Happy Chinese New Year

 

Happy Chinese New Year!

 

Genting Hong Kong Implodes!

Genting Hong Kong (“GHK”) chairman and chief executive officer Lim Kok Thay resigned, days after the company filed to wind up its business as cruise operator. All this because of Covid-19. Mr Lim, who owns 76 per cent of Genting Hong Kong, stepped down with effect from Jan 21, 2022.

More than two years into the pandemic, GHK is headed for liquidation.  The company’s shares are halted in Hong Kong. GHK is a stark example of how the virus has brought once-thriving businesses to their knees. 

Source: https://www.cruiseindustrynews.com

The company founded in 1993 was to diversify its risk away from the Genting group’s flagship casino resort in Malaysia. Genting, Genting Singapore and Genting Malaysia - have no cross shareholdings with GHK except for Mr Lim being a common stakeholder in all four.

While GHK offered “seacations” as part of a broader trend of cruises to nowhere, it still reported a record US$1.7 billion (S$2.29 billion) loss in May and its stock plunged more than 50 per cent since early of 2020. The company said in its winding-up petition that its cash was expected to run out around end January and it had no access to further funding. Earlier this month, its wholly owned shipbuilding subsidiary, MV Werften, filed for insolvency in a local court in Germany. 

Three Malaysian banks’ profits are set to take a major hit because of the above development. A report by Singapore’s Straits Times said that Malayan Banking (Maybank), CIMB and RHB are among some the unsecured creditors of Genting Hong Kong, with a combined exposure of US$600 million (RM2.5 billion).

It is probable that these banks may have provided fully for their exposures. Nevertheless, details will not be forthcoming under client confidentiality. The only way round this is for the Malaysian Parliament to set up a Banking and Finance Committee, as in the U.S. to understand exposures and implications to shareholders and the economy.

References:

Genting Hong Kong CEO Lim Kok Thay resigns after cruise operator files to wind-up, Straits Times, 24 Jan 2022 (https://www.straitstimes.com) 

Problems at cruise operator Genting Hong Kong could cause major financial trouble for three Malaysian banks, Ashman Adam, 23 Jan 2022 (https://malaysia.news.yahoo.com)

BlackRock Owns the World?

BlackRock, based in New York, is an American Multinational Investment management firm. Founded by Larry Fink and Rob Kapito in 1988, this firm has massively grown in the past 33 years. It now manages a staggering $9.5 trillion. 

This amount is not their own but is the assets that they manage on behalf of their clients. Almost 60% of the total managed assets are for institutional investors.

Source: https://en.wikipedia.org/wiki/BlackRock

The answer to the question of why BlackRock owns the world could be explained in just one line: “their clients are their first priority”. This makes them outshine others. 

This market leader believes in trying a hand in every sector and so has shares and voting rights in many of the biggest European companies in sectors such as energy, oil and gas, and of course finance. The company holds bonds, has real estate interests, and is an auditor and advisor along with being an investor of governments and central banks.

BlackRock is not run by an individual but a team of more than 16,000 employees in over 35+ different countries. The firm believes in chasing excellence which is procured when work is done as a team with everyone contributing their best. According to a survey done, 72% of employees at the company are satisfied with their job.

The key issue here is not its size but the data/information that it owns. It could take advantage or sell to third parties the information procured. How do you stop this? A juggernaut that is bigger than most governments may not listen to legitimate concerns!

References:

1. BlackRock: The company that you never heard of, owns the world! Yukti Thakur, August 12, 2021 (https://craffic.co.in)

2. Here are 9 fascinating facts to know about BlackRock, the world’s biggest asset manager, Rebecca Ungarino (https://www.businessinsider.com)

Secrets of the World’s Happiest Countries

Each year, a group of happiness experts from around the globe rank 156 countries based on how "happy" citizens are. They publish their findings in the World Happiness Report. Happiness might seem like an elusive concept to quantify, but there is a science to it.

When researchers talk about "happiness," they're referring to "satisfaction with the way one's life is going," Jeff Sachs, co-creator of the World Happiness Report and a professor at Columbia University, told recently. "It's not primarily a measure of whether one laughed or smiled yesterday, but how one feels about the course of one's life," he says.

Since the report began in 2012, Nordic countries — which include Denmark, Norway, Sweden, Finland and Iceland, plus the Faroe Islands and Greenland— consistently turn up at the top of the list. (The United States, on the other hand, lands somewhere around 18th or 19th place. Malaysia is 81).

Source: https://www.theatlantic.com

In 2019, Finland was ranked No. 1 for the second year in a row. Again, topped for 2020. In 2017, it was Norway, and Denmark grabbed first place in 2013 and 2016. Switzerland nabbed the top rank in 2015. This is no coincidence. Nordic countries rank so high on the happiness report because they have things like free education and healthcare, low crime rates, cushy social security nets, a relatively homogeneous population and they're fairly prosperous.

Perhaps most importantly, these countries prioritize balance, which is the "formula for happiness," Sachs says. "They're not societies that are aiming for all of the effort and time to becoming gazillionaires, they're looking for a good balance of life and the results are extremely positive," he says.

A "full-time" workweek in Denmark is typically 37 hours spread over the course of five days. On the other hand, the average American works 44 hours per week, or 8.8 hours per day, according to the Bureau of Labor Statistics.

While many Americans see working late as badge of honor and a way to get ahead, in Denmark it's seen as a weakness — it shows you can't get things done in the allotted work time.

To be as efficient as possible, Danes don't really socialize at work, or take breaks to run errands. Free time is "the most important thing they have," so it's rare that people would hang out with co-workers after working hours.

In Denmark, full-time employees are guaranteed five weeks of vacation time, regardless of their position or field of work. To put that in perspective, the average American worker with five years of experience is given 15 days of paid vacation, according to the Bureau of Labor Statistics. In Finland, many people spend their summers in cottages, called "mokki," where they unplug and relax with family and friends.

Freedom is another value that matters in a society, and determines someone's well-being, Sachs says. "Can you shape your life the way you want? If you're trapped by poverty, if you're trapped by debt, the answer will be no," he says. "If you have an opportunity to pursue the kind of life you want, the answer is yes. And if yes, that makes people a lot happier."

No matter where you live, research shows that finding work that really maps onto your core values can make you happier.

Although the culture and safety net in Nordic countries seems to promote happiness, life is not all warm. Nordic countries pay some of the highest taxes in the world. In Denmark, for example, there's a 25% sales tax, and a 150% tax on cars. People in Nordic countries are happy to pay those taxes because they get great universal social services in return. For example, daycare, public education including college and healthcare. 

What will make us happy in Malaysia? We need a government with high integrity, caring for its people and believe in a work-life balance. It is pointless to suggest that we pay higher taxes if the Government is corrupt. Kleptocrats and cronies will “skin” the taxes for themselves. Nordic countries have very high integrity and people don’t steal on the street or in the office.

Then we need policies that are needs-based and not race-based. Religion is left as a private matter between you and God – not a public display of arrogance!

Employers need to treat employees as humans and not expect output today when it could be done tomorrow. Employers also need to consciously reduce work hours to 37 hours, 4 ½ days a week (Dubai is an example).

Maybe the Human Resources Ministry could map-out strategies after they do the usual “lawatan sambil belajar” of Finland or Denmark?

References:

1. Work-life balance secrets from the happiest countries in the world, Cory Stieg (https://www.cnbc.com)

2. We’re learning the wrong lessons from the world’s happiest countries, Joe Pinsker, 27 June 2021 (www.theatlantic.com)

Will “Rich” EPF Savers Help The Poorer Members?

An interesting proposition made by Cindy Yeap, The Edge Malaysia is for EPF savers to help those with very little savings. Cindy suggests that policymakers could find out from the top 0.5% of the 14.9 million Employees Provident Fund (EPF) members who collectively hold 12.4% of the savings managed by the provident fund at end-2020. Or better, ask the top 2.2% or some 245,805 EPF members with at least RM500,000 in savings each, who collectively hold a quarter of the savings managed by the fund at end-2020. 

The top 0.5% refers to the 248 EPF members with at least RM10 million each saved with the provident fund at end-2020, as well as the 67,919 members who had saved between RM1 million and RM10 million each.

There were also 245,805 EPF members who had at least RM500,000 but less than RM1 million saved with the EPF at end-2020. This group makes up 1.7% of the total number of EPF members but have 12.8% of the savings managed by the provident fund.

According to The Edge’s calculations based on EPF’s membership and savings data at end-2020 as well as the dividend of RM47.64 billion (5.09% blended yield) distributed to members that year, around RM1.7 billion could collectively be redistributed to the lower-income group if EPF members with at least RM500,000 agree to receive a slightly lower dividend for savings above RM500,000 — while still having an effective dividend rate of between 3% and 5.08% instead of the blanket rate of just over 5.1%.

Their sacrifice could potentially raise effective yield for someone with only RM5,000 savings with EPF to 6.03%.

The 248 EPF members with at least RM10 million saved with EPF, however, would be deemed wealthy by most standards.

Just as how an opt-out system was applied when the government reduced the statutory contribution rate for employees to 7% or 9% (from 11%) during the pandemic, the government can ask EPF members with more than RM500,000, RM1 million or RM10 million to opt out if they choose not to sacrifice part of their dividends to help B40 or M40 (bottom or middle 40% income group) EPF members with less savings.

Tax credits or some other form of acknowledgement of their sacrifice may sweeten the deal for EPF multimillionaires. According to the Edge, an opt-in or opt-out system would also allay fears of the government arbitrarily taking dividends away from EPF members with more savings, many of whom may not really be all that wealthy but have been disciplined and not prematurely tapped their retirement savings.

On the first glance, it is appealing to the “rich” to assist the poorer segments of society. This is our subsidy mentality. Are we a socialist state? In China, the Government could confiscate your house (or any other asset) because all land belongs to the state.

But then, don’t we have compassion to help the poor? The key issue is low wages. The country has been promoting the “low-cost” economy thesis for the last 40 years. It is time to change wages, otherwise we will have more foreign workers and those locals remain in low-income jobs. Productivity and wages have to change.

To address the issues, several steps could be effected:

• Raise retirement age to 65%;
• EPF will secure Government support to “top-up” account 1 of the bottom 10% impacted by Covid-withdrawals (through bond issuance subscribed by “rich” EPF contributors);
• Increase minimum wage to RM1,500 initially, with the view of RM2,000 in 3 years time; and 
• Establish a joint public-private commission on wages

If you have to tax, then tax income or wealth, not contributors to a retirement fund. No matter what political stripe, this idea of using a retirement fund to address social issues is not the way forward. One may consider a higher tax for the “super-rich” (or the corrupt) to “save” the poor but please not a “tax” on “rich” contributors to a retirement fund! Otherwise, we could next have a “tax” on fixed deposits held above RM250,000 and not guaranteed by PIDM?

Reference:

Would multimillionaire EPF savers help poorer members? Cindy Yeap, The Edge Malaysia, 24 January 2022) https://www.theedgemarkets.com

Have Rich Countries Drained the Global South?

Recent research demonstrates that rich countries continue to rely on a large net appropriation from the global South. This flow of net appropriation occurs because prices are systematically lower in the South than in the North. For instance, wages paid to Southern workers are on average one-fifth the level of Northern wages. This means that for every unit of embodied labour and resources that the South imports from the North, they have to export many more units to pay for it.

Source: https://vesabarileva.medium.com

Economists Samir Amin and Arghiri Emmanuel described this as a “hidden transfer of value” from the South, which sustains high levels of income and consumption in the North. The drain takes place subtly and almost invisibly, without the overt violence of colonial occupation and therefore without provoking protest and moral outrage.

In a recent paper published in the journal New Political Economy, the work of Amin and others to quantify the scale of drain through unequal exchange in the post-colonial era was established. The drain increased dramatically during the 1980s and 1990s, as neoliberal structural adjustment programmes were imposed across the global South. Today, the global North drains from the South commodities worth $2.2 trillion per year, in Northern prices. For perspective, that amount of money would be enough to end extreme poverty, globally, fifteen times over.

Over the whole period from 1960 to today, the drain totalled $62 trillion in real terms. If this value had been retained by the South and contributed to Southern growth, tracking with the South’s growth rates over this period, it would be worth $152 trillion today.

These are extraordinary sums. For the global North (and these are the US, Canada, Australia, New Zealand, Israel, Japan, Korea, and the rich economies of Europe), the gains are so large that, for the past couple of decades, they have outstripped the rate of economic growth. In other words, net growth in the North relies on appropriation from the rest of the world.

For the South, the losses outstrip foreign aid transfers by a wide margin. For every dollar of aid the South receives, they lose $14 in drain through unequal exchange alone. This is not counting other kinds of losses like illicit financial outflows and profit repatriation. Of course, the ratio varies by country – higher for some than others – but in all cases, the discourse of aid obscures a darker reality of plunder. Poor countries are developing rich countries, not the other way around.

Neoclassical economists tend to see low wages in the South as “natural” – a kind of neutral market outcome. But Amin and other economists from the global South argue that wage inequalities are artefacts of political power.

Rich countries have a monopoly on decision-making in the World Bank and IMF, they hold most of the bargaining power in the World Trade Organization, they use their power as creditors to dictate economic policy in debtor nations, and they control 97 percent of the world’s patents. Northern states and corporations leverage this power to cheapen the prices of labour and resources in the global South, which allows them to achieve a net appropriation through trade.

During the 1980s and 1990s, IMF structural adjustment programmes cut public sector wages and employment, while rolling back labour rights and other protective regulations, all of which cheapened labour and resources. Today, poor countries are structurally dependent on foreign investment and have no choice but to compete with one another to offer cheap labour and resources in order to please the barons of international finance. This ensures a steady flow of disposable gadgets and fast fashion to affluent Northern consumers, but at extraordinary cost to human lives and ecosystems in the South.

There are several ways to fix this problem. One would be to democratise the institutions of global economic governance. Poor countries will then have a fairer say in setting the terms of trade and finance. Another step would be to ensure that poor countries have the right to use tariffs, subsidies and other industrial policies to build sovereign economic capacity. A global living wage system and an international framework for environmental regulations, and this would put a floor on labour and resource prices.

All of this would enable the South to capture a fairer share of income from international trade and free its countries to mobilise their resources. But achieving these goals will not be easy; it will require an organised front among social movements toward a fairer world, against those who profit so prodigiously from the status quo.

Reference:

Rich countries drained $152tn from the global south since 1960, Jason Hickel, Dylan Sullivan, Huzaifa Zoomkawala, 6 May 2021 (https://www.aljazeera.com)