Jan 30, 2008
UPFRONT
Battle to save Malaysia's Chinese dropouts
By Chow Kum Hor, Malaysia Correspondent
TRAPPED: The number of young Chinese dropping out of school is rising. Without proper qualifications or skills to land a job and with few other options, the youth are more likely to turn to crime. -- PHOTO: AFP
KUALA LUMPUR - MRS Chong, a mother of two, is deeply worried about her 11-year-old daughter's studies.
The reason: The Standard Six pupil does not seem to have much homework from her Mandarin-medium school in Seri Kembangan, a predominantly Chinese middle-class enclave that is 30 minutes' drive from Kuala Lumpur.
Although school has just started, others in her daughter's year have already been inundated with schoolwork in preparation for the year-end government examination that Standard Six pupils take.
But her daughter and her classmates 'appear to have been spared the burden', although they are 'not very good' in their studies, said the 38-year-old housewife, who declined to give her full name.
Those familiar with the Chinese school system in Malaysia will understand Mrs Chong's anxiety.
It is not uncommon for these schools to neglect the less academically inclined, and lack of homework is one of the signs. Teachers are too busy coaching the potential top-scorers to spend time on the weaker pupils.
'Some schools are overly focused on those who can score a string of As. These are the students who give their schools a good name. But they (the good students) are the minority,' said Chinese educationist Goh Kean Seng.
The result is that those who fail to keep up with their schoolwork drop out of school in later years, said Mr Goh, principal of a private Chinese secondary school in KL and an active member of an influential Chinese education group.
The situation is worsened by the switch from Mandarin to Malay as the medium of instruction when the pupils go on to secondary school, he added.
Government primary schools use either Malay, Mandarin or Tamil as the medium of instruction. But all government secondary schools teach in Malay.
About 90 per cent of Chinese children in Malaysia go to Mandarin-medium primary schools, which are run by the government.
But less than 5 per cent go on to Mandarin-medium secondary schools, which are privately-run and fee-paying. Parents prefer to send their children to government schools, where education is free.
'Many drop out because they cannot cope with the change in the medium of instruction,' said Mr Goh.
It does not help that some parents refuse to send their children to 'Remove Classes', a year-long preparatory programme in secondary schools to bring children up to speed in the Malay language.
Pupils who fail their Malay language exam at Standard Six are required to go on this programme before they can start Form One. But those who do so are often perceived to be slow learners, so parents try to get their children exempted from it.
Deputy Education Minister Hon Choon Kim told The Straits Times: 'Many parents see Remove Classes as a dumping ground, which should not be the case.'
The Malaysian Chinese Association (MCA) estimates that 25 per cent of Chinese students quit studying before they are 18, when they are due to sit for a government exam equivalent to the O levels.
This estimate puts the annual dropout figure at over 100,000 - what the party's youth wing calls a 'silent epidemic'.
There are no official figures on the number of dropouts among the Chinese, but feedback that the MCA gets from the community suggests that the situation has deteriorated, especially over the past five years.
Among the dropouts, some become apprentices in workshops, picking up skills like plumbing or motor-repair. But many more, eager to make a quick buck, find themselves in illicit trades, such as peddling pirated DVDs or collecting debts for loan sharks.
Police statistics do not show the number of dropouts involved in criminal activity. But MCA officials say anecdotal evidence suggests that more youngsters these days are prepared to break the law to earn a living.
Malaysia's crime rate has been soaring over the years, going up by 7 per cent last year compared with 2006.
'It's very sad to see young Chinese dropping out of school at the age of 15 to 17 and ending up trying to evade police arrest every day,' MCA Youth's education bureau chief Wee Ka Siong told The Straits Times.
The party is deeply concerned, not only because education has always been important to the Chinese community.
'With globalisation, not having the paper qualification puts you at a disadvantage. We do not want young, able Malaysians to lose out,' said Mr Wee, also a lawmaker from Johor.
The MCA has set up a series of programmes to address this problem, one of which helps the less academically inclined enrol in vocational schools.
This way, they not only acquire skills like electrical wiring or tile-laying, but also have a piece of paper that says they are qualified.
The party also arranges for students with mediocre or poor grades to get extra coaching after school.
In addition, it has set up a RM6 million (S$2.6 million) fund to subsidise dropouts undergoing skills courses.
Datuk Hon said that the Education Ministry, together with the MCA, has undertaken a pilot project in about 10 Mandarin-medium primary schools nationwide to reduce the number of dropouts. It is aimed mainly at boosting the self-confidence of those who are not exactly star students.
'Sometimes, we hold essay-writing competitions that exclude straight As students. If we open the contest to all, only the good students will win,' he explained. Parents are invited to the prize-winning ceremonies of these contests.
He noted that the programme has had encouraging success, with students showing more enthusiasm for their studies. The ministry plans to expand the programme to more schools.
'We just do not want anyone left out. Every student counts,' Datuk Hon said.
kumhor@sph.com.sg
Monday, February 4, 2008
Rail demand and capacity Jan 29 2008
Rail demand and capacity
RAIL commuters here, like those in cities with much larger populations, judge service satisfaction by peak-period frequencies and coach loading. On these measures the prevalent view has been that the MRT system has been passable: Reasonably good, but should be better. The Land Transport Authority (LTA) and the operator of the older and more heavily used lines serving the city centre and its immediate environs will have noted the rising volume of gripes about crowded coaches and inconsistent scheduling during the morning and evening rush. Riders would want an interval of no more than two minutes between trains either way during the extreme peak. They are prepared to give due allowance for the operators' limited fleet size and pool of drivers, but expect them to be more responsive to need by investing continually in these two factors. Population size has been growing with the immigrant influx.
Commuters should now allow the two operators, SMRT and SBS Transit, a fresh start. The first service augmentation in some years starts next week when 93 more trips a week will be added to the schedule of the North-South, East-West and North-East lines, partly at the urging of the LTA. The Transport Ministry expects waiting time during peak periods to be reduced to about two minutes. Can 93 more trips swing it? SMRT will get the lion's share of 83 more trips. SBS will have 10 trips added to the slightly patchy NEL. Divided by the two lines SMRT runs, it will amount to a notional six trips daily on each of the two. If weekends are excluded, the number rises to a more commodious eight. Depending on how widely or narrowly 'peak' is defined, the effect may be dispersed. After due evaluation, the LTA could be forced into making adjustments to serve better the North-South line, where present traffic and anticipated demand are heaviest. The stretch between Ang Mo Kio and Raffles Place and most stations in between (especially Orchard, Somerset, Dhoby Ghaut, City Hall) are at peak capacity. To achieve the two-minute target, which riders in the commercial and financial zones expect as the minimum, the peak-period window may have to be constricted, based on service capacity. This will bring a new set of complaints,
Moreover, weekends are not considered peak. This is a curious anomaly for an Asian city of seven-day commerce and weekend meals out. Western cities not on the tourism trail have little commuter traffic on Saturdays and Sundays, but weekends are bonanza time in any Asian city of size. It is time the operators updated their practice by extending peak-hour definition to include Saturday, Sunday and public holidays.
RAIL commuters here, like those in cities with much larger populations, judge service satisfaction by peak-period frequencies and coach loading. On these measures the prevalent view has been that the MRT system has been passable: Reasonably good, but should be better. The Land Transport Authority (LTA) and the operator of the older and more heavily used lines serving the city centre and its immediate environs will have noted the rising volume of gripes about crowded coaches and inconsistent scheduling during the morning and evening rush. Riders would want an interval of no more than two minutes between trains either way during the extreme peak. They are prepared to give due allowance for the operators' limited fleet size and pool of drivers, but expect them to be more responsive to need by investing continually in these two factors. Population size has been growing with the immigrant influx.
Commuters should now allow the two operators, SMRT and SBS Transit, a fresh start. The first service augmentation in some years starts next week when 93 more trips a week will be added to the schedule of the North-South, East-West and North-East lines, partly at the urging of the LTA. The Transport Ministry expects waiting time during peak periods to be reduced to about two minutes. Can 93 more trips swing it? SMRT will get the lion's share of 83 more trips. SBS will have 10 trips added to the slightly patchy NEL. Divided by the two lines SMRT runs, it will amount to a notional six trips daily on each of the two. If weekends are excluded, the number rises to a more commodious eight. Depending on how widely or narrowly 'peak' is defined, the effect may be dispersed. After due evaluation, the LTA could be forced into making adjustments to serve better the North-South line, where present traffic and anticipated demand are heaviest. The stretch between Ang Mo Kio and Raffles Place and most stations in between (especially Orchard, Somerset, Dhoby Ghaut, City Hall) are at peak capacity. To achieve the two-minute target, which riders in the commercial and financial zones expect as the minimum, the peak-period window may have to be constricted, based on service capacity. This will bring a new set of complaints,
Moreover, weekends are not considered peak. This is a curious anomaly for an Asian city of seven-day commerce and weekend meals out. Western cities not on the tourism trail have little commuter traffic on Saturdays and Sundays, but weekends are bonanza time in any Asian city of size. It is time the operators updated their practice by extending peak-hour definition to include Saturday, Sunday and public holidays.
Tao Li taken to task over comments
Tao Li taken to task over comments
They slam her reluctance to donate 6% of her earnings to youth
By Wang Meng Meng
TAO Li's view that she should not part with a portion of her winnings for youth development has not gone down well with the sports fraternity.
The swimmer is reluctant to give 6 per cent, or $1,425, back to youth development, as part of the newly introduced 15 per cent levy imposed by the Singapore Swimming Association (SSA).
That sum is derived from the $23,750 the 17-year-old schoolgirl will receive under the Multi-Million Dollar Award Programme (MAP). She earned the incentive after winning three individual titles and one team gold at last year's South-east Asia Games.
SingaporeSailing president Low Teo Ping was one of those who faulted her stand, saying: 'This is what I call a GGA - a Greedy, Grabbing Athlete. Very sad, you know.
'Every time my sailors go out and perform well, I thank them for making my job easier because when they do well, I continue to get funding.
'On top of that, they will be contributing to our development fund and they're happy to do so.'
Singapore Athletic Association supremo Loh Lin Kok was similarly critical, saying: 'It's not wrong for the association to stipulate a certain percentage be taken out from the MAP award to be pumped into youth development.
'To quarrel about it after the association puts in money to promote an athlete's interest is insincere. It doesn't leave a good taste in the mouth either.
'It is good that the SSA wants to show its transparency in exactly what it is doing with the money.
'Tao Li's still a teenager. She's also going to benefit from the money put back into development.'
For Singapore Table Tennis Association general manager Jackie Tay, the levy has not caused any friction between the association and its athletes.
He said: 'Our players donate 20 per cent of their MAP award, which will be used for the development of our academy players.
'This practice has been implemented for years and it is also explained clearly to our players. That is why there has been no adverse reaction from our paddlers.'
Bodybuilder Simon Chua, who has two Asian Games and three SEA Games golds, is also supportive of the levy.
He said: 'I believe in loyalty. The federation has been loyal to me throughout my career. Likewise, I must show the same.
'That's why I don't mind signing the agreement for my winnings to be 'taxed'.
'Altogether, I have made $530,000 from the MAP. The federation takes 15 per cent and this is an amount I have given willingly.'
But there are also those who stand in Tao Li's corner.
Freddie Choo, a reader, wrote: 'Instead of taking from Tao Li and other champions, the SSA should approach the government for more funding for youth development, using the track records of these champions to leverage their application.
'Why must the SSA feel they must take something back just because they have given to the swimmers?
'The swimmers have given too. The SSA could have spent 10 times more and not groomed any winners. So let's honour our champions instead of 'taxing' them.''
Parliamentary Secretary (Community Development, Youth and Sports) Teo Ser Luck has urged national sports associations (NSAs) to be transparent in the implementation of such levies.
He said: 'I believe the SSA has supported Tao Li, sent her for overseas competitions and these things cost money.
'Maybe she didn't have enough information and she has her own point of view.
'On the other hand, if the SSA wants to implement policies, it would be good to have dialogues with stakeholders for feedback.'
Sailor Maximilian Soh, who bagged an Asian Games gold in Doha, agreed with Mr Teo's call for the levy process to be transparent.
He said: 'I don't mind giving money back to the association. After all, they groomed the athletes and it is good that money is going back to the roots of the sport.
'But I'm concerned about transparency. I have given $52,000 from my MAP awards back to SingaporeSailing and I would like to know what it went to.
'I hope the money can be used to reward the coaches, to boost youth development and to be used as financial assistance to former sailors.'
The Singapore National Olympic Council, which administers the MAP scheme, declined comment. The Singapore Totalisator Board, which is the scheme's primary sponsor, did not reply by press time.
meng@sph.com.sg
They slam her reluctance to donate 6% of her earnings to youth
By Wang Meng Meng
TAO Li's view that she should not part with a portion of her winnings for youth development has not gone down well with the sports fraternity.
The swimmer is reluctant to give 6 per cent, or $1,425, back to youth development, as part of the newly introduced 15 per cent levy imposed by the Singapore Swimming Association (SSA).
That sum is derived from the $23,750 the 17-year-old schoolgirl will receive under the Multi-Million Dollar Award Programme (MAP). She earned the incentive after winning three individual titles and one team gold at last year's South-east Asia Games.
SingaporeSailing president Low Teo Ping was one of those who faulted her stand, saying: 'This is what I call a GGA - a Greedy, Grabbing Athlete. Very sad, you know.
'Every time my sailors go out and perform well, I thank them for making my job easier because when they do well, I continue to get funding.
'On top of that, they will be contributing to our development fund and they're happy to do so.'
Singapore Athletic Association supremo Loh Lin Kok was similarly critical, saying: 'It's not wrong for the association to stipulate a certain percentage be taken out from the MAP award to be pumped into youth development.
'To quarrel about it after the association puts in money to promote an athlete's interest is insincere. It doesn't leave a good taste in the mouth either.
'It is good that the SSA wants to show its transparency in exactly what it is doing with the money.
'Tao Li's still a teenager. She's also going to benefit from the money put back into development.'
For Singapore Table Tennis Association general manager Jackie Tay, the levy has not caused any friction between the association and its athletes.
He said: 'Our players donate 20 per cent of their MAP award, which will be used for the development of our academy players.
'This practice has been implemented for years and it is also explained clearly to our players. That is why there has been no adverse reaction from our paddlers.'
Bodybuilder Simon Chua, who has two Asian Games and three SEA Games golds, is also supportive of the levy.
He said: 'I believe in loyalty. The federation has been loyal to me throughout my career. Likewise, I must show the same.
'That's why I don't mind signing the agreement for my winnings to be 'taxed'.
'Altogether, I have made $530,000 from the MAP. The federation takes 15 per cent and this is an amount I have given willingly.'
But there are also those who stand in Tao Li's corner.
Freddie Choo, a reader, wrote: 'Instead of taking from Tao Li and other champions, the SSA should approach the government for more funding for youth development, using the track records of these champions to leverage their application.
'Why must the SSA feel they must take something back just because they have given to the swimmers?
'The swimmers have given too. The SSA could have spent 10 times more and not groomed any winners. So let's honour our champions instead of 'taxing' them.''
Parliamentary Secretary (Community Development, Youth and Sports) Teo Ser Luck has urged national sports associations (NSAs) to be transparent in the implementation of such levies.
He said: 'I believe the SSA has supported Tao Li, sent her for overseas competitions and these things cost money.
'Maybe she didn't have enough information and she has her own point of view.
'On the other hand, if the SSA wants to implement policies, it would be good to have dialogues with stakeholders for feedback.'
Sailor Maximilian Soh, who bagged an Asian Games gold in Doha, agreed with Mr Teo's call for the levy process to be transparent.
He said: 'I don't mind giving money back to the association. After all, they groomed the athletes and it is good that money is going back to the roots of the sport.
'But I'm concerned about transparency. I have given $52,000 from my MAP awards back to SingaporeSailing and I would like to know what it went to.
'I hope the money can be used to reward the coaches, to boost youth development and to be used as financial assistance to former sailors.'
The Singapore National Olympic Council, which administers the MAP scheme, declined comment. The Singapore Totalisator Board, which is the scheme's primary sponsor, did not reply by press time.
meng@sph.com.sg
S'pore backs code of practice for SWFs
S'pore backs code of practice for SWFs
But guidelines should apply to other investors as well, says Tony Tan
By Warren Fernandez, Deputy Editor & Foreign Editor
DAVOS - SINGAPORE supports the initiative to establish a code of best practices for sovereign wealth funds (SWFs), which would help ease concerns about their operations, Dr Tony Tan has said.
The deputy chairman of the Government of Singapore Investment Corporation (GIC) disclosed that Singapore was among several SWFs which had been asked by US Treasury Secretary Henry Paulson last October to offer suggestions for guidelines being drawn up, and had thrown up some ideas.
Among its suggestions: any new code should neither be overly prescriptive nor a one-size-
fits-all affair, given the wide diversity of funds which were labelled SWFs.
The guidelines, which should be largely voluntary, must also be kept general and flexible and be applied to other investors, such as hedge and private equity funds, so as to ensure a level playing field, he said.
More disclosure on the purpose and intention of investments made, whether they were for commercial reasons or some other purpose, as well as the governance processes within the funds would also be helpful, he said.
For its part, GIC was now working, in consultation with the Finance Ministry, on a document which would give more information on the processes, governance and purposes for its investments. This might be made public in the second quarter of this year. GIC would also report the rate of return on its investments more regularly, he added.
'The SWFs are here to stay. We believe it is good to have better understanding, some form of code of good practice, so that operations of the SWFs, and the reactions of the recipient countries, will not lead to further problems,' Dr Tan said.
'The SWFS can play a role... It is just a matter of working out a process whereby they can continue their operations, which is good for them and good for the companies they invest in.'
He was speaking to reporters at the end of a trip to Davos, Switzerland, where he participated in several high-level discussions on SWFs - a hot topic at this year's World Economic Forum meeting, which wrapped up yesterday.
GIC had drawn attention with two high-profile deals in recent months, investing US$6.88 billion (S$9.8 billion) in US banking giant Citigroup soon after forking out 11 billion Swiss francs (S$14.3 billion) for a stake of about 9 per cent in troubled Swiss bank UBS.
Dr Tan said that given the concerns about SWFs, he had decided to come to Davos to listen and exchange ideas on the issue. It was understandable, he said, that there would be some concerns about the purpose and intentions of SWFs, as there were many more players these days, including some large new ones from Russia and China.
'Our view is that the concerns are valid, and have to be addressed,' he said.
GIC had decided not to take up an invitation by the UBS to have a nominee elected to its board. GIC's position was that it was a long-term commercial investor in the Swiss bank, with no intention of taking control of its operations, he said.
Giving an insight into GIC's operations, he said it preferred to stick with the low-key approach it had adopted over the past 27 years, taking small stakes in a wide range of companies for the long haul.
But an unusual set of circumstances in recent months had led to some American and European banks needing to raise large sums of capital quickly. As it was difficult for them to do so from their traditional sources and shareholders, they had sought out the SWFs.
GIC decided to proceed only after careful consideration of the risks, he added, stressing that GIC was not in the business of making headlines.
Nor did he see the role of GIC and other sovereign funds to be white knights 'riding to the rescue of financial systems in the US or Europe'.
Instead, GIC had a duty to the Government and people of Singapore to protect their hard-earned national reserves and make sure they were not invested recklessly, he said.
GIC had decided in the middle of last year to convert some of its equity holdings into cash, given concerns about the direction of the markets. This was how it had the US$16 billion needed to invest when the opportunity arose, he said.
'In retrospect, GIC was right in determining the direction in which the markets would go. What surprised us was the fact that when the market actually turned, it did so at such a speed and the contagion effect was so broad that it affected even some of the best-known and well-regarded banks.'
DR TAN ON SWFs
'Sovereign wealth funds are here to stay. And that's why we believe that it's good to have some form of understanding or code of practice so that the operations of the SWFs and the reactions of the recipient countries will not lead to further problems, because the SWFs can play a role. They are not going to go away. And it's just a matter of working out a process whereby they can continue their operations, which is good for them and good for the companies in which they invest.'
ON INFLATION WORRIES
'My overall worry for 2008, even more than this economic recession, is inflation. If inflation increases, then it is going to have very serious impact for the US economy and the economies of the whole world, and ultimately for Singapore. Oil prices are high, food prices are going up, we've already felt the effects in Singapore.'
ON 'DECOUPLING'
'I do not believe that if the US runs into a deep recession, the rest of the world will be unaffected.'
ON GIC'S DECISION TO CONVERT SOME EQUITY HOLDINGS INTO CASH
'In retrospect, GIC was right in determining the direction in which the markets would go. What surprised us was the fact that when the market actually turned, it did so at such a speed and the contagion effect was so broad that it affected even some of the best known and well-regarded banks.'
But guidelines should apply to other investors as well, says Tony Tan
By Warren Fernandez, Deputy Editor & Foreign Editor
DAVOS - SINGAPORE supports the initiative to establish a code of best practices for sovereign wealth funds (SWFs), which would help ease concerns about their operations, Dr Tony Tan has said.
The deputy chairman of the Government of Singapore Investment Corporation (GIC) disclosed that Singapore was among several SWFs which had been asked by US Treasury Secretary Henry Paulson last October to offer suggestions for guidelines being drawn up, and had thrown up some ideas.
Among its suggestions: any new code should neither be overly prescriptive nor a one-size-
fits-all affair, given the wide diversity of funds which were labelled SWFs.
The guidelines, which should be largely voluntary, must also be kept general and flexible and be applied to other investors, such as hedge and private equity funds, so as to ensure a level playing field, he said.
More disclosure on the purpose and intention of investments made, whether they were for commercial reasons or some other purpose, as well as the governance processes within the funds would also be helpful, he said.
For its part, GIC was now working, in consultation with the Finance Ministry, on a document which would give more information on the processes, governance and purposes for its investments. This might be made public in the second quarter of this year. GIC would also report the rate of return on its investments more regularly, he added.
'The SWFs are here to stay. We believe it is good to have better understanding, some form of code of good practice, so that operations of the SWFs, and the reactions of the recipient countries, will not lead to further problems,' Dr Tan said.
'The SWFS can play a role... It is just a matter of working out a process whereby they can continue their operations, which is good for them and good for the companies they invest in.'
He was speaking to reporters at the end of a trip to Davos, Switzerland, where he participated in several high-level discussions on SWFs - a hot topic at this year's World Economic Forum meeting, which wrapped up yesterday.
GIC had drawn attention with two high-profile deals in recent months, investing US$6.88 billion (S$9.8 billion) in US banking giant Citigroup soon after forking out 11 billion Swiss francs (S$14.3 billion) for a stake of about 9 per cent in troubled Swiss bank UBS.
Dr Tan said that given the concerns about SWFs, he had decided to come to Davos to listen and exchange ideas on the issue. It was understandable, he said, that there would be some concerns about the purpose and intentions of SWFs, as there were many more players these days, including some large new ones from Russia and China.
'Our view is that the concerns are valid, and have to be addressed,' he said.
GIC had decided not to take up an invitation by the UBS to have a nominee elected to its board. GIC's position was that it was a long-term commercial investor in the Swiss bank, with no intention of taking control of its operations, he said.
Giving an insight into GIC's operations, he said it preferred to stick with the low-key approach it had adopted over the past 27 years, taking small stakes in a wide range of companies for the long haul.
But an unusual set of circumstances in recent months had led to some American and European banks needing to raise large sums of capital quickly. As it was difficult for them to do so from their traditional sources and shareholders, they had sought out the SWFs.
GIC decided to proceed only after careful consideration of the risks, he added, stressing that GIC was not in the business of making headlines.
Nor did he see the role of GIC and other sovereign funds to be white knights 'riding to the rescue of financial systems in the US or Europe'.
Instead, GIC had a duty to the Government and people of Singapore to protect their hard-earned national reserves and make sure they were not invested recklessly, he said.
GIC had decided in the middle of last year to convert some of its equity holdings into cash, given concerns about the direction of the markets. This was how it had the US$16 billion needed to invest when the opportunity arose, he said.
'In retrospect, GIC was right in determining the direction in which the markets would go. What surprised us was the fact that when the market actually turned, it did so at such a speed and the contagion effect was so broad that it affected even some of the best-known and well-regarded banks.'
DR TAN ON SWFs
'Sovereign wealth funds are here to stay. And that's why we believe that it's good to have some form of understanding or code of practice so that the operations of the SWFs and the reactions of the recipient countries will not lead to further problems, because the SWFs can play a role. They are not going to go away. And it's just a matter of working out a process whereby they can continue their operations, which is good for them and good for the companies in which they invest.'
ON INFLATION WORRIES
'My overall worry for 2008, even more than this economic recession, is inflation. If inflation increases, then it is going to have very serious impact for the US economy and the economies of the whole world, and ultimately for Singapore. Oil prices are high, food prices are going up, we've already felt the effects in Singapore.'
ON 'DECOUPLING'
'I do not believe that if the US runs into a deep recession, the rest of the world will be unaffected.'
ON GIC'S DECISION TO CONVERT SOME EQUITY HOLDINGS INTO CASH
'In retrospect, GIC was right in determining the direction in which the markets would go. What surprised us was the fact that when the market actually turned, it did so at such a speed and the contagion effect was so broad that it affected even some of the best known and well-regarded banks.'
GIC takes long-term, responsible approach
Jan 28, 2008
GIC takes long-term, responsible approach
GIC's deputy chairman, Dr Tony Tan, spoke with ST Deputy Editor Warren Fernandez and correspondent Bhagyashree Garekar about the key themes at this year's World Economic Forum meeting in Davos, which wrapped up yesterday. Here are excerpts from the hour-long interview:
THE whole issue of sovereign wealth funds (SWFs) is a matter of great concern at this year's Davos forum. Our view from Singapore is that these concerns over SWFs are valid and have to be addressed.
In the past, when there were only a few SWFs - Kuwait, Abu Dhabi, Singapore - there really wasn't very great discussion about them. Because obviously, Abu Dhabi, Kuwait, Singapore are too small to have any impact on economies or politics of the United States and Europe.
But now new funds are being set up - China, Russia, possibly more of the Middle Eastern countries. So it's understandable that there should be some worries about what the SWFs will do.
Do they have a political agenda, are they investing for other than commercial and financial reasons?
Our view is we understand these concerns, we believe the situation concerning SWFs has changed fundamentally, and that it's best to bring it out into the open.
Last October, at the IMF- World Bank meeting in Washington, the US Treasury Secretary convened a dinner at which several SWF countries were present, including Singapore as well as, I believe, the OECD countries and representatives from the IMF and World Bank.
Mr (Hank) Paulson suggested that the IMF and WB be tasked to work out some codes or best practices for SWF and their investments.
In general, Singapore supports this initiative. We believe it's a good starting point. Whatever code will arise remains to be seen, but our view is that it should not be too prescriptive.
The code should be general, it should be flexible. To an extent, it should be voluntary because SWFs are not the same, countries are not the same. Even the definition of SWFs hasn't been agreed.
GIC, I suppose, is a classic example of an SWF. We are a fund management company. We manage the foreign reserves of the Singapore Government. But the other entities, such as holding companies, state pension funds, are sometimes classified as SWFs, sometimes not. It's still a very vague area. But we believe further discussion is helpful, not only with regard to the SWFs, but also with regard to the recipient countries.
The big danger is that if we do nothing, then these worries build up, and may lead to some form of financial protectionism where barriers may be erected to hinder the flow of capital. I think this would be detrimental to world trade and to the world economy.
Different countries have expressed different views of SWFs. In Europe, Germany and France seem to have some reservations. Britain seems to be very relaxed about it. The Prime Minister of Britain, Mr Gordon Brown, has just been to China and has suggested that Chinese Investment Corporation set up an office in London and that Britain welcomes investment from China.
In the US, various congressmen have made some comments and, of course, it's an election year so the candidates who are vying for the Democratic and Republican nominations have also made some comments, basically to catch the headlines. So everything is in a state of flux.
That's why we think discussions should go on to clarify a lot of confusion regarding this area. What is important is that whatever code of practice is set up, it should not disadvantage the SWFs.
There has been a suggestion that copying the model in Norway, which is transparent for their own needs, the SWFs should be required to publish all of their shareholdings. I think that will not be fair.
It will not provide a level playing ground if other funds, hedge funds, private equity, hedge fund managers by Wellington, Capital group do not have to do so. And they will put the SWFs at a competitive disadvantage. So we don't think that it is necessary.
But even with a code of practice, it'll still be a code, what is more important is how each of the SWFs conducts itself.
In the case of GIC, because of the way it has conducted its operations over the last 27 years, it is generally well regarded as a professional investor. GIC is not a trader like a hedge fund.
Neither are we a strategic investor which takes stakes in companies for strategic or political reasons. We are a long- term financially-oriented investor. And the companies which we have invested in have generally welcomed GIC as a responsible, supportive investor.
GIC's general preferred mode of operations is to take a very low key, take stakes on a relatively small scale. Less than half per cent in a large number of companies.
We made two investments in December and January, in UBS and Citigroup, which is a bit unusual. This is a departure from our norm brought by an unusual set of circumstances. But it does not change the way in which GIC intends to conduct its investment operations.
New environment
THE environment in which GIC was able to operate in the 1980s for example, where we kept very much below the radar and actually there was very little notice taken of GIC, is the way we would like to conduct our business.
But we also know that with all these worries now, we cannot. We have to change some modes of our operation. The Ministry of Finance (MoF) has agreed that in the coming months, GIC will disclose more. We'll be more transparent in some of our operations. We have already put up a lot of information on our website but we'll probably do more.
For example, with regard to our rate of returns. The last time we announced our rate of returns was in 2006, when GIC chairman Minister Mentor Lee Kuan Yew, at our 25th anniversary dinner, announced that on average, GIC had made a return of 9.5 per cent in US dollar terms each year for the last 25 years; 5.3 per cent on real return rate, accounting for inflation.
It's impossible to do it only once in 25 years, we'll do it at regular intervals. But we've not yet settled on how often we should do it, probably won't be every year.
Because GIC is a long-term investor, it doesn't make sense to report year-to-year figures which may vary widely. So we'll probably do it in some form of average 10-year return. But we still have to settle this, discuss it with MoF.
New code
IT'S STILL at the very early stages. First of all, we don't think the one-size-fits-all code of practice is going to work. Countries are too different, the SWFs are too different. So we would suggest that we should start in a very general way with a code of practice which is flexible and to some extent voluntary.
We have also stated our view that what is important is to clarify the purpose of the investment made by each SWF. What is the reason, what is the motivation? Is it for commercial gain, financial reasons or is there any other agenda? We think that is fundamental.
The second area in which we think there should be more disclosure is governance. How is an SWF governed? To whom is it responsible? In the case of Singapore, of course, GIC is responsible to MoF which provides the funds. We manage and pay GIC a fee for managing the funds.
It should be quite clear what the role of the board of directors is, what is the role of management, and that we'll provide more information.
We're in the process of starting to draft some form of document which will provide more information in these areas. We still have to agree on the areas with MoF, but we would expect, hopefully, to make available more information on GIC's process, governance purposes of investment by possibly in the second quarter of this year.
GIC's recent investments
GIC has always had a very conservative approach to its investments. Today we conduct our investments under the risk parameters which have been specified by MoF. We adhere rigorously to these risk parameters. We don't breach them at all.
When we consider an investment, we always look at the risk first, whether it comes within our risk management framework, whether it is not excessive. Having decided that the risk is acceptable, then we look at the return. Our philosophy is if you look after the downside, the upside will look after itself.
In the case of two large investments in UBS and Citigroup, we have structured our investment in the form of convertible notes which pay GIC a rate of return over the next few years before we convert the notes into shares in UBS or Citigroup.
So this gives us a downside protection which we think is necessary in these turbulent circumstances. It doesn't mean we have taken no risk at all, we can't. If we take no risk at all, we would do nothing at all.
Our job is try to minimise risk as much as possible and we've done so in the case of UBS and Citigroup. But then the risk is if something terrible happens to Citicorp or UBS, and they go bankrupt, then we would have lost the investment.
But if we try to eliminate all risks, you will do nothing at all and keep all your money in cash, which is just as risky because then, if inflation is high, oil price is US$100 (S$144), then you'll face steady erosion of the purchasing power of your reserves.
SWFs not saviours for troubled banks
I SHOULD make it clear that when GIC invested in Citigroup and in UBS, we did so because we thought this was a good opportunity which only comes maybe once in two or three decades.
GIC did not do these investments to bail out the banks or to help stabilise the US financial system. With our investments, with a stronger capital base, we expect the prospects of UBS and Citicorp being able to overcome their problems, return to normal levels of profitability, will become more possible. It's good for all shareholders, including GIC. But I don't see SWFs riding to the rescue of the financial system in the US or in Europe.
For us in Singapore, GIC has a responsibility to the Government and the people of Singapore to make sure the funds which are entrusted to us are managed for the good of Singaporeans. It's not our job to try to be a white knight, to save the world's economic systems. That's the job of the IMF.
Why major banks turned to SWFs
WHEN a bank raises capital, it's different from a company raising capital. The bank has to do it quickly and the bank must succeed because banks run on confidence.
I'm sure that when the management and boards of directors of UBS, Citigroup, Merrill Lynch, Morgan Stanley decided to raise capital to rebuild their capital base after their writedowns over their mortgage-backed securities, they must have thought first - can we do it from our shareholders through a rights issue? That's the obvious thing to do. But a rights issue is uncertain and takes a long time.
Under the circumstances, the management decided this was not possible, and they decided to approach SWFs to see if they can inject the funds at very short notice. The fact that this has been done has helped the banks.
GIC's US$16b cash for investment
WE HAVE been very worried about the financial markets for many months. We thought the level of leverage in the US market was excessive, risk was not being priced correctly, asset prices were going up at a rate which was not sustainable. These worries have been growing over the years.
In the second quarter of last year, looking at all of these developments, we took a fundamental review of the GIC portfolio. Up till then, GIC had been fully invested in the markets. They had served us very well, giving us very good returns.
But under these circumstances, we felt we should move towards a more conservative portfolio and convert part of our equity holdings into cash, which is something we have not done for many years. We did that in the third quarter of 2007, in order to raise cash - because we were very worried about the outlook for the economies and the financial markets.
Even as late as the third quarter, the markets were still doing well - there had been modest falls, but they were still strong. Then in the last quarter, everything fell apart. By that time, we had raised a considerable amount of liquid resources. So when the invitation from UBS and Citigroup came to invest in their equity, we had the resources.
In retrospect, GIC was right in determining the direction in which the market would go. What surprised us was the fact that when the markets actually turned, they did so at such a speed and the contagion effect was so broad that they affected even the best-known and well-regarded banks such as UBS, Citigroup and Morgan Stanley.
There are worries about what happens in the first six months of this year, and we are right to be concerned.
But my real worry is the second six months...that's the real test. If it goes down in the first six months and it recovers, then I think we're all right, it's a downturn, but I think we can manage that. If it continues in the next six months, then we're in new territory. We don't know what will happen.'
GIC's decision not to sit on UBS board
WHEN we agreed to the investment of 11 billion Swiss francs (S$14.2 billion) in December, a seat on the board was not a condition of the investment. Subsequent to the investment, UBS chairman (Marcel) Ospel wrote to me to invite GIC to nominate a representative to be elected to the UBS board of directors. This was in December.
Over the last few weeks we have considered the invitation seriously. And our view is that as a financial investor, investing not only in UBS but also in other banks, and in the light of our intention to clearly not seek any control of UBS, or to have a say in the direction and management of UBS, we've decided that we will not be taking up a seat on the board.
I saw Mr Ospel on Thursday, thanking him of course for the invitation, but informed him that GIC will not be taking up his invitation. He said he understood the reasons and he agreed that under these circumstances, it's best for GIC not to accept.
We feel we have adequate access to the UBS board and management as a shareholder. As a shareholder, we've a right to express our views. We already have a small investment in UBS, in less than half a per cent of their equity, even before this large investment. We give our views. But we have also been making it very clear to them that these are views as a shareholder.
It is up to the management and the board of directors to make the decisions. They are the ones who are running the bank, we are not running the bank. And we want to make that clear. By not having a seat on the UBS board, I think this clarifies the situation.
GIC takes long-term, responsible approach
GIC's deputy chairman, Dr Tony Tan, spoke with ST Deputy Editor Warren Fernandez and correspondent Bhagyashree Garekar about the key themes at this year's World Economic Forum meeting in Davos, which wrapped up yesterday. Here are excerpts from the hour-long interview:
THE whole issue of sovereign wealth funds (SWFs) is a matter of great concern at this year's Davos forum. Our view from Singapore is that these concerns over SWFs are valid and have to be addressed.
In the past, when there were only a few SWFs - Kuwait, Abu Dhabi, Singapore - there really wasn't very great discussion about them. Because obviously, Abu Dhabi, Kuwait, Singapore are too small to have any impact on economies or politics of the United States and Europe.
But now new funds are being set up - China, Russia, possibly more of the Middle Eastern countries. So it's understandable that there should be some worries about what the SWFs will do.
Do they have a political agenda, are they investing for other than commercial and financial reasons?
Our view is we understand these concerns, we believe the situation concerning SWFs has changed fundamentally, and that it's best to bring it out into the open.
Last October, at the IMF- World Bank meeting in Washington, the US Treasury Secretary convened a dinner at which several SWF countries were present, including Singapore as well as, I believe, the OECD countries and representatives from the IMF and World Bank.
Mr (Hank) Paulson suggested that the IMF and WB be tasked to work out some codes or best practices for SWF and their investments.
In general, Singapore supports this initiative. We believe it's a good starting point. Whatever code will arise remains to be seen, but our view is that it should not be too prescriptive.
The code should be general, it should be flexible. To an extent, it should be voluntary because SWFs are not the same, countries are not the same. Even the definition of SWFs hasn't been agreed.
GIC, I suppose, is a classic example of an SWF. We are a fund management company. We manage the foreign reserves of the Singapore Government. But the other entities, such as holding companies, state pension funds, are sometimes classified as SWFs, sometimes not. It's still a very vague area. But we believe further discussion is helpful, not only with regard to the SWFs, but also with regard to the recipient countries.
The big danger is that if we do nothing, then these worries build up, and may lead to some form of financial protectionism where barriers may be erected to hinder the flow of capital. I think this would be detrimental to world trade and to the world economy.
Different countries have expressed different views of SWFs. In Europe, Germany and France seem to have some reservations. Britain seems to be very relaxed about it. The Prime Minister of Britain, Mr Gordon Brown, has just been to China and has suggested that Chinese Investment Corporation set up an office in London and that Britain welcomes investment from China.
In the US, various congressmen have made some comments and, of course, it's an election year so the candidates who are vying for the Democratic and Republican nominations have also made some comments, basically to catch the headlines. So everything is in a state of flux.
That's why we think discussions should go on to clarify a lot of confusion regarding this area. What is important is that whatever code of practice is set up, it should not disadvantage the SWFs.
There has been a suggestion that copying the model in Norway, which is transparent for their own needs, the SWFs should be required to publish all of their shareholdings. I think that will not be fair.
It will not provide a level playing ground if other funds, hedge funds, private equity, hedge fund managers by Wellington, Capital group do not have to do so. And they will put the SWFs at a competitive disadvantage. So we don't think that it is necessary.
But even with a code of practice, it'll still be a code, what is more important is how each of the SWFs conducts itself.
In the case of GIC, because of the way it has conducted its operations over the last 27 years, it is generally well regarded as a professional investor. GIC is not a trader like a hedge fund.
Neither are we a strategic investor which takes stakes in companies for strategic or political reasons. We are a long- term financially-oriented investor. And the companies which we have invested in have generally welcomed GIC as a responsible, supportive investor.
GIC's general preferred mode of operations is to take a very low key, take stakes on a relatively small scale. Less than half per cent in a large number of companies.
We made two investments in December and January, in UBS and Citigroup, which is a bit unusual. This is a departure from our norm brought by an unusual set of circumstances. But it does not change the way in which GIC intends to conduct its investment operations.
New environment
THE environment in which GIC was able to operate in the 1980s for example, where we kept very much below the radar and actually there was very little notice taken of GIC, is the way we would like to conduct our business.
But we also know that with all these worries now, we cannot. We have to change some modes of our operation. The Ministry of Finance (MoF) has agreed that in the coming months, GIC will disclose more. We'll be more transparent in some of our operations. We have already put up a lot of information on our website but we'll probably do more.
For example, with regard to our rate of returns. The last time we announced our rate of returns was in 2006, when GIC chairman Minister Mentor Lee Kuan Yew, at our 25th anniversary dinner, announced that on average, GIC had made a return of 9.5 per cent in US dollar terms each year for the last 25 years; 5.3 per cent on real return rate, accounting for inflation.
It's impossible to do it only once in 25 years, we'll do it at regular intervals. But we've not yet settled on how often we should do it, probably won't be every year.
Because GIC is a long-term investor, it doesn't make sense to report year-to-year figures which may vary widely. So we'll probably do it in some form of average 10-year return. But we still have to settle this, discuss it with MoF.
New code
IT'S STILL at the very early stages. First of all, we don't think the one-size-fits-all code of practice is going to work. Countries are too different, the SWFs are too different. So we would suggest that we should start in a very general way with a code of practice which is flexible and to some extent voluntary.
We have also stated our view that what is important is to clarify the purpose of the investment made by each SWF. What is the reason, what is the motivation? Is it for commercial gain, financial reasons or is there any other agenda? We think that is fundamental.
The second area in which we think there should be more disclosure is governance. How is an SWF governed? To whom is it responsible? In the case of Singapore, of course, GIC is responsible to MoF which provides the funds. We manage and pay GIC a fee for managing the funds.
It should be quite clear what the role of the board of directors is, what is the role of management, and that we'll provide more information.
We're in the process of starting to draft some form of document which will provide more information in these areas. We still have to agree on the areas with MoF, but we would expect, hopefully, to make available more information on GIC's process, governance purposes of investment by possibly in the second quarter of this year.
GIC's recent investments
GIC has always had a very conservative approach to its investments. Today we conduct our investments under the risk parameters which have been specified by MoF. We adhere rigorously to these risk parameters. We don't breach them at all.
When we consider an investment, we always look at the risk first, whether it comes within our risk management framework, whether it is not excessive. Having decided that the risk is acceptable, then we look at the return. Our philosophy is if you look after the downside, the upside will look after itself.
In the case of two large investments in UBS and Citigroup, we have structured our investment in the form of convertible notes which pay GIC a rate of return over the next few years before we convert the notes into shares in UBS or Citigroup.
So this gives us a downside protection which we think is necessary in these turbulent circumstances. It doesn't mean we have taken no risk at all, we can't. If we take no risk at all, we would do nothing at all.
Our job is try to minimise risk as much as possible and we've done so in the case of UBS and Citigroup. But then the risk is if something terrible happens to Citicorp or UBS, and they go bankrupt, then we would have lost the investment.
But if we try to eliminate all risks, you will do nothing at all and keep all your money in cash, which is just as risky because then, if inflation is high, oil price is US$100 (S$144), then you'll face steady erosion of the purchasing power of your reserves.
SWFs not saviours for troubled banks
I SHOULD make it clear that when GIC invested in Citigroup and in UBS, we did so because we thought this was a good opportunity which only comes maybe once in two or three decades.
GIC did not do these investments to bail out the banks or to help stabilise the US financial system. With our investments, with a stronger capital base, we expect the prospects of UBS and Citicorp being able to overcome their problems, return to normal levels of profitability, will become more possible. It's good for all shareholders, including GIC. But I don't see SWFs riding to the rescue of the financial system in the US or in Europe.
For us in Singapore, GIC has a responsibility to the Government and the people of Singapore to make sure the funds which are entrusted to us are managed for the good of Singaporeans. It's not our job to try to be a white knight, to save the world's economic systems. That's the job of the IMF.
Why major banks turned to SWFs
WHEN a bank raises capital, it's different from a company raising capital. The bank has to do it quickly and the bank must succeed because banks run on confidence.
I'm sure that when the management and boards of directors of UBS, Citigroup, Merrill Lynch, Morgan Stanley decided to raise capital to rebuild their capital base after their writedowns over their mortgage-backed securities, they must have thought first - can we do it from our shareholders through a rights issue? That's the obvious thing to do. But a rights issue is uncertain and takes a long time.
Under the circumstances, the management decided this was not possible, and they decided to approach SWFs to see if they can inject the funds at very short notice. The fact that this has been done has helped the banks.
GIC's US$16b cash for investment
WE HAVE been very worried about the financial markets for many months. We thought the level of leverage in the US market was excessive, risk was not being priced correctly, asset prices were going up at a rate which was not sustainable. These worries have been growing over the years.
In the second quarter of last year, looking at all of these developments, we took a fundamental review of the GIC portfolio. Up till then, GIC had been fully invested in the markets. They had served us very well, giving us very good returns.
But under these circumstances, we felt we should move towards a more conservative portfolio and convert part of our equity holdings into cash, which is something we have not done for many years. We did that in the third quarter of 2007, in order to raise cash - because we were very worried about the outlook for the economies and the financial markets.
Even as late as the third quarter, the markets were still doing well - there had been modest falls, but they were still strong. Then in the last quarter, everything fell apart. By that time, we had raised a considerable amount of liquid resources. So when the invitation from UBS and Citigroup came to invest in their equity, we had the resources.
In retrospect, GIC was right in determining the direction in which the market would go. What surprised us was the fact that when the markets actually turned, they did so at such a speed and the contagion effect was so broad that they affected even the best-known and well-regarded banks such as UBS, Citigroup and Morgan Stanley.
There are worries about what happens in the first six months of this year, and we are right to be concerned.
But my real worry is the second six months...that's the real test. If it goes down in the first six months and it recovers, then I think we're all right, it's a downturn, but I think we can manage that. If it continues in the next six months, then we're in new territory. We don't know what will happen.'
GIC's decision not to sit on UBS board
WHEN we agreed to the investment of 11 billion Swiss francs (S$14.2 billion) in December, a seat on the board was not a condition of the investment. Subsequent to the investment, UBS chairman (Marcel) Ospel wrote to me to invite GIC to nominate a representative to be elected to the UBS board of directors. This was in December.
Over the last few weeks we have considered the invitation seriously. And our view is that as a financial investor, investing not only in UBS but also in other banks, and in the light of our intention to clearly not seek any control of UBS, or to have a say in the direction and management of UBS, we've decided that we will not be taking up a seat on the board.
I saw Mr Ospel on Thursday, thanking him of course for the invitation, but informed him that GIC will not be taking up his invitation. He said he understood the reasons and he agreed that under these circumstances, it's best for GIC not to accept.
We feel we have adequate access to the UBS board and management as a shareholder. As a shareholder, we've a right to express our views. We already have a small investment in UBS, in less than half a per cent of their equity, even before this large investment. We give our views. But we have also been making it very clear to them that these are views as a shareholder.
It is up to the management and the board of directors to make the decisions. They are the ones who are running the bank, we are not running the bank. And we want to make that clear. By not having a seat on the UBS board, I think this clarifies the situation.
A fresh look at terrorism
BOOK REVIEW
A fresh look at terrorism's roots
By David Isenberg
THE LINKS: According to Prof Sageman, members of Al-Qaeda are 'part of a violent Islamist born-again social movement' which is formed through the spontaneous self-organisation of informal, trusted friends. -- PHOTO: AFP
Title: Leaderless Jihad: Terror Networks In The Twenty-First Century
Author: Marc Sageman
Publisher: University of Pennsylvania Press (December 2007); 176 pages; US$24.95
AVOID MISTAKES OF COLD WAR
The most important thing the US can do in countering global Islamic terrorism is to avoid the mistakes of the early Cold War era when policymakers assumed communism was one global monolithic movement. It wasn't. Nor is Al-Qaeda.
WHEN considering solutions to really important problems, it is useful to step back and ask whether everything we know is wrong.
The question, of course, is not asked nearly enough. Questions that are complex and difficult often require solutions that are equally complex and difficult. Sometimes they require us to shake off our preconceived blinders and think in entirely new ways,
Take, for example, the issue of terrorism. To look at a document like the White House's National Strategy For Combating Terrorism is to read statements such as this:
'The terrorism we confront today springs from: political alienation; grievances that can be blamed on others; subcultures of conspiracy and misinformation; and an ideology that justifies murder.'
But what if that is wrong? What if all the platitudes and cliches about why people turn to terror, such as claims by US President George W. Bush's administration that Islamic terrorists hate democracy and freedom, are based on myths and sound bites, signifying nothing?
What if most of the terror experts are guilty of the same sin that the intelligence agencies were accused of in regard to the reason the United States invaded Iraq, that is, cherry-picking the evidence?
If that is the problem, then the answer is this book.
Marc Sageman is a University of Pennsylvania professor of psychiatry and ethno-political conflict and a former foreign service officer. He worked closely with Islamic fundamentalists during the Afghan-Soviet war in the 1980s and gained an intimate understanding of their networks.
His 2004 book Understanding Terror Networks gave the first social explanation of the global wave of terrorist activity. In Leaderless Jihad, he gives us a book that chooses to boldly go where few books on terrorism have gone before; namely, to use scientific methods to study terrorism.
In so doing, he chooses not to focus on individuals and their backgrounds, or 'root' (micro and macro approaches respectively) causes, to explain how the extremists who carried out the Sept 11, 2001 attacks and those like them are radicalised to become terrorists.
Professor Sageman takes the common-sense view that you cannot defeat an enemy until you know him and understand what drives him. Instead, by using ordinary social science methods, he studies how people in groups influence each other to become terrorists.
By building his own evidence-based, independently checked database of more than 500 terrorists, he has been able to see what various members of Al-Qaeda had in common. He finds them to be 'part of a violent Islamist born-again social movement'.
And this social movement, similar to the Russian anarchists of the late 19th century, is actually motivated by idealism. Prof Sageman's data show them to be generally idealistic young people seeking glory by fighting for what they perceive as justice and fairness.
This runs against the Bush administration's counter-terrorist strategy, which is framed in terms of promoting democracy and freedom - a concept that is readily grasped by the American domestic audience.
But these are not terms with which Middle Eastern Muslims identify. To them, democracy means leaders who win elections with almost 100 per cent of the vote. And if a Salafi Islamist party does win an election, as was the case with the Islamic Salvation Front in Algeria in 1992, or Hamas in the Gaza Strip in 2006, the election results are cancelled or the world shuns the victor.
Thus, those who eventually become terrorists see Western- style democracy as a harmful 'domination of man over man', undermining their theocratic utopia (Salaf). In their view, that was the only time in world history that a fair and just community existed.
The Salafis, like other religious fundamentalists, see the Muslims' gradual decline over the centuries as evidence that they have strayed from the righteous path.
Among Prof Sageman's most useful points is his description of Al-Qaeda as both a social movement and an ideology. The most important thing the US can do in countering global Islamic terrorism is to avoid the mistakes of the early Cold War era when policymakers assumed communism was one global monolithic movement. It wasn't. Nor is Al-Qaeda.
Even before Sept 11, it had evolved beyond the group that formed in the aftermath of the Soviet-Afghan war, and it has evolved again several times since, and will continue to do so. Increasingly, to paraphrase the old cliche about politics, all terrorism is local.
Prof Sageman also does an excellent job of debunking the conventional wisdom as to how people become terrorists, i.e, that they are brainwashed when they are immature children or teenagers, that they lack family obligations, act out of sexual frustration or that there is something intrinsically wrong with them (the 'bad seed' school of thought).
Prof Sageman finds that one of the greatest motivators for joining an Islamic terrorist social movement is the one that is most easily understood: relationships with friends and kin.
In other words, there is no top-down recruitment into Al- Qaeda. Rather, the movement forms through the spontaneous self-organisation of informal, trusted friends.
And despite much right- wing fear-mongering, Prof Sageman finds that there are far fewer home-grown Islamic terrorists in the US than in other regions like Europe. He attributes this to the fact that the Muslim community in the US is far less radicalised due to America's greater acceptance of immigrants as a part of its integrationist, religiously tolerant, 'American Dream', 'melting pot' mythology. In short, inclusion, as opposed to exclusion, pays dividends.
In conclusion, Prof Sageman finds that as Islamic terrorism has evolved, it has also been increasingly degraded, out of necessity due to its own lack of appeal, into a 'leaderless jihad'.
To the extent it still has an agenda, it is set by general guidelines found on the Internet, allowing it to maintain a facade of unity. Without the Internet, it would dissipate into a political vacuum.
In truth, Islamic terrorism is not an existential threat to the existence of the US. No number of ominous predictions of Al-Qaeda acquiring chemical, biological or nuclear weapons will change that.
He feels the only thing that can keep Al-Qaeda from ending up on the dust heap of history is if the US 'transforms its fight against global Islamic terrorism into a war against Islam, which would mobilise all Muslims against the US'.
Thus, the answer to the terrorist threat is the same one proffered by American historian and diplomat George Kennan with respect to the Soviet Union: containment.
The goal is to accelerate the process of internal decay already taking place within Al-Qaeda and its copycat cells.
The writer is an adjunct scholar with the Cato Institute, contributor to the Straus Military Reform Project, a research fellow at the Independent Institute and a US Navy veteran.
Copyright: Asia Times Online
A fresh look at terrorism's roots
By David Isenberg
THE LINKS: According to Prof Sageman, members of Al-Qaeda are 'part of a violent Islamist born-again social movement' which is formed through the spontaneous self-organisation of informal, trusted friends. -- PHOTO: AFP
Title: Leaderless Jihad: Terror Networks In The Twenty-First Century
Author: Marc Sageman
Publisher: University of Pennsylvania Press (December 2007); 176 pages; US$24.95
AVOID MISTAKES OF COLD WAR
The most important thing the US can do in countering global Islamic terrorism is to avoid the mistakes of the early Cold War era when policymakers assumed communism was one global monolithic movement. It wasn't. Nor is Al-Qaeda.
WHEN considering solutions to really important problems, it is useful to step back and ask whether everything we know is wrong.
The question, of course, is not asked nearly enough. Questions that are complex and difficult often require solutions that are equally complex and difficult. Sometimes they require us to shake off our preconceived blinders and think in entirely new ways,
Take, for example, the issue of terrorism. To look at a document like the White House's National Strategy For Combating Terrorism is to read statements such as this:
'The terrorism we confront today springs from: political alienation; grievances that can be blamed on others; subcultures of conspiracy and misinformation; and an ideology that justifies murder.'
But what if that is wrong? What if all the platitudes and cliches about why people turn to terror, such as claims by US President George W. Bush's administration that Islamic terrorists hate democracy and freedom, are based on myths and sound bites, signifying nothing?
What if most of the terror experts are guilty of the same sin that the intelligence agencies were accused of in regard to the reason the United States invaded Iraq, that is, cherry-picking the evidence?
If that is the problem, then the answer is this book.
Marc Sageman is a University of Pennsylvania professor of psychiatry and ethno-political conflict and a former foreign service officer. He worked closely with Islamic fundamentalists during the Afghan-Soviet war in the 1980s and gained an intimate understanding of their networks.
His 2004 book Understanding Terror Networks gave the first social explanation of the global wave of terrorist activity. In Leaderless Jihad, he gives us a book that chooses to boldly go where few books on terrorism have gone before; namely, to use scientific methods to study terrorism.
In so doing, he chooses not to focus on individuals and their backgrounds, or 'root' (micro and macro approaches respectively) causes, to explain how the extremists who carried out the Sept 11, 2001 attacks and those like them are radicalised to become terrorists.
Professor Sageman takes the common-sense view that you cannot defeat an enemy until you know him and understand what drives him. Instead, by using ordinary social science methods, he studies how people in groups influence each other to become terrorists.
By building his own evidence-based, independently checked database of more than 500 terrorists, he has been able to see what various members of Al-Qaeda had in common. He finds them to be 'part of a violent Islamist born-again social movement'.
And this social movement, similar to the Russian anarchists of the late 19th century, is actually motivated by idealism. Prof Sageman's data show them to be generally idealistic young people seeking glory by fighting for what they perceive as justice and fairness.
This runs against the Bush administration's counter-terrorist strategy, which is framed in terms of promoting democracy and freedom - a concept that is readily grasped by the American domestic audience.
But these are not terms with which Middle Eastern Muslims identify. To them, democracy means leaders who win elections with almost 100 per cent of the vote. And if a Salafi Islamist party does win an election, as was the case with the Islamic Salvation Front in Algeria in 1992, or Hamas in the Gaza Strip in 2006, the election results are cancelled or the world shuns the victor.
Thus, those who eventually become terrorists see Western- style democracy as a harmful 'domination of man over man', undermining their theocratic utopia (Salaf). In their view, that was the only time in world history that a fair and just community existed.
The Salafis, like other religious fundamentalists, see the Muslims' gradual decline over the centuries as evidence that they have strayed from the righteous path.
Among Prof Sageman's most useful points is his description of Al-Qaeda as both a social movement and an ideology. The most important thing the US can do in countering global Islamic terrorism is to avoid the mistakes of the early Cold War era when policymakers assumed communism was one global monolithic movement. It wasn't. Nor is Al-Qaeda.
Even before Sept 11, it had evolved beyond the group that formed in the aftermath of the Soviet-Afghan war, and it has evolved again several times since, and will continue to do so. Increasingly, to paraphrase the old cliche about politics, all terrorism is local.
Prof Sageman also does an excellent job of debunking the conventional wisdom as to how people become terrorists, i.e, that they are brainwashed when they are immature children or teenagers, that they lack family obligations, act out of sexual frustration or that there is something intrinsically wrong with them (the 'bad seed' school of thought).
Prof Sageman finds that one of the greatest motivators for joining an Islamic terrorist social movement is the one that is most easily understood: relationships with friends and kin.
In other words, there is no top-down recruitment into Al- Qaeda. Rather, the movement forms through the spontaneous self-organisation of informal, trusted friends.
And despite much right- wing fear-mongering, Prof Sageman finds that there are far fewer home-grown Islamic terrorists in the US than in other regions like Europe. He attributes this to the fact that the Muslim community in the US is far less radicalised due to America's greater acceptance of immigrants as a part of its integrationist, religiously tolerant, 'American Dream', 'melting pot' mythology. In short, inclusion, as opposed to exclusion, pays dividends.
In conclusion, Prof Sageman finds that as Islamic terrorism has evolved, it has also been increasingly degraded, out of necessity due to its own lack of appeal, into a 'leaderless jihad'.
To the extent it still has an agenda, it is set by general guidelines found on the Internet, allowing it to maintain a facade of unity. Without the Internet, it would dissipate into a political vacuum.
In truth, Islamic terrorism is not an existential threat to the existence of the US. No number of ominous predictions of Al-Qaeda acquiring chemical, biological or nuclear weapons will change that.
He feels the only thing that can keep Al-Qaeda from ending up on the dust heap of history is if the US 'transforms its fight against global Islamic terrorism into a war against Islam, which would mobilise all Muslims against the US'.
Thus, the answer to the terrorist threat is the same one proffered by American historian and diplomat George Kennan with respect to the Soviet Union: containment.
The goal is to accelerate the process of internal decay already taking place within Al-Qaeda and its copycat cells.
The writer is an adjunct scholar with the Cato Institute, contributor to the Straus Military Reform Project, a research fellow at the Independent Institute and a US Navy veteran.
Copyright: Asia Times Online
Jan 28, 2008 - Muslim Youths to seek Muis guidance
Jan 28, 2008
Muslim youths urged to seek Muis' guidance
Muis will use rational debate to address their views: Yaacob
By Zakir Hussain
DR YAACOB Ibrahim has this message for young Muslims who may be drawn to radical ideas: Don't wait till it's too late.
He urged them to approach the Islamic Religious Council of Singapore (Muis) to clarify their doubts early without fear of repercussions.
'We want to embrace you, help you, guide you, not put you in jail,' said the Minister-in-charge of Muslim Affairs at a constituency event yesterday.
'We want to understand what your views are so we can discuss and debate rationally, so you understand where we are coming from... that these ideologies are not healthy.'
He was speaking to reporters on the recent arrest of two 26-year-olds for planning acts of terror.
They had become radicalised not through contact with terror groups but, like a new breed of 'do-it-yourself' or DIY radicals, through publications, videos and websites.
The pair, Muhammad Zamri Abdullah and Maksham Mohd Shah, nursed radical beliefs as early as 2003 and were detained last month.
They had gone abroad to try to join militant networks and fight in places like Afghanistan, ready to die as martyrs.
Another 26-year-old, who had fallen under their influence, was issued with a restriction order limiting his activities.
Dr Yaacob, who is also Minister for the Environment and Water Resources, said he was 'disappointed' and 'unhappy' these three had crossed the line, but the community had to be realistic as it was impossible to monitor the Internet. The community could help to minimise the occurrence of such cases, however.
He urged young Muslims who are interested in Islam to call the Mufti's office at Muis or recognised teachers for guidance, instead of developing extreme views.
He said: 'We have a group of young religious teachers coming out from the universities, very attuned to the modern world, comfortable with the English language.'
Like other community leaders, Dr Yaacob called on parents, families and friends to guide those they know who may have, through the Internet or books, developed such ideas that do not gel with how Islam is practised here.
DIY radicalism, he said, is 'a phenomenon which will persist for a long time, therefore we must be on our guard'.
The Internal Security Department and Malay-Muslim MPs have engaged community leaders to help deal with this challenge, he added.
'There is no more denial that there is a problem, a challenge. The sooner we bring the information to them, the better they trust us, therefore they can help us with this particular challenge.'
Four leading religious bodies also issued a statement on Saturday expressing concern over the recent arrests, saying they 'underline the need for continued vigilance on our part to stamp out terrorism'.
The leaders of the Singapore Buddhist Lodge, the Singapore Catholic Archdiocese, the Hindu Endowments Board and Muslim group Jamiyah Singapore said: 'We will not allow the trust and confidence that has been built up among the various races in Singapore to be undermined by such activities.'
Muslim youths urged to seek Muis' guidance
Muis will use rational debate to address their views: Yaacob
By Zakir Hussain
DR YAACOB Ibrahim has this message for young Muslims who may be drawn to radical ideas: Don't wait till it's too late.
He urged them to approach the Islamic Religious Council of Singapore (Muis) to clarify their doubts early without fear of repercussions.
'We want to embrace you, help you, guide you, not put you in jail,' said the Minister-in-charge of Muslim Affairs at a constituency event yesterday.
'We want to understand what your views are so we can discuss and debate rationally, so you understand where we are coming from... that these ideologies are not healthy.'
He was speaking to reporters on the recent arrest of two 26-year-olds for planning acts of terror.
They had become radicalised not through contact with terror groups but, like a new breed of 'do-it-yourself' or DIY radicals, through publications, videos and websites.
The pair, Muhammad Zamri Abdullah and Maksham Mohd Shah, nursed radical beliefs as early as 2003 and were detained last month.
They had gone abroad to try to join militant networks and fight in places like Afghanistan, ready to die as martyrs.
Another 26-year-old, who had fallen under their influence, was issued with a restriction order limiting his activities.
Dr Yaacob, who is also Minister for the Environment and Water Resources, said he was 'disappointed' and 'unhappy' these three had crossed the line, but the community had to be realistic as it was impossible to monitor the Internet. The community could help to minimise the occurrence of such cases, however.
He urged young Muslims who are interested in Islam to call the Mufti's office at Muis or recognised teachers for guidance, instead of developing extreme views.
He said: 'We have a group of young religious teachers coming out from the universities, very attuned to the modern world, comfortable with the English language.'
Like other community leaders, Dr Yaacob called on parents, families and friends to guide those they know who may have, through the Internet or books, developed such ideas that do not gel with how Islam is practised here.
DIY radicalism, he said, is 'a phenomenon which will persist for a long time, therefore we must be on our guard'.
The Internal Security Department and Malay-Muslim MPs have engaged community leaders to help deal with this challenge, he added.
'There is no more denial that there is a problem, a challenge. The sooner we bring the information to them, the better they trust us, therefore they can help us with this particular challenge.'
Four leading religious bodies also issued a statement on Saturday expressing concern over the recent arrests, saying they 'underline the need for continued vigilance on our part to stamp out terrorism'.
The leaders of the Singapore Buddhist Lodge, the Singapore Catholic Archdiocese, the Hindu Endowments Board and Muslim group Jamiyah Singapore said: 'We will not allow the trust and confidence that has been built up among the various races in Singapore to be undermined by such activities.'
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