Malaysia and its Proton - a success?

If you have a largely captive market, generous and vociferous government support, and handicapped competition, you are expected to perform, at least relatively, well. It is like having to run a race, where you are given a generous head start, and where competitors have to have their legs bound together.

Well, one is likely to win such a race and trounce the competition, right?

However, what defies common sense is that this is mostly untrue when it comes to Proton, the Malaysian national carmaker launched by Dr. Mahathir Mohammed to much fanfare in 1983. To provide a sense of perspective, one could look at how far Hyundai-Kia and the Korean auto industry have come, having started off on an equal footing in young, developing nations.

What, then, is the problem with Proton? How can one not succeed, with a captive market and strict protectionist policies against foreign interlopers? It almost takes effort to do so.

Perhaps the easiest and most expedient answer we can turn to is complacency, and this certainly helps account for some of the failings at Proton. Generally, one understands that some element of competition is beneficial for the growth and development of a company. Companies – and people – do not evolve and grow in a sheltered, sterile environment that does not reward creativity, risk-taking and innovation, but political connections and manipulations – the know-who economy instead of the know-how economy. This results not in the survival of the fittest company, but the most connected, which is detrimental to the health of the market and the national economy – and not least the ordinary Malaysian consumer.

A healthy dose of competition does make one stronger, and make for more efficient markets, which will benefit more people, more. But is that not the aim of any well-meaning government attempts to set up government-linked companies (GLCs) in the first place? To benefit the people of the country? Then why the exorbitant tariffs, channelled to a select few businessmen in the form of “approved permits” to own a foreign vehicle, so that ordinary citizens end up paying top-price for poorly produced cars, and indirectly subsidising an uncompetitive company? Who benefits from it?

Perhaps here we can also see how Proton has become too much of a political entity, than an economic one. When politics, not economics, have to influence the running of a company, you’ll most likely end up with a mess, and an entrenched political elite benefitting from it. Proton’s continued evasion of ASEAN free trade agreements with official government support, though inevitably still losing market share to its gradual implementation, and her failure to find a foreign technology partner points rather incriminatingly to this.

The end result it that Proton has become uncompetitive domestically, and internationally. As Malaysians see it, the ‘jaguh kampung’ (village champion) has now become so bloated and uncompetitive after years of generous support from the government, that it can no longer even compete in its own heavily-tilted domestic market. It cannot even win the race, 20 years on, when the other competitors are running with their legs bound.

The truly sad thing is to realise that the Proton story in large mirrors the Malaysia story – resource-rich, full of potential and promise, but somehow managing to squander such advantageous head starts away – while tiny, resource-less Singapore down south has already surpassed Malaysia in GDP.

To be fair – and quite optimistic - this ponderous, lumbering village champion can yet still recover, and be more streamlined, more lean and mean. It will be painful (but isn’t anything ever worth achieving always so), there will be reluctance and resistance, especially from those who benefit from such a system, but there is a possibility.

The solution is a simple one - there just has to be the political will, by the government of the day, to wipe out entrenched interests and political patronage and cronyism in all its forms, and nurture free and fair competition and healthy markets. The rise of a viable two party political system in Malaysia is a promising start, adding much needed checks-and-balances against abuses of political power, and yes, only through injecting a healthy dose of competition.

Indeed, in modern international trade and relations, nothing is ever a fait accompli. Even Burma is seeing reforms now, and already reaping some of its fruits. The lesson here cannot be more clear – or harrowing, for Malaysia. Once one of Asia’s most promising countries, it has taken only a few years of mismanagement and iron-fisted rule for Burma to plumb the full depths of the abyss of international isolation and condemnation.

The village champion will have to compete on an equal footing against other challengers from the same village, and then, once he has proven his mettle, against those from other villages and other seas. Complacency, closed-door policies and patronage will ultimately only harm a country, while benefitting its ruling politicians. This is where we can see if a government works in the broad interests of its citizens, or its pampered political elite, allowed to grow bloated feeding parasitically on the sweat and blood of its fellow, less-privileged citizens.

In a pro-market, pro-competition environment, Proton, like Malaysia, will have no choice but to streamline, consolidate, reform, and compete. Uncompetitive suppliers and contractors will have to be shed, no matter their political affiliations. Quotas and preferential treatments will have to be implemented correctly and not abused, and then gradually phased out.

Malaysia, like Proton also needs a new equation – she can no longer compete on cost. There has to be more value-add, a shift towards more knowledge and skills-intensive sectors (again, areas greatly stimulated by fair competition and meritocratic practises) - both Proton and Malaysia cannot afford to live in denial, to be the proverbial frog under a coconut shell, the Malaysian spin on the well-known frog in the well, who thought his well a mighty ocean.

For the world has changed. And in a globalised world, Malaysia needs to move fast. She has already fallen far behind Singapore. Vietnam and Indonesia are poised to take over as the new Asian economic tigers while Malaysia basks like the veritable fat cat purring contentedly over its supposed successes. Even Burma has started on the long but sure road to reform.

We should conclude with the very apt statement the World Bank made in a recent report: The world will not wait for Malaysia.

Singapore Budget 2012

With the global financial crisis still lurking in the background, you would expect the upcoming Budget 2012 to dole out some fiscal measures to support companies with their businesses. You would think that it would be the most ideal way of helping businesses raise productivity and cope with the rising business and labour costs. Which is exactly why the recent comments of Budget 2012 focusing on intensifying long-term economic restructuring efforts surprised even myself.

Amidst the uncertain global outlook, the upcoming Budget 2012 plans to help Singapore businesses stay focused on its long-term strategy of raising productivity. I recognize that budgets in the past have implemented tax relief schemes to help small and medium-sized enterprises (SMEs) to invest in R&D and human capital. With the downbeat forecast of the global economy, the government should not simply abandon these SMEs in this time of uncertainty, but rather continue to offer such schemes in a plain, straightforward manner. Surely companies would like to utilize these schemes put in place by the government, but lack the proper information and time to take advantage of them. This can only be attributed to the strict criterions and complicated application processes that come along with these assistance schemes. What I’d like to see is more flexibility in these assistance schemes in order for more businesses to reap the actual benefits.

In the government’s defense, there is a danger of SMEs becoming overly dependent on them to hand out reinforcements every time a slowdown in the economy occurs. Yet it is hard for me not to expect the government to ease the burden of rising costs of businesses. Singapore’s economy is not fully recovered from the major economic downturn and the government prospectus of the economy rebounding has yet to materialize with its subpar growth of 3% this year. Relative to the circumstances of the global economic climate, uneven growth patterns in the US, turbulence in euro zone, coupled with faltering growth in Asian economies; clearly, one can only imagine the future outlook to be more unpredictable.

Come Budget Day, I expect that businesses concerns should be properly addressed. In order for Singapore to continue to be a competitive hub for businesses in the Asian region and compete with regional economic hubs, it needs to be able to retain the growth of its companies.

Borrowing Christmas

“What are you getting your family and friends this Christmas?” At this time of the year, you must have heard this question at least a thousand of times! Whereas Christmas should be all about spending time with your family and friends and, for some, to revive their faith, nowadays the holiday’s emphasis is mostly laid on the material aspect.

With the global economy staggering, the ‘giving’ aspect of Christmas because more difficult. A financial times report stated that many Britons will take on more debt to fund their Christmas expenses. However, banks remain hesitant in lending money to lower income households. This creates a situation where people find their extra 300 pounds or so they need for their holiday gifts by going to a payday lender.

These types of short-term loans have increased significantly both in the UK as well as in USA, as households need some extra cash to pay for their monthly bills, or in some cases, to fund their Christmas expenses. When they receive their next months’ pay check, they then pay back their loan and, according to several sources, a 15 percent charge. Because these payday loans are most often for small amounts of money – usually only a couple 100 dollars – borrowers don’t often realise the huge rates they pay for it. However, if payday loans are rolled over, the annual interest rate for their loans can be extremely high. 

To give you an understanding of how important this phenomenon has become, the annual US payday market is 40 billion USD and the annual UK payday market is 2 billion pounds. While these practices have been in place for a while, this year new US firms were founded aimed to entering this large market. What Symbius and other companies are trying to do is deliver small loans through employers of companies to their low-wage workers. By working closely with employers these start-up firms can look into how much the employees earn and can assess whether a loan should be granted or not. The amount plus a (lower) charge will be deducted from their next pay-check. These charges are considerably lower than a payday lender’s charges, because they operate with lower costs.

The main issue for these start-ups is to convince companies of the benefit of this service. A potential benefit could be that there is less stress in the workplace because employees know that there is now a cheaper way to get that extra cash they need than going to a pay day lender.

However, from an ethical viewpoint, are these services encouraging people to get into more debt? Shouldn’t it be better to not provide any loans and let people be more conscious about their expenses? Your expenses this month will be more or less the same the next month, so if you have to borrow money to make this month, you probably also have to borrow for next month. Especially at this time of the year, wouldn’t you rather give your loved-ones a warm welcome to your house during the festivities and know you are able to make your bills in January, than take on a new loan to fund your gifts? 

A sad tail

Tis’ the season of giving. With the multitude of charities that exist, I decided to donate to one called SaveJapanDolphins.org when I was recently introduced to a documentary film, The Cove. Released in 2009 and directed by former National Geographic photographer Louis Psihoyos, The Cove boasts an enviable number of awards and critical acclaim, namely an Academy Award for Best Documentary and audience awards at Sundance and the Directors Guild of America just to name a few.

This film follows former dolphin trainer Ric O’Barry in his quest to document and publicize the hunting and subsequent slaughter of dolphins in Taiji, Japan. The Cove received conflicting reviews to say the least. Some call it a shocking exposé of one of the biggest environmental cover-ups in the world, whereas others shrug it off as a piece of propaganda with a grossly racist portrayal of the Japanese.

Social engineering in Japan has long created the culture of nurturing obedient, hard-working factory and white-collar workers to fuel the economy. There is no doubt that eating whale and dolphin meat has been a part of Japanese culture for hundreds of years. And it is not surprisingly that some people may view this film as being critical and lacking tolerance of a more conservative culture. 

Putting the issue of racism and politics aside, we cannot deny that fisheries all around the world are being depleted rapidly, and the whale and dolphin meat being consumed by the Japanese contain unsafe levels of mercury. I will add that the Japanese are unaware of this fact, and because of this, the controversy of whaling and dolphin slaughter has become not only a humanitarian concern, but also an ecological and public health concern. 

However there is a lot of money to be made off the exploitation of dolphins and other cetaceans. One live bottlenose dolphin can be sold for more than $150,000 to any dolphinarium or exhibition center. SeaWorld alone, which owns 20 of the world’s 42 captive orcas, made $1.4 billion in profit last year. As long as these numbers keep going up, we can be sure that the problems of depleting marine life and increased numbers of mercury poisoning are only going to get worse.

We live in an era that believes that money makes the world go round. Trying my utmost to avoid sounding like a hippie environmentalist, taking a moment to look away from the glare of greens, sometimes the other things we see may shock us. Hate him or not, we’ve got to give it to Ric O’Barry. The man has a drive to fight and work for a cause he so passionately believes in, a trait lacking in our society today. 

Free Water

I recently came across this video which showed me how a small simple idea can grow into a multi-million dollar non-profit organization. The video above pretty much explains the whole story. Anybody would be awestruck by such an ingenious plan to help so many people. Let me go into more depth.

Scott Harrison founded “charity: water” in 2006 when he was 31 with the motive of wanting more out of his life. Having previously been a NYC club promoter, he committed 2 years of his life studying the poverty situation through volunteer services. By tracing problems surrounding these situations, he deduced that a lack of clean water was a key factor. After which he began using his network to garner as much support for his cause as possible. As mentioned in the video, he started using the simple idea of giving up his birthday presents and asking people to give him a small sum of $20 instead.

When I first watched this video, I could only think how innovative this man was. How many people could honestly change so many people’s lives just by this simple idea? The truth is almost everyone. By creating awareness, the organization has raised over 40 million dollars as of July 1 2011 and this number continues to rise. The idea has struck so many people over the last 5 years that donations have been received from over 50,000 individuals and served about 19 countries in the world. People’s attention was captured since it was founded. So ask yourself, how do you start from scratch and grow to a multi-million dollar organization in such a short span of time?

Obviously if I had the answer to that above question, I wouldn’t be talking about it but rather getting on with the answer. The truth is that it’s easier said that done. However this example here shows us the importance of drive and passion when you’re trying to grow your company. Scott Harrison found a cause he believed in and it pushed him to “never stop” contributing to his organization. By aligning thousands of peoples interests with his own, he managed to do something huge for the people who require that simple resource that we take for granted everyday.

Inspiring don’t you think?

The end of bookstores?

During the past months there has been a lot of speculation about which e-book reader technology would become the most popular. Let us change gears for a moment and take a closer look at the book industry itself and at the future of independent bookstores more in particular.

Not only now do these independent bookstores experience significant competitive threats, but this has been the case for several decades. The first threat arose with the surge of large bookstore chains, which offered a larger selection of books. Afterwards, readers had the possibility to purchase their books cheaper via the internet. Consecutively, large brick and mortar companies started selling books at discounts. And most recently, it is e-book technology which challenges the existence of independent bookstores. What made these independent bookstores survive during the past decades and how can they remain competitive?

Identify your shop as a community cornerstone

The first option independent bookstores have, is to identify their shop as a key asset or centre point of the local community. To create community involvement, independent bookstore owners should organise book club meetings and arrange for appearances of bestselling authors. This larger community involvement will convince customers of the added value of paper books compared to e-books and will create a larger footfall to your shops and potentially drive sales.

Increase your product range to other products

If your core products, books, are in danger, leverage this exposure by offering other products. You should include convenience products, such as stationary products, near the counter so shoppers can look at them when they are queuing up. There even exist independent bookstores which offer almost completely different product lines next to their traditional ones. Other shop owners make their shop look unique or put nice sofas and coffee stands in it – assets which internet shops can’t offer. If your shop focuses on comic books, you can sell miniature versions of comic book heroes.

Control your costs

The major operating costs for an independent bookstore are labour and rental costs. It is important to control these costs as much as possible in difficult times. Next to this, take a closer look at costs related to your inventory and your book range. Define your shop image by determining the optimal inventory level and your selection of books by answering the next question: Will you attract more customers by offering titles which cannot be found in larger bookstores or does it make more sense for your shop to create a certain image by focusing on a particular genre of books?

Determine your optimal store format and image

It is funny how a decade ago, large bookstores out competed independent smaller bookstores because of their larger offerings and that now the situation has turned around because of the new competitive threats coming from large brick and mortar shops offering books at a discount, the internet and e-book technology. In this new competitive environment, it is not just the mega format which will be successful. As an example here is the bankruptcy of Borders earlier this year; this large bookstore chain operated with too large retail space while losing customers to e-book versions of many books. Clearly, nowadays there is also room for smaller store formats. In this way independent book stores can identify themselves as vendors of specialty books to attract a certain niche, while book stores in city centres still can afford to have a larger store format. What kind of niches are there? Basically all professions, hobbies and pastimes are documented in books. Organise your shop towards that particular niche.

In a nutshell, facing fierce competition of the book industry, independent bookstores can remain competitive by leveraging their importance to the community, by carefully assessing their location and its impact to the store size and lastly by identifying their shop as a specialty store focusing on a certain niche.

Finally it is useful to understand that the loss of independent bookstores will be detrimental for societies because they function as a cornerstone for general education and for social contact between community members. Next to this, I am sure that many of us have had the experience of wandering in a bookstore and, unexpectedly, finding a particular book which captures your strongest interests. Checking book titles on the internet can’t provide you with such a feeling. It is important for bookstores to emphasize these qualities in order to remain competitive. 

Occupy Wall Street

A recent Hagar the Horrible comic strip shows Hagar, our Viking protagonist, walking into a bar, where he meets a man who dressed like Robin Hood – green tunic, green hat with a feather stuck in it, and a quiver of arrows. “So what do you do for a living, stranger?”, Hagar asks. “Well,” the man replied, “I rob from the poor to give to the rich”. An incredulous Hagar retorts - “What kind of business is that?

“It’s part of the banking business”, the man snaps back, taking a patrician sip of wine.

It’s amazing how public perception of bankers have soured in recent years, especially since the Lehman Brothers saga. The recent – and ongoing – Occupy Wall Street movement, which brought a taste of the Arab Spring uncomfortably close to Uncle Sam’s own financial heart, captures this sentiment perfectly.

The movement has been portrayed by its advocates as a protest by an increasingly disenfranchised ‘99%’ against the current form of capitalism and its elite Brahmin class on Wall Street. But it is so new that the media and its pundits, from ignoring it in its early days, still can’t make head or tails of this sudden outburst. Much less the general public. Or even the protestors themselves. It’s definitely not just about making the rich pay more taxes. The overall sense is one of a general malaise within the system that no one is yet able to put a finger on.

And what we can’t diagnose properly, we can’t treat properly. The importance of keyhole economics, instead of vague, reactionary measures, cannot be stressed more – not unlike effective surgery on a very sick patient. It would be naïve to presume that there are simple solutions to complex problems, much less problems we cannot even clearly identify yet. We know something is wrong, but what exactly? And is there a better alternative that we can turn to?

President Obama hit the nail on its head when he spoke of the frustration of the people at a recent press conference, and this is perhaps the closest we can come to making sense of the movement, in a single, simple word. Frustration.

Looking at fresh developments of similar protests sprouting up in major cities around the world, against a backdrop of growing economic uncertainty in the global economy and rather deep-rooted shortcomings in the US and European economies, one can’t help but wonder, if Marx had been right all along, that this system is increasingly unsustainable?

The feeling of frustration is perhaps one arising out of a sense of being stuck in a rut – that we are stuck with this system as far as we can see, with its increasingly obvious shortcomings. The sentiment that there is no proverbial light at the end of an increasingly long, and dark tunnel.

The real question that this movement raises is quo vadis, America? Where to, America? Less importantly (to us, but maybe not to the millions of Americans), can America, and the American Dream, continue to provide leadership and inspiration to the rest of the world into this new century?

This is a worrying question. The problems of the system are perhaps glaringly obvious, but can we come up with an adequate solution? Can we fix it through keyhole economics, or is an entire systemic overhaul needed? And is there a political will to see it through, above the pragmatic, short-term interests of partisan politics? Change, we can?

There already is a growing sentiment – and body of evidence - that change is a must. Real change, not superficial change. And within any change is both opportunity and risk, which have to be managed carefully, and conscientiously. Then there may be light at the end of the tunnel – we just have to plan critically, tread carefully, act decisively, and keep our fingers crossed that it is not a speeding train.