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“Growth in Asia is slackening: What are we to do?”
“If you know the enemy and know yourself well, you need not fear the results of a hundred battles. If you know yourself well but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.”
As a past event sponsored by Mutiara Johan Group, the forum with the above title was jointly organised by KC Chia & Noor, Chartered Accountants, a GGI member firm, National Chamber of Small and Medium Enterprises, Malaysia and Confederation of APAC-CEO Alumni of the Tsinghua University, Beijing PRC. The above forum was held in Kuala Lumpur, the capital city of Malaysia and attended by above 400 participants.
The keynote speaker was Tan Sri Dato' Dr Lin See Yan who was the former Chairman and CEO of the Pacific Banking Group and former Deputy Governor of the Central Bank of Malaysia. In addition to as a British Chartered Scientist and Chartered Statistician, he also holds 3 post-graduate degrees from Harvard University, USA including a Ph.D. degree in Economics where he was a Mason Fellow and Ford Scholar.
Whilst discussing on the contemporary problems of Asia’s economy, with a wry sense of humour he also elaborated and exchanged ideas with the floor participants on how Asia has come a long way since the last Asian financial crisis exploded in 1998 and the ensuing explosive and breakneck growth in the past 17 years led by China and now possibly together with India, which has successfully helped to uplift economic expansion in most part of the world.
However, he stressed that Asia has started to slowing down in the face that the withdrawal of QE3, the continuing recession in Europe and the lackluster performance of most of BRICS nations. Asia now needs a new growth strategy in order to push and maintain its growth momentum, including finding ways and means to minimize the pains and economic setbacks which have called for immediate structural reforms. He regarded this will be a herculean task that is challenging most of Asian countries with Malaysia is no exception.
Dr. Lin elaborated on the contemporary problems of Asia’s economy and was challenged by the crowd to reflect upon the Western world’s recessions, and how it affected seemingly over-optimistic predictions of Asia’s explosive growth.
As a renowned banker and former deputy bank governor, Dr. Lin regaled the audience with personal anecdotes, on resolving conflicting interests between the public and private sector. Widely-read, Dr. Lin also entertained the audience with cartoons from The Economist, and with a wry sense of humour. True to his training as a disciplined Scientist and Statistician, he dribbled multiple data-sets before the audience: comparing economic indicators between economic regions, decades, and nationalities.
Below is the gist of his speech delivered in the forum:
1. Risks and uncertainties
The world economy continues to face significant uncertainty, with risks still tilted to the downside at the backdrop of a substantial worsening of the euro area crisis; the United States falling off the fiscal cliff; and a hard landing for some large developing economies with a slower economic growth and tumbling fluctuation in currencies.
He envisaged that new risks and uncertainties eventually unfolding as a result of the ever-expanding monetary measures adopted by certain developed economies could significantly impact adversely on financial stability and a prolonged period of subdued growth in certain economies with high unemployment and inadequate investment. Overall it leads to noticeably lower potential output in the future.
Other pertinent factors such as geopolitical risks with a growing trend of changing governments like musical chairs; rampant political unrests; the military tensions, arm race and potential military conflicts in the South China Sea and East Sea (or Sea of Japan); and artificial and natural disasters such as airplane crashes, earthquakes, floods, haze and typhoons that had been thrashing certain part of Asia could have the potential to decelerate such momentum and will result in a slackening economic growth.
2. Challenges and emerging trends
He elaborated despite Asia being the driver in economic growth, it is still facing the risk of the huge gap between rich and poor hindering economic growth, undermining democratic institutions, and triggering conflict in the region. The growing tide of inequality within the countries and disparities across economies are threatening the long-term growth prospects of Asia.
While some inequality can help promote investment by fostering the accumulation of capital in the hands of a few entrepreneurs, too much inequality implies reduced economic mobility that can lead to misallocation of resources and so to social and political unrest.
The mismatch of supply over demand situation as a result of over production capacity and duplication in the production processes in making largely visibly similar products in various countries in the region have caused operational inefficiency, stiff competition and economic setbacks. Although the robust economic growth has enlarged the rising middle income population which not only gives rise to a growing domestic demand, they also exert stronger demand for better quality of life, more civil liberty and democratic rights. The challenge will also call to guarantee greater economic opportunities for lower income population strata to achieve more inclusive and balanced growth.
3. Vigilant and precautionary measures
He mentioned that despite Asia and ASEAN countries remaining as growth positive, they have to undergo vigorous forms of structural reforms in order to make growth more sustainable. They have to reach out by an outward looking market focus requiring a shift beyond small domestic markets to a global arena as the regional market has gradually become too congested and intensely competitive.
In addition, various vigilant and precautionary measures including legal and economic reforms, administrative efficiency, accountability and transparency need to be in place. This is in order to curb corruption and politics, volatility and bubbles of the turbulent property and securities markets, uncertainty and turmoil relating to the fluctuating commodities prices which have badly affected the livelihood of the rural population and export revenue of nations. Risks linked to long tail “unlikely” shocks and calamities continue to abound in the aftermath of the economic stagnation, imminent currency war and QE withdrawal syndrome.
4. Strategies and maneuvers
To propel the continuous growth, it is imperative to become competitive, innovative and efficient in the regional economy. Thus, both the government and private sectors have to substantially invest in education and training, research and development activities, innovation projects and good governance in risk management in order to sustain invigorating business dynamics, capture new markets and in sharpening risk appetite.
To remain competitive, the nations need to adopt a opening-up approach in recruiting, capturing and accumulation of talents from all over the world via a colour-blind, passport-blind, religion-blind and country-blind open policy as the economy of those countries with rich natural resources and a strong pool of capable and creative talents will thrive, revive faster from the mud and are always performing better than others.
Despite lackluster performance, the US, Europe and Japan still offer big markets for demand of consumption goods, merger and acquisition initiatives, downstream technologies and open software as well as educated and trained human resources. Special focus also has to target at BRICS countries which still present good opportunities for new markets, merger and acquisition activities and green initiatives.
He summarized that China and India are defining factors in Asia’s overall economy and as emerging superpowers, both have been exerting more influence in the region, are expected to expand economically across the world, but it would take them at least two decades - a number that is highly variable subject to vagaries in global demand for their products and services, especially from volatile Europe and US.
However, US seems to be recovering slowly albeit shakily from their 2008 recession – and Asia needs new structural mechanisms in place, to organize and perpetuate growth as an economic region and political entity.
Malaysia, especially, has a number of challenges to tackle. Although they may be both domestic and international in nature, Dr. Lin opined that the two key factors required to achieve Malaysia’s economic reform are predominantly laid with a modern cohesive education system, political harmony and social stability at large.
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