Malaysia has a huge brain drain problem. The country’s human capital is haemorrhaging. A conservative estimate puts the number of Malaysians working outside the country as 1 million in 2010. This diaspora is large and expanding. One out of every five Malaysian with tertiary education has emigrated. The country aims to be a high income nation. But human capital is the bedrock of a high income economy. So, the irony is that Malaysia needs talent, but talent seems to be leaving.
Why is there such a big outflow of skilled people? There are two main reasons for this: the push and pull factors. On the domestic front, the push factors are corruption, social inequality, lack of religious freedom and educational opportunities and the government’s affirmative action policies. Outside, the pull factors are better career opportunities, better compensation and a better quality of life.
Singapore is the chief beneficiary of this brain drain. The island nation takes in about 57 of the total diaspora. Of this, 90% are ethnic Chinese. The Malaysian migrant community there has grown at a rate of about 6% over the last decade. Other receiving countries are Australia, Brunei, United States and United Kingdom.
Malaysia too has its immigrants. According to the 2000 census, 1.3 million or 5.9% of the country’s population are foreigners. As of this moment, that figure may have swelled to 4 million. But these are mainly uneducated and unskilled workers from Indonesia and Southern Philippines. They are encouraged to settle here to create racial dominance. So, for political expediency, the country has sacrificed quality for quantity. What can you say about that?
Wednesday, May 18, 2011
Thursday, March 31, 2011
Will the sun shine again
Japan was inflicted with the triple disaster of a magnitude 9.0 earthquake, 10 m high wave tsunami and the resulting nuclear radiation crisis on 11 March 2011. The destruction was widespread and extensive. The cost of the damages is estimated to be about US$309 billion and an estimate of US$200 billion is required for the rebuilding of homes, factories, roads and bridges. So, where is the government going to get all this money?
The Japanese government is already the most indebted among the advanced nations. Its public debt is equal to 200% of its GDP – about US$10 trillion. This has been accumulated over the last two decades when, the government, in an attempt to stimulate the economy, spent an enormous sum to build infrastructures like bridges to nowhere and concrete jungles along the shorelines. How much more debt can it take on?
The saving grace is that this 126 million people nation is rich. Japanese households sock away a massive savings of US$18 trillion. 95% of the public debt is funded by local institutions and its citizens. All of this at near-zero interest rate. The country also has a foreign reserve of US$1 trillion.
The government may issue more Japanese Government Bonds (JGBs) to fund reconstruction. But the domestic life insurance companies and the Government Pension Investment Fund may not be able to absorb much more of the new JGBs as they have to support more pension-related costs due to the aging population. That means foreigners will be expected to pick up some of the new JGBs. But, they will only do so at a much higher interest rate. This (higher interest rate) the Japanese government definitely cannot afford to pay.
However grim the situation may look today, you can be sure that the Japanese will rise again. It is their indomitable spirit and stoical character that will make them prevail. Just give them a decade and see.
The Japanese government is already the most indebted among the advanced nations. Its public debt is equal to 200% of its GDP – about US$10 trillion. This has been accumulated over the last two decades when, the government, in an attempt to stimulate the economy, spent an enormous sum to build infrastructures like bridges to nowhere and concrete jungles along the shorelines. How much more debt can it take on?
The saving grace is that this 126 million people nation is rich. Japanese households sock away a massive savings of US$18 trillion. 95% of the public debt is funded by local institutions and its citizens. All of this at near-zero interest rate. The country also has a foreign reserve of US$1 trillion.
The government may issue more Japanese Government Bonds (JGBs) to fund reconstruction. But the domestic life insurance companies and the Government Pension Investment Fund may not be able to absorb much more of the new JGBs as they have to support more pension-related costs due to the aging population. That means foreigners will be expected to pick up some of the new JGBs. But, they will only do so at a much higher interest rate. This (higher interest rate) the Japanese government definitely cannot afford to pay.
However grim the situation may look today, you can be sure that the Japanese will rise again. It is their indomitable spirit and stoical character that will make them prevail. Just give them a decade and see.
Thursday, March 24, 2011
Global Financial Integrity (GFI) has reported that Malaysia had an illicit financial outflow of US$291 billion (RM889 billion) in the period from 2000 to 2008. This is an enormous amount of money – equal to 150% of its 2009 GDP. Malaysia ranked fifth among countries with huge outflows. Critically, the first 4 countries are much larger economies like China, Russia, Mexico and Saudi Arabia. So, can Malaysia, a small economy, afford such a huge outflow?
Why is there such a big outflow from the country? Foremost, it must be ill gotten gains which need a safe haven such as a Swiss bank account. The ‘dirty’ money could be from corruption, kickbacks from contracts and other illegal means. The people that are involved are mainly politicians, government officials and other people in power. There is evidence that corruption is becoming more rampant in Malaysia. Transparency International’s ranking of how corruption-free Malaysia is has declined from position 36 in 2000 to 56 in 2010.
The Bumiputra policy has irked many business people in the country. Some of them feel that it is better to spread their eggs i.e. have some of their wealth stored outside the country. They do this in the guise of geographical diversification of their businesses. This also leads to an outflow of funds.
Malaysia’s income distribution is highly skewed. This means there is an inordinate number of high net worth individual in the country. These people are highly mobile and are likely to transfer some of their wealth outside the country.
Why is there such a big outflow from the country? Foremost, it must be ill gotten gains which need a safe haven such as a Swiss bank account. The ‘dirty’ money could be from corruption, kickbacks from contracts and other illegal means. The people that are involved are mainly politicians, government officials and other people in power. There is evidence that corruption is becoming more rampant in Malaysia. Transparency International’s ranking of how corruption-free Malaysia is has declined from position 36 in 2000 to 56 in 2010.
The Bumiputra policy has irked many business people in the country. Some of them feel that it is better to spread their eggs i.e. have some of their wealth stored outside the country. They do this in the guise of geographical diversification of their businesses. This also leads to an outflow of funds.
Malaysia’s income distribution is highly skewed. This means there is an inordinate number of high net worth individual in the country. These people are highly mobile and are likely to transfer some of their wealth outside the country.
Thursday, February 24, 2011
The poor Chinaman
Even though China has overtaken Japan as the world’s second largest economy in 2010, its GDP per capita ranked #86 out of 164 countries in 2009. Japan was ranked 19. China’s GDP per capita in 2010 was $4,300. In comparison, that for the US and Japan are $47,100 and $42,500 respectively. Both are nearly 10 times bigger than China.
The US GDP was $14.62 trillion in 2010. Those for China and Japan are $5.74 and $5.39 trillion respectively. So, when will the Chinese economy surpass the US? Some say 2020 while others predict 2025. But one thing is for sure, this is an inevitable event.
China’s inflation rate for January 2011 was 4.9%. But, this is not necessary a bad thing. As wages outpace productivity, workers’ share of the economy will rise – thus boosting consumption. Wage- driven inflation would help to narrow China’s trade surplus through a higher price for its exports. This could be a better way of rebalancing the economy than an outright appreciation of the Yuan. The latter modus operandi would cause big job losses in export firms. A gradual appreciation of the Yuan would also be unpalatable as it attracts large speculative capital inflows.
Inflation would help accelerate China’s GDP in US$ terms. Any appreciation of the Yuan would be helpful too. Whatever it is, a GDP per capita of $4,300 has ample room to grow. China has the technology and the entrepreneurial drive needed for growth. So, there should be no surprise that China would eventually be the number 1 economy someday.
The US GDP was $14.62 trillion in 2010. Those for China and Japan are $5.74 and $5.39 trillion respectively. So, when will the Chinese economy surpass the US? Some say 2020 while others predict 2025. But one thing is for sure, this is an inevitable event.
China’s inflation rate for January 2011 was 4.9%. But, this is not necessary a bad thing. As wages outpace productivity, workers’ share of the economy will rise – thus boosting consumption. Wage- driven inflation would help to narrow China’s trade surplus through a higher price for its exports. This could be a better way of rebalancing the economy than an outright appreciation of the Yuan. The latter modus operandi would cause big job losses in export firms. A gradual appreciation of the Yuan would also be unpalatable as it attracts large speculative capital inflows.
Inflation would help accelerate China’s GDP in US$ terms. Any appreciation of the Yuan would be helpful too. Whatever it is, a GDP per capita of $4,300 has ample room to grow. China has the technology and the entrepreneurial drive needed for growth. So, there should be no surprise that China would eventually be the number 1 economy someday.
Thursday, February 10, 2011
The myth on Japanese productivity
The US GDP for 2010 is about 15.3 trillion while that for Japan is 5.1 trillion. In terms of GDP per capita, the US is at $47,132 compared to Japan’s $33,828. This means the US is still far more productive than Japan. In actual fact, Japan’s overall productivity rate is only 72% that of the US.
The American worker remains the most productive in the world. Germany comes in second. Next is Japan. The US’s biggest productivity lead is in services. In manufacturing, Japan is more productive in machine tools, consumer electronics and motor vehicles. However, it is far behind the US in telecommunications and software industries.
Japan’s productivity growth rate was high in the 1970s and 1980s. This was due to strong government involvement in the economy and the permanent employment system. However, this same stimulus is now hindering Japan’s productivity. Japanese manufacturers now have some of the world’s highest production costs. Overregulation – be it governmental or company-wide, is stifling Japan’s productivity growth. That’s why Japanese consumers are paying on average one-third more for goods and services than Americans.
The American worker remains the most productive in the world. Germany comes in second. Next is Japan. The US’s biggest productivity lead is in services. In manufacturing, Japan is more productive in machine tools, consumer electronics and motor vehicles. However, it is far behind the US in telecommunications and software industries.
Japan’s productivity growth rate was high in the 1970s and 1980s. This was due to strong government involvement in the economy and the permanent employment system. However, this same stimulus is now hindering Japan’s productivity. Japanese manufacturers now have some of the world’s highest production costs. Overregulation – be it governmental or company-wide, is stifling Japan’s productivity growth. That’s why Japanese consumers are paying on average one-third more for goods and services than Americans.
Sunday, January 30, 2011
Steve Jobs
Below is a description of Steve developed by a Wharton's advanced management programme class which I think is very good.
Steve Jobs's natural talent is to imagine not only what consumers want now but also what they will want in the future -- and pay a premium price for. He searches for discontinuities in the external landscape. He figures out trajectories of new opportunities. Then he conceives and executes not only differentiated products that yield high margin and high brand recognition, but also business models that will exploit them most profitably.
He views a product as an experience, not just an object. He can visualize what it will look and feel like, and can then execute it to near perfection. He makes advanced technology friendly to consumers based on his uncommon talent for connecting it to user experience. He has an innate feel for design, convenience, simplicity, and elegance in the product. He connects the best ideas from widely diverse disciplines to create the consumer experience he's striving for. He figures out precisely what problems need to be solved, however impossible they may seem, and searches for the best people to solve them, regardless of their status.
He is a master of communications. He crafts simple messages that connect with audiences, leveraging his record of innovation to create buzz and build demand for a new product even before it is launched. He relates with consumers, employees, and partners, and turns them into rabid fans. He builds their trust in him, in Apple, and in the Apple brand.
Steve Jobs's natural talent is to imagine not only what consumers want now but also what they will want in the future -- and pay a premium price for. He searches for discontinuities in the external landscape. He figures out trajectories of new opportunities. Then he conceives and executes not only differentiated products that yield high margin and high brand recognition, but also business models that will exploit them most profitably.
He views a product as an experience, not just an object. He can visualize what it will look and feel like, and can then execute it to near perfection. He makes advanced technology friendly to consumers based on his uncommon talent for connecting it to user experience. He has an innate feel for design, convenience, simplicity, and elegance in the product. He connects the best ideas from widely diverse disciplines to create the consumer experience he's striving for. He figures out precisely what problems need to be solved, however impossible they may seem, and searches for the best people to solve them, regardless of their status.
He is a master of communications. He crafts simple messages that connect with audiences, leveraging his record of innovation to create buzz and build demand for a new product even before it is launched. He relates with consumers, employees, and partners, and turns them into rabid fans. He builds their trust in him, in Apple, and in the Apple brand.
Tuesday, January 25, 2011
Suicides in Foxconn
‘In 20 years, there will be only 2 companies: Foxconn will make everything and Wal-Mart will sell them.’ That may be a joke. But it does give an indication of how huge Foxconn is.
Foxconn was founded by Terry Gou in 1974. Today it is a colossal contract manufacturer of electronics employing over 800,000 people in more than 20 factories across China. Its revenue is about $55 billion in 2010. It does business with renowned companies like IBM, Cisco, Microsoft, Nokia, Sony, Hewlett-Packard and Apple.
Its factory in Longhua, Shenzhen has a workforce of 300,000 and occupies an area of 2.1 sq. km. It is a self-contained campus with all the basic facilities like hospital, restaurants, banks, Olympic-sized swimming pool, grocery store, internet cafe and a bookstore.
A spate of suicides brought the firm to the limelight. A lot is said about stress being the cause of the suicides – the workers do long hours under inhospitable conditions and poor living conditions in the dormitories. However, there may be a twist to this. It is suspected that some of them may have done it for money. The average worker earns about 2000 Yuan per month. But, the company pays 100,000 Yuan compensation to the family of anyone dying on site. To the unstable 20 year-old, the thought of that much money going to their parents could be attractive.
Foxconn was founded by Terry Gou in 1974. Today it is a colossal contract manufacturer of electronics employing over 800,000 people in more than 20 factories across China. Its revenue is about $55 billion in 2010. It does business with renowned companies like IBM, Cisco, Microsoft, Nokia, Sony, Hewlett-Packard and Apple.
Its factory in Longhua, Shenzhen has a workforce of 300,000 and occupies an area of 2.1 sq. km. It is a self-contained campus with all the basic facilities like hospital, restaurants, banks, Olympic-sized swimming pool, grocery store, internet cafe and a bookstore.
A spate of suicides brought the firm to the limelight. A lot is said about stress being the cause of the suicides – the workers do long hours under inhospitable conditions and poor living conditions in the dormitories. However, there may be a twist to this. It is suspected that some of them may have done it for money. The average worker earns about 2000 Yuan per month. But, the company pays 100,000 Yuan compensation to the family of anyone dying on site. To the unstable 20 year-old, the thought of that much money going to their parents could be attractive.
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