Wednesday, October 2, 2013
In February 1999, the High Level Committee on Corporate Governance (HLFC)1 issued the Report on Corporate Governance (HLFC, 1999) which laid the groundwork for the drafting of the Malaysian Code on Corporate Governance (HLFC, 2000). The Report provided a definition of the term corporate governance supposedly adapted for the Malaysian context but one that bore many similarities to definitions provided by the OECD and other international bodies: “Corporate governance is the process and structure used to direct and manage the business and affairs of the company towards enhancing business prosperity and corporate accountability with the ultimate objective of realising long term shareholder value, whilst taking into account the interests of other stakeholders” (HLFC, 1999, p.52). Although in recent times, too much focus has fallen on deterring fraudulent activities and on issues of transparency owing to some scandals of big corporations in the major economies of the world. In this paper, the concept of corporate governance is being visited not only in light of these scandals with means / ways to counter such attempts in future but also in terms of taking a serious look at the financial institutions in Malaysia following the concept further / beyond to make it a way of “corporate life” rather than just an option that may be followed for mostly gaining investors’ confidence. Malaysia (one of the worst-hit developing economies of the 1997/1998 Asian crisis) is a particularly interesting case in that for a number of years it was seen as a worthy example of a ‘tiger economy’, experiencing continuous economic growth and social development. Corporate governance came to be seen as a problem only following the financial crisis, with a range of international agencies and also the Malaysian government itself advocating improved corporate governance practices as a vital reform and a way of making the country resilient to any future financial crises. This paper, first, attempts to identify and understand the driving factors of the recent corporate governance reforms in Malaysia in the aftermath of the 1997/1998 economic crisis. The paper offers insights into the significance of the recent corporate governance reforms in Malaysia and looks at some suggestions that alternative approach to corporate governance may be more appropriate. The structure of the paper is as follows. The first section sets out the debate on whether corporate governance failure was one of the main causes of the 1997/1998 financial crisis. The paper then goes on to describe the initiatives taken by the Malaysian authorities to reform corporate governance practices and to explain why the initiatives were undertaken despite inconclusive evidence that corporate governance in Malaysia was fundamentally flawed. The next section describes the research method adopted to assess and explore the driving forces of corporate governance reforms in Malaysia. Finally, a number of conclusions are made in respect of the role of corporate governance reforms in Malaysia in the aftermath of the crisis. The HLFC was a partnership effort between the government and the private sector to enhance the standards of corporate governance in Malaysia. . Lack of Transparency and Inadequate Disclosure It has been argued that the lack of transparency arising from inadequate disclosure allowed significant problems to build up in the financial and corporate sectors. When the financial condition in East Asian countries deteriorated, the inability of investors and creditors to determine sound financial institutions and corporations due to the lack of transparency, resulted in investors (especially foreign) being reluctant to hold (domestic) shares while creditors became reluctant to rollover maturing short-term debts for fear of an imminent loss. It was believed that this contributed significantly to the erosion of investor confidence and in part exacerbated the crisis. In Malaysia, the then executive director of the National Economic Action Council (NEAC), Daim Zainuddin, who was specially appointed to ‘manage the 1997/1998 financial crisis’, stated that the financial crisis in Malaysia was a ‘crisis of confidence’, where a loss in, or rather the lack of, investor (especially foreign) confidence on the Malaysian market had been seen as having been stimulated by the weak supervision of the financial system and a lack of transparency and inadequacies in corporate governance (Zainuddin, 1998). Furthermore, Rahman (1998) commented that inadequate disclosure might not have been a major factor in triggering the crisis but it certainly contributed to its depth and breadth: “…… if there had been reliable accounting information available, the excessive financial exposures would have been detected earlier and allowed corrective action to have been taken by the banks and corporations themselves, the market participators, and the regulators thus diminishing the magnitude of the crisis. Accounting disclosures should have provided useful and timely information on the weakening financial condition of the enterprises. This could have given early warning signals” (Rahman, 1998, p.38). Despite such advocates of reforming corporate governance, there is a substantial body of work challenging the assumption that governance ‘failings’ were a major contributing factor to the 1997/1998 crisis. Stiglitz and Bhattacharya (2000), for example, claimed that increased transparency in the form of disclosure as would be the case with more extensive corporate governance requirements is unnecessary as markets provide optimal incentives for disclosure. Under certain circumstances, disclosure of corporate information could actually intensify fluctuations in financial markets and trigger an economic crisis. In addition, Furman and Stiglitz (1998) pointed to the fact that even countries with solid legal and regulatory systems and no transparency problems, such as Sweden, have had financial crises. Based on a study of eight emerging market countries (including Taiwan, Malaysia, Korea and Thailand), Gibson (1999) found that board of directors/top managers of emerging market companies are more likely to lose their jobs when their companies’ performance is poor, and therefore argued that “corporate governance is not ineffective in emerging markets” (p.23). Finally, Singh et al. (2002) provided evidence that there is no relationship between crony capitalism and the Asian crisis. Furthermore, they suggested the claim that poor corporate governance system was the main cause of the Asian crisis is flawed and argued that countries such as China and India were not affected by the 1997/1998 financial crisis even though their fundamentals were worse than those of the affected Asian countries (Singh et al., 2002). First, the question on the global claim that corporate governance in Malaysia was fundamentally flawed has not been explored thoroughly. The question is whether standards of corporate governance in Malaysia were really so poor or there was a misunderstanding by foreign governments and companies about business standards in Malaysia? For instance, the then chairman of the MASB, Raja Datuk Arshad Raja Tun Uda, stated that many foreigners still believe that the Malaysian GAAP was not based on the IAS. He argued that Malaysia should make an effort to market itself on its corporate governance framework if it wanted the world to know of its strength: “The problem with Malaysia is that we do not sell ourselves well enough despite of having all the corporate governance, accounting standards and corporate reporting framework as the outside world still does not know what we have” (quoted in Yeow, 2002, [online], accessed 29 October 2002). This raises another issue that, perhaps good fundamentals and policies were not enough if people cannot see it, implying that transparency is essential – however, this is contradicting by the fact that investors invest heavily in the country pre-crisis.
Before explaining some of the current health and safety issues in the work place, it is important to define what a "policy" is. It is as a plan of action; a course or method of action that has been deliberately chosen and those guides or influences future decisions. By stating principles and rules, an occupational health and safety (OH&S) policy guides actions. A policy statement indicates the degree of an employer's commitment to health and safety. To be effective, a policy must: • involve senior management and representatives in the preparation of the policy, • be seen as consistent with the workplace's objectives of operating in an efficient and predictable manner, • be relevant to workplace's real needs, not adopted from another workplace, and • be accepted as equal in importance to the workplace's other policy object Whereas, an OH&S Plan demonstrates an organisation’s commitment to health and safety in the workplace by providing a clearly written statement of intent and plan of action for the prevention of accidents and occupational illness and injury. OH&S is a cross-disciplinary area concerned with protecting the safety, health and welfare of people engaged in work or employment. The goal of all occupational health and safety programs is to foster a safe work environment. As a secondary effect, it may also protect co-workers, family members, employers, customers, suppliers, nearby communities, and other members of the public who are impacted by the workplace environment. It may involve interactions among many subject areas, including occupational medicine, occupational (or industrial) hygiene, public health, safety engineering, chemistry, health physics, ergonomics, toxicology, epidemiology, environmental health, industrial relations, public policy, industrial sociology, medical sociology, social law, labour law and occupational health psychology. The reasons for establishing good occupational health and safety standards are frequently identified as: • Moral- An employee should not have to risk injury or death at work, nor should others associated with the work environment. • Economic - many governments realize that poor occupational health and safety performance results in cost to the State (e.g. through social security payments to the incapacitated, costs for medical treatment, and the loss of the "employability" of the worker). Employing organizations also sustain costs in the event of an incident at work (such as legal fees, fines, compensatory damages, investigation time, lost production, lost goodwill from the workforce, from customers and from the wider community). • Legal - Occupational requirements may be reinforced in civil law and/or criminal law; it is accepted that without the extra "encouragement" of potential regulatory action or litigation, many organisations would not act upon their implied moral obligations. The current health and safety issues can be found in all workplaces where they carry hazards and risks, which may result at some stage in serious accidents or which may be a continual but imperceptible health burden for employees. For example, the consequences of continual noise, the stress resulting from unclear work practices, the ergonomic risks from poorly designed workplaces. This can in the long term result in absenteeism and poor staff health and well-being in general but workers exposed to poor work procedures such as improper use of computers (broken chairs, inadequate light, cables etc.) may suffer poor health in conjunction with routine work as well as by accident. The extent of the exposure or of the harm that may result may not be realised without a regular and detailed analysis of hazards in the workplace as part of an OH&S plan developed by HR/OH&S manager. Other forces of context, which may influence the actions of the OH&S, are the poor working conditions can also affect the environment workers live in, since the working and living environments are the same for many workers. This means that occupational hazards can have harmful effects on workers, their families, and other people in the community, as well as on the physical environment around the workplace. A classic example is the use of pesticides in agricultural work. Workers can be exposed to toxic chemicals in a number of ways when spraying pesticides: they can inhale the chemicals during and after spraying, the chemicals can be absorbed through the skin, and the workers can ingest the chemicals if they eat, drink, or smoke without first washing their hands, or if drinking water has become contaminated with the chemicals. The workers' families can also be exposed in a number of ways: they can inhale the pesticides, which may linger in the air, they can drink contaminated water, or they can be exposed to residues, which may be on the worker's clothes. Other people in the community can all be exposed in the same ways as well. When the chemicals get absorbed into the soil or leach into groundwater supplies, the adverse effects on the natural environment can be permanent. As to the impact that OH&S policies and practices in an organization may have on cost effectiveness, employee commitment and employee performance, can be viewed in two ways, one where measures which protect employees from health hazards of the workplace can conflict with the management’s objective of containing production costs. On the other hand effective health and safety policies can improve the performance of Overall, the costs of most work-related accidents or illnesses to workers and their families and to employers are very high. On the other hand for the employees the direct and the indirect costs are the following: - ¨the pain and suffering of the injury or illness; - ¨the loss of income; - ¨the possible loss of a job; - ¨health-care costs The indirect costs of an accident or illness, even more difficult to measure, can be four to ten times greater than the direct costs and particularly relate to associated human suffering to family lives Overall, efforts in occupational health and safety must aim to prevent industrial accidents and diseases, and at the same time recognize the connection between worker health and safety, the workplace, and the environment outside the workplace. However, each workplace is different. A small business in which the primary hazards may be equipment, toxic materials and precise work procedures will have different preventive strategies to a social welfare or health care organisation, in which work procedures with clients may be less clearly defined and the stresses involved in “helping” professional become more relevant.
Tuesday, October 1, 2013
In this article, the various aspects of internet and its relationship to education will be discussed . This is to show the significance it has gained in this Century. As more and more students gained access to the internet in the 1990’s, they soon saw it as a tool for the advancement of learning. Textbooks in some schools were out of date, computer-based courses were often called monotonous, whereas research on the internet moved quickly, was up to date, and included a wide variety of international sources. Students were among the first to realize the impact of the internet on their education—barriers to learning had been removed. Computer-literate teachers, researchers, and scholars saw the opportunity at the same time.In this respect, one needs to consider the advantages and disadvantages of internet.There are several key advantages to using the internet for education: • Flexibility and variety in mode and appearance • Ease and low cost of access for learners worldwide • Ease of putting student information online • Ease of updating course information. Further discussion will be dealt with in this paper. This is important because one needs to carefully consider the adoption of internet in the classroom especially in teaching a subject like literature. Apart from the above discussion, one would consider the literature pertaining to the internet. The Internet is constantly growing in popularity and availability. Many people use the Internet daily, sometimes without even being aware of the fact that they use the Internet on a daily basis. As noted by Warschauer, Shetzer and Meloni (2000), the Internet has been reshaping many aspects of society such as on-line teachers have become interested in using the Internet since recent developments in ICT support diversity in learning methods and multimedia materials that can be useful for language learners. The vast amount of information linked by hypertext on the Web seems highly valuable forlearners with a self-directed learning style. Each learner is allowed and encouraged “to manage the learning process independently and to explore linked pieces of information non-sequentially on the basis of their personal preferences and needs” (Son, 1998, p. 121). Language teachers, accordingly,can make their classes individualised and personalised, resulting in selfempowerment and autonomy in learning (Warschauer, Turbee & Roberts, 1996)... In respect of TESL, one also needs to discuss on the available literature. The Internet is a powerful tool for finding information from educational organizations, governmental organizations, business companies and individuals across the world (Shetzer & Warschauer, 2000). The Internet is also an important medium that provides the potential for purposeful and powerful use of on-line communication in language and writing classes (Warschauer, 2000). On the Internet, English as a second/foreign language (ESL/EFL) teachers can reinforce students to use the target language in an authentic setting (Daugherty & Funke, 1998; Moore, 1996; Mosquera, 2001). The Internet can also be a useful tool for collaboration among ESL/EFL learners locally, nationally or globally. It can be used to acquire informationfrom a large number of language resources for a variety of purposes (Daugherty & Funke, 1998; Gonglewski, Meloni & Brant, 2001; Moore, 1996; Pennington, 1996; Ryder & Graves, 1997; Singhal, 1997; Smith, 1997; Warschauer, 2000). Teachers can not only access the Internet for finding resources for their classes but also supply their own materials, knowledge and ideas for other teachers via the Internet (Warschauer, Shetzer & Meloni, 2000). For example, they can create homepages for the purpose of their lessons and put their materials on-line (Meagher, 1995). Muehleisen (1997) recommends ESL/EFL teachers to utilize the Internet in their classes for motivating students to use the English language outside the classroom and to make the language a part of their daily lives. Kern and Warschauer (2000) indicate that language learners with access to the Internet can potentially communicate with nativespeakers of English all over the world. They can communicate either on a one-to-one or a many-to-many basis any time they need from school, home or work. Therefore, it is not surprising that many ESL/EFL teachers have embraced Internet-assisted language teaching (IALT) and have developed new ways of using the Internet with their students. Peterson (2000) points out that an Internet-based learning environment can offer an instructional tool. Ryder and Graves (1997) also assert that the Internet is a dynamic medium, which provides teachers and students with immediate access to tools and resources. Similarly, Daugherty and Funke (1998) describe that the Internet can provide a wealth of information to students that are not readily available in textbooks or lectures. Students can access information and resources simply by having a computer with an Internet connection. The information is usually presented in meaningfulcontexts to explore widely or specifically. In addition, the use of the Internet can be interactive and collaborative in nature. Through e-mail, conferencing tools and newsgroups, a virtual community of learners can exchange knowledge, ideas and perspectives on certain issues or topics. As a result, the Internet can increase EFL learners’ motivation to learn the English language (Rico & Vinagre, 2000). The advancement of the Internet has created new ways of learning and teaching ESL/EFL. For instance, the Internet can be considered as an ideal learning and teaching tool because it offers authentic learning resources available without having to travel to English-speaking countries (Gonglewski, Meloni, & Brant, 2001; Singhal, 1997; Smith, 1997). Crystal (1997) notes that an estimated 85% of electronically stored information in the world is in English, so it is important for English language teachers to look at the social, economic, cultural and linguistic consequences of the global spread of the English language influenced by the development of the Internet. Warschauer (1996) also suggests that teachers should think about the implication of the use of the Internet for their classes because the Internet has become sowidespread in schools with increasing use by both teachers and students. In addition, Shetzer and Warschauer (2000) put forward that teachers need to learn how to use Internet tools with support and encouragement from their teaching situations. In other words, teachers need to gain knowledge and develop skills to use the Internet effectively in order to maximise on-line Having looked at the various aspects of the internet one would disuss on the teaching itself. First, we would like to start by giving a brief summary of four basic ways in which the Internet can be used in the EFL/ESL c1assto later move on to only E-mail based activities. It is important to show the gradation from general Internet activities to email basedonessince.in most cases, these are already included in the general ones. According to Grey (1999), cited in Lee (1999), there are four ways in which the Internet can function as an educational tool in institutions. (1) Search for and receive: this category comprises activities that are based on using the Internet as a library. The purpose of these activities is to search for and retrieve information. (2) Publish and provide: this category involves not the retrieval, but the publication of information. This publishing is, generally, done on webpages, which are the basic placeswhere information is stored in the Internet. (3) Talk and Reply: These are conversational activities that take place via the Internet through e-mail correspondence and in chat rooms. Strictly speaking, we can include here Internet phone conversations. (4) Collaborate and learn. This category includes joint projects that involve students in two or more classrooms that might be thousands of miles aparto This fourth way of using Internet, usually, involves one or more of the other three previous ways. Collaboration between classrooms almost always involves the use of email. Besides, it may include the joint publication of webpages or joint search activities. Some of the problems that one may encounter when using the internet in the closrom. This will be discussed with respect to the tools and applications. First problem is that the internet is not always accessible by all learners and teachers though English as a second language all over the world is taught widely. Statistics (The World Bank, 2004) indicate that internet use depends on the financial situations of countries. For example, some values on the internet accessibility of overall population are 75.6% in Sweden, 61.4% in Holland, 68.7% in Japan, 50% in Germany, 17.7% in Greece, 14.2% in Turkey, 11.1% in Russia, 10.9% in Thailand, 6.6% in Saudi Arabia and 4.5% in Kenya. To sum up, when the accessibility of overall population is considered, it is possible to say that the inequity issues in internet accessibility are discouraging for both language teachers and students in educational settings (Mike, 1996). Internet unfamiliarity is another problem that causes lack of training in second language classroom. In other words, little experience on the internet is an anxiety source for both second language learners and teachers. Third, since the internet offers all types of topics, some of them are not unsuitable for school children who learn English as second language. Though serious precautions are taken today, this is still an important problem for parents and children (Singhal, 1997). Last and fourth, the increasing amount of information generally makes learners confused while they try to reach specific information. (Chafe, 1999). Consequently, problems on internet use focus on computer unavailability, lack of internet accessibility and training, computer anxiety, computer unfamiliarity of both teachers and students and some financial obligations. Among the ways that are currently used in the ESL field to promote Internet interaction, also known as CMC (Computer Mediated Communication), chat, MUDS and MOOS, and e-mail are among the most popular that facilitate learners’ spontaneous and authentic use of the target language. 3.1 Chat Chat is an important means of CMC (Sokolik, 2001), which makes use of online chat programs to facilitate communication between teachers and learners, and among learners themselves. Functioning pedagogically in the same ways as e-mail, which I will discuss later, chat is more spontaneous as it happens in real time, and it is more conversational even though it is mediated through writing. It can be used to carry out and promote group discussion, especially with non-traditional classes where learners are not able to interact face to face. Almost every big website hosts chat programs. It is up to the teacher to find an appropriate place for their students to carry out their conversational tasks. 3.2 MUDS and MOOS Both MUDS (Multi-user Domains) and MOOS (Multi-user Domains Object Oriented) are programs that provide the users with text-based virtual spaces to describe environments and to interact with those environments (Sokolik, 2001). Game oriented, the users will invent rich environments with various objects for stories to take place and for other users to explore. During the whole process of navigating through spaces to find objects or secrets, the users write scenes in planned ways, hold dialogues in an impromptu manner, and “foraging” for information, which, according to Schumann (1994), is critical in the learning process. Countless MUDS and MOOS programs can be found on the Internet with various themes and stories, e.g. programs like “Worlds” where users can choose their avatars and carry out a conversation. These ready programs are a great help for teachers who want to use MUDS/MOOS in teaching. 3.3 E-mail E-mail is the most widely used means among learners and between instructors and learners to carry out conversations. Its use in the classroom has been much studied in the field to facilitate communication both in and out of classes, asynchronously and synchronously. A large quantity of designed e-mail tasks has been written with their focus on language learning (Kern, 1998). The following is a table of summery of the major activities that are designed for use with email in the field of language teaching (Sokolik, 2001:482). Communication is a primary tool for learning. By seeing, feeling, hearing, smelling etc a living being is able to manage itself, to survive. The human being is the superb example of learning by communication, because the human being is not only able to remember its experiences, but also to combine and reuse its experiences to new insight, skills and knowledge. And these qualities will affect the human behavior. In respect one has to carefully understand the mode of teaching literature as one of the components of communication. Internet can be used for many purposes, but using internet as a learning tool will really help students of literature or any other subject. The main thing which students will learn from Internet is clear understanding and objectives. Internet is necessary because literature students should be sure about what information they are getting in the class, after class students can further explore the topic studied in the class room. The internet will allow literature students to communicate with each other about ideas, thoughts or any assignment, even if they are sitting at their home. Students can also get in touch the teacher through internet, and they discuss their problems with the teacher over internet, without waiting for next day. These days many schools are connected with each other and the world outside and are no more isolated, students can now produce work which will receive a global audience. The immediacy, speed, and interactivity of the Internet seem to be a great motivational factor for literature students. Teaching students or literature to be serious of what they research on the internet can help them to be more serious overall. I think that a best way of teaching critical evaluation of material is by having the students’ access to their own class or school website. To implement and apply this at the elementary, high school level and middle school might not be very easy. Most schools and colleges are connected to the Internet for research purpose but availability of servers is non-existent or very short. But these problems can be handled easily if teachers are willing to use internet as a learning tool. The possibility of internet as learning tool for literature, is very interesting and worth exploring. A student or a whole class would be able to benefit from the experience and knowledge that would be gained by their experience with this endeavor. This, in fact, became apparent when the use of Internet as learning tool for literature was initiated in a small way in some schools and colleges. Students were involved in viewing other schools web sites or privately owned sits and sending feedback via email, and getting up-to-date information. All students adopted a new interest for learning literature and there was definitely increased motivation. Such interest was very heartening. It is obvious; however, that both students and teacher will face some specific changes if using the Internet regularly as a tool for learning literature, but after one or two months, they would not feel any difficulty. One of the main positive changes is that students will be engaged and involved in more active learning, which may require the subject teacher to get used to their pedagogy. There are many opportunities for increased interaction and communication between their peers within their own classroom and further in their field. Opportunities also arise for students to question literature ‘experts’ across the world about any specific question. Active learning through internet may also occur within specific interactive web sites and resources. Internet learning will bring about considerably greater learning success. Haing considered the above, there are many issues to still consider in this paper. What is this fascination among high school students and teachers with the Internet technology? Why will they ignore all the other resources, such as books and printed articles, at their disposal, determined to find all material on the Internet? Recent researches clearly indicate that ways students are using Internet for effective learning process and to get up-to-date information. While students may be technologically advanced, but they are deficient when it comes to developing efficient research skills and strategies and judging Internet information. Given that, is it nos so literature students should also be taught through conventional learning methods in addition to Internet. But is it right to allow our students to depend totally on the Internet for their information and learning process?. We need to emphasize and require that students use different sources for their research and education, thereby making them aware that the Internet is just another effective tool that can be added to their arsenal of information sources. It is clear the Internet will continue to influence the school and college curriculum. Given this reality, students will need to master information literacy skills and strategies if they are to harness the potential of this new era of information technology.
An examination of the importance of the Japanese Yen in exchange rate determination in Southeast Asia.
Introduction It is the objective of this paper to try to answer this question whether there is evidence as to the fact that the importance of Japanese Yen in exchange rate determination in ASEAN. The nature of the project is to examine the significance of an exchange rate determination.. The economic logic of this hypothesis is that whenever the real money of a domestic country is less than the real money of Japan, domestic currency will end up with a relatively lower purchasing power as compare to Japan’s currency. As such, domestic goods and services would seem cheaper in the eyes of Japanese, thereby increasing their tendency to import more goods and services from domestic country. On the other hand, domestic citizens will buy less goods and services from Japan, which are deemed more expensive. The end result of lower purchasing power of domestic currency is the improvement of domestic trade balance with respect to Japan. By the same token, a domestic country’s trade balance will deteriorate if its real money is more than that of yen’s real value. Exchange rate is one of the important prices in an open economy since it affects so many business, investment and policy decisions. Importance and Unique Characteristics of the Yen Some of the unique characteristics of the yen are: • Japan is very vulnerable to rising crude oil prices, as it imports all its oil and, being an export-dependent nation, is highly sensitive to rising energy costs. • Japan's foreign trade industry maintains an isolationist view. Japan lags behind the rest of the world in regards to foreign trade, resulting in a number of structural problems as well as low productivity for domestic companies. The lack of circulation of the yen outside Japan makes the JPY weak. • The manufacturing industry is a major component of the Japanese economy and is directly affected by the value of the yen. A high value of the yen causes companies to invest in lower-cost nations, since trading with Japan would cost more. History of the Japanese Yen Exchange Rate The yen was pegged at 1 USD = ¥360 in April 1949. It remained at this value for a period of 22 years until 1971. Significant economic growth was witnessed during this period. However, with the collapse of the Bretton Woods System, the floating exchange rate method was adopted. The Japanese yen has been appreciating since December 1971. During the 1971-1985 phase, the yen appreciated without any fluctuation in trend. After the Plaza Accord in 1985, the Japanese currency spiked. Against this backdrop, Japanese industries invested abroad to capture offshore markets. This, in turn, depressed domestic industrial growth and employment. Domestic Investments dipped and all these led to deflation in the Japanese economy. At this juncture, the Japanese government intervened in the forex market to curb the yen appreciation in order to boost the export sector. In early 2009, the yen benefited from the economic crisis. This was mainly due to the high repatriation of Japan’s extensive foreign investments. Yen Exchange Rate The following table gives a picture of the Japanese exchange rate against major currencies (as on January 1) 1 JPY= 2007 2008 2009 USD 0.00840195 0.00895175 0.0110144 GBP 0.00428977 0.00451129 0.00753432 Euro 0.00636656 0.00613008 0.00791323 CHF 0.0102462 0.0101414 0.0117557 The daily volume of the major foreign exchange markets of the world is approximately US$2 trillion, of which the yen makes up 21 per cent (BIS 1998). The volume includes both sides of transactions (e.g. both the selling of US dollars and the buying of yen), so world’s currencies total to 200 per cent. Evidence to support influence of Yen Of total world trade, 5 per cent is denominated in yen, which is below that in US dollars and euros, but also below that in UK pounds (Foreign Exchange Council 1999). The yen is little used even for Japanese export and import transactions, let alone for trade among third countries. About 35 per cent of Japan’s exports are denominated in yen, a level that has remained fairly constant. Only 20 per cent of imports are in yen, although this percentage has been rising gradually. Around 50 per cent of exports to Southeast Asia. In 1995 the yen made up 8 per cent of world reserves, but by the end of 1997 its share had fallen to 4.9 per cent, returning to the level of the early 1980s (IMF, various annual reports). Yen denominated bonds exceeded 20 per cent of cross-border bond issues in 1995, but with the financial crisis plummeted to 6 per cent – back to the level of the early 1980s Eight countries in the region (Cambodia, Indonesia, Laos, Malaysia, Myanmar, Singapore, Thailand, and Viet Nam) are classified by the IMF as having managed floats “with no pre-announced path for the exchange rate.” In practice, however, several of them – most notably, Cambodia, Myanmar, and Singapore – also appear to exhibit a considerable “fear of floating.” Until 2002 the same was true as well of Indonesia, though in the most recent period behavior seems to have moved more closely in line with Jakarta’s declared policy of a managed float. Until 2005, Malaysia also maintained a peg anchored to America’s greenback, before changing to a managed float. Literature review- Findings and implications of previous research Thus, it is not surprising to learn that the study of exchange rate has been one of the most important areas of economic research over the past few decades. This body of research has experienced tremendous growth, especially in the post-Bretton Woods era in which foreign exchange rate has been highly volatile after the inception of the floating exchange rate regime in 1973. The end of- period nominal exchange rates for the countries involved, namely Indonesia (IDR), Japan (JPY), Malaysia (MYR), the Philippines (PHP), Singapore (SGD) and Thailand (THB) are collected from various issues of International Financial Statistics (IMF). In this study, nominal bilateral exchange rate is defined as the foreign price of domestic currency. For example, the JPY/MYR exchange rate refers to the unit price of Malaysia ringgit (MYR) in terms of Japanese yen (JPY). The Japanese yen-based nominal bilateral exchange rates of these ASEAN-5 economies, together with their corresponding long-term trends. A stylised fact depicted in these plots is that, in the period of study, the nominal exchange rates of these ASEAN-5 economies depreciate with respect to Japanese yen (JPY). This is obvious from the downwards-sloping long-term trend of each nominal bilateral exchange rate. The depreciation of ASEAN-5 exchange rates in the period of study is mainly due to the appreciation of Japanese yen with respect to the U.S. dollar, whereas during the same period, the US denominated ASEAN-5 exchange rates either remain stable or depreciate For instance, Aggarwal and Mougoue (1996) found that both the yen and the ASEAN (Malaysian, Philippine, Thai and Singapore) currencies) and the yen and the ‘Tigers’ (Hong Kong dollar, South Korea, Singapore and Taiwan) are co-integrated, implying the existence of a long-run relationship between the currencies that prevents any one from getting too far out of line for an extended period of time. Others like Zhou (1998) concludes that there is a ‘notable influence of the Japanese yen in the region’ particularly on the Korean won and the Singapore and the Taiwan dollar currencies. Finally, Aggarwal et al. (2000) undertake a purchasing power parity analysis of Asian currencies and find significant relationships with the yen and the German mark but not with the US dollar. This corroborates the conclusions of Tse and Ng (1997) that there exists a cointegrating relationship between the currencies in the region that hinges specifically upon the presence of these rates. Zhou (1998) finds that these rates are especially receptive to a yen influence. Our findings are also consistent with those of Kwan (1996), Aggarwal et al. (2000) and Bowman (2004) who document an emerging yen influence more generally in the region during the 1990s. We also find an increasing yen influence on the Singapore dollar and the Thai baht. Overall the literature,suggests significant and strengthening trade, investment and financial linkages throughout Southeast Asia and while the yen is not as strong as the US dollar in terms of its dominance in regional financial markets, it may be gaining influence over time. This is a study of the stochastic properties of Asian exchange rates and of cointegration between the Japanese yen and two sets of Asian currencies, i.e., currencies of the ‘Tigers’, Hong Kong, South Korea, Singapore, and Taiwan; and currencies of the ASEANs, Malaysia, Philippines, Thailand, and Singapore. Using a longer time horizon than other cointegration studies and accounting for deviations from normality, non-stationarity, and the presence of unit roots, it is documented that (in contrast to the findings for the major currencies) both sets of Asian currencies are found to be cointegrated, with the influence of the Japanese yen increasing relative to the US dollar in recent years. This evidence of cointegration between the Yen and other Asian currencies has important implications for understanding Asian financial integration, the increasing international role of the Japanese yen, and for developing asset allocation and crosshedging strategies for investments denominated in these Asian currencies. The findings It can be said that ASEAN countries had so far linked their currencies largely to the U.S. dollar, This happened during the Asian currency crisis in 1997 prompted some of these countries to adopt a more flexible exchange rate system. In response to the above movement, the role of the yen in South East Asia, and also the possibility of further yen internationalization, has attracted a great deal of attention again. In the past few years, ASEAN economic ties with Japan have deepened In the 1960s, Japanese investments in Southeast Asia’s manufacturing sector help build region-wide production networks linking the two economies together. Japan’s Investment in heavy industries and infrastructure, further stimulated Japanese FDI in ASEAN. Japanese capital inflow into ASEAN and intra-industry exchange among Japanese subsidiaries operating throughout the region has directly contributed to the increase in intra-regional trade. ASEAN has been Japan’s important supplier of raw materials, production base for manufacturing industries and market for manufactures. ASEAN supplies both industrial and agricultural raw materials, at reasonable prices, which have been instrumental inJapan’s rapid economic development. ASEAN acted as an important production base for her manufacturing industries, which have succeeded in penetrating international markets (Lim, 1994). Trade between Japan and ASEAN amounted to US$113.4 billion in 2000, slightly below pre-crisis levels and it enjoys a trade surplus with ASEAN. However, the gap has significantly narrowed. In 2000, ASEAN mostly exports machinery and electrical appliances, mineral products, agriculture and prepared foodstuffs, and wood and wood articles. Japan’s share of trade invoiced in the yen is by far the lowest among six industrial countries. This low level of yen-invoiced trade is generally attributed to the Japan’s unique trade structure: one is the relatively large share of the United States in Japan’s exports and the other is the Japan’s high import ratio of raw materials and fuels. In addition, raw materials and fuels are mainly invoiced in the U.S. dollar as suggested by McKinnon’s hypothesis. Hence, the high import share of raw materials and fuels also impedes yen-invoiced trade. On the other hand, the yen-invoiced ratio is relatively high in Japan’s exports to Southeast Asia, which is particularly prominent in the exports of machinery and equipment. For example, 81.3 percent of the exports in the transport equipment industry is invoiced in the yen. On the other hand, only 26.7 percent of the imports from Southeast Asia are invoiced in the yen and the dollar-invoiced imports account for 71.6 percent. In view of Japan's importance in the world economy, the ratio of yen-denominated settlements in Japan's trade and capital transactions remains low, for instance as compared to Germany. Moreover, there has been very little change in this ratio over the past decade. In addition to the above, the ratio of Japan's yen-invoiced trade with Asia--a region with which Japan has strong economic ties--remains low due to various factors. Specific problems include [a] the inadequate development of foreign exchange markets for the yen and Asian currencies (The yen suffers the effects of a vicious cycle in which the foreign exchange markets for the yen and Asian currencies are underdeveloped because of the low volume of yen-invoiced transactions, and in turn, the volume of yen-invoiced transactions remain low because of the absence of adequately developed foreign exchange markets.) and [b] the instability of the exchange rates between the yen and other Asian currencies because such currencies had heretofore been linked to the U.S. dollar. Conclusion It can be said that in this paper one finds evidence of cointegration among individual ASEAN currencies and some of the global currencies, indicating a long-run relationship. Examination of the cointegrating vectors yields four main findings. First, there is a notable absence of a clear US dollar standard. Second, the yen is downright unimportant, suggesting that ASEAN currencies are quite far from a yen standard. Third, ASEAN currencies are also quite far from a euro standard. Fourth, and most surprisingly, the UK pound is very important. These results are at odds with the traditional (short-run) regressions which suggest that ASEAN is on a dollar standard, although it is not a perfect dollar standard because coefficients are not at unity and various other currencies are significant in different equations. Hence, the overall conclusion from this study is that there is a wide variety of influences on ASEAN exchange rates in both the long run and the short run. This suggests that ASEAN, as a group, is not pursuing – and is in fact not ready for – a global-currency standard. However, as to the earlier question raised, there is some evidence to show the importance of the Japanese Yen in exchange rate determination in Southeast Asia.
The Internet’s Significant Impact on Education As more and more students gained access to the internet in the 1990’s, they soon saw it as a tool for the advancement of learning. Textbooks in some schools were out of date, computer-based courses were often called monotonous, whereas research on the internet moved quickly, was up to date, and included a wide variety of international sources. Students were among the first to realize the impact of the internet on their education—barriers to learning had been removed. Computer-literate teachers, researchers, and scholars saw the opportunity at the same time. Online education was born. With nearly 888,631,131 users on the internet in 2005, 13.9% of the world’s population (http://www.internetworldstats.com/stats.htm), reliance on this tool has increased exponentially. Social barriers are disappearing as students interact worldwide. As technology improves, the technological revolution has a quicker and deeper impact on more and more lives. Educators, particularly those in for-profit colleges such as University of Phoenix, saw the opportunity early on and built an online course and online degree structure. The more traditional colleges were not far behind as they soon discovered they were losing student enrollments to for-profit schools and had to adapt, to change their paradigm—to move into online education. There are several key advantages to using the internet for education: • Flexibility and variety in mode and appearance • Ease and low cost of access for learners worldwide • Ease of putting student information online • Ease of updating course information. Flexibility and Variety The flexibility of the internet is perhaps the greatest advantage for online education. At first, some college courses attempted to replicate the traditional college experience: lectures were videotapes so that students off campus could watch them. But, as Bernadette Howlett of ISU so deftly pointed out, it was already apparent that lectures were not the most successful way to impart information to students. Trying to “…replicate classroom teaching in the online environment…” would cause educators to “fail to take advantage of the capabilities of the medium. Some situations may call for video, but not simply to replace the face-to-face lecture.” With the ease of creating websites, including interactive activities, chatrooms, and blogs, online education students and their professors can interact in ways that are familiar to them. For those new to the internet, the online course activities are assimilated easily due to reliance on user-friendly approaches. Even those new to the internet will learn to use it as they progress in their online coursework, finding themselves more and more comfortable as time goes on. At least one MBA course has been created in which a corporate environment is simulated so effectively that students gain real practice accessing typical documents, attending simulated meetings, creating “real-world” assignments, and essentially gaining on-the-job experience as they learn online. Ease and Low Cost of Access Perhaps one of the greatest impacts of the internet on education is the removal of barriers to gaining knowledge. It is no longer imperative that a student move or even travel in order to take a class or earn a degree from the right college. Working professionals who had to travel to and from classes after work now use those travel hours as study hours. For those with disabilities, online study is an even greater equalizer. With enrollment in an online course and the motivation and responsibility required, a student in a rural area can stay at home and learn online, for example, programming or database administrator skills. Live in rural Idaho and want to study Italian or Principles of International Business? Doable. Retired and want to learn oil painting from your living room? You have only to find the right online art course for you. Don’t have the funds to attend an ivy-league school? Take an online course for a fraction of the cost. Working professionals, by far the majority of enrollees in online course enrollment, continue to work full time, raise families, and take necessary courses and, if desired, earn the degrees or credentials they need for advancement and/or salary increases at work. Both they and their employers benefit from this win/win approach: business meetings are attended, business trips are taken, and coursework is completed—at the student’s convenience, albeit at 11:00 PM or 5:00 AM in pajamas and slippers. The employer retains the employee’s contribution to the organization and benefits from the gain in information and skill. The employee retains his or her job, learns what is needed for advancement, and enjoys family life while being at home. One area that still requires attention is high-speed access in some rural areas. While most enrollees have such access, many rural areas are still on dialup and students find that some interactive courses that utilize videoconferencing are not possible for them. Ease and Low Cost of Putting Information Line Online course technology is constantly improving. Colleges that utilize available, tested technologies from proven vendors find it much easier to move into the online arena quickly than do those who try to invent a new approach. Online classes now revolve around the faculty and students ease of using chat, email, and interactive meetings to gain and share information. Shy students who might not speak up in class find it easy to key in their ideas during their online class. And the records are retained so those who could not attend are able access the information at a time convenient for them. Students for whom English is a second language (ESL) have multiple chances to review the information and ensure they understood it so they can keep up with their online class. Ease of Updating Information Unlike revising a textbook, online course changes can be easily made or new material added to existing online courses. Online class enrollees may receive instantly the results of their exams instead of having to wait for days to know how they did. Student papers can be offered online for review by peers. A new source of information, perhaps a research paper or an editorial, is easily added to the online syllabus. Conclusion The growth of the internet has changed significantly the way we learn. Online education has made it possible for most of us to learn online, to become masters of subject areas, to develop business skills, even to learn meditation from anywhere, any time. Online education has a flexibility that enables those enrolled to learn and earn, never missing a meeting, a class, or time with families. Working professionals are motivated to learn and to earn online degrees essential for on-the-job advancement, particularly single mothers with children who might have found it impossible to move ahead two decades ago. Gone is the stress that attending night school used to create. And online learning is still in its infancy! Leaders in the field are now looking at how education could use the mobile platforms—mobile phones, PDAs (personal digital assistants), tablets, MP3 players, handhelds, laptops, among other possibilities, according to Ellen D. Wagner and Robby Robson in “Education Unplugged: Mobile Learning Comes of Age”.
Bank of America Malaysia Berhad 1. Bank Profile Bank of America Malaysia Berhad (BOA Malaysia) offers a comprehensive range of commercial banking services to corporate enterprises in Malaysia including simple checking accounts, electronic banking, foreign exchange, trade finance, credit products and project advisory and finance. 2. History 2,1 International and Parent company – Bank of America N.A 2.1.1 Its early history Bank of America's history dates to 1904, when Amadeo Giannini founded the Bank of Italy in San Francisco to cater to immigrants who were denied service from other banks. He was raised by the Fava/Stanghellini family when his father was shot while trying to collect on a $10.00 debt. When the 1906 San Francisco earthquake struck, Giannini was able to get all deposits out of the bank building and away from the fires. As San Francisco's banks were in ruins and unable to open their vaults, Giannini was able to use the rescued funds to start lending within a few days of the disaster. From a makeshift desk, he loaned money to anyone who was willing to rebuild. Later in life, he took great pride that all of these loans were repaid. In 1922, Giannini established Bank of America and Italy in Italy by buying Banca dell'Italia Meridionale. On March 7, 1927, Mr. Giannini consolidated his Bank of Italy (101 branches) with the then newly formed Liberty Bank of America (175 branches). The result was the Bank of Italy National Trust & Savings Association with a capital of $30,000,000, resources of $115,000,000. In 1928, Giannini merged with Bank of America Los Angeles and consolidated it with his other bank holdings to create what would become the largest banking institution in the country. He renamed his Bank of Italy November 3, 1930, to Bank of America. 2.1.2 Growth in California Giannini sought to build a national bank, expanding into most of the western states as well as into the insurance industry, under the aegis of his holding company, Transamerica Corporation. In 1953, regulators succeeded in forcing the separation of Transamerica Corporation and Bank of America under the Clayton Antitrust Act. The passage of the Bank Holding Company Act of 1956 prohibited banks from owning non-banking subsidiaries such as insurance companies. Bank of America and Transamerica were separated, with the latter company continuing in the insurance business. However, federal banking regulators prohibited Bank of America's interstate banking activity, and Bank of America's domestic banks outside California were forced into a separate company that eventually became First Interstate Bancorp, which in 1996 was acquired by Wells Fargo and Company. It was not until the 1980s with a change in federal banking legislation and regulation that Bank of America was again able to expand its domestic consumer banking activity outside California. New technologies also allowed credit cards to be linked directly to individual bank accounts. In 1958, the bank introduced the BankAmericard, which changed its name to VISA in 1975. A consortium of other California banks introduced Master Charge (now MasterCard) to compete with BankAmericard. 2.1.3 Expansion outside California Following the passage of the Bank Holding Company Act of 1967, BankAmerica Corporation was established for the purpose of owning Bank of America and its subsidiaries. In 1983 BankAmerica expanded outside California with its acquisition of Seafirst Corporation of Seattle, Washington, and its wholly owned banking subsidiary, Seattle-First National Bank. Seafirst was at risk of seizure by the federal government after becoming insolvent due to a series of bad loans to the oil industry. BankAmerica continued to operate its new subsidiary as Seafirst rather than Bank of America until the 1998 merger with NationsBank. In 1986 and 1987 BankAmerica was dealt huge losses by the placement of a series of bad loans in the Third World. The losses resulted in a huge decline of BankAmerica stock, making it vulnerable to a hostile takeover. First Interstate Bancorp of Los Angeles (which had originated from banks once owned by BankAmerica), launched such a bid in the fall of 1986, although BankAmerica rebuffed it, mostly by selling operations. It sold its Finance America subsidiary to Chrysler and the brokerage firm Charles Schwab and Co. back to Mr. Schwab. It also sold Bank of America and Italy to Deutsche Bank. By the time of the 1987 stock market crash, BankAmerica's share price had fallen to $8, but by 1992 it had rebounded strongly to become one of the biggest gainers of that half-decade. 2.1.3 Bank of America Tower in New York City. BankAmerica's next big acquisition came in 1992. It acquired Security Pacific Corporation and its subsidiary Security Pacific National Bank in California and other banks in Arizona, Idaho, Oregon, and Washington (which Security Pacific had acquired in a series of acquisitions in the late 1980s). This was, at the time, the largest bank acquisition in history. Federal regulators, however, forced the sale of roughly half of Security Pacific's Washington subsidiary, the former Rainier Bank, as the combination of Seafirst and Security Pacific Washington would have given BankAmerica too large a share of the market in that state. The Washington branches were divided and sold off to West One Bancorp (now U.S. Bancorp) and KeyBank. Later that year, BankAmerica expanded into Nevada by acquiring Valley Bank of Nevada. In 1994, BankAmerica acquired the Continental Illinois National Bank and Trust Co. of Chicago, which had become federally owned as part of the same oil industry debacle emanating from Oklahoma City's Penn Square Bank, that had brought down numerous financial institutions including Seafirst. At the time, no bank had the resources to bail out Continental, so the federal government operated the bank for nearly a decade. Illinois at that time regulated branch banking extremely heavily, so Bank of America Illinois was a single-unit bank until the 21st century. BankAmerica moved its national lending department to Chicago in an effort to establish a financial beachhead in the region. These mergers helped BankAmerica Corporation to once again become the largest U.S. bank holding company in terms of deposits, but the company fell to second place in 1997 behind fast-growing NationsBank Corporation, and to third in 1998 behind North Carolina's First Union Corp. On the capital markets side, the acquisition of Continental Illinois helped BankAmerica to build a leveraged finance origination and distribution business (Continental Illinois had extensive leveraged lending relationships) which allowed the firm’s existing broker-dealer, BancAmerica Securities (originally named BA Securities), to become a full-service franchise. In addition, in 1997, BankAmerica acquired Robertson Stephens, a San Francisco-based investment bank specializing in high technology for $540 million. Robertson Stephens was integrated into BancAmerica Securities and the combined subsidiary was renamed BancAmerica Robertson Stephens. 2,1,4 Merger of NationsBank and BankAmerica In 1997, BankAmerica lent D. E. Shaw & Co., a large hedge fund, $1.4bn so that the hedge fund would run various businesses for the bank. However, D.E. Shaw suffered significant loss after the 1998 Russia bond default. BankAmerica was acquired by NationsBank in October of 1998. The purchase of BankAmerica Corp. by NationsBank Corporation was the largest bank acquisition in history at that time. While the deal was technically a purchase of BankAmerica Corporation by NationsBank, the deal was structured as merger with NationsBank renamed to Bank of America Corporation, and Bank of America NT&SA changing its name to Bank of America, N.A. as the remaining legal bank entity. The bank still operates under Federal Charter 13044, which was granted to Giannini's Bank of Italy on March 1, 1927. However, SEC filings before 1998 are listed under NationsBank, not BankAmerica. Following the US$64.8 billion acquisition of BankAmerica by NationsBank, the resulting Bank of America had combined assets of US$570 billion, as well as 4,800 branches in 22 states. Despite the mammoth size of the two companies, federal regulators insisted only upon the divestiture of 13 branches in New Mexico, in towns that would be left with only a single bank following the combination. This is because branch divestitures are only required if the combined company will have a larger than 25% FDIC deposit market share in a particular state or 10% deposit market share overall. In addition, the combined broker-dealer, created from the integration of BancAmerica Robertson Stephens and NationsBanc Montgomery Securities, was renamed Banc of America Securities in 1998. 2.1.5 Its History since 2001 In 2004, Bank of America announced it would purchase Boston-based bank FleetBoston Financial for $47 billion in cash and stock. By merging with Bank of America, all of its banks and branches were given the Bank of America logo. At the time of merger, FleetBoston was the seventh largest bank in United States with $197 billion in assets, over 20 million customers and revenue of $12 billion. On 30 June 2005, Bank of America announced it would purchase credit card giant MBNA for $35 billion in cash and stock. The Federal Reserve Board gave final approval to the merger on 15 December 2005, and the merger closed on 1 January 2006. The acquisition of MBNA provided Bank of America a leading credit card issuer at home and abroad. The combined Bank of America Card Services organization, including the former MBNA, had more than 40 million U.S. accounts and nearly $140 billion in outstanding balances. Under Bank of America the operation was renamed FIA Card In May 2006, Bank of America and Banco Itaú (Investimentos Itaú S.A.) entered into an acquisition agreement through which Itaú agreed to acquire BankBoston's operations in Brazil and was granted an exclusive right to purchase Bank of America's operations in Chile and Uruguay. A deal was signed in August 2006 under which Itaú agreed to purchase Bank of America's operations in Chile and Uruguay. Prior to the transaction, BankBoston's Brazilian operations included asset management, private banking, a credit card portfolio, and small, middle-market, and large corporate segments. It had 66 branches and 203,000 clients in Brazil. BankBoston in Chile had 44 branches and 58,000 clients and in Uruguay it had 15 branches. In addition, there was a credit card company, OCA, in Uruguay, which had 23 branches. BankBoston N.A. in Uruguay, together with OCA, jointly served 372,000 clients. While the BankBoston name and trademarks were not part of the transaction, as part of the sale agreement, they cannot be used by Bank of America in Brazil, Chile or Uruguay following the transactions. Hence, the BankBoston name has disappeared from Brazil, Chile and Uruguay. The Itaú stock received by Bank of America in the transactions has allowed Bank of America's stake in Itaú to reach 11.51%. Banco de Boston de Brazil had been founded in 1947. On 20 November 2006, Bank of America announced the purchase of The United States Trust Company for $3.3 billion, from the Charles Schwab Corporation. US Trust had about $100 billion of assets under management and over 150 years of experience. The deal closed 1 July 2007. On September 14, 2007, Bank of America got an approval from the Federal Reserve to acquire LaSalle Bank Corporation from Netherlands's ABN AMRO for $21 billion. With this combination Bank of America will have 1.7 trillion in assets. The acquisition was completed on October 1, 2007. The deal increased Bank of America's presence in Illinois, Michigan, and Indiana by 411 branches, 17,000 commercial bank clients, 1.4 million retail customers, and 1,500 ATMs. Bank of America has become the largest bank in the Chicago market with 197 offices and 14% of the deposit share, surpassing JPMorgan Chase. 2.1.5 Acquisition of Countrywide Financial On August 23, 2007 the company announced a $2 billion repurchase agreement for Countrywide Financial. This purchase of preferred stock was arranged to provide a return on investment of 7.25% per annum and provided the option to purchase common stock at a price of $18 per share. On January 11, 2008, Bank of America announced the purchase of Countrywide Financial for $4.1 billion. In March 2008, it was reported that the FBI was investigating Countrywide for possible fraud relating to home loans and mortgages.This news did not stop the acquisition, which was completed in July 2008,giving the bank a substantial market share of the mortgage business, and access to Countrywide's resources for servicing mortgages.[ The acquisition was seen as preventing a potential bankruptcy for Countrywide. Countrywide, however, denied that it was close to bankruptcy. Countrywide provided mortgage servicing for nine million mortgages valued at US$ 1.4 trillion as of December 31, 2007. This purchase made Bank of America Corporation the leading mortgage originator and servicer in the U.S. , controlling 20–25% of the home loan market.The deal was structured to merge Countrywide with the Red Oak Merger Corporation, which Bank of America created as an independent subsidiary. It has been suggested that the deal was structured this way to prevent a potential bankruptcy stemming from large losses in Countrywide hurting the parent organization by keeping Countrywide bankruptcy remote. Countrywide Financial has changed its name to Bank of America Home Loans. 2.1.6 Acquisition of Merrill Lynch On September 14, 2008, Bank of America announced its intentions to purchase Merrill Lynch & Co., Inc. in an all-stock deal worth approximately $50 billion. Merrill Lynch was at the time within days of collapse, and the acquisition effectively saved Merrill from bankruptcy. Around the same time Bank of America was reportedly also in talks to purchase Lehman Brothers, however a lack of government guarantees caused the bank to abandon talks with Lehman. Lehman Brothers filed for bankruptcy the same day Bank of America announced its plans to acquire Merrill Lynch. This acquisition made Bank of America the largest financial services company in the world. Temasek Holdings, the largest shareholder of Merrill Lynch & Co., Inc., briefly became one of the largest shareholders of Bank of America, with a 3% stake. However, taking a loss Reuters estimated at $3 billion, the Singapore sovereign wealth fund sold its whole stake in Bank of America in the first quarter of 2009. Shareholders of both companies approved the acquisition on December 5, 2008, and the deal closed January 1, 2009. The Bank, in its January 16, 2009 earnings release, revealed massive losses at Merrill Lynch in the fourth quarter, which necessitated an infusion of money that had previously been negotiated with the government as part of the government-persuaded deal for the Bank to acquire Merrill. Merrill recorded an operating loss of $21.5 billion in the quarter, mainly in its sales and trading operations, led by Tom Montag. The Bank also disclosed it tried to abandon the deal in December after the extent of Merrill's trading losses surfaced, but was compelled to complete the merger by the U.S. government. The Bank's stock price sank to $7.18, its lowest level in 17 years, after announcing earnings and the Merrill mishap. The market capitalization of Bank of America, including Merrill Lynch, was then $45 billion, less than the $50 billion it offered for Merrill just four months earlier, and down $108 billion from the merger announcement. The acquisition made Bank of America the number one underwriter of global high-yield debt, the third largest underwriter of global equity and the ninth largest adviser on global mergers and acquisitions.As the credit crisis eased, losses at Merrill Lynch subsided, and the subsidiary generated 3.7 billion of Bank of America's 4.2 billion in profit by the end of Q1 2009, and over 25% in the Q3 2009. 2.1.7 Bonus settlement On August 3, 2009, Bank of America agreed to pay a $33 million fine, without admission or denial of charges, to the U.S. Securities and Exchange Commission (SEC) over the non-disclosure of an agreement to pay up to $5.8 billion of bonuses at Merrill. The bank approved the bonuses before the merger but did not disclose them to its shareholders when the shareholders were considering approving the Merrill acquisition, in December 2008. The actual amount of bonuses paid was $3.6 billion, of which $850 million was "guaranteed" and the rest was shared amongst 39,000 workers who received average payments of $91,000; 696 people received more than $1 million in bonuses; at least one person received a more than $33 million bonus. On September 14, the judge rejected the settlement . While ultimately deferring to the SEC, in February, 2010, Judge Rakoff approved a revised settlement with a $150 million fine. Bank of America received US $20 billion in the federal bailout from the US government through the Troubled Asset Relief Program (TARP) on 16 January 2009 and also got guarantee of US $118 billion in potential losses at the company. This was in addition to the $25 billion given to them in the Fall of 2008 through TARP. The additional payment was part of a deal with the US government to preserve Bank of America's merger with the troubled investment firm Merrill Lynch. According to a March 15, 2009 article in The New York Times, Bank of America received an additional $5.2 billion in government bailout money, channeled through American International Group. On December 2, 2009, Bank of America announced it would repay the entire US $45 billion they received in TARP and exit the program, using $26.2 billion of excess liquidity along with $18.6 billion to be gained in "common equivalent securities" (Tier 1 capital). The bank completed the repayment on December 9. 2009. 2.2 Malaysia BOA Malaysia was formerly known as Bank of America NT&SA. It was incorporated under the Companies Act, 1965 in September 1994. . It operates as a subsidiary of BankAmerica International Financial Corporation. BOA Malaysia began operations in Malaysia in early 1959 at the Rio Hotel (presently known as the Kwong Yik Bank Building). Later it moved to the Asia Insurance Building in Jalan Raja Chulan, where the official opening ceremony was held on June 1, 1959. In October 1976, the Branch moved its premises to Kompleks Antarabangsa in Jalan Sultan Ismail and then in 1994 to it present premises in Wism Goldhill, Jalan Raja Chulan. Since 1959, the bank offer wholesale banking services to corporations and financial institutions. It offers a comprehensive range of commercial banking services to corporate enterprises in Malaysia including simple checking accounts, electronic banking, foreign exchange, trade finance, credit products and project advisory and finance. Apart from that, it also provides a wide range of corporate banking and treasury management services in Malaysia and across Asia including: short-term borrowing, trade finance, short term investing, treasury management, and foreign exchange solutions. As part of its global working capital management solutions 3. Purpose and function of BOA Malaysia towards economic development The main purpose or function of BOA Malaysia is to keep the flow of money in the economy. That is, to transfer money from the ones that have surplus to the ones that needs them It would accept deposits from customers and using this money they would grant loans to people who need money. The customers who get the loan pay an interest and the ones that deposited the money in turn get a significant portion of this interest. This way, they promote businesses and keep the economy running. 4. Banks’s development since inception 4.1 Services provided BOA Malaysia currently offers wholesale banking services to corporations and financial institutions. Currently, it provides a wide range of corporate banking and treasury management services like short-term borrowing, trade finance, short term investing, treasury management, and foreign exchange solutions. As part of the global working capital management solutions. BOA Malaysia offer the following services in Malaysia: • Accounts – allow resident corporations to open and maintain MYR accounts. The bank also provides foreign currency accounts, which are used mainly for the booking of foreign currency loans and depository services. • Information – Current- and previous-day reporting is supported via a range of delivery options from Internet to direct file delivery. • Technology and client access – through its Global Banking System (GBS) fully deployed throughout its Asian network, enabling their clients to deliver cross-border and domestic transactions using a wide range of file formats and delivery methods. This uniquely integrated platform enables the bank to provide consistent services across the globe. • Liquidity solutions – Bank of America Malaysia offers notional pooling, zero balance accounts or cash concentration in MYR. • Trade – Bank provides access to a range of trade services including import and export letter of credit services, documentary collections and advisory services. • Client servicing – have a dedicated Client Services team that provides day-to-day support for treasury management business. Its servicing model has evolved in direct response to feedback received and aims to deliver a coordinated, world class servicing experience. 4,2 Size of the bank Its parent company BOA topped The Banker magazine’s 2010 with a ranking of the world’s banks, based on Tier 1 capital. Its Tier 1 capital rose by a third from last year to US$160bil, which saw it swap places with JPMorgan, whose Tier 1 capital dipped 2% to US$133bil. Based on the Half year ended 30 June 2009, BOA Malaysia Tier 1 capital was RM441,989,000. 4.5 Number of branches Currently, it does not have any branches in Malaysia. 5. Financial performance of BOA Malaysia In this financial analysis of BOA Malaysia, the unaudited condensed interim financial statements for the half year ended 30 June 2009 is used. It should be read in conjunction with the Bank‟s audited financial statements for the financial year ended 31 December 2008.This is the only available financial data for the bank and with it comparisons are made. Among the most important ratio measures of bank profitability used today are the following: 5.1.1 Return on equity capital (ROE) = (net income) / (total equity capital) The ROA is primarily an indicator of managerial efficiency; it indicates how much profit accompany earns for every dollar of its assets. Assets include things like cash in the bank, accounts receivable, property, equipment, inventory and furniture. ROE, on the other hand, is a measure of the rate of return flowing to the bank’s shareholders. It's a basic test of how effectively a company's management uses investors' money. ROE shows whether management is growing the company's value at an acceptable rate. 5.2.1 Return on assets (ROA) = (net income) / (total assets) Based on the half year ended 30 June 2009, we find that Bank of America Malaysia’s ROA and ROE are 1.46% and 4.12% respectively. If we compare with the Fitch ratings , February 2010, it estimates that the average ROA of the Malaysian banks was around 0.90% in 2009, down from 1.11% in 2008. Given this, Bank of America Malaysia is well above it. For the half year ended 30 June 2009, the Bank had cash and short-term funds of RM1, 039,097,000 which reflected the higher ROA. Using CAMEL framework in this financial an Evolved Nodes B alysis one would use variables comprising (1) capital adequacy, (2) asset quality, (3) management, (4) earnings and (5) liquidity. In the following figure is described the framework for the bank performance. There are five categories under the independent variables and each category has its own ratios. 5.2 Framework for Bank Performance a) Capital adequacy The calculation of capital, for use in capital adequacy ratios, measures two types of capital that for tier one capital and tier two capital. Tier one capital is capital which is permanently and freely available to absorb losses without the bank being obliged to cease trading. An example of tier one capital is the ordinary share capital of the bank. Tier one capital is important because it safeguards both the survival of the bank and the stability of the financial system. Generally Tier two capital is where capital absorbs losses only in the event of a winding-up of a bank, and so provides a lower level of protection for depositors and other creditors. It comes into play in absorbing losses after tier one capital has been lost by the bank. An example of tier two capital is subordinated debt. In the event of a winding-up, subordinated debt holders will only be repaid if all other creditors (including depositors) have already been repaid. Firms with high financial leverage will experience more volatile earnings behaviour. It indicates the extent to which an institution's capital base covers the risks inherent in its operations. According to Fitch rating, the average core Tier 1 Capital adequacy ratio (CAR) of the nine Malaysian banks strengthened to 8.8% at end‐September 2009 (end‐2008: 7.5%), with their Tier 1 and total CAR also higher at 10.8% and 14.0%, respectively (end‐2008: 9.1% and 13.5%). As for Bank of America Malaysia, its Tier 1 and Tier 2 capital are RM441,989,000 and 446,989,000 respectively. As at end-December 2009, the banking industry’s average overall risk-weighted capital adequacy ratio and tier-1 capital adequacy ratio stood at a healthy 14.7% and 13.3%, respectively (end-December 2008: 12.6% and 10.6%). For the half year ended 30 June 2009, Bank of America Malaysia’s Core capital ratio is 132.58% and its Risk-weighted capital ratio 134.08%. . b) Asset quality The assessment of asset quality involves much more than simply calculating past due and adverse classification ratios. In addition to assessing trends in classified assets, delinquent loans, and credit concentrations, the asset quality component rating takes into account management’s ability to underwrite and administer credits in a prudent and sound manner. In this financial analysis, to evaluate asset quality we choose two financial ratios which are the Total Loan to Total Assets ratio as regressor in the profit function in order to capture the effect of one of the core businesses of a bank on its profit, i.e. advances and investment. For Bank of America Malaysia its total loans to total assets are 6.6 %. Interest earned on advances and investment is the major source of revenue for the bank. The level of interest earning depends on the quantity of loans and the rate of interest. Non-performing loans refer to past due loan accounts whose principal or interest is unpaid for thirty 30 days or more after due date. NPL ratio is calculated by dividing non-performing loans to total loans. As well as the ratio of non-performing loans to total loans or total liabilities is considered to evaluate the asset quality in performance. Based on half year ended 30 June 2009, Bank of America Malaysia has a ratio of net non-performing loans to total net loans (as % of total loans less specific allowance) 0.84%. This is rather minimal when compared to other banks. . c) Management Management quality plays a big role in determining the future of the bank. The management has an overview of a bank’s operations, manages the quality of loans and has to ensure that the bank is profitable. The management sets the profitability objective and, in conjunction, determines the risk level to be undertaken by the bank. The management quality of a bank can be measured by examining its operating efficiency, which comprises of cost management and the productivity of employees. Thus, interest expenses divided to total loans can be measured as the bank management quality. For BOA Malaysia, its (3.65%). For this variable the other ratio is Total Operating Profit / Total Revenue. Here it’s about 87%. d) Earnings There are number of indicators used to evaluate how earnings related to the performance of the banking industry. Performance of a bank in terms of earnings and profitability reflects its ability to support present and future operations. More specifically, this determines the capacity to absorb losses by building an adequate capital base, finance its expansion and pay adequate dividends to its shareholders. Net interest margin (NIM) is an extremely important measure to the bank since it usually accounts for 70-85% of bank’s total revenue. A small change in margin has a huge impact on profitability. It is a good thing when this measure goes up. The higher its margin, the more profit the bank make. For BOA Malaysia if we compare the year ended Net profit for the financial half-year ended 2009 with 2008, it can be seen that its 8,981,000 compared to14,789,000 previously. Whilst it’s Earnings per share (sen) dropped to 6.61sen from 10.89 sen. e) Liquidity Banks need liquidity to meet deposit withdrawals and satisfy customer loan demand. Faced with liquidity risk, a bank may be forced to borrow emergency funds at an excessive cost to cover its immediate cash needs, hence reducing its earnings. Banks need to have a sound liquidity management to avoid incurring a high liquidity risk. This ensures that immediate funds will be available at the lowest cost. Liquidity ratio mainly can be examined by evaluating the following ratio - Cash to Deposit (CTD). LTD ratio is used to show the percentage of loan that has been given out to customer against the deposit by customer. Loan is considered as asset to the bank while deposit is a liability. Therefore the bank must balance up it loan against its deposit so as to ensure the liquidity of its asset will able to meet depositors demand.
The EDGE MALAYSIA has pointed out that the middle class in Malaysia is like a neglected child left alone to deal with the rising cost of living and increasing asset prices over the last several years. The poor receive government cash handouts and do not pay income tax while the rich have enough to absorb whatever life throws at them. Those in their 30s and 40s earning between RM3,000 and RM10,000 a month in urban centres are the ones most affected. They dutifully pay their taxes, but enjoy little government help when it comes to housing and medical care. Most, if they are lucky, have to get support from their parents' retirement funds. This is a fairly large group of close to 1.5 million people. The truth about government spending Official Employees Provident Fund (EPF) data for 2012 shows the following: Those earning between RM3,000 and RM10,000 a month – make up 23% of the fund's 6.39 million contributors from the private sector. A total of 78.66% earned RM3,000 or less a month, 91.07% earned RM5,000 and 97.41%, RM10,000 or less. Only 2.59% earned more than RM10,000. This means that there are 5.82 million wage earners making less than RM5,000 a month. This is the result of a decades-old policy of keeping wages low to attract foreign investments that started in the mid-1980s when the recession caused high unemployment. The government in the 80's "compensated" workers through subsidised fuel, electricity and water. But that is slowly being taken away while wages remain low. To make things worse for wage earners, a goods and services tax will be imposed soon. According to Merrill Lynch/CEIC estimates, the size of the Malaysian civil service as a percentage of the total labour force is 9.4% – much higher than Indonesia's (4.2%) and the Philippines' (5.1%). Government spending on civil service salaries and pensions in Malaysia is 7.9% of GDP compared with 2.4% in Indonesia and 5.1% in the Philippines; But most people do not believe the money saved from subsidy rationalisation will be put to good use. They think it will be used to bloat the civil service further and pay for more government procurements at inflated prices for the benefit of a few at the expense of everyone else. At a time when they are struggling to manage their family finances, it is a tall order to expect them to support cuts in subsidies, especially when they see the government on a spending spree, implementing all sorts of programmes for certain privileged groups. Taken partly from The Edge Media which was first published on Sept 23-29 issue.