Dispatch (Asia edition)

Equity injection

The Malaysian Government intends to inject RM5bn into Malaysian stocks to shore up sagging values, in a move lambasted by the opposition as a misallocation of funds.

Under the plan, the Government would borrow RM5 bn from the national pension fund - the Employees' Provident Fund (EPF) - to double the size of Valuecap to RM10 bn. Established in 2003, Valuecap is a fund management firm created to invest specifically in the Malaysian equity market in order to boost volume and liquidity.

As a body entrusted with public funds, EPF needs to ascertain that the rate of return it earns on the RM5 bn loan will either equal or exceed its dividend rate of 5.8%. Critics are also calling for improved transparency and disclosure of Valuecap's portfolio and performance past, present and future. According to The Edge financial daily, there is not much public information on Valuecap available. The Edge reported that Valuecap is believed to have about RM4.9 bn worth of investments in 70 companies and paid out a total of RM135m in dividends from inception to September 2007.

Aside from the equity injection, the Government unveiled other measures aimed at boosting confidence in the economy and attracting foreign investors unnerved by the uncertain political climate. These include reviewing some foreign investment committee guidelines to make investment more attractive for foreign investors, especially in the property and commercial sectors; liberalising the service sector to attract more investment and generate more local employment; prioritising projects that can be implemented expeditiously with high economic multiplier effects; and strengthening SMEs through new initiatives by financial institutions and access to special central bank funds.

However, the opposition labelled these as haphazard measures that are 'unlikely to abate the rapid withdrawal of foreign investment' and called for substantial measures to assuage foreign investor concerns relating to foreign equity ownership, enforcement of contracts, judicial independence and professionalism of the criminal justice system.

Singapore accountancy sector gets review panel

The Singaporean Government is setting up a high-level committee to review the accountancy sector, with an eye to positioning the country as the leading international centre in Asia for the provision of professional accountancy services, as well as the development of top-notch accountancy professionals.

'As we are witnessing a chain of bailout packages in the US and Europe, as well as collapsing stock markets, nothing else better underscores the need for competent and honest accountants than what we are experiencing now,' said Lim Hwee Hua, Senior Minister of State for Finance and Transport, speaking at the annual dinner of the Institute of Certified Public Accountants of Singapore.

Lim added that the Singaporean Government continues to recognise the importance of the accountancy services sector in supporting and forming the backbone of the country's financial services industry. She also noted that the accountancy sector's exportable services are growing and have 'high potential' for development overseas, and that local accountants are already much sought after by other countries, including China.

The Committee to Develop the Singapore Accountancy Sector will look into entrenching Singapore as the leading professional accountancy services hub in the region, namely how to develop and grow the exportable accountancy services of the Singapore accountancy sector, and how there can be more effective promotion of Singapore as a key provider of accountancy services in Asia. It will also review ways in which the accountancy profession's ability to attract, develop and retain talent can be enhanced. In addition, it will look at how accountancy education can be improved to equip accountants with the necessary professional skills and competencies for a dynamic international business environment. The Committee also wants to see Singapore become a regional education hub for the profession.

The Committee will be headed by former KPMG Singapore's managing partner, Bobby Chin, who is the current chairman of the Tote Board (Singapore Totalisator Board). Another 14 senior representatives from the accounting profession, business community and academic and public sectors will also be appointed to the Committee, whose full line-up was expected to be announced in November. Its review is expected to take more than a year.

'This review, a first of its kind, is timely as the accountancy sector is critical to Singapore's continued growth and success as an international financial and business hub,' noted Chin.

Surviving one day at a time

Every week, below the billion-dollar skyscrapers that pierce the Hong Kong skyline, corporate high flyers are living rough, seeking out a dry, sheltered place to sleep. Living in shanty dwellings they forage for food, trying to eke out an existence. Big Four accountants, investment bankers and stockbrokers are among those who are experiencing life below the poverty line.

It's not that things have become so dire in one of the world's financial capitals that large numbers of business people are now homeless; rather, it's an exercise in corporate social responsibility. These money men and women are participating in the Global Village Slum Survivor challenge run by the Crossroads Foundation, a charity co-founded by Malcolm Begbie, himself a chartered accountant.

Begbie, an Australian, came to Hong Kong in 1986 in search of opportunity. Even then, as today, accountants were in demand in Hong Kong. He and his wife Sally, a public relations consultant, were keen volunteers and offered to support NGOs (non-government organisations) by donating their respective professional skills. When floods in northern China devastated two million people, Begbie offered to do the budget for an aid project. But the immediate need was for clothes and bedding, so the Begbies started collecting - and they haven't stopped since.

In 1995, Crossroads Foundation was registered as a charity and today ships containers of aid to needy people in more than 60 countries. 'We grew 150,000% in the first four years - it was crazy,' said Begbie, who along with Sally quit his job to work full-time for the charity, without a paid salary.

Crossroads now has 5,000 private donors and 1,700 corporate supporters that donate goods and services - among them KPMG, Grant Thornton, UBS, Goldman Sachs, BNP Paribas, Credit Suisse, Macquarie Bank and Morgan Stanley. Many of their executives have participated in Slum Survivor.

It began when someone had an idea to put business leaders in a simulated slum for 24 hours so they could feel first-hand the poverty endured by a third of the world's population. It was meant to be a one-off fundraiser, but participants were so moved that Slum Survivor was born.

Each week, groups of executives still experience the harsh realities of slum life - struggling to find food, education, medical care and work. Other experiential struggles have been added as well, including the impact of Aids, supply chain inequality, living with a disability, surviving a monsoon and Refugee Run.

Begbie said that feedback after each session suggests corporates may change their workplace practices as a result. 'Many companies are looking for ways to connect with global issues. These simulations give them a taste of these, after which we discuss strategic ways in which they can engage.'

Road to convergence

China's new accounting system, effective for listed companies for almost two years, is paving the way for further convergence with international standards.

A forum held recently by licensed accounting, taxation and business advisory firm Lehman Brown, which has seven offices in China, looked at the system's progress thus far, as well as its future direction.

According to Dickson Leung, senior partner at Lehman Brown, the system is on track to improve China's market economy. It is a breakthrough first step and represents 'an important contribution on the part of fiscal and accounting work to economic and social development'.

Since the revised Accounting Standards for Business Enterprises (ASBE) were applied in January 2007, Chinese listed companies have had to produce financial statements equivalent to those under International Financial Reporting Standards (IFRS). The intention was that ASBE would be progressively rolled out to state-owned enterprises and small and medium-size enterprises (SMEs), although no timeframe has been yet announced.

'Incorporating accounting principles familiar to investors worldwide will encourage investor confidence in China's capital markets and financial reporting, and will be an additional spur for investment from both domestic and foreign sources of capital,' said Leung.

'For Chinese companies that are increasingly playing a global role, the new standards should also reduce the cost of complying with the accounting regimes of different jurisdictions.'

Firms that are undergoing transition to the new system may struggle to present a true financial picture in the short term. This has the potential to provide misleading information to shareholders in the form of incorrect financial reporting, thus damaging share values.

A new accounting system will also mean a new taxation system, which could mean reassessing a firm's tax liability. More consistent and regulated financial reporting could lead to higher volatility in results, which would need to be explained to stakeholders and may impact on raising loans.

Generally speaking, though, 'convergence is a process', and Leung believes that the goal of fully uniform accounting standards between Chinese firms and those applying IFRS is attainable in light of the progress that has been made.

AirAsia to go private?

AirAsia Bhd's single largest shareholder, Tune Air Sdn Bhd, is exploring the possibility of taking Asia's largest low-cost carrier private at a price tag of about RM1.35 per share, but this remains an option and is subject to market conditions, reported The Edge financial daily.

In a statement to the stock exchange, Asia's leading low-cost carrier clarified that privatisation is just one option it is exploring on how to best optimise and expand the operations of the company given the volatility of fuel prices, the current business environment, and the financial and capital markets.

Tune Air, controlled by AirAsia group chief executive officer Datuk Seri Tony Fernandes and AirAsia executive director and deputy CEO Datuk Kamarudin Meranun, held 729.46 million shares, or 30.7%, of AirAsia as of the end of March. The other major shareholder is the Employees' Provident Fund (EPF), the Malaysian national pension fund which owns 7.8% of the carrier as of 15 September. Based on the indicative price of RM1.35 per share, a buyout of the remaining shareholders, including the EPF, would cost Tune Air about RM2.2 bn.

The Edge weekly reported earlier that investors were already lined up to take up stakes in AirAsia post-privatisation. However, the airline's debt burden, which it took on to finance its ambitious expansion strategy, could deter potential investors. Under its fleet expansion programme, the carrier is scheduled to take delivery of 17 Airbus 320s next year and 23 the following year.

Australians head home

Not so long ago, a generation of young Australian professionals answered the global call for financial services talent. Armed with accounting, legal or IT degrees and a few years of experience, they headed overseas to pastures filled with promise, dreaming of success and riches.

Now, that golden era seems distant. As the financial industry job market tightens around the world, recruitment firms report of expatriates being forced home from places such as New York and London. Michael Page International is one, recording in August a 27% rise in the number of Australian white-collar expatriates looking to return from the UK to work in Australia, compared with the same month in 2007. In the US, the number of visits to the recruiter's Australian jobs website has more than tripled over the past year - 'a very strong trend', it notes.

Matthew Cook, national director of finance at Michael Page International, said most of the people heading home are management accountants and finance managers, followed by financial controllers and CFOs. Predominantly, they are in the mid to top-end salary range (A$70K and above), as these jobs make up the largest market sector.

Cook said an increasing interest in Australian jobs has been evident for the past six to nine months. In addition to expatriates returning home, there has been interest from overseas professionals hoping to try their luck in Australia. It's not so much that their jobs have actually disappeared, but that they're making a pre-emptive strike, said Cook.

'This is reflective of the objective decrease in the economies of the UK and US, and also subjective feelings of uncertainty. They expect the uncertainty to continue,' he said.

The good news is that professionals from these countries are 'global opportunities people', whose qualifications are portable. And in Australia, said Cook, their prospects are good. 'The jobs market for accountants in Australia remains strong, and we don't expect to see that diminish as finance and accounting are key functions that companies cannot do without.' And while they will always get paid more in the US and the UK because the cost of living is higher there, Australian salaries continue to grow. 'We expect an increase of 5% over the next 12 months,' said Cook.

Asian Games on track

KPMG Huazhen has signed a sponsorship agreement with the 16th Asian Games Organising Committee to be the exclusive supplier of accounting advisory services for the 2010 Asian Games in Guangzhou, China - the largest sporting event in the region. Carlson Tong, chairman of KPMG China, said the firm would establish a team of experienced professionals to work closely with the organising committee. 'We will make use of our international experience and service network to contribute to the success of the Asia Games,' he said.

In brief

Second global sukuk proposed
Malaysia's central bank recently proposed to issue a second sovereign global Islamic bond, or sukuk, which is most likely aimed at setting a new pricing benchmark and facilitating a price discovery mechanism for ringgit bond issues. The Malaysian Government issued its first sovereign global sukuk in 2002, spurring other governments such as those of the United Arab Emirates, Bahrain and Pakistan to follow suit. Apart from determining if Malaysia's sovereign credit rating remains intact, a second global sovereign sukuk would also help finance the Malaysian Government's budget deficit, which was estimated to surge to 4.8% in 2008.

Malaysian banks' CARs satisfactory
Fitch Ratings has said that Malaysian banks' capital adequacy ratios (CARs) have not suffered from the adoption of Basel II standards, reported The Edge financial daily. Fitch said it still viewed the capitalisation of the Malaysian banking system to be satisfactory, with Tier-1 and total CARs currently at around 10% and 13% respectively. These figures are well above the corresponding regulatory minima of 4% and 8%, even as other countries move to prop up their beleaguered banking sectors.

Changi Airport to be corporatised
Award-winning Changi Airport and its operating businesses will be sold next year to a company controlled by Temasek, the Singapore Government's investment arm. This effective corporatisation should enable the airport to stay nimble and capitalise on new opportunities while retaining its talent, senior government officials said. Changi Airport handled a record 36.7 million passengers in 2007, making it the sixth busiest airport in Asia after Tokyo, Beijing, Hong Kong, Shanghai and Bangkok. It expects to handle as many as 50 million passengers in five years. Analysts reckon Changi could be worth anywhere between US$1.5-2bn.

Singapore slips into recession
Singapore slipped into a technical recession in the third quarter, when it posted two consecutive quarter-on-quarter GDP contractions - the country's first since 2002, when the economy was hit by the severe acute respiratory syndrome (SARS) outbreak. Citigroup believes Singapore could also become the first major Asian economy to post an overall GDP contraction next year. The bank recently forecast the country could see an economic contraction of 1.2% as domestic demand is simply not big enough to offset weakness in external demand.

Asia bank ratings 'stable'
Moody's Investors Service revealed that its outlook for the banking industry in Asia is increasingly negative, but that its outlook for bank ratings generally remains stable. In a teleconference in October, Moody's Financial Institutions Group presented the outlook for the region's banking system generally, and more specifically for Japan, Australia and Korea. Jerry Chien, managing director of the Financial Institutions Group, Asia Pacific, said the ratings agency's conclusion is that while the next 12-18 months look gloomy, Asia will still outperform other regions due to its strong underlying economic growth. 'This and the region's capital positions, which are still intact, will help to protect bank ratings from being hit hard by the downturn. While low-income countries and their banks could be harder hit, these ratings are conservatively placed,' explained Chien.

Working mums' baby bonus
Working mothers in Australia should receive 18 weeks of paid maternity leave, and fathers a fortnight of leave, under recommendations by the Productivity Commission. One of the authors of the proposal, Angela MacRae, said mothers should be able to stay at home for at least the first six months of their baby's life 'since this is the most critical time for the nurturing of a newborn child'. Prime Minister Kevin Rudd has voiced his support for the proposal, which will now go before parliament for approval. Women on maternity leave would be paid the minimum weekly wage, which is currently A$544. If adopted, the proposal would make Australia one of the world's most generous nations in terms of payments to families.

Tourism feels strain
Asia Pacific tourism is starting to buckle under global financial pressure, according to analysis by Deloitte. The professional services firm reports that although hotels in the region reported positive growth for the year to August 2008, with revenue per available room up 13.2%, on closer inspection hoteliers have started to feel the strain over the last few months. Alex Kyriakidis, global managing partner of tourism, hospitality and leisure at Deloitte, said: 'Asia Pacific is by no means decoupled from the uncertain and volatile economic environment in the United States and Europe, and although the backlash for the Asia region has been delayed somewhat, it was only a matter of time.'