POINTERS

Indoor Locating in the World’s Biggest Market

2015-06-08T15:06:00.004+08:00

China has always been an exciting market for technology companies, given its size and dynamism.
As such, it’s very interesting – and no doubt significant – to see how Chinese tech giant Baidu plans to roll out its Indoor Locating Services for its estimated 270 million monthly active users of Baidu Maps.

As we wrote about previously (Indoor Locating: the Key Word is Scale), Baidu has set its eyes on Finnish start-up IndoorAtlas’s magnetic technology to power the mammoth enterprise of providing indoor location services in such a vast country, and across such a large user population.

The two companies have since moved rapidly since the first agreement was signed last year, which also saw Baidu providing $10m of funding for the start-up. A recent press release indicates that Baidu has started integrating IndoorAtlas’ technology in their indoor location services.

For us, that Baidu is choosing such a novel solution for so large a market says a couple of things: firstly, it underlines the potential of IndoorAtlas’ technology as a practical and cost-efficient indoor locating solution. If this takes off in China, it will most likely set the model for indoor locating in the rest of the world, given that China, with its vast, new and ever-increasing urban spaces, and still developing mobile and network infrastructure is probably one of the more demanding markets to ‘test-bed’ indoor locating.

Secondly, it gives us a glimpse of the dynamism and innovation in China’s tech-industries, where market leaders are not afraid to invest in, adopt and roll out as-yet-unproven, unorthodox technologies to a billion-strong audience. This, perhaps, is a startling vision of China’s potential – evolving from a cheap manufacturing centre to a pioneer and exporter of new technology and new ways of doing things.

The Rise of Big Mac in Vietnam

2014-09-16T16:26:00.000+08:00

For those who are craving for McDonald’s Big Mac and French Fries in Vietnam, those cravings can now be satisfied with the franchise’s inaugural opening in Ho Chi Minh City, also affectionately known as Saigon by the locals.

The man behind the brand’s introduction into the Vietnamese market is none other than Henry Nguyen. To watchers of Vietnamese politics, he is instantly recognizable as the son-in-law of Vietnam’s powerful Prime Minister Nguyen Tan Dung.

The new entrant joins the likes of other Western and Asian fast food conglomerates, namely, KFC, Burger King, Pizza Hut, Lotteria and Jollibean jostling for a share of the fast-growing Vietnamese consumer market. This is a reflection of the country’s rapidly changing landscape - there was no access to American products 4 decades ago when the US-backed government fell to the communist troop. Due to the liberalisation of its economy in the 1990s, Vietnam saw an influx of western brands in its food fast industry that was once limited to low cost traditional fast food.

The international chain has already served over 400,000 customers and 61,980 Big Macs in its first month of operations. A stellar performance by any measure, in a sector which is projected to grow at an average 15% this year. With such promising statistics in the midst of fierce competition, it is no wonder that McDonald has plans to open 100 branches across the nation. Some also see this wave as a sign of Vietnam’s rising affluence which is demonstrated by an average economic growth rate of 7% over the last 10 years – one of the fastest in Asia.

The American fast food company reported in July 2014 that profits fell more than expected in the wake of weak U.S and Europe sales while Asia-Pacific, Middle East and Africa increased by 1.1%. In our opinion, expanding its foothold in rapidly developing consumer markets with a growing middle class, is perhaps the best way forward for well-established and mature brands such as McDonald to increase its margins. Vietnam, so far, seems poised to be a big success story.

Indonesians and the rise of Indonesia

2014-02-03T17:12:00.000+08:00

Your correspondent went to Yogyakarta a couple of weeks ago for a short getaway weekend. The purpose of the trip was to visit the city and its famous Batik workshops as well as the two Unesco-listed temples of Borobudur and Prambanan. What actually happened is that besides adding two more sites to my list of Places To See in 2014, I got a true insight into the Indonesian economy and potential for development.

Let me explain. Yogyakarta is a city of over 630,000 inhabitants (as of 2012) in Indonesia’s largest and most populated island of Java. It was the capital of the Mataram Sultanate between 1575 and 1640, and was briefly the political capital of Indonesia during 1945 to 1949 before the title returned to Jakarta. Today, the city remains the island’s centre of classical Javanese fine art and culture such as batik, ballet, drama, music, poetry and puppet shows. Geographically, Yogyakarta rests in a plain surrounded by high volcanoes and is centred around the Kraton, or Sultan’s palace.

A stroll on the main street of Jalan Malioboro (which for a number of years was overlooked by a giant commercial poster by Marlboro, who decided to play on the similarity of the names to advertise its cigarettes) brings out a number of resemblances to other cities in Indonesia and Java. One is that the country is developing rapidly and that rural populations are moving to cities in mass while large numbers are coming out of poverty and entering the middle class segment. While newly arrived populations cluster in hastily built slums made of corrugated metal sheets and wood, in Yogyakarta thousands of others are little by little building sustainable homes with concrete bricks and glass windows, creating neatly organised neighbourhoods and establishing deep-tied communities. Sweeper, ojek (motorcycle taxi) or cycle tuk tuk driver, shop owner, street food cook – all are hard at work and contributing to the development of Southeast Asia’s largest economy. Another impression is that in Java, Batik remains a highly worn design and that most Javanese still wear it daily; men can be seen with short-sleeved brown or maroon patterns while a lot of women still wear the traditional kemben or torso wrap. In Yogyakarta, the strong presence of Batik workshops and the city’s historical attachment to Batik means that the Batik designs have evolved to appeal to a younger, more trend-oriented customer segment, with Batik-covered baseball caps, backpacks and purses covering stalls along main streets.

While visiting Borobudur and Prambanan, two other elements stand out. As a foreigner from Europe strolling around two of Indonesia’s most visited sights on a Sunday morning, your correspondent was arrested no less than a few dozen times by local school children and students looking to speak and improve their English, exchange impressions on Indonesia and pose for a picture. Two things are to be noticed here. First, it is impressive to witness the level of education millions of young people are accessing across Indonesia today. Most youngsters I spoke to had learnt English for a number of years already and knew how to have a simple conversation with a foreigner, asking name, country of origin, things liked about Indonesia. Most also fully understood the benefits of speaking English in building a career in the future. All across Indonesia, students are graduating from high school with a level of English which even some developed countries could envy. Second, all the school children I posed for a photo with took the photo... with a smartphone. What was once considered a unaffordable electronic item is slowly becoming mainstream, used to whatsapp, Facebook (with 64m active users, Indonesia is Facebook’s largest market in Asia-Pacific), email as well as make money payments and transfers.

Witnessing the economic emergence of a country happens in many ways, but sometimes, as in Indonesia, a close look at the locals, their work activities, hobbies and attire is quite sufficient.

Let's get water to Myanmar

2013-12-02T15:38:00.003+08:00

After decades of neglect, the water resource management system is coming under the spotlight in Myanmar. The second-largest country in Southeast Asia, home to about 62 million people and with a land surface of over 676,000 square kilometre, is finally seeing its leaders turn their interest to the provision and protection of potable water – opening up an array of opportunities for companies operating in the sector.

Forty-nine years of military rule have left Myanmar’s water management system in a dire state. The current water supply system in Yangon, the country’s economic capital, is over 50 years old; 40 percent of the water passing through its pipelines is estimated to be lost due to leakages and unreliable meter systems.

Despite the local government adding pipelines at a rate of 290 miles a year, only 60 percent of the city has access to tap water. With too few sewerage plans, water which does make it to the tap is not safe to drink and needs to be boiled or filtered. The situation outside of Yangon is not any better: throughout the country, septic tanks can be seen emptied into open drains, polluting rivers and groundwater reserves and causing long-term detrimental effects to the environment.

The water infrastructure outside of cities is almost inexistent, forcing rural populations to rely on unregulated boreholes and wells which dry up in the summer. Nationwide, an antiquated and inadequate water supply infrastructure means that only 6 percent of the potential water supply available in the country is being utilised, and demand far exceeds supply.

Things finally appear to be changing – Thein Sein’s government has made the supply of potable water a top priority to Myanmar’s initiatives in opening up its economy. Public-private partnerships are springing up throughout the country to speed up infrastructure renewal in the areas of flood protection, water quality and water supply.

In Yangon, Japan’s International Cooperation Agency (JICA) is working on building a masterplan for water supply and sewer works in the city’s metropolitan region; water and wastewater company VCS Denmark is completing a feasibility study to build a high-tech pipeline system to provide clean water to the capital’s residents. Countrywide, the Dutch institute Deltares has started collecting the knowledge and data required to develop an integrated water management system for Myanmar.

Local initiatives are also contributing to a changing water management landscape. The disappearance of the junta’s authoritarian rule has facilitated NGOs’ access to populations and rendered easier the collaboration with local governments in expanding connection to the water grid. Now rural villages are setting up pumping stations, digging artesian wells as well as laying pipelines, coordinating neighbourhood mapping and focus groups to identify shortfalls, design solutions, set budgets communicate progress reports to authorities. The government also plans to pass stricter environmental laws to regulate fresh water provision and protect the country’s biodiversity.

This trend provides a major incentive for water management companies to turn their attention to the “Golden Land.” The country is in dire need of pipelines, pumping stations and sewerage plants, demand for which is expected to rise significantly in the next few years. What’s more, besides the need to build the physical water infrastructure, the necessity is to establish water management techniques and know-how throughout the water resource management system.

For example, sector employees need to learn how to locate seepages using equipment, as well as determine whether meters are operating correctly or if water is being illicitly siphoned off. Specialised engineers need to be involved in the rehabilitation and extension of the distribution network, taking into account varying geographies and the differing water levels between seasons. And overall, water education needs to be provided – populations require information and advice regarding hygiene, water economies as well as agricultural irrigation.

Entry in Myanmar’s embryonic water market presents a number of challenges – frequently changing legislation, uncertainty regarding environmental regulations, under-developed supporting infrastructure, as well as rampant corruption throughout the country.

For companies which can harness and overcome these challenges early on, the water industry in Myanmar offers plenty of opportunities to capitalise on the country’s economic liberalisation. A solid strategy, healthy finances, trustworthy contacts and a strong set of nerves will be essential – but once the potential is unlocked the benefits are certain to be rewarding.

Note: This article was originally published on Myanmar Business Today on 18 November 2013

The Phantom Driver

2013-10-08T14:26:00.001+08:00

Following the steps of Google –whose self driving car is currently being tested on public roads in California –, it was German luxury car-maker Daimler AG’s turn to reveal a Mercedes S-Class Sedan capable of driving itself at this year’s Frankfurt Motor Show. The latest unveiling of driverless technology is part of a recent trend wherein major automotive players, including General Motors, Ford, Volkswagen, Audi, Toyota, BMW, Volvo and Nissan, are turning their interest to driverless car systems in a bid to claim a slice of the potentially lucrative market.

Expectations for the market are high. A recent Navigant Research report estimates the sales of autonomous vehicles to reach 95.4 million annually by 2035, a whole 75% share of all light-duty vehicle sales. According to Google co-founder and special projects director Sergey Brin, the opportunity for ordinary people to have a self-driving car will be a reality in less than five years. With Nissan announcing it would have a street-ready driverless car in 2020, the race is now on among car manufacturers.

In the United States, statistics show an increase in the number of older age citizens who are active drivers. By 2020, 26% of the country’s population will be over 66 years of age. The industry’s spotlight is now on the potentially cash-rich “silver tsunami” that is sweeping across the globe, with automakers turning to the potential of driverless technology to engineer safer cars for an ageing population with decreased abilities.

Car makers have designed a customized “ageing suit” to obtain insights on the challenges faced by elderly drivers. The suit mimics the constricted movements of an elderly while specialized goggles distort colours and simulate poor eye vision, thus helping car makers design features promoting a safer driving experience. Features include blind spot monitoring and lane departure prevention systems, as well as seatbelt-mounted rear airbags given elderly motorists appear more prone to thoracic injuries.

Moving to the local front and riding on the driverless technology wave is Singapore’s first electric autonomous vehicle. As part of a two-year collaboration between Nanyang Technological University, JTC Corporation and Induct TEchnologies, the vehicle will be on trial soon. This is a timely breakthrough as a similar demographic shift awaits Singapore – by 2030, one in five Singaporean residents will be age 65 and above. Though owning a Singapore-made driverless vehicle remains a distant dream, the reality of being able to be hands-free while driving on the roads is not a far-fetched one.

Abenomics

2013-09-17T11:46:00.002+08:00

For a student of Keynesian economics, it is fascinating to see how his policies are applied, almost textbook-style, by Japan's Shinzo Abe - arguably the most dynamic - and divisive - Prime Minister Japan has had in a while. The media has been quick to christen his raft of economic policies Abenomics, after Abe, with his sheer force of personality and political charisma, rammed the policies through, even bending the Bank of Japan to his will.

Abenomics is spearheaded by the so-called 'Three Arrows' - massive fiscal stimulus, aggressive monetary easing, and structural reforms to bolster Japan's competitiveness going forward.

The first two arrows are textbook Keynesian plays, which led a falling yen and a sharp rally in the Nikkei. The effects, as one would expect from pumping money into a system, are rather direct - a falling yen made Japanese exports more competitive, boosting the cash pile and stock prices of Japanese giants like Toyota, and generating inflation and more housing market activity in Japan. Good news considering that Japan has been dubbed the 'miraculous zero-growth economy' for the past two decades.

The third arrow, focusing on the creation of sustainable growth, however, has been widely panned by critics and observers as falling way short of its mark - this critical third arrow, they allege, consists of the same tired set of ideas that have been toyed around with during Japan's 'lost decade'. Abe, despite all the hype, was not doing anything more radical than Keynesian pump priming to bring a flagging economy back to capacity, or, in economic terms, to its production possibility frontier.

What is critical, however, is pushing this economic frontier forward and outward, to ensure that growth is long-term and sustainable - this is why the Third Arrow is perhaps the most crucial, and where Abe has fallen short of his self-declared mark. The markets reacted with a sigh and sputter since June when the third arrow was notched and fired.

The lesson here, perhaps, is that there are no quick, textbook fixes for the economy. It is only in taking deep structural reforms - in essence, taking a calculated risk, a bold plunge into the unknown (the future), that genuine gains will be made. In Japan's case, this means having to revisit almost 'taboo' topics such as immigration to make up for a rapidly-ageing population, and agricultural and labour reforms in preparation for the Trans-Pacific Partnership - issues no politician would be willing to raise.

It is about swallowing the bitter pill now, rather than dither and hope the illness will go away on its own. Put flatly, it will not, but one cannot expect mere politicians, fixated in staying in office and commanding the popular vote, to make these difficult but ultimately necessary decisions. It takes a truly visionary statesman to do so - it remains to be seen if Mr. Abe is ready to step into those big shoes and take Japan out of its lost decades.

Towards ‘Green’ flow – Beijing’s strategies

2013-08-30T11:40:00.004+08:00

Beijing – A city filled with historical tales and architecture, is also known for being one of the world’s most congested urban agglomerations. A supposedly forty minutes drive between the airport and downtown on a Sunday evening lasted in reality ninety minutes – one cannot imagine what rush hour traffic is like. Beijing city recorded a car population of 4.2 million at the start of 2013, a number expected to hit 5 million by the end of the year. Daily, this means an additional 2,214 vehicles on the capital’s roads. That certainly raises an alarm!

Striking the same chord with the government, easing traffic congestion tops Beijing’s work agenda. According to a news report, one of the goals of the local Transport Commission is to ensure the traffic congestion index within 5th Ring Road, Beijing’s main urban area, does not rise beyond level 5. The index measures the severity of congestion on the road and ranges from 0 (no congestion) to 10 (heavily congested). To do so, firm measures have been introduced to curb the traffic increase: an odd-even license plate system where driving your car within the 5^th Ring Road is prohibited on certain days if the tail number of your license plate ends with a certain number, and a license quota system that requires those who want to purchase a car to register by the first eight days of every month (only 17,600 quotas are issued monthly).

Another strategy to alleviate the number of cars on roads is an affordable public transport system. Besides the existing bus and metro services, the municipal government is also launching a customised bus service at the end of August 2013. The new offering seeks to replace an estimated number of 30 private cars on a single bus. The service aims to connect dense residential areas such the CBD and the Financial Street.

Individuals have taken it up to themselves to make the government and population act on the traffic. Wang Yong started to give strangers free rides thirteen years ago and has helped over ten thousand people – he has become Beijing’s campaigner of carpooling. His main objective is to convince the government to run carpooling campaigns across the city, and in June 2013, he helped launch a new campaign on the outskirts of Beijing where nearly 2,000 people joined.

The severity of the situation is growing on a daily basis – a recent headline in June read ‘Beijing Zombie Apocalypse Traffic Jam: Commuters leave behind vehicles in rush hour traffic’. Having government intervention is insufficient; the battle to ease congestion in Beijing is a long one which requires the concerted effort of every citizen in Beijing.

Expecto PETRONAS!

2013-08-06T09:51:00.001+08:00

Expecto PETRONAS!

A few months ago, in one of our posts, we highlighted that Malaysia could be facing a credit downgrade due to poor fiscal discipline on the part of the government, which still does not have the political gumption to cut back on a raft of populist policies that helped it win the last general elections (held in May 2013) with an unconvincing margin.

Ratings agency Fitch did not mince its words when it stated flatly that 'Malaysia's public finances are its key rating weakness', while revising the outlook for Malaysia to Negative from Stable a few days ago.

Is this the beginning of the slippery slide down to a credit downgrade?

While we certainly do not have a crystal ball, we can try to make a few predictions and informed guesses based on current global trends and directions.

Malaysia's over-reliance on oil-and-gas (O&G) revenues to finance expansionary budgets will most certainly come under pressure from the new developments in shale extraction techniques, which will have a profound impact on global energy dynamics. It certainly will not be business as usual for the OPEC and other petroleum-producing countries - even Saudi Arabia is feeling the heat; what more for Malaysia?

From this perspective, it is worrying to note that Malaysia still sees conventional oil-and-gas and vast PETRONAS (Malaysia's state-owned O&G company; incidentally also its only Fortune 500 firm) capital expenditure as the key driver of the economy and supplier of government funds, under the ambitious Economic Transformation Programme which aims to break the country out of the middle-income trap. To this point, there is a joke that goes - Malaysia is like a Harry Potter tale - when the going gets tough, there is always the PETRONAS (Patronus for Harry) spell. However, with the shale revolution, there may come a day when even the all powerful PETRONAS may not be able to save the day for Malaysia.

A lot, thus, will have to hinge on the government having the political will to cut subsidies and widen its tax base through implementing the long-delayed Goods and Services Tax, besides charting new growth trajectories for the economy beyond a reliance on natural resources, and spending prudently to build capacity and competitiveness for the future instead of on ever-ballooning operational expenditures. As it is, the Malaysian economy is facing significant headwinds from increased competition, falling exports, low crude palm oil prices, and a massive brain drain.

The PETRONAS spell won't be able to fix this mess in an instant - only a return to good and accountable governance, and a focus on building long-term competitiveness will. It is also not wise to rely on one spell alone, as any Harry Potter fan will tell you.

Economics again: The example of AirAsia

2013-06-12T11:03:00.002+08:00

In our last instalment, we discussed the vast gulf in terms of bus ticket prices across a stretch of land. While bus tickets from Singapore to Kuala Lumpur cost $30, it may be surprising to know that for that same journey, one can an air ticket on Malaysia-based budget carrier AirAsia for the same price.

So how do the economics work out here then?

Initially, we have to understand that the airline industry is a cutthroat and extremely price-competitive business. Ultimately, this competition benefits the ordinary consumer by driving prices down and raising service standards. The presence of national airlines receiving government support and the fact that the aviation business is ultimately a regulated one also help to ensure that no one player is able to completely dominate the market by strategically undercutting its competitors.

The fact that AirAsia has expanded aggressively from its initial 2 planes and 6 domestic routes in 2002 to become a leading regional carrier, has led to massive consolidation and economies of scale for the airline. With overhead costs spread over a larger fleet and passenger haul, the airline is in a position to offer very compelling fares. Which sometimes, as raised earlier, can be even cheaper than the price of a bus journey.

Still, this is not yet a satisfactory answer. There are many large airlines in the world with deep reserves and an impressive fleet – what then, is the secret ingredient that places AirAsia firmly in the black, while its more illustrious peers such as Malaysian Airlines and even Singapore Airlines struggle to balance their budgets?

The magic element is: operational efficiencies. AirAsia has managed to streamline its costs to such an extent that you would hear of top management inspecting and complaining about adding extra padding to the seats, which they calculate would subsequently weigh down the plane and cut fuel efficiency. Building an airline around a single kind of aircraft (the Airbus A320), focusing on a quick plane turnaround and a no-wastage policy, make AirAsia's economic model a very lean and mean machine – one that is difficult to emulate by others, giving it a sustainable competitive advantage which it has capitalised on to expand aggressively.

The fact that AirAsia is gradually shifting its company base to Indonesia is also another shrewd move to keep operating costs down, while at the same time tapping into a booming consumer market.

With a combination of sound management and of being in the right place at the right time at the heart of ASEAN's economic boom, one expects AirAsia to not just give its fellow airlines a run for their money, but even the long-distance bus companies. And that is how surprising – and pleasant – economics can turn out to be for the ordinary man on the street, who, compared to 20 years ago, does not have to be a big businessman to be able to take a weekend off in Bali.

The economics of a Singapore-Kuala Lumpur journey

2013-05-13T10:23:00.000+08:00

A bus ticket from Singapore to Kuala Lumpur costs S$30.

A bus ticket from Kuala Lumpur to Singapore, same company, same time and day, will cost you RM45, or S$18.

Why the price difference?

As an economist, I can think of various possible answers.

Purchasing power in Malaysia is lower than that in Singapore, so individuals living in Malaysia should be expected to pay less than those living in Singapore. According to Numbeo.com, consumer prices in Singapore are 94.22% higher than in Malaysia. So individuals making the return trip from Singapore to Kuala Lumpur (KL) could be expected to pay less, in absolute terms, than individuals living in KL and doing the inverse trip.

Singapore's regulation requiring cars and buses travelling out of Singapore to fill their tankers at the ¾ could mean that the trip out of Singapore is more expensive to the bus company than the trip out of KL, resulting in a higher cost of the Singapore-KL journey. Taxes and duties make up to 30% of pump prices in Singapore. Every year, Malaysia spends US$14bn subsidising gasoline. The result is cheaper gasoline in Malaysia compared to Singapore. To prevent arbitrage, the Singapore government requires all motorised vehicles leaving the city state to have tanks full at the ¾. This could mean the cost of a Singapore-KL trip is higher than that of the inverse journey, where buses will fill up tanks cheaply in KL and make their way to Singapore running on cheap petrol. In most business models, higher costs mean higher prices, so Singapore-KL should cost more than KL-Singapore.

More travellers make the Singapore-KL journey than the KL-Singapore one. This could be a possible answer due to Singapore's role and position as a global hub. However, it rests on the initial hypothesis that more travellers arrive in Southeast Asia through Singapore rather than leave from Singapore. The reasoning goes as follows. Singapore is regional transport hub: the world's largest harbour, the region's largest airport. Singapore is often the main point of entry of foreigners to the region. Foreigners could be more likely to make their way out of Singapore towards the peninsula via land rather than air, due to the ease of bus and car travelling. Consequently, one could hypothesise that buses towards KL are fuller than those towards Singapore. (Checking this hypothesis would be rather easy, just by asking a few bus operators)

Whatever the correct answer, the lesson to remember is to not buy a return trip when leaving Singapore – cheaper is to buy it in KL when you arrive!

Globalisation in action

2013-04-03T15:45:00.003+08:00

Harbours are fascinating places to witness the increasing interconnections the world is experiencing. A casual walk along the southern coast of Singapore, overlooking the harbour, provides just the experience.

For miles, ships are parked in the sea of Singapore. At night, their lights shine lightly along the horizon, while during the day their long shapes paint the horizon with narrow rectangles of maroons and reds. Awaiting their turn to offload and onload at the harbour, the writing along their sides hints at their port of origin. Hamburg Süd, Odfjell, 中国远洋 – Germany, Norway and China all meet in Singapore harbour.

Singapore is the world's second busiest port in terms of total shipping tonnage after Shanghai. Every day, millions of tons of furniture, cars, clothes, food are offloaded and unloaded along the city state's decks, managed by over 150,000 people employed across 7,000 companies. Every year, 7% of Singapore's total GDP is created in the huge warehouses and decks at the south and east of the city.

Ships from Europe, the Americas and Oceania gather here. In the port, thousands of containers are lifted in the air, containing the essential or superfluous elements for people all around the world. A Dutch ship might be travelling from Hong-Kong to Brazil with a stopover in Singapore, transporting thousands of remote-controlled cars assembled in Guangdong in China to excited children in Bolivia. These cars might have been constructed thanks to the trip undertaken by a ship registered in Australia, who earlier in the year sailed from Japan to China, filling a good part of its containers with electronic equipment designed by Japanese engineers. And too, a British-owned ship might have transported a new expatriate's luxury car from the United States to Singapore.

It is around harbours that one feels that the world is becoming increasingly small, and that distances are being slowly eliminated. More than cargo airports, which are often inaccessible to the general public, harbours are the physical face of globalisation.

A city on the verge of total gridlock

2013-03-19T15:38:00.001+08:00

Jakarta. The political and economic capital of Indonesia. And a city which is increasingly turning into an urban nightmare.

Anyone travelling to Jakarta will with little doubt comment on the major traffic jams the city experiences. At peak hours and during monsoon downpours, millions of cars, vans, and motorcycles bring the city to a standstill. A few numbers illustrate the scale of the problem: between 2011 and 2012, car sales increased by 11%, and the total number of cars increased ten times faster than the number of roads they roll on. Amongst the total population of the city, 30% uses public transport while the remaining 70% use private cars to get around. In 2014, the government expects Jakarta to experience total traffic gridlock.

The Indonesian authorities have been surprisingly slow in reacting to the traffic situation. Regulations limiting secondary car ownership and auto loans deposits were introduced last year, but with little success thus far and with wide discontent. The Transjakarta busways, implemented on the format of the Bogota TransMilenio, introduced separate road lanes for buses but remains inefficient due to poor urban planning and an inexistent sewage system, a big problem in a city affected by major floods. The 3-in-1 car passenger policy is widely ignored, and a proposed monorail project is still in limbos.

The economic consequences of the Jakarta traffic congestion are serious. Every year, the city loses US$1bn due to gridlock, and in 2020 the total economic losses – including vehicle operating costs and travel time – are expected to reach US$6.9bn.

New plans urgently need to be implemented. The recent election of Joko Widodo to the role of Governor of Jakarta has raised hopes to have the traffic situation finally tackled, with his main pledge being to defeat Jakarta’s traffic problem. Widodo has revived the option of a long-abandoned railway project, and introduced new laws regulating street stalls which clutter the streets and aggravate congestion.

In an emerging country growing at 6% and international car makers investing $2.2bn annually, communication, collaboration and strong leadership will be needed to eliminate the traffic problem.

Bali, the neglected island

2013-02-05T12:10:00.000+08:00

A holiday in Bali can be eye-opening in many respects. The blackness of the beaches of the volcanic island reminds us of the importance of nature in shaping our environment. The rice paddies clinging on to the hill cliffs remind us of how humans have mastered the physical environment around them and created one suitable for them to live and thrive in. And the piles of bottles on public beaches, the odd shoes found on the sand at low tide, the plastic bags clogging up ditches also remind us that humans have forgotten about actually caring for the environment around them.

Tourism began in Bali in the 1970s, when groups of Western hippies came to the island, attracted by the beauty and spirituality of the landscape and the friendly and tolerant reputation of the island’s inhabitants. Tourism then was what is called cultural, with foreigners expressing interest and concern for the region’s culture, the locals’ lifestyle, the island’s architecture and history. However, cultural tourism slowly made way to mass tourism, booming in the 1990s and 2000s as developers realised the huge tourism potential of the region. Hotels and resorts started popping up all over Bali, erasing coconut trees and beaches to make way for private terraces and infinity pools. Other beaches were widened and the background nature was destroyed, transformed into parking lots to accommodate the masses of tourists flying in from Australia and Europe.

Bali’s environment is at threat of succumbing to mass development. Every year, 700 hectares of land is lost to hotels, luxury housing and roads. Every day, 13,000 cubic metres of waste is dumped and only half of it is recycled. Traffic jams are becoming increasingly problematic, with the island’s road connections struggling to accommodate the 13% annual increase in number of cars.

Today, the main environmental issue regarding Bali is water, with one expert saying that Bali could face a drinking water crisis by 2015. Waste dumping is dramatically polluting freshwater reserves. The non-existent garbage collection system leads to individuals and hotels disposing of their waste in open-air public dumps, polluting the groundwater as rain trickles through the waste and soil, filled with polluting products. Intensive water usage is also a concern, with hundreds of hotels absorbing a large part of the freshwater reserves, depriving locals of an essential irrigation and drinking resource.

Locals and foreign tourism organisations are slowly realising the need for a sustainable plan of action regarding water and waste. Previously non-existent regulation regarding waste dumping was introduced last year, and information campaigns regarding water scarcity are being organised. But locals and foreigners alike will all have to seriously tackle the environmental issues facing Bali. The booming tourism industry, which involves both industry players and tourists, will have to become more aware and informed, and actively play their part in protecting the island’s environment, which is, after all the lifeblood of the tourism industry. With the participation of all stakeholders, the environment catastrophe looming over Bali will easily disappear and a lose-lose situation averted.

War on Two Fronts for the Personal Navigation Device

2013-01-07T13:14:00.001+08:00

One of our navigation-related articles has recently been published on Coordinates, a monthly magazine for the location and navigation industries.

Check out the online link here!
http://mycoordinates.org/a-war-on-two-fronts-for-the-pnd/

Thrills and shrieks gone east

2012-10-25T13:54:00.001+08:00

Awakened and welcomed by the activity and chatter in the air, I couldn't help but wonder if this was really a typical weekday in Singapore. A sense of excitement and anticipation came over me even before I approached its gates – the only barrier that stood between me and the “other world”. I felt like I time-travelled. My whimsical experience began the moment I passed over from a hectic sunny island into a veritable giant capsule loaded with ton of thrills and shrills – Universal Studio Singapore (USS). Breath-taking – and that is not an overstatement - is how I would describe my first encounter with the theme park

With the accompaniment of thrill-seeking comrades, we went straight on the world’s tallest dueling coaster. This was certainly not another day at the office. Even in the midst of all the adrenaline, I couldn’t help but be captivated by these masterworks that covered my path - done with such intricacy and soul, every character is played out to life. No small feat indeed considering that this magical world evolved from European fairs and pleasure gardens during the beginning of industrial revolution.

With heightened fanfare that included the dazzling array of stars that descended, the precision of its grand-opening time (8.28 a.m.) and the highly publicized lineup of attractions – USS opened in 2008 and became the only one of its kind in Southeast Asia. Posting a stellar performance of 3.4 million visitors in its first full year of operations with further room to grow, USS is not an isolated example of the industry’s future in this region - a recent report had noted that the area of themed attraction, gaming, entertainment and retail in Singapore and South East Asia is a booming market.

According to AECOM and the Themed Entertainment Association's 2011 Theme Index - Global Attractions Attendance Report, Asia hit an attendance milestone of 105.1 million. At that sheer figure (to North America’s 127 million), Asia’s share of the pie was reported as about a third of the global theme park attendance. It also mentioned that by adding 5-10 more theme parks, Asia will probably catch up to North America and then surpass it. And the nation that is poised to help boost those numbers is none other than China.

China, the world’s second largest economy has seen a huge rise in affluence and disposable incomes, coming from an economy that grew at an annual pace of 8.1% in the first quarter of 2012. The outlook is bright and the country looks set in the theme park race - holding the current record of having 9 out of the top 20 theme parks in Asia with several more to be added in the next few years – the most prominent icon being Shanghai Disney. The numbers gap will definitely narrow when Shanghai Disney finally opens in 2015, but not without first spilling its economic effects on the region. There is no doubt where the focus and capital will be heading to in the next decade or so. Ranking at number 8 on the world with an annual growth of 12.6% in 2011, the country’s largest park operator, OCT Group is expanding its operations with an addition of a tenth park to its brood of assets. Surely, now is the time to hop onto the Chinese entertainment bandwagon, which will probably resemble more a roller-coaster ride - up.

Malaysia's Budget 2013 - an overview

2012-10-01T16:51:00.000+08:00

The more cynical of us would come to understand that economic policy is essentially economics mitigated by a large dose of politics. And in a crucial elections year (which have to be called by April 2013, against a resurgent opposition), the Malaysian government has increasingly dipped into the national coffers to offer a ‘people-friendly’ budget – in essence, dealing out cash and subsidies as political sweeteners.

In an expected move, the federal government has run a deficit budget again (for the 15^th consecutive year), chalking up a total federal debt of some half a trillion Ringgit, standing at 53.7% of GDP. The expected budget deficit of 4.5% ranks third in Asia, behind only Japan and India – both economies which have seen better days.

Against an increasingly uncertain global economic climate, such a high level of debt naturally raises some concern. Countries have gone bust almost overnight, and key trade partners are experiencing weak growth, if at all. Bearing in mind that Malaysia is an export-dependent trading nation, can the Malaysian government continue to service its debts and deliver on its promises to rein in government spending, or is it just a bust away from fiscal disaster?

Perhaps it would be fairer to consider what the government spends its expansionary budgets on. Significantly, four-fifths of this year’s budget is allocated towards operational expenditure, while only RM49.7 billion is channeled towards developmental expenditure. In essence, while the government spends a huge budget, it is not spending so much for the future, as much as meeting present commitments. The multiplier effects and capacity-building is thus small despite a large expansionary budget being tabled.

Besides the continuous spending on expansionary budgets (the government has run deficits for the past 15 years, since the 1997 Asian Financial Crisis), the government’s revenue stream is also some cause for concern – around 45% of this comes from Petronas, the national oil and gas giant. Oil and gas prices are still high, but will it remain so, given that the world economy will probably remain weak for the foreseeable future?

There is an insidious addiction and overreliance to petroleum revenues, which has been likened by critics to leaning more and more heavily on a crutch that is getting shorter and shorter – oil and gas reserves, after all, are finite.

Besides the addiction to petroleum revenues, Malaysia is also addicted to subsidies – these, covering everything from fuel to sugar, make up a significant portion of the huge operational expenditures. Quite simply, there has been no political will to reduce the subsidy bill, as well as broaden the government’s revenue base by implementing an unpopular but deeply needed Goods and Services Tax. Similarly, efforts to restructure and reform the economy to promote greater competitiveness and efficiency, as well as to plug leakages from corruption, have been half-hearted and lacklustre.

There is an increasingly pressing need for the government to be decisive in implementing deep cuts and structural reforms, that while painful now, will save the country from traumatic pain further on especially as dark clouds drift over the economic horizon. These are essentially politically unpalatable but economically necessary measures that hopefully will be carried out by the government after the elections.

There indeed have been murmurs of a possible credit downgrade by Fitch and Standard & Poor if the government does not exercise fiscal discipline and stop trading economic prudence for short-term political expediency. As of now, chilling comparisons have been made between Malaysia and its more debt-laden A- peers, notably Italy.

Among the weak Southern European economies, Malaysia’s problems also bear a resemblance to Greece’s, with a bloated and relatively inefficient public sector, and its corresponding wages and pensions to be paid out. Spain’s propensity for mega-projects that become white elephants is also shared by Malaysia’s ruling classes.

Having run a decade and a half of deficits budgets, the government clearly has not saved while the going is good, even as oil prices soared to new heights during that period. This lack of fiscal discipline could come back to haunt the government in these uncertain days.

As conventional investing wisdom goes, when everybody is greedy, be fearful; when everybody is fearful, be greedy. The Malaysian economy, which can only be described as ‘gravity-defying’, as the Financial Times have, is not a cause for jubilation but rather concern. The relatively weak fundamentals in a state-dominated economy, dulled competitiveness and uncertain global economic outlook are not reflected in the present 5.2% growth rates, leading to the unpalatable question that has to be asked – is this a Potemkin economy, propped up by state spending, and is this sustainable?

As of now, there is still confidence that the Malaysian economy will continue to grow and the debt, which is held mostly domestically, will be serviced. However, in an increasingly volatile global economic climate with huge financial flows, where even advanced economies are just one crisis away from disaster, perhaps it is wiser to err on the side of caution.

ASEAN - the next big thing?

2012-09-03T12:01:00.001+08:00

While the Euro dream seems to be crashing down onto reality, could ASEAN – a disparate region of seemingly disparate economies and systems of governance, be on its way up?

Of course, as of now, ASEAN as a regional grouping carries little international clout or standing, unlike the European Union with its imposing common policies and army of bureaucrats in Brussels. ASEAN member states are also far from united, or even, similar – ASEAN spans a military junta in Burma to communist regimes in Indochina, to Singaporean-style democracy. The same grouping also brings together one of the poorest– and tragically most bombed – nations on earth (Laos) and one of its richest (Singapore).

The statistics and news coming out of ASEAN recently, however, look promising, as opposed to the flow of bad news from the Eurozone. The Philippines, for example, has recently recorded the second highest growth rate in Asia, after China, while other Southeast Asian economies emerged relatively unscathed from the recent crises, perhaps all the wiser after the 1997 Asian Financial Crisis. Burma, in another surprising example, has set off a scramble by investors keen on its untapped markets and resources. Indonesia, of course, is still the fund investor’s emerging market darling. Malaysia grew at a very robust pace of 5.4% this quarter, propped up by government spending, while Singapore has recently been dubbed the ‘richest country on earth’.

Quite simply, ASEAN as a region, to quote a recent report, ‘is no pushover’. This should not come as a surprise, as is the statistic that the size of ASEAN’s economy is marginally bigger than that of India’s (at a combined GDP of US$1.35 trillion, compared to India’s US$1.3 trillion). ASEAN, however, unlike a stalling India and EU, is on an upward trajectory.

Other relevant statistics - ASEAN’s population stands at 600 million potential consumers (some 10% of the world population), with an emerging middle class. The region is also resource rich, with a young and increasingly educated demographic, and situated across some of the most important sea lanes in the world. For better or for worse, ASEAN is sandwiched between the twin giants of India and China, both of which have had much influence over the region historically. In an economic sense, it is for the better – trade and investment between ASEAN and these giants have hit an unprecedented high, and is expected to grow still.

However, even as China’s seemingly infinite pool of surplus labour from the countryside seems finally to be drying up and India stalls under political mismanagement, ASEAN still seems to be steaming ahead. Indeed, investors wary of a possible Chinese hard landing and rising costs have increasingly shifted bases to ASEAN.

Most of the economies, with the sole exception of Singapore, are still in the resource mobilisation phase, as opposed to a resource optimisation one which emphasises ‘productivity’ – in essence, getting more out of a fixed set of resources, to ensure continual economic growth. In other words, there is still much potential and space for growth ahead, at least until the veritable middle income trap is reached (where Malaysia, Southeast Asia’s 3^rd largest economy, is stalled at).

What lies ahead for the ASEAN community is a move towards greater economic integration, bearing in mind, of course, the lessons of the Eurozone. First and foremost is clearly the integration of markets and the dismantling of trade barriers to encourage greater volume of trade – time and again, economic studies, since David Ricardo in 1817, have shown that trade benefits countries much more than protectionism – which, while packaged as ‘nationalism’ is often just a thin albeit useful veil to protect elite interests. Malaysia’s pantheon of scandals involving its ‘nationalised industries’ ranging from steel to automobiles bear witness to this, and I am quite certain that it is not Malaysia alone that has sustained huge losses from supposed protectionist, closed-door policies, especially now in an era of globalisation and global flows.

The fixation on free trade, however, always seems to neglect its equally important counterpart – fair trade. Importantly, trade and the removal of tariff barriers have to done in a not just a free, but also fair manner, bearing in mind the differing levels of development of the member states, which Cambodian Prime Minister Hun Sen had just recently dubbed the biggest stumbling block to the realisation of the ASEAN economic community.

The age of small, export-dependent, Western-oriented economies booming seems to be over – the East Asian economic miracle that saw little dragons – Singapore, South Korea, Taiwan and Hong Kong flourishing, has been replaced by the era of the aptly named BRICs – large countries with sizeable resource bases, a young demographic and strong domestic consumption. Integration of markets and greater trade seem to be the only sure way for smaller countries to continue on the global growth trajectory, much of which will be driven by population growth and resource consumption.

Perhaps more pragmatically, beyond the idealism of a single ‘ASEAN’ community, Malaysia, Singapore and Indonesia would do well to integrate their economies, as these are at a more comparable level of development and also stand to benefit from historical cultural and trade ties. There is also a good mix of the much trumpeted ‘ingredients of development’ - capital, resources, human potential, consumer markets and decent infrastructure to really let the region take off.

While I would not count on paying for goods and services in ASEANs in the future, there certainly is much to be gained from greater integration and unity in the region, not just economically but also politically, to fend off the growing clout and assertiveness of China in a region it has long regarded as its backyard.

K-pop continues to thrive

2012-08-13T09:20:00.002+08:00

What is the first thing that comes to your mind when the country – South Korea is mentioned? For the politically attuned, the spotlight will be on its relationship with its Northern neighbor. But not for me. South Korea’s stars aka Korean pop stars hog the limelight in my dictionary. The star factor has risen to such a great magnitude that a sub-culture is formed – ‘Hallyu’ wave and there is no stopping of its appeal. Judging by the looks of how the wave is sweeping rapidly across continents, one becomes curious on the origins of the ‘Hallyu’ wave, its creators and most importantly – factors attributing to the success of this worldwide phenomenon.

My love for all things Korean caused me to first set foot on the land a year ago. The surreal feeling of stepping on Korean soil for the first time was like a dream come true! Walking down the streets in Seoul, it is hard not to notice, the flood of star-endorsed advertisements ranging from daily necessities to luxury goods. Every one of those celebrities has a big $ sign attached – cash cows to their companies. Though these performers are only in their early to mid twenties, they are highly talented and versatile – often wearing several hats such as acting, hosting, modeling, etc. The reason for the success of these pop groups is sheer amount of investment and sacrifices made. Appalling as it is, trainees in their early teens sign a contract of 7 to 10 years with the entertainment company – slave contracts in my view. A mental picture depicting a soldier serving military service comes to mind - tough but necessary preparation for stardom.

To those that survive the process of metamorphosis to debut onstage, the return on investment is generous for the individual and the company. According to the source, koreaboo.com, SM Entertainment – one of the big three companies that manages the 9 member girl group Girls Generation, the sunk cost incurred for their debut is at least US$1.8 million and the company is expected to incur about the same amount even after the group debuts. If you are thinking that is a huge negative figure for a start-up, you are spot-on. But looking at statistic figures from the Financial Supervisory Service’s data analysis retrieval and transfer system, the company is definitely getting the longer end of the carrot. It is reported that the girl group made a whopping KRW 68.811 billion (approximately US$ 60 million) from 2009 to the third quarter of 2011. With the group’s popularity fast gaining momentum globally, the profit and the entourage of followers will definitely snowball. This will in turn spawn another trend of following - the fashion styles of idol groups.

As long as the wave is still at its peak, the opportunities to spin money off these groups are endless. The constant question that the creators have is how do they maintain their stars’ global appeal and feed the bottomless appetite of Korean pop followers. Well, in my opinion, the ‘secret potion’ is knowing overseas music trends, chic styling, massive amount of publicity and building an ideal idol image and ‘poof’ - boy group, EXO is born.

Where is Starbucks in Italy?

2012-07-16T11:53:00.003+08:00

I have always wanted to visit

Italy

and its beautiful history. Apart from the architectural allure of the place,

Italy

as a country has always held a certain charm. I had read in books and watched in movies of the little coffee shops and espresso bars lining Italian streets. As a coffee lover and a serial café hopper, the strong coffee culture of

Italy

was very attractive to me. Naturally, when debating on where to go for a summer holiday,

Italy

(specifically Rome) was top of my list.

Rome did not disappoint. Walking amongst ancient ruins such as the Coliseum and the Roman Forum where early civilization was enchanting and enriching. The city itself was amazing and had innumerable sculptures representing its rich tapestry of history. The winding alleys and streets of Rome also held so many quaint coffee shops and espresso bars. I was in my element, and tried several shops (short of giving myself a caffeine shock). However, despite there being a decently strong American brand presence, one thing grew clear to me as I toured Rome. There wasn’t a Starbucks in Rome! Could it be that

Italy

, the country that had inspired Starbucks’ creation did not have even one of its own?

It turns out that the CEO of Starbucks, Howard Schultz, has been asked that very question countless of times. His response has always been that Starbucks will eventually go into Italy’s market, which brings up the question – What is it about

Italy

that has preventing Schultz from entering even up till now?

There is a huge difference in the original Italian coffee culture and the inspired Starbucks one. Italians pride themselves on uniqueness and diversity, whereas Starbucks is ultimately an American model that pursues growth through franchises. More fundamentally, Italians and Americans drink different types of coffee, namely espressos versus the American drip coffee. Italians also drink their espressos in the café itself, whereas the working American population is rarely seen without a cupboard cup of coffee in hand aboard the subway. Such differences, while seemingly insignificant and small, could seriously hamper a Starbucks foray into

Italy

Furthermore, could you imagine the humiliation if Starbucks were to venture into the Italian market, only to fail? Should the Italians stamp a seal of disapproval on the Starbucks brand, it would be a very embarrassing situation for the international coffee powerhouse. Coffee in Italy is extremely readily available and it would prove a daunting task for Starbucks to establish a coffee franchise there. It is no wonder that Schultz has hesitated for so long in bringing Starbucks to Italy.

Despite such reservations, there is potential for the Starbucks model in Italy. Italians are normally quick about drinking their espressos because it tastes the best when it’s fresh. Starbucks, on the other hand, has managed to create a café culture in America (and influenced many other regions of the world, including places like Singapore and China). Rather than competing directly in the market for quick coffees, Starbucks should capitalize on its strengths, which is creating comfortable environments that serve yummy coffee for people to leisurely interact with one another, but with an Italian touch. By carefully presenting a different way of enjoying not just Italian-type coffee but also American-style coffee, Starbucks could very well succeed in the country that inspired its birth. Judging by the success of McDonald’s “McCafe” in Italy, Starbucks should have more confidence that its brand will do well there.

However, of course, such things are always a lot easier said than done. Penetrating the Italian market will require a lot of careful strategizing to get it just right. We will just have to see when Howard Schultz decides its finally time to return “home”.

Prince of Persia – Iran is not an American videogame

2012-06-05T09:29:00.002+08:00

In recent days, with more immediate and practical concerns over a possible “Grexit” and Spain’s floundering banks, Iran may have slipped out of the global media spotlight for a while.

Just as fickle – and oftentimes cruel – as the media spotlight, is the expedient and capricious nature of global power interests and foreign policy-making, made painfully apparent as in Iran. Nowhere else has America’s supposedly benign and benevolent foreign policy been so brutally exposed. Above all, it has failed miserably, unless some Machiavellian machination of creating a convenient bogeyman has secretly been the goal of American foreign policy in the Middle East all along.

First things first - it is not a push to say that the Americans had a hand in creating the Islamic Republic. The call for democracy against an autocratic and repressive regime in Iran may be a genuine plea, but one also cannot selectively ignore facts and history. It has been the Americans that propped up the highly unpopular and increasingly autocratic Reza Pahlavi, Shah-an-Shah, King of Kings (a hardly democratic title) against his democratically-elected premier Mohamed Mossadegh in a blatant coup, Operation Ajax, during the tumultuous days of the Cold War. Perhaps then we should not be so surprised that the populist backlash came in the form of Ayatollah Khomeini’s Islamic Revolution.

Further along the timeline, which most of the developed world and its policy-makers have conveniently forgotten, there is the horrific Iran-Iraq war, where the Americans, along with other major Western powers, backed Iraq – the aggressor.

In more recent years, most have also forgotten the US-led invasion and occupation of Afghanistan and Iraq with no clear mandate from the rest of the international community, and, in the latter, on false claims.
It is perhaps only reasonable that Iran would feel threatened - the encirclement of Iran by American military interests in Afghanistan, Iraq and the Naval Fifth Fleet in the Persian Gulf at Bahrain, and the close proximity of nuclear-armed Israel is enough to make anyone jittery. Why should we then feign surprise, misunderstanding, or even outrage when Iranians start to think, ‘we’re next’, and start taking precautionary measures? As an old Chinese strategist, Wu Zi mused, even animals when cornered will fight savagely – how much more still will man?

The recent tightening of international sanctions, besides forcing Iran further into a corner, would also have hurt ordinary Iranians the most, while authoritarian regimes and their cronies more often than not have comfortable nest eggs carefully squirreled away.

Intervention may also not always be the best solution - NATO’s opportunistic adventure in Libya which ousted Gaddafi, who has been the most progressive and reform-minded of the so-called ‘rogue states’, has merely forced others to adopt a hardline approach – it may be just speculation, but Syria’s Assad no doubt realised he had no other way out than a brutal crackdown and a further shift towards countries of similar ilk, who are willing to look the other way. It comes as perhaps no surprise that Syria, Iran and Syrian-proxy Lebanon are now best friends in the Middle East. This demonisation by sanctions or direct intervention certainly does nobody any favours, not least the people living under such regimes, besides de-stabilising the Middle East even more and affecting innocent trade partners.

One cannot approach the Iranian issue without understanding the historical backdrop and local geopolitics – everything happens within a context, as sociologists have always stated. While politicians may come and go, and the priorities and whims of foreign policy may prove fickle, the people often have longer memories than that. The American public may not understand Eye-ran, but most Iranians still do remember the Americans.

One thing that has struck me while travelling in these states with authoritarian regimes and less-than-sterling human rights records is that their people are often able to draw a clear distinction between the government-of-the-day and the people – just as they hate their own oppressive governments, they expressly dislike the American government for its hypocrisy, and still the few Americans travelling in Iran after dark are often unable to get home – often they are accosted in the streets and invited back to someone’s house for dinner.
Whereas, most of us may have failed to see the difference between the Iranian government, and the Iranian people, and maybe this is why chanting the perennially popular foreign policy mantra of ‘engagement’ has not been as successful as if it had been done with a better understanding of historical contexts and the genuine grievances and needs of the local populace. After all, if we are indeed sincere about democracy, basic liberties and human rights, any real change has to come from within, and not as the collateral by-product of fickle superpower interests and power-plays.

In short, we have to balance between respecting the genuine security concerns of Iran, the fact that the cleric-led government has a poor rights record and is autocratic, and the fact that most Iranians do not quite see eye to eye with their government and yet suffer the most from isolationist policies and sanctions imposed by the US-led international community. Nobody said it was going to be easy task, but it at least represents a more genuine attempt at engagement, as opposed to the current trajectory we are on, which only portends war.

Corruption... a personal perspective

2012-05-15T16:11:00.001+08:00

Recently, a friend who got back on a business trip from a developing country, stumped and frustrated by the loops of bureaucracy to be leapt through (and expectant palms to be greased in every turn) relayed this story about the local policemen. Apparently, once a month, the local chief convenes his subordinates for a meeting. Without a word, he passes each of them an envelope. In it is a small but significant stash of dollar notes.

In a word, corruption.

But it gets more complicated from here – Imagine yourself as a district policeman in the developing world - would you decline the envelope, and fall out of favour with the chief and risk your family’s livelihood? Chances are, the chief is just going to replace you with a more compliant underling. Make a report? Chances are, it won’t get past the chief’s chief, or even his chief for that matter.

Or would you say nothing, but pocket it anyway, just because – everyone else, even the chief, is doing it? And there is simply no better alternative?

Now we see corruption in a slightly more different light. It is at once a very major and obvious problem, crippling entire economies from their full potential, and a very minor one, stretching its tendrils all the way into our very personal lives. It is this perspective that allows us to glimpse its sheer breadth, the scale and depth of the problem – that corruption has almost become a culture, an institution and an inescapable fact of life.

Corruption seen this intimately and honestly is a serious scourge to countries, especially developing ones. Once there is an entrenched culture of corruption, once it gets passed down from the upper echelons, to buy favour and secure complicity, or even when there is a lack of will to tackle corruption (usually because the upper echelons themselves are complicit), you start to have a serious institutional rot, an institutional problem that will not be removed with one or two token arrests to placate the masses. And once our public institutions, first and foremost those under the executive and the judiciary, cannot be trusted anymore and become dysfunctional organisations serving the whims of those in power and wealth, civil society suffers. The foundations and safeguards of a healthy democracy will be greatly undermined. The rule of man, not the rule of law, will prevail. And far too often we have found that the rule of man is but a step from the rule of the jungle.

If you ever find yourself in a teahouse or coffeeshop in the developing world, and caught up in political chatter, chances are it is on the supposed corruption of the political elite, in its various guises – cronyism, nepotism, favouritism, graft... Beyond what hardened cynics may scorn as liberal idealism, all this no doubt have a very real and dire effect as well on the national economy and its competitiveness, besides deterring investment and business activity as my friend’s plight amply demonstrates.

Public outrage at corruption as the root of the national rot is common, and last year, the year of the Protestor as TIME magazine dubbed it, we have indeed seen plenty of it. Surely, this must be the key reason why some countries are held back when others with significantly less resources and less favourable conditions have succeeded? Surely, this must be why the sheer volume of aid pouring into Africa has not been effective at all, or why a wealth in natural resources have still left most countries poor, but with stark income disparities?

Corruption is a bottomless pit – a veritable Faustian pact – once you’re in, there is no backing out anymore. Institutionalised corruption simply chases ever greater wealth, ever greater security of power, for further gain and avoidance of prosecution – the unholy alliance between wealth and power, between public institutions and ruling political parties, the enmeshing of interests, become almost inevitable and similarly impossible to unravel.

Once a significant majority across the branches of government is complicit and benefits from ill-gotten gains, institutionalized corruption becomes almost impossible to eradicate. Imagine pestilent weeds – if you just shear off the part you see, it grows back again in no time. The solution is literally to tackle it at its roots – you take a shovel and claw it out.

I will stick my head out on the guillotine and say it: If there is institutionalised corruption in a country, it starts right at the top.

Clawing out pestilent weeds, as anyone who has done it before knows, is an arduous and painstaking task - entrenched political parties, with their amply funded war-chest and complicit and compliant public institutions at their disposal, merely sweep into power each and every election as a formality. And that is if there are even elections.

We need an extra strong weed-killer sometimes, because, as we are all too clear, the real cost of corruption is on democracy, individual rights as equal citizens before the law, a functioning and competitive economy, and a better quality of life.

Mighty oaks from little acorns grow

2012-03-12T15:38:00.000+08:00

People often look to big businesses with a mixture of awe and distaste. While it is always impressive the way a huge company or brand name comes to exist, it seems that you can’t get huge without stepping on more than a couple of toes. Growth strategies of huge corporations that involve gobbling up the little guys have led to negative impressions in the minds of the public. It also certainly did not help their reputations when the massive banks got taxpayers shelling out wads of cash (that a lot of them did not have) during the banking crisis. So actually, you can’t really blame the public can you?

However, with our economy stuttering along, is big business what we need? Small firms have often been lauded for their high creativity, flexibility and adaptability whereas big firms are often criticized as being cumbersome and clunky. While there are indeed some big firms that do live up to that, there are also a lot of big businesses out there that should be better supported for the good of the economy.

Despite being unlikable, many big firms have gotten big by being highly efficient. Well-run big companies know how to fully utilize their resources, which is a skill that this economy seriously needs to learn. They have plenty of advantages – the ability to reap economies of scale, bringing a greater variety of products to consumers at lower prices (hence improving standards of living) and for having the cash clout to invest in R&D that eventually leads to innovations and further growth for the economy.

Even though big firms have a lot of advantages over small ones, they have a lot to learn from the little guys. It is true that when a company grows in size, it naturally becomes more bureaucratic and ungainly. This is where the small firm mentality comes in. The leadership of the firm must continue to think like a small firm in terms of being creative and fluid in doing business. There should be a cultivated company culture that thinks on its feet and is deft in maneuvering. Impactful and truly inspiring companies like Apple and Google are well-known for maintaining a small business attitude internally despite being massive entities, and I daresay that it has contributed greatly to their incredible success.

If big firms were able to develop that sort of spunky attitude, it would be adding an incredibly powerful weapon to their already impressive arsenal of business weaponry. By taking advantage of that, hopefully they will be able to kick-start this stubborn economy and wake it up.

Malaysia and its Proton - a success?

2012-02-22T10:03:00.001+08:00

If you have a largely captive market, generous and vociferous government support, and handicapped competition, you are expected to perform, at least relatively, well. It is like having to run a race, where you are given a generous head start, and where competitors have to have their legs bound together.

Well, one is likely to win such a race and trounce the competition, right?

However, what defies common sense is that this is mostly untrue when it comes to Proton, the Malaysian national carmaker launched by Dr. Mahathir Mohammed to much fanfare in 1983. To provide a sense of perspective, one could look at how far Hyundai-Kia and the Korean auto industry have come, having started off on an equal footing in young, developing nations.

What, then, is the problem with Proton? How can one not succeed, with a captive market and strict protectionist policies against foreign interlopers? It almost takes effort to do so.

Perhaps the easiest and most expedient answer we can turn to is complacency, and this certainly helps account for some of the failings at Proton. Generally, one understands that some element of competition is beneficial for the growth and development of a company. Companies – and people – do not evolve and grow in a sheltered, sterile environment that does not reward creativity, risk-taking and innovation, but political connections and manipulations – the know-who economy instead of the know-how economy. This results not in the survival of the fittest company, but the most connected, which is detrimental to the health of the market and the national economy – and not least the ordinary Malaysian consumer.

A healthy dose of competition does make one stronger, and make for more efficient markets, which will benefit more people, more. But is that not the aim of any well-meaning government attempts to set up government-linked companies (GLCs) in the first place? To benefit the people of the country? Then why the exorbitant tariffs, channelled to a select few businessmen in the form of “approved permits” to own a foreign vehicle, so that ordinary citizens end up paying top-price for poorly produced cars, and indirectly subsidising an uncompetitive company? Who benefits from it?

Perhaps here we can also see how Proton has become too much of a political entity, than an economic one. When politics, not economics, have to influence the running of a company, you’ll most likely end up with a mess, and an entrenched political elite benefitting from it. Proton’s continued evasion of ASEAN free trade agreements with official government support, though inevitably still losing market share to its gradual implementation, and her failure to find a foreign technology partner points rather incriminatingly to this.

The end result it that Proton has become uncompetitive domestically, and internationally. As Malaysians see it, the ‘jaguh kampung’ (village champion) has now become so bloated and uncompetitive after years of generous support from the government, that it can no longer even compete in its own heavily-tilted domestic market. It cannot even win the race, 20 years on, when the other competitors are running with their legs bound.

The truly sad thing is to realise that the Proton story in large mirrors the Malaysia story – resource-rich, full of potential and promise, but somehow managing to squander such advantageous head starts away – while tiny, resource-less Singapore down south has already surpassed Malaysia in GDP.

To be fair – and quite optimistic - this ponderous, lumbering village champion can yet still recover, and be more streamlined, more lean and mean. It will be painful (but isn’t anything ever worth achieving always so), there will be reluctance and resistance, especially from those who benefit from such a system, but there is a possibility.

The solution is a simple one - there just has to be the political will, by the government of the day, to wipe out entrenched interests and political patronage and cronyism in all its forms, and nurture free and fair competition and healthy markets. The rise of a viable two party political system in Malaysia is a promising start, adding much needed checks-and-balances against abuses of political power, and yes, only through injecting a healthy dose of competition.

Indeed, in modern international trade and relations, nothing is ever a fait accompli. Even Burma is seeing reforms now, and already reaping some of its fruits. The lesson here cannot be more clear – or harrowing, for Malaysia. Once one of Asia’s most promising countries, it has taken only a few years of mismanagement and iron-fisted rule for Burma to plumb the full depths of the abyss of international isolation and condemnation.

The village champion will have to compete on an equal footing against other challengers from the same village, and then, once he has proven his mettle, against those from other villages and other seas. Complacency, closed-door policies and patronage will ultimately only harm a country, while benefitting its ruling politicians. This is where we can see if a government works in the broad interests of its citizens, or its pampered political elite, allowed to grow bloated feeding parasitically on the sweat and blood of its fellow, less-privileged citizens.

In a pro-market, pro-competition environment, Proton, like Malaysia, will have no choice but to streamline, consolidate, reform, and compete. Uncompetitive suppliers and contractors will have to be shed, no matter their political affiliations. Quotas and preferential treatments will have to be implemented correctly and not abused, and then gradually phased out.

Malaysia, like Proton also needs a new equation – she can no longer compete on cost. There has to be more value-add, a shift towards more knowledge and skills-intensive sectors (again, areas greatly stimulated by fair competition and meritocratic practises) - both Proton and Malaysia cannot afford to live in denial, to be the proverbial frog under a coconut shell, the Malaysian spin on the well-known frog in the well, who thought his well a mighty ocean.

For the world has changed. And in a globalised world, Malaysia needs to move fast. She has already fallen far behind Singapore. Vietnam and Indonesia are poised to take over as the new Asian economic tigers while Malaysia basks like the veritable fat cat purring contentedly over its supposed successes. Even Burma has started on the long but sure road to reform.

We should conclude with the very apt statement the World Bank made in a recent report: The world will not wait for Malaysia.

Singapore Budget 2012

2012-02-16T09:25:00.000+08:00

With the global financial crisis still lurking in the background, you would expect the upcoming Budget 2012 to dole out some fiscal measures to support companies with their businesses. You would think that it would be the most ideal way of helping businesses raise productivity and cope with the rising business and labour costs. Which is exactly why the recent comments of Budget 2012 focusing on intensifying long-term economic restructuring efforts surprised even myself.

Amidst the uncertain global outlook, the upcoming Budget 2012 plans to help Singapore businesses stay focused on its long-term strategy of raising productivity. I recognize that budgets in the past have implemented tax relief schemes to help small and medium-sized enterprises (SMEs) to invest in R&D and human capital. With the downbeat forecast of the global economy, the government should not simply abandon these SMEs in this time of uncertainty, but rather continue to offer such schemes in a plain, straightforward manner. Surely companies would like to utilize these schemes put in place by the government, but lack the proper information and time to take advantage of them. This can only be attributed to the strict criterions and complicated application processes that come along with these assistance schemes. What I’d like to see is more flexibility in these assistance schemes in order for more businesses to reap the actual benefits.

In the government’s defense, there is a danger of SMEs becoming overly dependent on them to hand out reinforcements every time a slowdown in the economy occurs. Yet it is hard for me not to expect the government to ease the burden of rising costs of businesses. Singapore’s economy is not fully recovered from the major economic downturn and the government prospectus of the economy rebounding has yet to materialize with its subpar growth of 3% this year. Relative to the circumstances of the global economic climate, uneven growth patterns in the US, turbulence in euro zone, coupled with faltering growth in Asian economies; clearly, one can only imagine the future outlook to be more unpredictable.

Come Budget Day, I expect that businesses concerns should be properly addressed. In order for Singapore to continue to be a competitive hub for businesses in the Asian region and compete with regional economic hubs, it needs to be able to retain the growth of its companies.

Borrowing Christmas

2011-12-16T09:59:00.000+08:00

“What are you getting your family and friends this Christmas?” At this time of the year, you must have heard this question at least a thousand of times! Whereas Christmas should be all about spending time with your family and friends and, for some, to revive their faith, nowadays the holiday’s emphasis is mostly laid on the material aspect.

With the global economy staggering, the ‘giving’ aspect of Christmas because more difficult. A financial times report stated that many Britons will take on more debt to fund their Christmas expenses. However, banks remain hesitant in lending money to lower income households. This creates a situation where people find their extra 300 pounds or so they need for their holiday gifts by going to a payday lender.

These types of short-term loans have increased significantly both in the UK as well as in USA, as households need some extra cash to pay for their monthly bills, or in some cases, to fund their Christmas expenses. When they receive their next months’ pay check, they then pay back their loan and, according to several sources, a 15 percent charge. Because these payday loans are most often for small amounts of money – usually only a couple 100 dollars – borrowers don’t often realise the huge rates they pay for it. However, if payday loans are rolled over, the annual interest rate for their loans can be extremely high.

To give you an understanding of how important this phenomenon has become, the annual US payday market is 40 billion USD and the annual UK payday market is 2 billion pounds. While these practices have been in place for a while, this year new US firms were founded aimed to entering this large market. What Symbius and other companies are trying to do is deliver small loans through employers of companies to their low-wage workers. By working closely with employers these start-up firms can look into how much the employees earn and can assess whether a loan should be granted or not. The amount plus a (lower) charge will be deducted from their next pay-check. These charges are considerably lower than a payday lender’s charges, because they operate with lower costs.

The main issue for these start-ups is to convince companies of the benefit of this service. A potential benefit could be that there is less stress in the workplace because employees know that there is now a cheaper way to get that extra cash they need than going to a pay day lender.

However, from an ethical viewpoint, are these services encouraging people to get into more debt? Shouldn’t it be better to not provide any loans and let people be more conscious about their expenses? Your expenses this month will be more or less the same the next month, so if you have to borrow money to make this month, you probably also have to borrow for next month. Especially at this time of the year, wouldn’t you rather give your loved-ones a warm welcome to your house during the festivities and know you are able to make your bills in January, than take on a new loan to fund your gifts?