The global centre of gravity shifting to Asia

“Danny Quah of the London School of Economics has calculated the world’s economic centre of gravity and reckons that, thanks to Asia’s rise, over the 70 years from 1980 to 2050 it will move eastwards from the mid-Atlantic all the way to somewhere between India and China. By 2015, the halfway point on this great journey, it will have reached the city of Bandar-e Mahshahr, in Iran, on the north-eastern tip of the Persian Gulf .”

 Danny Quah’s calculation of the world’s economic centre of gravity has been included in The Economist’s eye-catching statistical landmarks of 2015

Many see the rush to join the Asian Infrastructure Investment Bank as the beginning of a new international financial order and the decline of US dollar hegemony.

BRITAIN’S recent decision to join the Asian Infrastructure Investment Bank (AIIB) as a founder member has led to a kind of stampede by other allies of the United States in Europe such as Germany, France and Italy to follow suit.

So did two other important Asia-Pacific allies, Australia and South Korea. The only other major US ally in Asia which did not was Japan.

What is striking is that these allies went against the express wishes of the US which apparently saw the AIIB as a potential challenge to the domination of the international financial architecture by the US-controlled World Bank and the International Monetary Fund.

Particularly stunning is the British decision. According to senior fellow at the Department of Politics and International Studies at Britain’s Cambridge University Martin Jacques, in this year’s Boao Forum, this is the first time since Breton Woods in the 1940s, except for one occasion when Britain refused a US request to send troops to Vietnam, that Britain had ever said no to the US so publicly!

Jacques exaggerates somewhat as he should have begun with 1956 as the year when Britain abandoned an independent foreign policy, as a result of its misbegotten adventure in Suez, and became a faithful junior partner to the US.

Still, it is no less remarkable, even beginning with 1956, for it took about six decades before a clear British nay to the US came about.

Many saw the rush to join the AIIB as signifying the beginning of a new international financial order and the decline of US dollar hegemony, with China deemed to be the new or most influential nation.

Some, however, saw Chinese weakness rather than strength in this spectacle.

London’s Financial Times argued that resorting to a multi-lateral institution to exercise influence suggests weakness as China will be less able to get its own way, not to mention possible badgering from non-governmental organisations in future deliberations of the AIIB, than if it could do so by bilateral means.

It remains to be seen if a new financial order will eventuate. I will however make a few points about this development.

One is that it has shown in a dramatic way the global reach of Chinese economic strength, especially in the financial arena.

While it is true that China is already an economic force in other parts of the globe such as in the continents of Africa and South America, not to mention Asia and Australia, this is probably the first time that a major European nation has made an economic decision with obvious political implications favourable to the Chinese.

Someone defined a superpower as a nation or state that can project dominating power and influence in the globe, sometimes in one region or more, and that has the potential to attain global hegemony.

In this respect we can consider China an economic superpower.

Of relevance to our understanding of Chinese strength is the reason behind the British decision.

Britain in the past year or two has evinced a more positive attitude towards China.

According to an analysis in the Internet magazine, Counterpunch, the recent British economic recovery has been mainly based on financial flows to property and infrastructural projects in London and the south of England, and the prosperity of the City of London.

And the city of London is what keeps Britain from becoming a third-tier economy.

This is so important that David Cameron and the Conservatives could conceive of Britain leaving the European Union if the EU were to mess with the running of the City by imposing regulations.

A lot of the money recently has come from China and Britain is very keen to be involved in the offshore trading of the Chinese renminbi. Thus, there is every prospect of Britain getting more action from a China, with foreign reserves of around US$4tril (RM14.68tril), looking for more ways to use the renminbi.

Joining the AIIB in such a fashion, not only brings with it the prospect of possibly getting a leg up in future AIIB projects, but also gains Chinese goodwill. But it is important not to exaggerate Chinese strength. It is a superpower only in the economic arena, and not in other spheres such as the military and political.

Militarily, the US far exceeds China in the amount of money spent and in technological sophistication. Politically, what China can at present offer cannot match the global impact of values associated with the US such as democracy and human rights.

Even in the economic sphere, the Chinese Gross Domestic Product is only equal in size to the US in purchasing power terms, and not in dollar terms where the US GDP is more than one and the half times that of China.

In per capita terms, US GDP is at least four times more. And the US is still far more advanced in the sophistication of its financial market and industrial structures.

The significance of this AIIB development is not a demonstration of raw Chinese economic power.

It is unlikely to do away with the WB or the IMF.

It is really another symptom, this time in Europe and in the financial arena, of the global centre of gravity shifting to Asia.

By Dr. Lee Poh Ping

> Dr Lee Poh Ping is a Senior Research Fellow at the Institute of China Studies in the University of Malaya. The views expressed here are entirely the writer’s own.


Related posts

The AIIB groundswell; Asian development to the fore

Washington's Lobbying Efforts Against China's 'World Bank' Fail As Italy, France Welcomed Aboard. The cheese really does... 

Enter the Chinese Century: China is now the world's No.1 Largest Economic Power..

It was more contentious precisely because it was more momentous: the new numbers showed that China would become the world's largest economy far sooner than anyone had expected—it was on track to do so before the end of .... When the other G-20 nations agree that it is time that the leadership of international economic organizations be determined on the basis of merit, not nationality, the U.S. insists that the old order is good enough—that the World Bank, ..

The AIIB groundswell; Asian development to the fore

Washington's Lobbying Efforts Against China's 'World Bank' Fail As Italy, France Welcomed Aboard. The cheese really does stand alone. Every single U.S. ally with the exception of Japan have all hopped on board the Asian Infrastructure Investment Bank, or AIIB. Italy and France were approved on Thursday to become founding members, bringing the total membership base to 33 from the original 21.

The AIIB groundswell

Just in time for the deadline, an impressive coalition of countries have signed on for the newest development bank on the block

THE deadline of March 31 has passed, and 52 countries are now on the list of would-be founders of the Asian Infrastructure Investment Bank (AIIB).

The China-led bank was launched in October last year at the Great Hall of the People in Beijing, a year after Chinese President Xi Jinping proposed a bank to offer funds for development projects during his official visit to Indonesia.

The initiative would promote regional inter-connectivity and economic integration, he said when delivering a speech at the Indonesian Parliament.

In the past few days leading up to the deadline, news of more countries hurrying to join the AIIB made headlines, especially when a few of them announced the decision at the recently concluded Boao Forum in Hainan province, which Xi officiated.

The world was watching closely to see if the United States and Japan would sign up as founding members just before the deadline, but both have decided to opt out of the bank that is seen as a rival to the Western-dominated World Bank and International Monetary Fund.

Back in October last year, the bank had confirmation from 21 countries to participate as founding members – Malaysia was one of them – all of which are in the Asian continent.

The tipping point came when the United Kingdom announced its decision to join the AIIB in the middle of March, to the surprise of many.

More countries followed suit right after that, including France, Italy, Germany and Switzerland.

Martin Jacques, a senior fellow at the Department of Politics and International Studies at Britain’s Cambridge University, said the rise and growing awareness of the Chinese possibility in the context of a multilateral initiative pressed Britain to act the way it did, making AIIB not just an Asian institution but a global one.

“I think this is an extraordinary historical moment,” he said in a panel discussion during the Boao Forum.

“The new institutions (AIIB and the New Development Bank operated by Brazil, Russia, India, China and South Africa) do not necessarily conflict with the Bretton Woods institutions. They are very different.

“The developing countries now account for nearly 60% of global Gross Domestic Product and they represent 85% of the world population.

“The new institutions, unlike the Bretton Woods institutions, are being defined as relevant to the needs of this 85% of world population, most of whom are concentrated in this continent.”

Countries which have missed the March 31 deadline can still join as ordinary members, while those that have already submitted their application will find out if they are on the final list of founding members by April 15.

With an initial capital of US$50bil (RM184bil), AIIB is scheduled to be officially established at the end of the year, after the rules are finalised and signed in mid-2015.

New Zealand’s former Prime Minister Jenny Shipley said there is a need to define “infrastructure” to determine the types of projects that are qualified to obtain funding from the AIIB.

“If I could be provocative – if you were to put a diverse group of qualified women and men together and ask them the question, you’ll get a broader definition than if you just ask the question of classical male concept of buildings,” she said.

“We need to stand in the shoes of the people whose lives will be unleashed if we get this right. Just bringing in the classical morals of the same thing would not give us the breakthrough.”

Josette Sheeran, the president and Chief Executive Officer of the Asia Society, chipped in on this, citing Indian Prime Minister Narendra Modi’s agenda of building more toilets as an example.

“The reason young girls don’t go to school in India is that there is no toilet. That’s the kind of infrastructure that would really capture the mind of humanity and transform hope in the world,” she said.

Former Pakistan Prime Minister Shaukat Aziz was more concerned about the governance of the new banks, placing emphasis on professionalism, transparency and quality leadership.

“The people hired for AIIB must be professionals who know what infrastructure financing is all about,” he said.

“The quality of people will determine the ability of these banks to analyse risks to give money and to make credible loans which are payable back.”

Transparency, in the opinion of Deloitte global chairman Steve Almond, is also key to attract the private sector to come onboard.

“The regional or sub-regional projects are arguably the ones that bring the greatest impact to economic development. But because they go across the borders, they are also harder to manage and least likely to attract private sector capital,” he said.

“We need the mechanism to provide confidence to the private sector, and transparency governance is one of the compelling reasons to encourage them to come and join the projects.”

And what is the magic that would make good governance work?

Li Ruogum, former chairman and president of Export-Import Bank of China, believes in understanding.

“This newly established institution cannot just clone the older one, as we are working in a very different environment.

“We have to accumulate our experiences and need to have a mind of innovation. All should come together and understand each other, and try to achieve good governance.”

Check-in-China by Tho Xin Yi

 
Asian development to the fore

Chinese President Xi Jinping. - AFP  
Hungry for development: In 2013, President Xi Jinping proposed a new development bank, the Asian Infrastructure Investment Bank. One year later, 22 Asian countries had signed up, including 10 Asean countries - Blooberg

Asia’s need for better infrastructure and more development is too important to be held to ransom by outdated big power politics and petty posturing.

FOR many observers, the US “pivot” (later renamed “rebalancing”) to the Asia-Pacific was classic Obama: the rhetorical flourish was more dramatic than the policy substance.

In the second half of its first term, the Obama administration sought to assign two-thirds of its military assets to the Asia-Pacific theatre, up from the standard half from the even split between the Pacific and the Atlantic.

By the middle of its second term, officials were struggling to maintain a semblance of a policy largely left to coast under its steadily diminishing momentum. US foreign policy, and by extension US defence policy, appeared distracted by other concerns.

The State Department and the Pentagon seemed consumed at once by the Syrian debacle, Iraq’s instability, rising terrorism everywhere, civil war in Ukraine, Europe’s problems with Russia, Iran’s nuclear programme and an uppity Israel.

Then there were the ever-present ­budgetary constraints. Deploying another 16% of military assets to the Asia-Pacific, from half to two-thirds, seemed hardly noticeable or achievable.

Meanwhile, officials were anxious to insist that the rebalancing had nothing to do with the rise of China and its growing assertiveness in the region. It was, they said, part of efforts to preserve US strategic interests.

Whatever the choice of words, and however implicit China may be as motivation, rebalancing was fast becoming history. By March last year, a Pentagon official admitted it was going nowhere.

However, the Obama administration’s gift of verbalising policy intent made US intentions clear enough.

President Obama had famously said the US should be writing trade rules in the Asia-Pacific rather than let China do it.

Thus, the Trans-Pacific Partnership, a trade pact with controversial demands that swiftly became synonymous with US trade preferences. But China had not been idle either.

In 2013, President Xi Jinping proposed a new development bank, the Asian Infrastructure Investment Bank (AIIB). One year later, 22 Asian countries had signed up, including all 10 Asean countries.

In Asia, the world’s most promising continent for rapid economic growth, infrastructure needs for development are peaking. The IMF, World Bank and Asian Development Bank (ADB) can serve only a fraction of its needs: between 2010 and 2020 alone, some RM30tril is needed.

China set a deadline of March 31 this year for countries around the world to sign up as Prospective Founding Members (PFMs) before operations begin later in 2015. China would provide the biggest contribution to the authorised capital of US$100bil (RM363.49bil) and initial subscribed capital of US$50bil (RM181.75bil).

The US immediately saw this as a game-changer challenge to its dominance in global lending. For decades, it has controlled the World Bank, and through its European allies, the IMF and through its ally Japan, the ADB.

These institutions have been known to set tough conditions on debtor countries that may not serve domestic aspirations or national interests. A cash-rich China also felt it remained under-represented in these institutions even after becoming a leading global economy.

Washington had hoped, even expected, that its allies and friends would stay away from the AIIB as a rival institution. But like its pivot or rebalancing strategy, that hope steadily faded.

In Europe, Britain as the closest US ally was the first to sign up to the AIIB early last month. Soon, other major European economies like France, Germany and Italy followed, as did all the Scandinavian countries.

Washington then quietly pressured Japan, South Korea and Australia to stay away. But Seoul and Canberra signed up anyway. By then, the US had started to soften its stand, denying that it had ever pressured any country to stay away. It was only unsure if the AIIB would adhere to best practices in international lending.

Then, other US allies like Taiwan and Israel also signed up. The US was becoming increasingly isolated, with only Japan as the other major economy for company.

But not for long, perhaps. Last Monday, Japan’s ambassador to China, Masato Kitera, said in a Financial Times (FT) interview that Japan would join the AIIB as well, probably around June.

That came as a bombshell to the conservative Japanese government. It would seem too much of a betrayal of yet another US ally, the final one being the “unkindest cut of all”.

The next day, on the deadline for countries to sign up as PFMs for the AIIB, Tokyo denied that Ambassador Kitera ever said such a thing. Chief Cabinet Secretary Yoshihide Suga said Japan had no imme­diate plans to join the AIIB.

Besides being a US ally, Japan was also wary of the prospect of the AIIB undercutting the ADB.

Whatever the actual chances of Japan joining the AIIB, Tokyo would want to underplay it as much as possible.

Like the US, Japan said it was reluctant to sign up because of uncertainty over the AIIB’s standards. But countries such as Britain and Singapore that have joined said the best way to ensure high standards was to get on board and be part of the decision-making process.

To be part of that process, it was necessary to sign up early before the big decisions were made. The terms and conditions of lending and borrowing have still to be firmed up as dozens of countries including giants like India and Russia are already in.

The FT report also revealed that Japanese business leaders were pressuring their government to join the AIIB. Mitsubishi bosses, for example, had expressed confidence in Jin Liqun, a former senior ADB official who will head the AIIB.

On the deadline last Tuesday, China announced that 30 countries had been admitted as PFMs. More than a dozen others were in the queue.

Then a flood of criticisms and denuncia­tions of the stubborn US position came, mostly from within the US itself. Analysts and commentators, including in Forbes and The Economist, said the US administration had miscalculated badly in staying out, only damaging US long-term interests in East Asia and the Pacific.

Former US Secretary of State Madeleine Albright also condemned the US position, lamenting the way Washington had scored another own goal by rebuffing the AIIB. The US had placed itself behind the curve in changes in the Asia-Pacific rather than stay at the leading edge.

If and when Japan finally signs up, the US may have to be resigned to becoming a part of the AIIB. But as a latecomer, it may be limited to playing only a bit part such as an observer rather than sit at the main table.

China has long regretted the US fixation with what it calls a Cold War “them against us” bipolar mentality that frustrates progress on many fronts. For the countries of Asia hungry for more development, progress must not be held hostage to big power rivalry.

Ultimately, any rivalry between the US and China today is not over political ideology but economic ideology: the Washington Consensus of free trade rhetoric where the state and private industry are at odds with each other versus the emerging Beijing Consensus of close public-private partnerships that have worked so well for so much of Asia already.

US opposition to a proven formula for Asia is most unlikely to win friends and supporters anywhere, least of all in Asia.

By Bunn Nagara Behind the headlines

> Bunn Nagara is a Senior Fellow at the Institute of Strategic and International Studies (ISIS) Malaysia.

Related post:

Big boost for Asia with the Asian Infrastructure Investment Bank (AIIB) Launch, a positive step.

27 Oct 2014

Chinese President Xi Jinping's (C-R) meeting with the members of the Asian Infrastructure Investment Bank (AIIB) in the Great Hall of the People in Beijing, China 24 October 2014. 21 Asian countries are the founding ...

Not all debts are bad

Rising household indebtedness could be a signal of robust consumption pattern that is the driver of domestic economic growth.

Construction workers at work in Kuala Lumpur. About 46 of household debt is for the purpose of financing purchase of residential properties.

Rising household indebtedness could be a signal of robust consumption pattern that is the driver of domestic economic growth.

FEDERAL government debt, external debt, household debt, non-financial corporate debt – these debts amount to billions of ringgit each and there should be proper context and understanding of the different classifications of debts to be fully informed of the economic issues at stake.

At face value, debt is money owed that has to be repaid in principal and interest. To look at debt from a more constructive point of view, debt is also future consumption brought forward. Furthermore, the benefit derived from consuming at the expense of expected future income should equal or even outweigh its associated costs of financing.

The point is, there are good debts and there are bad debts. Debts raking in billions or outstanding loans growing at an increasing rate could potentially be alarming. However, it would be misleading to label huge debts as unsustainable and destabilising before making sense of the origins and the purposes of the money borrowed.

Debts continue to pile up

A recent research on global debt and leverage by the McKinsey Global Institute in February highlighted that global debt continues to grow post-global financial crisis. These debts – the sum of money owed by governments, households, corporates and financial sectors in the 47 countries under the research – have grown to US$57 trillion since 2007 and a significant portion of the growth came from the public sector.

Overall, the research pointed out that only five developing economies showed signs of deleveraging while most of other countries saw increased debt to GDP ratio during the period.

With hindsight, global growth recovery post-global financial crisis has been rather slow and a handful of governments had pursued expansionary fiscal programmes funded through debts.

Unfortunately, as the global pace of growth is still relatively tentative, high level of government indebtedness would take longer time to deleverage.

Meanwhile, the increase in household and corporate sector debts could signal deeper financial system penetration and also recovery in household and corporate balance sheets for private sector expenditure to grow again.

As of end-2014, Malaysia’s federal government debt amounted to RM583bil (54.5% of GDP); external debt totalled RM744.7bil (69.6% of GDP); household debt increased to RM940.4bil (87.9 % of GDP).

In the past four years, the compounded annual growth rate for government debt was 9.4%; 14.4% for external debt and 12.2% for household debt.

While these numbers seem alarming, the major concern over debts arises when they are unsustainable.

While there are concerns over the sustainability of our fiscal deficit over the long term, the Government has embarked on a fiscal consolidation effort in recent years. Because of this, government debt should be under control in line with its commitment to achieve a balanced budget by 2020.

The Government operates on a few crucial self-imposed budgetary rules and it caps the maximum limit of government debt to GDP ratio at 55%.

On external debt, Bank Negara has adopted the new debt definition in early 2014, keeping in line with the International Monetary Fund’s (IMF) new guidelines of widening its definition to better reflect the depth in financial markets and the real economy.

In essence, external debt refers to the debts owed by residents to non-residents, be it denominated in ringgit or foreign currencies.

Therefore, the public and private sector’s offshore borrowings, Malaysian Government Securities held by foreigners are included in the classification of the external debt.

Since the last quarter of 2013, the external debt growth has been on a downward trend, easing to 6.9% in the last quarter of 2014, down from the peak of 15.7% growth recorded in the last quarter of 2013.

Besides, the bulk of the growth in external debt since 2013 was primarily from offshore borrowings as it made up almost half of the total external debt.

Bank Negara, in its recent annual report, guided that private sector offshore borrowings are sound and sustainable, given that 70% of the corporate sector’s offshore loans were sourced from associated companies, parent companies and shareholders.

High household debts a concern

However, Malaysian household sector indebtedness undoubtedly tops the chart in the region.

According to McKinsey’s study, Malaysia’s household debt to income ratio is highest at 146% in 2014, way above the level of the United States (99%) and Indonesia (32%).

When we break down the household debt, 45.7% of it is for the purpose of financing purchase of residential properties. Hire purchase financing (16.6% of total household debt) and personal financing (15.7%) made up the remaining major components.

Even though Malaysia’s household financial asset to total household debt ratio is relatively high at 214% in 2014, the associated risks of high household indebtedness cannot be taken lightly.

The IMF, in its financial sector assessment on Malaysia in April 2014, cautioned that in the event of a sharp fall in housing property prices coupled with a recession in the economy, the burst of the housing asset bubble would have dire consequences on the real economy.

The Government and Bank Negara have in recent years attempted to rein in the growth in housing loans and also put a check on the property market through various macro-prudential tools.

For instance, the last Overnight Policy Rate hike in July 2014 by 25 basis points was primarily to mitigate the financial imbalances within the economy.

In January 2015, the growth of household outstanding loans from the banking institutions has slowed to 9.7%, down from the peak of 13.9% in November 2010.

Although it is a sign of improvement in domestic financial stability, a continued assessment of household loans would be a prudent measure.

Responsible use of leverage

Bad indebtedness is often described as how an overleveraged economy collapses on its own pile of toxic debts when triggered by an overlooked external event – the subprime mortgage crisis in the United States is a classic example.

On the other hand, good debts are those that are used to finance productive and sustainable purposes.

A government manoeuvering an economy out of recession could issue bonds to fund its fiscal stimulus programme while a company could maximise its true potential through the proper use of leverage.

In fact, given a youthful population and a stable work force in Malaysia, rising household indebtedness could be a signal of robust consumption pattern that is the driver of domestic economic growth.

Therefore, regulators and policy makers should not, in their fear of “indebtedness”, stifle the credit lines and the channels to expand present consumption for future capacity of growth.

Unfortunately, with a lack of hindsight, it can be difficult at times to ascertain if a debt is good or bad, A-tier quality or just a default waiting to happen.

In the end, it is not only the viability in repaying the loans but also the realised output and gains from entering a debt contract that should be examined to determine the sustainability in taking up debts.

In short, indebtedness is not necessarily bad. A responsible debtor should have a clear and comprehensive business or personal financial planning and ultimately transparency in dealing with all parties. After all, a good debt is a good customer for the other end.

My point By Mandkaran Mottain

Manokaran Mottain is the chief economist at Alliance Bank Malaysia Bhd.

Related post:

Unfair housing loan agreement

MOST if not all house buyers will require financing to buy their dream homes. While there appears to be stiff competition among banks for ...

Unfair housing loan agreement

MOST if not all house buyers will require financing to buy their dream homes. While there appears to be stiff competition among banks for market share and interest rates may be kept low, house buyers are ultimately at the mercy of banks when it comes to the detailed terms and conditions of the housing loan. (Banks in this context refers to commercial banks, Islamic banks and other financial institutions).

Unfair legal fees

When a borrower takes a housing loan, the borrower is required to execute a loan and other related agreements. This entails the borrower having to pay legal fees, the amount of which varies, depending on the loan amount – the higher the loan amount, the higher the legal fees although the complicity and level of work does not necessarily commensurate directly with the loan amount.

Although it is the borrower paying the loan lawyers’ fees, the said loan lawyer is actually acting for and on behalf of the bank. As such, the loan lawyer is not in the best position to advise the borrower if there are clauses in the loan agreement which are not in the best interest of the borrower.

In addition, in the event of any dispute between the borrower and the bank, the borrower cannot ask the loan lawyer for advice as the loan lawyer is acting for the banks.

If this is the case, then is it “fair or equitable” for the borrower to pay such legal fees when it is clear that the lawyer is actually acting for the banks? Obviously not. Hence, the bank should absorb the legal fees as the lawyers are clearly there to act for the bank and protect its interest.

Exorbitant fees for simple letters

The banking sector in Malaysia is a very tightly regulated industry. Any fees that banks intend to charge must be approved by Bank Negara. It is disheartening to note that borrowers continue to be charged exorbitant fees which seem to have the explicit blessings and consent of Bank Negara. Instances of borrowers being charged unreasonable fees for copies of redemption statement, EPF statement letter etc are common.

Allocation of monthly repayment to principal and interest

This is a story about three friends who took a housing loan (HL) of RM500,000 ten years ago. They were offered the same HL interest rate of 4.2% (base lending rate of 6.60% less 2.40%) but took different loan tenures as follows:

Albert took a 20-year HL. Eric took a 25-year HL and Jamie took a 30-year HL.

After servicing their monthly loan instalments diligently for the past 10 years, they decided to fully settle their housing loan using a combination of their EPF monies and own savings. When they asked for a redemption statement to find out what was the principal sum outstanding, they received a shock of their lives.

Albert, Eric and Jamie were under the impression as they had served 50%, 40% and 33.3% of the loan tenure, their principal sum outstanding would be RM250,000, RM300,0000 and RM333,333 respectively.

So, when their respective redemption statement showed that Albert, Eric and Jamie still owed respectively RM301,654, RM359,415 and RM396,652, they got a big shock.

So, why did they still owe so much more than what they had thought? The answer lies in the allocation of the monthly instalment towards covering the principal sum and interest charged by the bank.

In an equitable world, the monthly instalments would be allocated on a “straight line basis” to cover the principle and interest charged. Thus, a borrower who served 10 out of a 20-year HL would only owe 50% of the original loan amount.

However, the reality is that the borrower still owes 60.3% of the original loan amount.

The typical borrower will always be “penalised” for settling his loan before the maturity date. Even in the penultimate year of the original loan tenure, the actual amount outstanding is still higher than the theoretical amount, which should be the amount outstanding had the allocation of monthly instalments been done on a straight line basis.  

Is it fair and equitable?

Most borrowers do not know or even understand how this allocation is calculated. Is such an allocation “fair and equitable” to the borrower? Under such circumstances, are borrowers supposed to accept that the bank’s own generated computer system has calculated the interest correctly and allocated the payments in the correct manner?

To the borrower, they have paid 10 out of a 20-year loan, he should only owe balance 50% and not 60.3%. Is this manner of allocation not just another unjust way for the bank to generate higher profits, after all the bank did receive the payments on time and in full every month. It is the dream of every borrower to be debt-free as soon as possible and it is not fair to the borrower to be penalised in such a manner when he wants to settle his loan early.

That said, borrowers have no choice but to accept the calculation of the bank as correct and final. If the borrower were to reject and not pay the required sum, the loan will not be considered as repaid in full. The borrower could even be blacklisted and even have his property auctioned off by the bank to recover the remaining sum outstanding if the borrower refuses to pay up.

It would be more transparent and equitable if the monthly payments made by the borrower are allocated in a “straight line basis” to interest and principal equally over thetenure of the housing loan. Short of that, borrowers are at the mercy of banks.

Some banks operate like a “cartel” and standardise their fees to be charged to customers. One wonder whether such unfair practices are condoned by the regulators like Bank Negara.

It is also interesting to note that banks are exempted by the Malaysia Competition Commission allowing banks to agree and collude on unfair fees, penalties and practices to be charged to borrowers.

Unnecessary expenses

Loan agreement “printing charges” – sold between RM150 and RM350. The banks’ solicitors need to purchase a standard loan agreement from the bank (via soft copy) and adds the borrowers’ details in order to complete the loan agreement. The banks charge the lawyer and the lawyer charges the borrowers.

Standard loan agreements are now downloaded from the bank’s website or from soft copy. The bank no longer need to print them and should not charge for such documents. Alas, this has been continuing till to date. Lopsided terms and conditions

Lopsided terms and “add-on” products are aplenty, if the borrower wants to identify with them. It would be good practice to remove or qualify the banks’ arbitrary powers.

Conclusion

The National House Buyers Association (HBA) had on Sept 4, 2014 made representation to the Finance Ministry (MOF), Bank Negara. Housing and Local Government Ministry in the presence of Association of Banks Malaysia and Islamic Banks of Malaysia in the form of slides presentation on some observations and unethical practices of some banks.

HBA is looking to work closely with MOF, Bank Negar and all related stakeholders to level the playing field for housing loan borrowers in the long-term interest of the banking industry. We had proposed to set up a working committee to resolve all unfair practices. MOF and Bank Negara have a legitimate interest in the final shape of the banking industry into operating a principled and towards a “customer friendly arena”.


Buyers Beware By Chang Kim Loong

Chang Kim Loong is the honorary secretary-general of the national House Buyers Association: www.hba.org.my, a non-profit, non-governmental organisation manned purely by volunteers.

Related posts:

House buyers, learn your rights

Who is responsible: developer, contractor, local council or house-owner for the damages?

 

Who is responsible for slope management? Does the responsibility come with the property bought by the purchaser? THE collapse of a...

We need local councillors who can do the job 

Reponsible housing developers' traits and qualities expected

Traits of a responsible housing developer. KNOCK, knock! Any “good” housing developers out there? I am reluctant to use the words “good developers” as the words are not in my vocabulary. However, there are responsible ...

Singaporeans from ''Third World to First', emotional farewell to Lee Kuan Yew

 ‘From third world to first’: Lee Kuan Yew’s legacy in charts

Andreas Paleit and Jennifer Hughes - Hong Kong

Lee Kuan Yew, who has died aged 91, presided over a turnround in the economic fortunes of his nation, taking it from a colonial backwater to its status as one of the richest places on the planet — a journey ‘from third world to first’, as Lee titled his memoir.

From ease of doing business to concentration of millionaires, 21st-century Singapore consistently ranks among the world’s most economically developed nations.

But Lee’s legacy goes beyond wealth-creators. Since he came to power just about every aspect of Singapore has been transformed, and along with it the fortunes of ordinary Singaporeans. The population has, of course, grown.

Singaporeans have become much better educated and crime has dropped, partly as a result of Lee’s authoritarian influence.

An enormous public housing programme in the 1960s and 1970s has allowed more than 80 per cent of citizens to live in government-subsidised apartments. But an ageing population raises challenges for the years ahead.

The Financial Times Limited 2015. You may share using our article tools.

Emotional farewell for Singaporeans

 Thousands wait in long queue for hours to pay last respects to Lee Kuan Yew

SINGAPORE: Singaporeans wept on the streets and queued in their thousands to pay tribute to founding lea­der Lee Kuan Yew as his flag-draped coffin was taken on a gun carriage to parliament for public viewing.

After a two-day private wake for the family, the coffin was taken in a slow motorcade from the Istana government complex, Lee’s workplace for decades as prime minister and cabinet adviser, to the legislature yesterday. It will lie in state there until Sunday.

The 91-year-old patriarch died on Mon­day after half a century in government, during which Singapore was transformed from a poor British colonial outpost into one of the world’s richest societies.

The government led by his son Prime Minister Lee Hsien Loong, apparently taken by surprise at the heavy early turnout, announced that Parliament House would stay open for 24 hours a day until Saturday night “due to overwhelming res­­ponse from the public”.

Lee will be cremated on Sunday after a state funeral expected to be attended by several Asia-Pacific leaders even though he was just an MP when he died.

Applause and shouts of “We love you!” and “Lee Kuan Yew!” broke out as the dark brown wooden coffin, draped in the red-and-white Singapore flag, emerged from the Istana housed in a tempered glass case on a gun carriage pulled by an open-topped military truck.

Earlier, in scenes that evoked Singapore’s colonial past, the carriage stopped in front of the main Istana building, where British administrators once worked, as a bag­­piper from Singapore’s Gurkha Contingent – the city-state’s special guard force – played Auld Lang Syne.

After the motorcade emerged from the palace, many in the crowd waiting behind barricades along the route were in tears as they raised cameras and mobile phones to record the historic event.

Some threw flowers on the path of the carriage, while office workers watched from high-rise buildings.

President Tony Tan and his wife Mary were the first to pay their respects in the parliament’s foyer.

By mid-afternoon Singaporeans were waiting for up to eight hours in queues that snaked around the central business district, many using umbrellas against the 33°C heat.

In true Singaporean fashion the crowds were orderly, with free drinking water and portable toilets set up for mourners.

Police helped direct traffic flow and priority queues were created for the elderly, pregnant women and the disabled.

People from all walks of life turned up to honour the authoritarian former leader popularly known by his initials “LKY”.

“These are amazing scenes. I have not seen anything like this in my lifetime,” said bank executive Zhang Wei Jie, 36.

“LKY is the founder of our country. It is a no-brainer that we have to pay respect. We have taken some time off from work, my supervisor is also here somewhere in the crowd.”

R. Tamilselvi, 77, brought two of her granddaughters, each clutching flowers.

“Lee Kuan Yew has done so much for us,” she said. “We used to live in squatter (colonies) in Sembawang, my husband was a bus driver. Now my three sons have good jobs and nice houses. The children all go to school. What will we be without Lee Kuan Yew?” — AFP

Related posts:

Singapore former PM Lee Kuan Yew leaves rich political legacy

Former Singapore prime minister Lee Kuan Yew waves to supporters as he submits his nomination papers to contest in the elections in Sin...

Lee Kuan Yew's meritocracy: a key reason for S'pore's separation from Ma'sia, his quotable quotes..

No one could accuse LKY of being weak When he suddenly fathered a reluctant new nation, the iron was forged in him. LEE Kuan Yew...

The Origins and Evolution of Ethnocracy in Malaysia: The Malay Supremacy!

Merdeka: (From left) Tunku Abdul Rahman, first Yang di-Pertuan Agong Tuanku Abdul Rahman and MacGillivray standing outside King’s House in...

Dr. M. Bakri Musa Speaks His Mind:Liberating the Malay Mind

>>>> " 90% of the Doctorates held by Malays is not worth the toilet paper on which it is printed because it was all prod...

Lee Kuan Yew's meritocracy: a key reason for S'pore's separation from Ma'sia, his quotable quotes..

No one could accuse LKY of being weak

When he suddenly fathered a reluctant new nation, the iron was forged in him.

LEE Kuan Yew, former prime minister of Singapore, has died at the age of 91.

He was born Harry Lee Kuan Yew on Sept 16, 1923 in Singapore. When he left England after graduating with a law degree from Cambridge University, he also left his English name behind.

In 1954, Lee formed the People’s Action Party (PAP). In 1959, at the age of 35, he won the national elections of Singapore, then still part of the British Empire, and became Prime Minister for the first time. After a brief merger with Malaysia, in 1965 the Republic of Singapore was born. Lee was PM until 1990 when he voluntarily stepped down, at age 67, to make way for a younger man.

It is a cliché, but it has to be said: the passing of Lee Kuan Yew is the passing of an era for Singapore and Singaporeans. A Singapore without LKY will take some adjusting to.

Older citizens will probably remember him with more affection and gratitude. Younger Singaporeans may attend the academic institutions and win scholarships that bear his name, but they will likely feel no particular affection or disdain, but rather, a vague admiration for the legendary leader whom they have been told was the architect of modern Singapore.

“I have been accused of many things in my life, but not even my worst enemy has ever accused me of being afraid to speak my mind,” he once said. Perhaps he will be best remembered through his own words.

In 1980, he said, “Whoever governs Singapore must have that iron in him.” For him, it was in August 1965, when he suddenly fathered a reluctant new nation, that the iron was forged - from the fire in his belly to make Singapore succeed.

From that “moment of anguish”, he would “spend the rest of my life getting Singapore not just to work but to prosper and flourish.” Over the years, he would use that same steel to fight all forms of obstacles and undesirable dogma, prejudices and even personal habits.

He would go on to confront and battle challenges that included corruption, unemployment, poverty, communism, political opposition, smoking and at the end, his own deteriorating health.

His self-belief and devotion to the Singapore cause was intense and absolute: “This is your life and mine. I’ve spent a whole lifetime building this (country) and as long as I’m in charge, nobody is going to knock it down.”

He will be remembered for his ferocious fight against corruption. He believed vehemently, “The moment key leaders are less than incorruptible, less than stern in demanding high standards, from that moment, the structure of administrative integrity will weaken, and eventually crumble. Singapore can survive only if ministers and senior officers are incorruptible and efficient.”

He will be remembered for standing up for meritocracy. A key reason for Singapore’s separation in 1965 was Lee’s belief in multiracial meritocracy. He was utterly convinced that, “If you want Singapore to succeed…you must have a system that enables the best man and the most suitable to go into the job that needs them…”

Every time a Singaporean takes a ride in a bus along a tree-lined avenue, plays with her children in a park near their flat, or enjoys a picnic in Botanic Gardens, she might just think of Lee. He launched Tree Planting Day and “set out to transform Singapore into a tropical garden city.” He was completely certain that, “Greening raised the morale of people and gave them pride in their surroundings.”

Lee’s beliefs and ideas went on to mould not just the development of a small new country with no natural resources to speak of, but also, some would argue, the personal lives of its citizens. Under his leadership, his government implemented policies and ran campaigns to compel and urge Singaporeans to save water, to keep Singapore clean, to have two children, and later, to have three if they could afford it, and to speak Mandarin, among many other exhortations.

In response to critics who accused his government of interfering in the private lives and personal behaviours of the city-state’s inhabitants, he had this to say, “It has made Singapore a more pleasant place to live in. If this is a ‘nanny state’, I am proud to have fostered one.”

He will be remembered for the power of his convictions. “I have never been over concerned or obsessed with opinion polls or popularity polls. I think a leader who is, is a weak leader.” No-one could accuse Lee Kuan Yew of being a weak leader.

Of his own accord, he relinquished the position of Prime Minister in 1990, but stayed on in government as Senior Minister and then Minister Mentor in the governments of both his successors, Goh Chok Tong and his own son, Lee Hsien Loong, the current Prime Minister. He retired from Cabinet in 2011 but remained a Member of Parliament.

For those who remember Lee Kuan Yew in his prime, no matter to which side of the political divide they belong, they will recall a perspicacious politician whose intellect found admirers far beyond the little red dot, a powerful orator whose words conquered crowds and carried generations of Singaporeans with him, and perhaps, most of all, a pragmatic visionary who, against all odds, made the improbable nation a reality.

Lee was known for his admiration, gratitude and devotion to his wife, the late Kwa Geok Choo. He is survived by his two sons, one daughter and seven grandchildren.


By Peggy Kek

Singaporean analyst Peggy Kek is a former director with the Lee Kuan Yew School of Public Policy at the National University of Singapore. The views expressed here are entirely the writer’s own.





Quotable quotes from Lee Kuan Yew

Lee Kuan Yew commenting on death: 'There is an end to everything and I want mine to come as quickly and painlessly as possible, not with me incapacitated, half in coma in bed and with a tube going into my nostrils and down to my stomach.' – AFP pic, March 23, 2015

Here are some notable quotes from Singapore's founding prime minister Lee Kuan Yew, who died Monday at the age of 91.

On Japan defeating Britain to occupy Singapore in 1942:

"The dark ages had descended on us. It was brutal, cruel.

"Looking back, it was the biggest single political education of my life because, for three and a half years, I saw the meaning of power and how power and politics and government went together, and I also understood how people trapped in a power situation responded because they had to live.

"One day the British were there, immovable, complete masters; next day, the Japanese, whom we derided, mocked as short, stunted people with short-sighted squint eyes."

After World War II when the British were trying to reestablish control:

"... the old mechanisms had gone and the old habits of obedience and respect (for the British) had also gone because people had seen them run away (from the Japanese) ... they packed up. We were supposed, the local population was supposed to panic when the bombs fell, but we found they panicked more than we did. So it was no longer the old relationship."

As a law student in Britain:

"Here in Singapore, you didn't come across the white man so much. He was in a superior position.

"But there you are (in Britain) in a superior position meeting white men and white women in an inferior position, socially, I mean. They have to serve you and so on in the shops. I saw no reason why they should be governing me; they're not superior. I decided when I got back, I was going to put an end to this."

On opinion polls:

"I have never been overconcerned or obsessed with opinion polls or popularity polls. A leader who is, is a weak leader. If you are concerned with whether your rating will go up or down, then you are not a leader. You are just catching the wind ... you will go where the wind is blowing. That's not what I am in this for."

On his iron-fisted governing style:

"Anybody who decides to take me on needs to put on knuckle-dusters. If you think you can hurt me more than I can hurt you, try."

On his political opponents:

"If you are a troublemaker... it's our job to politically destroy you... Everybody knows that in my bag I have a hatchet, and a very sharp one. You take me on, I take my hatchet, we meet in the cul-de-sac."

On democracy:

"You take a poll of any people. What is it they want? The right to write an editorial as you like? They want homes, medicine, jobs, schools."

On justice:

"We have to lock up people, without trial, whether they are communists, whether they are language chauvinists, whether they are religious extremists. If you don't do that, the country would be in ruins."

On his policy of matching male and female university graduates to produce smart babies:

"If you don't include your women graduates in your breeding pool and leave them on the shelf, you would end up a more stupid society... So what happens? There will be less bright people to support dumb people in the next generation. That's a problem."

On criticism over the high pay of cabinet ministers and senior civil servants:

"The cure for all this talk is a good dose of incompetent government. You get that alternative and you'll never put Singapore together again: Humpty Dumpty cannot be put together again... and your asset values will be in peril, your security will be at risk and our women will become maids in other people's countries, foreign workers."

On religion:

"I wouldn't call myself an atheist. I neither deny nor accept that there is a God. So I do not laugh at people who believe in God. But I do not necessarily believe in God – nor deny that there could be one."

On his wife of 63 years, Kwa Geok Choo, who died in October 2010:

"Without her, I would be a different man, with a different life... I should find solace in her 89 years of a life well-lived. But at this moment of the final parting, my heart is heavy with sorrow and grief."

On death:

"There is an end to everything and I want mine to come as quickly and painlessly as possible, not with me incapacitated, half in coma in bed and with a tube going into my nostrils and down to my stomach."

On rising up from his grave if something goes wrong in Singapore:

"Even from my sickbed, even if you are going to lower me to the grave and I feel that something is going wrong, I will get up."

Related post:

Singapore former PM Lee Kuan Yew leaves rich political legacy

Former Singapore prime minister Lee Kuan Yew waves to supporters as he submits his nomination papers to contest in the elections in Singapore...

Singapore former PM Lee Kuan Yew leaves rich political legacy

Former Singapore prime minister Lee Kuan Yew waves to supporters as he submits his nomination papers to contest in the elections in Singapore, April 27, 2011. [Photo/IC]

• Lee Kuan Yew, modern Singapore's founding father

• a “Asian Tiger“.Lee Kuan Yew is not only regarded as the founding father of modern Singapore, but also as one of the most influential political figures in Asia.

• Studio interview: Yang Rui's first-hand account of interview with Lee

• who had a one-on-one interview with Singapore's founding prime minister back in 2011.Q1: What's the political legacy that Lee Kuan Yew has left to Singapore? ...

  
  

  Lee Kuan Yew, former prime minister of Singapore, died on Monday at the age of 91, according to a statement released by the Prime Minister's Office.
  
  "Mr Lee passed away peacefully at the Singapore General Hospital today at 3:18 am," the statement said.
  
  Lee, a Cambridge-educated lawyer, is widely credited with building Singapore into one of the world's wealthiest nations on a per capita basis with a strong, pervasive role for the state and little patience for dissent.
  
  He co-founded the People's Action Party (PAP), which has ruled Singapore since 1959 and led the newly born country when it was separated from Malaysia in 1965.
  
  Singapore's founding father also hailed for diplomatic pragmatism and for inspiring Beijing's reform, opening-up
  
  In Beijing's eyes, Lee Kuan Yew, the late founding father and leader of Singapore, was not only "an old friend of the Chinese people", but also "the founder of China-Singapore relations", according to China's previous official news releases about his visits.
  
  Bilateral, top-level interactions were pioneered by Lee 14 years ahead of the establishment of the two nations' diplomatic relations in 1990.
  
  Chinese media estimated that he had been to China more than 20 times, and he was known for his good personal relations with China's top figures, especially former leader Deng Xiaoping.
  
  Zhang Jiuhuan, the Chinese ambassador to Singapore from 2000 to 2004, noted that "it was a rare case" at the time that a foreign prime minister would visit China, as Lee did in 1976, in the absence of diplomatic relations between the two nations. Deng then paid back the visit, going to Singapore in 1978, in what Zhang described as a sensational trip.
  
  Lee was a man "with thoughts free from orthodoxy", and his pragmatism in diplomacy made Singapore a pioneer among Southeast Asia nations in harvesting large-scale trade, economic cooperation and talent exchanges with China, Zhang said.
  
  However, Lee's intimacy with China since 1976 goes way beyond his remarkable record of handshakes with most of China's top leaders, including Mao Zedong and Deng.
  
  Those who witnessed history unfold, as well as other observers, hailed the Singaporean statesman's efforts in inspiring China's reforms and opening-up.
  
  Jin Canrong, a professor of international relations at Renmin University of China in Beijing, noted that Lee's No 1 contribution to China was his efforts in "sharing Singapore's successful experience in governance", adding that "China has benefited a lot" from this.
  
  The China-Singapore Suzhou Industrial Park, inaugurated in February 1994 in Jiangsu province in East China, was proposed by Lee, who even went to the city in 1992 to inspect the site for the park.
  
  Now, with the park serving as a role model for China's economic cooperation with foreign countries, more such industrial parks hosted or co-hosted by China have been established domestically and abroad.
  
  Additionally, because of Lee's advocacy for sharing his country's inspiring philosophy of governance with China, Singapore has served as a de facto, inspirational training center for visiting Chinese officials.
  
   
  Then vice-president Xi Jinping, right, meets Singapore's former prime minister, Lee Kuan Yew, at the Great Hall of the People in Beijing, in this May 23, 2011, file photo. [Photo by Xu Jingxing/Asianewsphoto]
  
  In 2011, Xi Jinping, then China's vice-president, told Lee that "tens of thousands of Chinese officials at various ranks have been to Singapore for visiting and studying", and "this has played an important role in promoting bilateral relations and China's construction for modernization".
  
  Even during his last few China visits, Lee often expounded when meeting with Chinese leaders on nurturing talent and the need for further promoting people-to-people exchanges.
  
  Jin, the Renmin University professor, recalled his encounter with Lee in 2007 at a symposium in Singapore, in which Lee displayed his admiration for Deng Xiaoping.
  
  "Lee was asked by a visiting scholar from China for advice on China's future reform and opening-up," said Jin. "Lee said, 'You have Mr. Deng Xiaoping already. He is way better than me. Just follow him!'"
  
  In addition to his identity as a frequent visitor to China and guest of Beijing, he was internationally known as an insightful observer of China-related affairs who was often sought out for advice.
  
  His books, articles and comments on China's evolving role in regional and global contexts — either positive or negative, in the eyes of ordinary readers — often put him in the media spotlight.
  
  Some observers have regarded him as a bridge that connected China and the rest of the world, while others described him as a mirror that reflected "how China looks in the eyes of the region and other parts of the world".
  
  "Generally, China pays respect to him," professor Jin said. "The two sides may differ in some issues, because Singapore is another country, after all. ... It was perfectly natural for Lee to act out of national interests and deliver some differing opinions."
  
  Zhang, the veteran diplomat, said Lee was a man known for his "nonstop pursuit of new knowledge". Lee always learned new skills and kept pace with the changing world, including his Internet interactions with ordinary people and his fluency in the Chinese language, Zhang added.
  
  "Why have people always paid great attention to his insights and referred to him for advice on hot spot issues around the world? Because he often saw what people could not see," the former ambassador said.
  
   
  Lee Kuan Yew at the Great Hall of the People in Beijing, in this May 23, 2011, file photo. [Photo by Xu Jingxing/Asianewsphoto]
  
  Lee Luan Yew's Chinese connections
  
  Lee Kuan Yew, Singapore's former Prime Minister, is one of the few world leaders who have met with China's five top leaders. Lee has visited China as many as 33 times since his first visit in 1976.
  
  Lee is acclaimed as the "founder of close Sino-Singapore relations" by present Prime Minister Lee Hsien Loong, who is also Lee's oldest son.
  
  Major meetings with Chinese leaders
  
  1976 Mao Zedong met with Lee in Beijing
  
  1978 Deng Xiaoping visited Singapore and had a meeting with Lee
  
  1988 Deng Xiaoping met with Lee during Lee's visit in Beijing
  
  2000 Zhu Rongji met with Lee in Singapore during the China-ASEAN leaders' meeting
  
  2002 Jiang Zemin met with Lee in Beijing
  
  2004 Hu Jintao, Wen Jiabao met with Lee in Beijing
  
  2010 Xi Jinping visited Singapore and had a meeting with Lee
  
  2011 Xi Jinping met with Lee in Beijing
  
  
   
• File photo of Singapore's former Prime Minister Lee Kuan Yew taken on March 20, 2013. The country's Prime Minister's Office said on Wednesday that Lee remains critically ill in the ICU and has deteriorated further. [Photo/Xinhua]
  
  Health condition
  
  In a book published in 2013, the Asian statesman said he feels weaker by the day and wants a quick death.
  
  The longtime fitness buff has visibly slowed since his wife of 63 years Kwa Geok Choo died in 2010.
  
  The Prime Minister's Office (PMO) first announced Lee Kuan Yew was in hospital because of sever pneumonia in a statement on Feb. 21, and updated on Feb. 26 saying that he was still warded.
  
  A statement on Feb. 28 said Lee's condition had improved slightly, and he was continuing with his antibiotics. The statement noted he remained sedated and on mechanical ventilation at the intensive care unit in Singapore General Hospital.
  
  The PMO released statements on March 6 and on March 13 respectively, saying Lee Kuan Yew's condition remained largely unchanged, and he continued to be watched closely by his doctors.
  
  Lee's condition worsened due to an infection and remained critially ill in the ICU, said the PMO on March 18.
  
   
• Singapore's Minister Mentor Lee Kuan Yew meets with US President Barack Obama in the Oval Office of the White House in Washington, in this October 29, 2009 file photograph. [Photo/Agencies]
  
  Profile
  
  Singapore's 91-year-old founding father and its first prime minister Lee Kuan Yew was born on Sept 16, 1923. Lee ruled for 31 years until 1990.
  
  Lee has been credited with transforming the city-state from a sleepy tropical port to a wealthy, bustling financial hub with one of the highest incomes in the world.
  
  Early life
  
  His ancestral home is at Dabu county, Meizhou city, Guangdong province. He once attended Raffles Institution. His education was disrupted by World War II, but went on to study in England after the war. He briefly attended the London School of Economics before moving to the University of Cambridge, where he read law at Fitzwilliam College and graduated with a rare Double Starred (double First Class Honors).
  
  Political career
  
  A founding member of the ruling People's Action Party (PAP), Lee became prime minister in 1959 when Britain was gradually handing over colonial power to the new local administration. Singapore joined Malaysia in a federation in 1963, but the two split two years later.
  
  The PAP has returned to power in every election since 1959 and currently holds 80 of the 87 seats in parliament.
  
  He stepped down as prime minister in 1990 in favor of his deputy Goh Chok Tong. Goh in turn handed the reins to Lee Hsien Loong in 2004.
  
  Even after Lee retired, he continued to work for the government, first as "senior minister," a non-executive advisory post created for him, and from 2004 until 2011 as "minister mentor".
  
  He is still an MP for the port district of Tanjong Pagar but retired from advisory roles in government in 2011.
  
  Singapore's Minister Mentor Lee Kuan Yew speaks to the audience during the Arab and Asian dialogue in Singapore April 27, 2007.[Photo/IC]
  
  Political legacy
  
   
• Lee Kuan Yew, as the founding father of Singapore, left abundant political legacies behind, from which this Southeastern Asian country is still benefit.
  
  Attaching much importance to legislation
  
  One of the major ruling concepts promoted by Leeis legislation, to which he attached much importance. He believed that legislation provides the basic framework for social stability and development.
  
  He thought that law needs to demonstrate humanity and respect people's rights, however law also should limit abuse of power, which will lead to the falling apart of the social order. One of Lee's abiding beliefs has been in the efficacy of corporal punishment in the form of caning.
  
  Promoting economic development
  
  Lee encouraged innovation and opening to the outside world. He said that the quality of a nation's manpower resources is the single most important factor determining national competitiveness. It is the people's innovativeness, entrepreneurship, team work, and their work ethic that gives them that sharp keen edge in competitiveness.
  
  Under his ruling, the implementation of internationalized economic polices has made Singapore one of the most important manufacturing bases of export and import.
  
  He promoted development of infrastructure and forged Singapore into an oasis of development. Singapore also makes full use of the advantages of being a port of reshipment and provides international and authorized financial service.
  
  Emphasizing importance of knowledge
  
  Lee set English as Singapore's first official language and Chinese as the second to let people form an English thought pattern. He emphasizes the importance of knowledge in economic transformation but also rejects the classical separation between scholarship and entrepreneurship.
  
  "Those with good minds to be scholars should also be inventors, innovators, venture capitalists, and entrepreneurs; they must bring new products and services to the market to enrich the lives of people everywhere," he said.
  
   
• Britain's Queen Elizabeth II shakes hands with then prime minister Lee Kuan Yew as she arrived in Singapore, Feb 18, 1972. [Photo/IC]
  
  Art of diplomacy
  
  Singapore is a small country in both area and population, but it has a unique influence on Asia and even the world, which owes much to its founding father and first prime minister Lee Kuan Yew.
  
  To set foot firmly in the world, Singapore needs to be strong enough. As a tiny country, Singapore cannot compete with big countries in natural resources or military power. So economy is the best way out.
  
  Lee warned the government and the people that they should always have a strong sense of urgency.
  
  Under his leadership, Singapore witnessed the rapid rise and became an economic power in just one generation.
  
  Singapore became an independent country at a time when the cold war was like a raging fire. How to survive among the big powers became a problem for Lee.
  
  Lee is famous for pursuing balanced diplomacy. He once said that if there are two competing big powers in a region, then there is space for small countries to switch sides. He implemented the idea of nonalignment.
  
  Singapore maintains friendly relations with the United States, but does not have formal allies.
  
  He adopted the policy of neutrality and did not easily choose sides. But when the time came, Singapore would have its own voice and make its position clear.
  
  Source: China Daily/Asia News Network
  
  Related posts:
•  
  

  Dr. M. Bakri Musa Speaks His Mind: Liberating the Malay Mind

  >>>> " 90% of the Doctorates held by Malays is not worth the toilet paper on which it is printed because it was all prod...
  
  
  
  The Origins and Evolution of Ethnocracy in Malaysia: The Malay Supremacy!

  Merdeka: (From left) Tunku Abdul Rahman, first Yang di-Pertuan Agong Tuanku Abdul Rahman and MacGillivray standing outside King’s House in...