Housing woes: death spiral or virtuous cycle?

THE World Economic Forum estimates that the global cost of corruption annually is at least US$2.6 trillion (RM10.9 trillion) or 5% of global gross domestic product (GDP).

According to the World Bank, businesses and individuals pay over US$1 trillion (RM4.2 trillion) in bribes each year.

Corruption adds up to 10% of the total cost of doing business globally and up to 25% of the cost of procurement contracts in developing countries.

I gathered these shocking facts at a conference. There are other alarming statistics that shed light on the damage brought about by corruption and its dreadful impact on the economy.

Corruption leads to further impoverishment of the poor and other issues in many countries. The average income in countries with a high level of corruption is about one-third of those countries with a low level of corruption. In addition, corrupt countries have a literacy rate that is 25% lower.

The Corruption Perception Index 2018 released by Transparency International shows that on the scale of 0 to 100, where 0 is highly corrupt and 100 is very clean, over two-thirds of 180 countries score below 50, with the average score of 43.

In the index, Denmark ranked first in the world followed by New Zealand second. Finland and Singapore were tied for third with a score of 85. Malaysia was ranked 61st in the world, scoring only 47.

We were ranked the third highest in the Asean region, after Singapore and Brunei. Our country is doing better now with the ongoing investigation of the 1Malaysia Development Bhd scandal and other prominent cases.

In TI’s report, Malaysia is one of the countries on the watch with promising political developments against corruption. However, more solid action is needed in combatting all elusive forms of corruption.

According to Transparency International Malaysia, corruption had cost our country about 4% of its GDP value each year since 2013. Added together, this amounts to a high figure of some RM212.3bil since 2013. For 2017 alone, that figure was a whopping RM46.9bil!

As a comparison, our development expenditure in 2017 was RM48bil. If the value of corruption above was accurate, our development fund was almost “wiped out” because of corruption.

Transparency International Malaysia president Datuk Akhbar Satar said: “This is our estimate. It is likely to be higher in reality (on the value of corruption).”

No country can eliminate corruption completely. However, we can learn from good practices shown in some developed countries, such as the Scandinavian countries which all scored high on the Corruption Perception Index.

Corruption leads to poverty as money collected is not used for the welfare of the nation. As a result, the people end up suffering and paying for the leakage in the system.

If a country is corrupt-free, it will reduce the need for non-governmental organisations (NGOs). NGOs advocate for the rights of marginalised groups. The government can take care of those group when it has a surplus in the budget.

A clean government and system will have a positive impact on many aspects including affordable housing, one of the prominent needs of the people.

Whenever there is corruption, there is a compromise in the delivery of goods and services. The same situation applies to affordable housing.

Someone mentioned to me in the past that “the government isn’t interested in affordable housing as there is literally ‘no money’ to be made in it”!

Things have made a dramatic change for the better since May last year. Our new government is working on a platform of clean government and improving transparency. It plans to build one million affordable homes within two terms of its administration. To make this a reality, the government needs to put in real money to make it happen.

Corruption causes a death spiral that leads to various problems. Without it, a virtuous cycle grows that ensures every part runs smoothly and the marginalised in society are looked after.

With a promise of a cleaner government, we hope we will soon see a virtuous cycle that makes the one million affordable homes an achievable target.

By Datuk Alan Tong, who has over 50 years of experience in property development. He is group chairman of Bukit Kiara Properties. For feedback, please email bkp@bukitkiara.com. The views expressed here are solely that of his own.

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Declining performance of Malaysia's civil service, World Bank report

KUALA LUMPUR: The performance of Malaysia’s civil service has been declining since 2014, according to a World Bank report, which also expressed concerns about the sustainability of the country’s public sector wage bill.

The report, which came about following the visit of World Bank vice-president for East Asia and Pacific Victoria Kwakwa to Malaysia last December during which she met the Prime Minister, also ranked Malaysia lowly in its indicators for accountability, impartiality as well as the transparency and openness of its public service.

The report – which is included in the World Bank’s six-monthly economic monitor on Malaysia – will be formally launched today.

World Bank lead public sector specialist Rajni Bajpai said that while Malaysia was doing better than others in South-East Asia, there was a very “big gap” in the performance of its civil servants with Organisation for Economic Co-operation and Development (OECD) countries.

She said the report decided to compare Malaysia with the OECD countries as it was hoping to move from a middle-income status country to that of high-income.

“When you compare Malaysia with others in the region, Malaysia has been doing pretty well but we see that the performance has stagnated.

“If you look at the indicator for government effectiveness, Malaysia is still above in the region but in 2018, the performance is below that of between 1991 and 2014.

“If you take the average of that period between 1991 and 2014, it was higher than that in 2018, which means the performance is declining,” she said in an interview.

There were also some indicators in which Malaysia ranked even below the region, said Rajni, adding that this included accountability, impartiality and the openness of its public sector.

“There is a strong perception ... that recruitment of the civil service is not fair and neutral (with) Malaysia scoring very poorly on the indicators for impartiality in the government.

“It’s the lowest ranked, even below the region and way below the OECD,” she said, adding that the government in its election manifesto had suggested setting up an Equal Opportunities Commis­sion meant to tackle discriminatory practices in both the public and private sector.

“Malaysia also scores very poorly on the openness indicators. Malaysia is not a very open economy in the sense that data sharing is a very big problem.

“The government does not share of a lot of data, even within its own departments or with the citizens. “And citizens’ feedback and voices are not factored by the government into the design of programmes,” she said, adding that the report would suggest the setting up of an institutional and legal framework for open data sharing.

Another indicator that Malaysia performed “not very well”, according to Rajni, was in digitisation and technological advances, which the government had not been able to integrate into its system to provide services.

The report, said Rajni, also focused on another critical element in Malaysia’s civil service, in that the recruitment, which was carried out by the Public Services Department, was overcentralised.

Describing Malaysia as one of the “most overcentralised”, she pointed out that in many countries, this function had been devolved to other departments and even state governments.

“Overcentralisation does not allow for the people who actually need the public servants to do certain jobs ... because they don’t have the right people or the recruitment takes a very long time,” she said.

OECD countries, said Rajni, had been using a competency framework for the recruitment of their civil service, which defined the kind of roles and skills needed in the public sector, rather than taking in people generally for everything.

Among the indicators that Malaysia performed very well were for the ease of doing business – for which Malaysia is ranked 15th – and the inclusion of women in its civil service.

“Women occupied almost 50% of the civil service although there are some issues with women in higher management,” said Rajni.

Other indicators that were highlighted in the report included political stability, regulatory quality, rule of law and control of corruption.

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New bank underscores BRICS unity

The BRICS New Development Bank was established Tuesday with an initial capital of $50 billion shared equally by the five BRICS countries. The Contingent Reserve Arrangement was also launched with an initial fund of $100 billion. The development bank's headquarters will be in Shanghai. Its first president will be from India, the first chair of the board of directors from Brazil and the first chair of the board of governors from Russia. The bank will have an African regional branch in South Africa.

The idea of a BRICS bank was first mooted by India. The five countries reached a consensus at last year's BRICS summit and the bank has been launched this year. The fast pace and its implications have created waves in the West. This landmark event shows that BRICS countries have turned from a forum to an entity and may signal a new beginning for global strategic trends.

The five emerging powers from four continents have formed a financial group. Prior to that, the world's financial power was held firmly by Americans and Europeans.

Without exception, Western opinions have all been centered on the deep-rooted discrepancies among the five BRICS nations. They didn't expect that the wishes and ability of the five countries to overcome these discrepancies were so strong.

Has the world's financial pattern changed? We cannot say this yet, but the old pattern in which the World Bank and the International Monetary Fund dominated the field will face competition from now on.

The BRICS bank not only forms a new financing channel, but also will display the democracy and equality that the old financial pattern lacks most.

Western opinions have tried to drive a wedge among BRICS countries and have speculated about China's hegemonic ambition to dominate the institution. The successful launch of the bank has dealt a heavy blow to them.

Western elites have expressed opinions on emerging countries with a biased mentality, which makes their views detached from reality.

That Shanghai is chosen to site the bank headquarters is good news. Shanghai is becoming a new geographic and financial center in the 21st century. It unites the development momentum of the whole of China and is a major international metropolis in the Western Pacific. It is bound to be an outstanding host city.

On the other hand, the opening of the BRICS bank will provide a new driving force for Shanghai.

China's reform and opening-up in the past 30 years have created huge potentials for this city, while the stage where it can display its strength is relatively small. The BRICS bank is a timely opportunity which will broaden the scope of Shanghai and boost its influence.

China is the most outstanding country among all the emerging powers. The launch of the BRICS bank with Shanghai as its headquarters is a testament to China's national strength, diplomatic capabilities and strategic position. The confidence of all the emerging countries will be boosted. The five nations used to be earthen BRICS, and with the development bank, they will truly become gold BRICS.

Source:Global Times Published: 2014-7-17

BRICS Agree on $50 Billion Bank With Something for Everyone;

Photographer: Nelson Almeida/AFP/Getty Images

Leaders of the five BRICS nations agreed on the structure of a $50 billion development bank by granting China its headquarters and India its first rotating presidency. Brazil, Russia and South Africa were also granted posts or units in the new bank.

The leaders also formalized the creation of a $100 billion currency exchange reserve, which member states can tap in case of balance of payment crises, according to a statement issued at a summit in Fortaleza, Brazil.

Both initiatives, which require legislative approval, are designed to provide an alternative to financing from the International Monetary Fund and the World Bank, where BRICS countries have been seeking more say. The measures coincide with a slowing of economic growth in the five countries to about 5.4 percent this year from 10.7 percent in 2007, according to economists surveyed by Bloomberg.

“The BRICS are gaining political weight and demonstrating their role in the international arena,” Brazilian President Dilma Rousseff said after a signing ceremony.

Until the eve of the summit, India and South Africa had vied with China to host the headquarters of the bank, dubbed the New Development Bank. The administration of Indian Prime Minister Narendra Modi gave in after it was reminded that his country’s previous administration had agreed to Shanghai as the bank’s headquarter, according to an Indian official, who requested not to be named because the talks were not public.

Shared Out

Russia’s Finance Minister Anton Siluanov told reporters that the BRICS decided in favor of Shanghai because the city offers better infrastructure, opportunities to capture private funding, and is home to more investors than the competitors.

Each member country got something out of the deal. The first chairperson of the Board of Governors will be from Russia, while the first chairperson of the Board of Directors will be Brazilian. South Africa will establish an African regional center for the bank, which may not get off the ground for another two years, according to Carlos Cozendey, secretary for international affairs at Brazil’s Finance Ministry.

Unlike the IMF and World Bank, which are managed by Europeans and Americans, the BRICS bank “is quite democratic,” Brazilian Finance Minister Guido Mantega told reporters. 

Each member country has the right to withdraw different amounts from the joint currency reserves, according to a statement from Brazil’s central bank. China can withdraw half the amount it earmarks or $20.5 billion. Brazil, Russia, and India may withdraw the same amount they commit or $18 billion, while South Africa can tap $10 billion, twice its contribution.

“It’s a type of insurance policy, speculators looking for weaker countries without backup, will run because those countries will have sufficient solidity to face a currency problem,” said Mantega.

Aiding Development

The BRICS have evolved from the original term coined in 2001 by then Goldman Sachs Group Inc. economist Jim O’Neill to describe the growing weight of the largest emerging markets in the global economy. In 2011, South Africa joined to give the BRICS a broader geographic representation.

Even with slowing economic growth in BRICS countries, there are still plenty of opportunities for business, and the newly-created development bank will help those opportunities become reality, said Jorge Gerdau Johannpeter, chairman of Brazilian steelmaker Gerdau SA.

“The bigger the financing possibilities, the bigger the chances of implementing projects,” Gerdau told reporters at the summit.

The biggest winner among the BRICS and its newly created bank may be South Africa, as it stands to gain financial expertise, investment and trade, said Colin Coleman, the Johannesburg-based head of Goldman Sachs Group Inc. in sub-Saharan Africa, who attended the BRICS Business Council meeting.

Greatest Benefit

“Arguably we have the greatest amount to benefit because we’re partnering diplomatically and otherwise with some of the world’s most important emerging-market economies,” Coleman said in a phone interview.

While BRICS trade ministers in a joint communique yesterday said that member countries stood by the World Trade Organization’s Bali agreement, Brazil’s Trade Minister Mauro Borges said he understood India had certain concerns about its implementation and that the BRICS countries didn’t intend to forge a common stance on the issue.

BRICS share of world exports rose to 16 percent in 2011, from 8 percent in 2001.

Russia also proposed at the summit in the northeastern coastal city of Fortaleza the creation of an Infrastructure Fund during the summit, Kirill Dmitriev, chief executive officer of the Russian Direct Investment Fund, told reporters today. The fund could start up as early as next year, he said

.- By Raymond Colitt, Unni Krishnan and Arnaldo Galvao Bloomberg


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China surpasses US as world's top corporate borrower; Will the IMF headquarters move to Beijing?

China surpasses US as world's top corporate borrower

Corporate debtChinese corporate borrowers owed $14.2 trillion at the end of 2013 versus $13.1 trillion owed by U.S. corporations with the switch in ranking

The Chinese mainland has surpassed the US as the world's top corporate borrower, and higher debt risk in the world's second-largest economy may mean greater risk for the world, a report said on Monday.

However, Chinese economists noted that the debt risk in China's corporate sector is still well under control.

Nonfinancial corporate debt in the Chinese market was estimated at around $14.2 trillion by the end of 2013, overtaking the $13.1 trillion debt owed by the US corporations, a progress happening sooner than expected, said a report from the Standard & Poor's Ratings Services on Monday.

The report expects that by the end of 2018 debt needs of mainland companies will reach $23.9 trillion - around one-third of the almost $60 trillion of global refinancing and new debt needs.

"It [the mainland surpassing the US as the largest corporate borrower] is not surprising at all, as the [size of] mainland non-service sector has already surpassed that of the US," Tian Yun, an economist with the China Society of Macroeconomics under the National Development and Reform Commission, told the Global Times on Monday.

Cash flow and leverage at mainland corporations has worsened after 2009, and debt risks in the property and steel sectors remain a particular concern, the report said.

Private companies are facing more challenging financing conditions - highlighted by China's first corporate bond default case of Shanghai Chaori Solar Energy Science and Technology Co in March and another case of default of leading private steel maker Shanxi Haixin Iron and Steel Group.

"The capital market has been sluggish during the past few years, leading to the fast growth in corporate debts," Xu Hongcai, director of the Department of Information under the China Center for International Economic Exchanges, told the Global Times Monday.

Experts noted that the rapid growth in debt reflected some problems of the  Chinese economy, but the size of the debt is still in a safe range and will not cause major risks as the economy remains stable.

"The problems of the Chinese economy are institutional and structural," Tian said, "By addressing these issues, debt risks can be managed."

Tian further noted that most corporate debts in China are internal debts, thus debt problems in the country will have limited impact on the rest of the world.

The report also said a possible contraction in "shadowing banking" will be detrimental to businesses as general.

But Xu noted that China's tighter supervision of the "shadow banking" sector will make it more transparent and better-regulated, which will reduce the potential risks in the sector.


Local governments face massive debt repayment pressure

China's local governments are facing huge debt repayment pressure this year with 2.4 trillion yuan ($390 billion) of debts due in 2014, China Business News reported Monday.

From 2009 to 2013, China issued 94 local government bonds raising 850 billion yuan, the report said.

With another 400 billion yuan worth of bonds to be issued this year, the total financing since 2009 will reach 1.25 trillion yuan, according to the report.

However, the total local government debt is much higher than the amount raised through the bonds, the report said, noting that major debt came from bank loans.

Although the central government has stated several times that the overall debt risk is under control, the statistics from China's National Audit Office show that some local governments have a debt-asset ratio of more that 100 percent and are facing huge repayment pressure, the report said.

Market analysts hold the view that local governments may borrow new debts to pay for the old ones.

The central government allowed local authorities to raise funds since 2009 in the wake of the global financial crisis, while the central government also issued bonds and repaid debts on behalf of the local governments, a practice criticized by some as not conforming to market economy principles.

As the bond issuing backed by the central government is limited and could not fully meet the local needs, the local governments also turned to opaque financing channels including shadow banking activities, the report said.

Despite the big debt pileup, no local government default has so far taken place.

- By Liang Fei Source:Global Times Published: 2014-6-16 23:43:09 

Will the IMF headquarters move to Beijing?

The International Monetary Fund's headquarters may one day move from Washington to Beijing, aligning with China's growing influence in the world economy, the fund's managing director Christine Lagarde said early this month.

Attaching importance to China

Christine Lagarde made the statement at the London School of Economics and Political Science (LSE), saying that the IMF rules require that the institution should be headquartered in the country that is the biggest shareholder. This has always been the U.S. since the fund was formed.

"But the way things are going, I wouldn't be surprised if one of these days, the IMF was headquartered in Beijing," she said.

Lagarde remarked that the IMF had a good relationship with China, the world's second largest economy, and she praised the Chinese government's commitment to fighting corruption.

Lagarde added that she did not think the IMF should be controlled by Europeans in its first place. Since its establishment in 1945, the IMF headquarters has been headed by Europeans and located in Washington, while the World Bank has been headed by the Americans.

Not satisfied with the U.S.

Lagarde also pointed out that the U.S. government is an "outlier" among the G20 in refusing to approve IMF reform, and the IMF was trying to give emerging economies like China and Brazil a bigger voice through reform.

According to Lagarde, on the part of countries like China, Brazil, and India, there is frustration with the lack of progress in reforming the IMF by refusing to adopt the quota reform that would give emerging economies a bigger voice, a bigger vote, and a bigger share in the institution. “I share that frustration immensely,” she said.

She also claimed that the credibility and the importance of the IMF are closely related to proper representation among the membership. "We cannot have proper representation of the membership if China has a tiny share of quota and the voice, when it has grown to where it has grown," she said.

The IMF agreed to reform its management structure in 2010 so that emerging economies could play a bigger role, and made China the third largest member. The U.S. is the only member with control weight in the voting; meaning that any major reform must be approved by the United States.

Hello headquarters

Lagarde has no specific schedule for the headquarters' shift. However, this once again reminds China that there are few international organizations headquartered in its country, which is disproportionate to China's status as the world's second largest economy.

This article is edited and translated from 《IMF总部要搬北京？》，source:Beijing Youth Daily, author: Bu Xiaoming. (People's Daily Online)

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Fearful of China's rise?

PETALING JAYA: China may overtake the United States as the biggest economic power in the next four to six years but this does not mean that it will instantly become the world's superpower, says a leading expert on China.

Dr Martin Jacques, 67, author of the global bestseller When China Rules the World: the End of the Western World and the Birth of a New Global Order, said it would take several decades, from between 2030 and 2040, before it could even achieve developed state status.

“It'd be a long way to go as a superpower,” he said at a talk on “China As Global Superpower: What It Means For Asia and The World”, hosted by the Asian Centre for Media Studies, based in Menara Star.

The second edition of his book was released recently and 40% of its content was new.

“This includes an extensive chapter analysing events after the 2008 financial crisis,” he said.

Expert on China: Dr Jacques presenting a talk hosted by the Asian Centre for Media Studies at Menara Star.

 

His first was shortlisted for two major literary awards.

Dr Jacques said Westerners were fearful of China's rise due to scant knowledge and understanding of China and that it was a communist country.

They fear the country might throw its weight and its military power around.

However, Dr Jacques pointed out that China had no major interest in developing military power after Deng Xiaoping took over the country from the late 1970s to 1990s.

On fears that a communist country was not democratic, he argued that being democratic had not stopped Europeans from conquering others.

“Although China has a lot of problems now, it doesn't mean that it can't be humane and more democratic,” said Dr Jacques.

“Maybe, it will develop universal suffrage without following the Western way.”

Dr Jacques pointed out that the China Development Bank and China Export-Import Bank gave loans of more than US$110bil (RM338.415bil) to other developing countries in 2009 and 2010 while the World Bank only made loan commitments of US$100.3bil (RM307.65bil).

Dr Jacques, a Senior Visiting Research Fellow at the London School of Economics (University of London), visiting professor at Tsinghua University, Beijing, and Fellow at the Transatlantic Academy, Washington DC, was the former editor of Marxism Today, deputy editor of The Independent and a co-founder of the think tank Demos.

Fresh insight on China

PETALING JAYA: China continues to grab world headlines and dominate international news for many reasons. The world's second largest economy is now expected to be the biggest in only a few years, with many far-reaching implications to follow.

World-renowned author and academic Dr Martin Jacques (pic) will be presenting a fresh look at the new China in a talk at Menara Star in Petaling Jaya at 2pm on Thursday.

His talk titled “China As Global Superpower: What It Means For Asia and The World” is hosted by the Asian Center for Media Studies, based at Star Publications (M) Bhd.

Dr Jacques is the author of the global bestseller When China Rules the World: The End of the Western World and the Birth of a New Global Order, which has been translated into 11 languages, shortlisted for two major literary awards and described as the best book on China in many years.

To keep track of the rapid changes in China, Dr Jacques has just released the second edition of his book, incorporating the latest data and an extended analysis which includes a new section.

The discussant for the talk will be Dr Lee Poh Ping, a Senior Research Fellow in the Institute of China Studies at Universiti Malaya.

Dr Lee has written and published extensively on East Asian affairs and presented university seminars on Dr Jacques' work.

The talk will be moderated by The Star's associate editor Bunn Nagara.

The event at the Cybertorium in Menara Star is open to the public free of charge, with no registration required

 The Star/Asia News Network