Global Knowledge Management and Economy

Nik Zafri · at 3:58 AM

The Star Global Malaysian Forum - 24 October, 2007

Nik Zafri · at 3:56 AM

Corpbabes further posted :

First of all, thanks ahvincent and nik zafri for explaining patiently to the issue that i have put forth. Dont worry, I understand the ethical issues that arise, but theoretically, i still have to see things from every issue so that i can write a good research on it.

After taking everything both ahvincent and nik said, correct me if im wrong, but does it mean that during the warranty period, in the event of personal injury and death, the owner wont be fully liable, but he can bring in, say the developer etc as contributory negligent? but after the warranty period, it would be difficult to make the owner liable for any defects that comes up?

Further, on the same thread, can we then exclude design liability? It may take years to discover the defects, but say, from the owner's point of view, can we exclude liability still by contract and also contractually exclude tort after the warranty period is over?

re there any statutory prescriptions in relation to warranty periods for construction works that i spoke about in my first post, nik, you said that would depend on which stage that i'm referring to - pre-construction, during construction and post construction? May i know if there is any statutory prescriptions for all stages of construction?

Many thanks in advance.

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nikzafri's reponse

Let me try : (I’m trying only maaah - so corpbabes – take the following as my personal views…as I may be right and I may be wrong..all is based on experience - and you must excuse me..some of your questions may not be answered - not that I don't know - and I'm sorry)

1. “during the warranty period, in the event of personal injury and death, the owner won’t be fully liable, but he can bring in, say the developer etc as contributory negligent? but after the warranty period, it would be difficult to make the owner liable for any defects that comes up?”

2. “Further, on the same thread, can we then exclude design liability? It may take years to discover the defects, but say, from the owner's point of view, can we exclude liability still by contract and also contractually exclude tort after the warranty period is over?”

No. 1 - I’m sure you remember the Highland Towers Case? It was WAY after the warranty period itself BUT the designer was still being summoned by court.

http://www.lawyerment.com.my/library/doc/laws/casecode/jdgm/11082000-01-1.shtml

Within this civil suit, you can clearly see the consultant (design) consortium (defendants) was still being called to defend itself (not necessarily being charged if proven that the onus of liability is not due to his design)

So, when a case happen, it will relate to one process to another and will start from the Design/Planning stage itself.

Of course, in the process, if the designer will argue to prove that it may or may have nothing to do with his/her design - with sufficient evidence substantiating his/her testimony – if the court is OK with it, then definitely the developer would be the NEXT target (contract may be referred to)

In this stage, probably the answer/onus may lie on the developer or the contractor. Certain things like ‘approving and/or making unlawful (design) deviation’ not according to the ‘approved design brief/specifications/drawings/plans’ or ‘using low-quality materials’ etc. etc. may come into the picture.

It depends really on how the court handle the case judging by evidence submitted. You'll be surprised that the outcome may be a LOT different that what I've said here.

But, I personally think, despite that the owner said that he can bring the developer according to the contractual obligation; yet; by right, being the owner, he should know what’s happening right from the start to the end of the project .

Back to the ‘ugly reality’ the owner would usually ‘wash his hands’ and PUT other parties responsible for the ‘failure’ just because he has all the money but he doesn’t have the experience!

But he should remember that he’s the one who was responsible for appointing the developers (if not himself IS the developer) plus agreeing to the appointment of design consultants (in turnkey/design and build environment). So it would be more effective if the owner IS a technically competent person by qualifications/and/or experience.

When it comes to court’s judgement, it’s very complex to determine ‘who is wrong for what’ as the process of the law is a bit different…too many factors to be considered. Sometimes, the law doesn’t state clearly or citing the examples but there are supporting elements that can be deemed as legal – for example, standards and codes of practice regarding design.

In another situation, the right people you should also be asking would the insurance company on construction insurance – I do not know much about this one but I do know one thing, construction insurance can sometime NOT cover a ‘prototype technology/design’ without any technical documentation, codes of practice/standard, method statements, research etc. to prove that the design is SAFE even after the warranty period. So try the insurance company…

Apart from Insurance, you should also try to pose the question to these ‘guys’ who I considered ‘my e-associates’ as well :

http://pmimy.org/modules/newbb/viewtopic.php?topic_id=90&forum=2

Nevertheless, You should take this into account as well -.every warranty period has an ‘expiry date’. In some countries, 20 years is sometimes considered ‘dilapidated’, ‘unsafe’ and possibly ‘condemned’. Notice is given and legal action can be taken…

No. 2 – It really depends on the case we’re talking about, how severe the case would be. Usually design liability cannot be excluded even after the warranty period typically ‘in the event of ‘total design or major design failure’ (I’m unsure of personal injury and death – but in Highland Towers – the main focus was the design failure as it involved ‘total structure collapse’ as the 'cause' – then, followed by 'personal injury and death' as the effect - even the effect was associated to legal action taken by immediate family of the deceased..if not, probably there would be no case)

Of course, I’m not referring in view to discover defects related to design after many years of project completion, it wouldn’t be practical (we can’t dismantle or hack what is already being installed and used)

What I’m referring to is actually the documentation/data/forms/supervision during all stages of construction including design data/calculation, design amendment procedures, inspection and testing ,construction methodology/method statements etc. as this should be ‘archived’ safely during the post-construction stage (final accounts) – usually kept by all parties – the client, the developer cum the consultants + the contractor. (again, some data could already be destroyed due to record retention policy...hmmm difficult isn't it?)

Thus, from these documentation/data, we can ‘go back in time’, detect any possible deficiency/how the corrective/preventive actions being taken (right or wrong way)

On the question of whether there is such prescription of statutory, I think my answer has been given in ‘BOLD’ abovementioned. That’s why we have contracts, codes of practice, design coordination, method statements, inspection and test plans etc. – these documentation serve as the professional justifications to the law itself and to assist implementation of the law. Again I would reiterate - in any case..the law prevails.

(Which law? you can easily buy them - 3 titles recommended - Contract Law, Uniformity Building ByLaw and the Engineer's Act)

And YES, (again this is my personal view) it SHOULD be covering ALL STAGES of construction as design is not only during pre-construction – despite being approved – they are still subject to amendment and revision – why? Because of the application based on the actual site condition – there will still be deviations even during and after the construction. (But I’m not implying that the law mention all these very clearly) – Contracts are originally about ‘proclamation of I trust you and vice versa’ and they should be ‘referred’ to the law.

Here’s another unique case you should be looking into :

http://www.contractjournal.com/Articles/2007/01/31/53440/questions-of-law-and-design-liability.html

But alas, there are too many arguments on the subject that you’ve asked. I’m not surprised if some quarters may argue my opinion..so regard what I’ve said here as ‘personal views’ and not representing anyone or any party.

Nik Zafri · at 3:55 AM

The Star Global Malaysian Forum

The Star Business - Wednesday November 7, 2007

Construction assets draw foreign interest - Infrastructure and development projects a boon to sector

PETALING JAYA: Local construction assets seem to be attracting the interest of foreign investors of late.

Last month, Putrajaya Perdana Bhd saw the entry of a new controlling shareholder, Swan Symphony Sdn Bhd, which bought over Eastern & Oriental Bhd¡¦s stake in the former. Swan Symphony is jointly owned by Abu Dhabi-Kuwait-Malaysia Investment Corp (ADKM) and Autron Investment. With the support of the new shareholders, Putrajaya Perdana is anticipated to expand its presence to the Middle East.

Meanwhile, PJBumi Bhd told Bursa Malaysia on Monday that its substantial shareholder, PJS Industries Sdn Bhd, planned to sell a 10.2% stake to Al-Saudia for RM3.1mil. This was on top of the 25% that PJS disposed of to Metro Utilities Sdn Bhd in September. PJBumi, which is trying to return to profitability, is involved in the design, trading, installation and maintenance of fibre-reinforced plastic, reinforced concrete sewage treatment plants and underground petrol cum storage tanks.

It also manages wastewater treatment, solid waste and garbage collection.

The Government¡¦s efforts to improve the quality of water in the country by rolling out various projects look set to benefit PJBumi. Another company that is going to see a new shareholder is low-profile water player Loh & Loh Corp Bhd. The shares, which are usually thinly traded, seemed to have sprung to life, having appreciated more than 30% over the one week period. The counter was last traded at RM4.12 before being suspended in afternoon trade yesterday.

Loh & Loh told the exchange that its substantial shareholder, Vital Achievement Sdn Bhd, intended to dispose of its shares. An analyst at AmResearch said Loh & Loh was well known as a dam builder in the water sector, having completed several jobs as a sub-contractor for Gamuda Bhd. The company also has experience in bulk earthworks and rail track construction, having built bridges for the Ipoh-Rawang double-track project.

Aseambankers in a report said the domestic construction scene could be seeing another boom, given that at least RM165bil worth of infrastructure and development projects identified by the Government and the private sector were likely to kick off by the turn of the decade. Government spending should pick up since it had to date only spent 25.4% of the RM200bil in development allocation under the Ninth Malaysia Plan, it said.

¡§We foresee high impact and chunkier projects in the rail, water, and oil and gas sectors, and the government¡¦s regional development efforts, to be the key drivers,¡¨ the brokerage added.

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The way I see it this is a good tonic for the local construction industry. Of course, this has something to do with IDR, ECER, NCER just being launched, It is also related to the relatively competitive project management costs that Malaysia has to offer. With various crisis happening almost everywhere in the world, Malaysia is drawing construction FDI interests and possibly JV, smart partnership, strategic alliance and even merging possibilities would be happening. Despite my worries about uncontrolled construction materials cost; come to think of it; the FDI may help the local construction firms in terms of long term financing - thus may help in the long run to ensure the construction industry sustains.

There are somehow other concerns:

a. Shareholding in terms of JV or smart partnerships? Will our construction firms be too strict and not embarking on a 'win-win' situation?

b. Is the local construction firms ready with

i) all the necessary expertise,

ii) possible mixed work cultures influence,

iii) more than enough 'quality' services to provide - in terms of system/process/workmanship, the necessary infrastructures/machinery/ICT capabilities, corporate governance good practices etc.?

c) Will (more and more) our financial institutions be willing to cooperate - help out the local construction industry or just hope that the foreign construction firms come out with majority of financial backups and in the end, we promise them a big amount of concessions, contra with finished properties, or share the future profit reaped from the finished projects? etc? in order to cover the financial backups that are rendered by the foreign construction firms? (via foreign financial institutions e.g. soft loan or long terms bonds or any other financial instruments)

Thus, while we are happy almost seeing big money coming in, I think the local construction firms should also think of what I've said herein. Based on history (and my experience working with the local JV partners) many mega projects management appear to love doing things 'last minute' - I hope this is not the example we're going to show them.

Let's welcome construction FDI with wide hands..WELCOME..but please...let's local construction firms be ready to show a very professional ethics in terms of our personal traits, business, technical, system etc.

Nik Zafri · at 3:51 AM

This is one of the 'wake-up' call article.

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The Sun Makin Sens Section - by Tan Siok Choo

East Asia - no longer a follower?

THAT the US appears to be sliding into a recession cannot be denied. What is uncertain is whether East Asia in general, and Malaysia in particular, can avoid following in its wake. While it may be premature to offer a definitive answer to this question, three separate indicators underscore export-dependent East Asia’s growing resilience.

First, a recent article by Bloomberg suggests Japan may escape the recession that appears to be engulfing the US. As one of the world’s largest financial news and data provider notes, since 1970, Japan has followed the US into all five recessions. In 1970, the US accounted for 30% of Japan’s exports. Today, that figure has fallen to only 20%.

Japan’s reduced economic dependence on the US is largely due to the success of manufacturing companies like Toyota in capitalising on buoyant markets, particularly in China and other countries. In the past two years, Japan’s exports to China jumped by 45% while those to Russia doubled.

Additionally, a 5.6% drop in US vehicle sales didn’t stop Toyota’s total unit sales from rising in the first quarter. Furthermore, Toyota is poised to overtake the US-based General Motors as the world’s largest auto company in terms of sales.

Last month, two usually bearish brokers on Japan – Goldman Sachs and Morgan Stanley – backed off from predictions that the world’s second largest economy will go into a recession this year. The catalyst for both brokers’ changed view was because revised industrial production figures for February showed output rose to a record rather than fell, the Bloomberg article says.

Even though exports could slow down, corporate Japan is now financially stronger than when its stock and property bubble burst in the late 1980s. The average ratio of corporate liabilities to assets has dropped to about 65%, the lowest level since 1955 from about 80% in the mid-1990s, the Merrill Lynch report says.

Moreover, Japanese companies have soaked up excess production capacity. Reduced debt and streamlined production will enhance corporate Japan’s capability to withstand a slump in the US, Bloomberg notes.

Second, the price of oil has continued its inexorable climb to a record high, even though its biggest market appears to be softening. Last in electronic trading last Friday, US crude futures for June delivery hit an intra-day record of US$126.20 (RM403.84) a barrel.

Admittedly, the escalating price of oil this year may be prompted by concern about possible disruptions in continued supply in countries like Nigeria and Venezuela. That prices continue to skyrocket despite sharply declining demand from the US, the world’s largest consumer of oil, is unusual. In February this year, US demand for oil fell to 19.7 million barrels of oil a day, down by one million barrels from last year’s average.

The International Energy Agency (IEA) says oil use worldwide will increase 2% this year because of growing demand in emerging markets. For the first time this year, emerging markets will consume more crude oil than the US, the IEA notes. Emerging markets will consume 20.67 million barrels of oil a day, an increase of 4.4%. In contrast, demand in the US will contract by 2% to 20.38 million barrels daily.

"The US recession will be a footnote as far as the oil market is concerned. Supply isn’t growing and demand is growing robustly in the developing world," says Jeffrey Rubin, chief economist at CIBC World Markets in Toronto who has correctly forecast higher oil prices since 2000.

Third, shipments of personal computers (PC) grew at a double-digit pace worldwide in the first quarter despite anaemic growth in the US, technology research firm, IDC says. Indeed, global figures for the first quarter exceeded its forecast.

Although growth in US sales slowed to around 3%, overseas gains boosted global first quarter PC shipments 14.6%, IDC notes. That’s because the US accounted for 23% of global shipments in the first quarter compared with 25% a year ago.

"Even if there is a particularly bad US market, it is becoming a smaller piece of the global puzzle," IDC vice-president Bob O’Donnell points out.

Despite these positive indicators, East Asia’s growing resilience cannot be equated with total independence from the US economy.

For a start, if the US economy is in recession, it may take months before the impact is transmitted to East Asia. Additionally, in an increasingly interlinked global economy – particularly in financial markets – it is inconceivable that what happens in the US can be ring-fenced from other emerging economies.

But if the inconceivable does happen – if the US sinks into recession and if East Asia succeeds in decoupling from the world’s largest economy – then a new era in global economic history may have begun.

Nik Zafri · at 3:47 AM

Microsoft and Yahoo! No deal

Nik Zafri · at 3:45 AM

A good article from The Globalist Dot Com where I'm one of the subscriber.

Nik
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Acknowledging China By Jianxiong Zhang | Thursday, February 28, 2008

China's economic boom of the last three decades has raised concerns about resource scarcity, pollution and trade. While China's development has made it one of the world's largest economies, hundreds of millions still live in poverty. Jianxiong Zhang argues that the United States and the European Union must acknowledge China's efforts to address climate change and trade disputes.

In the context of globalization, the economy increasingly influences international relations. This is because strengthening interdependence and intensifying frictions between economies tend to go hand-in-hand. As a result, it is no wonder China is worried about the impacts on its relations with the United States and the European Union.

The scale of China's growth

It is well-known that China's economy has been growing at an average rate over 9% for 27 years now. And, in the past five years, its annual growth rate exceeded 10%.

In 2006, China’s GDP reached $2.6 trillion (in purchasing power terms), or 5% of the world total — ranking fourth in the world.

Growth and poverty

China’s development is as an evolutionary stage, rather than an obstacle to its relations with the United States and European Union.

China has reached the top ranks of economies in the world by GDP — but it still lags behind 109 other countries in terms of per capita income.

China needs to further develop, so as to improve the living standards of its citizens, allowing them to enjoy a life comparable to that in medium-developed countries.

This is their right — and indeed one of their fundamental human rights.

Supporting the world economy

The continual growth in China makes significant contributions to the world economy. Firstly, China’s economy contributed 13.8% of the global GDP growth during the 2003-2005 period.

The rate is second only to that of the United States. That is to say, with China’s continued growth, the world economy will not substantially slide down even if the U.S. economy falls into recession.

Benefits from China

China needs to further develop, so as to improve the living standards of its citizens. This is their right — and indeed one of their fundamental human rights.

Second, cheap goods exported from China are helpful to prevent inflation in its trading partners. Third, the fruits of economic growth in China are shared by industrialized countries in general — and in the United States and the European Union in particular.

They receive a great deal of profits from their place in the international division of labor, and gain significant returns from their financial services, foreign direct investment and patent income from China.

For example, about 20% of revenues from each mobile phone, 30% from each computer and 30-40% from numerically controlled machine tools made in China go to investors or patent owners in the United States, the European Union or other countries.

Concerns from abroad

Kind-hearted people in the rest of the world are happy to see and hail the economic progress in China, for it helps millions of people there escape from poverty. Thus, it brings new impetus to economic growth globally.

However, the United States and Europe are very concerned about the consequences of China’s development. Apart from positive expectations, they wonder what negative impacts China’s development will have on them.

Managing growth

Kind-hearted people in the rest of the world hail the economic progress in China, for it helps millions of people there escape from poverty.

For instance, they wonder whether China will compete for natural resources, energy and markets with them

— and to what extent China’s development will lead to pollution and climate change. A more extreme observation even views China’s development as a “threat.”

As regards climate change, it should be noted that Beijing has already set about tackling the problem.

The Chinese government pursues a policy of “scientific development” and carries out programs to build China into a resource-conserving society, which contain a series of measures to save resources and energy.

Resources in historical perspective

From 1990 to 2005, the energy consumption per thousand dollars of GDP was cut from 2.19 to 1.17 tons of coal equivalent, with an annual reduction rate of 4.1%. This figure, however, as well as greenhouse gases emissions per unit of GDP in China, is still higher than those in the United States and the European Union.

This is largely because the United States and the European Union have been in the post-industrialized stage (where more than 70% of GDP is contributed by service sectors), while China is still in the industrializing stage (where almost half of GDP comes from the industrial sector). This can be changed only by further development — and the change is under way at an accelerating pace.

Tackling climate change

Between close trading partners, disputes are a normal phenomenon. This should not be a factor to undermine relations between them.

The Chinese government set the targets of bringing down energy consumption per unit of GDP by 20%, cutting the total discharge of major pollutants by 10% and increasing forest cover from 18.2% to 20% between the end of 2005 and 2010.

The National Program on Tackling Climate Change released in May 2007 formulates that, by 2010, China will cut CO2 emissions by one billion tons through improving technologies and replacing fossil fuels with renewable energies.

If international cooperation in developing greenhouse gas zero-discharge technologies can be accelerated, the impacts of China’s development on climate change will be further minimized.

The rights of the poor

As for the equitable distribution of energy, as well as natural resources and markets, this matter requires bilateral or multilateral consultations. Such consultations must be carried out on an equal basis.

In this process, two issues should be considered. One is the development right of poor countries. There are quite a few countries in the world where people live a life far below the living standards of industrialized countries.

A sense of equity

If international cooperation in developing greenhouse gas zero-discharge technologies can be accelerated, the impacts of China’s development on climate change will be further minimized.

When distributing the world's resources, rich countries should give more considerations to the interests and rights of poor countries. Up to now, the per capita income in China is just equal to 4.5% of that in the United States, 5% of that Japan, 5.8% of that in the eurozone and 10% of that in South Korea.

There are still 135 million people in China who live on less than $1 per day. There are 750 million such people in the world, of which China accounts for 18%.

The other issue is the principle of equality. According to the World Bank, the 2000 per capita consumption of energy was 3.8 tons of oil in the euro zone, 8.2 tons in the United States — while just 0.9 ton in China. The per capita consumption of energy in the United States is nine times that in China.

Measuring China's growth

At the same time, the per capita rate of CO2 emissions in China was two tons, compared with eight tons in the eurozone and 21 tons in the United States. In 2004, the per capita CO2 emissions in China increased to four tons.

This figure, however, was only 87% of the world average — and 33% of the OECD average.

Accepting disputes, improving relations

Along with China’s development, the trade disputes between it and the United States as well as the European Union are on the rise. Between close trading partners, disputes are a normal phenomenon. This should not undermine relations between them.

The economic structure of China can be changed only by further development — this is happening at an accelerating pace.

Trade disputes occur between the United States and the European Union, the United States and Japan, as well as the European Union and Japan. Since its inception, the WTO dispute settlement mechanism has been mostly used to deal with disputes between the United States and the European Union. The disputes, however, have never undermined the bilateral relationship.

In short, the contributions of China’s development are a net plus — even in light of its negative influences on the rest of the world. The negative effects brought about by development are controllable.

China’s development should be taken as an evolutionary process, rather than an obstacle to its relations with the United States and European Union.
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Here's something better from China Daily

China is not decoupling from US Economy
(Agencies)
Updated: 2008-01-21 10:14

BEIJING - China's central bank on Sunday poured cold water on the idea that the country's economy can decouple from the United States.

China's exports will be badly hit if US consumption weakens, Zhang Tao, deputy head of the international department of the People's Bank of China, told a financial forum.

Figures due this week are expected to show that China's gross domestic product grew more than 11 percent in the fourth quarter of 2007 from a year earlier, despite a deepening US credit crunch.

But Zhang said he saw mounting risks to US consumer demand. He noted that retail sales unexpectedly fell 0.4 percent in December, while property prices were falling and rising petrol prices were crimping disposable incomes.

"If US consumption really comes down, that's bad news for us," Zhang said. "That will have a pretty severe impact on our exports."

Wang Jian, head of the China Society of Macroeconomics, agreed that China's growing trade with Europe was unlikely to insulate it from a drop in exports to the United States.

If US demand weakened, Europe would export less to America and, in turn, would buy less from China, Wang said.

"Global demand is ultimately driven by the United States," he said.

More US interest rate cuts or a further fall in the dollar in response to a weakening economy would have an impact on Chinese monetary policy, Zhang said without elaborating.

He said the subprime crisis would not divert China from the path of financial innovation.

"It will not change our general direction. However, it serves as a warning that we need to pay attention to risk controls and launch new businesses in a steady, orderly way," he said.

Dai Genyou, director of the central bank's credit bureau department, said higher Chinese interest rates would have little impact on the ability of companies to service their debts. Nor would they derail corporate investment plans, Dai said.

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