Too good to be true? Think twice


 

HAVE you ever grabbed an offer without any hesitation, simply because the price is too cheap to resist?

Many of us have this experience especially during sales or promotional campaigns. We tend to spend more at the end or buy things which we are uncertain of their quality when the deal seems too good to say no.

It may be harmless if the amount involved is insignificant. However, when we apply the same approach to big ticket items, it can cause vast implications.

Recently, I heard a case which reinforces this belief.

A friend shared that a property project which was selling for RM300,000 a few years ago is now stuck. Although the whole project was sold out, the developer has problem delivering the units on time.

The developer is calling all purchasers to renegotiate the liquidated and ascertained damages (LAD), a compensation for late delivery.

One of the homeowners said he is owed RM50,000 of LAD, which means the project is 1½ years late. When we chatted, we found that he purchased the unit solely due to its cheap pricing without doing much research in the first place.

The incident is a real-life example of paying too low for an item which can leave us as losers, especially when it involves huge sum of investment, such as property.

To many, buying a house maybe a once-in-a-lifetime experience, a decision made can make or break the happiness of a family.

A good decision ensures a roof over the head and a great living environment, while an imprudent move may incur long-term financial woes if the house is left uncompleted.

Nowadays, it is common to see people do research when they plan to buy a phone, household item, or other smaller ticket items.

Looking at the amount involved and implication of buying a house, we should apply the same discretion if not more.

It is always important for house buyers to study the background of a developer and project, consult experienced homeowners regarding the good and bad of a project before committing.

I have seen many people buy a house merely based on price consideration.

In fact, there are more to be deliberated when we commit for a roof over our heads. The location, project type, reputation of a developer, the workmanship, the future maintenance of the property etc, are all important factors for a good decision as they would affect the future value of a project.

Beware when a discount or a rebate sounds too good to be true, it may be just too good to be true and never materialised. If the collection or revenue of a housing project is not sufficient to fund the building cost, the developer may not be able to complete the project or deliver the house as per promised terms. At the end of the day, the “price” paid by homeowners would be far more expensive.

In general, the same principle applies elsewhere. It is a known fact that when we pay a premium for a quality product from a reliable producer, we have a peace of mind that the product could last longer and end up saving us money. Some lucky ones will end up gaining much more.

For instance, when we purchase a car, we should consider its resale value as some cars hold up well, while others collapse after a short period. Other determining factors include the specifications of the car, the after sales service, and the availability of spare parts.

Quality products always come with a higher price tag due to the research, effort, materials and services involved.

In addition to buying a house or big ticket items, other incidents that can tantamount to losing huge sums are like money games, get-rich-quick scheme, or the purchase of stolen cars or houses with caveats.

When an offer or a rebate sounds dodgy, the “good deal” can be a scam.

Years of experience tells me that when what is too good to be true, we should think twice. I always remind myself with a quote from John Ruskin (1819-1900) who was an art critic, an artist, an architect and a philosopher. “It’s unwise to pay too much, but it’s worse to pay too little. When you pay too much, you lose a little money – that’s all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do.

“The common law of business balance prohibits paying a little and getting a lot – it can’t be done. If you deal with the lowest bidder, it is well to add something for the risk you run, and if you do that you will have enough to pay for something better.”

Food for thought by Alan Tong

Datuk Alan Tong has over 50 years of experience in property development. He was the world president of FIABCI International for 2005/2006 and awarded the Property Man of the Year 2010 at FIABCI Malaysia Property Award. He is also the group chairman of Bukit Kiara Properties. For feedback, please email feedback@fiabci-asiapacific.com.

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The Asian financial crisis – 20 years later




East Asian Economies Remain Diverse

 

It is useful to reflect on whether lessons have been learnt and if the countries are vulnerable to new crises.

IT’S been 20 years since the Asian financial crisis struck in July 1997. Since then, there has been an even bigger global financial crisis, starting in 2008. Will there be another crisis?

The Asian crisis began when speculators brought down the Thai baht. Within months, the currencies of Indonesia, South Korea and Malaysia were also affected. The East Asian Miracle turned into an Asian Financial Nightmare.

Despite the affected countries receiving only praise before the crisis, weaknesses had built up, including current account deficits, low foreign reserves and high external debt.

In particular, the countries had recently liberalised their financial system in line with international advice. This enabled local private companies to freely borrow from abroad, mainly in US dollars. Companies and banks in Korea, Indonesia and Thailand had in each country rapidly accumulated over a hundred billion dollars of external loans. This was the Achilles heel that led their countries to crisis.

These weaknesses made the countries ripe for speculators to bet against their currencies. When the governments used up their reserves in a vain attempt to stem the currency fall, three of the countries ran out of foreign exchange.

They went to the International Monetary Fund (IMF) for bailout loans that carried draconian conditions that worsened their economic situation.

Malaysia was fortunate. It did not seek IMF loans. The foreign reserves had become dangerously low but were just about adequate. If the ringgit had fallen a bit further, the danger line would have been breached.

After a year of self-imposed austerity measures, Malaysia dramatically switched course and introduced a set of unorthodox policies.

These included pegging the ringgit to the dollar, selective capital controls to prevent short-term funds from exiting, lowering interest rates, increasing government spending and rescuing failing companies and banks.

This was the opposite of orthodoxy and the IMF policies. The global establishment predicted the sure collapse of the Malaysian economy.

But surprisingly, the economy recovered even faster and with fewer losses than the other countries. Today, the Malaysian measures are often cited as a successful anti-crisis strategy.

The IMF itself has changed a little. It now includes some capital controls as part of legitimate policy measures.

The Asian countries, vowing never to go to the IMF again, built up strong current account surpluses and foreign reserves to protect against bad years and keep off speculators. The economies recovered, but never back to the spectacular 7% to 10% pre-crisis growth rates.

Then in 2008, the global financial crisis erupted with the United States as its epicentre. The tip of the iceberg was the collapse of Lehman Brothers and the massive loans given out to non-credit-worthy house-buyers.

The underlying cause was the deregulation of US finance and the freedom with which financial institutions could devise all kinds of manipulative schemes and “financial products” to draw in unsuspecting customers. They made billions of dollars but the house of cards came tumbling down.

To fight the crisis, the US, under President Barack Obama, embarked first on expanding government spending and then on financial policies of near-zero interest rates and “quantitative easing”, with the Federal Reserve pumping trillions of dollars into the US banks.

It was hoped the cheap credit would get consumers and businesses to spend and lift the economy. But instead, a significant portion of the trillions went via investors into speculative activities, including abroad to emerging economies.

Europe, on the verge of recession, followed the US with near zero interest rates and large quantitative easing, with limited results.

The US-Europe financial crisis affected Asian countries in a limited way through declines in export growth and commodity prices. The large foreign reserves built up after the Asian crisis, plus the current account surplus situation, acted as buffers against external debt problems and kept speculators at bay.

Just as important, hundreds of billions of funds from the US and Europe poured into Asia yearly in search of higher yields. These massive capital inflows helped to boost Asian countries’ growth, but could cause their own problems.

First, they led to asset bubbles or rapid price increases of houses and the stock markets, and the bubbles may burst when they are over-ripe.

Second, many of the portfolio investors are short-term funds looking for quick profit, and they can be expected to leave when conditions change.

Third, the countries receiving capital inflows become vulnerable to financial volatility and economic instability.

If and when investors pull some or a lot of their money out, there may be price declines, inadequate replenishment of bonds, and a fall in the levels of currency and foreign reserves.

A few countries may face a new financial crisis.

A new vulnerability in many emerging economies is the rapid build-up of external debt in the form of bonds denominated in the local currency.

The Asian crisis two decades ago taught that over-borrowing in foreign currency can create difficulties in debt repayment should the local currency level fall.

To avoid this, many countries sold bonds denominated in the local currency to foreign investors.

However, if the bonds held by foreigners are large in value, the country will still be vulnerable to the effects of a withdrawal.

As an example, almost half of Malaysian government securities, denominated in ringgit, are held by foreigners.

Though the country does not face the risk of having to pay more in ringgit if there is a fall in the local currency, it may have other difficulties if foreigners withdraw their bonds.

What is the state of the world economy, what are the chances of a new financial crisis, and how would the Asian countries like Malaysia fare?

These are big and relevant questions to ponder 20 years after the start of the Asian crisis and nine years after the global crisis.

But we will have to consider them in another article.

By Martin Khor Global Trend

Martin Khor (director@southcentre.org) is executive director of the South Centre. The views expressed here are entirely his own.
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Invest in the future



IT has always interested me to see how the different selection of words sent varied messages to readers and listeners.

Of late, I’m intrigued with the use of oxymorons, a combination of words that have opposite meanings and which usually produces an incongruous, seemingly self-contradictory effect.

Some daily expressions such as “open secret”, “seriously funny”, “deafening silence” and “pretty ugly”, are good examples on how the completely opposite meanings of words create dramatic effect.

Among other oxymorons come an expression often heard among condominium owners to their management corporations (MCs) and management offices: “We want you to lower costs and improve quality.”

Just like any other oxymoron phrases, the statement above makes me puzzle and ponder. It is prudent to manage costs, but unrealistic cost cutting over the long run will lead to decline in the quality of facilities and services.

Based on my experience, quality always comes with cost especially in property management. It is impossible to achieve higher quality standards by reducing expenditure.

I have heard of occasions where homeowners’ representatives in MC set high benchmark for the property management team, but expect them to cut down on the number of workers and cleaners in order to reduce spending. Needless to say, we can imagine what the outcome would be without looking at the property itself.

In reality, MC and homeowners must invest, not spend less for better quality. While developers and property managers play the important role of ensuring the upkeep of properties, the property owners themselves are the main stakeholders in deciding the fate of their properties. They are the party who can approve the budget and usage of their service charge and sinking funds.

In my previous article, I mentioned it is important for homeowners to participate in property management, such as attending AGMs and EGMs to exercise their right to raise concerns and approve the budget during such meetings.

In addition, homeowners and MCs must be bold in making decisions to invest in their properties with the reserved funds they have in their account.

Hence, while it is important to manage cost, it is also important to spend wisely for the future. Inflation is a fact of life, so MCs and homeowners should factor the inflation rate into their service charges, and use the real inflation rate, typically higher than the officially sanctioned rate anywhere in the world.

Typically, service charge is used for the general maintenance of the building. Sinking fund, on the other hand, can be used for the painting and the repainting of the common property, acquisition of movable property, the replacement of any fixture or fitting, the upgrading and refurbishment of the common property, and any other capital expenditure deemed necessary.

Managing a strata property is like maintaining a car. We must service our car regularly and replace its parts when they are due for change according to mileage. If a car is serviced less often, it gets more expensive to fix later when the equipment falls apart, and sometimes it may be too late to change.

Hence, when we reduce spending on maintaining a property, the decline of quality may be slow but sure. It takes time and additional cost when homeowners want to re-invest to restore the property later.

Invest in the future is just like doing exercise. It is hard to do, but if done regularly it will build health, strength and happiness.

To invest in a strata property means to increase, not cut down services such as cleaning, maintenance, security and landscaping. It also means to spend the sinking fund regularly not just on replacements, but also on upgrades, as the world doesn’t stand still. New projects would make existing projects old and even obsolete if we don’t manage our property well.

Investor’s nightmare

How well a property is managed can make or break the value of the property. A quality property management will allow the value to increase; while poor management could translate into an investor’s nightmare.

Active management and upgrading of properties is an important approach to protect our homes and investments. As such, whenever homeowners or property management companies tell me they are able to increase quality and cut cost at the same time, I would wonder whether, “Is this a short-term gain at the detriment of long-term benefits?”

By Alan Tong

Datuk Alan Tong was the world president of FIABCI International for 2005/2006 and awarded the Property Man of the Year 2010 at FIABCI Malaysia Property Award. He is also the group chairman of Bukit Kiara Properties. For feedback, please email feedback@fiabci-asiapacific.com.

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Goodbye Motorola! How Chicago’s greatest tech company fell to earth?


Under the Galvin family, Motorola had soaring achievements. This was the
company, remember, that invented the cellphone. Those days are over.
What went wrong?  
Click below and Scroll or arrow down to keep reading.

Prospering with Belt and Road to reap the benefits of China’s initiative


Malaysia is one of 64 countries to reap the benefits of China’s initiative.

CAN money grow on fruit trees?

Yes, that is as far as Agriculture and Agro-based Industry Minister Datuk Seri Ahmad Shabery Cheek is concerned.

After witnessing the signing of a deal worth US$1.53bil (RM6.65bil) between Malaysia’s AgroFresh International and China’s Dashang Group for the export of local Cavendish bananas and tropical fruits to China, he said:

“Money does grow on fruit trees if our agriculture products could open up China’s market.”

The deal was part of the nine memorandums of understanding (MoUs) and agreements, with value totalling more than US$7.22bil (RM31.26bil), which were signed between Malaysian and Chinese companies on May 14.

But Datuk Seri Ong Ka Chuan, International Trade and Industry Minister II, sees more money flooding in once Malaysia is linked up with other Asean nations, China and Europe via rail connection under China’s Belt and Road Initiative, now termed as the New Silk Road project.

“Our trade figures can jump by three to four folds once Malaysia can export and import goods to our major trade partners (such as China, Europe and Middle East) overland via rail systems,” he tells Sunday Star.

Both ministers are among Cabinet members in the Malaysian delegation led by Prime Minister Datuk Seri Najib Tun Razak to attend the Belt and Road Forum for International Cooperation held in Beijing from May 14 to 15.

Malaysia is one of the 64 countries outside China that have benefited from the Belt and Road Initiative, propounded by Chinese President Xi Jinping in the autumn of 2013.

One project to be launched soon will be the RM55bil East Coast Rail Link. Examples of existing projects include Xiamen University and the deepening of Kuantan Port.

At the opening ceremony of the forum, Xi injected fresh impetus to his pet project by announcing hundreds of billions in new funds for infrastructure investment in Belt and Road countries that span Asia, Middle East and Europe.

According to some estimates, Chinese funds allocated for investing in Belt and Road countries – which include several exiting funds announced since 2013 – total around US$900bil (about RM4 trillion) now.

“Model of regional cooperation”

From Mongolia to Malaysia, Thailand to Pakistan and Laos to Uzbekistan, many projects, including high-speed railways, bridges, ports, industrial parks, oil pipelines and power grids, are being built, Xi said.

Since 2013, Chinese private businesses have invested more than US$60bil (RM260bil) in countries along the Belt and Road, in addition to the US$50bil invested by the Chinese government.

Xi’s speech also reveals that China will expand China-Europe railway cargo services, which are stirring up excitement in European nations – particularly Britain.

Belt-road: Ong signing Belt and Road MoU with Vice Chairman of National Development and Reform Commission of China Zhong Yong on May 13, 2017. Witnessing are Najib and China’s Premier Li Keqiang.

Calling his brand of globalisation as “project of the century” to achieve a win-win situation for all, Xi has committed to importing US$2 trillion (RM8.7bil) of goods from the 64 Belt and Road countries – many of which are under-developed and impoverished nations hungry for infrastructure and industrial investments.

The Chinese leader’s pledge of “non-interference” with the domestic politics of other countries is comforting, given that there are concerns that China could aim to be a hegemony with its economic and military might.

“What we hope is to create a big family where we can co-exist harmoniously,” Xi said last Sunday in his speech that also focused on connectivity in policy, infrastructure, trade, finance and people.

The forum is by far the most important and largest meeting on the Belt and Road Initiative since 2013.

About 130 countries were represented at the forum and they accounted for two thirds of the world’s population. Their combined gross domestic product accounts for 90% of the world’s total, according to Xinhua.

Klaus Schwab, founder and executive chairman of the World Economic Forum, regards the Belt and Road Initiative as “a shining model for regional collaboration, development and growth”.

“This initiative respects the differences between countries and their various paths for development, not imposing a specific plan or ideological framework, but seeking to create common ground for cooperation and mutual benefit,” Schwab told Xinhua.

UN secretary-general Antonio Guterres, also told Xinhua: “China will play a very important role in multi-lateralism with the Belt and Road. The initiative reflects a new model of international cooperation and interaction with mutually beneficial cooperation through the connection of policies and development strategies.”

And Jack Ma, executive chairman of Alibaba Group, shared: “The initiative goes far beyond the economic strategy of any single country or region. Its mission is to make the world more innovative, dynamic, and equal.”

Big step: Fernandes is excited that China has allowed AirAsia to be the first low-cost carrier to set up shop in the Middle Kingdom.

AirAsia deal – another first in China

On the sideline of the forum, Malaysian and Chinese leaders took the opportunity to clinch more agreements that brought bilateral ties to another new high.

While the deals signed last November were far more than this round and higher in total value, the Chinese Government continued to grant “first” to Malaysia. This was reflected in a project given to Tan Sri Tony Fernandes, group chief executive officer and founder of AirAsia Bhd. Soon, the sky will see AirAsia China.

“It is the first time a foreign airline is given permission to establish and operate a low-cost carrier in China. We are the first country to be granted such licence,” Najib told reporters at the conclusion of his visit to China.

AirAsia is establishing a joint venture with China Everbright Group, with an initial stake of 22%. However, AirAsia may raise its stake in future.

China Everbright is a government-owned financial services conglomerate, which is a major shareholder in China Aircraft Leasing Group Holdings Ltd and the Henan Government Working Group.

The plan is to set up AirAsia China to be based in Zhengzhou, the capital of Henan, to ply domestic and international flights.

“Tony Fernandes was very excited because he was able to meet the top transport and aviation officials, whom he could not secure appointments with previously. He has been working on this project for years,” a minister told Sunday Star.

Other Cabinet ministers are also upbeat after attending the Belt and Road Forum.

“I have witnessed the fruits of the close diplomatic ties between Malaysia and China, and between Najib and Xi Jinping during this trip,” says Transport Minister Datuk Seri Liow Tiong Lai, who signed a MoU on infrastructure cooperation with China.

“In China, economic developments are influenced by government policies. Now that our leaders have good ties with China, it is very timely for Malaysian businessmen to enter China, and vice versa,” he tells Sunday Star.

Important talks: Liow (second from left) leading a Malaysian delegation at a meeting with his Chinese counterpart at China’s Transport Ministry in Beijing on May 12 morning. From left are Transport Ministry deputy secretary-general Datuk Chua Kok Ching, MCA vice president Datuk Dr Hou Kok Chung and Fernandes.

“We have to promote economic growth fast enough so that we can harvest the fruits of the Belt and Road Initiative.

“The opportunities for Malaysia to develop the infrastructure and boost economic growth would not be available if not for the Belt and Road Initiative pushed forward by China,” he adds.

Minister in the Prime Minister’s Department Datuk Seri Dr Wee Ka Siong observes: “There are quite a number of business-to-business MoUs signed during this trip, in addition to the nine witnessed by Prime Minister Datuk Seri Najib Tun Razak.

“I was also invited to attend many discussions and meetings, sometimes I had to have many meals a day! (as discussions were held over meals).”

Wee, whose ministerial portfolio covers development of Chinese small and medium enterprises (SMEs), has personally requested Ma to reduce charges for Malaysian SMEs when they use Alibaba’s platform to sell products.

Ma, an e-commerce wizard and China’s second richest man, is expected to give consideration to the proposal as he has pledged to help Malaysia develop its digital economy. Ma will set up the Asean data centre in Malaysia before the end of the year.

Analysing Belt and Road Initiative, Shabery Cheek says: “Belt and Road is a different form of cooperation from other pacts, such as the Trans-Pacific Partnership (TPP) and World Trade Organisation (WTO). Those emphasised on what goods were tax-free and what were not, which sectors to open up and which could not. Essentially, they focused on how to protect the self-interests of individual countries.

“However, the Belt and Road talks about infrastructure networking, which is very important. They take the cue from the ancient Silk Road, which was not only a channel to transport goods, but also to spread Islam and Buddhism. That is a great thing.”

Source: Sunday Star by Ho Wah FoonTho Xin Yi

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Arrest decline in productivity and competitiveness in Malaysia


COINCIDENTLY, two major reports were released on June 1 on the decline of our national productivity and competitiveness. The first was our own Productivity Report 2016/2017, which was launched by Minister of International Trade and Industry Datuk Seri Mustapa Mohamad (pic) and the second one was the World Competitiveness Yearbook WCY issued by the Institute for Management Development.

This coincidence in decline is understandable since both productivity and competitiveness are closely inter-related. Lower productivity leads to lower international competitiveness.

Productivity

Our labour productivity fell short of our 11th Plan target of 3.7% growth by 0.2% to 3.5% last year. This is a small decline and has been rightly explained with confidence by the Minister of Trade in positive terms when he said that Malaysia was “on track”.

I think he will agree that we must be concerned enough to ask what are the causes and whether this is just a mere slip or could it be the beginning of a trend.

We have to take this fall as a wake up call, in case this decline happens again next year and later on. We have to review many recurrent and uncomfortable issues like brain drain and unemployed graduates – who could number over 200,000 – also reflect the low productivity of many graduates who are newly employed. The lower productivity can be attributed to our low use of automation, high employment of unskilled foreign and cheap labour and the new challenges of the digital economy.

The Minister’s proposal for the Government and private sector to “join forces to embark on initiatives” to improve productivity in nine sectors “of lower productivity”, is most welcome. The private sector has to make profit unlike the Government. Hence it has a greater sense of urgency in wanting to improve not only labour productivity but productivity from all factors of production, including good governance and integrity and quality services to the public. Thus it will be very interesting for the public to be made fully aware of the productivity improvements that should materialise not only in the private sector, but for the Government as well. For instance government departments can learn from the private sector how to provide better or excellent services in the fields of health and education and counter services at police stations, Customs, Immigration, etc .

Productivity in both the private sector and the government machinery should improve to raise our total national productivity. Only then will our nation be able to compete much more efficiently and effectively in the global economy.

We can have the best Productivity Blueprint like that which was launched on May 8 but our productivity can continue to slip and even slide, if we do not ensure that the blueprint is fully implemented and its progress diligently monitored and improved along the way. One way to seriously pursue our goal to raise productivity would be to increase the small sum of only RM200mil for a new Automation Fund. Modern machinery and equipment are expensive but the returns in terms of higher productivity can be very significant. So let’s go for higher productivity with greater automation and not approach the challenge on an ad hoc and piecemeal basis. The Treasury would need to support the Productivity Blueprint much more productively!

Competitiveness

Malaysia registered its lowest ranking in five years in the WCY.

This reflects our decline in productivity as competitiveness is the other side of the coin. However, I am surprised that the relationship is so sensitive. Just a drop of 0.2% in productivity can cause a drop in our international competitiveness ranking from 19th place to the 24th!

What this could show is that while we are sluggish in our productivity, other countries are much more aggressive in improving both their productivity and competitiveness.

There is thus no point in taking pride that we scored better in our ranking compared to the industrial countries like Austria (25th) Japan (26th) and Korea (29th). They are highly developed countries which enjoy much higher standards of living and a better quality of life that we do. They have reached the top of Mount Fuji and other mountains, while we are still climbing up from a lower economic base.

The drop in our competitiveness is significant and we have to take this decline very seriously. Malaysia slipped in all four sectors, that is, economic performance, business efficiency, government efficiency and infrastructure. That is why it is essential to investigate in depth into all these major falls in performance and tell the public what is being done to improve our rankings and ratings.

It is appreciated that Malaysia Productivity Corp’s Director General Datuk Mohd Razali Hussain has established Nine Working Cluster Groups to examine these poor indicators and report on improvements that must be made expeditiously.


Conclusion

It is good that we have these reports on productivity and international competitiveness to benchmark our national performance against them. We have to take advantage of these annual indicators and ensure that we keep improving rather than falling in productivity and competitiveness .

Our efforts to improve will be watched closely by our domestic and particularly international investors and international competitors .

We can only hope that these declines are not just coincidental but are also not developing declining trends. This could spell pessimism and falling confidence in our socio-economic management.

Instead we should take these set backs as warning signals and rededicate ourselves to a greater commitment to higher competition, more meritocracy and building a better socio-economic and political environment in Malaysia.

TAN SRI RAMON NAVARATNAM

Chairman Asli’s Centre of Public Policy Studies


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Chinese car-maker Geely to make Malaysia its global hub, help Proton drive into future


PUTRAJAYA: The entry of a major Chinese carmaker into Proton Holdings Bhd will not only ease its financial woes, but also bring fresh capacity to the group’s underutilised factories.

Zhejiang Geely Automotive Co Ltd plans to turn Malaysia into its global hub to manufacture all of its right-hand drive cars, including its premium Volvo brand.

Geely will take a leadership role in production, sales and marketing. Proton will be responsible for distribution of the brand in Malaysia.
These were among the highlights mentioned at the signing ceremony in Putrajaya between DRB-Hicom, the parent company of Proton, and Geely.

Proton and Geely yesterday signed an agreement that would see Geely take a 49.9% stake in Proton. Both parties have not finalised the price Geely would pay for the stake.

Through the partnership, Geely executive vice-president and chief financial officer Daniel Li said Geely would focus on assisting Proton to sell 500,000 cars in Malaysia and around the region by 2020.

He said Geely would be contributing technology, talent and money to Proton. These include platform-sharing that would see the development of Proton’s first-ever SUV model from Geely’s best selling model – the Boyue.

DRB-Hicom group managing director Datuk Seri Syed Faisal Albar said in the competitive automotive industry, partnership among carmakers globally was common.

A partnership would also further expand Proton’s reach to other markets and give it better economies of scale.

“This partnership with Geely will create more jobs in Proton,” he told reporters yesterday.

Proton has a workforce of about 10,000 which produces about 100,000 cars a year. In 2016, sales of Proton cars dropped 30% to 72,290 units from 102,174 previously.

The company reported a loss of almost RM1bil last year.

Proton’s Tanjung Malim plant, which is designed to produce a million cars every year, will be made a new manufacturing hub for Geely.

Syed Faisal said Proton would relocate its entire production from Shah Alam to Tanjung Malim within five years.

Despite the entry of a new foreign partner, Proton will maintain its national car status. This means its industrial linkages, including vendors and dealers, will not be affected by the change in shareholding.

Under the heads of agreement signed between DRB-Hicom and Geely, the Chinese carmaker will take a 49.9% equity interest in Proton and also a controlling stake in Lotus, the British sportscar maker, from Proton.

No financial details were disclosed in the sale of a stake in Proton, while for Lotus, Geely would be paying £51mil (RM284mil) for a 51% stake in Lotus.

Syed Faisal said DRB-Hicom planned to sign a definitive agreement with Geely in July.

Also present at the signing ceremony was Second Finance Minister Datuk Seri Johari Abdul Ghani, who clarified that with the partnership with Geely in place, Proton would need to repay its RM1.25bil soft loan from the Government.

As part of the conditions for the soft loan, Proton was required to collaborate with a well-known strategic partner.

The requirement to collaborate with a well-known strategic partner was imposed on Proton as part of the conditions issued by the Government for its approval of the RM1.25bil soft loan to Proton, in which a bulk of the money was used to pay its vendors.

Separately, Johari said Proton was entitled to a RM1.1bil reimbursement from the Government for its RM3.5bil spent on research and development in the past.

Johari also said there would be no more “subsidy” for Proton from now on, and that the Government would no longer have a golden share in Proton with Geely entering into a partnership with the national carmaker.

Source: The Star by intan farhana zainulandizwan idris

‘Geely to help Proton drive into future’

IPOH: The decision by Proton to embark on a partnership with China’s Zheijiang Geely Automotive Co Ltd is timely because cars are predicted to be next in line to undergo sweeping innovations.

International Trade and Industry Minister II Datuk Seri Ong Ka Chuan said that in light of Industrial Revolution 4.0, bringing in Geely as Proton’s strategic partner would ensure the Malaysian company’s survival as cars increasingly adopt digital technology.

Industrial Revolution 4.0, or Industry 4.0, is the current trend of automation and data exchange in manufacturing technologies which include cyber-physical systems, the Internet of Things and cloud computing.

“After attending the Hannover Messe, the world’s biggest trade fair for industrial technology, I learned that self-driving cars are the next big thing.

“This means that you are looking at a future where cars will have no steering wheel.

“With just the touch of a panel, the car will bring you to your destination,” Ong said after witnessing the swearing-in of the new committee of the Perak Chinese Cemeteries Management Association yesterday.

He said Geely would be Proton’s channel to embracing technological innovations.

“I’m not saying to expect Proton to be a frontliner in this, but at least with a strategic partner it can move along with the times,” he added.

He said Geely would also open a new market for Proton, which was important for the national carmaker’s survival.

He said it was not a decision made purely in favour of China.

“Over the years, it’s been no secret that Proton accumulated losses and will need a big market to cater to in order to settle all the debts. This is the reality.

“Proton only narrowly met its sales target of 580,000 units last year, while Chinese brands sold 28 million units,” he said.

In view of its small volume, Ong said it would be difficult for Proton to fund sophisticated research and development initiatives.

“We need a larger market for things to work out. The Industrial Revolution 4.0 is all about innovation. We can’t do it ourselves, which is why working with advanced nations is our best bet,” he added.

The Star by Amanda Yeap

Related links:

Najib: Up to RM1bil losses for Proton if sale to Geely blocked …

RM500 aid for civil servants – Nation

PM: Sovereignty will never be compromised – Nation

No place for sentiment in Proton deal – theSundaily

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Proton and a terribly flawed Malaysian Automotive Policy 

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