What’s wrong with the international monetary system?

WHAT ARE WE TO DO By TAN SRI LIN SEE-YAN

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President Johnson stated in 1968: “To the average citizen, the balance of payments, the strength of the US dollar, and the international monetary system are meaningless phrases. They seem to have little relevance to our daily lives. Yet, their consequences touch us all consumer and captain of industry, worker, farmer and financier.”

This is true when international financial arrangements are working well; and becomes even more evident when they are not. While not all would argue there is no life left in the international monetary system (IMS), almost all would agree the present system contains inherent contradictions which lead to frequent breakdowns.

Basic principles

Four basic principles underlie the IMS: (i) a country’s sovereign right to regulate internal demand to maintain stable conditions at home in terms of employment and domestic prices; (ii) free international movement of goods and capital and here, substantial progress has been made in meeting this goal; (iii) a system of mixed exchange rate regimes – from fixed exchange rate (eg China) to flexible exchange rate (eg US dollar, British pound and euro) to degrees of managed floats (eg yen and the ringgit); and (iv) a nation’s right to hold international reserves in the form of gold, US dollar and other major currencies. In addition, lines of credit are available from the IMF. The reserves available and potentially obtainable set a limit on the cumulative size of a country’s balance of payments (BOP) deficit, thus acting as a BOP constraint in domestic policy making. But there is no such corresponding limit for surplus nations. The system is asymmetrical; it “punishes” those in deficit and lets the surplus nations alone.

Most countries experience some trade-off between unemployment and price stability. As unemployment is lowered by policies to expand demand (as with the US stimulative packages), the higher is the price that has to be paid in rising inflation. The trade-off varies over time, and from country to country. The rationale behind this relationship centres on the tendency for money-wage increases to outstrip rises in productivity even under conditions of high unemployment. The current state of a jobless growth in the US with low inflation in the face of continuing high unutilised capacity shows no trade-off at this time. But as demand picks up and as growth picks up and unemployment trends down, inflation is bound to creep up.

G-20 finance ministers and central bank governors gather for a group photo during the IMF and World Bank spring meetings in Washington on April 15. — Reuters

What’s wrong?

First, there is the adjustment problem. The present IMS has no reliable mechanism to eliminate BOP dis-equilibrium (ie payments imbalances). This is fundamental. There are three possible ways of correcting a payments deficit: use of trade and capital controls; adjustment of exchange rate; and government policies working through internal changes in income and prices. All three go against the the principles underlying the system. So, when a country experiences a deficit, there is no assurance the deficit will be eliminated before its reserves are used up; or depending on the extent to which market forces are allowed to sufficiently depreciate the currency; or whether domestic policies are tightened enough to reduce demand.

Second, there is the problem of the exchange rate, which usually doesn’t react fast enough to correct imbalances. Destabilising capital flows exacerbate the problem. The IMS is also subject to massive (especially speculative) flows of funds which could complicate BOP adjustment. The flooding of cheap US dollar funds into emerging markets following QE2 (2nd phase of Fed’s quantitative easing) have led to capital controls and managed exchange rates limiting their appreciation. Of late, the size of speculative flows has become too large for even the larger emerging markets to cope. This is not the end. In the event QE2 exits, the impact of large capital withdrawals on the exchange rate can be just as destabilising.

Third, there is the problem of liquidity. The system has no arrangement to generate in an orderly and predictable way, increases in foreign reserves that are needed to meet demands of growing world trade. The creation of SDRs (Special Drawing Rights) in the IMF, as and when needed, is supposed to do the job; but in practice, increases in SDRs have been few and far between. By chance, the Fed’s recent expansionary program, including QE2, is now over-doing the job; indeed, these capital flows have become too large for orderly adjustments to take place.



Finally, there is the confidence problem. The system allows persistently large surplus nations to do virtually whatever they please in postponing real adjustment. Today, about two-thirds of global reserves is held in US dollar-denominated assets (especially Treasuries). China’s international reserves today amounted to about US$3.1 trillion, of which US$1.15 trillion is invested in US dollars. It has been estimated that Italy’s entire sovereign debt (principal plus interest until 2062) totalled US$3 trillion. In terms of oil, China’s reserves can buy 25 billion barrels of Brent crude, equivalent to 13 years of its net oil imports. Indeed, it could pay for the entire Nikkei 225 list of companies, with US$30bil in change. That’s how big China’s reserves are.

True, the Bretton Woods system had served the world economy reasonably well. In a sense, the system operated well in the 50s and 60s but was on borrowed time. The “tearless deficits” during this period left a legacy of a large and growing “overhang” of foreign dollar holdings, which frequently threatens a confidence crisis. Persistent US deficits had since led to a diminution in the quality of the US dollar in the eyes of most foreign holders.

Global payments imbalances require a co-ordinated global action to resolve. This is hard to come by. Of the four problem areas, I think the matter of speculative and exchange rate instability is serious. This involves two aspects: (a) threat imposed by the “overhang” of convertible claims against the reserve currencies (especially US dollar) where such claims are today touching 15% of global GDP (6% 10 years ago); and (b) the danger of private speculative runs against currencies under pressure, especially the greenback. They are inter-related. To top it all, the IMF practice of allowing nations to choose their own exchange rate regimes didn’t help the adjustment process. Fixed exchange rates operated uneasily alongside flexible exchange rates, including managed floats and permutations of these two major regimes, in the hope that somehow policies would be co-ordinated to converge and foster imbalances adjustment. Nothing like it will ever happen as each regime did its own thing to protect its national interest.

And so, until today, the four problems of adjustment, exchange rate, liquidity and confidence underlying the IMS persisted. One thing is clear: there is no political will to reform. The US, for which reform means the diminution of the dollar’s global role, is lukewarm. And Europe is distracted more than ever with protecting the status of the euro and the EU’s sovereign debt crisis. France, as chair of G-20, wants to find an IMS that more accurately reflects the new structure of the world economy. But the major emerging nations, especially the BRICS (Brazil, Russia, India, China & South Africa) want to move away from a virtual one-reserve regime to one based on multiple reserve currencies.

Are payments deficits good or bad?

For most, payments deficits are instinctively bad. But think about it. After all, the purpose of international trade is to obtain goods and services from abroad at less than can be produced (or not available) at home. Imports are the benefits of trade. A trade deficit means more goods and services are being received from abroad than are being given up. Surely that’s good from the deficit nation’s point of view. But this deficit has to be financed. So, the nation either loses reserves (uses savings) or borrows (living on credit), and this may prove uncomfortable as the deficit persists. In the end, the deficit country has to take corrective action, such as deflationary domestic policies (austerity measures), exchange controls, or devalue its currency. All of them conflict with one or more of its domestic economic goals. There is a cost to adjust.

The soft solution is to use reserves (“its function is to render exchange rate stability compatible with freedom for individual nations to pursue national economic goals”). While drawing down reserves or borrowing may reduce the conflict of objectives, it nevertheless increases the potential for future conflict.

That’s exactly what’s happening in the US. It has run persistent deficits for so long that its debt is now too high (close to 100% of GDP) and its liabilities to nations accumulating US dollar reserves (especially China and Japan) have grown so large that it can trigger off a confidence run on the greenback.

This has proved inconvenient at a time when the US continues to need expansionary policies to bring down its high unemployment. Surplus nations have the opposite problem since these surpluses are inflationary and reflect an inefficient utilisation of reserves in the form of involuntary foreign lending. It can be viewed as the mere hoarding of resources that might have enhanced future output and welfare if added on to domestic investments instead. To sum up, today’s mixed exchange rate regimes provide no mechanism for systematic and effective BOP adjustment that does not conflict with major goals of public policy.

IMS reform

Reform of the IMS is clearly needed. V. Lenin once said that “the surest way to destroy the capitalist system (is) to debauch its currency.” The IMS is at the heart of the world economy. When rules of the global monetary game are unclear, inadequate, some even obsolete, nations find it difficult to play; indeed, some may exploit them to their advantage.

This undermines the very fabric of the IMS. Some history. In 1944, Bretton Woods gave birth to the IMF and today’s US dollar-centred IMS. The Bretton Woods conference was dominated by two strong-willed economists, H.D.White (US) and J.M.Keynes (UK). The UK wanted a system in which global liquidity is regulated by a multilateral agency (IMF), while the US (for self-interest) preferred a US dollar-based system.

Because of its enormous political power, the US got its way. Keynes, for all his intellect and persuasiveness, failed to: (i) endow the IMF with the power to create a new global reserve unit as an alternative to the US dollar; and (ii) secure a global regime which forces surplus as well as deficit nations, and the issuer of the reserve currency as well as its users, to adjust. It’s a pity as Keynes’ failures haunt us to this day. Nations with chronic surpluses (Germany, China and Japan) and the US as dominant supplier of US dollar reserves, do not face the same pressures to adjust their imbalances as do deficit countries that are often bullied to do so.

In my view, what is needed is a tripolar IMS organised around the US dolar, euro and RMB (China’s yuan or renmimbi). Let’s face it, neither the euro nor the RMB are in any position today to challenge the US dollar. The world will be better off with a viable alternative to the US dollar. Their interplay forces on the reserve currencies a market discipline earlier and more consistently. This way, central banks seeking to accumulate reserves will have a choice, so that the US no longer has “so much rope with which to hang itself” (so says my friend Barry Eichengreen). Another view is to transform the IMF’s SDRs into an international reserve currency (IRC). The trouble is, the SDR is not market tradable. To be an effective IRC, the IMF will have to be accorded the role of a world central bank. This is unlikely; indeed, a non-starter, as it was in the Bretton Woods days.

At the recent G-20 finance ministers meeting in Paris, all central bankers acknowledged that global imbalances remain a critical problem, and that a solution will involve policy co-ordination. Yet, each played down its own role. Until a solution is found, the “accumulation of foreign exchange reserves is a powerful instrument of self-insurance.” There is no political will to reform only the will to congregate and obfuscate. In the Bretton Woods days, the might of the US called the day. Today, it’s nobody’s call. What a pity.

Former banker, Dr Lin is a Harvard educated economist and a British Chartered Scientist who now spends time writing, teaching & promoting the public interest. Feedback is most welcome; email: starbizweek@thestar.com.my

Asian economies recalibrate to address inequality

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ASIA should have a smile on its face. The region's economy is displaying resilience in the teeth of a structural rise in oil and commodity prices. Overheating is a greater threat than a swoon in growth.

Yet the tone of some officials' recent comments has been strikingly cautious, reflecting an awareness that Asia has failed to seize the chance during the past decade of strength to address long-standing vulnerabilities.

Asia is still hopelessly dependent on final demand from rich countries. Investment, the seed corn of growth, remains far below levels scaled before the 1997-98 financial crisis, except in China and India.
Cross-border financial and monetary linkages are puny. Infrastructure, the sinews of every economy, is patchy. Asia generates less electricity than Latin America and has proportionately fewer phone connections.

So far, so familiar.

But policy makers are drawing increasing attention to another shortcoming of Asia's export-oriented growth model: inequality.

Disquiet over a widening gap between the haves and the have-nots was a factor in Singapore's election on Saturday, which ended in gains for the opposition.

And the urban-rural fault line running through Thai politics is in good part a rich-poor divide.

“There has been a significant increase in attention to inequality globally, and particularly in Asia,” said Xiaoqing Yu, the World Bank's lead economist for social protection in East Asia and the Pacific.

“Countries realise that inequality is contributing to social tensions and lost opportunities,” Yu said.
“Global events in recent months point to that,” she added, alluding to turmoil in the Middle East.

Even the International Monetary Fund, synonymous with stony-hearted austerity, has taken to stressing that “inclusive” growth is critical to the credibility of market-oriented reform and long-term development.

Inequality, up to a point, helps drive efficiency. But excessive inequality holds people back and stifles consumption. People cannot be expected to spend freely if they have precarious, low-paying jobs and scant social protection.



“It's really important for the region to continue to target more inclusive growth,” Anoop Singh, director of the IMF's Asia-Pacific department, said recently in Hong Kong. “It would not only reinforce stability, it would also help facilitate the rebalancing that Asia needs toward domestic demand and against simply an export-led model over the medium term.”

China is the best-known illustration of the economic and income imbalances spawned by such a model. Living standards on the seaboard, where export industries are concentrated, are many times as high as in the interior.

But South Korea is also counting the cost of a political economy geared toward supporting exporters at the expense of consumers and domestic service providers, according to Kwon Young Sun, an economist at Nomura.

The Korean economy recovered strongly from the 2008 global financial crisis, thanks to a largely undervalued won, huge fiscal stimulus and lower interest rates.

The ensuing increase in inflation and domestic debt penalised wage earners, while corporate profits rose as a share of national income.

The resulting widening in income inequality was one reason why the governing Grand National Party fared poorly in by-elections held on April 27, Kwon wrote in a report.

He said he expected the government to tweak policy in response, favouring consumers, smaller companies and lower-income families, rather than producers, big companies and rich families.

Other governments across Asia are also reacting. China is increasing health and welfare spending, while Hong Kong has just introduced a minimum wage. The Philippines is experimenting with a conditional cash transfer programme to help the poorest.

Yu of the World Bank said the 2008 crisis had brought home the need for a degree of social protection in a region where the umbrella of the extended family had largely substituted for public welfare.

“Even governments that traditionally have not put a lot of emphasis on poverty, inequality and protection now realise that they need some kind of mechanism, even if it's modest, to cope with a shock,” she said.
Of course, it will take more than a social safety net to temper inequality. As technological progress puts an ever-growing premium on skills, poorly educated workers are falling behind.

Here, the task for governments was to ensure a more level playing field by investing in skills development, Yu said, adding that Singapore, Australia and South Korea were showing the way.

In the grander scheme of things, nurturing a more equal, better-educated society will be critical if Asia is to avoid falling into the middle-income trap. This is when per capita incomes stall because countries fail to graduate from a reliance on resources and cheap labour to growth based on innovation and productivity.

South Korea has successfully made the transition. Malaysia and the Philip-pines are struggling to escape the trap.

If it avoids the trap, Asia would account for half of world output by 2050, up from 27% now; if it fails, the proportion will be about 32%, according to a report prepared for the annual meeting of the Asian Development Bank (ADB), held last week in Hanoi.

The report captured the prevailing circumspect mood, warning that Asia needed to address “daunting multi-generational challenges and risks.”

The ADB's managing director general, Rajat M. Nag, said the message was clear. “Your rise is not preordained; it is plausible, but you've got to earn it,” he said.

“You've got to make some policy decisions now to reduce inequity, increase the basic education, address issues of governance and corruption, show leadership and have strong regional integration if you are going to avoid the middle-income trap.” Reuters

New consumer mindsets

 Books Review by CHOO LI-HSIAN


Author: John Gerzerma and Michael D’Antonio Publisher: Jossey-Bass

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Spend Shift: How the Post-Crisis Values Revolution is Changing the Way We Buy, Sell and Live

IN their book Spend Shift: How the Post-Crisis Values Revolution is Changing the Way We Buy, Sell and Live, John Gerzerma and Michael D’Antonio show how consumers are “moving from mindless to mindful consumption” in an attempt to cope with their post-crisis loss of purchasing power and trust in institutions. In doing so, consumers are becoming “increasingly powerful and unpredictable”.

How they consume products is based as much on their emotional state as the environment around them. The book cautions that for companies “prone to celebrating a leadership position and a competitive market advantage, commoditisation may lie just around the hairpin corner.”

Consumers are resetting their spending and their lives to the new post-crisis financial realities. Through more strategic spending, consumers are voting for values with their dollars and influencing corporate behaviour. Communities are moving from capitalism to social collectivism supported by common values, a shared spirit of entrepreneurship and new skills in areas such as social media.

In response to this, many companies and brands are also making a very intentional effort to prioritise principles over profits, offering greater authenticity and creativity. At Walmart, Microsoft, Zappos and other companies, the authors met with executives who are applying new technologies side-by-side with old-fashioned customer-first practices to make their companies more relevant, resilient and profitable.

Stewards and staff of companies that are doing well by doing good ultimately also feel better about their positive impact on the communities they serve and the planet they share with their customers.

To tell the story of Spend Shift, the authors travelled from coast to coast, visiting large cities and small towns across eight American states to examine the value shifts sweeping the nation. They sat across kitchen counters, talked to small business owners and interviewed people from over 50 start-ups and large corporations. Their resultant efforts help readers to realise the depth and dimensions of the economic crisis and its consequences for American society and the world at large.

Marrying these real-life stories with solid research from Young & Rubicam, they analyse the changing consumer psyche, document the five shifting values and consumer behaviours that are remaking America and the world; and explain what it means to businesses and leaders. In stark contrast to the usual tired narrative of America’s decline, the book offers an uplifting alternative account of innovation, inspiration and surprising opportunity.

The authors introduce us to people who are reinventing their lives and livelihoods in the wake of the “Great Recession” that has “rearranged priorities, awakened creativity and reconnected us to the people and things that really matter.” We meet Torya Blanchard, owner of “Good Girls Go to Paris”, a tiny crepe restaurant that serves low-cost but high-quality meals in Detroit, a city where shuttered shops now outnumber those that are occupied.

There is Paul Savage, CEO of Nextek Power Systems, which champions electrical equipment made from direct current (DC) systems, Thomas Edison’s original creation.



We encounter Leslie Halleck, the first in her Dallas locality to start raising chickens in her backyard, who created a business to train other locals to do the same. Leslie stands as a shining example of how households across America are moving to more self-reliant lifestyles by shifting from consumption to production.

Through Cuban immigrant and Dallas librarian, Mariam Rodriguez, we discover how public libraries have become training centres for those who need to brush-up on skills, conduct a job search, or get free instruction in English as a second language. Library use in America has in fact reached record levels during the recession as people seek out education and community cheer. Sixty-eight percent of Americans now have a library card, the highest percentage ever.

We learn how technology and social media forums are helping to make generational and geographical divides disappear. The book talks of how senior editor of Make magazine, a bible for do-it-yourselfers, Phil Torrone partnered with Limor Fried to create Adafruit Industries, which sells kits and parts for original open-source hardware electronic projects out of a small loft in lower Manhattan. Adafruit sponsors “MakerFaires”, an online social forum where Millennial-aged electronics enthusiasts are mentored by retired engineers from NASA and Boeing.

The authors also reveal how Rob Kalin and his partners in Brooklyn created Etsy, an online place where artisans around the world could display handmade work and sell these to global buyers.

New business models with innovative incentivisation ideas have also emerged from the ashes of the crash. Partners, Lynn Jurich and Ed Fenster, solved the basic problem in rooftop solar energy that roadblocks many aspiring adopters – upfront cost. Her San Francisco firm, SunRun, gives homeowners guaranteed fixed energy costs through fixed leases for 30 years (that can be transferred to subsequent house owners) along with free maintenance with little or no investment; setting a fixed cost for power. SunRun’s customer base has increased by over 400% in 2010.

We speak with Andrew Mason, founder of Groupon, the group discounting phenomena that mobilises the masses with daily deals on products, services and even meals. The discounts are unlocked and activated when a threshold number of people agree to pay for the coupon or “groupon”. We see city council recycling manager Jon Norton working with RecycleBank to initiate the use of trucks mounted with scales and bins with electronic identification tags; so that the paper, glass and metal left on the curb by homes can be weighed and the households rewarded with shopping discounts.

In Western Massachusetts, locals have even created their own currency called Berkshares (named after the Berkshire Mountains) to help native shops survive competition from national chains moving into small mountain towns. Thirteen bank branches and community businesses have agreed to exchange these dollars to keep cash within the community.

The shift has not only been harnessed by small start-ups but also by the behemoths of big business. A case study shows how Scott Monty, head of social media at Ford Motor Co has moved the company toward openness and transparency. His goal was to start conversations with anyone who cared to speak to Ford. The Fiesta Movement on Twitter required that Ford actually allowed people to talk about the car in a way that was “unedited, uncensored, unscripted.” This new culture, coupled with new products designed through close counsel with customers and Ford’s refusal of Government bailout money, has helped to engender new respect and interest for the brand.

As the world economy struggles to find its feet after the last economic earthquake and its aftershocks, people are clearly coping by moving away from the material towards the more fundamental and the ethical. The book is vital reading for any marketer seeking to recalibrate their campaigns after the recession.

It provides a useful blueprint on new consumer mindsets and movements in the 2010s. It shows how businesses can adapt to the new consumer spending reality (more inquisitive, less acquisitive); repositioning themselves to appeal to this new sense of value tied to traditional values.

Aaron rules Malaysia's Twitter land

By HARIATI AZIZAN sunday@thestar.com.my

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Aaron Lee may call himself an average Joe but this student is Malaysia's top Twitterer.

OUR Prime Minister Datuk Seri Najib Tun Razak may be the leader of the country but in twitterverse, another Malaysian rules the roost: Aaron Lee.

Err.. who, you ask? Better known as Ask Aaron Lee on the social media network, the international marketing student from Universiti Malaysia Sabah has notched a total of 169,056 followers 60,409 more than Najib, according to twitter counter Twitaholic.com.

The self-proclaimed Average Joe is quick to put things into perspective when the issue of his popularity is broached, though.

“Well, I guess that is only true (that I'm more popular than the PM) in Twitter because I have the time to manage my account more actively . . . since I don't have a country to manage!” he quips, before adding “As we all know, our PM is much more influential.”

Still, Aaron admits that he relishes being at the “top”. “It is definitely a nice spot to be in, although there are more accounts catching up like @AirAsia.”

Of course there are sceptics. First, there are the “Never heard of him” reaction when his name is mentioned.

Then there is the fact that the number of followers does not necessarily equal influence.

Huge following: Aaron at the recent global digital media conference iStrategy Singapore with friends Stephanie (left) and Amelia.

 

As fellow twitterer G. Yeoh highlights: “Twitterers who follow massively insane amount of people, and then get followed back doesn't count as popular'...” (Aaron follows 131,738 twitters).

Grey, another twitterer, nonetheless notes that “Aaron does have a lot of followers, including a few of the social media people in town... so maybe he is genuine.”

Crucially, before one dismisses him as a narcissist who cannot stop broadcasting what he had for breakfast and lunch or a shameless fame-seeker, it must be recognised that Aaron's tweets mainly deal with queries on social media hence the moniker Ask Aaron Lee.

He receives various questions from social media network problems to latest tech and business trends.
He points out that Twitter allows him to do the two things he likes connecting with people and learning new things, especially about social media.

“When I started using Twitter, I only wanted to connect with people. I love connecting with new people and engaging. I also love to learn and one way to learn is to read and tweet about it.”

The social media advice he offers is based on his own experience, he adds. The most common question people ask him, he shares, is “how do you build your followers?”

“Second question would be are you a celebrity?', which I usually respond with I wish' and a big LOL'.”

The strangest question he has ever been asked, he reveals, is What is the meaning of life?'

“Of course I didn't know, so I used Google and found out that the answer was the number 42' which appeared in the movie The Hitchhiker's Guide to the Galaxy.”

Aaron says he started tweeting in March 2009. “I actually stumbled onto Twitter by accident. I posted a link of a blog and I got curious about the site. I searched around and saw people talking; so I followed them and responded to them, and a few minutes later they responded back! Then I realised I had stumbled onto something big because it was something I couldn't do on other sites like Facebook.”

Now, he says, Twitter is his favourite social media network, Hands down.' What he likes most about Twitter is how fast it moves compared with other social networks.



“Stuff goes viral instantly, just like the news on the earthquake which hit Japan recently, and it allowed me to keep up-to-date with real time information from people on Twitter. So happens, one of my followers was from Japan, and I was able to get real time information from him quicker than a lot of people.”

Malaysians, however, generally prefer Facebook to Twitter, he concedes. “I think they feel more connected on Facebook as their friends are already on it. Not many Malaysians like to tweet, I guess.''

Still, he believes that Twitter is growing in Malaysia and this year could probably be the year (it explodes here).”

Unlike many social media proponents and observers, Aaron feels that Malaysians are not ignorant about the safety and privacy issues of social media.

“Most people around the world aren't really aware about their safety and privacy on Facebook anyway. Last year, someone from the US was fired because she posted something bad about her students in school. It shows how open Facebook or Twitter is.”

His advice to them to keep safe: “I would recommend thinking twice before you say or post something on social networking sites or set the privacy to be closed to the public. Today, even employers are online and they will monitor their employees' account.”

As for the use of social media among Malaysian politicians, Aaron feels there is a lot of room for improvement.

“I've seen improvements over the past year but I wish more of them would be more personal and more responsive. I notice there isn't a lot of two-way communication online.”

He says our PM has the best online profile and the best strategies on the social media network.

“Our Prime Minister created #TanyaNajib and allowed people to ask questions on Twitter and he would answer them on a video. I do hope in the future, he would take in more serious questions and stream the answers live on the Internet.”

He counts himself lucky to have the support of his family and friends.“At first they were sceptical about me being on Twitter but today they are extremely supportive.

“My brother is on Twitter too but he is not as active as I am. My mum and dad don't tweet but my dad is on Facebook and he has been extremely supportive, reading my feeds and liking' them.

“Some of my friends do poke fun at the nickname @askaaronlee just for laughs but my close friends are extremely supportive of what I do online,” he shares. Living in Sabah, Aaron shares that Internet connection can get testy but he is not deterred.

“The reception here is not good in certain parts of the state, I depend a lot on 3G so that I can bring my social networking' with me most of the time. And when the reception is not as good, I just land line (streamyx) when I get home.

“It's tough for me not to be online as most of my work requires me to be online. When I am not online, I am either reading a book, out with my friends or attending classes at my university.”

What is certain is that Aaron cannot imagine life without social networking, especially Twitter.
As he puts it, Twitter has changed his life completely.

“Three years ago I was on Facebook playing games and today, I am connecting with amazing people around the world like Alyssa Milano who is following me on Twitter.

“Last year, I was invited to attend a social media conference in Singapore because I connected with the creative director of Philips, @thomasmarzano, one of the speakers of the conference on Twitter. Today we're good friends.

“In April next year, I'll be hiking the Himalayas for charity with people whom I've connected on Twitter.”

LinkedIn IPO to value firm at $3.3bn

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LinkedIn's IPO in New York next week is expected to spark a gold rush of social networking flotations

Josh Halliday and Dominic Rushe,guardian.co.uk

Inside LinkedIn HQ, Mountain View, California. The firm expects to raise up to $274m in the first IPO for a major US social networking group Photograph: David Paul Morris/Bloomberg News

LinkedIn, the social network for business professionals, will be valued at $3.3bn (£2bn) when it floats on the New York Stock Exchange next week, setting off a multimillion-dollar gold rush of social media companies.

The nine-year-old social network plans to float on the NYSE on 19 May and said it could raise as much as $274m. In January the firm said it was looking to raise $175m in the initial public offering.

The firm is cashing in amid an increasingly frenzied investor appetite for the next generation of internet firms. It will become the first major US social network to go public and follows the float of Renren, China's version of facebook, which saw its stock soar 40% in its first day of trading on the NYSE earlier this month.

LinkedIn's float is expected to be followed by a wave of flotations including those of Groupon, the online discount business; Zynga, maker of the Cityville and Farmville online games, and Facebook. Facebook's valuation has soared in recent months as investors clamour for shares in the privately held company. The company was valued at $50bn when investors put in more cash in January but its privately held shares have since traded at prices that suggest the firm could be worth more than $70bn.


Analysts said LinkedIn's flotation would be seen as the first real indicator of investor appetite for US social media firms. Colin Gillis, internet analyst at BGC Partner in New York, said: "Renren had everything – it's Chinese and it's social networking. LinkedIn is going to be the first real indicator of demand for the US social network firms."

LinkedIn has about 100 million users and turned a profit of $15.4m on revenues of $243m in 2010. Though other social networks are far larger, notably Facebook with about 700 million users worldwide, the business orientation of LinkedIn's members make them potentially more valuable to advertisers. The company managed to grow through the recession and turned profitable last year having made operating losses from 2007 until 2009.

At $3.3bn, LinkedIn would be priced at 13 times last year's revenues of $243m – a lower multiple than its peers. Facebook has a multiple of 32 times its estimated 2010 sales, according to Nyppex, a private-share market.

The company will offer 7.8m shares at $32-$35 each – the top of its previously expected price range. It said it intends to use the proceeds for general corporate purposes, including working capital, sales and marketing, general and administrative matters and capital expenditures.

Reid Hoffman, co-founder and chairman, and the chief executive, Jeffrey Weiner, are selling a small number of shares, less than 0.5% of the company. They will join the company's other shareholders, Bain Capital, Goldman Sachs and McGraw-Hill, in selling 3m shares in the public offering. LinkedIn will offer a further 4.8m shares.

Other major investors – Sequoia Capital, Greylock Partners and Bessemer Venture Partners, which together own about two-fifths of the company – will not be participating.

Unlike more mainstream advertising-supported social networks such as Facebook and Twitter, LinkedIn has a "freemium" commercial model, offering premium services to paying customers, while basic features and registration are free.

According to its flotation prospectus, filed in January, revenue from paying users dropped to 27% of overall revenues for the first nine months of last year, down from 41% in the previous year. Job listings and recruitment contributed 41% of net revenue in the same period, up from 29%. Advertising revenue remained steady at 32%.

Morgan Stanley, Bank of America and JP Morgan are LinkedIn's three lead advisers.

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Apple bumps Google as most valuable brand

by Don Reisinger

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Chalk another one up for Apple.

Apple is the world's most valuable brand with a value of $153.3 billion, according to Millard Brown Optimor's annual "BrandZ: Top 100 Most Valuable Global Brands" study released today. In just one year, Apple's brand value has increased by 84 percent, the study said.
Google, the leader in the study for four years running, was knocked down to second place this year, losing 2 percent of its brand value to end up at $111.5 billion.

 

(Credit: Millard Brown Optimor)

IBM, McDonald's, and Microsoft rounded out the top five with brand values of $100.8 billion, $81 billion, and $78.2 billion in brand value, respectively.

The marketing and advertising industry, not surprisingly, believes strongly in the importance of brand value. "Strong brands, while not immune to the vicissitudes of the market, are more protected, prepared, resourceful and resilient," David Roth of WPP, parent company of Millard Brown Optimor, said in a statement.

If that's the case, Apple's ability to insulate itself from market issues has exploded over the last several years. Millard Brown Optimor said Apple's brand value has increased 859 percent since 2006--the first year of the BrandZ study. Moreover, Apple's year-over-year growth has easily overshadowed the rest of the market. According to the study, the top 100 brands have seen their combined value increase by 17 percent to $2.4 trillion since last year.



Apple wasn't the only fast mover in the study. Facebook's brand value jumped to 35th place, increasing 246 percent year over year to $19.1 billion. China's biggest search engine, Baidu, saw its brand value increase by 141 percent year over year to $22.5 billion, which gave it 29th place.

Such companies have helped tech lead the way in brand value. The researchers said tech companies make up one-third of the top 100 brands worldwide. Amazon.com was also able to beat Wal-Mart to become the most valuable retail brand with a value of $37.6 billion.

Emerging markets are playing a bigger role in the top 100 list. Back in 2006, just two companies from emerging markets made the list. Last year, that tally reached 13. And this year, 19 of the top 100 brands came from emerging markets.

Millard Brown Optimor's BrandZ study is derived from both financial performance and "in-depth" interviews of consumers about their perceptions of brands and why they choose a specific product over another. The company's database includes 2 million such interviews from 30 countries.

Don Reisinger is a technology columnist who has written about everything from HDTVs to computers to Flowbee Haircut Systems. Don is a member of the CNET Blog Network, posting at The Digital Home. He is not an employee of CNET. Disclosure.

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Targeted killngs, a human rights concern?

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Global Trends By MARTIN KHOR



The killing of Osama bin Laden, the bombing of Muammar Gaddafi’s house and the deaths of civilians by drone missile attacks are some incidents that highlight the many questions of the legality and human rights in the issue of targeted killings.

THE killing of Osama bin Laden was undoubtedly the biggest news last week. While the shooting of the al-Qaeda chief filled the headlines for days, the confusion over what happened and questions over legality of the killing had taken over the discussion soon after.

United States officials had originally announced that Osama was killed in a firefight in the house in Pakistan he was occupying, and that he used his wife as a human shield.

A few days later, it was admitted he had been unarmed, and there was no use of a human shield. Instead, there was no firing on the US forces, except for one person at the initial stage.

The death of Osama came a few days after the Nato bombing of the house of Libyan leader Muammar Gaddafi, which the Libyan authorities said had killed his son and several grandchildren.

This raised the question of whether it is legal for one state or states to kill persons, including political leaders, in other states.

These two events, in Pakistan and Libya, highlight the issue of targeted killings carried out by a government agency in the territory of other countries.

For example, drones controlled by operators thousands of miles away are increasingly being used to fire missiles at buildings and vehicles in which the targeted persons are believed to be in, with high “collateral damage”.

Drone attacks killed 957 civilians in Pakistan last year, according to the Human Rights Commission of Pakistan. This was almost as many as the 1,041 civilians killed by suicide bomb attacks in the same year.

The high civilian deaths and casualties by US drone attacks have caused great public resentment in Afghanistan and Pakistan, with the leaders in these countries warning the United States to control or curb the attacks.

As worldwide public clamour increased last week for more information on what really happened during the raid on Osama’s house, United Nations human rights officials also called on the United States to disclose the full facts, including whether there had been plans to capture him.

The UN High Commissioner for Human Rights Navi Pillay called for light to be shed on the killing, stressing that all counter-terrorism operations must respect international law.

Last Friday, a joint statement was issued by Christof Heyns, UN special rapporteur on extrajudicial, summary or arbitrary executions, and Martin Scheinin, special rapporteur on protecting human rights while countering terrorism. Both report to the UN Human Rights Council.




They said that in certain exceptional cases, deadly force may be used in operations against terrorists.

“However, the norm should be that terrorists be dealt with as criminals, through legal processes of arrest, trial and judicially-decided punishment,” they added.

A Reuters report from New York on Thursday said: “The legality of the commando killing of the al-Qaeda leader is less clear under international law, some experts said. President Barack Obama got a boost in US opinion polls, but the killing raised concerns elsewhere that the United States may have gone too far in acting as policeman, judge and executioner of the world’s most wanted man.”

The German newspaper Sued­deutsche Zeitung expressed misgivings about the legality of the killing.
“Which law covers the execution of bin Laden?” wrote its senior editor Heribert Prantl.

“US law requires trials before death penalties are carried out. Executions are forbidden in countries based on rule of law. Martial law doesn’t cover the US operation either. The decision to kill the godfather of terror was political.”

In May last year, the issue of targeted killings was addressed in a landmark report to the Human Rights Council by Philip Alston, who was then UN Special Rapporteur on extrajudicial, summary or arbitrary executions.

Alston, who is a law professor in New York University, criticised the CIA-directed drone attacks, which he said had resulted in the deaths of many hundreds of civilians.

“Intelligence agencies, which by definition are determined to remain unaccountable except to their own paymasters, have no place in running programmes that kill people in other countries,” the report said.

Alston suggested that the drone killings carry a significant risk of becoming war crimes because intelligence agencies “do not generally operate within a framework which places appropriate emphasis upon ensuring compliance with international humanitarian law”.

More generally, the report said that in targeted killings, there has been a highly problematic blurring and expansion of boundaries of the relevant legal frameworks – human rights laws, laws of war and use of inter-state force.

“The result is the displacement of legal standards with a vaguely defined “licence to kill” and the creation of a major accountability vacuum,” said the report, concluding that many of the practices violate legal rules.

It warned that whatever rules the United States attempt to invoke or apply to al-Qaeda could be invoked by other states to apply to other non-state armed groups.

The failure of states to comply with their human rights law and international human rights obligations to provide transparency and accountability for targeted killings is a matter of deep concern.

In light of the increasing use of targeted killings in recent weeks and years, the issues and proposals raised in the May 2010 report should be seriously followed up.

Britain's super-rich get even richer!

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Britain's richest people got collectively wealthier by 18 percent as the rest of the country weathered harsh government cuts, according to an annual list published Sunday.

Indian-born steel tycoon Lakshmi Mittal retained the top spot in The Sunday Times Rich List for a seventh straight year, despite seeing about £5 billion ($8 billion, 5.7 billion euros) wiped off his fortune.

The 1,000 richest people in Britain saw their wealth continue to bounce back from the recession and increase to a collective fortune of £395.8 billion.



The number of billionaires in Britain now stands at 73 -- up from 53 last year and almost matching the record of 75 set in the list of 2008 before the financial crisis. Forty are British-born.

Russian businessman Alisher Usmanov moved from sixth position to second spot in the list after adding £7.7 billion to his fortune, which is now worth £12.4 billion.

Usmanov owns a large stake in Russian iron and steel firm Metalloinvest and recently courted controversy in Britain by trying to build up a controlling stake in English football giants Arsenal.

His bid was thwarted last month when US sports tycoon Stan Kroenke took control of the Premier League side.
Meanwhile the fortune of Mittal, the London-based head of ArcelorMittal, the world's largest steel maker, fell by around 22 percent to £17.5 billion in the past 12 months, the biggest drop on this year's list.

The huge fall in the 60-year-old's wealth was driven by a plunge in the share price of ArcelorMittal as the global steel industry struggled to cope with costly raw materials and slow demand.

The highest new female entry is Chinese businesswoman Xiuli Hawken, 48, who made her fortune converting underground military shelters in China into underground shopping malls. She was ranked 61st, with a fortune of £1.06 billion. She lives in London.

Another new female entry is Mary Perkins, who founded the chain of glasses shops, Specsavers, with her husband Douglas. Their wealth has increased 42 percent since last year and stands at £1.15 billion.

The increased wealth comes as most of the country faces harsh austerity measures introduced by the coalition government to cut Britain's record deficit.

The list, which is for those who have Britain as their home or main base of operations, is based on identifiable wealth such as land, property or significant shares in publicly quoted companies, and excludes bank accounts.

- Britain's top 10 billionaires in The Sunday Times Rich List 2011 (last year's rank in brackets):

1. Lakshmi Mittal -- steel -- £17.514 billion (1st)

2. Alisher Usmanov -- steel -- £12.4 billion (6th)
3. Roman Abramovich -- oil, industry -- £10.3 billion (2nd)
4. The Duke of Westminster -- property -- £7 billion (3rd)
5. Ernesto and Kirsty Bertarelli -- pharmaceuticals -- £6.87 billion (4th)
6. Leonard Blavatnik -- industry -- £6.237 billion (15th)
7. John Fredriksen and family -- shipping -- £6.2 billion (16th)
8. David and Simon Reuben -- property, Internet -- £6.176 billion (5th)
9. Gopi and Sri Hinduja -- industry, finance -- £6 billion (new)
9. Galen and George Weston -- retailing -- £6 billion (7th)

© 2011 AFP
This story is sourced direct from an overseas news agency as an additional service to readers. Spelling follows North American usage, along with foreign currency and measurement units.
 

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