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I want to share with you about this blog report in pdf format. Click here to see it!

PETALING JAYA: Allowing greater flexibility for insurance companies and takaful operators to tie up with foreign partners will result in the adoption of better international practices and expertise, as well as facilitate consolidation in the industry.

Besides strengthening the local insurers’ resilience and competitiveness, the move would also raise service standards for consumers, said General Insurance Association of Malaysia executive director CF Lim.

“This objective will be further assisted by the flexibility to employ expatriates with the relevant value-added expertise to benefit the industry and at the same time, raise the skill and competency levels of Malaysian personnel to international standards.”

Lim told StarBiz the flexibility to establish branch offices nationwide without restriction would also help companies achieve higher levels of insurance penetration as well as provide depth and breadth to customer services.

With immediate effect, foreign equity participation in insurance companies and takaful operators has been increased to 70% from 49%.

A higher foreign equity limit beyond 70% for insurance companies would be considered on a case-by-case basis for players that can facilitate consolidation and rationalisation of the insurance industry.

MAA Takaful Bhd CEO Salim Majid Zain said greater flexibility on foreign equity participation would attract foreign expertise, technology transfer and product innovation into Malaysia.

“Local companies will be driven to devise more competitive strategies in facing the competition, including seeking new foreign partners or increased foreign participation.

“The move to allow locally incorporated foreign insurers and takaful operators to establish branches will help increase confidence and market awareness in the rural areas,’’ he added.

ACE Synergy Insurance Bhd chief executive officer and managing director Raj Nanra said the increase in foreign equity ownership would provide fertile ground for consolidation and rationalisation in the industry.

These initiatives would strengthen the industry and give policyholders greater sense of security and confidence in their insurance providers in the challenging economic environment, he added.

ACE Synergy is 51% owned by Zurich based-ACE Ltd and 49% by Advance Synergy Capital Bhd.

Asked if foreign partners with 70% equity stake would have management control of the local entity, Syarikat Takaful Malaysia Bhd group managing director Datuk Hassan Kamil: “Management control would depend on the agreement between the existing management and the new shareholders.

“It is normal for the new majority shareholders to have management control. They may absorb part of the existing management as part of their new team.”

On the granting of up to two new family takaful licences for this year, Hassan said this was an excellent proposition since the takaful industry was still lacking the depth in talent, especially in product development and finance.

PUTRAJAYA: The Government will issue up to nine new banking and insurance licences until 2011 and allow foreigners to own up to 70% equity in the country’s Islamic banks, investment banks and insurance companies.

Prime Minister Datuk Seri Najib Tun Razak said the liberalisation package, comprising six thrusts, was aimed at enhancing Malaysia’s linkages with international economies.

“It will also bring about greater confidence into the economy and promote better economic regional integration,” Najib said when announcing the steps at his office yesterday.

Najib, also the Finance Minister, said there would be flexibility in allowing for an increase in foreign equity ownership limits of investment banks, Islamic banks, insurance companies and takaful operators from 49% to 70%.

“Such alliances will strengthen business potential and enhance growth prospects of financial institutions through the international expertise and global networks of foreign shareholders,” he said.

However, the foreign equity limit for commercial banks would remain at the current 30%, said Najib.

He said new licences for seven banks and two family takaful players would also be issued.

Under this, a maximum of two new Islamic banking licences would be issued to foreign players to establish banks with paid-up capital of at least US$1bil (RM3.62bil).

Also, two new commercial banking licences for foreign players that would bring in specialised expertise would also be issued.

These four licences would be issued this year, together with the two new family takaful licences.

In 2011, up to three new commercial banking licences would be issued to world-class banks.

The Government, Najib added, would offer operational flexibility to foreign institutions to increase the number of branches, while locally incorporated foreign commercial banks could establish four new full-fledged branches from 2010, and 10 micro-finance branches starting this year.

Effective June 1, holding companies in Labuan, incorporated under the Offshore Companies Act 1990, would be given flexibility to establish an operational and management office in Kuala Lumpur.

Najib said that offshore banking institutions and insurance companies licensed by the Labuan Offshore Financial Services Authority (Lofsa), which met the predetermined criteria, could be allowed to have a physical presence onshore from 2010 and 2011 respectively.

“Greater flexibility will also be accorded for employment of expatriates in specialist areas able to contribute to the development of the financial sector,” he said.

Najib said that over the last three years, the finance and insurance sector had expanded by 8.8% per annum, outpacing the growth in real gross domestic product of about 6%.

CAROL YIP gives her best comment about living after age of 55. Let’s read it!

HOW to stretch your ringgit when you hit 55? Continue to work is the answer. The current financial crisis is a clear message that we need to work longer to ensure that we have money to live through retirement if we cannot depend on investments for financial security.

Imagine if we face a similar crisis when some of us are in our 50s, 60s or 70s? What will happen to our retirement money?

Even if our investments are not affected by the crisis, it can still be financially challenging for some to live through old age, especially in this world of consumerism and rising cost of living, coupled with the smaller family nucleus, having kids at older age, broken families, divorces, being a widow and single parenthood.

There will come a time when retirees need to work again, not for passion but for the money. Therefore, the ability to work and the opportunity to be employed beyond 55 are necessary. This is evident in Singapore and Japan.

Singapore will put in place a new law in 2012 that requires firms to rehire workers beyond the retirement age of 62.

Japan’s pensionable age is being lifted gradually from 60 to 65 because Japanese workers are finding it increasingly necessary to continue working after retirement to help defray the rising cost of living as well as to cope with shrinking pensions.

The gradual revision started in 2001 and is due to be completed in 2013. Under the law, employers can choose from three ways to extend the employment of workers.

The most popular option is to keep the retirement age at 60 and re-employ workers after they retire, as this entails minimal changes to hiring policies. Some companies prefer the second option of raising the retirement age to match the pensionable age.

McDonald’s Japan is one of the few companies that have adopted the third option – eliminating the retirement age altogether. The country’s largest hamburger chain even has workers in their 70s and early 80s at its outlets.

In Malaysia, many have to retire at 55. Some choose to retire early, with the hope of enjoying life or finding better financial prospects with other jobs or through businesses. There are cases of retirees failing to make money doing business and ending up using up large portions of their retirement funds to sustain their businesses.

Unless a person is equipped with entrepreneurial skills, abilities, networking, knowledge and experience to do something that can make money, his safest option is to continue to be employed.

However, even if we want to continue working after 55, there is the employability issue. Most companies are not keen to employ people who are approaching their 50s unless they have special skills, valuable knowledge and experience, reputation, recognition or good connections. People who lack the suitable criteria will disappear from the employment radar.

It does look like a chicken-and-egg situation. Do we need to first urge employers to extend the employment age beyond 55 or should employees first demonstrate keenness to continue working past 55?

Unless we have the means to continue growing our money, we may not be able to see the silver lining beyond those grey clouds.

For a better tomorrow, we should seriously look into employment after 55. Employers need to consider extending the employment age to at least 65.

We should also have headhunters and employment portals for people in their mid-40s and above, making it easy to match employees and employers in this target market.

Living through middle age and into retirement can be challenging. At work, we either experience being productive or we are in stagnation. Therefore, it is good for human resources personnel to conduct training-needs analyses for employees aged 40 and above so as to identify programmes to upgrade skills, promote motivation and instill confidence.

I would also suggest health education programmes on the ageing process and active living for the employees to prepare for transition to their “Third Age”. This is because hormonal changes (menopause for women and andropause for men) can affect employees’ moods, emotions, self-esteem and motivation at work.

Last but not forgotten, financial programmes on personal money management, financial products and how to invest money wisely are important soft skills training. After all, money is a reason for working.

JOHOR BARU: Takaful Ikhlas Sdn Bhd, a subsidiary of MNRB Holdings Bhd, is targeting RM2mil in premiums from its new product – Ikhlas Big Bike Takaful – in the financial year ending March 31, 2010.

President and chief executive officer Syed Moheeb Syed Kamarulzaman said the company had decided to target the product at big bike riders as there was renewed interest in biking in Malaysia following the economic crisis.

“Statistics from the Road Transport Department show there are about 9,000 big bikes in the country and we want to tap the market,’’ Syed Moheeb told a press conference after the product launch yesterday.

He said the Takaful insurance coverage would be opened to owners of superbikes of 500cc and above. Under its comprehensive plan, bike owners will be compensated in the event of loss of life or damage to the machines due to accident or theft.

Syed Moheeb said policy-holders would also enjoy assistance in case of any breakdown without additional charges unlike conventional motorbike insurance coverage.

“Our survey showed that most of these big bike owners are businessmen and they need specially-tailored coverage for themselves and their machines,’’ he said, adding that contrary to popular belief, these bikers were well disciplined while on the road.

Personal Investing – By Ooi Kok Hwa

Wealth for retirement, How to earn 30-year investment returns with different savings amounts and rates

ON Jan 28, we have written an article on We all need to become millionaires. That article explained that we need to have cash reserves of about RM1mil to be able to maintain our current lifestyle 20 years after retirement.

Some readers responded and would like to know more on how to accumulate enough money for their retirement.

In this article, we will look into 30-year investment returns with different savings amounts and rate of returns. Our computation is based on the assumption that we start investing at the age of 25 and intend to retire at 55.

·Based on how much rate of returns you can achieve

The table shows that if we save RM100 per month and invest the money into fixed deposits (FD), assuming the FD can provide about 3% return over the next 30 years, our investment portfolio will reach RM58,274 when we reach 55.

However, if we can generate 5%, 7% and 10% returns, our investment portfolio will achieve RM83,226, RM121,997 and RM226,049 respectively.

The EPF may be able to provide us about 5% whereas unit trust investments may be able to give us 7% to 10% returns over a very long-term period.

Assuming that we treat the 3% FD return as our risk-free rate, any extra returns above this rate will be the risk premium for the additional risk that we are prepared to face.

Therefore, we need to understand our risk tolerance level before considering any type of risky investment.

We should ask ourselves whether we are willing to accept the uncertainty of return that is inherent in those investments.

Besides, we need to understand whether we can afford to have our savings tied up for a long period before we can achieve our investment targets.

·Based on how much you save and not how much you earn

We agree that when you earn more money, you should have more money for your investments. Unfortunately, some investors are unable to save even though they earn high salaries.

From the table, we can see that if we are able to save RM500 per month in FD, assuming a 3% return per annum, our investment portfolio will reach RM291,368 when we retire at age 55, five times higher than the savings of RM100 per month.

Hence, if we can cut down on our expenses and live below our means, we should have more money to save.

We should always ask ourselves whether we want to spend money on unnecessary luxury items to keep up with the Jones or be more frugal and spend less to achieve financial freedom earlier.

The question on how to generate high returns is frequently asked by readers. Unfortunately, there is no straight-forward answer to this.

We can equip ourselves with strong financial and investing knowledge which helps us in making better investment decision that will eventually translate into better returns.

Laalitha Hunt gives very good writing about consumers buying attitude at this moment.

THE many price hikes in Malaysia over the past year have had a very damaging effect on household finances, and most families have found it difficult to make ends meet each month due to the rising cost of living.

Food inflation is particularly a pressure on many budgets, adding hundreds of ringgit onto the annual grocery bills.

Although in recent months, commodity prices had come off from their highs at the global level, retail prices locally have yet to see the impact.

The financial strain felt by households means that many have had to look for different ways to cut back on costs, and one avenue is to reduce the amount they spend on their shopping.

According to mother of two toddlers, Prishna Vasanthakumar, she and her husband had cut their monthly grocery bills by about 20% since the middle of last year.

“As a result, we were able to save about RM200 each month. We have put the money aside in case of emergencies,” she shares.

Shamani Nadaraja, 30, says she always compares prices of groceries at various supermarkets and hypermarkets by going through the newspapers.

She then shops where the goods are cheaper. “Besides buying in bulk, I try to get the best deal possible by buying from several outlets,” she adds.

However, when petrol prices shot up last year, she limited her weekly shopping to the outlet offering the best promotion for that particular week. This way, she saved on travelling costs.

“By cutting out unnecessary travel, I was able to reduce my monthly fuel costs from RM600 to RM400 last year,” she notes.

Shamani, a mother of two, says she and her family now dine out only once or twice a month instead of weekly. “I cook more often now instead of eating out. As for entertainment, we play more board games such as chess and monopoly,” she adds.

In addition, there are less frequent family holidays. “We used to travel every three months but now we travel only once a year,” she says, adding that she makes advance airline ticket bookings, which enables her family to save up to 60% on fares.

Since the economic downturn, Shamani, who is fond of gold jewellery, has postponed purchases of these luxury items because the price of the precious metal had spiked to record highs last year.

Meanwhile, Mabel Lim, 24, and single, has been controlling her impulsive shopping habits in order to cope with her new car loan payments.

Lim, a first-time car owner, says she has saved about RM200 a month by cutting down on her shopping sprees.

“At the same time, I am able to manage my new car loan instalment of RM500 a month with my current salary,” she adds.

According to a recent report by OSK Research, the poor global macroeconomic outlook, coupled with rising retrenchments, will result in consumers being more cautious in their spending as the threat of losing their jobs exerts pressure on discretionary spending.

“This would lead to consumers downtrading to cheaper substitutes,” adds the research outfit.

The report also says recent survey data indicates that people are generally more cautious in their spending and have taken measures to counter the slowdown, including those in the higher salary segment with average monthly incomes of more than RM7,000.

“From the survey, about 90% of those in the higher income segment claimed that the current outlook would have an impact on their spending habit,” the report says.

KUALA LUMPUR: The economy should perform better in the second half of the year as the fiscal stimulus packages are implemented and the effects of the supportive monetary environment kick in, Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said.

“The first quarter was very much affected by external economic contraction taking place, our exports numbers have shown that,” she said.

Malaysian Institute of Economic Research expects local exports to decline 24% this year on sagging worldwide demand, the think tank said in its report yesterday.

Speaking after launching the Interbank Murabahah Master Agreement (IMMA) and Master Agency Agreement (MAA) yesterday, Zeti said the domestic economy was still growing and “this is what we need to sustain the country’s economy”.

Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz (right) and AIBIM president Datuk Zukri Samat and with the newly launched Interbank Murabahah Master Agreement. She said the economy is expected to perform better in the second half.

Asked if the central bank would revise its economic growth target, she said: “Right now, we have made the assumption that in the second half, the external environment will stabilise and that the fiscal stimulus packages will be implemented.”

“And so, in the current environment, our projection is flat growth as the contraction of the external sector would be offset by domestic demand,” she said.

Bank Negara has projected the economy to register a growth rate of -1% to 1% this year.

On whether the economy had bottomed, Zeti said: “No, it is not clear yet what the direction is in the global economy.”

There was “some stabilisation” taking place but “we still have to wait and see”, she said.

To another query on interest rates, the governor said the central bank had already adopted an aggressive stance and now the focus was to ensure that lending continued.

Zeti said there was no need to raise banks’ minimum capital requirement at the moment.

Non-performing loans were at a historical low now at just over 2%, she said, adding that even if the rates rose, banks were “well positioned to absorb it”.

Zeti said Malaysia did not manage its exchange rate against any specific currency.

“The currency is not a policy instrument but is used to facilitate trade and investment,” she said.

Meanwhile, the newly launched agreements have been adopted by the members of the Association of Islamic Banking Institutions Malaysia (AIBIM) for their deposit-taking and placement transactions.

AIBIM president Datuk Zukri Samat said the adoption of the IMMA and MAA documents would help increase the intensity of Islamic interbank activities.

Like any other money market products, the success of commodity murabahah-based instruments would depend largely on the existence of a standardised document as well as a universally-acceptable structure that was widely recognised by the market, he said.

LEE KIAN SEONG gives very good writing about leadership. Enjoy!

WITH many economies in the world having turned upside down following the crisis that erupted in the US’ financial industry and as we start to look at doing things differently, the concept of good leadership is also being challenged.

But no single leader is able to carry out the mission alone and as correctly pointed out by renowned authority on problem solving and creativity in organisations, University of California Los Angeles Prof Moshe F. Rubinstein.

People, he says, should realise that leadership is not about investing in a single person or only about the general giving orders. “Great leadership requires partnership collaboration, innovation and creativity from everybody,” he says.

“Leaders should be connected with enough people and create good relationships to have sufficient resources when faced with difficulties in performing tasks,” Rubinstein says, adding that authority should be accorded to people to allow them to realise the importance of taking swift action.

In fact, he says, leadership should be exercised by everyone in an organisation at their own levels and it helps tremendously for leaders to use the “we” more than the “I” to generate passion and energy in an assignment.

“A leader has to energise his team to think about what is needed to achieve a certain purpose,” he says. Uncertainty, he says, is a good thing as it allows for better preparation in the event of a crisis.

He says leaders cannot assume it is all about them in an organisation. They should use the word “we” rather than “I” as they are not able to conduct an orchestra by themselves.

Clarity of purpose and task is another essential that needs to be conveyed by leaders as the staff need to know that they’re not wasting their time doing and undoing tasks with no clear objective.

Rubinstein spoke recently in Bali at the Asian Leadership Development Conference (ALDC) organised by the International Centre for Leadership in Finance (ICLIF) and Lembaga Pengembangan Perbankan Indonesia.

The aim of the conference was to assist leaders steer their organisations through the turbulent business environment, focusing on teamwork, creating an emotionally-intelligent workplace and a future-focused leadership.

ICLIF was established by Bank Negara in October 2003 to provide leadership development programmes for senior executives from financial institutions and business corporations in Malaysia and globally.

Another expert in the field of transformational leadership, Roger Konopasek says organisations need to change and be “open” in their management to attract the right people.

“Nowadays, people do not think of themselves as an employee … they are working with you but not for you, is how they think. If they don’t like the things that you are doing, they will leave as they too may have their own vision,” he says.

With that, he points out that the new work culture is no longer about subservient order taking, and the company who has less innovation will face problems in retaining talent.

“The best employees aren’t the comfortable followers who are submissive and don’t question. Information and knowledge technology are moving so fast nowadays, and a single person is not able to understand all of it, thus leaders need to work with people to get the ideas,” he says.

What makes a good leader? Konopasek says a leader needs to readily admit that he/she is not perfect or insecure about seeking opinions and views in making decisions.

“They have to talk less and ask more. Many managers talk too much and always tell people what to do. Instead of giving too many orders or comments, the good way is to work together with your team,” he says.

“You should make them know that it is their ideas and make them believe that they can make a difference,” he adds. Evidently, that’s the new leadership style — empowering people to be the best they can.

Konopasek says a leader should be involved with people as much as possible to let them understand his or her decision, as communication is crucial.

“Create ownership by letting your team members handle projects and explore their potential. Allow them to fail sometimes. Don’t manage them all the time,” he says.

David Winfield, executive director and chief executive officer of ICLIF says that during these turbulent times, one of the ways to help companies retain people is by training them in a variety of ways.

“You need to be able to lead your people and inspire them during difficult times. You need to manage the change and communicate effectively so your members know what the business is, your direction and expectations,” he says.

“Leaders need to understand talent management, talent development and risk management,” he says, adding that the understanding of reputation risk, brand building and marketing is also important.

Winfield says companies should not treat leadership development as a cost factor and they shouldn’t cut back their budget in leadership development during hard times.

Mohamed Ashraf Iqbal, conference chairman for ALDC and director of consulting firm, MindSpring Sdn Bhd, says companies have to find strategies on how to train ordinary people to do extraordinary things.

“Based on the surveys that I have done, 95% of the people tell me that they will not be doing their current jobs if they had absolute choice,” he says.

Ashraf says companies need to get people energised and excited about their work.

“Toyota is successful because they know how to engage the entire talent of the workforce. They know how to get into the minds of their people and get them committed to engage in their work,” he says.

“There shouldn’t be any deadwood in a company. If there is, something must be wrong with the company or leadership to have brought about these deadwoods who are not motivated,” he says.

Just watch it and post your comments to me!