Did Britain Steal USD45 Trillion from India to be “Great”?

Britain ruled India for about 200 years, a period marred by poverty and famine in India. The commonly told story in Britain is that the colonisation of India was not of any major economic benefit to Britain – much like joining the EU in 1973. The fact that the empire was sustained for so long was a gesture of Britain’s benevolence!

Utsa Patnaik, an economist, dealt a crushing blow to the above narrative. Patnaik calculated that Britain had actually drained nearly USD45 trillion during the period 1765 to 1938. That’s 17 times the GDP of the U.K. today.

It was a scam – theft on a grand scale, that puts 1MDB’s shenanigans as “loose” change. Indian taxes was used to purchase Indian goods for Britain and/or for re-export elsewhere. That is the basis of financing Britain’s Industrial Revolution. On top of this, Britain was able to sell to India finished products with India having no option of securing cheaper alternatives. So India was in debt to their colonial overlords. That is control.

In a 2014 poll, about 50% of the people in Britain believed colonialism was beneficial to the colonies. Yet over 200 years there was almost no increase in per capita income in India. In fact, millions died because of policy induced famine.

So what must Britain do today, other than Brexit? An apology? Reparations? Changing the narrative? I could say all of the above but reparations is the last thing “poor” Britain could forward. Perhaps, do as Shashi Tharoor suggests pay £1 annually to India for the next 200 years and issue a public apology for the misdeeds!

References:

1. How much money did Britain take away from India, Business today

2. How Britain stole $45 trillion from India, Jason Hickel

Is the U.S. Abandoning Its Services Economy?

According to Anne Krueger, a former World Bank chief economist, the U.S. under Trump is playing on its weakness rather than from its strength.

In the 19^th century, 70% of American workers were in the farming sector. In 2017, it was only 2%. In 1970, 32% of private employment was in goods producing industries. The figure in 2018 was 13.5%. The dynamic sector of the U.S. economy is services – not house cleaners or maintenance crews but transportation, IT, finance, professional and business services, education, entertainment and many more. Of all private sector employment, 70% is in services. So you have the likes of Google, Microsoft, Oracle, Disney, 20^th Century Fox, Amazon, McKinsey and many more.

With affluence, people spend more on travel, entertainment, education, healthcare and others. The U.S. leads the world in many services. In 2017, America’s export of services was USD798 billion while imports was USD542 billion. And services exports have been growing rapidly compared to exports of goods.

As technology accelerates, it is the services sector that will provide future employment not coal, steel or farming. Trump has no grasp of this, as he reads little and follows “Fox News” for ideas! That is the self-proclaimed genius of a President! And America will pay a heavy price if the President prevails with his silly obsession, i.e. trade balance!

Reference:

Trump’s Anti-Service Economy, Anne O Krueger

Insight Deals - Proposed Solar Plant (upto 50MW) in North Peninsular Malaysia

We are in the midst of organising a proposed solar project with the following key ingredients:

·       Up to 50MW

·       Project cost of around RM200 mil – 250 mil; and

·       Land area of up to 150 acres, flat and unhindered access to sunlight (land has been identified).

We are looking for interested parties who wish to invest/ sponsor the Project, upon a tender exercise by the Government.

If you are interested in the above opportunities or would like to offer your hot deals, please contact info@mpcap.com.my or 603 - 2283 1170 for further details!

Logit vs Probit

In a previous article, we illustrated the usage of logit model to predict the potential PTPTN defaulters (Read more here).  One could use the probit model to run the analysis as well.  In the logit model the log odds of the outcome is modelled as a linear combination of the predictor variables.  Meanwhile, in the probit model, the inverse standard normal distribution of the probability is modelled as a linear combination of the predictors.

The following chart shows the comparison between logit and probit results.  Both models gave similar results, with logit model giving slightly “fatter” tails.  The capability of their predicting power is the same for both models.

The choice between logit and probit model is purely personal.  But it is always good to have an alternative model to cross check the results.  They are used in various fields, including machine learning.  Logit is more popular in medical fields and social sciences while probit is often used in advanced econometric, finance and political sciences.

Are You the New CEO in a New Year?

The New Year may see many large or small organisations led by new CEOs. In the U.S., one-third of all CEOs chosen to guide companies are gone within three years of appointment. Getting a good start is essential and much has been written regarding the first 100 days.

McKinsey’s Kevin P. Coyne and Bobby S. Y. Rao interviewed 15 current and former CEOs of U.S. companies about choices and lost opportunities. These CEOs led companies with annual sales of USD1 billion to more than USD25 billion. What Coyne and Rao gleaned include:

(i)        Seize the day – the period between designation and ascension is critical to make the difference;

(ii)       Attack areas of weakness – overcome personal areas of weakness through re-training, consultation with industry experts, hire a private coach or simply follow the retiring CEO on a tour of field operations;

(iii)      Know the Board – each member of the Board is important and a personal touch and understanding them early is useful;

(iv)       Have a narrative before Day One – people may be impatient to know your long-term strategy for the company on the first day of work! Project confidence that the new leadership can address issues;

(v)        Get help for unpleasant tasks – policy changes, removing problem executives could be unpleasant and getting independent outside help is useful;

(vi)       Find a confidant – external business associates, a Board member or a professional coach could fill that role; and

(vii)      Beware of civic duties – many “new” causes of a social or community nature may arise – but postpone any  commitment until you get your bearings right.

What about job focus? Well it depends on the circumstances but these five were listed by Roger L. Martin:

(i)         Revenue Growth – grow the revenue pie;

(ii)        Follow processes/procedures;

(iii)       Consult your team where necessary;

(iv)       Set high strategy standards; and

(v)        Encourage diversity – people with different backgrounds, qualifications, experience add value to the company. Monoculture or a one race mentality is usually a recipe for disaster!

So if you are called to lead an organisation and find yourself thrust into a hugely challenging role, remember you don’t have to be the one in three failures! Good Luck!

References:

1.  A Guide for the CEO-elect, Kevin P. Coyne and Bobby S. Y. Rao, McKinsey Quarterly (Aug 2005)

2.  The Five Rules Every New CEO Should Follow, Roger L. Martin, Harvard Business Review

Growth and Game Changers for 2019-2020

The economy is anticipated to grow 4.5% - 5.5% for 2019-2020. Growth is driven largely by private consumption. Sectorally, the services sector is targeted to sustain growth at 6.3%. Other sectors are anticipated to grow more measuredly. This is the Government’s prognosis in the last mid-term review of the 11^th Malaysia Plan (“Plan”).

Beyond thrusts and pillars, the Plan reviews the following game changers:

(i)        Uplifting B40 towards a middle-class society – that’s laudable, but improvements have been slow. For example, rural B40 household income increased form RM1,760 (2014) to RM1,969 (2016) while the urban household income for the B40 is now RM3,262. The starting salaries of fresh graduates have been “stuck” around RM3,000 – RM3,500 in the banking sector over the last 5-8 years and that is not helpful for private consumption led growth;

(ii)       Enabling industry-led Technical and Vocational Education and Training (“TVET”)-  quality is the issue and relevance to industry. The other problems (not cited in the Plan) in education include:

·         the emphasis of STEM by authorities while no supporting framework exists for graduates to be employed. It is time to have a Scientific Stream in the civil service;

·         then, English and its proficiency – which is poor for the private sector. A huge debate ensues along nationalistic lines if someone mentions the importance of English or Mandarin;

·         Quality schools and quality teachers – elite schools are necessary unless we believe in a levelised system that encourages mediocrity;

·         Issues on private tertiary education and PTPTN, amongst others;

(iii)      Embarking on green growth – the new Minister of Energy seems to be keen on renewables and I sincerely welcome that! It is something TNB may follow reluctantly. Besides SEDA, the regulator, a Renewable Energy Corporation needs to champion it for business, factories and homes;

(iv)       Productivity – a huge area for improvement with automation, AI and digital technology;

(v)        Innovation to wealth – community or sectoral-based research with tertiary institutions encouraged to work with industry/agriculture. Grants should be given based on success of commercialisation of research;

(vi)       Investing in competitive cities – only Kuala Lumpur, Johor Bahru, Kuching and Kota Kinabalu are mentioned. What about Penang, Ipoh or Seremban? The bulk of SMEs are probably on the west coast of Peninsular Malaysia and they provide employment, revenue and exports. So a broader industry-backed platform for innovation and financing is needed. P2P platforms on an industry basis could be helpful besides the traditional bank route.

We need early “fruits” of any Plan to make people believe there is a future and hope for everyone. God Bless!

Nostradamus 2019 Predictions!

The famed mystic Michel de Nostredame prophesied future events in 16^th century France, publishing them as four-lined quatrains. His followers believe that he predicted Adolf Hitler’s rise to power, the Great Fire of London and death of Henry II of France.

Cryptic passages supposedly predict outbreak of World War 3, fall of Western world and impact of an asteroid on Earth. None of these have come to pass but followers are now claiming 2019 is the year! So what are they?

Word War 3 could breakout between U.S. and Russia or U.S. and North Korea. And this will last for 27 years. Then there will be an asteroid impact which will destroy the planet as we know it. Rising temperatures will melt ice caps and major hurricanes will plague parts of the planet. People will also start talking to animals! The pig will be a brother to man.

So what do you make of it? Isn’t this astrology? But everyone loves a sage giving some prediction even if it is from the 16^th century! The problem with reading Nostradamus is he is always right after the event. So please don’t read too much into this and trust the God who is in control of the world! Have joyful and blessed New Year!