July 21, 2010

Malaysia: How poor are we, really?


The government likes to boast that Malaysia has almost erased poverty. It is the one unchallenged success that is shouted out again and again to show how far we have come since Merdeka.

The line is familiar: “In 1970, 49.7 per cent of households were living in poverty. Now it is only 3.8 per cent.” Or out of 6.2 million households, only 228,400 can be classified as poor.

These 228,400 are households that earn an average of RM800 a month and below.

Is RM800 a fair cut-off point? Because it effectively means that if a household of four earns RM900, RM1,000, or even RM1,500 a month, they cannot be considered poor.

If that is the case, then why are there more and more media reports of families complaining that they cannot make ends meet even when they earn RM2,000?

How did the government calculate and decide that RM800 is the poverty line?

Jayanath Appudurai, who writes extensively on poverty for the Centre for Policy Initiatives, believes that the government’s calculations are unrealistic.

Here, he argues that we need a new standard to measure poverty — one that more accurately represents the cost of food, clothing, rent and other basic necessities, and how much it takes for an average family of four to keep themselves afloat in today’s Malaysia.

Jayanath’s assessment is based on government data in its 10th Malaysia Plan (10MP) report released in June, and the New Economic Model (NEM) that was out in April.

The Poverty Income Level (PLI) is defined as:
“An income that is necessary to buy a group of foods that would meet the nutritional needs of the members of a household. The income is also to meet other basic necessities such as clothing, rent, fuel and utilities, transport and communications, medical expenses, education and recreation.”

Plainly speaking, the PLI is how much money in a month a Malaysian household needs to meet these eight components.

Though the Government calculates different PLIs for Malaysia’s three regions, the total average PLI is RM800.

For this demonstration, Jayanath uses the Peninsula PLI of RM763.

A household living in the peninsula is considered poor only if its monthly income is below RM763.

“The government claims that it uses a World Bank standard to measure PLI. But they do not reveal the actual methodology of how they arrive at RM763,” says Jeyanath.

The World Bank standard, Jayanath says, recommends that medium-income countries should calculate PLI based on US$2 (RM6.20) per individual per day. Meaning one person would need US$2 per day in order to meet both food and non-food necessities.

If that figure were used for Malaysia, a theoretical household of 4.4 people would then need RM858 a month to not be declared poor.

The government considers a household as comprising an average of 4.4 members, says Jayanath. (Total number of households divided by total population = 4.4).

The PLI of RM763, therefore, is translated into a daily income of RM25.45 that a household needs to meet the eight components such as food, rent, clothing and fuel.

“Or, that if a member of a household earns RM5.80 a day, they cannot be considered poor. Since, according to the government, you are able to live on RM5.80 a day.

In other words Jayanath explains:
“RM5.80 is supposed to pay for three meals, transport costs, rent, recreation and the other components for ONE person in ONE day. Tell me, can a Malaysian in the Peninsula even buy three meals a day on RM5.80?
“In fact, I’d challenge our government ministers to try that,” said Jayanath.

Jayanath says countries such as Britain and Australia calculate PLIs based on the median income of its households. The median income is a country’s total income divided by half.

The PLI is two-thirds of the median income.
In Malaysia the median income is RM2,830. Using this method, the PLI would then be RM1,886.

In effect, this translates into RM14.20 per day for an individual to meet all their eight needs.

“Compared to RM5.80, is not RM14.20 a more realistic figure in terms of how much one needs per day in Malaysia?”

A former finance minister had once said, repeatedly, that if we were to revise how we measure poverty, our poverty rate would not be the vaunted 3.8 per cent. He is right, technically.

Jayanath’s calculations would put Malaysia’s poverty rate at somewhere between 31 to 32 per cent.

“Our poverty level looks good on paper but woefully ignores reality. We are so obsessed with selling this story that we are a success.”

Statistics are supposed to accurately measure our economic environment, so that in this case, pin-point policies to deal with poverty can be crafted.

The government has begun scaling back subsidies so that it would only benefit those their meant for — the poor.

How is it supposed to do this if we cannot even accurately measure who the poor are?

How did the government calculate and decide that RM800 is the poverty line?

Jayanath Appudurai, who writes extensively on poverty for the Centre for Policy Initiatives, believes that the government’s calculations are unrealistic.

Here, he argues that we need a new standard to measure poverty — one that more accurately represents the cost of food, clothing, rent and other basic necessities, and how much it takes for an average family of four to keep themselves afloat in today’s Malaysia.

Jayanath’s assessment is based on government data in its 10th Malaysia Plan (10MP) report released in June, and the New Economic Model (NEM) that was out in April.

The Poverty Income Level (PLI) is defined as:
“An income that is necessary to buy a group of foods that would meet the nutritional needs of the members of a household. The income is also to meet other basic necessities such as clothing, rent, fuel and utilities, transport and communications, medical expenses, education and recreation.”

Plainly speaking, the PLI is how much money in a month a Malaysian household needs to meet these eight components.

Though the Government calculates different PLIs for Malaysia’s three regions, the total average PLI is RM800.
For this demonstration, Jayanath uses the Peninsula PLI of RM763.

A household living in the peninsula is considered poor only if its monthly income is below RM763.

“The government claims that it uses a World Bank standard to measure PLI. But they do not reveal the actual methodology of how they arrive at RM763,” says Jeyanath.

The World Bank standard, Jayanath says, recommends that medium-income countries should calculate PLI based on US$2 (RM6.20) per individual per day. Meaning one person would need US$2 per day in order to meet both food and non-food necessities.

If that figure were used for Malaysia, a theoretical household of 4.4 people would then need RM858 a month to not be declared poor.

The government considers a household as comprising an average of 4.4 members, says Jayanath. (Total number of households divided by total population = 4.4).

The PLI of RM763, therefore, is translated into a daily income of RM25.45 that a household needs to meet the eight components such as food, rent, clothing and fuel.

“Or, that if a member of a household earns RM5.80 a day, they cannot be considered poor. Since, according to the government, you are able to live on RM5.80 a day.

In other words Jayanath explains:

“RM5.80 is supposed to pay for three meals, transport costs, rent, recreation and the other components for ONE person in ONE day. Tell me, can a Malaysian in the Peninsula even buy three meals a day on RM5.80?
“In fact, I’d challenge our government ministers to try that,” said Jayanath
Jayanath says countries such as Britain and Australia calculate PLIs based on the median income of its households. The median income is a country’s total income divided by half.

The PLI is two-thirds of the median income.
In Malaysia the median income is RM2,830. Using this method, the PLI would then be RM1,886.

In effect, this translates into RM14.20 per day for an individual to meet all their eight needs.
“Compared to RM5.80, is not RM14.20 a more realistic figure in terms of how much one needs per day in Malaysia?”

A former finance minister had once said, repeatedly, that if we were to revise how we measure poverty, our poverty rate would not be the vaunted 3.8 per cent. He is right, technically.
Jayanath’s calculations would put Malaysia’s poverty rate at somewhere between 31 to 32 per cent.

“Our poverty level looks good on paper but woefully ignores reality. We are so obsessed with selling this story that we are a success.”

Statistics are supposed to accurately measure our economic environment, so that in this case, pin-point policies to deal with poverty can be crafted.

The government has begun scaling back subsidies so that it would only benefit those their meant for — the poor.

How is it supposed to do this if we cannot even accurately measure who the poor are?

July 15, 2010

Survey: Boo-Hoo!Global Fund Managers Will Ignore Malaysia

What a blow-another real low blow!

How sad that Malaysia has been relegated to the second-least-favoured destination among global emerging market (GEM) fund managers.

This is a serious matter since it comes from a poll conducted by Bank of America Merrill Lynch Global Research which has just been released this week.

The July survey had Taiwan, Malaysia and Chile as the most underweight markets for GEM investors. They were also slightly underweight on China due to slower growth prospects.

In financial markets, the term underweight is used by analysts to advise investors to reduce their holdings.

The findings of the survey could potentially signify a setback for poor PM Najib's bid to make Malaysia into a more competitive destination for global portfolio investment.

The Najib administration has been trying to lift Malaysia’s profile as a destination for foreign investment to help the country achieve an average gross domestic product growth of at least six per cent per annum over the next five years so that it can become a high-income nation.

The country’s foreign direct investment rates have fallen faster than other regional players like Singapore and China, and at the same time, capital outflows have dampened private domestic investments. Net portfolio and direct investment outflows had reached US$61 billion (RM197 billion) in 2008 and 2009 according to official data.

Asia-Pacific fund managers that were surveyed, though slightly underweight on Malaysia, held a more favourable view of the country and were looking to cut back the most in Korea, India and Australia instead, while China, Indonesia and Taiwan were the most-favoured markets.

There was an increased pessimism among the fund managers overall on the economic outlook, with a net 12 per cent expecting weaker economic conditions over the next 12 months, as compared with a net 42 per cent expecting a stronger global economy in a survey two months ago.

The fund managers also expect China’s prospects to worsen, with a net 39 per cent expecting weaker growth, as compared with 60 per cent seeing stronger growth in January of this year.

Malaysia’s economy grew by an impressive 10.1 per cent in the first quarter of this year but the prime minister had on July 6 cautioned that growth in the second quarter could be slower due to deteriorating external circumstances.

The local stock market had been on a seven-day winning streak and neared a two-year peak before succumbing to profit-taking yesterday.

About 200 global fund managers with portfolios worth from US$250 million to over US$10 billion had participated in the Bank of America Merrill Lynch survey.

So ,are we wiping away our tears?

Don't Cry for me, Malaysia?

Penthouse owner offers RM672m for Playboy

Hefner (left) laughs with Playboy's Playmate of the Year Hope Dworaczyk during a celebration in Las Vegas, Nevada May 15, 2010.
 The desire for adult-themed entertainment is heating up.

The owner of Penthouse magazine yesterday offered to buy rival Playboy Enterprises Inc for US$210 million (RM672 million), making a bid that was 13 per cent above the buyout proposal from Playboy’s iconic founder Hugh Hefner earlier this week.

To sweeten the deal, Penthouse publisher FriendFinder Networks said Hefner is welcome to retain editorial control of Playboy magazine and to continue to reside in the Playboy Mansion — a property valued at roughly US$40 million, including art, according RBC Capital Markets estimates.

Hefner “built a cultural icon and he is a cultural icon,” FriendFinder Chief Executive Marc Bell told Reuters in a telephone interview. “He is trying to protect his legacy. We would love nothing more than to help him achieve his goal, protect his legacy and really become a partner.”

A company synonymous with bunny ears and centrefolds, Playboy has been struggling to put its business back on course as circulation and advertising revenues decline with people flocking to the Internet for free pornography.

FriendFinder proposed to give Playboy shareholders US$6.25 a share, above the US$5.50 per share, or US$185 million, from Hefner and his partner Rizvi Traverse Management.

Hefner, 84, already owns around 70 per cent of Playboy’s Class A common stock and 28 per cent of its Class B stock. Shares of Playboy closed up a penny, or 0.2 per cent, at US$5.52 on the New York Stock Exchange yesterday.

Playboy said in a statement it received FriendFinder’s proposal and the board would give it “appropriate consideration.”

Several individual shareholders have filed suits against Playboy alleging that Hefner’s offer was not in the best interest of stakeholders. Hefner’s offer had represented a 40 per cent premium to Playboy’s market price at the time.

Marc Boyar of Boyar Asset Management, which owns a 1.3 per cent stake in Playboy, said that both Hefner and FriendFinder’s offers were inadequate. He predicted that if Playboy remained a publicly listed company, its shares would double in about two years.

“I think people actually are starting to believe this company is in the early stages of a really promising turnaround,” said David Bank an analyst with RBC Capital Markets.

With US$600, Hefner kickstarted a shift in cultural thinking about sex when he launched the first issue of Playboy with a partially nude photo of Marilyn Monroe in 1953.

“The word playboy became metaphoric for a very distinctive lifestyle,” said Robert Thompson, professor of popular culture at Syracuse University.

Hefner turned Playboy and its bunny head logo into a symbol for a lifestyle he embodied as bachelor extraordinaire, living in a mansion surrounded by wealth and beautiful women.

But after the 1970s, Playboy began to fade. Hefner was forced to let go of some trappings such as a private jet plane with a bedroom, a miniature disco and a kitchen, according to Steven Watts, author of “Mr Playboy: Hugh Hefner and the American Dream.”

Hefner, though, has managed to stay in the spotlight. “He’s kind of like Betty White in that regard, he never goes away,” Thompson said.

In an effort to get some of its lustre back, Playboy appointed Scott Flanders, the former CEO of Freedom Communications and the publisher of the Orange County Register, as its top executive last year. Previously, Christie Hefner, Hugh Hefner’s daughter, ran the company.

While Flanders has been at the helm he has cut costs, outsourced the magazine’s production except for its editorial content and struck licensing deals with clothing makers, casinos and clubs.

“There is still some value but for the most part it not necessarily a growing business,” said Rick Munarriz, a senior analyst at The Motley Fool.

With Flanders’ appointment, speculation mounted that Hugh Hefner was looking to exit the business he had controlled for more than 50 years as Playboy searched for a potential buyer.

Late last year, Playboy was in talks to sell itself to Iconix Brand Group Inc, a company that licenses clothing brands such as Joe Boxer, but no deal was reached. Iconix said in June it was no longer looking at a potential licensing deal with Playboy because it was “uncomfortable” with some of Playboy’s businesses.
FriendFinder’s Penthouse faces similar business challenges to Playboy.

“Penthouse is under the same pressures of trying to become viable in this digital age,” said Brad Adgate, senior vice president of research at Horizon Media. “I don’t know what they would do that would be anything substantially different.”

FriendFinder, which hired Imperial Capital LLC as its financial adviser, said it had contacted potential financiers and was confident it would have the funds available for the acquisition.

FriendFinder said its deal could value Playboy’s equity at more than US$210 million depending on the results of due diligence and updated financial data.

Nomura Now upgrades GenM

Nomura Research says after recent sell down and downgrades, it believes that all the bad news has been priced in and expects earnings upgrades as the key catalyst going forward.


Nomura Research has upgraded its call on Genting Malaysia  to a "buy" from neutral previously, backed by strong domestic operations and Genting UK to contribute positively in the long run.

The research house said after recent sell down and downgrades, it believes that all the bad news has been priced in.

"Fundamentally, we see earnings upgrades as the key catalyst going forward," it said, noting that the company looks appealing on a risk-reward basis.

GENM's proposed acquisitions of the UK and the US casinos will exhaust most of its cash, removing the overhang of concern on its plan for its huge cash reserves.

Besides upgrading the call to "buy", Nomura also increased its target price to RM3.70 from RM2.66 previously.

The research house said competition for GENM's mass market business is likely to be shortlived where its domestic operation should continue to generate strong cash flows.

"Consensus earnings upgrades post second quarter 2010 earnings, scheduled to be released in August would likely trigger a re-rating of the stock.

As I have said before, do not willy-nilly follow most of these yoyo fund manager predictions. Do your own homework if you intend to buy or sell GenM.

July 13, 2010

GentingM:The Racino Caper


The Malaysian firm that runs the largest casino in the world is in a one-horse race to become the operator of Aqueduct race track's slot machine casino near Kennedy Airport.

Until now, Genting Malaysia Berhad has had only a behind-the-scenes presence in U.S. gaming as an investor, including providing seed money for the Foxwoods casino in Connecticut.

But last week, the state Lottery Division disqualified two other bidders, making Genting the only contender left standing. If lottery officials and legislative leaders ultimately approve Genting's bid, the company will for the first time take on an upfront role in North America.

Earlier this year, state leaders had a deal with Aqueduct Entertainment Group - which boasted the politically connected Rev. Floyd Flake as one of its partners - but AEG was found to be unlicensable by lottery officials.

Details of what a Genting-run Aqueduct would look like began to emerge over the weekend when the company disclosed some plans for the antiquated site.

In addition to 4,500 slot machines, there would be a two-story, 450-seat food court, a 34,000-square-foot meeting site for corporate and community events, an entertainment center, a 2,200-car garage, shuttle buses to JFK, valet parking and an outdoor terrace that could accommodate 10,000.

And of course, a 75-foot waterfall.

"It's going to look like a first-class casino," Jay Walker, Genting's spokesman, said.

Genting will outline its plans in more detail Thursday night for Community Board10, which was stunned last week when lottery officials said the other two bidders, SL Green and Penn National Gaming, had been disqualified.

Those firms inserted too many protections for themselves into their proposals, officials said, including provisions that would shield them if Nassau County manages to get the Shinnecock tribe to build a rival casino at the Nassau Coliseum.

Genting has already generated some controversy in New York.

Last year, Joseph Bernstein, the former CEO of Empire Resorts, which runs Monticello's race track, complained to state racing authorities that he was pushed out of office by Genting, which has a $55 million investment in Empire.

Bernstein charged that Genting's representatives, Michael Brown and Colin Au, were trying to make a side deal with the St. Regis Mohawk tribe to sell the tribe some of Empire's land for a casino - a deal that Bernstein said would hurt Empire's investors.

He later withdrew his complaint after getting a $1.5 million severance package, but the state Racing and Wagering Board is continuing to investigate all the same, an agency spokesman said.

Genting is known for lending money to Native American tribes at a hefty interest rate of 30%; members of the Seneca Nation have complained that more profits from their casinos went to Malaysia than to upstate New York.

GenM: Now it is a Buy?


Genting Malaysia Bhd, the country’s sole casino operator, rose the most in three weeks in Kuala Lumpur trading after Morgan Stanley initiated coverage of the stock with an “overweight” call and RM3.05 share forecast.

The stock rose 1.1 per cent to RM2.69 at 9:05 a.m. local time, set for its biggest gain since June 18.

I think we should retire all these fund managers and hire someone we can truly trust- Paul, the Octopus!

July 09, 2010

Pig Trotters: Collagen,Chondrotin,Glucosamine

Yes, this is a rave in London. Get the real thing that gives give the required collagen, chondroitin and glucosamine.