Saturday, 31 March 2012

Rental Properties: Cash Cow Or Money Pit?


 Investopedia, Contributor
Your home for independent, unbiased financial education on the web.

Real estate investors must have basic valuation skills to make buy, sell, or hold decisions. Real estate investment companies have developed sophisticated valuation models to aid them in making investment decisions. However, by using spreadsheet tools an individual can produce an adequate valuation on most income-producing real estate. This would include residential real estate purchased as residential rental property.

SEE: 3 Ways To Value Real Estate Investments

Valuing real estate using discounted cash flow or capitalization methods is similar to valuing stocks or bonds. The only difference is that cash flows are derived from leasing space as opposed to selling products and services. Read on to find to out how any investor can create a valuation satisfactory enough to weed through prospective investment opportunities.

Individual Valuations

Some individuals feel that producing a valuation is unnecessary if a certified appraisal has been completed. However, an investor’s valuation may differ from an appraisal for several reasons. The investor may have different opinions about the property’s ability to attract tenants or the lease rates that tenants are willing to pay. As a prospective purchaser or seller, the investor may feel that the property has more or less risk than the appraiser. Appraisers are compelled to conduct separate assessments of value. They include the cost to replace the property, a comparison of recent and comparable transactions and an income approach. Some of these methods commonly lag the market, underestimating value during uptrends, and overvaluing assets in a downtrend.

Finding opportunities in the real estate market involves finding properties that have been incorrectly valued by the market. This often means managing a property to a level that surpasses market expectations. A valuation should provide one’s estimate of the true income-producing potential of a property.

Real Estate Valuation

The income approach to evaluating real estate is similar to the process for valuing stocks, bonds, or any other income-generating investment. Most analysts use the discounted cash flow (DCF) method to determine an asset’s net present value (NPV). NPV is the property value in today’s dollars that will achieve the investor’s risk adjusted return.The NPV is determined by discounting the periodic cash flow available to owners by the investor’s required rate of return (RROR). Since the RROR is an investor’s required rate of return for the risks involved, the value derived is a risk-adjusted value for that individual investor. By comparing this value to market prices, an investor is able to make a buy, hold, or sell decision.

Stock values are derived by discounting dividends, bond values by discounting interest coupon payments. Properties are valued by discounting net cash flow or the cash available to owners after all expenses have been deducted from leasing income. Valuing a property involves estimating all the rental revenues and then deducting all expenses required to execute and maintain those leases. (For tips, check out Golden Opportunity For Real Estate Investors.)

All income estimates come directly from leases. Leases are contractual agreements between tenants and a landlord. All rent and contractual increases in rent (escalations) will be spelled out in the leases, as well as options for space and rent concessions. Owners also recoup part or all of the property expenses from tenants. The manner in which this income is collected is also stated in the lease contract. There are three main types of leases:
In full-service leases, tenants do not pay anything in addition to rent. In net leases, tenants usually pay their portion of the increase in expenses for the period after they move into the property. In triple-net leases, the tenant pays a pro-rata share of all property expenses.

The following are the types of expenses that have to be considered when preparing an income valuation:
Leasing costs refer to the expenses necessary to attract tenants and to execute leases. Management costs refer to property level expenses, such as utilities, cleaning, taxes, etc. as well as any costs to manage the property. Income less operating expenses equals net operating income (NOI). NOI is the cash flow derived from normal operations of the property. Cash flow is then derived by subtracting capital costs from NOI. Capital costs are any periodic capital outlays to maintain the property. These include any capital for leasing commissions, tenant improvements, or capital reserves for future property upgrades. (Check out Closing A Real Estate Deal In A Down Market.)

Valuation Example

Once periodic cash flows are determined, they can be discounted back to determine property value. Figure 1 shows a simple valuation design that can be adjusted to value most properties.

AssumptionValueAssumptionValue
Growth in Income Yr1-10 (g)4%Growth in Income Yr11+ (g)3%
RROR (K)13%Expenses % of Income40%
Capital Expenses$10,000Reversion Cap Rate (K-g)10%
Figure 1

The valuation assumes a property that creates annual rental income of $100,000 in year one, which grows by 4% annually and 3% after year 10. Expenses are estimated at 40% of income. Capital reserves are modeled at $10,000 per year. The discount rate, or RROR, is set at 13%. The capitalization rate for determining the reversion value of the property in year 10 is estimated at 10%. In financial terminology, this capitalization rate equals K-g, where K is the investor’s RROR (required rate of return) and g is the expected growth in income. K-g is also known as the investor’s required income return, or the amount of the total return that is provided by income.

The value of the property in year 10 is derived by taking the estimated NOI for year 11 and dividing it by the capitalization rate. Assuming the investor’s required rate of return stays at 13% then the capitalization would equal 10%, or K-g (13% -3%). In Figure 2, NOI in year 11 is $88,812. After periodic cash flows are calculated, they are then discounted back by the discount rate (13%) to derive the NPV of $58,333.

ItemYr 1Yr 2Yr 3Yr 4Yr 5Yr 6Yr 7Yr8Yr 9Yr 10Yr 11
Income100104108.16112.49116.99121.67126.54131.60136.86142.33148.02
Expenses-40-41.60-43.26-45-46.80-48.67-50.62-52.64-54.74-56.93-59.21
Net Operating Income (NOI)6062.4064.89667.49470.19473.00275.92478.9682.11685.39888.812
Capital-10-10-10-10-10-10-10-10-10-10-
Cash Flow (CF)5052.4054.9057.4960.196365.9268.9672.1275.40-
Reversion---------888.12-
Total Cash Flow5052.4054.9057.4960.196365.9268.9672.12963.52-
Dividend Yield9%9%9%10%10%11%11%12%12%13%-
Figure 2 (in thousands of dollars)

Figure 2 provides a basic format that can be used to value any income-producing or rental property. Investors purchasing residential real estate as rental property should prepare valuations to determine whether rental rates being charged are adequate enough to support the purchase price being paid. Although appraisers will often use a 10-year cash flow by default, investors should produce cash flows that mirror the assumptions on which the property is assumed to be purchased. This format, although simplified, can be adjusted to value any property, regardless of complexity. Even hotels can be valued this way. Just think of nightly room rentals as one-day leases.

SEE: Real Estate Deal-Breakers That Shouldn’t Be

Buy, Sell or Hold

When purchasing a property, if an investor’s assessed value is greater than the seller’s offer or appraised value, then the property can be purchased with a high probability of receiving the RROR. Conversely, when selling a property, if the assessed value is less than a buyer’s offer, the property should be sold. In addition, if the assessed value is in line with the market and the RROR offers an adequate return for the risk involved, the owner may decide to hold the investment until there is a disequilibrium between the valuation and market value.

Value can be defined as the greatest amount that someone would be willing to pay for a property. When purchasing an asset, financing should not affect the ultimate value of the property because each buyer has different financing options available. However this is not the case for investors who already own properties that have been financed. Financing must be considered when deciding on an appropriate time to sell because financing structures, such as prepayment penalties, can rob the investor of his or her sale’s proceeds. This is important in cases where investors have received favorable financing terms that are no longer available in the market. The existing investment with debt may provide better risk-adjusted returns than can be achieved when reinvesting the prospective sales proceeds. Adjust risk RROR to include the additional financial risk of mortgage debt.

The Bottom Line

Whether buying or selling, it is possible to produce a valuation model accurate enough to assist in the decision-making process. The math involved in creating the model is relatively straightforward and within the grasp of most investors. After gaining some rudimentary knowledge about local market standards, lease structures and how income and expenses work in different property types, one should be able to forecast future cash flows.

READ MORE: Homeowners, Beware These Scams!
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Britain universities in crisis

Universities in crisis as student numbers fall

Colleges that have offered most to poorer students will be biggest losers as impact of fees bites

London: More than 30 universities are facing a 10 per cent fall in student numbers this autumn, according to figures released Wednesday.

A breakdown of next year's university budgets shows that middle-ranking universities and former polytechnics will suffer as a result of the new funding system, which will see tuition fees rise to up to £9,000 a year.

Worst hit, according to the Higher Education Funding Council for England, will be the University of East London and the University of Bedfordshire, which are likely to suffer falls of 12 per cent.

In all, 34 universities in England will have their student numbers cut by at least 10 per cent.

HEFCE estimates there will be 10,900 fewer student places across the country. Academics said it was universities who had done the most to open themselves up to disadvantaged groups that appeared to be suffering the worst cuts.

By contrast, most of the members of the Russell Group – which represents most of the country's leading research institutions – are set to expand student numbers.

Michael Driscoll, chairman of the million+ university think tank and vice-chancellor of Middlesex University, said the overwhelming majority of institutions were losing student places.

"These allocations show the true extent of the Coalition's reform of fees and funding and the cutback in the overall number of university places being funded," he said.

Sally Hunt, general secretary of the University and College Union, added: "At a time when record numbers of people are out of work, the Government should be making it easier for people to access education."

Although overall student numbers have been cut, under the new system universities can recruit beyond their fixed target so long as they take in students with at least two As and a B at A-level.

In addition, 20,000 places have been set aside for higher education providers charging less than £7,500 a year.

As a result, elite universities with a higher percentage of AAB students tend to benefit, as do further education colleges charging lower fees. An extra 65 such colleges are receiving funding for higher education degrees for the first time.

According to HEFCE, just over 10,000 of the 20,000 places for low charging universities have gone to further education colleges. The shake-up appears to have created a "squeezed middle" among universities, which are unlikely to recruit large numbers of AAB students but are still charging higher fees.

Sir Alan Langlands, chief executive of HEFCE, said he did not believe the changes would see universities "going into substantial financial problems". "All of these can cope with this level of reduction," he added. He said they were all "confident they can ride it out". The Independent

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Personal finance: what rich Asian women want for their money?


Starting today, StarBizWeek features a column on personal finance called Money & You, which will focus on money matters as they relate to YOU. Our two writers will take turns every fortnight to shed light on personal finance matters.

■ Yap Ming Hui is an independent financial advisor and author of five best-selling books on personal finance. He is the managing director of Whitman Independent Advisors, an independent financial advisory firm licensed by Securities Commission and Bank Negara Malaysia. Since 2000, Yap and his team of licensed independent financial advisors have successfully helped numerous clients achieve financial freedom. Yap believes that all Malaysians can fully optimise their wealth using a holistic wealth management approach.
 
Carol Yip, founder of Abacus For Money, believes that if people understand their money mindset, behaviour and money psychology, they can be financially happy and successful. She actively promotes financial literacy and intelligence within families and for women, youths and retirees.

MONEY & YOU By CAROL YIP

WOMEN in Asia are building and inheriting more wealth than ever before. According to Boston Consulting Group (BSG) 2010 report, the percentage of wealth controlled by women in Asia (ex Japan) is rising nearing 30% annually and total wealth controlled by women reached RM2.8 trillion in 2010. Their heightened visibility in financial circles can be traced to more women achieving success in the workforce and a greater number of women actively managing family finances. Kim Sung-Joo recently made her debut on the inaugural Forbes list of Asia's Power Businesswomen in celebration of International Women's Day recently. She is the youngest daughter of an energy conglomerate tycoon in South Korea and created her wealth from luxury fashion.

The increasing number of wealthy women is also partly because they are inheriting wealth due to their longevity. Puan Sri Lee Kim Hua, 81, widow of the late casino magnate Tan Sri Lim Goh Tong, is one of the 40 richest Malaysians on the 2012 Forbes Asia list.

Without a doubt, Asian women are creating significant financial visibility. But are bankers and wealth advisors paying sufficient attention to this alluring segment of the market?

Women of wealth

Based on research conducted in 2011 by the Family Wealth Advisors Council, a network of US-based, independent fee-only wealth management firms, the financial services industry has a long way to go if it wishes to provide the kind of service wealthy women say they want. The title of the study of high net-worth American women says it all: “Women of Wealth: Why Does the Financial Services Industry Still Not Hear Them?”

Involving 551 women across the United States with a net worth of US$1mil or more, the study collected survey questionnaire data across marital status, employment status, age and net worth. The research looked at what worries wealthy women:

About 86% of working women surveyed consider obsolete careers and eroding earning power as risks to their financial success;

Married women believe health challenges present a greater risk to their financial security than the death of a spouse;

About 96% of women want their unique circumstances and their entire life picture understood by their financial advisor;

About 80% of women (either married or divorced) believe that they will be called on at some point to help one or more of their children in a crisis;

About 81% of retirees see a potential decline in the economy as a major risk, versus 45% of full-time working women; and

About 57% of married women feel that divorce poses a significant risk to their financial well-being.

With women's economic clout in the workplace and purchasing power in all consumer and commercial markets increasing, their dissatisfaction with the financial services industry is also growing. The study clearly showed that women do not like to be considered a monolithic group, but want services tailored to their specific circumstances. Evidence suggests that wealthy women in Asia Pacific are also having similar experiences.

Different women different needs 

As more women call the shots on money, they also want their wealth advisors to do a better job of meeting their needs. They want the same attention, advice, terms and deals that men get with advisers who provide investment recommendations. But, at the same time, women want advisors to tailor services to them because they have very different needs and expectations than men.

In the BSG survey, women said advisors tend to assume they have a lower risk tolerance than men, so advisors provide only a narrow range of investment alternatives. Some women claimed that advisors for women are too quick to focus on strategies that don't emphasise on performance, assuming that women are more inclined to make investment decisions based on social issues. With these and other study insights, wealth advisors who service female clients should foremostly recognise that women want to be treated differently. Some suggestions come from the findings:

Women want to be understood as unique individuals. They want an advisor who listens to their needs and is trustworthy. A fiduciary advisor who knows how to create strategic investment allocations based on a women's situation, goals and risk appetite will stand a better chance of securing their business.

Women are looking for advisors who can provide advance planning, relationship management and investment advice a one-stop boutique financial centre.

The wealth advisor's gender plays an important part of the financial planning process for wealthy ladies. Female wealth advisors will be able to relate better to their situations and challenges than men.

Women's investment attitude

It's no surprise that women's behaviour as earners, investors and savers is the subject of a large and growing body of behavioural economic research, which has yielded important findings. Women prefer to focus on long-term investment goals and seek holistic advice. When women invest, they tend to look for informed advice and better rate of return than men. Women can be too conservative in their approach, especially given the fact that they tend to live longer than men. Ultimately, from the way they seek financial information and advice, to their understanding of the long term, women's financial behaviour holds crucial lessons for all financial advisors.

Women may also tend to limit their trading far more than men do. They prioritise by protecting principal rather than taking risks to grow their assets. A study by the University of Michigan's Retirement Research Center finds that men frequently and unnecessarily trade their holdings. All other things being equal, the male participants trade 56% more than their female counterparts, and the more they trade, the worse their performance becomes “a result of a too-rosy estimation of their own investment skills,” the researchers write.

The landmark study on gender differences in stock investing also finds that men tend to sell too early, or to swap assets for new ones that underperformed what they havve sold. By contrast, women are more inclined to take the long-term view and understand that performance in many cases are best measured over time.

Huge potential 

Women's financial behaviour and preferences across varied situations show major differences from men's. Women's financial strengths are significant. So are their challenges.

The provision of tailored wealth management services for wealthy women is much needed. There is a unique opportunity for the financial services industry to design investment, insurance, trust and estate planning products and services that better address women's needs, psychological preferences, life values and different life stages.

Wealth is a “means of life planning rather than a goal in itself” for women. The one-size-fits-all concept is no longer appropriate. Customised fitting is always the preferred choice to make wealthy female clients happy. Wealthy female clients will be loyal customers when wealth advisors deliver the results they want. A long-term trusting client-advisor relationship will be the result.

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Friday, 30 March 2012

China three decades from now



CHINA in the Next 30 Years is a new collection of 17 essays published in October 2011 on the future of China, of which eight authors are foreigners. This is one of the few books published simultaneously in Chinese and English.

Reading the book in both the original and translatied versions gave me sometimes a complete different reading of the authors' sentiments, and I had to go back often to the original to find out what the author was really trying to get at.

This is a valuable book precisely because it reflected not only some of the leading thinkers in China but also a number of very original thinkers outside looking in.

The first essay by Michael Hudson of the Institute for Study of Long-term Economic Trends is nothing short of iconoclastic.

He sees the era of debt-driven consumption in the West (1945-2010) coming to an end, and China in the next 30 years must not only avoid the finance, insurance and real estate bubble (FIRE) trap, where China will be blamed by the West, but also go down a path in strengthening its real economy, solving the wealth gap and improving efficiency (subject to ecological constraints).

The future economic prospects are considered by three leading Chinese thinkers.

Prof Wu Jinglian, the most respected Chinese economist of his generation, argues that reforms have gone into deep waters due to the complex battle against vested interests and rent-seeking activities.

There is no alternative except to deepen reforms, particularly re-balancing the playing field between minyin (private) enterprises and the dominant state-owned enterprises.

Tsinghua University Prof Li Daokui regards the three great challenges facing sustainable development as an open mind, more inclusive and harmonious development and formulating China's role in global affairs as a major power.

Returned scholar Wang Huiyao examines the strengths and weakness of the “Chinese models of development”.

He clearly recognises that the pragmatic and adaptive models of the past may not work in the future as sustainable development faces a more complex, interactive and geo-politically fragile world, especially in the ecological, resources and energy issues.

The political challenges are considered by two thoughtful commentators.

In considering Chinese politics within the geo-political order, Peking University Prof Pan Wei argues that any bright prospects in the next 30 years would depend on three key conditions no economic vacillation, no political distraction and no international partiality.

He refutes the argument that there has been no political reform, since the massive economic reforms could not have been possible without significant changes in China's political system.

At the same time, the pillar of China's politics has been its civilisational constancy, based on its humanist democracy, meritocracy at all levels of government and a unified ruling group.

Fellow Peking University Prof Yu Keping identifies the challenges of governance reform as social inequality, corruption, social instability, crime, environmental degradation and ignorance of citizens' human rights.

He recognises the need for a realistic review of China's socialist democratic theories, but also a rethink of popular Western democratic theories.

On the new global order, Nobel laureate Robert Fogel's essay warns that China's future geo-political position may be stronger than estimated.

Taking a long historical and demographic view, he sees Chinese income per capita being double that of Europe by 2040 and accounting for nearly 40% of world GDP, significantly larger than the United States and Europe.

His higher estimates are due to currently favourable demographics, good education and resilience in the political system, overtaking aging population in the West with a different work and lifestyle.

Singapore diplomat Tommy Koh echoes the recognition that China will become more powerful in terms of soft and hard power, and wishes that China will continue to practice good neighbourliness, play a constructive role in global governance and embrace sustainable development.

Five out of the 17 essays are devoted to green growth, with the best article by Tsinghua Professor Hu Angang, who sees a Green Vision as China's third generation of modernisation.

He powerfully argues that the idea of greenness is essentially the ancient Chinese philosophy of harmony of man with nature and that innovation and realisation of green modernisation is a civilizational objective that has global benefits.

The message of cutting carbon emissions, clean energy, green technological innovation, and central importance of Chinese agriculture and rural development are reinforced by essays by Copenhagen Professor Bjorn Lomborg, Swiss agriculturalist Hans Herren, Worldwatch President Christopher Flavin and Shanghai Professor Li Wuwei.

The last and longest essay is an intriguing and wide-spanning exploration on China's “Civilization-State Model” by Malaysian-born, India-based scholar Tan Chung.

He argues that China is the longest surviving civilization-state that is actually a commonwealth of different tribes, languages and cultural communities that has lived within its borders for more than 2,000 years.



China has absorbed different cultures, particularly Buddhism from India, more recently Marxism from the West and has evolved its own concept of “grand universal harmony.

He actually laments the fact that many modern Chinese scholars have learnt “whole-hog Westernization of China” without drawing upon the inner cultural confidence of ancient China.

His suggestion that Chinese leadership is differentiating between the “kingly way versus the hegemonic way”, echoes an important book by Tsinghua political scientist Yan Xuetong, which I shall review shortly.

Professor Yan argues that modern statecraft depends on kingship, founded by humane authority and strong moral standing.

Hence, for China to be a superpower modeled on humane authority, she has to forge a harmonious society from which other states are willing to learn.

The fundamental contribution of this book is that it has pointed the way on how China intends to move towards a harmonious green economy through the recent 12th Five Year Plan (2011-2015).

This is a bold and arduous journey unprecedented in history in terms of scale and difficulties.

All hopeful global citizens must wish its success, because its failure could have geopolitical consequences beyond contemplation.

Andrew Sheng is president of Fung Global Institute.

THINK ASIAN By ANDREW SHENG

Spy on citizens?

To spy or not to spy on citizens? That’s the question

KUALA LUMPUR: Should governments use “trojan horse” programs or other computer hacking tools to spy on its citizens?

Mikko Hypponen, chief research officer for network security solutions company F-Secure Corp, believes the end does not justify the means. But he admits that there is no clear answer.

 “It's a problematic subject. As long as technology is used to catch drug smugglers or terrorists, that's great.

“But when a government places a trojan on the computer of an innocent person, it is a horrible wrongdoing,” he said recently.

He was in Kuala Lumpur for a meeting at F-Secure's network security monitoring centre in Bangsar South, which covers the Asian region.

The problem has been compounded in recent times because terrorists and so-called “hacktivists” have no qualms about launching cyber attacks against governments and others.

So why shouldn't governments resort “to fighting fire with fire”?

Hypponen said it was a question for each government to mull over because there was no one-size-fits-all solution.

He cited Germany as an example where a government-backed trojan program was set loose on public networks.
Controversy arose in Germany in October last year after a hacker group highlighted what it claimed was a government trojan program to spy on people, Hypponen said.

The program, apparently deployed to help law enforcement agencies, could record Skype calls, monitor online messages, log keystrokes on a computer and even take pictures of the screen.

Hypponen said he was glad to note that such trojan programs had not been deployed in Malaysia.

Last year, Hypponen tweeted about the Anonymous hacker group's threat to attack government websites in Malaysia, which later happened.

> Watch out for the full interview in StarBytz, the information technology pullout of The Star.

By GABEY GOH The Star/Asia News Network

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The Digital Detective: Mikko Hypponen's Escalating War On Malware (howwecreatevalue.com)

Thursday, 29 March 2012

Being grateful is Love, the simple things?


Datuk Seri Idris Jala and the Kelabits have shown that being grateful is a way of showing real humility but it should not be mistaken as being subservient.

THERE was an elderly Kelabit man who had never seen a TV set in his life – not until he visited his son’s modern house.

He sat on the sofa and watched the news and his son noticed that the old man paid special attention to reports on the floods in Kelantan, especially the deaths due to drowning.

The father turned to his son and asked why there were deaths? He was shocked when he was told it was an annual occurrence.

“Why didn’t they just move away from the river? Our people would have just moved to higher ground,” he said.

This story was related to a group of about 30 analysts and journalists at a briefing on Thursday by probably the most famous Kelabit of all, Datuk Seri Idris Jala. The old man was his father Henry Jala.

“That’s how our people are. Our tribe has moved to near the Kalimantan border just to get away from the floods,” said Idris, who is the boss of Pemandu – the government unit set up to implement the New Economic Model and the various transformation programmes.

Pemandu is the acronym for Performance Management & Delivery Unit of which Idris is the chief executive officer. He is also a Minister in the Prime Minister’s Department.

He readily admits his bias towards the rural transformation programme and the key initiative to build basic infrastructure for the rural folk.

“Till today, my village has no electricity supply. Fifteen years ago, our longhouse was burnt down because a woman forgot to put out a candle before going to sleep,” Idris told the audience as he expounded the virtue of the Government Transformation Programme and the Economic Transformation Programme.

(The acronyms of GTP, ETP and Pemandu has become synonymous with Idris.)

The Kelabits, numbering some 5,000, are probably the most successful bumiputra community in Sarawak.

It has been reported that at least 90% of the Kelabits are literate and that some 10% of them have obtained diplomas, degrees, post-graduate degrees and professional qualifications. At least another 1,000 have sat for their Form Five examination.

Besides Idris, the community has got doctors, lawyers, police officers, engineers, millionaire businessmen and top state civil servants.

Ask any Sarawakian about Kelabits, and they will speak of them in a respectful tone with full admiration.
After all, many of the older ones are well-known warriors and war veterans.

One could even say that pound for pound, the Kelabits are the most highly successful community in the country despite their small number.

Idris had told another audience at a more informal setting at Tapis Rouge – a restaurant cum mini-theatre owned by celebrity Datin Seri Tiara Jacqueline – that his people who lived in the Bario Highlands, although led a simple life, were ambitious.

A widely travelled man, Idris told of his life in Holland and Britain and how our country was not that lacking.

“I have always considered my life very blessed. I constantly remind myself that Malaysia has got a lot going for it.

“While we look admiringly at the roses far away, we must not forget the roses that are in our own garden,” he told his audience at his Blues Jam session at Tapis Rouge.

Idris said his favourite quote on this came from management guru Dale Carnegie which went: “It is tragic when we put off living. We dream of a magical rose garden over the horizon and miss the roses blooming outside our windows”.

The strain of leading the Government’s charge to transform the nation into a high-income and developed nation shows on Idris face but his bubbly self seems to shine through whenever he gets his hands on a guitar.

In his closing remarks to the 300-odd friends and supporters who turned up to hear him sing and play the guitar, Idris reminded them that Malaysians must learn to count their blessing and “learn to love the simple things like music, family and roses”.

Come Monday, the 2011 annual reports of the ETP and GTP will be submitted to Prime Minister Datuk Seri Najib Tun Razak live on TV at 8.30pm.

> Executive Editor Wong Sai Wan is still looking forward to a trip to the Bario Highlands to see for himself the Kelabits in their own environment.

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Malaysians, work hard to succeed ! 
Malaysia could go bankrupt by 2019?  

Shandong workers driven to despair!

Aaron Ngui newsdesk@thesundaily.com


GEORGE TOWN (March 28, 2012): Driven to despair by alleged ill-treatment from her employer, a mother of two from China tried to take her life on Tuesday afternoon by jumping off the busy Jalan Aziz Ibrahim flyover.

Wang Li Mei, 38, was however persuaded by police, who had been alerted by passers-by, to change her mind.

She was among four women from Shandong province in China who came to Penang three years ago to work as reflexologists and who claimed to have been mistreated and their pay withheld by their employer.

The other women are Duan Li Hong, 23, Jiang Yong Ken, 38, and Zhang Ying, 38.

Speaking on their behalf, Pantai Jerejak assemblyman Sim Tze Tzin said the final straw for Wang was when she tried to get her pay, which had been withheld since last December, but was rebuffed.

"She was so upset that she resorted to this desperate act," he told a press conference today after their plight came to light following the incident.

Sim said the four were owed more than RM10,000 each by their employer and claimed they had to work "day and night" from 11am to 1am at the centre near the popular Queensbay Mall here.

He said the four were also not allowed to go anywhere and were only given 45 minutes twice a week to shop for groceries.

"They have to sleep in the centre which is locked from the outside and they do not have a key to exit the building," he said.

All four have since lodged police reports.Sim urged employers to treat employees with respect and dignity.

He said an application for a protection order would be made at the magistrate's court and he would contact the Chinese embassy to assist the four.

When approached, Wang said she missed her two daughters, aged 10 and four, very much.

"I came here to work to lighten my family's burden. Now I just want my money and to go home," she said.

South-west district police chief Supt Mohd Hatta Mohd Zin, when contacted, said police were investigating the case under section 13 of the Anti-Human Trafficking Act 2007.

Boss who allegedly ill-treated Shandong workers out on bail

By WINNIE YEOH  winnie@thestar.com.my

BALIK PULAU: The man who had allegedly mistreated his four Shandong workers at his reflexology centre in Bayan Baru has been released on bail.

The 36-year-old was earlier detained for two days at the Southwest District police station here. Balik Pulau OCPD Supt Mohd Hatta Mohd Zain said investigations were still ongoing.

Four Chinese nationals, Duan Li Hong, 23, Wang Li Mei, Jiang Yong Fen and Zhang Ying, all aged 38, had lodged police reports against the man for mistreating them over a period of three years.

They claimed that they had to work 364 days a year and had not been paid since December.

When Wang resorted to attempting suicide, the man brushed aside the threat, telling her to “go ahead”.

He even offered to inform the Chinese Embassy after her death. Frustrated, Wang tried to jump off an overhead bridge along Jalan Aziz Ibrahim but was stopped by policemen

The four have been sent to a women's protection centre in Kuala Lumpur and will stay there for 14 days to facilitate investigations. Meanwhile, the man, who wished to be known only as Lim, denied mistreating the four.

“They earned about RM1,800 a month and they were not locked up in their workplace at night.

“There are two more Indonesian workers staying there and the key is left at the counter,” he said. He also denied that he had told Wang to “go ahead”.

“I don't know how she cooked up the story. I do have a CCTV footage showing Wang and Duan having a fight in the shop on the same day when Wang threatened to jump off the bridge. I was having a meeting in Tanjung Tokong at that time.”

Lim also claimed that he had helped Duan to send RM60,000 back to China over the past 18 months.

“I keep the receipts of every transaction. I don't know how she could have so much of money,” he added. 

Malaysia's minimum wage, and its implications

Dramatic rise in wages poses upside risk to inflation
  
NOMURA RESEARCH

RECENT news suggests that Prime Minister Najib is likely to announce setting a minimum wage on Labour Day (May 1). This is authorised under the National Wages Consultative Council Act of 2011 passed by parliament in July last year.

Because of the looming general elections, the announcement is likely to be construed as politically motivated, but there are also important economic consequences of a legislated minimum wage requirement.

The minimum wage is likely to be set anywhere between RM800 to RM1,000 per month. If we assume RM1,000, this would imply a significant 17% rise in the wages of unskilled workers, which according to Malaysia's Employers Federation 2010 Salary Survey, are earning an average RM852 a month.

To put this in perspective, it compares with the average increase of wages in the manufacturing sector of only 6% per year.

This poses an upside risk to inflation, in our view. First, overall labour productivity growth, which has been slowing in the last few years to an average of 2.7% (versus 5.3% pre-1998), is likely to substantially lag the potential increase in minimum wages, resulting in a rise in unit labour costs.

Second, while one could argue that the legislation only affects a certain segment of the employed sector, in 2010 the share of private wage earners earning RM1,000 or below comprise nearly 50% of total employment, according to the Malaysian Institute of Economic Research.

Given the significant share, this is also likely to affect wage negotiations among higher skilled workers, and could stoke higher wage expectations.

As is common in other countries (e.g. Indonesia), minimum wages can be perceived as a wage-setting mechanism (which sets a floor to actual wages) rather than just a safety net for low-wage workers.

Finally, given the current strength in domestic demand (indeed Bank Negara's annual report suggests that domestic demand “will continue to be the anchor for growth,”) firms are likely to pass on rising input costs, fueling CPI inflation.

There are also longer-term concerns:

Minimum wages could introduce rigidities into the labour market that may ultimately structurally raise unemployment rates. We think part of the reason Malaysian unemployment rates recovered quickly during the 2008/09 global financial crisis is that wage flexibility allowed downward adjustment in wages rather than employment losses during the downturn. Indeed, wages fell more sharply in 2008/09 than in the previous recession, and the unemployment rate recovered to pre-crisis levels more quickly and stayed there until now. The legislated minimum wages could reduce some of that flexibility.

● This could also hurt external competitiveness, which, as we have argued before, is facing some pressures that are not due to an appreciating real exchange rate. If a minimum wage of RM1,000 is set, Malaysia's labour costs will be nearly twice the regional average and will be the highest in South-East Asia except Singapore.

We understand that the Government is fully aware of these concerns and has pledged to address them by a broader set of structural reforms under Prime Minister Datuk Seri Najib Tun Razak 's New Economic Model and the 10th Malaysia Plan unveiled in 2010.

The problem, however, is implementation has been slow so far and without more meaningful progress, these concerns will likely persist. One key argument of the proponents of the minimum wage is that this is supposed to complement these reforms by imposing a hard constraint on firms to improve productivity and reduce their reliance on low-skilled, low-wage foreign workers.

The risk is the reforms lag the minimum wage implementation, and hence the argument fails to hold, while external competitiveness could suffer.

The extent of the impact will still depend on the level of the minimum wage set, and the enforcement among firms.

While the latter remains to be seen, for the former, we can draw on some findings from academic literature to gauge the optimal level of the minimum wage, i.e. whether it is high enough to improve living standards of wage workers but low enough to keep competitive pressures under control.

A study by the World Bank suggests that a useful rule of thumb for developing economies is that the minimum wage at the national level should be no more than 40% of average wages.

By this benchmark, a minimum wage set at RM1,000 for Malaysia seems appropriate on average, though there is considerable variation across sectors. For instance, it is around 41% of the current average in the manufacturing sector, but about 75% of the rubber sector.

In terms of the near-term monetary policy implications, although headline inflation eased for the fourth consecutive month in February to 2.2% year-on-year from 2.7% in January, we see risks to our current policy rate forecast of a total 50 basis points cut in the second half of 2012.

We think the risk of Bank Negara remaining on hold for the rest of 2012 has already increased given that in its recently released annual report, the central bank continued to assess that “at the current level (3%) of the overnight policy rate, monetary conditions remain supportive of economic activity.”

Minimum wages implemented in May could provide additional upside risks to inflation, when fiscal policy is highly expansionary and commodity prices are elevated.

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Wednesday, 28 March 2012

Angry with the Malaysian education system in a mess

Be civil even when angry

ALONG THE WATCHTOWER By M. VEERA PANDIYAN

The ‘325 Rally’ organised by Dong Zong was touted as a peaceful gathering but it turned into an ugly show of anger.



IF civil dialogue is the life blood of demo­cracy, the fits of rage seen at the “325 Rally” organised by the United Chinese School Committees’ Association of Malaysia (Dong Zong) are indeed unfortunate.

What was touted as a peaceful gathering to highlight the serious shortage of Chinese vernacular school teachers turned into a show of anger, hardly reflective of the community’s cherished Confucian values.

Among the resolutions passed at the rally was a call to remove all newly-assigned non-Chinese-speaking teachers and those who did not have Chinese language qualifications – including Bahasa Malaysia and English teachers – from Chinese schools.

Dong Zong also wants teachers with the right qualifications, who had earlier been transferred out, to return to these schools.

The other demands include a review of the Education Act to ensure plurality in the country’s education policy, fair treatment for vernacular schools and safeguarding their existence and development.

The Chinese educationists also want the ministry to conduct training for teachers with Chinese language qualifications who had been teaching Malay and English at Chinese primary schools for at least three years.

But of course, the resolutions have now been obscured by the verbal abuse and near-assault of Deputy Education Minister Datuk Dr Wee Ka Siong.

Although the deputy minister has been accused of “gate crashing” the event, the organisers of the rally had indeed issued an open invitation to him to attend.

Through advertisements in the Chinese newspapers, they had also listed 13 prohibitions for those coming to the rally – behaving violently or acting against the principles of peace, being abusive, provocation or making any indecent moves, carrying weapons and such.

But with the loss of almost all civility in our political discourse, we can only expect frenzied partisan views, especially in cyberspace where emotions are stoked daily into seething froth.

The reality is there are no quick fix solutions for the teacher shortage problem facing Chinese as well as Tamil schools.

Dong Zong president Yap Sin Tian said at the rally that the problem had remained unresolved for tens of decades, accusing the Govern­ment of having a lack of will to resolve it.

Here’s a sense of déjà vu. It’s been 25 years but nothing seems to have changed on the problems facing Chinese schools – except for the main players changing roles and shifting allegiances.

Just like the “325 Rally” in Kajang, a huge gathering took place at the Thean Hou Temple in Kuala Lumpur in 1987 to protest against the Education Ministry.

The Dong Zong is now said to be aligned with DAP and its Pakatan Rakyat allies of PKR and PAS but in 1987, Barisan Nasional’s Chinese-based parties – MCA and Gerakan – as well as DAP joined the Chinese educationists in calling for a boycott of the schools involved.

Guess who was the much-despised Education Minister accused of “deliberately” attempting to undermine the educational standards of Chinese schools? The fast-rising Umno leader then was none other than the current leader of Pakatan.

There is no denying that our education system is in a mess, no thanks to the flaws in implementation. We need to rectify the shortcomings both in national and vernacular schools as well as institutions of higher learning.

But not much can be done if sentiments are always tied to political posturing or show of power, with complete absence of civility in discussions.

Before the rally, discussions were already being held between Dong Zong, Jiaozong (the United Chinese School Teachers Association of Malaysia), Huazong (the Federation of Chinese Associations Malaysia), NUTP (the National Union of the Teaching Profession) and SJKC Headmasters Union and a special committee on shortage of teachers in Chinese schools, chaired by Dr Wee.

The deputy minister also announced eight long- and short-term measures to address the problem, including transferring out the non-qualified teachers, enabling Chinese school headmasters to hire temporary teachers and training of more teachers with Chinese qualification.

During his live interview over 98.8FM, Prime Minister Datuk Seri Najib Tun Razak confirmed that the steps had been accepted in principle by the Cabinet, and that the Government was serious about resolving the matter once and for all. But the assurances were snubbed by Dong Zong as “hasty and expedient attempts” to merely counteract the rally.

Now that the protest rally is over and the demands made, the right thing for Dong Zong to do is to go back to the discussion table. Civil discourse is the right path to take, no matter how angry one is.

> Associate Editor M. Veera Pandiyan likes these wise words of Confucious: The gentleman is calm and peaceful; the small man is always emotional. Without feelings of respect, what is there to distinguish men from beasts?

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Tuesday, 27 March 2012

Now, buggy for Hospital, how about Golf ?

 Buggy boost for hospital
 
PATIENTS and visitors to the Penang Hospital no longer have to walk far to the hospital’s multi-storey car park with the introduction of a buggy service.

The hospital’s Board of Visitors chairman Lim Thoon Deong said the hospital was the first government hospital in the northern region to use golf buggies for the service.

He said the buggy service would operate within the hospital compound.

Lim said that the buggy, which cost RM42,000, was sponsored by a company which supported MCA.

“The service aims to save patients and visitors time walking some 100 to 200 metres from the car park to the hospital lobby and vice-versa,” he said.

Number one: Project coordinator Datuk Lim Gim Soon (right), Thoon Deong (seated), Dr Yasmin and Komtar Barisan Nasional coordinator Loh Chye Teik (second left) posing for a photo with the buggy at Penang Hospital 
 
Lim, who is also Penang MCA Public Complaints Bureau deputy chief, said the service would begin today.

He said the service was also aimed at making it convenient for handicapped visitors and patients.
Lim said the buggy would be able to transport six people including its driver each time at five-minute intervals between the two stops.

“We will consider seeking sponsors for more buggies if there is an overwhelming response to the service,” he told a press conference after going for a ride on the buggy at the hospital yesterday.

Hospital director Dr Yasmin Sulaiman said the service would help solve parking problems in the hospital compound.

“It will prevent visitors from parking randomly in the compound and encourage them to park at the multi-storey car park because they can now use the buggy service to get to the lobby,” she added.

By HAN KAR KAY hankk@thestar.com.my  Photo by ZHAFARAN NASIB

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Healthy Ageing

Keep busy, sweat it out, and embrace the years. These are some simple tips on healthy ageing. 


 
THE golden rules of healthy ageing are very simple: eat right, exercise, be your age and do not smoke. Most of all, focus on being happy and don’t forget your life goals.

To embrace the years with positivity, says Professor Makoto Suzuki, 87, one should look at them as chouju, meaning “celebrating long life” in Japanese. “The onus is on us to focus on quality, and work on having many momentous occasions.”

Suzuki, chief director of the Okinawa Research Center for Longevity Science, was speaking to a captive audience at the 1st World Congress of Healthy Aging, in Kuala Lumpur last Wednesday. The title of his talk was, Secrets Of The Okinawan Centenarians’ Longevity.

This specialist in cardiology and gerontology had moved to Okinawa from Tokyo to accept a tenure with the University of Ryukyus 35 years ago. He also had a role model in his own mother, who passed away last year, at the age of 100 years and 10 months.

Forget the wrinkles: Keep active, eat moderately and embrace the years, says Professor Makoto Suzuki, happily posing for a photo with his wife, Yoko.
 
From the lessons gathered from a community that boasts the highest and healthiest longevity rates in the world, Suzuki says a diet laden with vegetables, but less meat, plays a big part in healthy ageing. The goal is to maintain the same body weight one had at the age of 30.

Statistics from 2006 show that women in Okinawa have an average life expectancy of 87 years, about 10 years higher than that of the men. (In Malaysia, life expectancy averages 73.17 years.)

“The Okinawans have a custom of saying ‘harahachibu’ before each meal. This is a reminder not to overeat. Preferably, one should stop when the stomach is about 70% full,” Suzuki says, when met after his talk at the KL Convention Centre.

He also points out that the Okinawan diet is rich in anti-ageing ingredients such as polyphenol, phytoestrogen, isoflavones and good amyloids. These are commonly found in bitter gourd, soybean products like tofu (Okinawa is especially famous for its silky beancurd), brown rice, cereals and fatty fish.

Okinawans also favour the use of mugwort (artemisiabulgaris), touted for its medicinal qualities. Its leaves are dried, ground and used to flavour grilled meats and vegetable stir frys.

Exercise also comes into the equation and Suzuki advises the young to start as early as possible as the effective benefits of that lessens after the age of 40.

The dapper Tan Sri Dr Ahmad Mustaffa Babjee feels it’s important to follow the ways of nature.
 
As an archer and mountain climber himself, he emphasises that the elderly must find a way to sweat it out. Since his move to the flat plains of Okinawa, he has exchanged his climbing gear for a hoe because his wife, Yoko, has a farm where they spend most of their weekends.

For them, as with the majority of Okinawans, it is simply a matter of maintaining ikigai, the Japanese equivalent of raison d’être.

“Don’t worry about the wrinkles or being slow. Just be busy,” says Suzuki, who still lectures and conducts research at Ryukyus.

Inevitably, talk of active, healthy living leads to the question of bedroom frolics – which turns the hearty professor a shade of pink. Although he is not telling, from his exchanges with Yoko, 80, a homoepath, one gathers they are “quite active”.

“Funnily, I asked an Okinawan centenarian the same question but he refused to answer me. However, his wife said it is because of her that he is still healthy,” Suzuki says, laughing.

Death is also inevitable, but for the elderly in that island, what’s far more important than the end of one’s days is the role of the community in ensuring that they have a place in society.

Elderly people need to have a sense of belonging, to know their role in a family is still valued. One of the reasons why the centenarians of Okinawa are able to lead a happy life is because they are revered by the younger people,” he says.

Suzuki elaborates on a daily ritual called ugan, during which the Okinawans pay respect to their ancestors at the family altar, and air their grievances to the dead. This has a therapeutic effect for the living, as it helps to alleviate stress.

On that loaded issue, fellow speaker Professor Suresh Rattan says mild stress is necessary for healthy living because it helps one stay alert and active. Exercise is one example of beneficial stress, as are brain teasers and games (like Sudoku), all of which help to keep the body flexible and the mind nimble.

Suresh, 57, a biogerontologist at the University of Aarhus’ Department of Molecular Biology in Denmark, spoke about Healthy Ageing – From Molecules To Hormesis. 

On the home front, a specialist in healthy ageing at Pantai Medical Centre, KL, says often, senior citizens are not encouraged to keep pushing themselves, both physically and mentally.

“The Malaysian mindset is that old people should not exert themselves. As a result, their physical and mental faculties are left to decline,” says Dr Rajbans Singh, 52.

To have wellness and health in old age, it is crucial for an individual to take a proactive stand, like taking up tai chi, for example.

It may also be necessary to abstain from fast food and fizzy drinks, Dr Rajbans adds, because the high fat, sugar and sodium contents of these foods can lead to or aggravate conditions like hypertension and diabetes.

For Tan Sri Dr Ahmad Mustaffa Babjee, a fellow of Academy of Science Malaysia, acceptance of one’s age is crucial so that growing old can be seen as a positive, natural process. Do not, for example, tell others that you are 47 when you are in fact 74! Instead, learn to enjoy being your age.

“It is important to be what you are and follow the ways of nature,” says Dr Ahmad, 75, who still cuts a dashing figure with his long snowy locks and thick moustache.

As for death itself, he reckons that it will be similar to being under anaesthesia, hence there is no need to fear.
“I am more afraid of being lonely,” adds Dr Ahmad, who continues to drive his 4WD into the jungle for a spot of bird watching, wildlife photography and white water rafting.

Dr Tan Maw Pin, associate professor of geriatric medicine from Universiti Malaya, says the Malaysian government can do more for the elderly in terms providing much-needed facilities.

“One mistake the planners made was to omit the elderly from the nation’s development plan, believing that as ours is a caring nation, they will automatically be taken care of. This is very well for those who are wealthy and can afford to pay for elderly care. What about those who cannot?” Dr Tan asks.

Datuk Seri Dr T. Devaraj, chairman of Malaysian Hospice Council, notes that the family safety net that once existed has been weakened by urbanisation.

Today, it is not uncommon for young people to leave their parents behind as they migrate to bigger cities to seek employment, says Dr Devaraj, 87. Also, the elderly cannot assume that they can spend their twilight years in their children’s homes.

But leaving everything entirely to welfare is not the answer either, he adds.

Since the early days of Hospice, he had insisted that volunteers make home visits and not have the patients placed in a facility. This is so that their families, too, can play their part in the care-giving process.

“The idea is to have a sharing of responsibilities. If the state completely takes over, then family support will decrease,” adds Dr Devaraj. That, in turn, will make the elderly feel even more alienated.

The World Congress on Healthy Ageing was organised by the Malaysian Healthy Ageing Society.

By GRACE CHEN

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Angers to the deception of Malaysian Chinese education

Chinese education problems: Real solutions needed

Pauline Wong
newsdesk@thesundaily.com
KAJANG (March 25, 2012): The anger and frustration of Chinese educationists and the community over the decades-old problems faced by Chinese schools boiled over today.

This was manifested in the treatment meted out to Deputy Education Minister Datuk Wee Ka Siong when he attended a rally organised by the United Chinese School Committees Association (Dong Zong) here.

Wee was not only heckled and jeered by a rowdy crowd of over 7,000 people at the New Era College where the rally was held, but someone even managed to throw a punch at him as he was leaving the event.

Fortunately, due to the cordon of police personnel around him, the full force of the punch was deflected and Wee only suffered a glancing blow on his left cheek.

Despite the incident, Wee was seemingly calm when he spoke to reporters at a press conference later, saying he was saddened by the way the crowd had become emotional.

“While we do not expect cheers or applause from them (the crowd), the whole purpose of attending this rally is to listen to the people,” said Wee, who believed the crowd was made up of mostly opposition supporters.

Earlier, on his arrival about 11am, Wee had been met by a ‘hostile’ crowd and had to be protected by about 20 uniformed police and Rela personnel who formed a human wall around him.

Even after he had sat down, Wee was booed at every time the Education Ministry was mentioned in the speech by Dong Zong president president Yap Sin Tian who lashed out at the ministry for failing to solve the problems which have festered for over 40 years.

Among them, the lack of teachers in Chinese primary schools, which has been a sore point among its educationists for many years, made worse by the government placing non-Chinese speaking teachers as stop-gap measures.

Yap said as far back as 1968, the Education Ministry was on record in Parliament as admitting that Chinese schools faced a shortage of 1,172 teachers.

“This problem has never been resolved and remained the same for over 40 years. Over the years, many senior officials continue to say that the shortage would be resolved, but nothing has materialised,” he said.

“The Education Ministry today continues to say it needs to gather information about the problem before anything can be done, but the fact is, the ministry is in possession of the most up-to-date and complete information.

“Therefore, it can be concluded that the ministry does not intend to settle the problem, not because of the lack of ability, but the lack of will,” Yap said.

The rally later passed four resolutions presented by the Dong Zong standing committee.

They are, for the Education Ministry to :
  • immediately transfer out all teachers who do not have the required SPM Chinese language qualification from Chinese primary schools;
  • conduct special courses for Chinese language teachers who have taught Bahasa Malaysia or English for at least three years so that they are qualified to teach all three languages;
  • reform the teachers training syllabus so that more qualified Chinese-speaking teachers can be trained to fulfil needs of Chinese schools; and
  • review the Education Act to ensure vernacular schools are accorded equal status and safeguarded as an integral part of national education system.
Responding to Dong Zong’s demands, Wee said the ministry would continue to work towards resolving the issues raised.

However, he was evasive when pressed as to whether the government would give a commitment to resolve the problems or concede to the demands of the Dong Zong.

“We will most certainly take into consideration anything, listen to whatever grievances which we think are rational,” he said, adding that was why the cabinet had agreed to set up a special committee, which he chairs, to resolve the problem.

“The committee will get the cooperation of all stakeholders. Over the past month, we have engaged stakeholders to resolve this issue. We will study each of their resolutions and demands and consider it. We have come up with strategies,” he said.

When it was pointed out that Chinese educationists have been faced with this problem for over four decades and will not accept any more delays, Wee reiterated that the committee was formed to look into it immediately.

“Of course, we know this needs immediate attention. As far as government is concerned, we need to identify the root of the problem before we can solve anything.

“Transferring the non-Chinese speaking teachers out will not solve anything. There are integrated issues which have to be resolved and discussed as a whole, not piecemeal,” he added.

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