Making Malaysia’s Base Lending Rate more relevant

 New interest rate framework expected to be more linked to funding cost

BANK Negara is moving ahead with the times by replacing the outdated base lending rate (BLR) with a more relevant interest rate benchmark.

“The BLR has become less meaningful as a basis for the pricing of loans, as the retail lending rates on new loans being offered by the industry are at a substantial discount to the BLR,’’ The Star reported, quoting governor Tan Sri Dr Zeti Akhtar Aziz.

For the third quarter this year, the average lending rate (AVL) was 5.4% compared with the BLR of 6.53% and fixed deposit (FD) rate of 3.15% for 12 months.

For the corresponding quarter last yer, the AVL was 5.55% while the BLR was still at 6.53% while the FD rate for 12 months was 3.16%.

The current BLR reflects other costs such as overhead costs.

The new framework will be more related to funding cost, especially marginal funding cost, which is actually how banks are pricing their loans, Zeti said.

While work is underway to come up with a new BLR, the intervention rate under the current BLR framework is expected to nudge upwards, said Nazlee Khalifah, the chief corporate strategist of Affin Bank.

Under the current BLR regime, the intervention rate of 3% is expected to increase 25 basis points by next June, said Nazlee.

The upcoming BLR is being discussed with a concept paper expected next month.

‘“They have to think of how to prevent capital flight as interest rates in the United States may rise and attract capital back to the country,’’ said Nazlee.

Beginning next January, the Fed announced it would start pulling back its bond buying from US$85bil per month to US$75bil.

Instead, it will provide forward guidance on interest rates which are expected to remain low, in view of US unemployment being above 6.5% and inflation kept low.

The US$1 trillion stimulus programme has been a huge success but this is the journey back to fundamentals.

The world economy is being weaned of easy money and every player has to play his part in ensuring recovery and sustainability.

It is not enough for just the regulators to be keeping an eagle eye on miscreants but the participants themselves have to know their limits.

The Hong Kong Securities and Futures Commission is cracking down on insider trading.

In a landmark ruling, a Hong Kong court has ordered Du Jun to pay 297 investors almost HK$24mil for the money he earned from his illegal dealing in 2007, said the South China Morning Post (SCMP).

Last year, 7,700 investors who bought shares of Hontex International were paid back after a court ordered the sport fabric maker to pay HK$1.03bil to small shareholders for allegedly misleading information in its listing prospectus, said the SCMP.

There have been many instances of insider trading but the punishment has become more severe in view of the trend towards investor protection and reimbursement worldwide.

Contributed by Columnist Yap Leng Kuen applauds the tapering off of the era of easy money.

It is a small world

The world is actually quite small

EVERY week, I go to the nearby wet market to stock up on provisions. One of the stalls I have to stop by is run by a young man who knows that I am there to collect my weekly quota of 20 kampung eggs.

Recently I asked him if he might want to consider starting up an online service to provide home delivery to his regular customers. After all, even the major hypermarkets are going big time in providing such a service to tap into the trend of people being so busy that grocery shopping needs another approach.

His reply tells me once again that true wisdom rests among ordinary people who truly know what the real world is all about. You can grab quotations from wise men and manage­ment gurus but sometimes the real gems are from people like my egg seller.

He basically told me that it is better for me to come out and get the chance to meet people rather than stay in the house. Every moment in any public area, he said, is fresh and unpredictable.

“You can bump into people you have not met for a long time or come across something interesting that cheers you up when you are feeling down,” he said.

The egg seller is correct to say that every moment in public is fresh and unpredictable. I have always believed that nothing happens by chance. Some call it divine appointments but it is this connection of one human to another that opens up a myriad of possibilities.

Through such encounters, we learn that the world is actually quite small once we start connecting the dots and learn that the person we have just met is actually not quite a stranger after all.

As much as I love the written word, I find that it is the spoken word, with all the body language appended, that conveys the true meaning of what we want to say.

To tell someone you are sorry through a card is easy even if you do not really mean it. But to say you are sorry up close and personal, you’d better mean what you say or else.

Those who are less socially inclined than I am will disagree when I say that we are not created to be solitary beings. We need company to flourish in thought and in deed.

We can talk about feeling the pulse of the people and of being connected to the grassroots, but if we are only doing so from the comfort of our living room or office, we will never get the real picture.

Some of the things I read online will make me think there is absolutely no hope left in the country, but when I am out there, I realise that this is just not the case.

Take a ride on the bus or the LRT, drop in to see a friend at the hospital, take a walk around the neighbourhood, have a chat with the grasscutter ...

Then you will learn that the world we live in is a wonderful place because the people make it so.

And we do so by not merely looking out for our own personal interests, but also for the interests of others.

In this season of Christmas, it is my hope that we do our part to reach out and love one another. We can, and we will, make a difference.

Contributed by Soo Ewe Jin. He wishes all Christian readers a blessed Christmas with a gentle reminder that this is the season not only for giving but for forgiving as well.

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Get pay from spying?

Whistleblowing hero: Germans holding up pictures of Snowden while protesting in front of the Reichstag building which houses the Bundestag (lower house of parliament) in Berlin . — AFP

Heavy-duty spying does not pay 

The hidden costs, and the controversy, of the massive US global spying operation keep on growing.

IF officials behind the US-based “Five Eyes” spying network had hoped the scandal would soon fade away, their obvious disappointment should be an object lesson about their excesses and abuses.



US, British, Canadian, Australian and New Zealand spies – together with their Singaporean and South Korean co-conspirators – had violated the implicit trust placed in their governments by friendly and ally nations around the world.

Former US intelligence contractor Edward Snowden had exposed how the conspirators had tapped into fibre-optic cables in 20 locations worldwide and infiltrated 50,000 computer networks.

This unprecedented scale of spying makes no distinction between friend and foe. It has provoked questions about the value of being a friend or “ally” of these Western countries.

Countries in the world’s main regions have routinely been spied on: Europe, East Asia, West Asia and Latin America. The spying exceeds all norms of intelligence gathering to target the personal cell phones of national leaders, from German Chancellor Angela Merkel to Indonesian President Susilo Bambang Yudhoyono and even his wife Ibu Ani Yudhoyono.

Snowden’s leaks reveal that Spain, for example, had been spied on so much as to have 20 million phone calls tapped each day. For the US authorities to insist that it was all for the sake of fighting terrorism is too much of a stretch.

The spying covers economic as well as political purposes. It was revealed that a foreign government’s confidential information picked up from spying is also used to give an unfair advantage to US companies against other companies in bids for international contracts.

Today’s supercomputers can do a lot of work in very little time. The ones used in the US global spying scheme apparently had very little ethical human supervision, precisely because that was the intention.

It has long been a “given” that all countries gather intelligence, to varying degrees, through some of their diplomats, expatriates and other undercover operatives. The extent of this activity also varies with the distance in relations between the spying country and the one spied upon.

Between friendly countries, discussions on issues of common interest and concern are the means of updating one another on events. Excessively intrusive and invasive spying, however, such as the kind Snowden has revealed, is supposed to be for untrustworthy governments and enemy nations.

Such universal perceptions and expectations lie at the heart of the current spying controversy. There is little wonder that countries so sordidly spied on take the matter so seriously.

Such spying shows the United States would enforce its will on all other countries, as opposed to sharing information between equal partners with mutual respect. It also implies that rules will be made by the US alone.

At the bilateral meeting in Jakarta during the week between Malaysian Prime Minister Datuk Seri Najib Tun Razak and Susilo, Malaysia declared full support for Indonesia in placing the spying scandal on the agenda of the next Asean Summit in Myanmar.

In seeking a satisfactory corrective for spying intrusions that breach all known limits, granting a regional profile to the problem is the least that Indonesia and Malaysia can do. Thailand is another Asean country targeted by these spies operating in part from the respective Australian embassies.

France and Germany are particularly outraged by “Five Eyes” snooping. Italy, the Netherlands and Spain are also concerned, as the scandal unites political parties within individual nations as well as European countries throughout the EU – except for Britain.

The aggrieved countries find the excessive spying violating privacy rights, their national sovereignty as well as their domestic laws. US officials predictably reject its seriousness.

The EU now wants a new law requiring private IT companies to inform European regulators if a foreign snooping request is made on any European citizen. That effort could clash with an existing US law that bans any company whose “cooperation” is required from telling anyone.

The potential conflict would pit European determination against US intransigence. It would further test the trans-Atlantic alliance in the post-Cold War period.

As the initial leaks started to provoke European anger, clandestine efforts tried to dilute or divert the upset.

It was somehow also “leaked” that the French government had been spying on its own population, followed by allegations that the German government had known about and even used information obtained by US-connected spies. The truth of these “mitigating” leaks was, however, less clear.

As expected, such efforts at damage control had a very limited effect. The harm perpetrated by US-led spying on the trust, goodwill and relations with Europe was far more serious, and remains a main feature in the foreground.

In Latin America “south of the border”, Brazil, Colombia, Mexico and Venezuela are particularly disturbed by US-led spying activities. Argentina, Bolivia, Chile, Ecuador, Nicaragua, Paraguay and Uruguay are also concerned.

Several of these countries have already offered asylum to Snowden, who hopes to avoid prosecution in the US after his current one-year asylum stay in Russia. The more Washington pressures and threatens these countries, the more keen they are to protect whistleblowers like Snowden.

The Union of South American Nations (Unasur) is currently working on a new, alternative communications system that will cut the prospect of US spying in the region. As a sign of seriousness, the region’s defence ministers who form Unasur’s defence council are tasked with developing the new system.

Unasur’s 12 member countries may be disadvantaged in lacking sophisticated technological inputs for the system. However, they also enjoy certain advantages in a renewed unity, determination and strength of purpose.

Brazilian President Dilma Rousseff, whose email had been hacked by US spies, has accused Washington of violating human rights and crime. Four days ago, she followed this with a defence procurement contract that spelt out clearly where Brazil stood.

Capping a 10-year plan, Rousseff announced on Wednesday that Brazil would buy 36 of Sweden’s Saab Gripen fighter jets instead of Boeing’s F/A-18s in replacing the air force’s ageing fleet. Brazil had bargained the price down from US$6bil (RM19.8bil) to US$4.5bil (RM14.8bil).

US officials privately grumbled over having lost “a US$4bil deal” but in fact the cost of NSA spying on Brazil is almost twice that. Boeing’s price for the F/A-18s was US$7.5bil (RM24.7bil).

Over the longer term, the cost to the US economy is likely to grow if Washington does not or cannot seriously mend its ways. US-based companies like Google, Yahoo! and Microsoft are often seen by other countries as part of the problem in having to comply with US laws and demands.

Unasur is already showing the way forward by working on an alternative. In time, other regions like Europe and countries such as Russia, India and China may also develop their own communications systems and software, taking more business away from US companies.

In the short term it is always tempting to blame the messenger such as Edward Snowden rather than the problematic nature of the message itself. Ironically, the development of modern communications has raised awareness of privacy and sovereignty rights – and of their violations.

To level the playing field, IT development as well as spying activities may need to become more equalised. By serving the greater interests of the greater number, that would be democratisation indeed.

Contributed by Bunn Nagara, who is a Senior Fellow at the Institute of Strategic and International Studies (ISIS) Malaysia, The Star/Asia News Network

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