Share This

Monday, July 4, 2011

Rote learning, painful lessons!





Painful lessons on rote learning

Indian Diary By Coomi Kapoor

In spite of India’s universities churning out some two million graduates every year, there has been no Bill Gates or a Nobel laureate among them in a long time. The education system that rewards rote learning over originality and creativity seems to be at fault.

AN unusual announcement by a Delhi University college recently made headlines. The elite college said only those with 100% score in the school-leaving board exam should apply for admission to an honours degree course in commerce.

This left tens of thousands of anxious students who did the college trail mid-June at their wits’ end. Human Resource Development Minister Kapil Sibal was not happy, either. But there was little he could do since university colleges enjoy a good degree of autonomy.

 
Flood of applicants: Crisis in higher learning has manifested in a high percentage of school-leavers seeking admission to Delhi University and others located in big cities. – AP

The 100% cut-off, however, helped focus on the growing malaise in higher education. Schoolleavers with 90% to 95% marks could not be certain of admission to colleges and courses of their choice. And those with 70% or lower could well drop t he idea of doing an undergraduate course at the University of Delhi.

Indeed, it would be hard for the vast majority of the teaching community in the university to gain admission on the basis of their ma rks now. Until very recently, it was rare for anyone to score a perfect 100 in school-leaving exams.

A good first class, say, 70%, was enough to get one in a couple of decade s ago. Following complaints of subjective and erratic marking in the school-leaving exams, the Central Board of Secondary Education tried to make the system as objective as possible. Unfortunately, the big downside of the new system was that it further privileged rote learning over intelligence and understanding.

Overnight, there was a huge inflation in marks across the board. The grade inflation did not translate into brighter and better stud ents. Barring a small percentage, a vast majority of school-leavers lacked basic understanding of subjects in which they had scored very high marks. It was sheer rote learning.

Also, along with the grade inflation, almost simultaneously college cut-offs for admissions to various courses touched new highs.

Crisis in higher learning also manifested in an inordinately high percentage of school-leavers seeking admission to Delhi University and others located in big cities like Bombay, Chennai, Calcutta, Bangalore, and Hyderabad. Clearly, the standard of education in the hinterland was not the same as it was in big cities.

With the number of colleges in big metros not keeping pace with the exponential growth in the student population, it was natural for the elite institutions to feel the pressure. Hence, the 100% benchmark for admission to the capital’s most prestigious commerce college.

Though old-timers bemoan the decline in standards at even the most prestigious colleges in big metros, there still existed a wide gulf in the quality of education in main centres and provincial towns.

Besides, there was a cache attached to not only British era universities such as those in Mumbai, Delhi, and Calcutta, but also to elite colleges which made it easier in later life to seek jobs and even matrimonial alliances.

With 400-odd universities churning out some two million graduates annually, including over half-a-million in engineering courses, there was an increasing demand for a basic college degree for joining the job market.

Employers insisted on a college degree even for menial j obs such as a peon or a chauffeur. No wonder there was such a huge rush for admissions to undergraduate colleges.



Admittedly, vocational education for school-leavers was talked about as one of the ways to ease pressure on college admissions. Given the social and economic backgrounds of a vast majority of aspirants for college education, the authorities believed they were better off learning professional skills.

A fast-growing economy with a rising middle class needed carpenters, masons, air-conditioning and refrigeration mechanics, television and computer repairmen, etc. in increasingly large numbers.

Unfortunately, even those who ended up as unskilled workers such as clerks and couriers insisted on acquirin g a plain bachelor’s degree because most employers in public and private sectors had laid that down as the minimum educational qualification. There was a low demand for admissions in vocational courses in the few institutions that existed in big cities like Delhi.

Despite all the emphasis on a college degree, it was notable there were no great achievers in scientific research and academic fields. The sole emphasis being on passing the exams through rote, improvement of mind naturally took a back seat.

That explained the total lack of achievers in various disciplines of educational instruction. In short, in spite of India’s universities churning out some two million graduates every year, there has been no Bill Gates, no Steve Jobs and no Nobel laureate among them in a long, long time. When the education system rewarded rote over mind, it was not surprising that originality and creativity was at a huge discount.

Recognising the value of learning by rote, a huge number of coaching institutions sprouted up all over the country.

Private tutors charged large amounts on students eager to score high marks in school-leaving exams. Indeed, even the all-India exams for admission to class one central government services had become a simple matter of learning by memory.

In recent years, Kota, a mid-sized town in Rajasthan, has gained prominence all over the country for its record number of coaching institutions.

Here, each institution vies with the other in boasting that its students scored the highest marks in various competitive exams, beginning with the school-leaving one.

Eager to enrol fresh students, such “shops” regularly take out fullpage advertisements in newspapers to claim “100% success” of its alumni in various exams. Essentially, these coaching coll eges help students mug the answers to questions asked in the relevant exams over the previous two decades or so. That was it.

However, a further damage to the quality of students getting into regular university colleges was done by the abolition of the interview at the screening stage.

Following complaints that interviewers were often subjective in assessing admission-seekers, the entire emphasis was shifted to percentage of marks in the school-leaving exam.

Thus, there was no way of knowing whether an admission-seeker was otherwise mentally-equipped for further education. No wonder India’s colleges no longer produce alumni who are good in studies, sports and extra-curricular activities.

Get industry help, varsities told





UK research director: Experts can advise academics on needs of private sector

By DAVID TAN davidtan@thestar.com.my

MALAYSIAN universities should consider engaging professionals who have served in multinational corporations (MNCs) to enhance collaboration between universities and the private sector to produce skilled human resources.

Dr Shi Yongjiang (pic), who is a research director of the Centre for International Manufacturing at the University of Cambridge, said retired and semi-retired professionals could identify the fields of collaboration relevant to the needs of industry.

He said the university had all the while engaged those who had served in well-known MNCs to serve as tutors and consultants for its industrial systems, manufacturing and management programme (ISMM).



“With their experience, they can serve as tutors to instruct and to give input on how to improve the curriculum to better serve the needs of the industry.

“As consultants, they can advise on how to improve the communication between the academic and private sectors,” he said.

He was speaking after visiting Qdos Holdings Bhd, a flexi-circuit production company in Bayan Lepas, Penang.

Shi is visiting Malaysia and Singapore from June 26 to July 10 with 10 postgraduate students to compare the industrial systems of the United Kingdom, Malaysia and Singapore.

“Under the ISMM programme, students are sent to work in manufacturing plants to apply what they have learnt in theory.

“This is to test how effective the theory is,” he said.

On Malaysia’s competitive edge, Shi said the country had very advanced skills in management systems and inventory planning compared to countries such as India, China, and Indonesia.

On the shortage of engineers in Penang, Shi said the problem was not unique as the UK and Germany also faced the same problem.

“One way to overcome the problem is to open the doors to international talents.

“The other solution is to revamp the engineering curriculum in universities and the science curriculum in high schools to make the subjects interesting. This is being done in the UK,” he said.

Shi said one of the reasons for the shortage of engineers in the UK was the very attractive salaries in the banking sector.

Engineering graduates are lured to jobs in the banking sector because of the pay. Banks are also in favour of hiring engineering graduates as they have the analytical ability to solve complex problems,” he said.
Shi added that local companies should invest more on research and development activities to move up the value chain.

Sunday, July 3, 2011

Inflation in Malaysia: Myths and perceptions!





By PRISCILLA LIM 

The general view on the street is that Malaysia suffers from rising inflation. Do the statistics back the claim?

RECENT headlines in the Malaysian media have highlighted the issue of the unholy alliance of rising inflation, stagnant wages and subsidies rationalisation.

It is an “unholy” alliance simply because subsidies rationalisation and imported inflation result in rapidly rising price levels. Coupled with the problem of slow rising wages, it implies that our buying power as consumers is decreasing.

Certain quarters would have us believe that Malaysia is a ship headed for an iceberg and a Titanic-style tragedy could happen any time now. To add salt to the wound, they argue that those at the helm, like the captain on the Titanic, are sleeping and that like the passengers on the Titanic, we will not survive this tragedy. But is this gospel truth or an urban myth?


Is our purchasing power shrinking?

In a recent article, it was claimed that Malaysians have been suffocated in recent months by rising prices of food and necessities as well as a wage rate that is as difficult to move as a buffalo on a padi field.

It was implied that Malaysians are incapable and not resilient enough to cope with the price hikes as their purchasing power is relatively lower than in many countries.

A quick check with the industry standards on price levels and wage data, the Swiss bank, UBS, Price and Earnings Report, indicates that residents in Kuala Lumpur have similar purchasing power with their counterparts in Singapore. Their purchasing power also tops that of Shanghai, Beijing and nearby Bangkok and Jakarta. We are also not far behind Taipei and Seoul in terms of purchasing power (see Chart 1).

Absence of subsidies in these countries has led to rapidly increasing price levels. As a result, employers have had to compensate workers with a higher wage which then increases the costs of production. This increase is passed on to consumers, causing prices to increase again and thus begins the vicious cycle economists call wage-push inflation.

To put it simply, wages have risen in tandem with the rapidly rising costs of living in those countries.

Is inflation on the rise?


The general perception on the street is that Malaysia suffers from rising inflation, at a level much higher than what the common Malaysian can cope with. Anecdotal evidence suggests that price levels have been rising at a much faster pace than what is officially reported. Many recount stories of how our much favoured teh tarik cost only 80 sen five years ago but today, it is between RM1.50 and RM1.80.

In pure MythBusters ingenuity, The Economist has created a rough method to test whether the statisticians have been toying with the inflation figures. It makes use of its famous Big Mac Index, which attempts to roughly measure inflation by tracking the increase in price of a McDonald's Big Mac over the years.

To achieve an accurate measure of inflation, one requires a basket of goods that is identical and commonly available across many countries. The McDonald's Big Mac was chosen because it is produced to a common specification in 120 countries around the world.

In order to determine the reliability of official inflation figures, The Economist compared the difference in the 10-year average of the Big Mac Index and the official reported inflation. A positive figure would indicate that the government has been under-reporting inflation and a negative figure implies otherwise, i.e. the government has been over-reporting inflation.


The Economist (The McFlation Index, Jan 27, 2011), in reporting its findings, accepted an error margin of +/- 2%. It expects the Big Mac inflation to exceed overall inflation as food prices have escalated much faster in recent years. Furthermore, the Big Mac basket of goods (food, materials, wages and rent) differs only slightly from the common basket of goods for overall inflation (food, fuel, rent, healthcare and transport, among other things). To compare how Malaysia fares against other countries, see Chart 2.

Malaysia scored a “positive” 2% point difference between the Big Mac Index and the official inflation rate. While the “positive” 2% may mean that Malaysia's reported official inflation rate is under reported, the inflation rate of the US and Japan is also marginally under reported, where the quantum is similar to Malaysia.

Thus, compared with other countries, Malaysia can be considered as faring rather well. We are on par with China and the US while just slightly above Japan and the European region. Considering that we are just under the +2% threshold with an error margin of +/- 2%, we can definitely conclude that our inflation figures are rather reliable.

Why then is the price of teh tarik increasing faster than the reported inflation? The main culprits of such inflation are unscrupulous traders who take advantage of the situation to earn a hefty profit. Tales have been told of how the price of a cup of coffee at the kopitiam increased by 20 sen when the price of 1kg of sugar was increased by 20 sen. Such price increases often go unreported, hence resulting in the disparity between the popular anecdotes and the official inflation rate.


Is the captain steering this ship sleeping?

The reported inflation rate in May 2011 increased 3.3% from May last year. The biggest increase came from the alcohol and tobacco group (6.3%), followed by transportation and hotels and restaurants (6%). Food and non-alcoholic beverages is third at 4.5%.

Economists, and politicians on both sides of the divide, concur that inflation has been rapidly increasing in recent months, sparked by the wave of subsidy rationalisations.

The argument for cutting subsidies is a logical and rational one. Malaysians have been enjoying artificially low food and fuel prices compared with regional peers so much so that we have grown reliant on these subsidies to maintain the lifestyle that we now enjoy.

Our reliance on these low food and fuel prices has rendered Malaysia's economy vulnerable to price shocks happening internationally. World prices of essential items such as sugar, fuel, cooking oil and flour have been increasing rapidly due to shortages in world supply.

How so? Prices are signals given by the economy-at-large regarding the supply and demand of the products we want. An artificially low price will cause us to consume more than what is available, thus leading to a misallocation of scarce resources.

In order to mitigate the effects of subsidy rationalisations, the government increased the price of petrol systematically so as to cushion the impact of the price hike on consumers. RON95 was introduced in December 2009 at the price of RM1.75 per litre as an alternative to RON97 after the government announced plans to fully remove the subsidy from RON97. All subsidies for RON97 were removed from July 2010.

The increase in food prices has also been limited to sugar, cooking oil and flour. The government has explained that this is due to the escalating prices of these products in the world market. The price increases, however, have been gradual rather than immediate.

Subsidies for other produce such as rice and fish, which are locally produced, remain. The subsidies for these sectors also remain as those that will be most affected should these subsidies be removed are the hardcore poor and low-income families. Table 1 and Table 2 outline the various subsidies provided and the amounts allocated by the government to fund these subsidies.

For the hardcore poor, the Agriculture and Agro-based Ministry has the Rice Subsidy Programme for the People (Subur) programme. It issues coupons to the hardcore poor and other targeted low-income groups three times a month to purchase 10kg of ST15% grade rice at a discounted price of RM14 rather than the retail price of RM24.

Stagnating wages?

Much to the disappointment of economists around the world, the Democratic Capitalist view that market forces alone are efficient enough to determine fair wages is no longer valid. Employers today no longer play the passive role of adopting the market wage rate. They are instead active participants and key players in the wage determination.

Researchers at the Federal Reserve of Cleveland found that standard factors such as type of occupation, human capital, demographics and industry characteristics only accounted for half of the wage variation between employees. The other half has been attributed to employer characteristics.

This implies that the bargaining power of workers today has declined not only in Malaysia but across the world as well. The imbalance of power and control at the bargaining table has caused the Malaysian labour market to become uncompetitive and inefficient, resulting in stagnating wage levels.



Here, I would like to suggest two reasons why wage levels in Malaysia have been stagnating over the years.

1. Over-supply of labour 

According to basic economics, employers will not have the incentive to offer higher wages should there be a large number of employees who are first able and then willing to work at the offered wage.

The logic is similar to the goods market where oversupply of a product causes prices to drop since the demand for the product can be easily fulfilled. This scenario is relevant to two large groups of Malaysians the low-skilled workers and fresh graduates or junior executives.

Low-skilled workers are often in jobs labelled as 3D dirty, dangerous and demeaning. We have foreign workers who are eager to perform these jobs at wages that are lower than what Malaysians would accept. This undermines the job opportunities for many of the “low-income to hardcore poor” Malaysians who do not mind taking on these jobs as it may be their only opportunity to earn a living.

Included in this category of workers are domestic maids, cleaners, construction workers, odd-job labourers, and coffee shop waiters.

As such, it is highly relevant that the government has taken its first step to a minimum wage for workers with the passing of the National Wages Consultative Council Bill in the Dewan Rakyat last week.

A mandatory minimum wage for low-skilled workers will ensure that they are not exploited by unethical employers and will not be vulnerable to the tides of change that are common in today's globalised economy.

With most of these jobs being performed by foreign workers, millions if not billions of ringgit are transferred out of Malaysia in remittances, and the country loses out in foreign exchange. When the Minimum Wage regulations kick in, there should be no wage differential for the same job, eliminating the advantages of having foreign workers instead of local Malaysians.

More low income Malaysians would have more job opportunities.

In the case of fresh graduates/junior executives, a simple survey of Salary Guides available in the market showed that their wages have not increased by much. Salaries for non-executives, however, showed the largest increase of between 6% and 12% across the industries in the last five years.

Industry experts suggest that there is an oversupply of graduates with similar skill levels. Employers often lament the inability to hire good quality graduates that are not just head-smart but have the initiative and relevant soft skills to bring value to the company.

A study done by the National Higher Education Research Institute (IPPTN) revealed that most Malaysian graduates are not aware of the realities of the working environment as well as employer expectations. Most are caught up in their own world and have an apathetic attitude towards the world around them.

2. Price levels of commodities/basket of goods and services

Wage increases are motivated by increasing price levels. The employment of labour in economics is described as a derived demand.

This suggests that increases in the demand, hence price, of goods and services generate employment and increase in wages.

Domestic price adjustments in Malaysia to world prices have been slow due to the many subsidies that are provided by the government. As such, many private sector employers do not find the need to increase basic wages in order to keep their employees. Instead, they provide other forms of compensation such as better healthcare coverage, share options, higher EPF contributions, etc. While some doomsday soothsayers only compare the wage and purchasing powers, how does Malaysia's rate of EPF contributions compare with those in other countries?

Wage adjustments have also been known to lag behind inflation as wages are more difficult to change compared with the price of a cup of teh tarik at your favourite coffee shop. Employment contracts and company budget allocations come only once a year compared with the menu that can be reprinted overnight. With the subsidy rationalisations, it would be a matter of time before the pressure mounts on employers to increase wages.

Gospel truth or urban myth?

Gone is the era where unity among Malaysians is not just about racial harmony and living peacefully together but also encouraging one another in the spirit of muhibbah to be resilient and brave the troubled times that challenge our path as a young nation. Fifty-four years down the thorny road, a much expressed opinion is that the younger generation today is either apathetic to nation building or unpatriotic.

As a member of this young “Y” Generation, I would like to believe that we are not unpatriotic. Instead, I believe we lack the understanding of what it means to build a nation together as one community with “blood, toil and tears”.

Building a nation is not just about building its economy. It's also about building its people. We are the heartbeat of the Malaysian economy. It is not the government nor the Opposition that is steering this ship and selecting the course that this ship takes. It is people like you and me, the Malaysian rakyat.

> The writer is a Gen-Y Malaysian who is currently pursuing her PhD with the University of Nottingham (Malaysian campus) in Economics. She graduated with a First Class Honours in Economics from the same university and hopes to become a person in high demand without the prescribed side effects of permanent head damage.

It’s all about politics, in the end





On The Beat By Wong Chun Wai

The competing forces have little choice but to bring in the numbers, and every single one of them will claim to represent and act for us.

THERE isn’t much time left, really. Those of us who live in Klang Valley can only brace ourselves for the numerous police road blocks that would be set up ahead of this Saturday’s illegal Bersih 2.0 rally.

The city will be locked down for sure, even as early as Wednesday, and we can expect a lot of inconvenience. But the police have a job to do.

It does not look like there is going to be a compromise or a middle ground solution between the organisers of the rally and the police. The organisers want to proceed and have no intention of applying for a permit.

The police, meanwhile, have said there will be no more talk with the organisers and stressed that it is time now for action and the full force of the police would be applied.

Deputy Inspector General of Police Datuk Seri Khalid Abu Bakar did not rule out the possibility of the police invoking the Internal Security Act to nab participants of the illegal rallies.

What is different from the first Bersih protest held in 2007 and other past massive protests is that this time, two other parties have warned that they would proceed with counter demonstrations if the Bersih 2.0 rally went ahead.



This time, the police fear a clash and their concerns are justified, given the emotions that have built up. From the information the police have gathered, there are good reasons why police are talking about taking tough preventive measures.

In 1997, supporters of Datuk Seri Anwar Ibrahim staged a huge protest after the court sentenced him to six years’ jail for sodomy. A passing TV3 vehicle was attacked in front of Masjid Jamek by an angry mob in full view of the public and many shops were looted. And it was a one-sided affair then.

Anwar’s conviction, the protests and the backdrop of the 1997 financial crisis in Asia certainly had an impact as (then Prime Minister) Tun Dr Mahathir Mohamad had a tough election in 1999.

In the case of the Bersih protest in 2007, which also called for electoral reforms, about 250 demonstrators were arrested as they clashed with the police. When elections were called the following year, Pakatan Rakyat won five states, despite claiming the electoral rolls were “unclean”, and that cheating and dirty tactics were used. And for the record, PAS has ruled Kelantan for 21 years.

But it’s hard to argue against a case for a clean electoral system. It’s a clever political package. Seriously, who can argue against such a clarion call and who can say “no” to freedom of expression and the right to protest, which are all basic principles of demo­cracy?

It’s understandably attractive for many and, undoubtedly, a matter of choice if people wish to take part in the rally. But again, those who organise the rally and those who wish to take part should also know the legal and political consequences of their decisions.

Any gathering of five, without a permit, is illegal and even if we feel that it is an archaic law, it remains a law until it is changed.

The organisers of Bersih 2.0 should give a convincing answer to whether their campaign is initiated by Paka­tan Rakyat, which has given the whole show a political dimension, or it has been hijacked by them.

It doesn’t help that Anwar has said he could just call organiser Datuk S. Ambiga to call off the rally. Of course, like many politicians, he claimed he was misquoted.

PAS deputy president Mohamed Sabu has also said on record that the Bersih 2.0 rally would help Pakatan in the elections.

On the surface, it looks simple but it’s all politics in the end and not quite as innocuous as it seems. The reaction has been political, and likewise the counter protests.

The organisers of Bersih 2.0 cannot expect their rivals to join them on the argument of a clean electoral system when the latter feels that the system is sufficient, admittedly it can still be improved, as the opposition has gained so much.

Against the rising political temperature, the issue has become more explosive when elements of religion and sedition come into play.

Some have said the authorities over-reacted and the communist revival claim is a little scratched, given the fact that almost all the commie icons are long dead. Even China and Vietnam are communist in name only these days.

Still, the July 9 rally won’t be a stroll in the park. It is a political event. So, let’s not bluff ourselves that it is a non-governmental organisation affair as they wouldn’t be able to marshal the numbers, if it is indeed an NGO show. The organisers need PAS particularly to bring in the crowd.

It is essentially a show of strength ahead of the polls. The competing forces too have little choice but to bring in the numbers. Every single one of them will claim to represent and act for us, not because the rallies and counter-rallies will help their political ambitions.

There will be enough people who believe in them. Just as enough people climbed trees to put up PAS flags and quarrelled with their families and friends for Datuk Ibrahim Ali, until he called himself an independent.

There will also be people who still believe in him now that he is representing an NGO and he is doing all these for Malay rights.

There will also be people who believe politics can be clean and there are wannabe politicians with noble intentions.

The Datuk Trio, meanwhile, must be upset at the seeming obsession of the authorities over the Bersih 2.0 rally as the sex video issue has been forgotten overnight, which is what Anwar probably wants.

All these groups could hold their gatherings in stadiums, with even a short march thrown in, if they want to. They could shout and make speeches for 24 hours if they want, but as Selangor Mentri Besar Tan Sri Khalid Ibrahim was quoted in Sinar Harian as saying, it would have lacked the “oomph”.

Without the chaos, the anger, the water cannon, the arrests, it would not be a success. So it all comes down to that.

Saturday, July 2, 2011

Ex-BNM assist governor among 2 Aussie firms & 6 charged with bribery in banknote scandal!


http://dinmerican.files.wordpress.com/2011/07/rm5.jpg





Ex-BNM assistant governor charged

By LISA GOH and NURBAITI HAMDAN lisagoh@thestar.com.my 

KUALA LUMPUR: Former Bank Negara assistant governor Datuk Mohamad Daud Dol Moin, 58, has claimed trial at a Sessions Court here to two counts of accepting bribes amounting to RM100,000 from a businessman to help procure a contract from the central bank.

The contract was to print RM5 polymer bank notes by Note Printing Australia Ltd.

Dressed in a dark suit, he calmly pleaded not guilty when the charges were read out to him at about 11am yesterday.

He was accused of receiving two bribes of RM50,000 from Abdul Kayum Syed Ahmad at Dome Restaurant, Bangsar Shopping Centre, on Dec 1, 2004, and Feb 16, 2005.

If convicted under Section 11(a) of the Malaysian Anti-Corruption Commission Act, he can be jailed up to 20 years and fined five times the bribe amount, for each charge.

Out on bail: Mohamad Daud (centre) being escorted out of the court Friday. — Bernama
 
According to the Malaysian Anti-Corruption Commission, the contract was worth about RM95mil.
DPP Manoj Kurup prosecuted while lawyers Collin Goonting and J.D. Goonting stood for the accused.
The prosecution suggested a bail of RM100,000, with one surety and the defence lawyers had no objections.

Bail was granted and judge Rosbiahanin Arifin fixed Aug 2 for mention.

Mohamad Daud, who joined Bank Negara in 1975 and retired as the assistant governor on May 1, 2009, was then taken to the Shah Alam court complex for another charge.

In SHAH ALAM, businessman Abdul Kayum claimed trial at the Sessions Court to two counts of bribing Mohamad Daud with RM100,000 as an inducement to secure a contract for the printing of the RM5 polymer notes in December 2004.

Abdul Kayum, 62, pleaded not guilty before judge Asmadi Hussin. He was charged under Section 11 (b) of the Anti-Corruption Act and faces a maximum 20 years' jail and fines five times the bribe amount.

The offences were allegedly committed at the EON Bank, Jalan Taipan in Subang Jaya on Nov 24, 2004 and Feb 15, 2005. He was arrested on July 5 last year.

DPP Manoj offered bail at RM100,000 but defence counsel Gurbachan Singh asked for RM15,000.
He said Abdul Kayum was now unemployed and had a wife and three schoolgoing children.

The court fixed bail at RM50,000 with one surety and set Aug 2 for mention.

Meanwhile Bank Negara has made it clear that it does not condone any misconduct by its employees.
“The central bank upholds the highest standards of integrity and professionalism in carrying out its roles and functions.”

In a statement late yesterday evening, Bank Negara also said it had been cooperating fully with the Malaysian Anti-Corruption Commission and other agencies in their investigations.



Two banknote firms and six ex-employees charged

SYDNEY: Two banknote firms linked to Australia's central bank and six of their former employees were charged with bribing Asian officials to secure contracts to print their currencies.

Australian Federal Police said the charges against the men and currency companies Securency International and Note Printing Australia (NPA), relate to alleged bribes given to officials in Indonesia, Malaysia and Vietnam.

Police said that during the period 1999 to 2005, the senior managers from Securency and NPA were believed to have utilised international sales agents to bribe foreign public officials in order to secure banknote contracts.

The Reserve Bank of Australia (RBA) said it deeply regretted that the governance arrangements and processes in the companies at that time were not able to prevent or detect the alleged behaviour.

Governor Glenn Stevens said controls at both firms had been overhauled since the scandal broke two years ago, adding that all those charged no longer worked with the companies and the use of sales agents had stopped.

Securency, which is partly owned by the RBA and produces polymer banknotes used in more than 30 countries, said it had been charged with three counts of conspiracy to influence foreign officials.

The company said it was cooperating fully with authorities and considering its legal position.

NPA, a wholly owned RBA subsidiary responsible for running the printing works where Australia's banknotes are printed, made no immediate comment.

Police said that, in Indonesia, a foreign official allegedly received a bribe to ensure a joint venture banknote contract for Securency and NPA, while in Malaysia a bribe was allegedly used to win a contract for NPA.
In Vietnam, an official allegedly received a bribe paid in the form of a university scholarship to secure a banknote contract on behalf of Securency.

Police Commander Chris McDevitt said the six Australians charged, aged between 50 and 66, had been chief executives, chief financial officers or sales agents for Securency or NPA. - AFP

Greece is bankrupt !





WHAT ARE WE TO DO By TAN SRI LIN SEE-YAN

A rose by any other name would smell as sweet. In the case of Greece, default by any other name just stinks! The plain truth: Greece is bankrupt. Greece's sovereign debt crisis deepens daily as the gap in reality widens between politically driven “in denial” views of European Union (EU) leadership and market-place views as reflected in 5-year Greek bonds trading at a yield close to 20%; Standard & Poor cutting Greece's rating to triple-C (the lowest credit rating ever); and highest premiums payable on CDS (credit default swaps, used as insurance to protect investors against defaults) on Greek debt. Probability of default by Greece over the next 5 years has jumped to 86%.

Today, a CDS will cost US$2mil annually to insure US$10mil debt over 5 years. Markets have indicated for some time Greece suffers from a condition of bankruptcy rather than a crisis of liquidity (i.e. cash-short).

This simply means Greece cannot survive without significant debt relief and restructuring, combined with an overhaul of the ways its government collects revenue and expends. In essence, Greece has 2 major problems: it has too much debt and it cannot grow. I am afraid more and more of EU will get contaminated.

Trouble in Greece: A Greek flag at the Akropolis in Athens. Millions of Greeks participated in a strike to oppose new heavy austerity measures. — EPA
 
The Greek illusion

Greece should not have been into the euro in the first place. It failed to join in 1999 because it did not meet fiscal criteria. When it did so in 2001, it was through phony budget numbers. As Twitter R. Cohen wrote: “Europe's bold monetary union required an Athenian imprimatur to be fully European. So everyone turned a blind eye.” But Greece has had an awful history. The 1912-13 war wrested northern Greece from Ottoman control. Then came the massive exchange of 1923 where 400,000 Muslims were forced from Greece to Turkey and 1.2 million Greek Orthodox Christians, from Turkey to Greece.

A military dictatorship followed in the 1930s; brutal German occupation in 1941-44; and a civil war in late 1940s. There was the rightist dictatorship of 1967-74, not to mention the on-going conflict with Turkey over Cyprus. In “Twice a Stranger”, B. Clark wrote of Greece as a society “where blood ties are far more important than loyalty to the state or to business partners.”

It would appear EU membership provided some balm to Greek wounds. It detoxifies history. So Greece took to the EU as a passport to live on the never-never. The bottom line: a monetary union among divergent economies without fiscal or political union support has no convincing historical precedent. For a while, the easy-money, easy-lifestyle allowed everyone to overlook peripheraleconomies like Greece from becoming uncompetitive with the euro (with no drachma to devalue) and not showing any signs of “converging” (closing the gulf between strong and weak nations within EU), but amassing unsustainable deficits and debt. Greece remains a nation suspicious of outsiders and a place where state structures command scant loyalty.

This does not abode well. We now see a Greece resentful of deep spending cuts, and of the sale of state assets meted out by technocrats from outside. They feel the poor and unemployed are paying for the errors of politicians, and a globalised system that punishes those left behind. Strikes and violence are a measure of a EU that now leaves most Greeks unmoved by the achievements of European integration.

Greece is insolvent

It is true a sovereign state, unlike a firm, has the power to tax. In theory, it can tax itself out of trouble. But there is a limit on how far it can tax before it becomes politically and socially unsustainable. Already, Greece has a debt/GDP ratio of 143% in 2010, rising to 150% this year. It is too high to convince creditors to continue lending.

In practice, the market expects Greece to reduce its debt ratio considerably before it can borrow again. This means it has to create a primary budget surplus (revenue less non-interest expenditure) in excess of 8% of GDP to be credit worthy again. Among advanced nations, none (except oil-rich Norway) has managed to attain a durable primary surplus exceeding 6% of GDP. Greece is insolvent.

This is a dire situation. Government bonds serve as a reference asset by setting the “riskless” rate of interest. So any doubts about its value can cause turmoil. Indeed, solvency of the Greek financial system is at risk. So are other European financial institutions. Equally vital is contagion with its sights set firmly on other debt-distressed nations notably Ireland, Portugal, Spain and Italy.

But it doesn't stop there. Top Europeans have warned contagion to EU members could spark off a crisis bigger than the Lehman Brothers collapse in Sept 2008. So, it is not difficult to understand the hard line taken by the European Central Bank (ECB) aimed primarily to protect European banks which need time to strengthen their capital base. For obvious reasons, it has rejected any sort of restructuring of debt raising the spectre of a chain reaction, and threatening to punish any restructuring (re-negotiation of the terms of maturing debt) by cutting banks' access to liquidity.

Moreover, credit rating agencies would deem any such action as a default (i.e. non-payment of due debt). With Greece insolvent, the EU has taken the narrow road of beefing up the financing for Greece (which can't refinance itself in the market), while using moral suasion to persuade private creditors to roll-over their bonds. It is buying breathing space.



More denial doesn't work just prolongs the agony. What's happening to Greece is distressful. Over the past 12 months: the number of unemployed rose by close to 40%; unemployment is above 16% among youths, it's a devastating 42%. IMF estimates showed its GDP contracted by 2% in 2009 and 4.5% in 2010 and will shrink by 3-4% this year.

Despite severe fiscal austerity, its budget deficit will improve only slowly: from -15.4% of GDP in 2009 to -9% in 2010 and -7% this year (and estimated at -6.2% in 2012). That's a long way to surplus! Greece has become so uncompetitive its current balance of payments deficit was -11% of GDP in 2009, -10% in 2010 and optimistically estimated at -8.2% this year (and at -7.2% in 2012). Truly, Greece is in “intensive-care” a solvency crisis, not just caught in a short-term cash crunch (yes, it also does not have cash to meet its next debt payment before July 15).

Even at today's low interest rates, Greece's government interest payments alone amounted to 6.7% of GDP, against 4.8% for Italy and considerably higher than all other major European nations and the United States (2.9%). Even Portugal's ratio is lower at 4.2%.

Political solution: slash and burn won't work

What Greece needs is deep economic reforms or fiscal transfers from the EU which help address deepening market concerns about sustainability of its huge debts. Without these, the crisis will simply be deferred.

The message is clear: Greece's debt load at Eureo 350 billion or 150% of its expected economic output this year, is simply too large for the EU troika's (plus ECB and IMF) strategy to succeed. Athens had accepted a package of Euro 110 billion of EU/IMF loans in May 2010. But it now needs a 2nd bailout of a similar size to meet financial obligations until end 2014 when it hopes to move seamlessly into the new ESM (European Stability Mechanism) bailout fund (which takes effect in 2013) to prop up fiscal miscreants.

Latest draw-down involves release of a vital Euro 12 billion very soon but carries a proviso that parliament passes on June 29 (which it did with a slim majority) Euro 28.6 billion in spending cuts and tax increases as well as Euro 50 billion from privatisation of state assets, in addition to continuing existing austerity policies.

That's not all. The new plan calls for private creditor's participation on a voluntary basis (meeting ECB's insistence to avoid even a hint of default) or “Vienna Plus”, a reference to the 2009 Vienna initiative where banks agreed to maintain their exposure to Eastern Europe.

For Greece, the brutal austerity plans call for enormous sacrifices; indeed, no end to their agonies. Today, the situation at Syntagma Square and in front of parliament is getting more strained, angry and confused, surrounded by riot police and clouds of teargas. The people are becoming frustrated at being always at the receiving end.

On the German side, however, voters are aghast at the prospect of a 2nd bail-out, which they regard as pouring good money after bad. Germans consider the Greek government as corrupt; its tax system operates on voluntarism; state railroad's payroll is 4 times larger than its ticket sales; many workers retire with full state pension at age 45; etc.

Be that as it may, the IMF in particular needs to learn from lessons of the Asian currency crisis, where it has since acknowledged its prescriptions at the time made matters worse in Indonesia, Thailand and the Philippines, in the name of unleashing market forces to force adjustment and ignoring the adverse social and political impact of their policies.

I see them repeating the same mistakes again in Greece, paying too little heed to human suffering and adverse social impact to protect private sector creditors and pushing the end-game at breakneck pace. Germany's insistence to get private creditors share in the burden is a good soft step forward. Even so, the IMF seems too harsh.

Few options left

The fact remains Greece was outstandingly egregious in its fiscal profligacy and its lack of prudent economic governance. But Greece was not the only European economy that was living beyond its means and being pumped withill-conceived loans mainly from German and French banks. Greece is today insolvent. The EU's solution addresses only immediate funding needs, without offering a credible long-term resolution. It's just a stopgap. Frankly, Greece'spolicy options are limited: either a default, partial haircut (creditors taking losses on their investments), or a guarantee on Greek debt. Bear in mind Germany remains the biggest beneficiary of the euro-zone experiment. In 2010,

Germany recorded a US$185bil balance of payments surplus or 5.6% of GDP. No doubt, the EU has since pledged to stabilise the euro-zone economy, vowing to starve off a Greek default, and the ECB has categorically ruled out debt restructuring. That leaves Greece with only deflation, a lot of it.

As I see it, this will not work. First, in a democratic Greece, people are clearly not in the mood for deeper spending cuts and more austerity. Policies can be adopted but they can fail. Second, deflation had already made Greece's debt problem worse the debt is too large and the economy won't grow with continuing deflation. It can't just deflate its way to solvency.

The better option left is debt guarantee. Issuing guarantees (preferably partially backed by Greek assets) could help persuade creditors to exchange debt for new debt with longer maturities, effectively giving Athens more time to repay. As of now, only 27% of Greek debt is held by banks, 30% by ECB/EU/IMF, and 43% by other privates. Banks are already quietly resisting voluntary rolling-over unless offered incentives. EU has preferred to use moral suasion.

EU has also resisted haircuts. Mr Axel Weber, former Bundesbank governor, has since weighed in: “At some point you've got to cut your losses and restart the system,” drawing parallels between guarantee for Greek debt and steps taken by Germany and others during the financial crisis to backstop troubled banks.

The Greek problem “is a deep-rooted fiscal and structural problem that probably needs more than a 30-year time horizon to solve. The measures Europe need to adopt are much more profound than just short-term liquidity funds.” That, of course, raises the issue of “moral hazard”. EU has since pledged to stabilise the euro-zone, and starve off a Greek default in exchange for continuing Greek deflation and voluntary creditors' roll-over. Getting banks to share in the burden remains problematic. But, a narrow policy option is taken. It's another muddle-through created in response to politics. It offers no long-term way for Greece to resume growth.

I am told the political mood in Greece improves automatically in July and August as the urbans head en masse for family villages in the islands and mountains. Surely, for a little while, human woes will be eased by exposure to the beauty of the Agean.

Former banker, Dr Lin is a Harvard-educated economist and a British Chartered Scientist who now spends time writing, teaching and promoting the public interest. Feedback is most welcome at starbizweek@thestar.com.my

Friday, July 1, 2011

US Dollar’s Share Of Global Reserves Continues To Slide, Reserve Status Questioned




Dollar’s Share Of Global Reserves Continues To Slide, Reserve Status Questioned

 Timmy Geithner and Bennie Bernanke have contributed to the dollar's decline - Getty Images North America.

WASHINGTON - APRIL 21:  Treasury Secretary Timothy Geithner (L) and  Federal Reserve Chairman Ben Bernanke applaud during the unveiling of the new $100 note in the Cash Room at the Treasury Department April 21, 2010 in Washington, DC. According to the Treasury Department, the U.S. government evaluates advances in digital and printing technology to redesign currency and stay ahead of counterfeiters. The new note will be put into circulation in Feburary 2011.
WASHINGTON - APRIL 21: Treasury Secretary Timothy Geithner (L) and Federal Reserve Chairman Ben Bernanke applaud during the unveiling of the new $100 note in the Cash Room at the Treasury Department April 21, 2010 in Washington, DC. According to the Treasury Department, the U.S. government evaluates advances in digital and printing technology to redesign currency and stay ahead of counterfeiters. The new note will be put into circulation in Feburary 2011.

Further confirmation that the U.S. dollar is gradually losing its reserve status came today from an International Monetary Fund report on global holdings of foreign exchange reserves by central banks.  The greenback, and the euro, lost share vis-à-vis the Japanese yen, the Australian, and the Canadian dollar, pointing to a “slow, gradual diversification” of reserve holdings.

With Christine Lagarde recently appointed General Manager in replacement of the disgraced Dominique Strauss-Kahn, the IMF released its latest “Composition of Official Foreign Exchange Reserves” (COMFER) which lists reserves held at central banks in 33 “advanced economies” and 105 “emerging and developing economies.”  China, one of the largest holders of foreign reserves, is not included in the sample. (Read IMF Appoints Lagarde To Fix A Disgraced institution).

Attesting to the continued global loss of confidence in the U.S. dollar, the greenback’s share of the world’s reserve continued to slide in the fourth quarter of 2010, the latest data show.  Interestingly, the trend can be explained entirely by valuation effects, with the trade-weighted dollar depreciating 4%% in that time frame.

The U.S.’ share of allocated reserves fell in the first quarter to 60.69%% from 61.53% from Q4 2010.  Central Bank reserves move slowly, but the slide in the greenback’s share, which Nomura suggests would be even steeper if China was included in the sample, has been very pronounced if one takes a longer-term window.



A year before the latest data, Q1 2010, the greenback’s share stood at 61.64%, while in Q1 2001, ten years before, it stood at 72.3%.  While USDs dominance was unquestioned a few years ago, it is anything but rare to speak of a move toward a multi-currency system, with the dollar still a primus inter pares [first among peers]. (Read Central Banks Dump Treasuries As Dollar’s Reserve Currency Status Fades).

Emerging and developing nations aggressively accumulated foreign reserves in the first quarter, as their high-growth economies attracted massive capital flows from so-called advanced economies.  While rich nations added $65.5 billion in reserves, $1.6 billion of those in U.S. dollars, emerging markets added $366.3 billion, $65.8 billion of those in dollars.  Regardless, EM central banks also sought further diversification, with the Japanese Yen as the main destination.

Emerging market central banks accumulated $6.6 billion in new JPY reserves in the first quarter, taking their allocation up to 2.9%.  “While the increase appears small, it signifies that the yen has recently found favor amongst EM central banks as an alternative safe haven,” noted Nomura.

“Other” currencies, as denominated by the IMF, made up 20% of emerging market reserve accumulation in the first quarter.  With the Canadian and Australian dollars as some of the biggest beneficiaries, the share of “other” currencies climbed up to 5.8%, from 5.1% in Q4 2010.

Euro share of global reserves crawled up a couple of percentage points to 26.6%, despite being shunned by EM central banks (where its share fell to 28.2%).  With the euro gaining 5.8% against the dollar in the first quarter, the data indicates EM’s actively selling euros.  “It is likely that central banks sought to rebalance their reserve portfolios in the wake of EUR strength and corresponding USD weakness. That is, they sold EUR and bought USD and other currencies to counter the sharp change in valuation,” explained Nomura’s analysts.

The IMF’s most recent COFER continues to support the thesis that the U.S. is losing its reserve status.  Central banks are sticking to “relatively stable allocations of major currencies,” namely the U.S. dollar and the euro, yet they are gradually moving away, adding yen and “other” currencies.  While the greenback will continue to play a predominant role in world trade, there can be no doubt that slowly, but surely, central banks will rely less and less on it.

Why the US is the greatest threat to Lagarde at the IMF?




"It's a victory for France," President Nicolas Sarkozy said of Christine Lagarde's appointment as the new head of the International Monetary Fund.

Christine Lagarde has been named as the new head of the International Monetary Fund, ending a fiercely fought contest dominated by Europe's intensifying debt crisis.
Christine Lagarde leaves a private TV studio after appearing on prime time news in Boulogne Photo: REUTERS
It should come as no surprise that the unpopular French leader is trying to put a positive spin on losing his highly-regarded finance minister. And, in one sense, Sarkozy is spot on.

Lagarde becomes the IMF's fifth French leader, and her appointment ensures that the Gallic republic keeps a powerful voice at an institution that has made a comeback thanks to the financial crisis. But Lagarde won't have appreciated her former boss airing his sentiment in public. The 55-year old will start her first day in the job next Tuesday with three question marks hanging over her appointment.

The first and least troublesome one is some inevitable concern within the IMF that she's not an economist. Lagarde trained as a lawyer and spent 25 years working at US law firm Baker & McKenzie before moving into politics in 2005. Some of this will be intellectual snobbery, but some will be legitimate concern over whether she's qualified for the job. She's regarded as highly intelligent and the fund already has an army of economists that matters can be delegated to.

The second is whether her selection was a stitch up. And it was. Europe still wields a disproportionately large amount of votes at the IMF's top table - a gift from history that the continent is understandably reluctant to relinquish. There's nothing she can do about that, and Lagarde has already pledged to make changes to the voting system so it better reflects the shifting balance of economic power in the world.

The third is by far the most serious. As the French finance minister intimately involved in Europe's debt crisis during the last 12 months, will she be able to give the IMF an independent voice and protect the interest of its creditors? Lagarde certainly thinks so. During her job interview last week she told the IMF's Executive Board that "I will not shrink from the necessary candour and toughness in my discussions with European leaders." Adding that "there is no room for benevolence when tough choices must be made."



The former lawyer spent much of the past month visiting China, India and Brazil to assure them that she will not throw good IMF money after bad to solve Europe's debt dilemma. The fund, which means its donors, is supplying about a third of the €110bn that was pledged to Greece as part of the first bail-out in May, 2010. Such assurances appear to have won over those three economic heavyweights, who declared for her rather than Agustin Carstens, the head of Mexico's central bank, and Lagarde’s only rival.

Victory, though, only came when the Obama administration threw its weight behind Lagarde this week. US Treasury Secretary Tim Geithner sang the praises of his former counterpart and new neighbour in Washington DC. But it's politicians in the US capital, rather than Beijing, Delhi or Sao Paulo, that pose the greatest threat to Lagarde.

Despite the warm and no doubt genuine words from Geithner, The White House is increasingly frustrated at Europeans' handling of their own debt debacle. Its latest flaring comes as the US economic recovery is losing momentum, and Obama is trying to wrestle back the political initiative from a Republican party emboldened by the recent US slowdown. The irritation was likely behind an unusual public rebuke to European leaders from Geithner last week when he said it would be better if they could speak with one voice.

A still bigger threat comes from Congress. The Obama administration struggled to push through an extra $108bn in funding for the IMF in June 2009. If bail-out was a toxic word in Washington then, it has only become more so since. So far the contributions from the IMF, where the US is the biggest single donor, have raised relatively few heckles in the House of Representatives or Senate. But with Republican candidates currently vying for the right to challenge Obama next year, the chances are that will change. And any money required from the IMF for Greece's second bail-out will receive far more political scrutiny in the country that will have to dig deepest into its own pockets.

It's to her new neighbours in Washington, more than anyone else, that Lagarde needs to prove that her appointment is no victory for France.