US Court Drives FCC Towards Nuclear Option to Regulate Broadbank

• By Ryan Singel

An US federal appeals court all but told the FCC (Federal Communications Commission) Tuesday that it has no power to regulate the internet, putting large chunks of the much-lauded national broadband plan at risk. And the FCC has only itself to blame.
Telecoms and many internet activists have long argued that the internet is a developing technology that was innovating so quickly that strict regulations would hamper it. In 2005, that argument drove the FCC under the Bush Administration to win a fight in the Supreme Court for the right to deregulate broadband providers, classifying them as an “information service,” largely outside the FCC’s power, rather than a “telecommunications service” that could be regulated like the phone system.

Following that win, the FCC simply issued a set of four principles of net freedom that it said it expected broadband companies to follow. They promised that broadband users could plug in whatever devices they wanted to their connection and then use whatever software or online application that they liked — without interference from their provider. Those principles never went through a rule-making period, and when the FCC went after Comcast for blocking peer-to-peer file sharing services, the company sued the commission in court.
And, on Tuesday, won.

Now broadband companies effectively have no regulations that constrain them, as the FCC has left itself with no statutory means to control what telecoms do with their internet networks.

A broadband company could, for instance, ink a deal with Microsoft to transfer all attempts to reach Google.com to Bing.com. The only recourse a user would have, under the ruling, would be to switch to a different provider — assuming, of course, they had an alternative to switch to.

Companies can also now prohibit you from using a wireless router you bought at the store, forcing you to use one they rent out — just as they do with cable boxes. They could also decide to charge you a fee every time you upgrade your computer, or even block you from using certain models, just as the nation’s mobile phone carriers do today.

While this might seem like a win for the nation’s broadband and wireless companies, the ruling could be so strong that it boomerangs on them. For instance, if the FCC is left without the power to implement key portions of the National Broadband Plan — a so-far popular idea — then Congress or the FCC may have to find a way to restore power to the commission. That could leave the FCC stronger than it was before the ruling.


The option favored by public interest groups is for the FCC to take the drastic course of formally reclassifying broadband as a regulated service, reversing the position it held and defended just a few years ago.


“The FCC should immediately start a proceeding bringing internet access service back under some common carrier regulation similar to that used for decades,” said Gigi Sohn, the president of the pro-net neutrality group Public Knowledge. “In our view, the FCC needs to move quickly and decisively to make sure that consumers are not left at the mercy of telephone and cable companies.”

The FCC’s own statement on the decision acknowledges it will have to do just that.
“Today’s court decision invalidated the prior Commission’s approach to preserving an open internet,” said FCC spokeswoman Jen Howard in a written statement. “But the Court in no way disagreed with the importance of preserving a free and open internet; nor did it close the door to other methods for achieving this important end.”

“Other methods” obliquely refer to either Congress passing a law giving it the power (a process that would likely take years) or the FCC reclassifying broadband as a telecommunications service — in legal terms, moving broadband from Title I to Title II of the Telecommunications Act.

Title II-type regulations should be very familiar to most Americans — they are the rules that apply to phone services. For instance, phone customers have the right to attach whatever device they like to the phone network — from rotary-dial machines to modems to fax machines — so long as they don’t harm the network. They also have the right to call anyone else in the country from friends to astrology services, and phone companies are obliged to connect the call — making them into “common carriers.”

Phone companies that own the physical lines that connect to your house have to rent them to competing services at fair rates. They also have to provide cheap services to low-income customers — subsidized by a tax known as the Universal Service Fee. And they have their prices regulated.

That doesn’t mean moving broadband into “Title II” would impose the full spectrum of telephony regulation on internet service. The FCC has a power known as “forbearance” that lets it lift selected obligations, according to Free Press’s policy counsel Aparna Sridhar.

“Let’s say Title II has 50 provisions,” Sridhar said. “The commission can decide 48 of these don’t make sense for broadband, but one or two or three do. It will be a skinny Title II. Monopoly-style rate regulation is not necessarily the outcome.”

Another consideration is whether the FCC would then be in the business of regulating the content of the internet — as it famously does with fines against broadcasters for profanity on the radio or over-the-air television. Sridhar said that wouldn’t have to be the case.

“If the FCC decided to reclassify the underlying transmission, that doesn’t mean that Hulu or The New York Times or your favorite app will be regulated.”

Hoping to prevent the FCC from reclassifying broadband, the Wireless Association — an opponent of net neutrality rules — argued before the ruling arrived that the Comcast case wouldn’t undermine the national broadband plan.

“I don’t think the National Broadband Plan is in jeopardy, based on the Comcast case,” Guttman-McCabe said a day before the ruling. “Look at things about disclosure and even the Universal Service Fund — there is no need to have Title II authority to address those issues.”

But the court’s reasoning undermines Guttman-McCabe’s theory. While it was tangential to the net neutrality case, the appeals court took the time to point out that the Universal Service Fund was approved by the courts only because it was tied to the FCC’s “Title II responsibility to set reasonable interstate telephone rates.” In short, the court is saying that the Universal Service Fund couldn’t be changed to support broadband, since the FCC has no similar mandate to set broadband rates.

The Wireless Association welcomed the ruling in a written statement Tuesday, ignoring the tricky question of how the FCC could implement large portions of the National Broadband Plan without the authority to regulate broadband.
“Today’s unanimous and very thorough opinion in the Comcast case makes clear that the FCC needs to focus on the important task of making the promise of the National Broadband Plan a reality by spurring investment, innovation and job growth, and turn away from calls to impose restrictive regulations on broadband providers and the internet ecosystem,” said Steve Largent, the group’s CEO.

Comcast also welcomed the ruling, while trying to strike a conciliatory note by saying it likes the idea of open internet principles.

“We are gratified by the Court’s decision today to vacate the previous FCC’s order,” said Sena Fizmaurice, a Comcast spokeswoman. “Comcast remains committed to the FCC’s existing open internet principles, and we will continue to work constructively with this FCC as it determines how best to increase broadband adoption and preserve an open and vibrant internet.”

Meanwhile, Thursday marks a now odd deadline the FCC’s attempt to bolster its net neutrality authority by creating a proper rule-making process last fall that would have codified the ad hoc principles it used to go after Comcast.

Companies and interest groups were set to file final comments by Thursday on that rulemaking — which rested on the same arguments the court just struck down.

That makes the proceeding mostly useless, even though the FCC will still likely take the comments to heart, if and when it ever regains any authority over broadband.

 Craig A. Rodway,  
Source: http://newscri.be/link/1064454

• Court to FCC: You Don’t Have Power to Enforce Net Neutrality


• Comcast Ordered to Allow Free Flow of File Sharing Traffic


• FCC Backs Net Neutrality — And Then Some

Skype, Wireless Companies Fight to Shape Net-Neutrality Regs

FCC Approves Net Neutrality Rules, Now the Fight Begins

Comcast Discloses Throttling Practices — BitTorrent Targeted

Fears Swirl Over Whether FCC Will Enforce Comcast Throttling Order 

   Tags: FCC, Net Neutrality

The Right Way to Earn Money – Blogging to The Bank 2010

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If you are looking to make this system work for you and you want to get to be successful online, you will need to put some effort into it, as with any home based business you can expect slow growth at first but as you learn it will grow. Once you have put the work in and have the system in place and the methods down, your business will take off flying. Then you will be able to enjoy watching the money roll into your bank account thanks to the automated system.

So in the end, Blogging To The Bank 2010 is worth every penny. Its a great system that will allow you to make a good deal of money through blogging. While there are many other courses on the Internet that claim to offer similar programs, most of them are scams. This online course gives you everything you’ll need to build a successful online business. It will show you how to build a great blog, then keep building on it along the way. You ultimately decide how much money you will make using the world of blogging.
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Technorati Tags: Blogging, blogging to the bank, blogging to the bank 2010, blogging to the bank 2010 bonus, blogging to the bank 2010 review, rob benwell

Tags: Blogging, blogging to the bank, blogging to the bank 2010, blogging to the bank 2010 bonus, blogging to the bank 2010 review, rob benwell

5 Secrets of YouTube’s Success

Astley: Getty; Vader, dalmatian, Cyrus: Corbis

As the video giant celebrates its fifth anniversary, Wired goes behind the scenes of the site that launched a million memes.

The Content

It elevated the absurd.

These early YouTube hits turned unknowns into Internet sensations. We tracked down five surprise superstars to see how they’ve capitalized on their fame.
— Steven Leckart

“Evolution of Dance”

Date uploaded 2006
Views to date 137 million
Motivational speaker Judson Laipply first performed his pop-dance montage as the finale of his act. Now it’s the second-most watched clip on YouTube. His popularity bumped up his speaking fees and inspired him to publish a self-help book, Might As Well Dance.
Excerpts from an interview with Judson Laipply, inspirational comedian:

“Numa Numa”

Date uploaded 2006
Views to date 42 million
Gary Brolsma’s spirited lip sync to a techno tune inspired legions of imitators — including a spoof on South Park. He has since launched his own Numa Network and appeared in a Vizio commercial during the Super Bowl. The 24-year-old still lives at home with his mom.
Excerpts from an interview with Gary Brolsma, singer/musician:

“Here It Goes Again”

Date uploaded 2006
Views to date 50 million
When LA band OK Go couldn’t afford to make a video, singer Damian Kulash tapped his sister, rookie filmmaker Trish Sie, to shoot it. The band’s treadmill moves won the vid a Grammy, and the album sold more than 250,000 copies in the US. Sie now directs TV commercials.
Excerpts from an interview with Trish Sie, director/choreographer:

“Winnebago Man”

Date uploaded 2006
Views to date 1.5 million
VHS copies of a 1989 sales video featuring foulmouthed pitchman Jack Rebney were circulating in the ’90s, but YouTube made them into a viral hit. The reclusive Rebney, age 80, is now the subject of a documentary, Winnebago Man, due out this summer.
Excerpts from an interview with Ben Steinbauer, director/writer/producer:

“Chocolate Rain”

Date uploaded 2007
Views to date 47 million
Tay Zonday’s piano balladeering took center stage when he was still a PhD student. The 27-year-old now lives in LA as a working musician, licensing songs, selling tracks, appearing in Dr Pepper commercials, and cashing in on the ads sold against his YouTube videos.
Excerpts from an interview with Tay Zonday, singer/actor:

Wired’s YouTube Video Jukebox

Evolution of Dance

Numa Numa

Here It Goes Again

Winnebago Man

Chocolate Rain

The Business Model

It got creative with advertising.

Once YouTube broke out of the one-size-fits-all mindset, the money started to flow.
— Fred Vogelstein

By 2006, YouTube was a hot property. Microsoft, Yahoo, and News Corp. were all reportedly looking to buy it. Deep-pocketed Google won the day, paying $1.65 billion. Free with purchase: a financial sinkhole. YouTube had no profits, and no plan for creating any.

Worse, the more popular the site grew, the more money it lost — a fiscal annoyance that soon became a huge problem for Google. True, the emperors of search built their own servers and negotiated some of the cheapest bandwidth rates in the world. But at YouTube scale, even cheap was starting to feel expensive. As YouTube topped more than a billion clips a day, Web video began to cost Google hundreds of millions of dollars a year.

The losses proved so great — and a business model so elusive — that some company insiders wondered whether the deal might turn out to be one of the dumbest business moves in the short and frequently witless history of the Internet.
Fast-forward almost four years and it looks like the Google team that was tasked with making YouTube profitable might have cracked the code. “We’re finally at a point where more traffic doesn’t hurt us. It helps,” says director of monetization Shishir Mehrotra.

The revelation that got the company to that point seems obvious in retrospect: YouTube stopped copying Google. The search giant’s success is based on the premise that all visitors want the same thing: to search, find, and leave as quickly as possible. But YouTube visitors have much more diverse needs. Some come to watch short clips of cats doing silly things, others to view TV shows or how-to videos. Some have 30 seconds to kill, others spend an afternoon. Mehrotra and his team developed different advertising approaches for each class of user.

So say you want to see a TV show. Mehrotra’s plan could let you choose a long commercial at the beginning or the more traditional interspersed format. He’s also toying with letting users skip the ads. Amazingly, Mehrotra says, sponsors love that last part, because viewers who choose not to skip them are opting in — priceless reassurance for advertisers that allows the big G to charge higher rates.

Another major step was the way YouTube approached illegally uploaded material (see “It Plays Nice With Hollywood,” right). Instead of pulling down copyright-protected clips, the system lets studios and labels cash in on the ads sold against their content. Rights holders can earn a cut off videos they didn’t even upload.

Between these new tactics and the ordinary ads, independent analysts expect YouTube to generate as much as $700 million in revenue this year. That’s still a long way from justifying its high price tag, but at least the sinkhole is starting to look a little like a cash cow.




Monkey, baby, kitten: Corbis

The Legal Picture

It plays nice with Hollywood.

YouTube has a smart way to spot copyrighted content. And the studios are cashing in.
— Steven Levy

Star rating distrubtion

From the beginning, YouTube executives knew they had a big problem. For every grainy home movie posted on the site, countless copyrighted videoclips were also being uploaded — without permission. Hollywood started to freak. But rather than raise a Napsterian middle finger, YouTube agreed to yank the content whenever requested.

The Digital Millennium Copyright Act provides video-sharing sites some protection against their users’ transgressions, but it’s still a legal gray area. “As traffic grew, so did the number of illegal files,” says Chris Maxcy, YouTube’s director of partner development. “We started to ask ourselves, how can we even control this?”

Engineers began taking a hash — a digital representation — of any infringing video. If someone tried to upload the same clip again, it could be blocked. But the system couldn’t recognize slightly different versions of the same content, so some copies slipped through. By 2007, at least six hours of video was being uploaded every minute, a good portion of it illegal.

YouTube needed a smarter system, and later that year it came up with something called Content ID. It works like this: Engineers create a spectrogram — a graphical representation of audio and video output — of each file. Unlike hashes, spectrographic data can be scanned for similarities, not just exact duplicates. When a user uploads something, it’s cross-referenced with a database that’s now brimming with more than a million reference files. If a close match turns up, the system checks the guidelines for that piece of content. If it’s cleared for posting, YouTube alerts the copyright holder, which can choose simply to monitor its stats or begin sharing the ad revenue.

Today a third of the ads on YouTube are served alongside copyrighted content found through the system. Companies like Sony, Warner Bros., EMI — even copyright stickler Disney — participate, allowing the movie-trailer remixes and kitten videos backed by pop soundtracks to keep on streaming.

YouTube Videos Watched Per Month (Per Viewer in the U.S.)
Source: Comscore

The Content Producers

It launched a new creative class.

YouTube’s top celebs are quirky and lo-fi, but they draw audiences any cable network would envy.
— Claude Brodesser-Akner

Fred Figglehorn

Joined YouTube October 2005
Total views 452 million
Sixteen-year-old Lucas Cruikshank has been uploading videos of himself portraying a lonely kid for about five years. Annoyed by his grating, computer-enhanced voice? Wait till you hear about his six-figure income and freshly inked movie deal.

Ryan Higa

Joined YouTube July 2006
Total views 290 million
At 18, Ryan Higa was studying nuclear medicine at UNLV. Now 19, he has switched his major to film and collects a tidy allowance from his channel, Nigahiga, which offers lo-fi parodies and polemics riffing on everything from Asian TV to the inanity of Twitter.

NewsPoliticsNews

Joined YouTube February 2009
Total views 57 million*
When “doctor Jon” started posting clips of the political commentariat’s latest distortions, he drew millions of views. Then he got banned for posting network content without permission. Twice. Now the anonymous MD curates the videos for Mediaite.
*Includes sister channel news1news.

David Colditz

Joined YouTube August 2007
Total views 146 million
The musician with the most subscribers on YouTube isn’t Jay-Z or Miley Cyrus. It’s David Colditz, aka Dave Days, whose power-pop parodies have earned him 146 million views. Colditz is at work on an album, but he might not seek a record deal. He might not need one.

Natalie Tran

Joined YouTube September 2006
Total views 212 million
A student at the University of New South Wales, the Internet-famous Tran has no interest in Hollywood. “I’m unambitious,” she says. She’s satisfied to upload her observational comedy while pulling down a nice income from the ads YouTube serves against her clips.

Wired’s YouTube Video Jukebox

Fred Figglehorn

Ryan Higa

NewsPoliticsNews

David Colditz

Natalie Tran

The Future

It’s willing to reinvent itself.

We asked Margaret Gould Stewart, YouTube’s head of user experience, to explain how her redesign of the site will keep you hooked.
— Mathew Honan

Why mess with a good thing?
The old YouTube worked really well if you knew what you wanted to watch, but there were a lot of situations that we could’ve been serving better. We want to get incredibly smart about putting videos in front of you that you compulsively have to watch.
How do you do that?
By bringing context into the experience. Historically, the site has been designed around the video you’re watching right now — related videos use that first clip as a starting point. But what if you’re not just looking for content related to that subject? People who come to the site from social networks might be more interested in what else their friends are watching. The idea is to understand the mindset that people bring with them and build off that.
Does that mean a lot of the changes are aimed at users who have an account with YouTube?
Exactly. If you log in, you can import contacts from Facebook or Gmail, and that’ll push a pretty rich set of videos at you immediately — things your friends have favorited or rated or uploaded.
What if you don’t log in?
We’ll still show you the five videos that everybody should watch today. You know — a plane has crashed in the Hudson River. But it’s kind of a give-and-take: We want to reward people who give us information, so they see that it’s worth it.
What’s the ultimate goal?
Once we process these social signals — your behaviors and actions — we’ll be able to deliver a whole playlist that’s made just for you. We want you to go into passive mode, sit back, and watch.

The Most Discussed Videos of All Time

01 “10 questions that every intelligent Christian must answer” (909,978 comments) 02 “Macedonia Is Greece” (797,051 comments) 03 “Susan Boyle — singer — Britain’s Got Talent 2009” (507,691 comments) 04 “Leave Britney Alone!” (457,438 comments) 05 “Miley Cyrus — ‘7 things’” (453,649 comments)

Margaret Gould Stewart, Susan Boyle: AP

Source: http://newscri.be/link/1062599

Report: Apple adds engineers for new chip design

Apple is adding engineers from Intrinsity, a small chip company that has been working with Samsung to boost processor performance and may be connected to the iPad's A4 chip design, according to a Macrumors report.

As reported last month, Linley Gwennap, president and principal analyst of The Linley Group, believes the iPad's 1GHz A4 chip uses an ARM CPU designed by Intrinsity and manufactured by Samsung. Apple's iPhone also uses ARM chips supplied by Samsung. Typically, chip companies take the basic ARM blueprint and mix and match features as they see fit.

The iPad's main circuit board with the A4 chip: Intrinsity inside? And notice the preponderance of Samsung-branded silicon

Source: http://newscri.be/link/1062452

A Wealth of Issues for Financial Planners

Progress and problems of the financial planning sector

By FINTAN NG

fintan@thestar.com.my

ALTHOUGH financial planning has been around in the local financial services landscape for years, most people are not aware of the industry and what its practitioners, who call themselves wealth planners or financial planners, do.

The situation becomes even more confusing to the average person with little or no knowledge of what financial planning is as there are now products that are bundled with insurance plans.

There are financial planners who are independent of any bank or product supplier and then there are tied agents of these players. Much of the industry is regulated by the Securities Commission and Bank Negara.

The question arises – are insurance agents financial planners too, in the broadest sense of the term, since they too help clients plan their finances by making sure their clients do not get into debt when they fall sick?

Readers should not forget that health plans have the investment-linked option and these options are often touted as a way to save. But an observer say insurance health plans, even if it comes with the investment-linked option, should not be seen as a savings plan at all.

Financial Planning Association of Malaysia (FPAM) president Wong Boon Choy says the debate is still raging as to what constitutes financial planning.

The FPAM has 10,000 individual members and 44 corporate members.

“There are purists on the one hand who insists that financial planning involves pure advisory work and all else is a sham. On the other hand, there are those who strive to seek a better way to serve their clients in their provision of financial products and services and seek to utilise the financial planning approach to ensure that they recommend the appropriate products and services,” Wong points out.

“At the end of all these discussions, the key, we feel, is still for consumers to be well educated and have a personal interest in their finances, and for finance professionals, no matter in which sector they are in, to be in possession of the necessary knowledge and competencies and that in all communication between them, appropriate disclosures and transparency prevail,” Wong says.

A Penang-based practitioner, Lion Wealth Advisors Sdn Bhd director K.P. Thum sums up the issues of the industry into four areas – human resource, markets, regulations and limited choices in products.

He says there are not many CFP, RFP or ChFC holders in the country. “People are not interested to take it up full time because there’s no track record of success,” Thum says.

He believes the public awareness of the benefits of financial planning or engaging a financial planner is lacking because there is a lack of concerted action on the part of players such as practitioners, suppliers, authorities, associations and other related parties to educate the public.

“There may also be confusion and lack of trust as there have been instances of fraud by non-licensed practitioners claiming themselves to be financial planners,” Thum says, adding that the concept of paying fees to write a financial plan is still very new.

He points out that one example of the low level of “financial intelligence” of the general public is the way most are attracted by high returns without knowing the risks.

“Most are interested in the features of a product such as the investment return but are not interested to find out whether the product is helping them meet their financial goals or whether it’s necessary or duplicates what they already have,” Thum says.

He says the authorities may also be unsure on how to regulate the industry especially for independent financial planners not attached to a bank or supplier and who imposed high requirements and conditions for practitioners.

“Major financial product providers do not open their products to independent financial planners because of how it may affect existing channels such as tied agents and banks,” Thum says.

Standard Financial Planner Sdn Bhd chief executive officer Alfred Sek says the situation is confusing for the public as financial institutions such as banks, insurance and unit trust companies are offering financial planning services through their agents and relationship managers.

He says financial planners need to be licensed (as they are by the Securities Commission and Bank Negara) but often the ones in banks are not.

“The problem is people chose to ignore it as there are no enforcement and not enough publicity to inform the people. If this is allowed to go on, the growth of the local financial planning industry will be greatly affected,” Sek says.

He says one option is to review the licensing entry requirement to allow more practitioners from the insurance and unit trust industries to be licensed as practised in Singapore and other developed countries.

“To promote and create value for the licensed firms, all stakeholders in the financial services industry must work together to address the obstacles and challenges faced by the practitioners,” Sek says.

NEM – a steep hill to climb

COMMENT BY STEWART FORBES

WITH the publication of Part 1 of the National Economic Advisory Council’s New Economic Model (NEM) For Malaysia report on March 30, the Prime Minister has committed the country to a fundamental process of change.

Much of the NEM report’s findings are already known and have been debated extensively by both the Government and the private sector.

The falling levels of foreign direct investment (FDI), the relatively poor levels of productivity, the over-dependance on foreign labour and the low levels of expenditure on research and innovation have all been identified. Similarly, the distortions emanating from a low-cost, subsidy-rife economy and some poor perceptions of Malaysia externally are not newly discovered.

Where the NEM report scores, however, is in its bringing together all the disparate elements in our current economic situation and setting out in stark detail the implications for Malaysia if no change is made.

While growth continues, it is fragile, and if the country is to continue to be locked into the so-called “middle-income trap” then not only will we see many nations increase the economic distance between themselves and Malaysia but other, more aggressive developing nations, will overtake us, pushing Malaysia to lower and lower world rankings.

Ultimately, instead of Malaysia gaining “promotion” to the champions league of nations, we could find ourselves “relegated” to division two or even lower.

And here is our dilemma: If Malaysia’s attractiveness as an investment destination deteriorates, then economic activities will decline since we do not have the population base to drive growth solely through domestic consumption. And if economic growth declines then the country cannot afford the incentives and fiscal policies that are necessary to sustain investment attractiveness. Thus, a vicious downward spiral is generated.

Accordingly, as the Government knows well, and has articulated both verbally and now through the comprehensive NEM report, there is no status quo solution – we cannot stand still. Malaysia either accelerates upwards economically or risks a downward spiral and possible stagnation.

Much to applaud

This might seem a dismal picture but just as the issues are identifiable, so too are many of the solutions. From a private sector perspective there is much to be applauded in the honest appraisal presented by the NEAC’s NEM report and many of the solutions proposed will materially improve economic performance. But only if there is a concerted effort to implement change and the will exists to take what in some cases will be difficult decisions.

There is no one “silver bullet” that will fix everything; a range of actions is necessary, some palatable and some less so. But seeking to implement only the popular measures and ignore the unpopular ones is a sure recipe for failure.

From a private sector point of view, therefore, are the outline proposals in the NEM report likely to stimulate business and allow the NEM to emerge? At the core of any success must be business growth, new sources of income generation and increased investment.

While it is not the purpose of these short comments to examine the socio-economic aspects of the NEM, it should be apparent that the laudable goals of poverty eradication, affirmative action programmes in favour of under-privileged groups and a more equitable distribution of wealth cannot take place if there is no wealth to be distributed.

Thus, a move towards a high-income economy with higher value-added business contributing to a significantly stronger gross domestic product (GDP) growth is a mandatory success factor for the NEM and its associated objectives.

The NEM calls for a reinvigoration of the private sector and a return to private sector-led investment levels of the 70s and 80s rather than the Government-led investment scenario that now appears to be the norm.
This is a difficult challenge and a steep climb. Fundamentally, when the details of the implementation of the NEM are revealed over the next few months following consultation with stakeholders, investors will want to see a number of clear indications of commitment to a more conducive business environment. Some of these would include:

● First and foremost evidence that the Government will take the difficult decisions necessary without backtracking. It is inevitable that some reforms not favour certain groups who benefit today from special protected positions. These groups are always the most vociferous in defending their positions.

If the Government allows itself to be browbeaten into reversing reform policies once agreed upon, then the entire structure of NEM will be compromised and sceptical investors will run for cover to business regimes that offer greater certainty;

● Foreign investors must be assured of ownership and management of their business operations. This is more relevant in the context of new high-value industries and services where intellectual capital and IP form a larger element of the business capital than bricks and mortar and machinery.

Growth from tech transfer

While positive steps have already been taken in this direction, all government ministries need to embrace an open, liberalisation agenda so that growth is derived more from technological transfer and the multiplier effects of clustering and new cutting-edge industries, rather than demanding a minority slice out of every pie.

The proposed corporatisation of Malaysian Industrial Development Authority, and its enhanced role in investment promotion, is an important component in a better integrated process of investment identification, negotiation and finalisation;

● The NEM must deliver on the human capital needs of a new economy. This is perhaps the single biggest problem confronting us today and is a real barrier to developing new business, especially in the high-tech arena.

A reduction in over-dependance on foreign labour will spur a greater emphasis on productivity in support of a higher income model.

At the same time, the new technologies and processes associated with the desired new investments demand skills that are in limited supply today. This is ultimately unacceptable to investors; and

● Finally, the total environment surrounding business will need attention under the NEM, the fiscal environment must encourage risk taking and innovation through appropriate incentives and low corporate taxation. Corruption must be a zero tolerance feature of society and personal security must be an automatic assumption of residents’ rights.

The NEM report is a positive and honest appraisal of the current national dilemma and points clearly to desired reforms to advance the nation, both economically and socially. It has raised considerable expectation in the minds of both the people and business. If it fails to deliver through a lack of political will, excessive compromise or prevarication, then the negative impact may be severe.

The private sector has concerns that previous experience suggest deliverables rarely match rhetoric and both domestic and foreign investors will find it difficult to re-energise in terms of expansion or new investment if uncertainty prevails.

The clarity and forthrightness of the NEM report Part 1 make it an exemplary document. It must now be matched with equal clarity and decisiveness in setting out and implementing the action agenda.

We have a steep hill to climb, but the ultimate goal justifies the effort and support by all Malaysians.

● The writer is executive director of the Malaysian International Chambers of Commerce and Industry.

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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