World's Worst Places To Catch A Cab

I came across an article on the World's Worst Places To Catch A Cab. I thought naturally Malaysia would be in the top 3 ... at least. Then I thought further on what would be the worst things about catching a cab.

Being fleeced would be number one. Untidy, smelly and and unhygienic cabs would be next. Rude, verbally abusive or impolite cab drivers would also count. Safety or a lack of and dangerous driving should also figure. I guess comfort would have to be included. Then there is touting and illegal operators, you don't know who to trust when you are in a foreign place. Last would be cost I guess.

So, in my books, the worst place to catch a cab has to be Malaysia, hands down. Not that I want to run down my own country but its pathetic. The only good thing is cost, and that is so at the bottom of many people's essential list. Its very poorly regulated. There are too many operators, see what happens when you keep giving out master licenses to various operators. Not using the meters. They are taxi drivers but they can pick and choose their passengers, how in hell can I be flagging down cabs and three empty ones pass by not stopping, they must be making a very good living... when you hail a cab, be prepared for a 75% hit-miss ratio, you may not be presentable enough to catch one.

I love the tuk-tuks in Thailand, its a bit dangerous, and yes they may try to fleece you but if you negotiate beforehand, its usually agreeable ... not like here, if you are a foreigner and tries to negotiate a cab fare, you have a better chance of asking Bung Mokhtar to be polite and respectful.

Cairo was scary shit, they are the worst, well not worst in that sense, shall I say most daredevillish drivers in the world. New York was ok and the cab drivers are not as rude or obnoxious or witty as the TV shows make them out to be. London was very good. In HK you can tell when the economy is bad or good, if taxi drivers are more polite and nice, that means the economy is very bad... and vice versa. I get away with murder in Indonesia when I take cabs cause when you speak Indonesian/Malay, hey, its like a family reunion with them.

Sydney's decent as well though in recent years there have been too many new immigrants taking on the cabbie jobs. That's ok too as long as they improve their English skills la. I guess I can comment on cab drivers because I was one before for 2 years while studying in Sydney.
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Here is the article in Sydney Morning Herald:

Generally I've found the less developed a country, the more perilous you can expect your cab ride to be.

Cab rides in LA, for example, tend to be largely uneventful, and spectacularly expensive. Black cabs in London are the height of predictability - you'll get where you want to go, and it will cost you the equivalent of a month's rent in a Putney flat. (Minicabs are another story, on both counts.)

However, a cab ride in, say, Nairobi is a bit different. For starters, you don't get the taxi to yourself. You'll probably be in a shared taxi, or matatu, which sticks to a rough route, but will pull over anywhere for passengers to get on or off.

So it works out cheaper than a normal taxi, you just have to be prepared to share a mini-van with 15 of your closest African friends.

Plus there's the slight danger of, um, decapitation. I remember picking up the local paper a few days in to my last Kenya trip, and reading about a matatu that had been pulled over and its occupants all slaughtered for the few bucks they were carrying on them. Adds a touch of adrenalin to your ride, I guess.

They won't decapitate you, but cyclo and rickshaw drivers in India's "golden triangle" (Delhi, Agra and Jaipur) will certainly bug you to death. They're the kings of the commission-based up-sell.

First, they'll want to be hired for a full day - which, if you're a talented haggler, could work out to be a good deal. Next, they'll want to suggest the hotel you should really be staying at. And did you know there are some very, very good shops that you should have a look in?

It drives you bananas, but you get where you want to go eventually.

Of course, the "I can't take you to that hotel" routine isn't limited to India. Stop me if I've already told this one, but I had a mate who caught a tuk-tuk somewhere in Thailand, and upon giving the driver the name of the hotel he wanted to go to, was given the old, "Oh, that one burnt down" excuse. As savvy travellers do, he insisted on being taken there anyway, only to find... the burnt-out shell of what was once a hotel. Sigh.

Outside of the danger of being ripped off, there's also the danger of being killed in a high-speed accident. Taxis in Europe are mostly fine, but if you catch one late at night in Prague, take a tip, and whack on a seatbelt. Those guys scream through the wet, cobbled streets like they're late for a tracksuit-and-mullet convention.

Russian cabs are in no danger of breaking land-speed records, but they're not exactly gold-panelled horse-drawn chariots either. My favourite was the St Petersburg taxi whose boot could only be opened with a screwdriver. The driver pulled up, jumped out of the old bomb, jammed a screwdriver in the boot, shoved it with his hip, grunted towards the now open hatch, and leapt back in the cab.

So where's a good place to get a taxi? Try Buenos Aires. As long as you can pronounce your destination in Spanish, you'll be taken straight there, and it'll cost next to nothing.

In the Algarve region of Portugal it'll cost a bit more, but all the taxis are spankin' new Mercedes, so you can put up with forking out a bit more.

I even found Beijing cabs okay, as long as you have the address written down in Mandarin. Mind you, I was blessed to have Beijing's self-proclaimed "number one tassi driver" ferrying me around. Surely not everyone could be that lucky...

p/s photos: I usually do not post photos that are too racy, but I have to make an exception because she has to be the most enticing looking girl I have come across for a long time. Eri Otoguro is a Japanese actress who was born in Bangkok, Thailand. She has a small role in the Hollywood remake of the Thai film, Shutter.

Grave & Deathly Humour

People who can laugh at life and at themselves are fun people. Death is a serious thing, but you can pass on with character and wit, or any way you want as long as you have sorted out your afterlife during your lifetime. Some might say grave humour is in bad taste, ah, shaddup already, go dig a hole and plant yourself. My favourite is the last one... I told you so... so many times!!!

At least when your family and friends visit your grave, they smile and remember what a character you were.

Toll Roads, Airports, IPPs - All Need Proper Cost-Benefit Analysis

Certain services should never be privatised. The Sydney airport is a prime example of when you should not sell. Of course now, we are still complaining over toll roads privatisation - toll roads are basically OK to be privatised, our Malaysian gripe is that the terms of the contract were so favourable to the operator that in the end its the public that get whacked every year, and the contract is so bloody long.

If we stopped issuing such favourable terms in the first place (e.g. IPPs as well) then we wouldn't need to put out so many fires year after year. Thankfully MAHB is a "decent operator" and not a vampire like Macquarie - can you imagine paying AUD4 (RM10) for the use of a trolley???... how about AUD14 (RM35) for parking an hour. Always do a proper and transparent Cost_benefit Analysis and make known the permissible rate of return and burdens on the public when deliberating major privatisation of public services.

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Sydney Morning Herald: Sydney Airport is the country's worst and most expensive, the consumer regulator reported yesterday, confirming what many travellers already believe.

The airport, majority-owned by various Macquarie Bank funds, has continued to chalk up record profitability in the past five years but has not raised its spending on services at the same rate.

As a result, it is delivering lucrative returns to its owners but providing the worst service in the country to passengers and its airline tenants.

For the third year running, passengers rated Sydney at the bottom of a list of the country's five major airports in terms of overall quality, according to the Australian Competition and Consumer Commission report.

The report, which also examined parking at airports, suggested that high charges showed evidence of "monopoly rents".

The Assistant Treasurer, Chris Bowen, said the Government was considering further action on car parking. But the chairman of the ACCC, Graeme Samuel, said he was not sure that any government would want to start regulating parking costs, short of publicly exposing how expensive they were.

At A$14 an hour, Sydney's parking is the most expensive in the country. At Adelaide, an hour's parking costs A$4.

The airport also drags in the highest rate of revenue from airlines per passenger. The airport bills airlines about A$13 for every passenger, almost double the rate Melbourne Airport charges.

The release of the report coincided with a strike by more than 450 Qantas baggage handlers, catering and ramp staff, protesting over outsourcing of jobs and claims of falling safety standards.

By the time staff went back to work at 1pm, 67 flights had been delayed, including 32 that were delayed for longer than an hour. Airport staff reacted by piling baggage that could not be processed in the middle of the departure lounge, while passengers lined up for more than an hour to reach a counter.

Tore Milsen and his wife, Patricia, from Seattle, had visited Australia over the past month, passing through airports at Adelaide, Gold Coast and Sydney, among others.

They were due to fly back to the US on Qantas. Mr Milsen said the couple had been given no information on when their plane would be departing. They were waiting in a queue behind 50 people to get his baggage checked out.

Mr Milsen said he had travelled around the world and Sydney Airport was one of the worst he has visited. "The only thing I've come close to this is one [airport] we went through in Mexico," he said.

Two travellers from Mexico, Juan Alvero and Jose Torre, agreed that standards at Sydney were poor. They had to wait four hours because their flight to Los Angeles was delayed.

"It was disappointing no one told us anything. It all seems a bit chaotic here," Mr Alvero said.

The ACCC report found that check-in times had continued to grow in the past five years. Airlines complaining about a shortage of counters and queuing space.

Sydney Airport said yesterday it would spend A$500 million to upgrade and expand its international terminal.

Its chief executive, Russell Balding, said the period covered by the ACCC report had coincided with extensive construction work at the airport.

p/s photos: Shu Qi

New PM & New Business Landscape?

This is the kind of article that people like to read. Following Najib's "confirmation", the witty guys at CLSA came up with an assessment of the important business people "close" to Najib. Twenty years on and we are still a politically-linked market place. A politically linked market place naturally implies favoritism, and that in turn implies a lack of transparency - back to square one??? If we are to mature as an economy and democracy, we shouldn't be revisiting these politically-linked themes at all - old habits die hard? Yes, it is very difficult to change the status-quo with so much vested interests, and that is the crux of what is the tippling point for our country. I am not an idealist, I am pragmatic enough to know that changes cannot be done overnight. Even if Pakatan were to win the next election, these things will take at least a decade to change. All I hope for is at least Najib will turn the ship towards transparency and better democracy. You cannot change the stripes on a zebra, but maybe the zebra can start acting like a better behaved animal. I really hope that the new administration will take the opportunity to liberalise investments, improve transparency, usher in a more merit based society, and help formulate strategies to move local industries further up the value chain.

As for me, I really couldn't be bothered about which counter is more politically-linked than the next..... if your company's existence and fortunes is based on that factor, what kind of business model are you operating on???... certainly not replicable or scalable when you venture overseas.

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TheEdgeDaily: Najib Razak will win the UMNO Presidency uncontested and become Malaysia’s 6th Prime Minister. · With the changing of guards in Putrajaya, we highlight Najib’s six confidants and four brothers. · Politically-linked stocks like MRCB and IJM will benefit from the government’s stimulus packages. · We remain concerned on the banking sector in a cyclical downturn but Bumi-Commerce is well-run group with Nazir Razak at its helm. · Small cap politically-linked stocks, including loss making ones, have been outperforming the market. UMNO General Assembly 24-28 March

In a CLSA report issued last week, the brokerage and investment group try to ascertain if traders can profit from the changing of guard in Putrajaya, and if longer term investors should start to pay more attention to Malaysia's structural growth story.

Najib Razak won the post of UMNO President in the UMNO General Assembly uncontested. Seeing as how UMNO is the largest member in the ruling coalition Barisan Nasional, the UMNO President is traditionally made the nation’s Prime Minister.

Najib’s six confidants

Very soon after Najib was appointed Finance Minister in September, he personally picked six individuals for a corporate roundtable. It is widely believe that these six individuals with corporate and investment background, have at one point or other given significant input to Najib on issues ranging from the economy, capital markets and business in general. It is also interesting to note that out of the six, three are currently board members at Khazanah. Thus although it is the outgoing Badawi administration that empowered Khazanah as the government’s strategic investment vehicle, we believe Khazanah will remain very relevant in the Najib administration.

Najib’s four brothers

Najib is the eldest of the five siblings in the Razak family and he was 17 years old when his father Abdul Razak was Malaysia’s 2nd Prime Minister from 1970-1976. Najib is also a nephew of Malaysia’s 3rd Prime Minister Hussien Onn. Out of his four brothers, Nazir Razak CEO of Bumi-Commerce is the most well-known one and has also been very vocal in the press, regularly calling for a revamp of the archaic National Economic Policy (NEP). Thus it is no surprise that Nazir has Najib.s ear as the latter has recently been on national TV promising to make changes to the implementation of NEP.

We continue to believe that the Najib administration has plans for further liberalisation in the services sector. In Najib’s mini-budget speech on March 10, he said that the Foreign Investment Committee (FIC) will be adopting a more liberal approach to nurture a more investor-friendly environment, i.e. to attract more investments including foreign direct investments. Therefore the government is formulating new guidelines to reflect this new role for FIC. We are guessing that they may further relax the NEP in the services sector. Many have argued that the NEP has been a disadvantage in attracting FDIs/portfolio investments into Malaysia. Thus further dismantling of this arcade policy could put Malaysia back on the path to structural growth over the longer term, and will correspondingly boost the local equity market in the long run.

Stocks to keep an eye on

We have done a screen of stocks which we believe traders and investors should keep an eye on as the guards change in Putrajaya. We continue to like MRCB (MRC MK-RM0.87-BUY) and IJM (IJM MK-RM4.02-BUY) as they stand to benefit from the government’s fiscal spending ahead. Furthermore, CEO of MRCB Shahril Ridzuan was hand-picked to be one of the pioneering members under the government’s GLC reform initiatives. As for IJM, ultimate parent is MMC Corp (MMC MK-RM1.41-N-R), whose major shareholder is Syed Mokthar Albukhary, who many believe will remain in the inner circle. Both MRCB and IJM have Employees Provident Fund (EPF) as their single largest shareholder.

We remained cautious on the banking sector given the cyclical downturn ahead, but Bumi-Commerce (BCHB MK-RM6.55-SELL) will continue to draw interest from long term investors. Despite concerns on withdrawal of Middle Eastern investments in Iskandar Malaysia, another favourite amongst traders is UEM Land (ULHB MKRM0.75- N-R).

Finally a few of observations from Figure 3. Firstly, three groups are prominently featured in the table, i.e. Sapura, Hong Leong and MMC. Secondly, oil & gas companies namely Sapura Crest and Wah Seong with cheap PE multiples of 7-8x have been outperforming the market over the last three months. Thirdly, TH Group, George Kent, Johan and Paramount are loss making but have outperformed the market.

The faces to remember

Najib's brothers

Key to CLSA investment rankings: BUY = Expected to outperform the local market by 10%; O-PF = Expected to outperform the local market by 0=10%; U-PF = Expected to underperform the local market by 0-10%; SELL = Expected to underperform the local market by >10%. Performance is defined as 12-month total return (including dividends).

©2009 CLSA Asia-Pacific Markets ("CLSA")

p/s photos: Noon Wongsawan

No Alternative Available For Now To Replace USD As Reserve Currency

Special Drawing Rights have captured the market's imagination in recent days. Behind the scenes, Chinese and Russian officials have harping on it, and the head of China's central bank posted a report suggesting that SDRs should have an expanded role in global finance, including as a super-reserve asset. In a presentation to the Council on Foreign Relations, beleaguered US Treasury Secretary Geithner appeared to some to initially be open to such proposals.

Governor Zhou Xiaochuan. In it Governor Zhou argues that the world needs a new and better reserve currency, one not dominated by a single country, and that it is in the best interest of the world that this reserve currency be created by a body like the IMF.

Many people are unfamiliar with SDRs. Special Drawing Rights were first issued by the IMF in 1969, as Bretton Woods was straining and fears there was not enough gold and dollars, the main reserve assets, were growing. SDRs are a basket of existing currencies. The basket gets reset every 5-years. The last reset was in November 2005. The US dollar accounts for 44% of the SDR basket. The euro's share is 34%, while the yen and sterling's shares are 11% each. The SDR is a basket of existing currencies not a single currency like the euro, but rather more like the old European Currency Unit. The value of the SDR is calculated and posted by the IMF daily. It is currently worth about $1.51.

There have been two allocations of SDRs. The first was in 1970-1972 for 9.3 billion SDRs and the second one was in 1979-1981 for another 12.1 billion SDRs. In 1997, there was a proposal to double the SDR issuance to 42.8 billion (roughly $64 billion). One hundred and thirty one members endorsed the proposal and they had a weighted vote of 77.7%.

Approval requires 85%. The US has a 16.75% vote share, and has not approved the proposal. If there was a signal in Geithner's remarks is was that the Obama Administration may reconsider the US stance. Here is why it is necessary: Roughly the fifth of the IMF members which have joined since 1981 have never received an SDR allocation. Of course that inhibits their ability to participate in the SDR system. Moreover, given the depth and magnitude of the financial crisis and economic downturn—anticipated to be the first time in more than half a century that the world economy will likely contract—an new allotment of SDRs may be compelling.

We have heard these kinds of arguments many times before over the course of the 20th century, and usually in response to a global balance of payments crisis. Is there anything new about this proposal? It looks likely to be a purely political move.

A number of people including Columbia University’s Joseph Stiglitz, are supportive of the idea, arguing that the status of the US dollar as the world’s reserve currency creates unnecessary problems for both the US and the rest of the world.

Most importantly for the US it means that it is very difficult for the Fed to manage domestic monetary policy because the US financial system must accommodate not only conditions in the US but also distortions introduced by the use of the US dollar as a reserve currency, and these distortions can be massive. The most obvious example is the way over the past decade systematic industrial policies mainly in China and East Asia aimed at running trade surpluses and the accumulation of reserves meant that the US economy and its financial and monetary systems were forced to adjust in ways that created large and serious imbalances, which only now are we resolving.

At least four months ago George Soros (and others) proposed an increase in SDRs to help provide sufficient liquidity to arrest the deflationary forces that were growing. Ironically, China and Russia, apparently inspired the by famous speculator, have gone even further.

For one thing liquidity is key, and I think not even the euro – and certainly not SDRs or alternatives to the SDR – can ever hope to achieve anything like the level of liquidity implicit in the US dollar market. For another thing, for a currency to achieve reserve status there must be some systematic way of delivering the currency to central banks and other players who want to acquire it, and the US does so by its ability and willingness to run persistent trade deficits. How will the IMF or whoever controls the SDR create and assign reserves?

A new issuance of SDRs is not the same thing as diluting the role of the dollar. The sums are a pittance, especially given the magnitudes of world trade, cross border movement of capital or the holdings of currency reserves. SDRs have been around for 40 years, but they are not really money. Money, as economists understand it, is a means of exchange, a store of value, and a unit of account. SDRs are not a means of exchange. As a basket of already existing currencies, it might appear more stable and hence a better store of value, but what is the metric? The purchasing power of fiat currencies individually and collectively has generally been eroded by inflation. The SDR is not a fiat currency, but a basket of fiat currencies. For the most part SDRs are relegated to a unit of account for the IMF and a few other international organizations.

Some observers suggest that SDRs are the IMF's money (sometimes referred as paper gold), but that reflects a misunderstanding. Issuing SDRs is not the same as the IMF printing money. The IMF doesn't do that. An increase in SDRs simply boosts each member’s claims on the composite currencies. The IMF is not a central bank.

More specifically, if the SDR is indeed a true reserve currency, and not simply an accounting entry that allows central banks to pretend that they are not holding dollars but whose value ultimately rests on its convertibility to the US dollar, who will determine the global money supply and how do we prevent this from becoming a horribly politicized process? After all the Fed has an interest in seeing stability in the value and use of the dollar, and so it can be counted on more or less to act in the best interest of the reserve currency, but why should anyone care about the value of the SDR over the long term and, more importantly, how can prudent behavior be enforced? More worryingly, if Europe has had so much trouble managing monetary policy among a group of neighboring countries with fairly similar social and economic conditions, how do we manage monetary policy on a global scale?

Perhaps the SDR is a covert way of getting back to something resembling the gold standard by creating a fiat currency with very strict rules about its expansion. If that is the case, the SDR almost certainly won’t last long.

Final thoughts:

a) the ramblings by China was interesting but its an airy-fairy idea at best, its motive is likely to "scare" the US officials to think harder about their macro and monetary policies going forward

b) the move will never happen unless IMF becomes more representative of the global financial system, that could take years of appointments to change the racial and country mix of IMF

c) there are a lot of countries that does not agree with IMF's policies

d) SDR needs to get liquidity to a substantial level before it can be an alternative, that is like asking Malaysia's economy to move into the global top 10 biggest economies in 5 years, possible but improbable

e) a saner proposal will be akin to the Euro currency - it can be started by getting ASEAN members to throw all their currencies into the hat together with HK, China, Japan and India... the rest can join later and the new currency can be called AZO... but even that proposal will be extremely difficult, in fact many times more difficult than for the the European Union/ Euro Currency to be formed because of the various differing political platforms each country has, and that each country basically have to give up on having their own monetary policies - if your country unemployment is very bad, but the rest are OK, there's nothing you can do to your monetary policies to loosen the purse, etc...

So, SDR, a pipe dream...

p/s photos: Lara Dutta

Ratings Agencies Still Scot Free

For all the anger being lashed out at bank employees compensation. Bank CEOs have been grilled, even Greenspan has been lambasted (rightly). But what about the ratings agencies?? They were mostly responsible for the growth of CDOs, rating them AAA when only a small component of those CDOs consist of AAA borrowers. Without their implicit approval, the investment banks could not have managed to lure so many investors to buy these so called triple A rated papers. Just a notch below AAA would have seen these CDOs growth cut by a substantial amount. Its not the first time ratings agencies have "helped" to create troubles for the global financial markets. You can name Enron, Worldcom and now CDOs. These buggers get their rating fees upfront and not even a slap on the wrists. I would suggest that Moodys, Fitch and S&P be fined the sum of all fees received from rating the CDOs for 2004-2008. There has to be punitive action. I certainly hope that the upcoming G20 meeting will see some "action" on these ratings agencies.

Sydney Morning Herald: Ratings agencies such as Moody's Investor Services, Standard & Poors and Fitch rule the roost. They decide who is risky and who is safe. But how scientific are these ratings? Who is on the judging panel? And how accurate are they? Let's start at the last question. In terms of accuracy, their record is nothing short of appalling.

These are the are people who brought you Enron, who claimed the biggest corporate scam in US history was a fabulous investment opportunity just a few weeks before it collapsed. And not just Enron. The agencies gave the nod of approval to a whole range of dotcom darlings, including Worldcom, which lost billions of dollars in shareholder funds and where executives found themselves before courts and in jail.

But if you thought they'd learnt from that horrible and hugely embarrassing experience, you'd be dead wrong. Because around the time they were copping a shellacking over the dotcom collapse, in 2001, the ratings agencies were sowing the seeds for the downfall of the Western capitalist system as we know it

A huge number of unscrupulous participants played a role in the American real estate boom that has since brought the system to its knees. But it was the ratings agencies that provided the legitimacy for America's investment banks to pump up the market, to sell collections of high-risk loans to vast numbers of unsophisticated investors around the world, and all under the mask of a gold-plated AAA rating.

Just in case you missed the point, you had subprime loans to home buyers - which by definition were loans to people with a history of default - being packaged up, diced and spliced and repackaged as low-risk investments. The "mortgage-backed securities" were repackaged into "collateralised debt obligations" and Wall Street investment bankers sold them as safe investments to dentists in Norway, country councils in Australia and anyone else with more dollars than sense. Those who tipped in their money thought it was a terrific deal: a huge return on a AAA-rated investment. If only they'd known those selling them laughingly referred to them as "the cream of the crap".

So what is wrong with the ratings system? For a start, it involves an enormous conflict of interest. Those with the product - not the client or the investor - pay for the rating. From the ratings agency's perspective, it's easier to make money that way.

When it is just companies or governments issuing debt, the potential conflict is bad enough. To get a decent rating, you have to pay all three of the main agencies. And not just for the initial rating. There is an ongoing annual fee that gets levied so you can maintain your rating. And guess what happens if you don't pay that fee? Well, the ratings agency decides it doesn't have quite enough information and it downgrades your debt, which in turn raises the interest you pay to the lenders. What would you do in that situation? You'd pay up, that's what.

The whole thing smacks of extortion. But if the situation was bad with governments and corporations, when it came to the brave new world of "structured finance", the ratings agencies lost all control and all respect. As the US property boom took off, a huge number of organisations were issuing a vast array of property-related investments. The agencies began clambering over each other to rate the CDOs - the toxic products into which the Obama Administration is now forced to tip trillions of dollars to save the American banking system - as AAA.

Investors who bought those loans on their coveted AAA clearly did not want them downgraded even when the economy began to tank. And, as it transpired, the ratings agencies had never even contemplated factoring a property downturn into their calculations. Instead of providing a sobering influence, the ratings agencies pumped up the boom. So far, their role in the global financial crisis has been largely overlooked. A US Senate committee last October subjected the heads of the three main firms - all of whom had earned megamillion-dollar salaries through the boom - to an embarrassing grilling. But now they are back at it, as though nothing has happened. It is business as usual.

p/s photos: Kathy Chow Man Kei

Li Ka Shing Says It Is Time To Buy

Li Ka Shing says it is time to buy. Let's not be so cynical on his opinion. At least he didn't ask all to buy 2 months ago, or 4 months ago or even 6 months ago. Hence I would view his opinion with some merit.

New York Times: The oracle of Hong Kong has spoken. And his message: it’s time to consider buying stocks and real estate. Li Ka-Shing reported on Thursday that his companies had severe profit declines in 2008, but he said that “if you buy in a slow market, in the medium term you get good returns,” The New York Times’s Bettina Wassener reported.

The proclamation on Thursday by Li Ka-Shing, the self-made billionaire who controls some of Hong Kong’s largest companies and carries enormous sway among investors throughout Asia, was made at a rare public appearance. Exuding confidence, Mr. Li joked with reporters and looked anything but depressed about the sharp fall in profit his companies reported Thursday.

Whether Mr. Li is proved right about stocks and property — and he certainly has a lot to gain personally if he is right — his comments come at a time when stock markets have rallied on hopes that the economic slump may be bottoming out.

“If you have money in your pocket,” Mr. Li said, consider buying into stocks. As for the property market in Hong Kong, he said, “history tells us that if you buy in a slow market, in the medium term you get good returns.”

Mr. Li advised against borrowing to invest in what remains a shaky and volatile environment. Even though couched with caution, Mr. Li’s comments were enough to echo around the investment world and helped send the Hang Seng index up 3.6 percent Thursday. Mr. Li is the man the local media call “Superman” and liken to the investor Warren E. Buffett, who controls Berkshire Hathaway. Considered one of Asia’s most powerful men, Mr. Li is also one of the continent’s most generous philanthropists.

In the last year, as the economic crisis has dragged on and deepened, Mr. Li has jumped in from time to time to try to restore confidence.

Last September, shortly after the collapse of Lehman Brothers caused the world financial system to convulse, savers in Hong Kong lined up outside the Bank of East Asia, one of the territory’s best-known and biggest banks, responding to rumors that the bank was in trouble. Mr. Li let it be known that he had been buying shares in the bank, an expression of confidence that quickly helped put an end to an old-fashioned bank run.

And this month, HSBC was trying to raise $18 billion in a rights offering, prompting the bank’s shares to fall sharply. A majority of local residents here own shares in the bank, which is now based in Britain but has its roots in Hong Kong. When it appeared that the rights offering might falter, Mr. Li — along with several other Hong Kong tycoons — pledged to put about $300 million of his own funds into the issue.

Still, it has been a difficult year for Mr. Li, and the Superman title sat a little awkwardly on him on Thursday, after Cheung Kong Holdings and Hutchison Whampoa, the flagships of the property-to-ports-to-electricity conglomerate he controls, both reported declines in net profit of more than 40 percent for 2008.

Small wonder, given that the rapid slowdown in the global economy had tipped Hong Kong, along with the United States, Japan and others, into a recession and put a damper on the breakneck growth of neighboring China. Rental and property prices in the territory, a mainstay of the conglomerate’s earnings, are expected to tumble further this year, hitting developers hard.

But the Cheung Kong group is not just any Hong Kong company, and Mr. Li is not just any Hong Kong company chairman. Thursday’s event was not just any annual news conference, but the pinnacle of the Hong Kong earnings season, complete with a boisterous media scrum that regularly lends the bespectacled and affable Mr. Li the aura of a pop star.

The complex network of companies Mr. Li controls — three of them members of Hong Kong’s benchmark Hang Seng index — epitomize the hustle and bustle of entrepreneurial Hong Kong and its roller-coaster economy. And Mr. Li himself has the kind of rags-to-riches history that inspires every Hong Kong resident. The Cheung Kong group and its various interlinked companies grew out of the humblest beginnings imaginable: a plastic-flower manufacturing business the young Mr. Li set up in the 1950s.

Five decades later, Mr. Li is now one of Hong Kong’s leading developers of residential, commercial and industrial properties — about one in seven private residences here were developed by the group. Hutchison Whampoa, of which Mr. Li also is chairman, operates businesses as diverse as ports, hotels, supermarkets and drugstore chains, and is a major telecommunications operator in Hong Kong and abroad.

Cheung Kong Infrastructure, headed by Mr. Li’s son Victor, and HK Electric, one of the territory’s dominant power companies, also belong to the Cheung Kong/Hutchison stable of businesses.

Together, these businesses are a cross section of Hong Kong’s economy and reflect more than any other company the territory’s boom-to-bust character: riding the wave of Asia’s breakneck growth in recent years, and now suffering in line with the slowing global economy.

Mr. Li’s personal fortune has fallen as well, having slipped to 16th in the Forbes annual ranking of the world’s richest people, down from 11th in 2008, with a fortune now worth $16.2 billion — down from $26.5 billion a year ago.

p/s photos: Keiko Kitagawa

Want Higher Salaries, Don't We All

How do you like our graduates being paid starting salaries of RM4,000 - RM5,000 per month? That is quite achievable but we need to do some things first.

What is galling is that its 2009 and we still pay fresh graduates around RM2,500 a month. Geez, I still remember its 1995 and we were paying graduates the same rate!!! What went wrong?

The fact is only about 10% of the working public pay any taxes in Malaysia. That figure should surprise you. In fact all civil servants should be a lot nicer to those of us who pay taxes because we really pay their salaries.Corporate taxes contributes about 21% of total federal government revenue while personal income taxes make up only 9%. Let's focus on personal tax first. If personal income tax only make up 9% of federal government revenue, there is little reason why we are not more competitive. In fact the high rates should be lowered to 20% max and the lower tax threshold be extended to include at least a wider base of tax payers. Seriously, at least 25% of working public should be paying taxes, not just 10%.

Corporate taxes should stay the way it is until we liberalise other areas which the country subsidises indirectly. Companies, including foreign companies are still willing to pay Malaysia's higher rates because the country subsidises a lot in the form of fuel subsidy and electricity subsidy. Take that along with a much lower land cost, and throw in the cheap foreign labour to keep labour cost low - that makes Malaysia a effectively cheap place to operate.

Our infrastructure is comparatively good, even the logistics are pretty decent. We should revamp our tax codes because we need a new way of thinking and new way to position Malaysia's future. Going down this same road will only keep the low value industries in our midst. It will not encourage our industries to move up the value chain.

If you were thinking of investing an operation in a more expensive country, say Singapore, you would have to make sure that it is of very high value add to compensate for the higher labour and land cost. Of course it is not as simple as changing the tax code. We will need to support the shift with ably educated workforce that matches the high value add input required. We also need proper strategy with regards to foreign workers. They keep our labour cost low and subsequently dragging overall labour cost lower as well. We need to be vigilant with the number that we allow in, and monitor them properly. We think we have 2m, but there are possibly double that when you include illegals - 4m almost makes up 25% of our total workforce. Have a plan to limit at 2m and make sure that sticks. Don't just penalise the workers, give out stiffer penalties on employers that employ illegals, and enforce it well. Then have a plan to gradually lower that to 1.5m by 2011 and to 1m by 2013. Maids should not be counted in that group as they help to liberalise our workforce.

The country subsidises too many things. Controlled food items are OK as its for the public. You can still keep subsidy in oil and gas for the general public, but not for corporates. Have a plan to phase out subsidy in oil, gas and electricity for all companies - e.g.reduce subsidy by 1/3 by 2011, reduce by another 1/3 by 2014 and total elimination by 2017. That way, foreign investment will be able to plan properly. The higher operating cost for companies will be partly compensated by lowering corporate tax rates, but that will change the kind of FDI we attract, from being low cost to higher value add types. We have a high percentage of our workforce that are graduates, its just that we keep seeing many leaking out to work in other higher paying countries. We do not have sufficient high paying industries to keep them here.

There will be some fallout so the plans have to be gradual. At the same time, we have increase the incentives to lure in higher value added industries. We also need to restructure and trim down our civil service substantially, by at least 30% over the next 5 years. You may ask where are the new jobs going to come from, it will have to be coordinated with a proper masterplan, creating a top-down supply chain industry cluster that encourages the entire industry to congregate at certain places.

Penang and northern parts of the country should refashion their strategy to only encourage higher value add technology industries - at the same time supporting that with more specialised technology based universities to churn out more relevant workforce. Certain other areas could be leveraged to form clusters for oil & gas, higher education campuses, etc...

Then you will get higher salaries all around. Yes, cost of living will rise as well, but that is part and parcel of a maturing economy. You cannot have grade A salaries working in New York, HK or Singapore without corresponding rise in cost of living. At the same time, land cost and properties will also rise. If we argue around maintaining the status quo, ten years from now, we will still be living the same way and supporting the same industries.

We need big thinkers, as much as I dislike Mahathir, his Cyberjaya/MSC is a move in the right direction - we just need to execute better, bring in globally qualified lecturers for specialised higher education to churn out properly qualified staff to support the vision. The port thing down south was good as well, again we need to execute better. The Proton city was a good idea but Proton did not move up the value chain and we still suffer from too much cronyism and who we know to get things done.

When we have higher salaries, other capable people will want to work in Malaysia also as they can get decent salaries. As things stand now, most of the brain drain is one way, we go to HK, Singapore etc... to get double or triple our pay. Better industries, better salaries, better workforce. Want better salaries, we desperately need a huge revamp in the way we think and govern.


p/s photos: Erika Sawajiri

Overly Aggressive Retrenching Is A Western Disease

Every time recession hits, its the MNCs who will be the first to retrench workers. Yes, you can argue that on an export destruction platform, but that is just part of the real story. Generally, local companies "are not as quick" to fire or retrench staff than say MNCs.

If you look at what has been happening around the world, almost all listed companies have enforced some sort of retrenchment or cost cutting exercise. From the GMs to the Sonys to even pharmaceuticals and construction firms. No industry is spared.

Don't you find it interesting that Malaysian companies, in general, list and unlisted, are not quite so trigger happy. Companies in developed markets tend to follow the mantra that the CEO is responsible for the fortunes of the company. The big movement over the past 15 years to tie CEOs compensation (and those of senior management) to the share price returns has produced a magnifying glass effect on management's behaviour and financial figures.

Everybody knows that American and some European companies are the quickest to retrench and downsize at the slightest hint of uncertainty or diminished orders coming in or inventory piling up.

The biggest culprit is the emergence of the quite silly Quarterly Earnings Results and the subsequent Quarterly Earnings Guidance. Needless to say, this kind of short term managing will result in a very difficult operating environment. Long term objectives and strategy will be compromised to attain short term goals and targets. QEG will not just affect the top layer of management, but will work itself down to the nuts and bolts of every organization, especially sales and marketing. Constantly doing, re-doing, re-working, re-stating QEGs will create a damaging focus on meaningless short-term performance and undermine a company's ability to manage for the long term. This re-working, re-stating, re-doing will have to be re-communicated down the line re-peatedly. Re-diculous!

Wall Street's relentless focus on whether companies hit or miss quarterly earnings targets encourages balance-sheet manipulation and discourages long-range planning. A consensus is growing among CEOs, regulators and analysts to go against QEGs. Many CEOs despise giving such guidance but are afraid to stop because they think they would be punished by Wall Street analysts and shareholders.

The unfortunate consequence of these excessive focus on short term numbers is that retrenchments and downsizing are textbook plays when things are starting to look bad. When things are bad, the management is EXPECTED to quickly do SOMETHING, and firing and downsizing are the quickest to pacify the markets.

In many ways, we should be glad that Malaysian companies are not there yet. We do not yet have that magnified focus on quarterly numbers every few months. We do not see CEOs being fired every now and then for not meeting numbers (maybe we should fire more CEOs actually). Is that good or bad? But of course the local CEOs payscale and reward structure are nowhere close to those of the Western world.

I think companies should be managed not quarter by quarter but rather based on a 3 or 5 year plan with visible and measurable milestones being communicated to all. At the moment probably less than half of all companies have a proper strategy going forward - they have little idea of how their industry will pan out 3 years or 5 years down the road, and how they are positioning themselves. They do not know where their critical strengths are (if they had any) and where they have critical competitive advantages in order to leverage on them. They have no idea on scalability, organic growth strategy and growth via acquisitions. But I digress...

p/s photos: Linda Chung Ka Yan

Hedge Fund Top Earners

Even with such an exceptionally bad year like 2008, many regular top hedge fund earners still make their billions. James Simons will always stay near the top because of his patented trading software which spots the oversold and overbought areas and ekes out the differences. Still, we should feel sorry for James Simons because he made only $2.5bn in 2008 compared to $3.7bn in 2007. Simons' fund does not take in any more new funds for a number of years already, they manage funds that have stayed invested with them in the first few years of inception and now mainly manages their own employee funds. I think the trading software was so reliable that they can charge a 40% share of profits compared to the usual 20%.

John Paulson continues to make real dough by shorting the mortgage lenders and banks. Soros is still there, great investor indeed. Surprisingly Druckenmiller also made the top ten in 2008. He was Soros' right hand man before striking out on his own.


2008

2007's top earners

p/s photo: Han Chae Young

Retrenchment & Severance Pay

There are many soft terms for being fired. The more popular ones: constructive dismissal; realignment of resources; progressive redundancy (???)... Locally, the Employment Act in Malaysia is quite reasonable.

Statutory notice periods, applicable to all dismissals, including those for operational reasons, but except dismissals for misconduct, are as follows (sec. 12(2), EA, as amended):

• four weeks for employees with less than two years of service;
• six weeks for employees with two to five years of service; and
• eight weeks for employees with more than five years of service.

These provisions are merely statutory minima, and it is open to employers and employees to agree on greater periods of notice, which must be determined in writing in the contract of employment.

Either employers or employees may make a payment in lieu of notice (sec. 13, EA, as amended).

Severance pay

The Employment (Termination and Lay-Off Benefits) Regulations, 1980, provide for statutory severance pay in the event of terminations for operational reasons or performance, on the following scale (sec. 6(1)):

• ten days’ wages for each completed year of service of less than two years;
• 15 days’ wages for each year of two to five years’ service; and
• 20 days’ wages for each year of service exceeding five years.

These Regulations apply to employees with more than one year’s service (sec. 3(1)) and, again, set out statutory minima only, which the parties are free to increase by agreement. They do not apply to:

• dismissals for misconduct, after due inquiry;
• terminations upon the employee attaining retirement age; or
• voluntary terminations by the employee (sec. 4).

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Recent article on retrenchment in financial industry by Finance Asia.

Finance Asia: It's natural to assume that those who are fired early get the worst deal - after all, they've been out of work longest. But when it comes to severance packages, on average, those who were the first victims of the subprime-sparked crunch got better deals.

At Goldman Sachs, for example, those who were retrenched in the summer got statutory severance plus a pro rata bonus for the months they had worked, based on 2007 levels of incentive compensation. In the third quarter, those who were laid off at Merrill Lynch and UBS also got severance pay plus a payout to compensate them for the fact that they would not be on the payroll at bonus distribution time. But by then, the percentage of last year's bonus had dropped to around 25%, pro-rated.

Things went downhill quickly thereafter for bankers in the firing line. In the large round of layoffs at Citi towards the end of the year, different parts of the bank got different packages, with the statutory severance the only thing consistent between divisions. Some parts got a one-time payout of one month's pay for every year worked, while others received only 20 days for every year worked. The payout was generally capped at one year's salary - so if you had more than 12 years' service in the former instance, you still got only 12 months' salary. No-one got a payout to compensate them for the bonus they would forego for the year.

Deutsche Bank was a little more generous and in addition to one month for every year worked, employees who were let go in December got 10% of the 2007 bonus. This all seems set to change with lay-offs still to come. Cash bonuses for 2008 at firms such as UBS were capped, while others, including the Royal Bank of Scotland, paid no cash bonus for 2008 performance. At Goldman Sachs and other US investment banks there is a move to pay as much incentive compensation for 2008 as possible in stock, both to bind employees to the firm and to reduce cash outflow.

Employees who are laid off this year will probably just get the statutory minimum due to them, based on the jurisdiction in which they are employed.

p/s photos: Jessie Chiang Yu Chen

Oooiiii Advisors, Wake Up La For TMI

TMI was suspended yesterday, and will trade again today. Well, it seems that somebody thought it was sufficient already to announce that you will be raising RM5.25bn via an issuance of RM1.00 par value shares. Eskue me, investors also need to know the ratio and pricing. You can do a variety of combinations and come up to RM5.25bn you know. What was surprising was, didn't SC already approve the rights issue??? Is it OK to approve the rights issue as long as you know the amount you are raising, but not the ratio and pricing??? Same for going into an EGM to approve the size only??

Can you announce the EGM to approve the rights without informing about the ratio and pricing beforehand? It is not just a technicality. Hallooo advisors and lawyers... rights issue by a listed company not something new... you all probably have a checklist....
1) listen to Khazanah
2) follow Khazanah on what they want
3) Khazanah tells you how much to raise
4) make sure there is somebody to mop up amounts that are under subscribed
5) make sure SC is well informed on time line for approval
6) make sure EGM is set within time line for rights issue approval
7) make sure rights issue ratio and pricing are communicated well before EGM

Probably number (7) was on the next page and the paper was jammed in the copier!!??

Seriously, I think they were all caught up doing something else.... preparing the incredible launch of the change of name for TMI to Axiata... ta-dah... Hmmm... Axiata... isn't that part "co-axial cable" and part "data"??? ... sounds like a cable and wire company, but isnt TMI primarily mobile?? Isnt mobile and cellular the improvement and innovation from not having to use cable and wires anymore for data transfer??????????

p/s photos: Sammi Cheng

Why DIGI Is The Country's Biggest Telco

Malaysia must be one of the most open economies in Asia. Why..., we even have a 50.8% Norwegian owned company being the biggest telco in the country!!! Which Asian country can boast of such openness?!!! As things stand now, the market cap are as follow:

DIGI $4.57bn
Telekom Malaysia $3.2bn
TMI $3.4bn

Of course, the comparison is a technicality owing to the recent split by TM into TMI and Telekom Malaysia. Still, its a big deal no matter how you cut it. Here are some interesting facts and reasons why DIGI is 'number one':

a) DIGI is still technically the third largest mobile operator but is number one in market cap.

b) DIGI smartly concentrated on the prepaid market, money upfront, no delinquencies. Others probably thought that the prepaid market was beneath them. DIGI understood the importance of the foreign workers market, others probably thought the number of foreign workers was closer to the official estimate of 2m, when the real figure is probably closer to 5m when you include the illegals.

c) DIGI properly understood branding, who does not love the yellow fat man. I still cringe whenever I see Celcom's big big poster "Widest, Fastest, Clearest... Undisputed #1". The simple tag line probably was thought up by a bunch of high school kids because thats the mentality behind the tag line - its naive and cringeworthy. Being number one or the best in every category is best accorded by someone else, it pisses people off when you toot your own horn. If that is branding, the people at Celcom needs to grow up or hire better people.

d) The using of celebrity endorsement by Celcom is a hit and miss. Why Wang Lee Hom??? Some high ranking marketing chick in Celcom probably likes him a lot!!! He carries zero brand attachment for Celcom. Harith Iskandar was much better - it makes it fun to be identified with Celcom. Peterpan??? Gawd, you mean for the Indonesian foreign workers???

e) DIGI's emergence as the #1 in market is all the more credible after being "forced" to go to bed with TimedotCom - let's put it as DIGI's national service.

f) After solidly controlling the prepaid market, it now can focus on grabbing market share in the postpaid side, especially via their 3G rollout. Maxis and TMnet broadband uncertain and inconsistent service leaves the market very very open to a potentially better provider. Let's not make it a local or foreign argument here, I am just highlighting the better player, and lets learn from the better player and not try to defend on other silly platforms. Even izzi provides a vastly superior broadband / wireless service now compared to Maxis and TMnet.

g) You cannot just hype up on marketing and branding, it has to be supported by a strong level of service. TM did well with their BlueHyppo thingee, the hippo is lovable and cute, but users wished that the image is attached to good qualities... sigh. Hence the yellow man would have been a useless marketing ploy for loyalty and identity if it wasn't supported by a good level of service - its the expectations and predictability of service being met or surpassed.

h) DIGI does not hire useless consultants and pays them millions of ringgit a few times a year, unlike... Consultants only mask the underlying truth, that the company's staff are generally "not up to the mark". Using consultants is also a MBA way of diverting responsibility for big decision making issues. Using consultants usually means there is a dire lack of qualified staff in the most imporatant category - load and efficiency management for one. Using consultants will in the end mean there is very little transfer of technology or capability, but the need to always go back to them and pay them millions everytime a glitch needs to be fixed.

i) If you breakdown the management systems at all telcos, you will find that DIGI has a vastly superior CRM system that better tracks subscribers, defaulters, client drop-offs, service accountability, response time rates on downtime or complaints, etc... Of course DIGI has the support from Telenor which probably has better expertise at designing a much more elaborate CRM or client management system. One must invest in a proper CRM before you start thinking of other areas - seriously folks!!!

j) To be fair, the capex burden on DIGI is a lot less stressful than for the rest. DIGI has a more nimble business model with little legacy baggage.

k) Exceptional focus on ebitda margins, always within 40%-50%, pretty exceptional.

l) A motivated staff force. Treat your staff well, empower them to create and achieve and they will respond likewise. Staff morale is a priority, so is loyalty and pride in company. When you have huge pockets of staff in your company who regard employment as a safe haven till retirement - the entire thing weighs down the company.

p/s photos: Wang Rouyi