FDI – more than economics

DIPLOMATICALLY SPEAKING
By DENNIS IGNATIUS

Malaysia needs to go well beyond mere economic and fiscal measures if it is to reverse the decline in foreign direct investment. 

THE recently released UNCTAD World Investment Report 2010 indicating that foreign direct investment (FDI) in Malaysia declined by a massive 81% in 2009 has quite understandably grabbed headlines.

According to the report, FDI declined from US$7.3bil (RM23bil) in 2008 to a mere US$1.4bil (RM4.4bil) last year. In addition, there was a massive US$8.04bil (RM25.3bil) outflow of capital.

The overall result was that our country experienced its worst FDI performance in decades.

As we so often tend to do with bad news, we shift the blame; the drop in FDI was explained away as the result of “external factors.”

The argument was made that the global economy is, after all, still recovering from the worst economic crisis since the Great Depression. Besides, the doubling of foreign ownership of Malaysian Government Securities (compared to the previous year) and the splendid performance of the Ringgit indicate that investor confidence continues to remain high.

The massive outflow of funds from Malaysia, on the other hand, was explained away as Malaysian companies aggressively pursuing investment opportunities abroad, a coming of age of sorts even, by our multinationals.
Nevertheless, for a country that has long depended upon FDI to prosper and grow, such a drastic decline comes as a rude awakening.

For years we always bragged about how special Malaysia was by virtue of our success in attracting FDI at levels which left our neighbours green with envy.

High investment inflows were seen as a reflection of our competitiveness, our highly favourable business environment as well as our political maturity and stability.

Dismissing the significance of the precipitous decline in FDI might be politically convenient but it will not hide the arresting message that it sends: a serious loss of confidence in Malaysia and a sign of our decline.

Anyone closely monitoring developments in Malaysia, including foreign investors, cannot but conclude that our nation is now increasingly shaky in several areas. And they must also wonder, given recent events, if we are even up to the challenges we face.

Right now we are transfixed by the staggering RM12.5bil Port Klang Free Zone scandal.

What is really distressing is that such corruption and scandalous mismanagement of public finances keeps recurring with frightening regularity.

We seem to helplessly careen from one major scandal to another. It is a mess, a sordid mess, that must surely cause many foreign investors to simply shake their heads in disbelief and dismay.

And more than that, it tells the world that we still have not found the political will or the necessary institutional architecture to prevent such massive corruption from recurring.

It would be naïve to think that corruption on this scale will not impact investor confidence.
And, given our dismal record of bringing to justice the real kingfishers of corruption, not many believe that things are about to change.

Cumulative scandals affecting other national institutions, including the police and judiciary, have also steadily undermined the perception of Malaysia as a safe and competitive place for long term investments.

And then there is the increasingly strident and racially charged rhetoric that marks so much of what passes for political discourse in our country these days.

It may be just politics Malaysian style to some or a convenient, if morally bankrupt way, to garner support to others but it makes foreign investors, and many locals too, very jittery.

It is not for no reason that more and more Malaysians of all ethnic backgrounds are packing up and moving abroad.

According to the World Bank, the number of emigrants out of Malaysia rose from 9,576 in 1960 to almost 1.5 million in 2005. Over 300,000 left between March 2008 and August 2009 alone.

In this connection, I wonder how much of that US$8.4bil that left our shores last year was simply Malaysians moving their capital to safer shores.

The assurances by the government that it will take proactive measures to reverse the decline in FDI are of course welcome as are the measures already introduced under the Government Transformation Programme and the New Economic Model.

Our response, however, needs to go well beyond mere economic and fiscal measures if we are to reverse the decline.

What is also urgently needed is real and effective political leadership to tackle head on the corruption issue and the growing racial and religious divide.

The Prime Minister’s 1Malaysia policy, while constructive and desperately needed, unfortunately already suffers from a thousand cuts. Unless he is able to revive confidence in the Government’s ability to bring about its realisation, it will not help turn the tide of slumping investor confidence.

If we ever hope to raise the RM115bil worth of investments to achieve the goals of the 10th Malaysia Plan, we must act now.

And not with half-measures and half-hearted gestures but with credible policies and programmes backed by the necessary political will.

Bearing in mind the turbulent and uncertain global economic environment we are in, our very prosperity, if not survival, depends upon it.

How expert are the experts?

Review by Choo Li-Hsian

Wrong: Why Experts Keep Failing Us – And How to Know When Not to Trust Them
Author: David H. Freedman
Publisher: Little, Brown & Co

EVERY day, we are surrounded by “expert advice” from various media. So, how do we pick the good stuff out of the constant stream of flawed ones?

In a sense, we often trust experts blindly because we are programmed to do so from young – at first with our parents, teachers, and then the authoritative voices in textbooks and the network news.

Studies on brain scans apparently show that we actually surrender our own judgment and forego our own decisions when presented with “expert advice”.

David H. Freedman, author of the book Wrong: Why Experts Keep Failing Us – And How to Know When Not to Trust Them has spent the past three years examining why expert pronouncements so often turn out to be exaggerated and misleading.

He provides several reasons. One of them is that scientists are not as good at making trustworthy measurements as we give them credit for.

Surveys revealed that fraud, careerism, suppression of data and lousy analysis, among other reasons, are fairly rampant even among the most respected researchers and institutions.

As Freedman puts it: “It is not that they are mostly incompetents and cheats. Well, some of them are... (but) a bigger obstacle to reliable research though is that scientists often simply cannot get at the things they need to measure.”

He terms this as the streetlight effect – a reference to a joke scientists love to tell. Late at night, a police officer finds a drunken man crawling around under a streetlight.

The man says he is looking for his wallet; that he is likely to have dropped it across the street. “Then, why are you looking over here?” the police officer asks. Because the light is better here, explains the drunken man.

Freedman notes that “many and possibly most scientists spend their careers looking for answers where the light is better rather than where the truth is more likely to lie... it is often extremely difficult or even impossible to cleanly measure what is really important, so scientists instead cleanly measure what they can, hoping it turns out to be relevant.”

In many cases, scientists are stuck with surrogate measures in place of what they really want to quantify.

For example, economists cannot track the individual behaviour of billions of consumers and investors, so they rely on economic indicators and data extracts to form conclusions. A 1992 study by researchers at Harvard and the National Bureau of Economic Research examined papers from a range of economic journals. They discovered that none of them had conclusively proved anything.

John Ioannidis, a highly regarded “medical mathematician” from Greece’s University of Iaonnina examined the 45 most prominent studies published since 1990 in the top medical journals. He found that about one-third of them were ultimately refuted.

Scientific studies are also not always performed on the right subjects. Patient recruitment is a problem in medical studies. Researchers often end up enlisting those who do not represent the population in terms of health or lifestyle – students, the poor, drug abusers – as their subjects.

Studies on human health are based on animal testing but three-quarters of the drugs that prove safe and effective in animals end up failing in early human trials.

“Publication biasness” is quoted as the biggest culprit, that is, journals’ tendency to eagerly publish the small percentage of studies that produce exciting, surprising breakthrough results.

How can we counter all this? Freedman is not calling us to discard experts and their findings. The key is to distinguish between expertise that is “more likely to be right” and those that is “less likely to be right”.

We need to ask: “What does better advice have in common?” or conversely “What does bad advice have in common?” Bad advice, according to Freedman, tends to be simplistic.

It tends to be definitive, universal and certain; it is advice we love to hear, for example, chocolate is good for you.

The best advice tends to be less certain – those who say: “I think maybe this is true in certain situations for some people.” We should, therefore, avoid findings which shout “it’s exciting, it’s a breakthrough, it’s going to solve your problems.”

Instead, we should consider advice that embraces complexity and uncertainty. While this may go against our intuition, we have to accept that we live in a complex, messy and uncertain world. Experts who are more likely to steer us in the right direction are those who acknowledge this.

But here’s the million dollar question: since Freedman is a kind of expert on experts, why should we trust him? Freedman concedes that you should not.

In fact, he even dedicates a whole chapter to this subject entitled “Is This Book Wrong?” He emphasises that his purpose is not to give people answers but to provoke thinking, raise awareness and point out that there are real questions we should all be asking instead of passively accepting the status quo. In essence, we should all be smarter about how we pick our advice.

Life after retirement

By EUGENE MAHALINGAM
eugenicz@thestar.com.my

RETIREMENT. To many people, it refers to the period in life where one should be kicking back, relaxing and catching up on the things they never could during their long, gruelling working lives.

Realistically, however, not many people get a chance to enjoy their retirement period, usually due to financial constraints that comes once we stop earning a living.

With the rising cost of living, many retirees are finding it difficult to make ends meet with their EPF (Employees Provident Fund) savings or pension scheme alone and are forced to continue working.

For the purpose of this article, we’re going to skip that group of people who, during their working lives, were prudent with their expenses and shrewd with their investments and are now laughing themselves all the way to the bank till the day they die.

For those who still need to earn a living post retirement, embarking on a job can still be fun and need not be a burden. In fact, many of today’s retirees view retirement not as an end, but instead as a new and exciting phase in their lives.

Work from home

For a retiree, working from home has its advantages, says Janice Tam, a retired school teacher.
“You can work at your own pace and avoid the hassle of travelling to and fro to an actual office,” she says.
Tam today provides tuition classes for kids below 12 years of age.

“Providing tuition classes is a very popular side income alternative. Baby sitting is also a good post retirement job choice, especially when the parents drop the child at your place and saves you the hassle of having to go to their home.”

Starting your own business

Many a times, the experiences of a long career can provide retirees with the confidence and knowledge to launch a successful business.

G. Murthy used to serve with the armed forces and now, at 57, is heading his own security firm.

“My experience with the armed forces allowed me to gain invaluable knowledge in self defence and now it not only allows me to help protect people, it also provides me with a decent income.”

Sometimes, the knowledge and experience could be gained from a family business.
Growing up, Rashid Abu Bakar, now 67, used to enjoy the nasi lemak his mum sold to the local village-folk to earn a living.

After serving with the Government, he is now retired and is continuing the family business and claims that it is “good pocket money.”

“It makes for a good side income on top of the pension that I get every month.”
Rashid says he enjoys eating the nasi lemak just as much as he does making them.

“As it’s important to find pleasure in what you do, or else it would just become a burden. I have to wake up very early in the morning to prepare the food but it is something that I enjoy doing.”

He adds that it is important to understand the demands and dynamics of running your own business, its prospects and needs.

Become a consultant

Many people retire from their jobs only to become consultants to their previous employers or advisors to organisations within the industry.

Says Alvin Loh, 63, an advisor to a local property developer: “Consult-ing provides you with a lot of flexibility and due to the person’s invaluable years of experience, demand for such jobs are good and so is the salary.”

Go back to school

It is not uncommon for senior citizens to enrol part time or even full time at a college or university to learn a new skill and take up a new job, says Kajang-based private college tutor Rashid Ali.

“There are many senior citizens where I teach who are taking up something new. Some of them even come back to do another course!”

Rashid admits that taking up a part-time diploma or degree can be a huge sacrifice for someone who is married.

“There are many private institutes that offer night-time or weekend courses to cater to this group of people. There are many genuine courses that one can do online.

“Having an extra qualification on your resume carries a lot of weight and if it means better job and salary prospects, it’s worth it,” says Rashid.

Become a volunteer

There are many organisations out there that are eager to accept volunteers, regardless of a person’s age, says Jacob Wong, a committee chairman for a Kepong-based non-profit organisation.

“Because we have to constantly keep our budgets down, we’re always looking for volunteers. Believe it or not, a lot of times we prefer to work with retirees because they are less demanding and are quite satisfied with the pocket money that we give them.

“Many of today’s youths are just interested in making money and are not interested with volunteering. That’s why we prefer to work with senior citizens,” he says.

Schools, libraries, religious and relief centres and charitable organisations are among some of the places that are always on the look out for volunteers, Wong adds.