SY Lau, a Malaysian took China’s WeChat by storm


SY lau china's WeChat.jpgSY Lau has made the country proud through talent, perseverance and hard workWeChat_SY LauiKnown globally as the WeChat Company, Tencent is the largest Internet service provider in Asia, with a market capitalisation (as of April 16, 2015) of US$193bil. It delivers value-added Internet, mobile/ telecom services and online advertising, in order to fulfil the strategic goal of providing users with “one-stop online lifestyle services”.

In 2006, when SY Lau (pic) joined Tencent as one of the senior management team, he focused on driving corporate growth with the specific mission of overseeing Tencent’s Online Media Group (OMG).

Today, OMG is one of the largest media companies in the world, with a portfolio that includes a matrix of online information and entertainment products.

We sit down to talk to the Star Speaker of this year’s Chief Marketing Officers (CMO) Conference.

Early days

I came from an average family and was raised by parents who believed strongly in traditional Chinese parenting. I am the eldest in the family with two younger sisters. My dad worked in the Nanyang Press for more than 25 years before he passed away at an early age due to illness. My mom was an excellent tailor, but I guess my sisters and I would remember her most as a disciplinarian who instilled the spirit of inquisitiveness and competitiveness within us during our formative years.

I studied in St John’s Institution before graduating with a major in Mass Communication from one of the local universities. Subsequently, after working for 10 years or so, I obtained my MBA from Rutgers, the State University of New Jersey, and graduated from Harvard Business School upon completing their pinnacle AMP programme.

My first job was with McCann Erickson as a trainee account executive. How did I get the job? When I was in the final year of my undergraduate studies, I decided to conduct a field research on the Malaysian Advertising Industry using collections of communication theories. The research effort opened up doors for me to conduct field work with more than 10 leading advertising agencies in Malaysia.

A month before my graduation, I received six job offers from the top 4As agencies, and Noel Derby offered to pay RM1,000 to have my work translated into English for use by his company.

I chose McCann because of two reasons. I strongly believed in the motto of the company, Truth Well Told, and, more importantly, Ong Thiam Hong impressed me as a sincere business leader.

Did you go to China by accident or was that part of your plan for a long time? How did it all begin?

Well, it was both by accident and somewhat part of the plan. I was fluent in both English and Mandarin and I thought that if I had an opportunity to venture overseas, China would certainly be my first choice.

I remember when the opportunity came, I was already working with Leo Burnet. One day during lunch, I met Ong Thiam Hong and he told me McCann Hong Kong was in trouble.

One of their biggest international clients, Nestlé, had a new managing director for Greater China, and she was about to fire McCann. The new MD was Leong Ming Chee, a highly respected Nestlé veteran from Malaysia, with a remarkable track record in one of the most significant markets in Asia.

So, the McCann regional management team was frantically looking for a lead person to solve this problem. Apparently Ong had given my name to the regional team based on the fact I used to be one of the well-respected account leaders on the Nestlé account in Malaysia.

I spent the next three years stabilising and building the Nestlé business for McCann, by nurturing and building a professional local team from scratch.

We ended up winning more than a dozen new business accounts for both China and Hong Kong markets.

During this time I won the prestigious Milo Account for China and the media Agency of Record (AOR) , which was a first in Asia.

Lessons learned

China is a huge market, and I have seen many business professionals cutting corners here and there in the name of responding to pressure. Irrespective of industry, I think business people today could excel more if they were more conscious of focusing on leadership led by principles.

This reminds me of an advertising campaign that I saw recently on CNBC; I think it is for a bank from Singapore. The story goes… a father was bringing his son to a fun fair. As the father was purchasing tickets to enter the circus, the ticket seller said it would cost a dollar for an adult ticket and half price for children under four. The father then asked for two tickets. The ticket seller appeared to be shocked and asked curiously about the age of the boy, to which the father replied five. The ticket seller then said you could have told me he was four and I would have let you in without knowing. The father replied while holding his son’s hands, “Well, you may not have known, but he would have.”

Today, we live in a world where few people believe principles really do define who we are. It is my wish we have more principle-driven executives in the business world.


Leadership talks

In recent years, I have been honoured to be invited to deliver a number of speeches at some of the world’s leading universities. The main topics of the speeches explored the development of China’s digital economy environment and Tencent’s role in that development.

In 2012 at Stanford, taking into consideration that the number of Chinese web users had increased slowly since June 2008, I predicted that the demographic dividend (the organic growth brought by the growing number of Chinese Internet users) is going to be cashed out.

So, I proposed that targeted advertising placement and personalised content creation would be the key to break the bottleneck.

I believe that mobile media can not only help advertisers with product promotion, brand communication and customer relationship management, but also with the integration and optimisation of business models, which can become a new marketing platform in the long run. Future digital marketing will go Personal: shifting from media buying to user buying; go Richer: developing a technology-driven creative team and raising the proportion of developers; and go Offline: powering the integrated marketing model with O2O, and achieve closed loop marketing from advertising to sales.

At the Said Business School of Oxford University last year, I shared opportunities brought about by the growth of mobile Internet access across China; we see opportunities at three different levels: the consumer level, the industrial level, and then extending to the level of the whole economy.

Mobile Internet meets the pent-up demand of Chinese people for increased and upgraded levels of consumption, facilitates a long called-for industry transformation as well as expediting the liberalisation of the national economy.

In short, the Internet plays the role of an enabler to transform the new thinking of sustainable development into reality under what we call the New Normal.

The second-mover advantage triggered by the Internet industry can be summarised by examining two different perspectives: Industrial and Geographical.

Very simply put, the Internet has changed the lives of people in China in profound and meaningful ways.

It provides not only a new way of thinking and doing, but a feasible methodology for achieving China’s economic goals. The Internet is not just a resource; it is a means to turn dreams into economic reality.

Digital vision

I think Malaysia had the vision a long time ago, but unfortunately this vision was not implemented to the best of its potential. At the end of the day, the Internet today has become a basic infrastructure, and it should be discussed at a national policy level.

When I attended the recent BoAo Economic Forum, I had the privilege to meet and dine with Tun Abdullah Ahmad Badawi.

He patiently listened to my story of how the private sector got involved in formulating a national policy for Internet Plus in China.

As you know, one of the most significant characteristics in the development of China’s digital economy exists in its integrating with various industries at high speed.

In China, we call this procedure “Internet Plus” – Internet plus the retail industry, plus the real estate industry, plus the manufacturing industry, and of course, plus the media industry.

China has already revealed that Internet Plus will become a policy for the country alongside another national strategy for the manufacturing industry, that is “Made in China 2025”.

A government fund of 40 billion yuan (US$6.38bil) has already been put in place for investment in China’s emerging industries.

Meanwhile, the “Broadband China Project” is being carried out. It will help to make broadband coverage in China reach over 250 million users, and a newly-gained user number of 4G service hit 200 million by the end of 2015.

All of these provide guarantees for the development of the digital economy.

Tencent’s future

Since Internet companies are always impacted by the combined forces of technology and users, I want to talk about some opportunities that I see as solid and realistic here…

Connecting the last billion

First of all, it took 20 years for the Internet to really take hold in China, turning 47.9% of the total population into Internet users.

For the other half of the population who are not yet using the Internet, a lot of them are elderly, young children, or those who cannot afford the necessary equipment.

To plug those people into the Internet world with easy and inexpensive access will be our major mission in the near term.

I think mobile phones are the most viable option to achieve this goal. Through what Nicholas Negroponte of the MIT Media Lab calls, “connecting the last billion”, I believe Tencent will be capable of enabling the development of China even more.

Media of the ‘Mega Web’

Actually, I call this idea of a fully inter-connected world “the world of the Mega Web”, in which the role of the media will greatly expand. The media is already connecting users to content, and it will further connect us to many more things; more devices, more context, more people.

Media will expand to touch almost everything, everywhere. When connectivity expands to that level, singularity will be triggered. The information that we have will become “intellectual” as Big Data accumulates, interconnects and becomes available to even more devices. This expanded access to intelligence is the basic information we act upon, machines act upon and entire smart cities act upon.

The future: connect, call out, make the whole community answer

When data itself becomes both interpretive and predictive, a judgment like “Something needs to be done to improve this situation” will more frequently be made by media rather than people, and more insightfully than we can imagine now. Once everyone is inter-connected, we will be able to reach out to every member of the society, in every remote part of the globe, and call for collective actions to solve problems both locally and globally.

Currently, our mission is to support the Internet Plus Action Plan of China. We are ready to cooperate with the partners and potential partners coming from different vertical industries on a strategic level, so that together we can provide better O2O commerce, online payment experiences and smart livelihood services for our users. We see opportunity around the world, whether this is for our own apps like WeChat or for partnership and investment in Western businesses.

I think WeChat is possibly the most recognisable brand for those in the US or UK.

Tencent also supports other famous brands around the world in markets like gaming and social. Companies like Epic Games and Riot Games are owned by Tencent, while we have our own gaming IP that is successful in China.

To see SY in action on April 21, visit http://www.marketingmagazine.com.my/cmo20015

– The Star/Asia News Network

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Tencent: The Growing Giant

by Simon Kemp in News

We Are Social - Largest Social Channels May 2014

Tencent released its Q1 results earlier this month, including the latest monthly active user figures for its various social platforms.

As the chart above shows, Tencent’s platforms have attracted a huge share of the world’s
social media users, even if the majority of those users are still based in China.

Despite this geographic focus, Tencent now accounts for 3 of the world’s top 5 platforms, driven by the continuing growth of QQ, Qzone and WeChat:

Qzone alone now accounts for around 40% of the world’s social media users.

Moreover, the impressive growth of WeChat (Weixin), both in terms of its active user numbers as well as the platform’s functionality, suggests that Tencent is still far from reaching its peak.

Is it only a matter of time before the rest of the world joins the Tencent family?

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Lawyers who refused to return client RM4.9mil house sale struck off rolls


Singapore Supreme CourtSingapore’s Supreme Court.

Latest case is second instance of lawyers being disbarred in two weeksSINGAPORE — Two senior lawyers were today (April 13) struck off the roll for taking advantage of a client who had transferred S$1.8 million to their wives for safekeeping.

Mr Manjit Singh Kirpal Singh and Mr Sree Govind Menon had claimed that the money paid by Ms Bernadette Rankine was a gift, and had refused to return the money when asked.

After Ms Rankine lodged a complaint with the Law Society, the duo fought proceedings against them, alleging bias by the disciplinary panel president and filing judicial reviews to challenge decisions of the Chief Justice.

Today, the Court of Three Judges – comprising Judge of Appeal Chao Hick Tin and Justices Judith Prakash and Tay Yong Kwang – ruled that the lawyers had been dishonest and ordered their disbarment. “In cases of proven dishonesty, a solicitor will invariably be struck off the roll, regardless of the solicitor’s mitigating circumstances,” the judges wrote.

Mr Singh was admitted to the Bar in 1977 and Mr Menon was admitted in 1998. Ms Rankine had approached Mr Singh for legal advice in 2009, when she wanted to sell her property in Joan Road to live off sale proceeds after breaking up with a Malaysian businessman. She feared her ex-beau would try to prevent the sale of the property, which he did by lodging a caveat against it.

In 2010, the lawyers helped in getting the caveat discharged and Ms Rankine netted S$6.9 million from the sale of the property. She received a S$5 million cheque from the lawyers’ firm and used another S$50,000 to pay her personal assistant. Mr Singh handed her a cheque worth S$1.8 million and the lawyers advised her to issue cheques of the same amount to their wives for safekeeping and future legal fees, which she did.

In Dec 2010, Ms Rankine complained to the Law Society after they refused to return the money. She withdrew the complaint in Nov 2012 after getting her money back, but the Law Society pursued its charges against the duo.

The Society found Ms Rankine’s characterisation of the S$1.8 million payment to be convincing and believable, and said the two lawyers had acted dishonourably and showed no remorse for reprehensible conduct.

The duo had embarked on an elaborate scheme to cheat Ms Rankine, while ensuring the payment could not be traced back to their firm’s account, argued the Law Society, represented by Mr P E Ashokan. Instead of directly transferring the S$1.8 million from the law firm’s account to that of his wife and Mr Menon’s wife, Mr Singh had used Ms Rankine as a conduit so that things would appear above-board, noted the Court of Three Judges.

The judges noted that Ms Rankine had already paid substantial legal fees to the duo and “a gift of this magnitude to a solicitor with whom the client had no previous dealings … simply defies belief”.

Mr Singh also faced a second charge for misusing a S$20,000 cashier’s order from Ms Rankine to pay for an unrelated matter, which the judges said “underlines his lack of…integrity and trustworthiness”.

This is the second time in two weeks that lawyers have been disbarred — veteran lawyer Pascal Netto was struck off the roll last week for professional misconduct that included unauthorised borrowing from a client’s firm.

By Neo Chai Chin chaichin@mediacorp.com.sg

Woman takes due to court over refusal to return RM4.9mil from house sale

Certified dishonest

TWO lawyers who refused to return S$1.8mil (RM4.9mil) to a client were struck off the rolls on April 13.

The client had transferred the money to their wives for what she thought was safekeeping.

Manjit Singh, a lawyer of 37 years, and Sree Govind Menon, a lawyer of 16, were partners in the firm, Manjit Govind & Partners.

In disbarring them, the Court of Three Judges, with power to censure, suspend or strike lawyers off the rolls for professional misconduct, noted that the pair had acted dishonestly.

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In 2009, Singh was hired by Bernadette Rankine, then an art gallery owner, to handle the sale of her house in Joan Road, off Thomson Road, which was sold for S$12mil (RM32.5mil).

She had decided to sell the property and live off the proceeds after ending her 13-year relationship with Malaysian businessman Amin Shah.

But her former boyfriend lodged a caveat against the property to block the sale. In February 2010, the caveat was lifted and the net sales proceeds of S$6.9mil (RM18.7mil) held by the law firm were ordered to be released to her.

Singh gave her a cheque for S$5mil (RM13.6mil) as well as S$50,000 (RM135,000) for her assistant’s wages.

A few days later, he gave her a cheque for S$1.8mil, while she in turn issued two cheques, one for S$1.6mil (RM4.3mil) to Singh’s wife and the other for S$200,000 (RM544,000) to Menon’s wife.

Singh had advised her to place the money with their wives for safekeeping, saying that if her former boyfriend launched more legal action against her, her money would be frozen and she would not have the means to pay for lawyers.

Nine months later, she asked them to return the money. When they refused, she complained to the Law Society. They have since returned the full sum.

In April last year, a disciplinary tribunal found the pair guilty of misconduct – Singh for advising her to pay the money to the wives and then refusing to return it, and Menon for agreeing with the advice.

The pair contended that the money was a gift from Rankine but the tribunal found this “inherently absurd”.

Yesterday, the court agreed, saying it was unlikely that Rankine, who needed money for pending legal matters, would give away one quarter of her key asset to the wives of the two lawyers she had known for less than six months and to whom she had already paid fees. — The Straits Times / Asia News Network
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The global centre of gravity shifting to Asia


Asia_danny-quah-east-shift1“Danny Quah of the London School of Economics has calculated the world’s economic centre of gravity and reckons that, thanks to Asia’s rise, over the 70 years from 1980 to 2050 it will move eastwards from the mid-Atlantic all the way to somewhere between India and China. By 2015, the halfway point on this great journey, it will have reached the city of Bandar-e Mahshahr, in Iran, on the north-eastern tip of the Persian Gulf .”

 Danny Quah’s calculation of the world’s economic centre of gravity has been included in The Economist’s eye-catching statistical landmarks of 2015

Many see the rush to join the Asian Infrastructure Investment Bank as the beginning of a new international financial order and the decline of US dollar hegemony.

BRITAIN’S recent decision to join the Asian Infrastructure Investment Bank (AIIB) as a founder member has led to a kind of stampede by other allies of the United States in Europe such as Germany, France and Italy to follow suit.

So did two other important Asia-Pacific allies, Australia and South Korea. The only other major US ally in Asia which did not was Japan.

What is striking is that these allies went against the express wishes of the US which apparently saw the AIIB as a potential challenge to the domination of the international financial architecture by the US-controlled World Bank and the International Monetary Fund.

Particularly stunning is the British decision. According to senior fellow at the Department of Politics and International Studies at Britain’s Cambridge University Martin Jacques, in this year’s Boao Forum, this is the first time since Breton Woods in the 1940s, except for one occasion when Britain refused a US request to send troops to Vietnam, that Britain had ever said no to the US so publicly!

Jacques exaggerates somewhat as he should have begun with 1956 as the year when Britain abandoned an independent foreign policy, as a result of its misbegotten adventure in Suez, and became a faithful junior partner to the US.

Still, it is no less remarkable, even beginning with 1956, for it took about six decades before a clear British nay to the US came about.

Many saw the rush to join the AIIB as signifying the beginning of a new international financial order and the decline of US dollar hegemony, with China deemed to be the new or most influential nation.

Some, however, saw Chinese weakness rather than strength in this spectacle.

London’s Financial Times argued that resorting to a multi-lateral institution to exercise influence suggests weakness as China will be less able to get its own way, not to mention possible badgering from non-governmental organisations in future deliberations of the AIIB, than if it could do so by bilateral means.

It remains to be seen if a new financial order will eventuate. I will however make a few points about this development.

One is that it has shown in a dramatic way the global reach of Chinese economic strength, especially in the financial arena.

While it is true that China is already an economic force in other parts of the globe such as in the continents of Africa and South America, not to mention Asia and Australia, this is probably the first time that a major European nation has made an economic decision with obvious political implications favourable to the Chinese.

Someone defined a superpower as a nation or state that can project dominating power and influence in the globe, sometimes in one region or more, and that has the potential to attain global hegemony.

In this respect we can consider China an economic superpower.

Of relevance to our understanding of Chinese strength is the reason behind the British decision.

Britain in the past year or two has evinced a more positive attitude towards China.

According to an analysis in the Internet magazine, Counterpunch, the recent British economic recovery has been mainly based on financial flows to property and infrastructural projects in London and the south of England, and the prosperity of the City of London.

And the city of London is what keeps Britain from becoming a third-tier economy.

This is so important that David Cameron and the Conservatives could conceive of Britain leaving the European Union if the EU were to mess with the running of the City by imposing regulations.

A lot of the money recently has come from China and Britain is very keen to be involved in the offshore trading of the Chinese renminbi. Thus, there is every prospect of Britain getting more action from a China, with foreign reserves of around US$4tril (RM14.68tril), looking for more ways to use the renminbi.

Joining the AIIB in such a fashion, not only brings with it the prospect of possibly getting a leg up in future AIIB projects, but also gains Chinese goodwill. But it is important not to exaggerate Chinese strength. It is a superpower only in the economic arena, and not in other spheres such as the military and political.

Militarily, the US far exceeds China in the amount of money spent and in technological sophistication. Politically, what China can at present offer cannot match the global impact of values associated with the US such as democracy and human rights.

Even in the economic sphere, the Chinese Gross Domestic Product is only equal in size to the US in purchasing power terms, and not in dollar terms where the US GDP is more than one and the half times that of China.

In per capita terms, US GDP is at least four times more. And the US is still far more advanced in the sophistication of its financial market and industrial structures.

The significance of this AIIB development is not a demonstration of raw Chinese economic power.

It is unlikely to do away with the WB or the IMF.

It is really another symptom, this time in Europe and in the financial arena, of the global centre of gravity shifting to Asia.

By Dr. Lee Poh Ping
> Dr Lee Poh Ping is a Senior Research Fellow at the Institute of China Studies in the University of Malaya. The views expressed here are entirely the writer’s own.

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The AIIB groundswell; Asian development to the fore


Washington’s Lobbying Efforts Against China’s ‘World Bank’ Fail As Italy, France Welcomed Aboard. The cheese really does stand alone. Every single U.S. ally with the exception of Japan have all hopped on board the Asian Infrastructure Investment Bank, or AIIB. Italy and France were approved on Thursday to become founding members, bringing the total membership base to 33 from the original 21.

The AIIB groundswell

Just in time for the deadline, an impressive coalition of countries have signed on for the newest development bank on the block

THE deadline of March 31 has passed, and 52 countries are now on the list of would-be founders of the Asian Infrastructure Investment Bank (AIIB).

The China-led bank was launched in October last year at the Great Hall of the People in Beijing, a year after Chinese President Xi Jinping proposed a bank to offer funds for development projects during his official visit to Indonesia.

The initiative would promote regional inter-connectivity and economic integration, he said when delivering a speech at the Indonesian Parliament.

In the past few days leading up to the deadline, news of more countries hurrying to join the AIIB made headlines, especially when a few of them announced the decision at the recently concluded Boao Forum in Hainan province, which Xi officiated.

The world was watching closely to see if the United States and Japan would sign up as founding members just before the deadline, but both have decided to opt out of the bank that is seen as a rival to the Western-dominated World Bank and International Monetary Fund.

Back in October last year, the bank had confirmation from 21 countries to participate as founding members – Malaysia was one of them – all of which are in the Asian continent.

The tipping point came when the United Kingdom announced its decision to join the AIIB in the middle of March, to the surprise of many.

More countries followed suit right after that, including France, Italy, Germany and Switzerland.

Martin Jacques, a senior fellow at the Department of Politics and International Studies at Britain’s Cambridge University, said the rise and growing awareness of the Chinese possibility in the context of a multilateral initiative pressed Britain to act the way it did, making AIIB not just an Asian institution but a global one.

“I think this is an extraordinary historical moment,” he said in a panel discussion during the Boao Forum.

“The new institutions (AIIB and the New Development Bank operated by Brazil, Russia, India, China and South Africa) do not necessarily conflict with the Bretton Woods institutions. They are very different.

“The developing countries now account for nearly 60% of global Gross Domestic Product and they represent 85% of the world population.

“The new institutions, unlike the Bretton Woods institutions, are being defined as relevant to the needs of this 85% of world population, most of whom are concentrated in this continent.”

Countries which have missed the March 31 deadline can still join as ordinary members, while those that have already submitted their application will find out if they are on the final list of founding members by April 15.

With an initial capital of US$50bil (RM184bil), AIIB is scheduled to be officially established at the end of the year, after the rules are finalised and signed in mid-2015.

New Zealand’s former Prime Minister Jenny Shipley said there is a need to define “infrastructure” to determine the types of projects that are qualified to obtain funding from the AIIB.

“If I could be provocative – if you were to put a diverse group of qualified women and men together and ask them the question, you’ll get a broader definition than if you just ask the question of classical male concept of buildings,” she said.

“We need to stand in the shoes of the people whose lives will be unleashed if we get this right. Just bringing in the classical morals of the same thing would not give us the breakthrough.”

Josette Sheeran, the president and Chief Executive Officer of the Asia Society, chipped in on this, citing Indian Prime Minister Narendra Modi’s agenda of building more toilets as an example.

“The reason young girls don’t go to school in India is that there is no toilet. That’s the kind of infrastructure that would really capture the mind of humanity and transform hope in the world,” she said.

Former Pakistan Prime Minister Shaukat Aziz was more concerned about the governance of the new banks, placing emphasis on professionalism, transparency and quality leadership.

“The people hired for AIIB must be professionals who know what infrastructure financing is all about,” he said.

“The quality of people will determine the ability of these banks to analyse risks to give money and to make credible loans which are payable back.”

Transparency, in the opinion of Deloitte global chairman Steve Almond, is also key to attract the private sector to come onboard.

“The regional or sub-regional projects are arguably the ones that bring the greatest impact to economic development. But because they go across the borders, they are also harder to manage and least likely to attract private sector capital,” he said.

“We need the mechanism to provide confidence to the private sector, and transparency governance is one of the compelling reasons to encourage them to come and join the projects.”

And what is the magic that would make good governance work?

Li Ruogum, former chairman and president of Export-Import Bank of China, believes in understanding.

“This newly established institution cannot just clone the older one, as we are working in a very different environment.

“We have to accumulate our experiences and need to have a mind of innovation. All should come together and understand each other, and try to achieve good governance.”

Check-in-China by Tho Xin Yi


 

Asian development to the fore

Chinese President Xi Jinping. – AFP
Hungry for development: In 2013, President Xi Jinping proposed a new development bank, the Asian Infrastructure Investment Bank. One year later, 22 Asian countries had signed up, including 10 Asean countries – Blooberg

Asia’s need for better infrastructure and more development is too important to be held to ransom by outdated big power politics and petty posturing.

FOR many observers, the US “pivot” (later renamed “rebalancing”) to the Asia-Pacific was classic Obama: the rhetorical flourish was more dramatic than the policy substance.

In the second half of its first term, the Obama administration sought to assign two-thirds of its military assets to the Asia-Pacific theatre, up from the standard half from the even split between the Pacific and the Atlantic.

By the middle of its second term, officials were struggling to maintain a semblance of a policy largely left to coast under its steadily diminishing momentum. US foreign policy, and by extension US defence policy, appeared distracted by other concerns.

The State Department and the Pentagon seemed consumed at once by the Syrian debacle, Iraq’s instability, rising terrorism everywhere, civil war in Ukraine, Europe’s problems with Russia, Iran’s nuclear programme and an uppity Israel.

Then there were the ever-present ­budgetary constraints. Deploying another 16% of military assets to the Asia-Pacific, from half to two-thirds, seemed hardly noticeable or achievable.

Meanwhile, officials were anxious to insist that the rebalancing had nothing to do with the rise of China and its growing assertiveness in the region. It was, they said, part of efforts to preserve US strategic interests.

Whatever the choice of words, and however implicit China may be as motivation, rebalancing was fast becoming history. By March last year, a Pentagon official admitted it was going nowhere.

However, the Obama administration’s gift of verbalising policy intent made US intentions clear enough.

President Obama had famously said the US should be writing trade rules in the Asia-Pacific rather than let China do it.

Thus, the Trans-Pacific Partnership, a trade pact with controversial demands that swiftly became synonymous with US trade preferences. But China had not been idle either.

In 2013, President Xi Jinping proposed a new development bank, the Asian Infrastructure Investment Bank (AIIB). One year later, 22 Asian countries had signed up, including all 10 Asean countries.

In Asia, the world’s most promising continent for rapid economic growth, infrastructure needs for development are peaking. The IMF, World Bank and Asian Development Bank (ADB) can serve only a fraction of its needs: between 2010 and 2020 alone, some RM30tril is needed.

China set a deadline of March 31 this year for countries around the world to sign up as Prospective Founding Members (PFMs) before operations begin later in 2015. China would provide the biggest contribution to the authorised capital of US$100bil (RM363.49bil) and initial subscribed capital of US$50bil (RM181.75bil).

The US immediately saw this as a game-changer challenge to its dominance in global lending. For decades, it has controlled the World Bank, and through its European allies, the IMF and through its ally Japan, the ADB.

These institutions have been known to set tough conditions on debtor countries that may not serve domestic aspirations or national interests. A cash-rich China also felt it remained under-represented in these institutions even after becoming a leading global economy.

Washington had hoped, even expected, that its allies and friends would stay away from the AIIB as a rival institution. But like its pivot or rebalancing strategy, that hope steadily faded.

In Europe, Britain as the closest US ally was the first to sign up to the AIIB early last month. Soon, other major European economies like France, Germany and Italy followed, as did all the Scandinavian countries.

Washington then quietly pressured Japan, South Korea and Australia to stay away. But Seoul and Canberra signed up anyway. By then, the US had started to soften its stand, denying that it had ever pressured any country to stay away. It was only unsure if the AIIB would adhere to best practices in international lending.

Then, other US allies like Taiwan and Israel also signed up. The US was becoming increasingly isolated, with only Japan as the other major economy for company.

But not for long, perhaps. Last Monday, Japan’s ambassador to China, Masato Kitera, said in a Financial Times (FT) interview that Japan would join the AIIB as well, probably around June.

That came as a bombshell to the conservative Japanese government. It would seem too much of a betrayal of yet another US ally, the final one being the “unkindest cut of all”.

The next day, on the deadline for countries to sign up as PFMs for the AIIB, Tokyo denied that Ambassador Kitera ever said such a thing. Chief Cabinet Secretary Yoshihide Suga said Japan had no imme­diate plans to join the AIIB.

Besides being a US ally, Japan was also wary of the prospect of the AIIB undercutting the ADB.

Whatever the actual chances of Japan joining the AIIB, Tokyo would want to underplay it as much as possible.

Like the US, Japan said it was reluctant to sign up because of uncertainty over the AIIB’s standards. But countries such as Britain and Singapore that have joined said the best way to ensure high standards was to get on board and be part of the decision-making process.

To be part of that process, it was necessary to sign up early before the big decisions were made. The terms and conditions of lending and borrowing have still to be firmed up as dozens of countries including giants like India and Russia are already in.

The FT report also revealed that Japanese business leaders were pressuring their government to join the AIIB. Mitsubishi bosses, for example, had expressed confidence in Jin Liqun, a former senior ADB official who will head the AIIB.

On the deadline last Tuesday, China announced that 30 countries had been admitted as PFMs. More than a dozen others were in the queue.

Then a flood of criticisms and denuncia­tions of the stubborn US position came, mostly from within the US itself. Analysts and commentators, including in Forbes and The Economist, said the US administration had miscalculated badly in staying out, only damaging US long-term interests in East Asia and the Pacific.

Former US Secretary of State Madeleine Albright also condemned the US position, lamenting the way Washington had scored another own goal by rebuffing the AIIB. The US had placed itself behind the curve in changes in the Asia-Pacific rather than stay at the leading edge.

If and when Japan finally signs up, the US may have to be resigned to becoming a part of the AIIB. But as a latecomer, it may be limited to playing only a bit part such as an observer rather than sit at the main table.

China has long regretted the US fixation with what it calls a Cold War “them against us” bipolar mentality that frustrates progress on many fronts. For the countries of Asia hungry for more development, progress must not be held hostage to big power rivalry.

Ultimately, any rivalry between the US and China today is not over political ideology but economic ideology: the Washington Consensus of free trade rhetoric where the state and private industry are at odds with each other versus the emerging Beijing Consensus of close public-private partnerships that have worked so well for so much of Asia already.

US opposition to a proven formula for Asia is most unlikely to win friends and supporters anywhere, least of all in Asia.

By Bunn Nagara Behind the headlines

> Bunn Nagara is a Senior Fellow at the Institute of Strategic and International Studies (ISIS) Malaysia.

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27 Oct 2014
Chinese President Xi Jinping’s (C-R) meeting with the members of the Asian Infrastructure Investment Bank (AIIB) in the Great Hall of the People in Beijing, China 24 October 2014. 21 Asian countries are the founding …

Not all debts are bad


Rising household indebtedness could be a signal of robust consumption pattern that is the driver of domestic economic growth.

Construction workers at work in Kuala Lumpur. About 46 of household debt is for the purpose of financing purchase of residential properties.

Rising household indebtedness could be a signal of robust consumption pattern that is the driver of domestic economic growth.

FEDERAL government debt, external debt, household debt, non-financial corporate debt – these debts amount to billions of ringgit each and there should be proper context and understanding of the different classifications of debts to be fully informed of the economic issues at stake.

At face value, debt is money owed that has to be repaid in principal and interest. To look at debt from a more constructive point of view, debt is also future consumption brought forward. Furthermore, the benefit derived from consuming at the expense of expected future income should equal or even outweigh its associated costs of financing.

The point is, there are good debts and there are bad debts. Debts raking in billions or outstanding loans growing at an increasing rate could potentially be alarming. However, it would be misleading to label huge debts as unsustainable and destabilising before making sense of the origins and the purposes of the money borrowed.

Debts continue to pile up

A recent research on global debt and leverage by the McKinsey Global Institute in February highlighted that global debt continues to grow post-global financial crisis. These debts – the sum of money owed by governments, households, corporates and financial sectors in the 47 countries under the research – have grown to US$57 trillion since 2007 and a significant portion of the growth came from the public sector.

Overall, the research pointed out that only five developing economies showed signs of deleveraging while most of other countries saw increased debt to GDP ratio during the period.

With hindsight, global growth recovery post-global financial crisis has been rather slow and a handful of governments had pursued expansionary fiscal programmes funded through debts.

Unfortunately, as the global pace of growth is still relatively tentative, high level of government indebtedness would take longer time to deleverage.

Meanwhile, the increase in household and corporate sector debts could signal deeper financial system penetration and also recovery in household and corporate balance sheets for private sector expenditure to grow again.

As of end-2014, Malaysia’s federal government debt amounted to RM583bil (54.5% of GDP); external debt totalled RM744.7bil (69.6% of GDP); household debt increased to RM940.4bil (87.9 % of GDP).

In the past four years, the compounded annual growth rate for government debt was 9.4%; 14.4% for external debt and 12.2% for household debt.

While these numbers seem alarming, the major concern over debts arises when they are unsustainable.

While there are concerns over the sustainability of our fiscal deficit over the long term, the Government has embarked on a fiscal consolidation effort in recent years. Because of this, government debt should be under control in line with its commitment to achieve a balanced budget by 2020.

The Government operates on a few crucial self-imposed budgetary rules and it caps the maximum limit of government debt to GDP ratio at 55%.

On external debt, Bank Negara has adopted the new debt definition in early 2014, keeping in line with the International Monetary Fund’s (IMF) new guidelines of widening its definition to better reflect the depth in financial markets and the real economy.

In essence, external debt refers to the debts owed by residents to non-residents, be it denominated in ringgit or foreign currencies.

Therefore, the public and private sector’s offshore borrowings, Malaysian Government Securities held by foreigners are included in the classification of the external debt.

Since the last quarter of 2013, the external debt growth has been on a downward trend, easing to 6.9% in the last quarter of 2014, down from the peak of 15.7% growth recorded in the last quarter of 2013.

Besides, the bulk of the growth in external debt since 2013 was primarily from offshore borrowings as it made up almost half of the total external debt.

Bank Negara, in its recent annual report, guided that private sector offshore borrowings are sound and sustainable, given that 70% of the corporate sector’s offshore loans were sourced from associated companies, parent companies and shareholders.

High household debts a concern

However, Malaysian household sector indebtedness undoubtedly tops the chart in the region.

According to McKinsey’s study, Malaysia’s household debt to income ratio is highest at 146% in 2014, way above the level of the United States (99%) and Indonesia (32%).

When we break down the household debt, 45.7% of it is for the purpose of financing purchase of residential properties. Hire purchase financing (16.6% of total household debt) and personal financing (15.7%) made up the remaining major components.

Even though Malaysia’s household financial asset to total household debt ratio is relatively high at 214% in 2014, the associated risks of high household indebtedness cannot be taken lightly.

The IMF, in its financial sector assessment on Malaysia in April 2014, cautioned that in the event of a sharp fall in housing property prices coupled with a recession in the economy, the burst of the housing asset bubble would have dire consequences on the real economy.

The Government and Bank Negara have in recent years attempted to rein in the growth in housing loans and also put a check on the property market through various macro-prudential tools.

For instance, the last Overnight Policy Rate hike in July 2014 by 25 basis points was primarily to mitigate the financial imbalances within the economy.

In January 2015, the growth of household outstanding loans from the banking institutions has slowed to 9.7%, down from the peak of 13.9% in November 2010.

Although it is a sign of improvement in domestic financial stability, a continued assessment of household loans would be a prudent measure.

Responsible use of leverage

Bad indebtedness is often described as how an overleveraged economy collapses on its own pile of toxic debts when triggered by an overlooked external event – the subprime mortgage crisis in the United States is a classic example.

On the other hand, good debts are those that are used to finance productive and sustainable purposes.

A government manoeuvering an economy out of recession could issue bonds to fund its fiscal stimulus programme while a company could maximise its true potential through the proper use of leverage.

In fact, given a youthful population and a stable work force in Malaysia, rising household indebtedness could be a signal of robust consumption pattern that is the driver of domestic economic growth.

Therefore, regulators and policy makers should not, in their fear of “indebtedness”, stifle the credit lines and the channels to expand present consumption for future capacity of growth.

Unfortunately, with a lack of hindsight, it can be difficult at times to ascertain if a debt is good or bad, A-tier quality or just a default waiting to happen.

In the end, it is not only the viability in repaying the loans but also the realised output and gains from entering a debt contract that should be examined to determine the sustainability in taking up debts.

In short, indebtedness is not necessarily bad. A responsible debtor should have a clear and comprehensive business or personal financial planning and ultimately transparency in dealing with all parties. After all, a good debt is a good customer for the other end.

My point By Mandkaran Mottain

Manokaran Mottain is the chief economist at Alliance Bank Malaysia Bhd.

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MOST if not all house buyers will require financing to buy their dream homes. While there appears to be stiff competition among banks for …


Unfair housing loan agreement

MOST if not all house buyers will require financing to buy their dream
homes. While there appears to be stiff competition among banks for …

Unfair housing loan agreement


MOST if not all house buyers willrequire financing to buy their dream homes. While there appears to be stiff competition among banks for market share and interest rates may be kept low, house buyers are ultimately at the mercy of banks when it comes to the detailed terms and conditions of the housing loan. (Banks in this context refers to commercial banks,Islamic banks and other financial institutions).Unfair legal fees

When a borrower takes a housing loan, the borrower is required to execute a loan and other related agreements. This entails the borrower having to pay legal fees, the amount of which varies, depending on the loan amount – the higher the loan amount, the higher the legal fees although the complicity and level of work does not necessarily commensurate directly with the loan amount.

Although it is the borrower paying the loan lawyers’ fees, the said loan lawyer is actually acting for and on behalf of the bank. As such, the loan lawyer is not in the best position to advise the borrower if there are clauses in the loan agreement which are not in the best interest of the borrower.

In addition, in the event of any dispute between the borrower and the bank, the borrower cannot ask the loan lawyer for advice as the loan lawyer is acting for the banks.

If this is the case, then is it “fair or equitable” for the borrower to pay such legal fees when it is clear that the lawyer is actually acting for the banks? Obviously not. Hence, the bank should absorb the legal fees as the lawyers are clearly there to act for the bank and protect its interest.

Exorbitant fees for simple letters

The banking sector in Malaysia is a very tightly regulated industry. Any fees that banks intend to charge must be approved by Bank Negara. It is disheartening to note that borrowers continue to be charged exorbitant fees which seem to have the explicit blessings and consent of Bank Negara. Instances of borrowers being charged unreasonable fees for copies of redemption statement, EPF statement letter etc are common.

Allocation of monthly repayment to principal and interest

This is a story about three friends who took a housing loan (HL) of RM500,000 ten years ago. They were offered the same HL interest rate of 4.2% (base lending rate of 6.60% less 2.40%) but took different loan tenures as follows:

Albert took a 20-year HL. Eric took a 25-year HL and Jamie took a 30-year HL.

After servicing their monthly loan instalments diligently for the past 10 years, they decided to fully settle their housing loan using a combination of their EPF monies and own savings. When they asked for a redemption statement to find out what was the principal sum outstanding, they received a shock of their lives.

Albert, Eric and Jamie were under the impression as they had served 50%, 40% and 33.3% of the loan tenure, their principal sum outstanding would be RM250,000, RM300,0000 and RM333,333 respectively.

So, when their respective redemption statement showed that Albert, Eric and Jamie still owed respectively RM301,654, RM359,415 and RM396,652, they got a big shock.

So, why did they still owe so much more than what they had thought? The answer lies in the allocation of the monthly instalment towards covering the principal sum and interest charged by the bank.

In an equitable world, the monthly instalments would be allocated on a “straight line basis” to cover the principle and interest charged. Thus, a borrower who served 10 out of a 20-year HL would only owe 50% of the original loan amount.

However, the reality is that the borrower still owes 60.3% of the original loan amount.

The typical borrower will always be “penalised” for settling his loan before the maturity date. Even in the penultimate year of the original loan tenure, the actual amount outstanding is still higher than the theoretical amount, which should be the amount outstanding had the allocation of monthly instalments been done on a straight line basis.

 

Is it fair and equitable?

Most borrowers do not know or even understand how this allocation is calculated. Is such an allocation “fair and equitable” to the borrower? Under such circumstances, are borrowers supposed to accept that the bank’s own generated computer system has calculated the interest correctly and allocated the payments in the correct manner?

To the borrower, they have paid 10 out of a 20-year loan, he should only owe balance 50% and not 60.3%. Is this manner of allocation not just another unjust way for the bank to generate higher profits, after all the bank did receive the payments on time and in full every month. It is the dream of every borrower to be debt-free as soon as possible and it is not fair to the borrower to be penalised in such a manner when he wants to settle his loan early.

That said, borrowers have no choice but to accept the calculation of the bank as correct and final. If the borrower were to reject and not pay the required sum, the loan will not be considered as repaid in full. The borrower could even be blacklisted and even have his property auctioned off by the bank to recover the remaining sum outstanding if the borrower refuses to pay up.

It would be more transparent and equitable if the monthly payments made by the borrower are allocated in a “straight line basis” to interest and principal equally over thetenure of the housing loan. Short of that, borrowers are at the mercy of banks.

Some banks operate like a “cartel” and standardise their fees to be charged to customers. One wonder whether such unfair practices are condoned by the regulators like Bank Negara.

It is also interesting to note that banks are exempted by the Malaysia Competition Commission allowing banks to agree and collude on unfair fees, penalties and practices to be charged to borrowers.


Unnecessary expenses

Loan agreement “printing charges” – sold between RM150 and RM350. The banks’ solicitors need to purchase a standard loan agreement from the bank (via soft copy) and adds the borrowers’ details in order to complete the loan agreement. The banks charge the lawyer and the lawyer charges the borrowers.

Standard loan agreements are now downloaded from the bank’s website or from soft copy. The bank no longer need to print them and should not charge for such documents. Alas, this has been continuing till to date.

Lopsided terms and conditions

Lopsided terms and “add-on” products are aplenty, if the borrower wants to identify with them. It would be good practice to remove or qualify the banks’ arbitrary powers.

Conclusion

The National House Buyers Association (HBA) had on Sept 4, 2014 made representation to the Finance Ministry (MOF), Bank Negara. Housing and Local Government Ministry in the presence of Association of Banks Malaysia and Islamic Banks of Malaysia in the form of slides presentation on some observations and unethical practices of some banks.

HBA is looking to work closely with MOF, Bank Negar and all related stakeholders to level the playing field for housing loan borrowers in the long-term interest of the banking industry. We had proposed to set up a working committee to resolve all unfair practices. MOF and Bank Negara have a legitimate interest in the final shape of the banking industry into operating a principled and towards a “customer friendly arena”.


Buyers Beware By Chang Kim Loong

Chang Kim Loong is the honorary secretary-general of the national House Buyers Association: http://www.hba.org.my, a non-profit, non-governmental organisation manned purely by volunteers.

 

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Singaporeans from ”Third World to First’, emotional farewell to Lee Kuan Yew


‘From third world to first’: Lee Kuan Yew’s legacy in charts

Lee Kuan Yew, who has died aged 91, presided over a turnround in the economic fortunes of his nation, taking it from a colonial backwater to its status as one of the richest places on the planet — a journey ‘from
third world to first’, as Lee titled his memoir.
From ease of doing business to concentration of millionaires, 21st-century Singapore consistently ranks among the world’s most economically developed nations.
Charts: Economic freedom and dollar millionaires

But Lee’s legacy goes beyond wealth-creators. Since he came to power just about every aspect of Singapore has been transformed, and along with it the fortunes of ordinary Singaporeans. The population has, of course, grown.

Singaporeans have become much better educated and crime has dropped, partly as a result of Lee’s authoritarian influence.

An enormous public housing programme in the 1960s and 1970s has allowed more than 80 per cent of citizens to live in
government-subsidised apartments. But an ageing population raises challenges for the years ahead.

Emotional farewell for Singaporeans

Thousands wait in long queue for hours to pay last respects to Lee Kuan Yew

SINGAPORE: Singaporeans wept on the streets and queued in their thousands to pay tribute to founding lea­der Lee Kuan Yew as his flag-draped coffin was taken on a gun carriage to parliament for public viewing.

After a two-day private wake for the family, the coffin was taken in a slow motorcade from the Istana government complex, Lee’s workplace for decades as prime minister and cabinet adviser, to the legislature yesterday. It will lie in state there until Sunday.

The 91-year-old patriarch died on Mon­day after half a century in government, during which Singapore was transformed from a poor British colonial outpost into one of the world’s richest societies.

The government led by his son Prime Minister Lee Hsien Loong, apparently taken by surprise at the heavy early turnout, announced that Parliament House would stay open for 24 hours a day until Saturday night “due to overwhelming res­­ponse from the public”.

Lee will be cremated on Sunday after a state funeral expected to be attended by several Asia-Pacific leaders even though he was just an MP when he died.

Applause and shouts of “We love you!” and “Lee Kuan Yew!” broke out as the dark brown wooden coffin, draped in the red-and-white Singapore flag, emerged from the Istana housed in a tempered glass case on a gun carriage pulled by an open-topped military truck.

Earlier, in scenes that evoked Singapore’s colonial past, the carriage stopped in front of the main Istana building, where British administrators once worked, as a bag­­piper from Singapore’s Gurkha Contingent – the city-state’s special guard force – played Auld Lang Syne.

After the motorcade emerged from the palace, many in the crowd waiting behind barricades along the route were in tears as they raised cameras and mobile phones to record the historic event.

Some threw flowers on the path of the carriage, while office workers watched from high-rise buildings.

President Tony Tan and his wife Mary were the first to pay their respects in the parliament’s foyer.

By mid-afternoon Singaporeans were waiting for up to eight hours in queues that snaked around the central business district, many using umbrellas against the 33°C heat.

In true Singaporean fashion the crowds were orderly, with free drinking water and portable toilets set up for mourners.

Police helped direct traffic flow and priority queues were created for the elderly, pregnant women and the disabled.

People from all walks of life turned up to honour the authoritarian former leader popularly known by his initials “LKY”.

“These are amazing scenes. I have not seen anything like this in my lifetime,” said bank executive Zhang Wei Jie, 36.

“LKY is the founder of our country. It is a no-brainer that we have to pay respect. We have taken some time off from work, my supervisor is also here somewhere in the crowd.”

R. Tamilselvi, 77, brought two of her granddaughters, each clutching flowers.

“Lee Kuan Yew has done so much for us,” she said. “We used to live in squatter (colonies) in Sembawang, my husband was a bus driver. Now my three sons have good jobs and nice houses. The children all go to school. What will we be without Lee Kuan Yew?” — AFP

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