan’s 13 other component parties.

Every misplaced word and misconstrued action will be exploited by their political foes to the fullest to drive the non-Malay electorate away from the ruling coalition.

Najib has repeatedly said in the past few days that his 1Malaysia concept calls for “acceptance” and not just “tolerance”, and the party leadership has re-emphasised this by putting up huge billboards depicting multi-racial scenes with wordings like “Kami anak Malaysia” (We are the children of Malaysia) all over the PWTC.

This is one of Umno’s biggest efforts to reach out to the other communities.

The more than 100 speakers at the Youth, Wanita, Puteri and main party’s assemblies must also reflect this spirit of accepting all Malaysians so that the calls that their leaders make will not be seen as mere slogans.

The speakers should also pick up on the call by Najib for unpopular elected representatives to “voluntarily” bow out instead of having to be pushed out.

Umno has been, for too long, associated with warlords who refuse to give up their seats or positions that they see as theirs for life, but this will not do in today’s modern, connected world.

Voters today want to see changes and abhor politicians who overstay their welcome. Umno warlords must realise this and by voluntarily stepping down, play their part in reinventing the party, and at the same time gain the gratitude of younger members.

Malaysians of every social and political stripe will be watching this assembly and listening intently to every word each speaker makes.

Umno and Barisan Nasional will be measured, judged, punished or rewarded based on what happens in the next four days.

All political parties like to claim that their annual gatherings are important, but few can deny that this Umno assembly is a watershed that could change Malaysia’s political landscape forever.

Battle to win the warlords over


The pressing issue for Umno is to hammer home the theme that the party’s warlords, division chiefs and apparatchiks are unimportant for the crucial battle ahead.

UMNO is mobilising its grassroots to stage its annual general meeting at PWTC in Kuala Lumpur this week in a great show of choreographed pomp and colour and with members pledging party unity ahead of the most crucial battle of all, the 13th general election.

The party is set to put on the biggest show ever and the media coverage will be overwhelming; a stark contrast to its rival PKR, which just concluded its annual general meeting in Pulai Springs hotel, Johor, and whose assembly attracted less attention.

While for PKR, the debate in a nutshell centred on enemies from within, the Umno debates are expected to centre on winning candidates – a theme Prime Minister and Umno president Datuk Seri Najib Tun Razak has been broaching for some months now.

For the Umno leadership, the pressing issue is to get the party grassroots behind this theme, that Umno warlords, division chiefs and party apparatchiks are unimportant for the crucial battle ahead.

What is important would be winning candidates who will fight in the constituencies that Umno will contest and in other constituencies where the party’s allies will do battle.

The challenge for the Umno leadership is to convince the power brokers in the party and the division chiefs that the next election is a battle for Umno’s survival and that only a certain type of candidate will be allowed to carry the Barisan Nasional flag.

Najib has to convince the power brokers to voluntarily relinquish the decision to choose the candidates to the party’s top leadership.

Once that is accomplished, this would ensure that the warlords and division chiefs work to ensure the party wins.

They must not, out of anger at not being chosen, simply abandon the election machinery in their areas, go for a holiday at the most crucial moment or even indulge in acts of sabotage.

They must not, as party members, stand as independents and split the votes.

Everything hangs in the balance for the next general election: the number of seats that Barisan Nasi­onal can expect to win, the percentage of votes it can garner, the extent of transformation to society that has taken place and whether voters are convinced.

Najib has been preaching about winning candidates as he makes his rounds around the country.

Deputy prime minister Tan Sri Muhyiddin Yassin has also been spreading the importance of winning candidates.

Above all, they want consensus.

An agreement from the party warlords that their candidate choices for the general election will be accepted and endorsed.

A division chairman or his deputy are not automatically the best candidates in their constituencies.

The best candidates could be a humble teacher or a district officer or a doctor or just any ordinary member in the party hierarchy who has a certain degree of easy confidence and restraint and has no derogatory label at the local level.

This, then, is what Najib will set out to do – to establish the fact that party comes first above all else.
The warlords will be asked to make sacrifices and not pull the party leviathan in different directions at the grassroots level.

They will be asked to promise that they will strictly put party interest above self and support wholeheartedly the candidates that the leadership has chosen for the big battle.

Pakatan Rakyat is not an easy enemy to defeat. It might be wounded, it might have “enemies within” and it might have three different agendas.

But they have a unifying figure in Datuk Seri Anwar Ibrahim, no matter how beaten down, and a unifying vision of occupying Putrajaya.

They are not easily defeatable.

Besides, Umno has to carry the MCA, MIC, Gerakan and PPP into battle with it, at least in the peninsula.

These parties are in various stages of reinventing themselves for a new generation of voters.

Except for the MCA, which is in a showdown with the DAP, the rest have to accept their defeated images and exist as feeders of votes to big brother Umno in return for representation in parliament.

It’s a new reality that they will have to accept.

Najib will spell out the realities of the altered political landscape at the Umno general assembly that he is not just Umno president but also the Prime Minister for all Malaysians no matter what their race, ethnic group or social status are.

Although badly mauled by defections, PKR has pledged to reinvent itself and fight Umno.

The DAP, on the other hand, is a strong, sleeping giant, sure of Chinese voter support.

PAS, meanwhile, is struggling for Malay votes beyond its one-million card carrying members, having lost the political initiative to Umno.

Its many liberal policies were designed to endear it to non-Malays but it has woken up late to the fact that it needs the Malay voters too and is fast catching up, ratcheting up a hardline stance.

If Najib can convince his party warlords to ease off and not battle him over his choice of candidates and to put party above self, then he would have won half the battle.

The other half is to convince voters that he has been working day and night since becoming Prime Minister in February 2009 while the “Prime Minister-in-waiting” Anwar has been giving speeches from India to Egypt and countries in between.

Najib can win a new mandate from voters but he has to get his party warlords behind him.

Malaysia passes ban on street protests

Activist lawyers decry new law they say imposes tougher restrictions and penalties for demonstrators. 

Malaysia's lower house of parliament has approved a ban a on street protests after opposition legislators boycotted the vote and activists criticised the ban as repressive and a threat to freedom of public assembly.

The law is expected to be enforced after parliament's upper house, also dominated by the ruling National Front coalition, approves it as early as next month.

Najib Razak, the country's prime minister, has framed the bill as part of a campaign he launched in September to replace tough laws on security, speech and assembly in a bid to shore up support ahead of elections he is expected to call for next year.

He defended the act on Monday, saying it guarantees the right to peaceful assembly and said the law prohibits public marches to avoid disruptions to general society.

But it has been assailed by opposition politicians who call Najib's reforms an election ploy, and say the bill validates their fears that tough old laws will merely be replaced by strict new rules.

Malaysian and international rights groups describe it as repressive because it bans street rallies and imposes tough restrictions and penalties for demonstrators.

The law was announced only last week, and some critics say the vote was rushed without proper public consultation.

About 500 lawyers and their supporters marched to parliament hours before the vote, urging lawmakers to reject the bill and chanting "freedom to the people'' before police stopped most of them from entering the complex.

The new law would confine demonstrators mainly to stadiums and public halls. Depending on the venue, organisers may be required to give 10-day advance notification to police, who would determine whether the date and location are suitable.

Children under 15 and non-citizens would be barred from attending rallies, which also cannot be held near schools, hospitals, places of worship, airports or gasoline stations.

Demonstrators who break the law can be fined $6,200.

VK Liew, a deputy Cabinet minister in Najib's office who received a protest note from the lawyers on Tuesday, suggested that critics should not be too quick to criticize the law.

"We should look at it holistically, not piecemeal,'' Liew told reporters.

Opposition reaction

Anwar Ibrahim, the opposition leader, said he believed the Peaceful Assembly Act would be "more draconian'' than laws in Zimbabwe or Myanmar.

Other opposition activists indicated they might challenge the law in court, insisting it breaches the people's constitutional rights.

Amnesty International, the UK-based rights group, called the Peaceful Assembly Act "a legislative attack on Malaysians' right to peaceful protest,'' while Human Rights Watch said the law is being pushed through parliament with "undue haste".

"The government must reject the bill as it infringes on the rights of the people and violates the constitution," said Wong Chin Huat of Bersih 2.0, which spearheaded a rally for electoral reform in July that was broken up by police.

Lim Chee Wee, president of the Malaysian Bar Council, said the ban was "outrageous".

"Assemblies in motion provide the demonstrators with a wider audience and greater visibility, in order for others to see and hear the cause or grievance giving rise to the gathering," he said.

Critics including the Malaysian Bar Council and Human Rights Watch maintain the act would grant police too much power over the timing, duration, and location of gatherings.

"This bill is a legislative attack on Malaysians' right to peaceful protest," Sam Zarifi, Amnesty's Asia-Pacific director, said in a statement.

The ruling Barisan Nasional coalition has been accused of routinely using tough laws to block challenges to its five decades in power.

Al Jazeera and agencies
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Malaysia's 'Peaceful' Bill off to a rocky start, at odds with ... 

Tuesday, November 29, 2011

Make Mandarin a compulsory exam subject

Chua: Make Mandarin a compulsory exam subject

KUALA LUMPUR: The MCA will push for Mandarin to be made a compulsory Sijil Pelajaran Malaysia (SPM) paper for students in Sekolah Menengah Jenis Kebangsaan (SMJK).

Party president Datuk Seri Dr Chua Soi Lek said making the subject compulsory was important because there should be a minimum level of language proficiency for those wishing to teach in Chinese schools.
He added that the boards of SMJK nationwide were unanimous in their decision to request that the language be made a compulsory subject.

Dr Chua, however, said there would be a shortage of Mandarin teachers to teach the subject.

The party has directed its Youth chief Datuk Dr Wee Ka Siong, who is also Deputy Education Minister, to look into the matter.

Dr Chua hopes to see more students from independent Chinese schools joining teacher training colleges once the institutes begin accepting Unified Examination Certificate students.

He said this at a press conference after a meeting with representatives from the 78 SMJK school boards yesterday.

Dr Chua also urged the Education Ministry to look into reintroducing English Literature in schools to strengthen the command of English.

“Learning Science and Mathematics in English is good but as far as MCA is concerned, there is a need for literature to be reintroduced.”

On the criticism levelled against MCA's forum on hudud on Dec 4, Dr Chua said: “There is nothing wrong in educating my own members. We don't believe hudud will not affect the non-Muslims and we are holding this to educate them.”

He added that there were many educated people asking for more space for discussion.

“Why are they upset when we do a closed door forum? Does DAP or PAS have something to hide which makes them want to prevent MCA from holding its own forum within its own premises?” Dr Chua asked.

The forum will be held at Wisma MCA and is open to the public, although it is organised for party members.

Allah knows the best: Finding truth in fact and fabrication!

CIA World Factbook 2008 figures of total nomin...

Finding truth in fact and fabrication

Ikim Views
By Mohamad Azhar Hashim Fellow, Centre for Economics and Social Studies

Many Muslim scholars are still debating the authenticity of the expression ‘seek knowledge even as far as China’. While Muslims continue to be divided on this, China is fast becoming the largest economy in the world.

WHILE Muslims are engaging in a long debate whether the expression, “seek knowledge even as far as China” is really the words of the Prophet or a hadith, China has already emerged as the second largest economy in the world.

Economic experts made it official early this year that China has surpassed Japan to become the world’s second largest economy.

Indeed, the huge nation cannot wait any longer for Muslims to resolve their nagging debate on the authenticity of the expression and other trivialities, as toppling the United States as the largest economy in the world is now within sight.

Today, China’s economy is the fastest growing in the world, with the output growth rate in its Gross Domestic Product (GDP) growing consistently at an average 10% over the past 30 years.

China is currently the largest exporter and second largest importer of goods, as well as the world’s largest car market and the biggest energy consumer.

The significant growth in its investments, consumption and living standards is the result of its economic reforms initiated in the late 70s. The reforms have been successful in resolving poverty issues and driving China’s active participation in the global market.

China’s emergence in the world economy today not only has been made through the government but also through private companies.

Its currency, the renminbi or yuan, has become stronger and regarded as a benchmark currency for international transactions, especially on a regional basis.

Economic superpowers often feel threatened by the rising power of the yuan, accusing China that their currency brought about instability in the world trade.

For many years, Muslims have been debating on expression, whether it can be classified as authentic hadith or not. There were also disputes whether it was actually pronounced by the Prophet or just words of wisdom.

There have been differences in opinion. There are scholars who place this expression in the category of weak hadith (dhaeef), and there are also scholars who reject the expression as a hadith all together.

They opined that this expression was fabricated (mawdhu’) or fake words attributed to the Prophet, which means it was not the words of the Prophet at all, as there was no basis to claim so.

In addition, there are scholars who opined that even if this expression is an authentic hadith, it does not mean that there is an obligation for Muslims to seek knowledge in China in the literal sense.

In essence, Muslims are urged to seek knowledge related to Syariah or religious knowledge, even if it takes a person to faraway lands.

These opinions over the years may have had a psychological impact on Muslims, both in pursuing the type of knowledge and the position of China.

Muslims scholars may have found the truth that the expression is not from the Prophet, based on their study in the knowledge of hadith. As laymen, we are obliged to uphold and respect the opinion of the scholars.

However, imagine if Muslims did not engage in the debate on the authenticity of the expression but instead, acknowledge it, and act accordingly to the explicit intention of the message contained in the expression.

Who knows, today Muslims may have done well economically, and may have dominated the world economy in ways that could be superior than present advanced economies.

Whoever uttered or designed or fabricated the expression, “seek knowledge even as far as China” centuries ago, he was wise, as he probably saw the future vividly.

While Muslims have heard the expression for ages, and have been all the while arguing, debating and disputing it with different opinions, other nations have been building bridges with modern China and made an impact on the huge nation.

Indeed, China has successfully transformed its economy from an impoverished communist nation to an economic powerhouse. It has overtaken Europe and Japan, and is now set to take the number one position from the United States, which many economic experts believe can be achieved between 2020 and 2030.

While Muslims continue to embrace and subscribe to the words or expressions of wisdom of every visionary in the world without much hesitation, we still debate at length words of wisdom from visionaries of our rich intellectual civilisation. Only Allah knows best.

Monday, November 28, 2011

Moving to the next frontier of space programme

China astronaut Zhai Zhigang. Taken at the Chi...                      Image via Wikipedia


CHINA is moving in the right direction to build a 60-tonne space station around 2020.

On Nov 3, the unmanned Shenzhou 8 shuttle docked with Tiangong-1, which is China’s first space lab module, after travelling 343km in orbit.

The shuttle separated from the target spacecraft after 12 days and carried out its second docking on Nov 14. Two days later, Shenzhou 8 left Tiangong-1 and returned to Earth as scheduled.

News from the China Manned Space Engineering Office is that Tiangong-1 has continued its voyage at a height of 370km smoothly and transferred into a long-term operational mode.

The space lab module will wait for docking with the manned Shenzhou 9 and 10 sometime next year.

According to the office’s vice-director Wang Zhaoyao, during the flight of Shenzhou 8 its general biological experimental device functioned normally and 17 samples of Sino-Germany cooperative space life science experiments were recovered after the shuttle landed at the recovery site in Inner Mongolia.

He said Tiangong-1 had also carried out a series of experiments and tests as scheduled, including space-to-earth remote sensing exploration application experiment, space materials scientific experiment and space environment and physical detection tests.

“This space rendezvous and mission has fully realised its objective of ‘accurate entry into orbit, precise docking, stable assembly operation and safe return’.

“It marks a critical breakthrough for China’s space technology and set a milestone for our manned space development,” he told a press conference recently.

Wang said Tiangong-1, launched into orbit on Sept 29, was designed with a lifespan of more than two years and it would be well maintained until its following docking operations next year.

Under China’s space programme, after completing its first round of missions, Tiangong-1 will return to earth in 2013. It will be replaced by the larger Tiangong-2 and Tiangong-3 modules which will conduct more sophisticated space probes.

Tiangong-3 will probably be a 60-tonne full-size space station to be manned by astronauts.

The China’s Manned Space Engineering Office maintained that China is not working on the space station development alone and the country always welcomed other nations.

“We emphasise independent development but never said we want to develop in isolation. The development and operation of China’s space station are open to foreign colleagues and experts in the field on the principle of mutual respect and benefit, transparency and openness,” Wang said.

China has had fruitful space cooperation with Russia, Germany, France and other nations.

China would like to be involved in the building of the International Space Station together six other space agencies but because of various reasons, China remains excluded from the programme, he added.

He also refuted claims that China’s manned space programmes had military functions.

“We can say that none of the eight Shenzhou missions had direct military applications. But, we all know that space-related technological developments can be used in civilian and military sectors.

“For example, a communications satellite can be used for TV broadcasting and military communication. So it depends on what you use it for,” he added.

Wang hoped that critics would be responsible and fair when criticising China’s space programmes.

“The United States and some media have been criticising our space exploration programme and development saying is not transparent enough. First of all, they have to be fair in their comments.

“Last year, I accompanied Nasa administrator Charles Bolden for a tour of our space programme facilities, laboratories and launching centres in China. He was pleased on how transparent we were,” he said.

China’s space programme consists of three stages. Phase 1 saw the historic launch of the unmanned Shenzhou 1 shuttle in 1999 for missions to conduct space experiments. It was followed by the launch of Shenzhou 2, Shenzhou 3, Shenzhou 4, Shenzhou 5, Shenzhou 6 and Shenzhou 7.

The Shenzhou 7 mission, China’s third manned spacecraft, was the most historic when Chinese astronaut Zhai Zhigang became the first man from China to do a spacewalk on Sept 27, 2008. It marked a successful extra-vehicular activity (EVA) mission for China.

Phase 2 began with the launch of the Tiangong-1 space module. One of the main missions during this phase will be the docking of a manned space shuttle with the space lab.

The space programme administration will decide between Shenzhou 9 and 10 which one will be manned by China’s first female astronaut next year.

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Recipe for innovation

AirAsia CEO and others give you recipe for innovation


KUALA LUMPUR: What fosters the spirit of innovation? The answers point to an encouraging environment and putting Malaysia into context, there is much to be done at the home, education and corporate levels to create an environment fertile for sowing the seeds of unconventional thinking.

That was the main take-away from the second Merdeka Award Roundtable last week, featuring group chief executive of AirAsia Bhd Tan Sri Tony Fernandes, Malaysian Invention and Design Society president Tan Sri Dr Augustine Ong Soon Hock and Universiti Teknologi Malaysia (UTM) vice-chancellor Prof Datuk Dr Zaini Ujang.

The award was founded by energy companies Petronas, ExxonMobil and Shell in 2007 where award recipients will receive a certificate and RM500,000 cash award for each of five categories.

“(Innovation) is not something you can teach or programme. It is creating a lot of little ecosystems to make sure (the environment is right) and culture does play a part in this,” Fernandes said, kicking off the discussion on “Cultivating a culture of innovation in challenging times.”

Sharing ideas: (from left) Zaini, Ong and Fernandes at the second Merdeka Award Roundtable. The discussion was hosted by Astro Awani’s Norina Yahya

Of the education system, Fernandes said the focus on books had overwhelmed the development in other areas that build thought leaders.

“When we look at some of the great leaders, they are all rounded. Our schools have lost a lot by focusing on academics only,” he said.

Fernandes believed that while the Government should foster innovation as well as trust the people and allow ideas, education is the key to take Malaysia to the next level. He opined that bringing back arts, culture and sport would change the way the future generation thinks.

“A successful education system should be about bringing out the best in children and giving them the ability to experiment and try all sorts of things and turn that raw diamond into a polished diamond,” he said.

As a parent, he believed that it was important to “expose the children to as many things as possible and allow them to go where they want.”

At the corporate level, he added that there was also a culture of subordination in Malaysia that hampered creative output: “When you go against the norm in Malaysia, you can be whacked. It's sometimes seen as insubordinate or questionable when you challenge the norm.”

“That's the culture. Malaysians are an innovative lot but sometimes we need to praise innovation by creating the environment,” he said, adding that the success stories of Malaysian innovation were not sung often enough.

“We don't hear enough of the success stories. A lot of our technology came from Malaysians and we need to show that the commercialisation of these ideas have come to fruition,” he said.

During the discussion, Fernandes also revealed that the flat structure in AirAsia's management was the “secret weapon” for its success in the industry. He said that communication flow relied on organisation structure.

“If you have a hierarchical organisation, the people who have ideas are sometimes too scared to speak up. (But) it's all right to give ideas, it's all right to talk,” he said of the potentially stifling hierarchical organisation structures in many Malaysian companies.

“I always say I would rather have 9,000 brains working with me than just 10,” he said, adding on that “if you create an environment where everyone feels equal and there's freedom of expression (among all levels of employees), that provides a very powerful machine.”

However, innovating per se should not be the end goal too.

Ong, who is also a former member of the Merdeka Award Health, Science and Technology Committee, said there needed to be market-driven innovations to encourage worthwhile creations.

“When you have innovation for a market that is not ready for it, that becomes a problem,” he said.

“We should also look at what our country has a niche in. We should concentrate on areas where we already have good industries going on where innovation can bring some results,” he added, saying that foreign areas like nuclear energy may not be an ideal area to innovate since the country had yet to develop its know-how and infrastructure.

In terms of getting academicians engaged with market-centric needs, Zaini said UTM had a professorship scheme with Proton Holdings Bhd where professors were positioned at the company to spur on-the-ground projects with the staff.

“We target to have 100 patents under Proton per year from this industrial PhD,” the former Merdeka Award recipient said, highlighting the university's market-relevant endeavours through the reverse flow of ideas from the market into academia.

The roundtable will be broadcast on Astro Awani in early December.

Think global or you lose out ! Malaysians consumed too much with local affairs!

Malaysia (dark green) / ASEAN (dark grey)


They (Malaysian businessmen) don’t think global. They don’t want to even think Asean. For them, they are in a comfort zone and it is enough to do business in Malaysia.

NINE years ago, Datuk Ilyas Mohamed’s businessmen friends laughed when he asked them to invest in Indonesia.

“Malaysian economy was at its best until 10 years ago. We were at the peak. After that, it started to go down,” recalled the Cartrade Group executive chairman.

And Ilyas decided to enter the Indonesian market. His first deal was to buy Mandala Airlines.

The deal, however, fell through when a Singaporean company outbid his group. It put more money on the table.

But the setback did not discourage him.“I am very fortunate as I have a business partner there, who is one of the richest men in Indonesia,” noted the 50-something businessman.

His silent partner is a low profile multi-billionaire (we’re not talking about rupiahs but in US dollars).

“He is by name my partner. But he is not interested in my business as it is too small for him. Half of Jakarta belongs to him,” Ilyas related.

(Who? Google: Artha Graha Group.)

Now, 20% of Ilyas’ business is in Malaysia and the rest overseas, mostly in Indonesia; coal mining in Kalimantan and property development in Surabaya and Jakarta.

And his friends, who laughed at him as they thought he would be conned in Indonesia, are now following his footsteps.

“Indonesia is THE market. They have 245 million people. Can you go wrong in a market with 245 million people? And the Indonesian Govern­ment welcomes Malaysian companies,” he explained.

“There are a lot of opportunities in Indonesia. They are not even developing. They are just about to develop. If you go in now it is the best time. You can’t piggy back when they are (already) up there.”

Ilyas, however, cautioned:

“Of course, the important thing is to find the right partner. Many people go there and find the wrong partner, they get conned and then they say Indonesians are ‘penipu’ (conmen).”

The Malaysian market is small as the country’s population is 28 million.

“You can do small business (in Malaysia). But if you want to think big, you have to go out (of Malaysia),” the businessman said.

How big is Indonesia?

“Out of the 245 million Indone­sians, about 10% are super rich and that’s the total population of Malaysia,” Ilyas said.

How rich is “rich”?

“Oh, they are very, very rich,” he said and gave a figure (in ringgit) which I thought was unbelievable.
The thing with Malaysians, according to Ilyas, was we think small.

“They don’t think global. If not global then think Asean.

“But, they don’t want to even think Asean,” he said.

“For them, they are in a comfort zone. Sudahlah (it is enough) to do business in Malaysia.”

Most Malaysian businessmen (and we are not talking about the bosses of CIMB etc) do not want to venture.

For example, Ilyas said, “Sri Lanka is a good market now. Their trade minister, chief justice and banker (with a bank equivalent to Maybank) came down to talk to our businessmen. But they were not interested.”

It is the opposite for Singapore entrepreneurs. With their rock solid Singapore dollar, they are rushing into Sri Lanka.

“They know that their local base is small and they have to do business outside of Singapore,” he said.

The Philippines’ economy is also booming.

“Over the past 30 years, Filipinos are fed up with politics. And they work and work, building the economy themselves. And if we are not careful, we might be sending maids to the Philippines soon,” Ilyas said.

It is politics as usual in Malaysia.

“Instead of coming up with ideas on how to create business opportunities, our politicians come up with all sort of (political) issues,” Ilyas contended.

“They are creating issues for cheap publicity. For example, you can take 10 Chinese, 10 Indians and 10 Malays and sit them down together and there will be no racial issue among them.

“But it is the politicians and not the rakyat that come up with all sort of racial issues.”

“How to be a global player when you are thinking of politics 24 hours a day?”

Ilyas flies in and out of Indonesia spending about 15 to 16 days a month in that country.

So I asked: “Why don’t you relax and do business in Malaysia?”

His eyes gleamed. “Of course as a businessman, you are an opportunist. When you see so much of opportunities (in Indonesia) you just can’t resist.”

Ilyas assures that the Indonesian market is not as hostile as its fans during an Indonesia vs Malaysia football match.

Consumed with local affairs


The Philippines looms as the next big Asean entity and Indonesia is the place to ‘park’ one’s money, but we would rather not know that the barbarians are at the gate.

THE barbarians are at the gate and yet Malaysians are more fixated with whether a mentri besar was caught for khalwat with a girl from Pasir Panjang.

Not true, says the MB. But tongues still wag.

Perhaps we should be more concerned with the fact that the Philippines will be the next big thing in Asean.
I remember reading a report saying that if we are not careful, in two decades or so we will be sending maids to Manila.

The thing about us is we are more consumed with domestic affairs than foreign happenings.

Yes, from my Twitter timeline, Malaysians are also interested in the fact that former president Gloria Macapagal Arroyo was arrested on charges of fraud and Muammar Gaddafi’s son Saif al-Islam was captured.

But we are more intrigued with when Parliament will be dissolved, and whether Parti Kita president Datuk Zaid Ibrahim will contest in Petaling Jaya Utara or Petaling Jaya Selatan.

I, too, am guilty of paying too much attention to local politics and not enough to global issues.

Yes, I’m aware of the eurozone debt crisis. But don’t ask me to get into specifics.

However, I’ve become a specialist on Kedah Gerakan Youth chief Tan Keng Liang’s challenge to DAP publicity secretary Tony Pua: he will consume a mug of Kedai Rakyat 1Malaysia’s (KR1M) Chocolate Malt if the Petaling Jaya Utara MP donates RM1,000 to charity.

The challenge came after Pua claimed that KR1M’s 1Malaysia Growing Up Milk contained eight times the permitted amount of Vitamin A and was missing essential nutrients such as Omega 3, Vitamin B1, Vitamin D, Vitamin C and folic acid.

There was so much excitement in TwitterJaya (the moniker of the Malaysian twittersphere) over the issue, with some twitterers milking the issue with clever tweets such as “Pray for @TanKengLiang because he is going to drink 1Malaysia Choco Milk”.

Another big issue on TwitterJaya has spawned the mother of all puns and has also something to do with milk.

So syiok I was to absorb these comments like SpongeBob SquarePants, until I read a tweet by @Art_Harun (the lawyer) on Wednesday.

He tweeted in Malay: Malaysian politics – last month it was about molesting breast, this month it is about cows. When will we discuss the maximum impact of the eurozone on our economy?

Ouch. Time to come out from under my coconut shell.

So I decided to find out what the barbarians (Malaysia’s foreign rivals) were up to.

On Friday, I met a 20-something think-tank director at Coffee Bean in Bangsar Village to pick his brain.

The cerebral hotshot, who wants to keep a low profile at the moment, listed three challenges that Malaysia faces.

“Population wise, we are too small. We have a population of 28 million. Compare that with Indonesia’s 245 million, Thailand’s 66 million and the Philippines’ 103 million,” said the animated man, still wearing his maroon Friday prayer shirt.

“In terms of economies of scale, our enterprises will not grow so big because our market is small. We don’t have any option but to invest outside.”

Malaysian enterprises, he said, should think Asean to survive and grow.

“We should be on the forefront of ‘big’ Asean,” he explained.

He noted that Malaysian companies such as CIMB and Khazanah were investing in vibrant Indonesia, the country to “park” one’s money.

And through Twitter, he understands how important Indonesia is to the United States by reading the tweets of the American ambassador to Jakarta.

“Food security,” he said. “Many Malaysians do not realise that Malaysia imports almost everything – rice, fish and even chilli.

“Imagine chilli! I did not know that we imported chilli until I attended a briefing by Pemandu (Performance Management and Delivery Unit).  
“We are also overly dependent on foreign workers. Free movement of people is important in a globalised world.

“But certain industries, such as palm oil and construction, should train Malaysians to work in these sectors.

“Suddenly they are finding it difficult to recruit Indonesian workers as that country’s economy is booming. Indonesians would rather work in Malaysian-owned palm oil plantations in their own country than in Malaysia.”

Note to myself: download the Economist iPad edition that has, as its cover story, “The magic of diasporas: Immigrant networks are a rare bright spark in the world economy”.

In the meantime, I wonder what will happen to Tan should he drink the 1Malaysia Chocolate Malt.

Sunday, November 27, 2011

Housing supply and demand – are we nearing equilibrium?

Photo of the Kuala Lumpur, Malaysia.Image via Wikipedia


Is there any equilibrium point in housing market, considering the many factors influencing demand and supply?

The main determinants of the demand for housing are demographic. Population size and population growth are the core demographic variables. However, family size, the age composition of the family, the number of children, net migration, non-family household formation, the number of double family households, death rates, divorce rates, and marriages are other demographic variables that would influence demand for housing. Other factors such as household income, price of housing, cost, availability of credit, consumer preferences, investor preferences, price of substitutes and price of complements all play a role in determining demand for housing.

Income is an important determinant of demand as shown by a study conducted by De Leeuw in 1971 that showed positive income elasticity of demand in North America ranging from 0.5 to 0.9, meaning the market demand for housing grew as real income rose. The price of housing is also an important variable influencing demand for housing, where in terms of elasticity just like any normal goods it is negative increase in price will result in decrease in demand.

As for supply, the quantity of incoming supply is typically influenced by cost, price of existing stock of houses, and the technology used in the construction, where material costs tend to contribute the largest share of the construction cost, about 30% to 40%. In the short run, supply tends to be very price inelastic increase in cost will have less effect on supply. However, over a longer period, it tends to be very price elastic increase in cost will lower supply.

A study conducted by Fallis in 1985 showed price elasticity of supply was estimated at 8.2, indicating increased in cost would lower supply significantly. The degree of elasticity depends on the elasticity of substitution and supply restrictions. For example, the use of capital intensive technology has been employed to reduce the rising labour cost, thus having less impact on the supply of housing.

As at first half of 2011, Malaysia had 4,466,062 units of housing, an increase of 1.7% from the total of supply in the first half of 2010. About 24,709 units were completed in the first half of 2011, a lower number compared to 50,611 units completed in the first half of 2010. Kuala Lumpur and Selangor accounted for 6,567 units or 27% of the total new stock. Kuala Lumpur and Selangor had 414,436 and 1,285,192 homes, reflecting an increase of 2.0% and 1.7% respectively from the total as of first half of 2010.

Other states which showed significant number of units completed are Sarawak (2,612), Penang (2,507) and Perak (2,184). The incoming supply in the country was recorded at 560,636 units, where Selangor is the largest contributor (134,143 or 24% of the total) followed by Johor (76,429 or 14%) and Negri Sembilan (65,227). Kuala Lumpur has 39,656 units coming on stream.

In terms of transactions recorded as of first half of 2011 for the country, there were 133,984 transactions in the residential category, out of which the largest transacted numbers were priced in the range of RM100,000 to RM150,000, which accounted for 22,857 units, followed by units priced between RM250,000 and RM500,000, which accounted for 21,559 units.

Selangor recorded the highest number of transactions at 38,424 units, followed by Johor (15,015 units), Penang (13,832 units), and Kuala Lumpur (11,522 units). The most popular units transacted in Selangor, Kuala Lumpur, and Penang were for units priced between RM250,000 and RM500,000, while in Johor, the highest transactions recorded were for units priced between RM100,000 and RM150,000.

This brief analysis gives an indication that the total number of units coming into the market needs to be in line not only with the level of affordability of potential buyers in the area the projects are to be launched but also the demographics of Malaysian population.

As of July 2010, total population was estimated to be 28.25 million and the population is expected to grow at a rate of 2.4% per annum, where about 65% of the population is urban population. Today, less than 4% of Malaysians live in poverty and it is estimated that about 2.0% of the total urban population in Malaysia lives below the poverty line, earning monthly household income of equal or less than RM750. Low income households (earning income equal or less than RM2,000 per month) represents 75% of the median income in Malaysia.

The national average household income is estimated at RM4,000 per month. It should also be noted that about 65% of Malaysia's population is below the age of 35, thus there would definitely be strong demand for housing.

Due to continuous movement in the factors affecting supply and demand for housing, policy intervention is necessary to ensure that the majority of the population has equal access to own homes. Singapore's public housing policy is often cited as the most successful example of affordable housing provision in Asian cities. A study conducted in 2000 estimated that about 85% of the total population lived in public housing with nearly 95% of them owning the flats they occupied.

By centralising its public housing effort under a single authority, Housing Development Board, Singapore has circumvented the typical problems of duplication and fragmentation of duties, and bureaucratic rivalries associated with multi-agency implementation. This centralised function also serves as a mechanism to ensure supply and demand are checked.

It is hoped that the provision of affordable homes as announced in Budget 2012 would achieve its main objective of increasing home ownership among the majority of the population.

Senator Datuk Abdul Rahim Rahman is the executive chairman of Rahim & Co group of companies.

Appearances aside, not yet all at sea: US vs China!

President Barack Obama confers with U.S.Secret...Image via Wikipedia

Appearances aside, not yet all at sea

Behind The Headlines By BUNN NAGARA

THE People’s Liberation Army (PLA) set up a new office to streamline its management last Tuesday, and this week the PLA Navy will conduct training in the Western Pacific.

Some of this may be China’s response to enhanced US manoeuvres in the region, although in declaring plans to station US troops in northern Australia, President Barack Obama said they were “not aimed against any country in particular”.

Beijing also described the sea exercises as “routine” and not aimed against any country in particular. How did it all begin?

In Tokyo, Hanoi and Manila, China’s recent postures over disputed maritime territory have made a renewal of US “commitment” to the region timely.

However, Beijing sees recent US moves in Vietnam and the Philippines, following alliance-building in Japan, Australia and India, as provocative encirclement.

China’s moves are then regarded as justified reaction. Only the type and degree of reaction are being debated in Beijing.

China is neither anxious nor impatient to respond to US moves. Any change in Chinese foreign policy or naval deployment would take time through party-government-military hierarchies, and present circumstances discourage it.

The US is heading into a presidential election, with China itself readying for leadership changes next year. Beijing wants to avoid being sidetracked or becoming a US election issue.

The atmosphere of mutual US-China suspicion has developed so keenly as to make caveats necessary. In announcing diplomatic initiatives in Myanmar, Washington said they were not meant to isolate Myanmar’s long-time ally China.

But US attempts at alliance-building have seen patchy results. South Korea’s right-wing President Lee Myung-bak has not agreed to just about any US proposal to counter China’s rise.

Seoul is unimpressed by Obama’s trade grouping, the Trans-Pacific Partnership (TPP), a discreet alliance that excludes China. Australia is in this effort to draw a dividing line down the Pacific but not Japan, since the latter already hosts US troops and has military ties with the US.

For the TPP to exclude the second and third largest economies in the world shows its main concern cannot be trade. And for the US to dominate the TPP’s membership reveals its unilateral nature.

South Korea is unsympathetic to the TPP since it already has problems domestically in ratifying a Free Trade Agreement with the US. However much some countries may agree ideologically, national interests come first.

The same applies to the US in the UN Convention on the Law of the Sea (UNCLOS), which Washington has signed but refused to ratify. The US here is in the company of a handful of countries like Afghanistan, Bhutan, Burundi, North Korea, Iran, Libya and Rwanda.

A total of 161 countries, including China, have signed and ratified the Law of the Sea treaty covering the rights and responsibilities of nations at sea, from issues like navigation to pollution. China is particularly irked when the US lectures it on how to behave at sea.

China’s latest overtures have been attractive offers: US$10bil (RM319.7bil) in trade credits for Asean, US$3bil (RM9.6bil) for a new maritime cooperation fund, and efforts to boost two-way trade to US$400bil (RM1.3 trillion) this year alone.

Last Wednesday, Japan’s Foreign Minister visited Beijing, and the next day both countries jointly announced a commitment to build stronger ties. Japanese Prime Minister Yoshihiko Noda will visit China next year to mark the 40th anniversary of normalised relations.

In foreign policy, China is at a promising crossroads. This establishment has long been a small elite, founded largely on the Standing Committee Politburo of the Communist Party and the Central Military Commission, yet whose composition has been somewhat messy.

But that establishment is now more open than before, with more inputs from other actors such as diplomats, scholars, policy researchers, media, major state corporations and local governments. The Foreign Ministry may be heralding the opening of a new China, provided that foreign provocations do not force a reversal.

Current US strategy on China is multi-pronged, which Secretary of State Hillary Clinton calls “smart power”: an opportune combination of “hard” and “soft” power as coined by Harvard’s Joseph Nye.

Hard power concerns traditional power like military forces, whereas soft power covers cultural issues like mass entertainment, Peace Corps volunteers and institutions like the TPP and the Proliferation Security Initiative (PSI).

The “hard” and “soft” concepts are analogous to Chinese kung fu, whose written records of these styles go back at least 2,500 years. So China already has a head start on that.

And in kung fu, the soft style may be less obvious but more sophisticated and effective.

Related post:

The role that the US plays in Asia: Containment of China!

Pentagon planning Cold War against China - AirSea Battle concept! 

The role that the US plays in Asia: Containment of China!

President Barack Obama talks with Chinese Pres...Image via Wikipedia

The role that the US plays in Asia

Comment by XUE LITAI

SINO-US ties were in focus at the recent Asia-Pacific Economic Cooperation (Apec) summit in Honolulu and the just concluded East Asia Summit (EAS) in Bali, especially because of the European economic and political crises.

It was not a good time for US President Barack Obama to attend the EAS, given the unstable state of the American economy, and the Congressional super committee’s failure on the federal budget.

The frictions between the United States and China – from the yuan’s exchange rate to the South China Sea disputes – are nothing new. But the problem now is that the two countries seem unable to narrow their perception gap.

Obama met with Premier Wen Jiabao twice during the EAS to say that China should allow the yuan to revalue more rapidly.

At the Apec summit in Hononulu, Obama had complained to President Hu Jintao that the yuan was undervalued and said it “disadvantages American business; it disadvantages American workers. And we have said to them that this is something that has to change”.

The Chinese leaders responded that the yuan’s exchange rate was not responsible for the US’ high trade deficit with China, instead structural problems in the American economy were to blame for that.

In fact, China has been emphasising the need for a new mechanism for global economic governance to increase “the voice of emerging markets and developing economies”.

Before the summits, US officials had said countries concerned should exercise self-restraint and refrain from taking any action that could escalate or complicate the territorial disputes in the South China Sea. The US remark was directed at China, too.

But before that, Obama had issued an indirect message to China saying: “We want you to play by the rules.”

He warned that “where we see rules being broken, we’ll speak out and, in some cases, we will take action.”

Chinese leaders and people, however, think that the US dragged the South China Sea disputes, an irrelevant issue, to the EAS to fulfil its own agenda.

To them, the US’ intention is clear: It is using the South China Sea disputes to drive a wedge between China and some of its South-East Asian neighbours, which have enjoyed “20 years of steady friendship”.

It is clear that the US is desperate to engage full-time and establish its diversified presence in Asia as part of its global repositioning strategy. Washington is in the process of one of the most important transitions, that is, repositioning and rebalancing its foreign policy priorities.

To that end, it has begun shifting its resources and capabilities from the Middle East and South Asia to East Asia. Recognising that the “American future is in Asia”, the US is hell-bent on establishing a strong presence in Asia.

In the 21st century, as US Secretary of State Hillary Clinton has said, the world’s strategic and economic centre of gravity “will be Asia Pacific”. Clinton said that with the withdrawal of American forces from Iraq and Afghanistan, the US had reached a “pivot point” that should allow it to “lock in a substantially increased investment – diplomatic, economic, strategic and otherwise – in this region”.

Obama soon underscored the shift by stressing: “There is no region in the world that we consider more vital than the Asia-Pacific region; we are going to prioritise this region.”

Such a strategic calculus makes US-China ties the most important and complex relationship Washington has ever established. Thus, the US has to have constructive engagement with China.

But simultaneously, some senior US officials also consider it necessary to continue their China-containment policy. As a result, the US is using the South China Sea disputes to prevent China’s influence from advancing southward
Actually, Obama’s decision to attend the EAS is symbolic of Washington’s policy shift towards Asia. In other words, the US’ purpose was to use the EAS to reduce China’s influence in the region.

The Obama administration has demonstrated the US’ established policy on containment of China over the past two years.

Once, Obama even declared: “We’ve brought more enforcement actions against China over the last couple of years than had taken place in many of the preceding years.”

Probably, his declaration was aimed partly at the strategic calculations mentioned above and partly to blunt criticism of his administration by trade unions and Republican rivals, who could accuse him of not taking tougher action against China in the run-up to next year’s presidential election.

The US’ focus on Trans-Pacific Partnership could be interpreted as part of its economic strategy to compete with China’s increasing influence in the region.

In response, China has announced that it would offer its South-East Asian neighbours US$10bil (RM31.8bil) in infrastructure loans and establish a three billion yuan (RM1.5bil) fund to accelerate maritime cooperation with Asean member states.

Among the areas covered by the fund are marine research, navigation safety and combating transnational crimes. Asean member states now look to China for economic revitalisation and seek security guarantee from the US.

But such is the triangular US-China-Asean ties that only after the US and China reach greater agreement over Asia-Pacific affairs can Asean member states overcome the dilemma of choice. — China Daily/Asia News Network

> The author is a research associate at the Center for International Security and Cooperation at Stanford University in California, US.

Related post:
Pentagon planning Cold War against China - AirSea Battle concept!

Saturday, November 26, 2011

Longer wait for certainty and clarity - Accounting standard for property developers


Property developers, plantation firms given more time to adopt new accounting standards

PROPERTY developers and plantation players must be a relieved lot these days after the Malaysian Accounting Standards Board (MASB) recently ruled that such businesses are not obliged albeit temporarily to comply with two new accounting treatments that would have otherwise come into effect in January.

The two industries have complained that certain international accounting policies that Malaysia is supposed to adopt, ignore the way such businesses operate here and thus can be onerous and can distort the local companies' financial results.

The Real Estate and Housing Developers' Association of Malaysia, for example, has argued that the international accounting rules for recognising revenue from property development are based on the build-then-sell model of the West. However, in Asia, it's the norm for purchasers and their end financiers to pay progressively for the properties according to the stage of construction. Therefore, it makes more sense for developers to report revenue based on the percentage of completion method.

As for the Malaysian plantation companies, their contention is that their oil palm or rubber trees are comparable to a factory with its associated plant and equipment. These trees, the so-called bearer biological assets, should be valued differently from consumable biological assets such as wheat and maize.

The industry players' efforts to impress these points on the MASB has apparently been fruitful, and the board has worked to push forward these views at the regional and international levels.

On Nov 19, the board issued a new accounting framework called the Malaysian Financial Reporting Standards (MFRS), comprising standards issued by the International Accounting Standards Board (IASB) that are effective or will be effective on Jan 1 next year. This is part of the MASB's long-standing plan for convergence with the International Financial Reporting Standards (IFRSs).

However, entities that are within the scope of MFRS 141 Agriculture (MFRS 141) and IC Interpretation 15 Agreements for Construction of Real Estate (IC 15) are allowed to defer their adoption of the MFRS framework by another year.

MASB chairman Mohammad Faiz Azmi explained: “The rationale to provide the transitional period for both the agriculture and real estate industries is that, while the board is seeking full convergence, we need to be mindful of potential changes on the horizon that may change current accounting treatments. As the IASB is planning to issue a new standard on revenue recognition next year that will subsume IC 15 and may likely amend IAS 41 Agriculture (the equivalent of MFRS 141) requirements for bearer biological assets, we believe that to accommodate those affected by imminent accounting standard changes, a transitional arrangement should be given.

“Given this uncertainty, the board felt we should allow the status quo until the IASB direction is clearer. On balance, we believe this will not affect our convergence objective as the MFRS framework is fully IFRS-compliant and the transitional period given is only for a limited period and based on the IASB's own programme for standard changes.”

The MASB calls it a transitional period, but it also means there will be another year of uncertainty. And can we be sure that the IASB will sort out these things in time? Observers say it may be easier to amend IAS 41, but breaking the impasse over how developers should recognise revenue is likely to take a while.

On Nov 14, the IASB issued for public comment a revised draft standard to improve and converge the financial reporting requirements for revenue recognition. It is the second time that there is an exposure draft on this subject; the first such document was published in June 2010. IASB will be accepting comments on the current exposure draft until March 2012. After that, there will surely be months of deliberation and consultation. Is MASB being merely hopeful in expecting IASB to deliver a new standard on revenue recognition next year? And what happens meanwhile?

The plan initially was for the relevant Malaysian entities to adopt IC 15 for financial years beginning on or after July1, 2010. However, in August 2010, the MASB deferred it to January 1, 2012. At the same time, the board allowed companies to voluntarily implement IC 15 ahead of the deadline. One listed company, ATIS Corp Bhd, clashed with its auditors over a major subsidiary's decision to opt for early adoption.

Mazars, the auditors, insisted that property developers in Malaysia should stick to the percentage of completion method. With neither side willing to back down, three shareholders of ATIS requisitioned for an EGM to remove Mazars and the resolution was voted through.

This may well be an isolated episode, but asking shareholders to be pick sides in such a complex and esoteric debate was ludicrous. The corporate scene could do without a repeat of this. But when certainty and clarity are put on hold, there's always the risk of making poor decisions.

Executive editor Errol Oh wonders if it's naive to believe in the idea of one set of financial reporting standards to rule them all.

The audacity of hedge funds and their lack of righteousness

Lehman Brothers Rockefeller centre


IN the old days, technical books were read for one's education, but they are so boring that you would fall asleep. You read novels instead for their drama, romance and excitement. In this fast moving world where daily events are more thrilling than fiction, books like More Money than God by Sebastian Mallaby make you want to turn the next page.

Written by a former journalist, who today works for the US Council for Foreign Relations, the book has combined blood and guts story-telling of the hedge fund industry with careful analysis, tracing meticulously how the industry works like Sherlock Holmes. The narrative is so thrilling that when the author described the scene where the hedge funds took down Thailand in 1997, my hair stood on end. I was a ringside witness but I had not known who was doing what and how they did it.

If you want to know how hedge funds sniff out opportunities by talking to honest and nave central bankers who admit that they made policy mistakes and then make more money than God, read this book. It is both a clinical analysis of how hedge funds emerged from nowhere to become the market movers of today, as well as a morality story that raises more questions than it is able to answer. It may not be illegal (at least under existing law) to do a trade that tips a nation into abject poverty because there were tragic policy mistakes, but is it morally right to take home billions by accelerating the process of “creative destruction”?

The central insight of the hedge fund industry is brilliant it is that the academic finance theory is all wrong and we are all naive to believe otherwise. Modern finance theory begins with the assumption that the market is efficient and knows best. The efficient market hypothesis is based on the view that it is not easy to beat the market.

However, the hedge fund industry makes most money from the inefficiencies of the market. If you are not convinced, how between May 1980 and August 1998, the Tiger Fund earned an average of 31.7% per year after fees, beating the 12.7% return on the S&P500 index. The offshoots of the Tiger Fund, created by people who left the Fund to set up on their own, generated returns of 11.9% per year between 2000 and 2009, compared with the average of 5.3% per year for the S&P index.

Mallaby takes the story from the 1949 creation of the first hedged fund by Alfred Winslow Jones to the emergence of a sophisticated and complex US$2 trillion industry. He weaves a wondrous tale of how tribal and interconnected the industry became as it emerged.

Nobel Laureate Paul Samuelson, famous for arguing that randomly chosen stock selection would beat professionally managed mutual funds, was a founder investor of the Commodities Corporation, one of the first “quants” to use computer analysis to trade commodities. The Commodities Corporation was the nursery for three future hedge fund giants, Bruce Kovner (Caxton), Paul Tudor Jones (Tudor Investments) and Louis Bacon of Moore Capital.

Louis Bacon had connections with two of the Big Three in the early 1990s, being related by marriage to Julian Robertson (Tiger Funds) and worked briefly with Michael Steinhardt. The last of the Big Three is George Soros (Quantum Fund), who became famous as the man who made 1bil speculating in sterling and has become a philosopher/philanthropist. Many of these funds were involved during the speculative raids on Asian currencies during the 1997/98 Asian crisis and it is likely that many of them are having a food fest in Europe right now.

The last chapter of the book is a defense of why hedge funds should not be regulated. “The case for believing in the industry is not that it is populated with saints but that its incentives and culture are ultimately less flawed than those of other financial institutions.”

In Mallaby's view, “whereas large parts of the financial system have proved too big to fail, hedge funds are generally small enough to fail. When they blow up, they cost taxpayers nothing.” Yes, but when their prime brokers blew up with them, it cost taxpayers trillions.

Here lies the contradiction of their existence. Hedge funds are symbiotically tied to their prime brokers, the investment banks and large global banks that provide the leverage for their activities. No leverage means no ability to hedge or speculate. The latter group is too big to fail and its proprietary trading, combined with those of the hedge funds, are large enough to move markets.

The earlier argument that the prime brokers would safeguard systemic stability by indirectly regulating hedge funds (many of whom are former staff of the prime brokers) failed when Lehmans collapsed.

Hedge funds thrive because of regulatory and information arbitrage. The more the regular banking system is regulated, the more business drifts to the under-regulated shadow banking institutions.

Mallaby argues that it remains unproven whether heavier regulation will succeed. The regulators were scared to regulate, because of moral hazard, that is, the industry would take higher risks and the government would pay. Unfortunately, whenever there is a financial crisis, the government would be blamed and have to pay, irrespective of heavy or light regulation.

While hedge funds are not of public concern if they remain small, their herd like effect becomes a real problem when the momentum play can drive even mid-sized nations over the brink. Europe today is a live experiment of gigantic proportions. If someone makes tens of billions through speculation from the failure of some European countries and millions become unemployed, it is no longer a regulatory issue. Rightly or wrongly, this is a political crisis of the first order.

More Money than God should be the first book for everyone to read if they are to understand how the hedge funds dissect the European crisis as an opportunity.

Andrew Sheng is President of Fung Global Institute and author of From Asian to Global Financial Crisis.