Can The Human Brain See Quantum Images?

Nobody knows whether humans can access exotic images based on quantum entanglement. Now one physicist has designed an experiment to find out

The strange rules of the quantum world lead to many weird phenomena. One of these is the puzzling process of quantum imaging, which allows images to form in hitherto unimagined ways.

Researchers begin by creating entangled pairs by sending a single laser  beam into a non-linear crystal, which converts single photons into entangled pairs of lower frequency photons, a process known as parametric down conversion. A continuous beam generates a series of pairs of entangled photons.

Next, they send the entangled photons towards a pair of detectors. Each member of an entangled pair by itself fluctuates in random ways that make its time and position of arrival uncertain.

Use one of the detectors to receive just one half of the entangled photons and the result is a blur, smeared by the process of randomness.

But use two detectors to receive both sets of photons and the uncertainties disappear, or at least are dramatically reduced. In this case, the 'image' is pinsharp. The uncertainty disappears because of the quantum correlation between the entangled pairs.

Researchers have extended this technique by superimposing a pattern on the wavefront of the initial laser beam, creating shapes such as a donut. They've shown that a single detector alone cannot 'see' a such a donut image even though it appears clean and sharp when two detectors pick up both sets of the entangled pairs.

These strange pictures are called quantum images or higher order images and quantum physicists think they can use them to carry out exotic processes such as sending information secretly and performing quantum lithography.

Today, Geraldo Barbosa at Northwestern University in Evanston, Illinois, raises another interesting possibility. He asks whether it is possible for humans to see higher order images and suggests that a relatively simple experiment could settle the question.

This experiment consists of a laser beam shaped into an image, such as the letter A. This laser then hits a non-linear crystal, generating entangled pairs of photons that retain this image shape. The set up is such that these photons are then detected, not by conventional detectors, but by human eyeballs.

The question is whether the human retina/brain combination can access the correlation that exists between the entangled pairs. If so, the human would see the letter A. If not, he or she would see only a blur.

Of course, there are some significant experimental challenges. One is to design the experiment in a way  that ensures the subject can only receive the image through this quantum process and not through some other channel, such as talking to the experimenter. However, that should be straightforward for any psychologist to design.

Another problem, however, is that the retina can only detect photons in groups of 7 or more and these have to arrive within a specific time window. Only then can a human subject 'see' the result. Generating the required intensity of entangled photons is one challenge.

The key question is whether the entanglement survives this group process. If the brain can access the quantum correlations, the image will be visible. If not, the result will be a blur.

That's a fascinating experiment not least because a positive result would be astounding. It would show that we humans can essentially 'see' entanglement.

Barbosa points out that new forms of imaging are not unknown in the animal world. Various animals and insects see in the infrared and ultraviolet, giving them an entirely different perspective on the world.

There is also some evidence that birds can 'see' the earth's magnetic field thanks to the quantum interaction between the field and light sensitive molecules in their retinas.

So the possibility that new ways of seeing the world can emerge is not unprecedented. However, the idea that humans can access higher order images thanks to quantum entanglement is clearly an idea of a different ilk.

Perhaps the most exciting aspect of Barbosa's idea is that it appears feasible now. There's no reason why this experiment couldn't be done in any quantum optics lab in the near future.

We'll look forward to seeing the results.

Ref: arxiv.org/abs/1202.5434: Can humans see beyond intensity images?

TRSF: Read the Best New Science Fiction inspired by today’s emerging technologies.

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IBM Scalable Quantum Computing

IBM Paves The Way Towards Scalable Quantum Computing

Alex Knapp, Forbes Staff

Three superconducting qubits. (Credit: IBM Research)

IBM has announced today that it’s achieved a breakthrough in its work to develop scalable quantum computing by developing a superconducting qubit made from microfabricated silicon that maintains coherence long enough for practical computation.

And now that I’ve thrown a ton of information at you in one tiny sentence, let’s break it all down. I had a chance to talk with IBM scientist Matthias Steffen about this new technology, and he broke it down for me. Let’s start with the qubit. Classical computing, as you probably know, is based on the bit. A bit can exist in one of two possible states, which are typically referred to as “0″ or “1″. A qubit is the equivalent of a bit for quantum computing. It can be in three possible states – “0″ or “1″ or both. The “both” state is known as the superposition. Now, the difference may seem subtle, but mathematically, it’s huge. A few hundred qubits can contain more classical bits of information than the the universe has atoms.

IBM Shrinks Computer Memory Into Only Twelve Atoms
  Alex Knapp Forbes Staff
 
What makes quantum computing challenging is the problem of decoherence. When a qubit is moved from the 0 state to either 1 or the superposition, it will decohere to state 0 due to interference from other parts of the computer. In order for quantum computing to be scalable and practical, the qubits have to be coherent for a long enough time that error-correction techniques can be employed to make sure that the decoherence doesn’t prevent accurate computation.

“In 1999, coherence times were about 1 nanosecond,” Steffen told me. “Last year, coherence times were achieved for as long as 1 to 4 microseconds. With these new techniques, we’ve achieved coherence times of 10 to 100 microseconds. We need to improve that by a factor of 10 to 100 before we’re at the threshold we want to be. But considering that in the past ten years we’ve increased coherence times by a factor of 10,000, I’m not scared.”

 

Alex Knapp Forbes Staff
 MIT's Scott Aaronson Explains Quantum Computing

The IBM team has taken two approaches to quantum computing, both of which factor into the breakthroughs announced here. The first approach is building a 3-D qubit made from superconducting, microfabricated silicon. Steffen notes that the benefit of using silicon for these qubits is that the manufacturing equipment and know-how already exists – new techniques don’t have to be developed. 3-D qubits were pioneered by the Schoelkopf Lab at Yale, and Steffen expressed his admiration for that work. Building on the Yale techniques, the IBM team was able to maintain coherence for 95 microseconds. (“But you could round that to 100 for the piece if you want,” Steffen joked.)

How To Make A Cheaper Quantum Computer
  Alex Knapp Forbes Staff

 The second approach involved a traditional 2-D qubit, which IBM’s scientists used to build a “Controlled NOT gate” or CNOT gate, which is a building block of quantum computing. A CNOT gate connects two qubits such that the second qubit will change state if the first qubit changes its state to 1. For example, if qubit A’s state is changed from 0 to 1, and qubit B’s state is 1, it will flip to state 0. But if qubit A’s state is changed from 1 to 0, qubit B is unaffected. That seems simple enough, but when you scale multiple logic gates like this together, you have a very real basis for computation. The CNOT gates were able to maintain coherence times of 10 microseconds, which is long enough to show a 95% accuracy rate. The previous accuracy record for CNOT gates was 81% accuracy, so this is a huge step.  Of course, Steffen was quick to note that there’s still a ways to go before this can be implemented as a computing solution. That makes common sense, since 95% is accurate, but in the long run you need the accuracy to be as close to 100% as possible. 
 

The Inner Workings of a Quantum von Neumann Computer Alex Knapp Forbes Staff

Given the rapid progress that IBM has made, scalable quantum computing is starting to look like a real possibility. As error-correction protocols improve and coherence times lengthen, accurate quantum computing becomes a real possibility. But don’t expect to have a quantum smartphone anytime soon using this technique. In order to get the results the IBM team has seen in either the 2-D or 3-D configuration, the qubits have to be cooled down to less than a degree above absolute zero.

“There’s a growing sense that a quantum computer can’t be a laptop or desktop,” said Steffen. “Quantum computers may well just being housed in a large building somewhere. It’s not going to be something that’s very portable.  In terms of application, I don’t think that’s a huge detriment because they’ll be able to solve problems so much faster than traditional computers.”

The next steps for the team is to improve coherence and error-correction protocols to the point where the accuracy is over 99.9%. That means they’ll have achieved a “logical qubit” – one that, for practical purposes, doesn’t experience decoherence. From that point, the next step is to develop a quantum computing architecture. IBM is considering some possibilities here, including developing some quantum memory architechture. But what encourages Steffen in these endeavors is that these are questions of engineering, not of theory.

“We are very excited about how the quantum computing field has progressed over the past ten years,” he told me. “Our team has grown significantly over past 3 years, and I look forward to seeing that team continue to grow and take quantum computing to the next level.”

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HSBC makes £13.8bn profits

 HSBC's annual profits rose 15% to £13.8bn ($21.9bn) in what it called a year of "major progress".

The bank said that 2011 was a year of major progress for HSBC

The bank is the biggest in Europe and makes about 90% of its profits outside the UK.

HSBC's UK profits were 17.2% higher than last year at £1.5bn.

The bank singled out its "strong performance" in faster-growing markets, with revenue up 12% in Asia and Latin America, as well as in the Middle East and North Africa.

It said these regions now accounted for 49% of group revenue. It also said 2011 was a record for commercial banking.

Profit before tax in that division was up 31% at almost £5bn.

Also helping the headline profit figure was a rise of £2.5bn in the value of its debt.



The investment banking division fared less well. Profits there fell 24% to £15bn as a result of the eurozone crisis.

UK banking
 
The UK division met its Project Merlin lending targets, set by the government.

It lent £49.4bn to businesses, well above its target of £38.8bn, with £11.9bn going to small and medium-sized enterprises (SMEs).

HSBC also increased mortgage lending by 12% to £13.2bn and expects to increase that to £15bn this year, with £3bn earmarked for first-time buyers.

Like other UK banks, HSBC has faced claims over mis-sold payment protection insurance - policies which were sold to maintain loan repayments in the event of illness or redundancy.

But in many cases, the insurance was sold to those who were not appropriate customers for the product.
The bank said it was "truly sorry" to those adversely affected by "our failings".

Lloyds Bank last week took back £2m in bonuses from senior executives, and HSBC said it, too, had exercised "clawback".

HSBC's total bonus pool for the year to 31 December was £2.64bn.

Top earners
 
The group chief executive, Stuart Gulliver, received a total pay award of £7.2m, made up of a £1.2m salary, a £2.2m bonus and long-term incentives of £3.75m, which is in shares and cannot be sold until he retires or leaves the bank.

Mr Gulliver was not the top earner this year, however. Another senior bank employee, who has not been named, will receive £8m in total.

More than 200 key employees in the UK earned a total of £53m.

The size of the remuneration was seen as inappropriate by some, partly because the bank is currently in the process of cutting 30,000 jobs worldwide as part of wide-ranging cost-cutting measures designed to save up to £2.2bn by 2013.

David Fleming, national officer at the union Unite, said: "How can Stuart Gulliver have a clear conscience over his reward package of £7.2m while thousands of staff face uncertainty about their jobs?"

The bank's chairman, Douglas Flint, who will receive £3.4m for 2011, said he accepted that "a few people" were paid "extraordinarily well" but insisted the bank needed to attract and retain the best staff.

'Traction'
 
HSBC is the currently the most profitable Western bank, with its nearest rival, JP Morgan, reporting a profit of £12bn.

It operates in 80 countries and employs 288,000 people, 50,000 in the UK.

Mr Gulliver said: "2011 was a year of major progress for HSBC. We gained traction in our strategy designed to simplify the structure and improve the management and control of the group.

"I am pleased with our progress, but there is a lot more to do and we remain focused on delivering our targets."

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Malaysia's looming General Election 2012

Key trends in the looming GE13

Ceritalah By KARIM RASLAN

Datuk Seri Najib Tun Razak is slated to win the next general election, with the margin depending on how both sides of the political divide appeal to and win over the 1.9 million new voters.

I HAVE spent the past three weeks almost exclusively in Malaysia – travelling and listening to people. A lot of this time has inevitably been spent with fellow writers and editors.

In fact, journalists prefer talking to other journalists so there’s always a danger that we’re living in a bubble — something that we often accuse politicians of doing!

At the same time, and as explained by Malaysian Insider’s Jahabar Sadiq: “We were caught napping in 2008. Ever since, we’ve been over-compensating.”

So bearing in mind our collective fear of being wrong, here – for what it’s worth – are the key trends I’ve identified that will feature in the next general election (GE).

> The delayed pendulum: Ma­lay­sian GEs have tended to follow a pendulum-like movement, with swings to and from Barisan National (BN) in alternate polls.

However, in 2012/3 there will be a subsidiary trend at work in Sabah, Sarawak and Johor (dubbed BN’s “Fixed Deposit”) if there is a shift of Chinese support while the rest of the peninsula reverts to form.

> The democracy wave from Singapore: The vote in southern Johor will be impacted by the many Malaysians who live and work in the city-state.

Having observed the republic’s two nation-wide polls (parliamentary and presidential) in 2011 and witnessed the extent to which the PAP government subsequently reversed unpopular housing, healthcare and immigration policies, Johoreans will have learnt the value of tactical voting in order to engineer policy shifts.

> Sabah: West Malaysian/Umno leaders continue to underestimate the importance of the Royal Commission of Inquiry on Illegal Immigrants for Sabahans (especially the KadazanDusun and Murut communities).

> The Prime Minister’s two key performance indicators (KPIs): Datuk Seri Najib Tun Razak is slated to win the next GE.

However, victory is only the first of his KPIs.

The second is that he must surpass his predecessor Abdullah Ahmad Badawi’s 2008 showing (140 seats).

Indeed, the rationale behind Najib’s rise to the premiership was his unspoken promise of returning Umno (and BN) to its earlier glory. Failure to achieve this will lead to a reassessment of his leadership.

> Najib’s presidential style campaign: It has boosted the premier’s approval ratings. Given the fact that Malaysia has adopted the Westminster system, the PM’s popularity has not translated into greater support for Umno (or BN), leaving many potential candidates to struggle.

As such, there is no guarantee that Najib’s personal popularity will strengthen BN in the 13th GE.

> Newly-registered voters: Esti­mated at some 1.9 million, both sides are scratching their heads as to how to appeal to and win over this disparate and largely disinterested mass of voters.

There appears to be little party loyalty and commitment among this group. Their support may well depend on a last-minute and/or unexpected political “black swan-type” event triggering a sudden and massive swing in either coalition’s favour.

> Indian community: The community is no longer virulently anti-Barisan. While Malaysian Indians are by no means “grateful”, the Hindraf-connected anger has dissipated with the departure of MIC honcho Datuk Seri Samy Vellu and Datuk Seri G. Palanivel’s low-key leadership.

The Indian vote will help BN in countless marginal seats.

> NFC – “Istana” Mat Deros for 2012: In 2008 we had Umno’s Port Klang Assemblyman, the late Zakaria Mat Deros, and his infamous “Istana” built on allegedly illegally-acquired land.

In 2012/13 we have the National Feedlot Corporation (NFC) scandal, which continues to unfold.

The NFC has been very damaging in rural Malay and Indian communities where voters are most familiar with the economics of cattle-rearing.

> Changing face of domestic politics: Malaysian politics is shifting. This will be the last GE for “institutional” players, the Umno warlords who refuse to court public opinion.

Most of these political dinosaurs can’t be bothered to engage with the public, debate and/or win support from the media.

Indeed, party hacks – from both BN and Pakatan – will become increasingly unpopular and loathed.

They have no future and will be replaced by those who can think, talk and argue in public such as Saifuddin Abdullah, Zambry Abdul Kadir and Shabery Cheek.

Emotional intelligence and humility will also be important. The absence of these two qualities will lead to the premature political demise of certain candidates.

> Kedah: Pakatan extols its successes in Penang and Selangor. However, the coalition is strangely silent about the Kedah government’s less than sterling record of administration.

> Public trust in the Government: Widespread cynicism and distrust will force the Government to shelve many policy and business initiatives.

BN’s ability to command public support without extensive consultation and stakeholder engagement has evaporated.

Put all this together and what do you get? A very, very interesting 2012/13 indeed.

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Poser over Penang Bayan Mutiara deal

Bayan Mutiara is a prime land, given its proximity to the Bayan Lepas free trade zones, the international airport and also the second Penang Bridge.

Comment by KHOO KAY PENG

There are still several questions left unanswered by the Penang government over the sale of the prime property.

SEVERAL Penang-based analysts and local community leaders have questioned the Penang government for selling a 41.5ha plot of prime state land to a private developer, Ivory Properties Group Berhad, for RM1.07bil.

Their concern is understandable due to scarce availability of state-owned land on the island which may hinder the ability of the state government to drive a balanced development and ensure it does not drive out the lower middle-income group from the area.

Most private property projects on the island are focused primarily on premium and luxury property which have driven up prices beyond the reach of most Penangites. There is worry that the sale of the state-owned Bayan Mutiara land to a private developer may end up in a similar fate.

Apart from escalating property prices, there is a concern that the land may have been sold below the prevailing market value. The state government had explained that the current selling price was above market value at the time of transaction.

However, it does not explain if it is usual to allow the purchaser a period of five years to settle the full payment. Did the transacted price factor in any interest payment accrued by the five-year payment period?

The opportunity cost derived from a potential increase in land premium over the next five years should be included to ensure that it is a fair deal.

Accusations and allegations of a lack of transparency in the tender process should be comprehensively addressed by the state government. Critics had alleged that the sale was done through direct negotiations between the state government and the purchaser.

Without justifying the five-year payment period, these allegations will create doubt over the much ac­­claimed transparency and ac­­count­ability of the state government.

Moreover, the allegations are peppered by talk that a bidder who is prepared to make a full payment for the purchase was not selected during the tender process.

Some analysts have questioned how can the sale benefit the people? They wonder why the development of Bayan Mutiara cannot be taken up by the Penang Development Corporation (PDC) which has the capacity and experience to handle people-centric development projects such as the Penang Free Trade Zones, housing estates, Komtar and others.

Regrettably, the issue of public accountability and good governance has been grossly politicised by certain parties. Politicians have gone to the extent of throwing down the gauntlet of challenging each other to resign over false allegations related to the land sale. We expect such showmanship from politicians but we deserve straight and accurate answers from them.

Politicising this issue is going to deprive many concerned stakeholders a chance to ask relevant and legitimate questions about the decision to sell the land to a private developer.

Chief Minister Lim Guan Eng had described allegations of wrongdoing over the tender award for the Bayan Mutiara mixed deve­lopment project by PDC as “a pack of lies”.

While some of these allegations may be malicious, it is pertinent for Lim’s administration to identify legitimate concerns over the sale. He should acknowledge that the state government controls less than 5% of total land size on the island and this calls for a prudent and strategic management of state-owned prime land.

Hence, it is best for his administration to address these issues immediately in order to convince the people of Penang that it has taken the best interests of the people into consideration before agreeing to the sale. Major issues include:

> What was the rationale to allow a five-year payment period to the purchaser? It gives an impression that the purchaser may not have secured financing for the purchase.

> Is it true there was another bidder who was prepared to pay an upfront full payment for the asking price?

> Did the transacted price factor in any interest charges or projected land price appreciation over the next five years?

> Is there any restriction or precondition between the state government and the purchaser to discourage any sub-sales? If the purchaser were to divide and resell some parcels of the land to other developers at a higher premium, it may further drive up property prices on the island. If such sales were allowed, is the state government entitled to a share of the higher premium?

> It is understood that the government would like to use the proceeds from Bayan Mutiara land to finance its low-cost housing scheme in Batu Kawan. While the low-cost housing scheme is welcomed and encouraged, the state government needs to justify if the sale of Bayan Mutiara land is the best option to help finance the project.

> Lim said part of the RM500mil financing for the housing scheme came from the state coffers. If this is the case, what is stopping the state from raising money through external sources to fund the entire project and carefully weigh all options to optimise the use of the Bayan Mutiara prime land bank?

Bayan Mutiara is no longer about selling above the current market value but the use of scarce prime land on the island for the purpose of socio-economic transformation. Ownership of prime land is very crucial for the state government to drive the state’s economy.

We do not want a repeat of high premium-reclaimed lands being sold to private developers who in turn inflate property prices in Penang and raked in billions in profit at the expense of the people.

Bayan Mutiara could be what the state government needs to help transform the landscape of Penang and create new attractions to boost its attractiveness as a tourism and cultural destination and a services hub.

Time will judge if the current state government has made the right decision on Bayan Mutiara and if the proposed plan is not going to turn out to be just another expensive commercial project by a private property developer.

> Khoo Kay Peng is an independent policy analyst and a management consultant. He was born and raised in Penang. Khoo can be contacted at kpkhoo@gfworld.com.my.

Read more: Land deal raises more questions - Columnist - New Straits Times http://www.nst.com.my/opinion/columnist/land-deal-raises-more-questions-1.51940#ixzz1nYV1Q098

Malaysians protest against rare earth refinery, Lynas

Opponents of plant, which will process radioactive ore from Australia, say it poses health and environmental risks

Protesters say the rare earth plant being built in eastern Malaysia poses a hazard from radioactive waste. Photograph: Bazuki Muhammad/Reuters




About 3,000 Malaysians have staged a protest against a refinery for rare earth elements being built by the Australian mining company Lynas over fears of radioactive contamination.

It was the largest rally so far against the £146m plant in eastern Malaysia, and could pose a headache for the government with national elections widely expected this year.

Authorities recently granted Lynas a licence to operate the rare earth plant in Pahang state, the first outside China in years, and it has been the subject of heated protests over health and environmental risks posed by potential leaks of radioactive waste.

Lynas says its plant, which will refine radioactive ore from Australia, has state-of-the-art pollution controls and plans to start operations by June.

Protesters, including opposition MPs, pledged on Sunday to put pressure on the government to scrap the project. Many wore green T-shirts with the words "Stop Lynas" and some shouted "Destroy Lynas" during the two-hour rally in the Pahang state capital, Kuantan.



The opposition leader, Anwar Ibrahim, said his alliance would seek an emergency motion in parliament to urge the government to cancel the project. He also pledged that the opposition would scrap the plant if it won national polls expected by June.

"We don't want [this project] to sacrifice our culture and the safety of the children," he told the crowd.

Lynas says its refinery could meet nearly a third of world demand for rare earths, excluding China. It also may curtail China's stranglehold on the global supply of 17 rare earths essential for making hi-tech goods, including flat-screen TVs, mobile phones, hybrid cars and weapons.

Malaysian activists and Pahang residents have sought a court order to halt the Lynas plant.



An International Atomic Energy Agency team, which assessed the Lynas project last year, found it lacked a comprehensive long-term waste management programme and a plan to dismantle the plant once it is no longer operating.

Malaysia's last rare earth refinery, operated by Mitsubishi of Japan, in northern Perak state, was closed in 1992 after protests and claims that it caused birth defects and leukaemia among residents. It is one of Asia's largest radioactive waste cleanup sites.

The rise of social enterprises in Malaysia

By JOHN LOH and WONG WEI-SHEN starbiz@thestar.com.my

Although still at an early stage, they can make a difference in addressing social issues

PROFIT with a conscience - that could well be the mantra for a new kind of business taking root here called the social enterprise.

Although there is no one definition, social enterprises are generally understood to be businesses that exist primarily to fulfil social goals, which could be anything from reducing poverty, creating jobs for the disadvantaged, to educating children in rural areas.

According to Leaderonomics chief executive officer Roshan Thiran, a social enterprise bridges the gap between a traditional non-profit organisation and for-profit corporation (see chart).

In fact, he points out, all businesses start out with some kind of social mission in mind, like how Google was premised on organising information on the Internet, and Ford on making cars that were affordable to the masses.

To accomplish its social objectives, a social enterprise has to find ways to generate income by providing a product or service, and the resulting profits are funnelled back into a specific cause.

Unlike a non-governmental organisation or charity, social enterprises do not rely on donations, but they may seek grants, equity, or loans to support their capital needs.

Kal Joffres, chief operating officer of the Tandem Fund, says that in any case, “there isn't enough free or donor money to go around to fix the problems we have today”. Tandem Fund is a not-for-profit venture fund that invests in social enterprises in Malaysia.

It can be hard to change the mindset of existing leaders, but what we can do is create leaders from the youth. - ROSHAN THIRAN

 

“Social enterprises are still at a very early stage, but they could be very transformative for a lot of the problems we face,” he contends.

Due to their non-traditional structure, social enterprises tend to take innovative approaches around their business model.

In the case of Leaderonomics, which got its seed funding from Star Publications (M) Bhd, The Star's parent shareholder, a part of the proceeds from its training and human resources consultancy work done for corporates is reinvested into its youth leadership-building activities.

For example, the company organises regular leadership camps for young people where half of the spots are reserved for orphans and underprivileged children.

In addition, it opened a youth community centre for “kids-at-risk” called DropZone in Petaling Jaya and is piloting a leadership club for secondary schools.

Leaderonomics' main aim, Roshan says, is to build leaders from the grassroots. “It can be hard to change the mindset of existing leaders, but what we can do is create leaders from the youth. If we are successful in changing their value system into one that is authentic and based on integrity, we have a shot in 20 years to see many leaders in the country emerge from this group,” he says.

To supplement its core mission, it offers a range of consultancy services, such as its talent accelerator programme for those identified as an organisation's “top talent”, and it counts companies like Malakoff, RHB Bank, and Sime Darby among its blue-chip clients.

“Social” returns

In the 1980s, General Electric boss and maverick management guru Jack Welch introduced the idea of “shareholder value” which dictated that a company is duty-bound, above all else, to maximise returns on investment (ROI) for its shareholders, increase its share price, grow its market capitalisation and so on.

Turning this concept on its head, social enterprises measure themselves against a different set of criteria, using terms like social ROI, and the triple bottomline, referring to people, planet, profit.

I think paying taxes makes us more powerful. We are on the same footing as any other business. - DR REZA AZMI 

“Things like marketing and branding, they are not real. But if you can create lasting social value, I think the community will (continue to) give back,” Roshan quips.

Most social enterprises, it would seem, have one thing in common: they were motivated by a problem.

Online crafts retailer Elevyn - whose name was derived from the phrase “the eleventh hour” - started out this way.

One of its founders, Puah Sze Ning, was volunteering with the orang asal in Sabah as part of efforts to document land rights issues and the displacement of local communities when she was asked by one of the women if she could help them sell their handmade crafts in Kuala Lumpur.

“They were really poor - some are single mothers, some are elderly. And they have no other source of income,” explains Mike Tee, co-founder of Elevyn with Devan Singaram.

“Even when they make it, they can't really sell it as Sabah has a very limited market. Sze Ning was quite stumped, she had just finished university at the time. So she came back and felt really helpless.

“During one of our meet-ups, she told us this story. Since we're (Tee and Devan) both software developers, we thought about setting up a website that would connect producers to customers.”

The term “orang asal” refers to all indigenous people throughout Malaysia, while “orang asli” refers to those in the peninsula, Tee says. The website, elevyn.com, sells a variety of fair trade items, and it is worth noting that beside each product display is a box that shows exactly what percentage of its sales price goes to the maker, designer, reseller and for materials.

They were really poor - some are single mothers, some are elderly. And they have no other source of income. - MIKE TEE

 

“We started with a group in Kudat, Sabah, then expanded to the peninsula with a couple of orang asli groups. Recently, we started working with Burmese refugees based in Kuala Lumpur. People have described us an ebay for the poor,” Tee chuckles.

To get on their feet, the team applied for and won a RM150,000 grant from the Multimedia Development Corp (MDEC) in 2008. At the time, MDEC gave out pre-seed funding to start-ups with technology businesses.

On Elevyn's business model, Tee points out that some 70% to 80% of the sales price goes back to the producers of the goods, and the team receives a 5% cut after deducting PayPal transactions.

“We make very little money from this. That's why for this model to work, we need scale,” he says. A percentage of the profit is also apportioned for a particular cause like school books, for instance.

Currently, Elevyn either sells individual products to visitors at its website or bulk orders directly to corporate clients. They have yet to sell to gift retailers, but Tee says this might be a possibility in the future.

However, several operational hurdles stand in its way. First, the products must address market needs. “Sometimes we tell our producers to make a product this way or that to suit the market, but what they are making could have been passed down from their ancestors, and we certainly don't want to disrupt that,” Tee explains.

Second, constant supply is difficult to ensure, since most of the orang asal depend on the rattan and other raw materials that grow near their homes, which, in turn, may be determined by the seasons.

Profitable venture?

A rented home in Sri Hartamas serves as an office for Wild Asia, a social enterprise that advises clients on environmental and social policies and practices.

“We have been profitable since we started,” exclaims Dr Reza Azmi, Wild Asia founder and director.

“We are service-based, and so did not require a lot of capital,” he says of the enterprise that started out as an online platform for information exchange on nature-related issues.

Some of Wild Asia's services include sustainability assessments to help plantation companies comply with standards set by the Roundtable on Sustainable Palm Oil, as well as developing their environmental and social management systems.

Social enterprises are still at a very early stage, but they could be very transformative for a lot of the problems we face. - KAL JOFFRES 

This social enterprise got off the ground some 10 years ago with RM10,000 in seed capital from a few individuals, including Reza. Wild Asia, which he says has close to RM1mil in paid-up capital now, is based on a model whereby 65% of its profit goes to its cash reserves as well as to invest in responsible tourism initiatives, such as the Okologie dive and study centre at the Batu-Batu Resort in Mersing, Johor.

A further 25% of its profit is shared among staff and associates as a bonus, while the balance 10% is split between Wild Asia's shareholders.

Reza, who studied biology in the United Kingdom, says he found his calling in conservation work during a gap year from university. “I wanted to be a professional beach bum,” he jokes.

Having done this for a number of years, he observes that there has been growing concern among businesses to preserve the natural world. “Banks and investment houses are starting to take notice. They might refrain, for example, from putting their money in or lending money to companies that deal with converted forests.

“We are one of the groups they hire to verify these things. But its the foreign banks that have specific policies on this,” Reza explains.

Even so, profitability remains a key concern for social enterprises. According to Tandem Fund's Joffres, start-ups break even in about three to five years, but social enterprises can take up to eight years.

“It takes them (social enterprises) longer to grow the market, and they often take smaller margins and do community-building activities at the same time,” he quips. Compounding this is the issue of funding, which can be hard to come by for social enterprises.

The tax question

Another issue that could curtail the growth of social enterprises is the lack incentives and tax breaks. They can currently only register as private limited companies and are taxed as such, since they derive an income from business activities.

Tee says Elevyn is taxed on a percentage of its profits, though not if the company is loss-making. To make things easier for social enterprises, the Social Enterprise Alliance, where Joffres is a committee member, is pushing for more policy recognition for the sector.

For starters, it is hoping to make amendments to the tax policies to make it legal for charitable trusts or foundations to give money to social enterprises.

Foundations cannot provide monetary support to social enterprises under the present tax regime as it would be viewed as an investment by the Inland Revenue Board (IRB), Joffres stresses.

Deloitte Malaysia country tax leader Yee Wing Peng tells StarBizWeek via email that while the Government does provide for tax exemptions on income received under the Income Tax Act 1967, this is for approved charitable organisations.

“A limited liability company or Sdn Bhd is not included because it is formed with a profit-seeking motive and the profits generated can be returned to shareholders in the form of dividends. There is no restriction to prevent the company from distributing profits to the shareholders instead of using the profits solely for charitable purposes.

“I advise the social enterprises to use a legal form that is acceptable to the IRB as this would encourage more donors to contribute due to the availability of tax deduction and with the income exempt from tax, more funds can be channelled for charitable causes.

“If the initiator has to use a Sdn Bhd set-up due to compelling business needs, attempts may be made to the higher authority i.e. the Finance Minister to consider exemptions. Putting in place covenants to ensure that the profits made by the Sdn Bhd can only be used for the intended charitable purposes may help,” Yee explains.

Nonetheless, Wild Asia's Reza argues that social enterprises “don't need handouts to survive”. “I think paying taxes makes us more powerful. We are on the same footing as any other business. You are a business entity just like any other,” he says.

More than money

A key question moving forward for social enterprises will be how sustainable they can be, and what kind of impact they can deliver. That will depend on, among others, how quickly they can adjust their business models to respond to market forces.

Asked about Wild Asia's impact, Reza says it has been the cultural shift within organisations in their treatment of the environment. He cites the example of a major government-linked corporation they had consulted that now has its own 20-man team to do the job internally.

He also notes that Wild Asia is beginning to attract interest from disillusioned corporate dropouts wanting to join his team and do something with a purpose other than financial gain.

According to Tee of Elevyn, the impact of a social enterprise need not be purely financial either. “You can't fix a problem just by putting money into it,” he says.

“There was recently an order that came in from Japan and Spain. We told them (the producers) to ship it to these addresses and the women were very surprised, because to them these countries are a world apart, and yet they had an interest in their products.

“The impact is not just in terms of money, but also the pride that what they're making has value.”

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