A positive surprise from Malaysia?

M'sia may turn out to be the biggest economic surprise in Asia

Singular Vision - By Teoh Kok Lin

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MALAYSIA is blessed. We sit on a great location in Asia; in a geographically peaceful, fertile land with abundant natural resources.

We are a multi-cultural, multi-lingual and multi-talented nation. We have a well-trained workforce and also modern infrastructure in place. We also know there is an urgent need to quickly improve existing infrastructure; such as with better mass rapid transit in Kuala Lumpur, faster Internet broadband across the country and an improving education system for the population, among others.

Malaysia's good economic prospect was never in question; it is how Malaysia goes about fulfilling its good potential that has been in doubt.

Today, in general, expectations for Malaysia to outperform economically are not that high however, I personally feel Malaysia could potentially spring the biggest economic surprise in Asia.

Here are four reasons why:

First and second are closely linked. I believe the country's governance and economy could potentially improve substantially with both the Government Transformation Plan (GTP) and Economic Transformation Programme (ETP) now off the ground and running. While their successful implementation depends critically on political will and the determination of all Malaysians to work together, there has been gathering momentum and some early signs of success.

In the GTP for example, efforts to improve urban transportation quickly transformed into decisions to invest an estimated RM36bil in the mass rapid transit (MRT) system for “Greater KL” which is scheduled to start work by July 2011.

If completed successfully with an open tender system and full transparency as proposed, it will also speak volumes for good governance.

Similarly, reducing crimes and fighting corruption are two areas of GTP showing early results. Pemandu and the Home Ministry said in December that street crimes in the country were down by almost 40%, with certain parts of KL experiencing 47% reduction. The Government plans to continue rolling out new initiatives for crime prevention next year.

And in fighting corruption, we see many more prominent corruption cases being bought up to the courts this year.

Second, under ETP, both the New Economic Model and National Key Economic Areas crucially focus on lifting working Malaysians to a higher income level by attracting best-of-the best industries to operate in Malaysia creating high quality employment and income.

This model is to help get us out of the “middle income trap”. Malaysia needs to move up the value chain as China, India, Indonesia and Vietnam have been out-competing us in our traditional areas of expertise in labour intensive and other export and contract manufacturing industries.

Wages and employment income of a nation's working population is the real measure of a nation's wealth. It is therefore more critical to create higher income jobs, professions and enterprises as a means to address any social inequality.

To quote the New Economic Model concluding part (Dec 3, 2010) executive summary chapter six, “After all, before wealth is to be distributed it must first be sustainably generated”. It is hoped that the focus will be on expanding the economic pie rather than how to split an existing pie.

Third, while liberalisation increases competition domestically, it also encourages Malaysian companies to venture out and become regional champions. Khazanah, for example, has been fairly successful at transforming Malaysia's government-linked companies into regional champions such as with CIMB and Axiata.

There are many factors to Khazanah's success but one key secret I believe is that for many years, Khazanah has been hiring and paying for top talents from the financial, consulting and banking industries both locally and from abroad.

I personally have visited successful Khazanah-owned companies such as CIMB Niaga, the Indonesian subsidiaries of CIMB and XL, the Indonesian subsidiary of Axiata. A common thread I noticed is they are well integrated with local culture, they hire the best talents and they are meritocracy-based.

Meritocracy is also part of the foundation for a civil society where talents can come from any nation and be any race, all working to attain high level of accomplishments.

Finally, Malaysia is again fortunate to be a trading nation sitting in the middle of an economically-vibrant Asia. To our right is India, a market with one billion population and an economy that is just starting to take off after more than 10 years of reforms; to the far north of us sits China, the second-largest economy in the world with 1.3 billion people and the new economic engine of the world; and to the south of us lies Indonesia, 300 million strong of increasingly vibrant and wealthier consumers.

Malaysia enjoys good relations with all these major economies and should take full advantage of many economic opportunities in these coming years.

With China for example, Malaysia is not only one of China's largest trading partners (total trade was about US$52bil in 2009) but China is now increasingly funding Malaysian infrastructure projects such as for the Second Penang Bridge (US$800mil) and likely more projects in the future.

The potential inflows of large direct investments from China and other Asian countries can also be a very important component to boost our economic growth.

What we do with our advantages and opportunities will determine if we are a successful nation or not. I personally think Malaysia's government today is getting some of our priorities right in theory with these transformation programmes, I hope we put these plans into good practice.

Some direct or portfolio investors may still be sceptical but the increasing contributions by these programmes to Malaysia's economic growth are quite clear to me. In addition, good governance will attract more talents and investors to our shores, and will likely give an added boost to Malaysia's capital and equity markets.
I, for one, am certainly more optimistic and hopeful than before.

Teoh Kok Lin is the founder and chief investment officer of Singular Asset Management Sdn Bhd

Lehman 'prophet' fears second crisis

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Lehman 'prophet' fears second crisis if US interest rates are kept low, risks falling into debt trap

America is storing up a second financial crisis by keeping interest rates at record low levels, according to David Einhorn, the hedge fund manager who first publicly warned about the financial catastrophe facing Lehman Brothers.

David Einhorn said the US risks over-borrowing and falling into a 'debt trap'. 

By Richard Blackden, US Business Editor 6:30AM GMT 26 Dec 2010

"The crisis that required zero interest rates has passed," said Mr Einhorn, who co-founded and runs Greenlight Capital, a $6.5bn (£4.2bn) fund. By not raising rates "it increases the chance that governments will over-borrow and fall into a debt trap".

The criticism of the Federal Reserve comes as it embarks on another $600bn (£380bn) of quantitative easing – or printing money – in an effort to fire up a stronger recovery next year.

Interest rates around the western world, including in Britain, have sat at or below 1pc since the near collapse of the financial system in 2008 triggered a global recession.

"If interest rates ever do go up again, you have another crisis," Mr Einhorn told The Sunday Telegraph.

Those in favour of very low interest rates point to the support it has given the real estate market in the US and that, as in the UK, it should encourage politicians to begin to tackle the $1.3 trillion budget deficit without fear of damaging the economy.

Greenlight, which Mr Einhorn founded in 1996 with about $1m, including an investment from his parents, has its single largest position in gold – an asset that many investors have historically turned to during periods of economic uncertainty.

The gold price, which is closing in on a tenth straight year of gains, reached a record $1,432.50 an ounce earlier this month.

Mr Einhorn admits that he is having to pay far more attention to the broader economic picture when making decisions about which companies to invest in than he has ever done. He declined to say what he thought of either the UK or eurozone economies at the moment.

The 42 year-old, already well known within the hedge fund industry, shot to wider prominence in 2008 after using a lecture in May of that year to voice criticisms of how Lehman was valuing its assets. The lecture had echoes of one he gave six years earlier on Allied Capital, a lender which he accused of using misleading accounting practices.

That lecture sparked an almost decade-long battle with Allied, which is recorded in Mr Einhorn's 2008 book Fooling Some of The People All of The Time. The financial crisis, he says, has done little to ensure that the regulators are any better at detecting either fraudulent or financially weak companies.

Both lectures drew stinging criticism from some investors and parts of the media, who accused the fund manager of stirring up concerns because it had short positions in both companies that would see Greenlight benefit if their share prices dropped.

Mr Einhorn has responded that he only holds short positions if he has serious worries about a company.
Though Mr Einhorn is best known as a short seller, Greenlight typically has more long positions than short positions.

Greenlight, which hasn't taken any new money from investors since the early part of this decade, has delivered an average annual return of 21pc since it was started.

Vodafone is currently one of his largest positions and he also owns shares in Apple.

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Apple, Steve Jobs hit new heights in 2010

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Apple dethroned Microsoft as the world's most valuable technology company in 2010 as its co-founder Steve Jobs soared to new heights with the touchscreen iPad tablet computer and the latest iPhone.

Apple dethroned Microsoft as the world's most valuable technology company in 2010 as its co-founder Steve Jobs soared to new heights with the touchscreen iPad tablet computer and the latest iPhone.

Britain's Financial Times last week named Jobs its "Person of the Year" and even US President Barack Obama joined in the plaudits to the 55-year-old chief executive of the Cupertino, California-based gadget-maker.

Jobs' appearance on a San Francisco stage in January to unveil the iPad capped what the FT called "the most remarkable comeback in modern business history."

"It wasn't simply a matter of the illness that had sidelined him for half the year before, leaving him severely emaciated and eventually requiring a liver transplant," the newspaper said.

"Little more than a decade earlier, both Mr. Jobs' career and Apple, the company he had co-founded, were widely considered washed up, their relevance to the future of technology written off," it said.

Obama, at a White House news conference on Wednesday, held up Jobs as an example of the virtues of the "free market."

"We celebrate somebody like a Steve Jobs, who has created two or three different revolutionary products," Obama said. "We expect that person to be rich, and that's a good thing."


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Apple CEO Steve Jobs (R) looks at a display of the new MacBook Air at the company's headquarters in Cupertino, California. Britain's Financial Times last week named Jobs its "Person of the Year".

The iPad hit stores in the United States in April and Apple reported sales at the end of September of more than eight million of the devices that the FT said offer a glimpse into a world without a computer mouse or Windows.

Other technology firms are trying to match Apple's success with tablets of their own, including South Korea's Samsung, Canada's Research In Motion, maker of the Blackberry, and US computer giants Hewlett-Packard and Dell.

But none has yet to prove capable of preventing Apple from establishing the same dominance over the tablet computer market that it exercises over the MP3 music player scene with the ubiquitous iPod, introduced in 2001.

Goldman Sachs said it expects Apple to ship 37.2 million iPads in 2011 -- "which could potentially make Apple one of the largest vendors in the global personal computing market" -- tablets plus personal computers.

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The iPad wasn't Apple's only hit product in 2010.

The iPhone 4, the latest version of the touchscreen smartphone introduced by Apple in 2007, sold 14.1 million units in the quarter which ended in September, up 91 percent over the same quarter a year earlier.

Even Apple TV, a product Jobs once dismissed as a "hobby," is notching up strong sales. Apple said last week that sales of the latest model of the set-top box that can stream content from the Web had topped one million units.

The rare blemishes on Apple's record in 2010 were its continuing inability to come out with a promised white model of the iPhone 4 and complaints of lost reception due to the radical antenna design on the device.

Apple shares, worth 10 dollars at the end of 2003, gained around 60 percent this year, closing at more than 320 dollars on Wall Street on Thursday.

In May, Apple surpassed Microsoft as the largest US technology company in terms of market value. The only companies with larger market capitalization than Apple's nearly 300 billion dollars are ExxonMobil and Petrochina.

Meeschaert New York analyst Gregori Volokhine described Apple's rise as "absolutely extraordinary" and said "every analyst has an even higher target price for next year, between 360 dollars and 430 dollars."

"Apple's more than just a company," Volokhine told AFP. "It's become a cultural phenomenon. The hard part now will be not to disappoint."

(c) 2010 AFP

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