Monday, April 5, 2010
Moving up the value chain
The economic policies are no longer enough to keep Malaysia competitive. The NEAC has drafted the New Economic Model to outline a drastic transformation plan.
THE list of what ails the Malaysian economy is no state secret. Opinions on the matter, both verbally and in print, are long and detailed.
A tally of what is wrong would point to a poor education system, corruption, and policies that encourage patronage and rent-seeking, among others. Those grouses, along with a litany of other issues, highlight what has been counterproductive for the Malaysian economy and its people in general.
That has put the authorities in a quandary. Do they upset the status quo or should something be done to shake the cobwebs from Malaysia’s social and economic structure?
The answer, even before reading the outline proposals contained in the New Economic Model (NEM) drafted by the National Economic Advisory Council (NEAC), suggests that radical action is needed immediately. And the draft spells out just why radical changes are needed.
“Malaysia has reached a defining moment in its development path. It risks being left behind or worse still, suffering a reversal in living standards, unless it implements far reaching and comprehensive reforms,’’ says the NEAC in presenting its initial blueprint for changes that need to take place within the country.
The report adds that the economic policies to date are no longer keeping Malaysia competitive enough, regionally and globally, to generate sufficient growth.
“Fundamental reform is long overdue and decisive actions are needed to speed up economic transformation. The NEM report provided a critical review of the deficiencies that preventing Malaysia from moving forward, which we concur,’’ says CIMB Research in its note on the NEM.
“Malaysia is in urgent need of an overhaul as it runs the risk of a downward spiral and also the painful possibility of stagnation if it fails to reinvent itself.’’
The proposals contained in the NEM are the seeds of government policies that will be needed to lift GNP (gross national product) per capita from the current US$7,600 to US$17,700 by increasing growth rates to an average of 6.5% per annum until 2020.
Those bold measures seeks unlock investment, drive labour productivity and boost efficiency while changing the way business has been done over the past decades.
Private sector back to the fore
“Anything that makes Malaysia more competitive is good. More opportunities to grow businesses are deemed good. Otherwise more businesses will leave Malaysia,’’ says Top Glove Corp Bhd executive director Lim Cheong Guan.
“In the past, we used to say that Malaysia would be able to compete with Taiwan or Singapore to be among the best. Right now, we are behind them and we are talking about competing with Thailand or Indonesia. If we don’t start something new in the future we may have to compete with Cambodia or the Philippines.”
The proposals from the NEAC are numerous but essentially they seek to have the private sector take over the driver’s seat of the economy.
That change is crucial as the Government is painfully aware that the decline in private investments in the country needs to be halted and reversed should Malaysia stand any chance of moving up the economic ladder.
The drop in total investments for much of the decade after the Asian financial crisis was cushioned by increased government spending, but no matter how much money the Government was pumping into the economy, it could not make up for the money that the private sector is not investing.
Total investments in the economy has about halved since the crisis and growth has been supported by consumption.
That increase in public investment was done by using Malaysia’s bountiful natural resources but that is unsustainable, given that these are depleting resources, particularly oil. Furthermore, pump-priming the economy has come at the expense of the Government’s own finances.
“It’s timely as we move towards that change. It’s important for Malaysia to move into the new phase to retain and attract talent. And to do that, we need that change,’’ says Spirit AeroSystems Malaysia Sdn Bhd managing director Francis Hiew.
The NEM wants to see the private sector regain its role as the driver of growth and to accomplish that, sweeping liberalisation and pro-market policy changes will be implemented to drive productivity and efficiency.
The NEAC has forecast the services sector to drive growth, followed by the manufacturing sector.
Skilled workers
The report points out that apart from setting the right market-centric policies and incentives, human capital development is of great importance to get the country up towards high income status.
It’s not to say the country does not have the building blocks to pull that off.
The problem of the migration of skilled workers, which has been increasing to an alarming rate, is an indication that the country does possess the necessary skill levels for higher valued added industries. It is just that greener pastures lie outside the country.
More private investments in higher technology and value-added industries is one crucial way of keeping those valuable employees in the country. To achieve that, policies stressing inclusiveness will be championed.
One example of the latent potential of the economy and its people, and the Government’s ability to attract higher value added industries is the decision by Spirit AeroSystems to set up shop in the country more than a year ago.
Spirit AeroSystems is one of the largest tier-1 suppliers to Boeing and Airbus. Malaysia was picked mainly because of its trainable people. Only 8% of its employees are high school graduates; the rest have at least diplomas.
“You talk about growing with the rest of the world. Yes, we are, as we are doing something (as in designing components for the A350) that is not there yet,’’ he says.
Still, there are constraints in Hiew’s operation. For one, he employs 21 engineers but would like to have 60. To overcome that, the company is bringing a training programme to universities in order to get their skill requirement.
Having such programmes is a cost to Spirit AeroSystems and other companies too, and businesses are going straight to the source to get their labour needs.
“Quantity is there but it is not easy to get them. We are also going to the universities directly. The Government should also do things to keep our brightest in Malaysia,’’ says Lim of Top Glove.
He adds that because there is demand for such skilled people from other companies, competition for top students in universities has intensified.
In the process of moving up the value chain, companies too are envisaged to increasingly move away from hiring unskilled or low-wage labour in favour of automation.
Top Glove hires about 5,000 foreign workers and Lim says their presence in the economy is not as bad as it is made out to be.
Such workers create demand for other products and services, and by having them to do more menial work in factories, it allows companies in Malaysia to hire Malaysians to fill managerial or skilled positions.
“If we cannot operate from Malaysia, then those jobs will go elsewhere,’’ Lim points out.
He also counters that it would be unwise for companies to differentiate pay scales between Malaysian and foreign workers, saying that the decisive factor in any of such argument is productivity.
Nonetheless, the shift in processes towards more automation is a gradual and inevitable progression.
“A decade ago, our production line may require 10 workers but today it is 3.5 workers per production line. Every expansion, we need more engineers and chemists and that means we need more graduates every year. And we do hire more than a 100 of them every year,’’ he says.
“Direction-wise, we will be heading towards automation as foreign workers are becoming an issue.’’
Benefits of a high income economy
Moving up the economic value chain calls for more investments into more productive way of doing things.
Investing in new technologies and automation helps open up new avenues of business opportunity while presenting companies with new streams of revenue and profit.
One industry that somewhat encapsulates such a progress may well be the telecommunications industry.
From providing basic call services, telecommunication companies have evolved and grown their scope and influence almost exponentially, whereby new devices and delivery channels such as the Internet have seen hundreds of smaller companies hiring skilled workers churn out the services and packages that would utilise such diverse channels.
Maxis Communications Bhd chief operating officer Jean-Pascal van Overbeke said Maxis, which started out as a cellular company, is today seeing 40% of its revenue from the data business.
“This requires all our people to grow with the industry and learn a new business and changing the business at the same time. This is about learning a new skill,’’ he says.
One of the drivers of growth in the NEM is broadband penetration. As more households and businesses start adopting broadband services, it would be valuable to just not the economy where such services are known to increase economic activity but also for the companies that provide and support such services.
“Part of our business and future is not only to provide ways to allow people to speak with each other. The phone is not a phone anymore but a device which allows us to access a lot of things,’’ he says.
The evolution of the phone and its applications is also creating demand for new skills within companies.
Companies that have a workforce that are used to doing things the old way would have to find the means to adapt.
“In a few years more than 50% of our revenue will be from the Internet and in some ways we will become an Internet company. But 90% of the people employed today have been employed to do the mobile business,’’ says van Overbeke.
Implementation is key
The next step in getting acceptance for the NEAC proposals would come from the public. And to secure the mandate for such a game-changing policy might be a difficult and tedious process.
Revamps to affirmative action policies could strike a nerve with some quarters, and changes that would nudge people off their comfort zones could be viewed with suspicion.
“A lot of it will, however, depend on implementation. The important thing is for everyone to have the opportunity to compete and do away with inefficiency and corruption, and make the government machinery more efficient so as to encourage people to stay here,’’ says Top Glove’s Lim.
To meet the short timeframe to achieve high income status, a lot of the proposals have to be accepted quickly by the public and adopted immediately by the Government.
But for businesses that will be called on for their money and patience, time is a luxury most entrepreneurs will not have.
“If the Malaysian government makes the conditions as competitive as those of other countries, there is no reason why Malaysian businessmen would leave,’’ Lim argues. “Businessmen are not static. They will go to where the best opportunities are offered.”
By JAGDEV SINGH SIDHU jagdev@thestar.com.my
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Looking for growthSunday, April 4, 2010
NEM needs political will and mindset change
THINK ASIAN
By ANDREW SHENG
SOME of you may have wondered why I have not written about the New Economic Model (NEM) that has been in the Malaysian news this week. My colleagues at the National Economic Advisory Council (NEAC) have been working hard in the last few months to make the NEM as robust as possible, and now Part I has been rolled out to be “beta” tested. Part II will come out in the second half of the year.Just like the iPad, which comes out this week, there is lots of anticipation, but the proof of the pudding is in the eating.
So I was not surprised that there was a lot of scepticism about what’s new and whether there is will to implement the NEM. Even the iPad as an electronic book reader is not new – Sony got there first. But, after the success of iPod and
Development is a process and like any product, the NEM will have to go through the process of conceptualisation, strategy, prioritisation, execution, feedback, review the outcomes and then refine and move ahead.
This week, I had the privilege of listening to legendary Harvard Business School professor Ram Charan talking about execution. He rightly pointed out that the Vision thing is the easy part. The hardest part is to translate a vision into action.
Generals see Vision as Strategy and Execution as Tactics. Ram Charan says this is completely wrong. “Execution is not just tactics – it is a discipline and a system. It has to be built into a company’s strategy, its goals, and its culture.”
Quite right. I also learnt the hard way that it is easy to talk but tough to deliver. Hence, it’s all about discipline, feedback and follow through. You learn to adjust by making mistakes, but you follow through. You cannot make omelettes without breaking eggs.
So the first thing is to admit that we will make mistakes, which is why we have to have consultation and feedback. This column is about inviting the consultation from anyone interested in the NEM to give their views about specific sectors, issues and problems.
The second thing is that we have to be practical – we cannot do everything at once and we do not have the resources to do everything. Tough choices will have to be made. Part I of the NEM is to set the framework to think about what needs to changes and our goals.
We want to be an advanced nation that is high income, inclusive and sustainable. To do this by 2020, we need real growth averaging at least 6.5% per year.
Can we achieve that? Not if there is a massive global crisis in between. But, if the Asian region, and especially India and China, continue to power ahead at more than 8% per year, given our strategic geographic location, our natural resource base and pretty advanced infrastructure, there is every reason for us to be able to achieve that target.
If we don’t, then it would mean that we have failed to remove the bottlenecks to growth and did not execute at the right place at the right time.
When people ask about the political will, they forget what President Kennedy posed: Ask not what your country can do for you, but what you can do for your country.
The NEM is a result of reforms – reforms that need political will and a mindset change of the rakyat. Political will cannot come without the rakyat being willing and able to change their mindset. If the grassroots are convinced of change, the politics will change. If the people will not change, the Government will in turn not change.
This column will not dwell on how we got into the middle income trap but on how we will get out of it. Another of my favourite Harvard professors, Malcolm Sparrow, said we should “pick important problems, fix them and tell everyone.”
There are so many problems to fix, that we will not be able to tackle everything. Indeed, we would be lucky to fix three or four major problems in each specific area or sector. The NEAC has identified eight strategic reform initiatives. If we were to pinpoint at least three key problems to fix in each initiative, we are already dealing with 24 issues.
But the public is expecting us to identify issues and solutions to a whole range of economic sectors. If you run down the list of sectors alone, you can count the education sector, manufacturing, agriculture, services and cutting across these are energy policies, telecommunications policy, housing policy, transport, environment, tourism, health et cetera, et cetera.
I learnt from the power of the Web that none of us is smarter than all of us. Many of you are experts or have first-hand experience in the sectors I have mentioned. Over the next few months, my colleagues and I will be drilling down to build up a concrete implementation plan that not only has bones, but meat.
To give you an illustration, the appendices in the Part I report on the palm oil and E&E (electrical and electronics) sectors show how we worked with market experts to identify the key issues and put forth some suggestions for reform. We are inviting you the readers to give us your views on what we should do to realise the full potential in Malaysia.
The reason why we need your advice and insight is obvious. It is unrealistic to expect the eight members of the NEAC and the secretariat to be experts in all the complex economic sectors and to be able to pick the winners or identify the losers.
For this, feedback from those of you who have direct understanding of the issues in diverse sectors would be invaluable. What we specifically look for is not just problem identification, but concrete and practical solutions on what needs to change and what we can do about it.
Please help us prioritise by picking out the most important issues and give alternative solutions. Over the next few months, the NEAC members and the secretariat will be meeting many stakeholders to map out a detailed implementation plan so as to reduce the margin of error of implementation.
We accept that the mindset change will not be easy, because as Capra and Henderson shrewdly identified, “unlimited quantitative economic growth on a finite planet cannot be sustainable”. “Qualitative economic growth, by contrast, can be sustainable if it involves a dynamic balance between growth, decline, and recycling, and if it also includes development in terms of learning and maturing,” they say.
We look forward to receiving your feedback and ideas, and you are welcome to email us your suggestions to
as@pmo.gov.my or my colleague at the secretariat:
yassif@pmo.gov.my. Please also log on to the NEAC website and take part in the poll at
www.neac.gov.my.
● Apart from being a member of the NEAC, Datuk Seri Panglima Andrew Sheng is adjunct professor at Universiti Malaya, Kuala Lumpur, and Tsinghua University, Beijing. He has served in key positions at Bank Negara, the Hong Kong Monetary Authority and the Hong Kong Securities and Futures Commission. He is the author of the book “From Asian to Global Financial Crisis”.
The iPad Arrives: The Wait is Over (And Wasn’t Bad)
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Friday, April 2, 2010
Data-Driven Companies
We are a society awash in data. Computing power is growing all the time, making number crunching and data processing faster and faster. Then there's the cloud, where an infinite amount of data can be stored and managed. Making sense of all our data is getting more complicated. Here's a look at companies and new technologies that can help.
Overview
Why Predictive Analytics Is A Game-Changer
How companies use real-time data to plan for the future.
Making Data Work For You
Just because you have an abundance of data and expensive tools doesn't mean you're making good use of them.
Who Is In Charge Of Your Data?
Nobody owns data. That costs companies billions.
Supercomputing For Rent
Exa is streamlining the number-crunching business--and its customers' rides.
By The Numbers
America's Fastest-Growing Tech Companies
Data-driven companies score high.
How To Win At Gambling
The way to get wise when the numbers are against you.
Compute Your Way Through Traffic
Inrix navigation software gets its predictions about traffic congestion down to a science.
New Horizons
Obama's Data Visionary
Graphics guru Edward Tufte on the iPad and how companies can avoid a data-driven money pit.
Wowd: Searching The Darkness
Wowd aims to go where Google can't by tapping users to perform Web search.
How Smart Web Guys Win
Omniture CEO Josh James on how big companies are getting smarter about marketing online.
The Corporate View
IBM's Billions For A Peek Ahead
Big Blue's data analytics push.
When Google Runs Your Life
Eric Schmidt wants to merge play and work on the desktop. Is that such a terrible thing?
Microsoft's Data Play
A future of big sets, sensors--and computer software sales?
Aging gene found to govern lifespan, immunity and resilience
A nematode worm that has a bacterial infection (highlighted in green). Copyright: Dr Robin May, University of Birmingham
(PhysOrg.com) -- Scientists funded by the Biotechnology and Biological Sciences Research Council (BBSRC) at the University of Birmingham have discovered that a gene called DAF-16 is strongly involved in determining the rate of ageing and average lifespan of the laboratory worm Caenorhabditis elegans (C. elegans) and its close evolutionary cousins. DAF-16 is found in many other animals, including humans. It is possible that this knowledge could open up new avenues for altering ageing, immunity and resistance to stresses in humans. The research is published today (01 April) in PLoS ONE.
Dr Robin May, who led the research said: "Ageing is a process that all organisms experience, but at very different rates. We know that, even between closely related species, average lifespans can vary enormously.
"We wanted to find out how normal ageing is being governed by genes and what effect these genes have on other traits, such as immunity. To do that, we looked at a gene that we already knew to be involved in the ageing process, called DAF-16, to see how it may determine the different rates of ageing in different species."
Dr May and colleagues compared longevity, stress resistance and immunity in four related species of worm (see notes for details). They also looked for differences in the activity of DAF-16 in each of the four species and found that they were all quite distinct in this respect. And, importantly, the differences in DAF-16 corresponded to differences in longevity, stress resistance and immunity between the four species - in general higher levels of DAF-16 activity correlated with longer life, increased stress resistance and better immunity against some infections.
Dr May continued: "DAF-16 is part of a group of genes that drive the biological processes involved in ageing, immunity and responses to physical or environmental stresses. The fact that subtle differences in DAF-16 between species seem to have such an impact on ageing and health is very interesting and may explain how differences in lifespan and related traits have arisen during evolution."
The research in Birmingham is now moving on to look at the way in which DAF-16 coordinates a complex network of genes in order to balance the differing needs of an individual's immune system over time.
Professor Douglas Kell said: "Research using model organisms that uncovers the biology underpinning ageing gives us the opportunity to understand some of the mechanisms that determine how humans age in a healthy, or at least normal, way. It is very important to develop a good understanding of healthy ageing if we are to appreciate what happens to an older person's physiology when they become unwell or experience difficulties with everyday tasks such as recalling memories or moving around. Improving the healthspan to mirror increases in the lifespan is an important subject of BBSRC research."
Source: http://newscri.be/link/1060843
Thursday, April 1, 2010
Irish banks on verge of collapse,
Irish Banks Need $43 Billion on ‘Appalling’ Lending
By Dara Doyle and Colm Heatley
The fund-raising requirement was announced after the National Asset Management Agency said it will apply an average discount of 47 percent on the first block of loans it is buying from lenders as part of a plan to revive the financial system. The central bank set new capital buffers for Allied Irish Banks Plc and Bank of Ireland Plc and gave them 30 days to say how they will raise the funds.
“Our worst fears have been surpassed,” Finance Minister Brian Lenihan said in the parliament in Dublin yesterday. “Irish banking made appalling lending decisions that will cost the taxpayer dearly for years to come.”
Dublin-based Allied Irish needs to raise 7.4 billion euros to meet the capital targets, while cross-town rival Bank of Ireland will need 2.66 billion euros. Anglo Irish Bank Corp., nationalized last year, may need as much 18.3 billion euros. Customer-owned lenders Irish Nationwide and EBS will need 2.6 billion euros and 875 million euros, respectively.
‘Truly Shocking’
The asset agency aims to cleanse banks of toxic loans, the legacy of plunging real-estate prices and the country’s deepest recession. In all, it will buy loans with a book value of 80 billion euros ($107 billion), about half the size of the economy. Lenihan said the information from NAMA on the banks was “truly shocking.”
“The regulator is taking the bank system by the scruff of the neck,” said James Forbes, senior equity strategist at Irish Life Investment Managers in Dublin. “Allied Irish has a lot of work to do to avoid majority state ownership, Bank of Ireland less so.”
Allied Irish rose 10 percent to 1.37 euros as of 9:06 a.m. in Dublin. Bank of Ireland surged 26 percent to 1.62 euros. Credit-default swaps insuring both banks’ debts declined.
Allied Irish will sell its stakes in banks in the U.S. and Poland and said late yesterday this will meet a “substantial part” of its capital needs. It also plans a share sale.
Bank of Ireland said today it’s working to fill the capital deficit after posting a net loss of 1.46 billion euros in the nine months through December 2009. The lender expects to be able to raise most of the new capital privately, Chief Executive Officer Richie Boucher said.
Capital Target
Lenders must have an 8 percent core Tier 1 capital ratio, a key measure of financial strength, by the end of the year, according to the regulator. The equity core Tier 1 capital must increase to 7 percent.
AIB’s equity core tier 1 ratio stood at 5 percent at the end of 2009 and Bank of Ireland’s at 5.3 percent. Those ratios exclude a government investment of 3.5 billion euros in each bank, made at the start of 2009.
“The banks are undergoing major surgery via NAMA,” financial regulator Matthew Elderfield said at a press conference in Dublin. “They need a transfusion now to speed their recovery and that of the economy.”
Credit-default swaps insuring Allied Irish Bank’s debt against default fell 6.5 basis points to 195.5, according to CMA DataVision prices at 8:45 a.m. Contracts protecting Bank of Ireland’s debt fell 7 basis points to 191 and swaps linked to Anglo Irish Bank’s bonds were down 3.5 basis points at 347.5.
Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. A decline signals improving perceptions of credit quality.
State Aid
If Allied Irish can’t raise enough funds privately, the state will step in with aid, Lenihan said. It is “probable” the government will then end up with a majority stake, he said.
The banks “are in a better position today, but we also have to be cautious about thinking we are done and dusted here,” Forbes said.
Ireland may not be able to afford to pump more money into the banks. The budget deficit widened to 11.7 percent of gross domestic product last year, almost four times the European Union limit, and the government spent the past year trying to convince investors the state is in control of its finances.
The premium investors charge to hold Irish 10-year debt over the German equivalent was at 139 basis points today compared with 284 basis points in March 2009, a 16-year high.
Ireland’s debt agency said it doesn’t envisage additional borrowing this year related to the bank recapitalization. It is sticking to its 2010 bond issuance forecast of about 20 billion euros, head of funding Oliver Whelan said in an interview.
“The bank losses, awful as they are, represent a one-off hit. It’s water under the bridge,” said Ciaran O’Hagan, a Paris-based fixed-income strategist at Societe Generale SA. “What’s of more concern for investors in government bonds is the budget deficit. Slashing the chronic overspending and raising taxation by the Irish state is vital.”
To contact the reporters on this story: Dara Doyle in Dublin at ddoyle1@bloomberg.net; Colm Heatley in Belfast at cheatley@bloomberg.net
Computer Scientists Develop a Comfortable and Secure Login Method
ScienceDaily (Mar. 31, 2010) — As most internet users know, it is often hard to remember or keep apart all the passwords and login names for one's different online accounts.
Moreover, the new approach solves a common problem which many internet users choose to ignore: passwords can be tapped by so-called keyloggers, i.e. trojans on the computer a password is entered into, and could later be misused for criminal purposes. As Dr. Borchert's method does not rely on permanent passwords anymore, the problem of tap-ping becomes obsolete.
The new method was filed for patent application.
From the user's point of view, Borchert's approach works as follows: The user downloads the method's application software to his smartphone. For each account he wants to be managed by the app, he needs to go through a short initialization process on the smartphone. In order to access an account, the user can open the respective login page in a browser window on any computer. He will then be shown a 2D-code that he must scan with the smartphone's camera. After the data is processed by the app, the smartphone contacts the account server via internet. The server checks the data received, connects to the browser window on the computer and opens the user's account. Thus, the user gets into his account almost by magic -- he only has to scan the 2D-code. In order to prevent unauthorized persons from logging in to an account, e.g. in case the smartphone is stolen, the user may protect his most important accounts with an additional tap-proof password query.
A prototype of the new application software was programmed by computer science students -- the link below refers to the demonstration web page which also contains a short demo video. Appropriate apps already exist for some types of smartphone. The project team is currently looking for account providers willing to implement the method in order to offer it to their users.
Demonstration web page containing more information and links: http://www2-fs.informatik.uni-tuebingen.de/~borchert/Troja/Open-Sesame/index.php?lang=en
Source: http://newscri.be/link/1058800
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