EngagingNew Kids the

On The Block

(838740P)

Islamic Finance and Human Resource Challenges:Truth or Myth?

Human Capital DevelopmentYou Can Lead a Horse to Water

ISSUE 09 2012

Managing Talent in a Fast Changing Environment

EAIC 2012 Sponsorship Ad.pdf 1 10/8/12 6:23 PM

Asian Link 2

Editorial Team

Tan Sri Dr. Zeti Akhtar AzizChairman of the Board, Governor, Bank Negara Malaysia

Datuk Ranjit Ajit SinghVice Chairman of the Board,Chairman, Securities Commission Malaysia

Tan Sri Azman HashimChairman, AmBank Group

Dato’ Sri Zukri SamatManaging Director, Bank Islam Malaysia Berhad

Dato’ Hj. Syed Moheeb Syed Kamarul Zaman

Dato’ Dr. Nik Norzrul Thani Nik Hassan ThaniChairman and Senior Partner, Zaid Ibrahim & Co

Dato’ Yusli Mohamed YusofNon-Executive Chairman, Mudajaya Group Berhad

Mr. Hashim HarunPresident and CEO, Malaysian Re

Mr. Kung Beng HongDirector, Alliance Financial Group Berhad &Alliance Bank Malaysia Berhad

AIF Board Of Directors

3 Editorial Note

4 Engaging the New Kids on The Block

8 Managing Talent in a Fast Changing Environment

11 Islamic Finance and Human Resource Challenges: Truth or Myth?

15 Human Capital Development You Can Lead a Horse to Water

18 Potential Risks of Competition Law Infringement in Mergers and Acquisitions in Malaysia

22 Customer Satisfaction Index for Banks in Malaysia

26 The Winner Takes it All, Really Now? Discovering Talent Lessons from the

Olympics

28 The International Conference on Financial Crime and Terrorism Financing 2012

contentscontents

DISCLAIMER: The Asian Institute of Finance does not

represent nor warrant the completeness, accuracy,

timelines or adequacy of this material and it should not

be relied on as such. The Asian Institute of Finance does

not accept nor assumes any responsibility or liability

whatsoever for any data, errors or omissions that may

be contained in this material or for any consequences

or results obtained from the use of this information. This

publication does not necessarily reflect the views or the

positions of the Asian Institute of Finance.

Chief EditorDr Raymond Madden

Co-editorsDr Sofiza AzmiRichard Yu

Assistant Managing EditorsDr Zamros DzulkafliFara Iza Abd RahimYogaretnam Kanagandram

3 Asian Link

noteeditorial

Play the Talent Game The talent market has changed significantly since McKinsey first exposed the “war for talent” as a strategic business challenge and a critical driver of organisation performance. Changes in economic and geo-politics dictate a new approach and focus on talent management. This is even more so in the financial services industry. With further liberalisation of the financial sector, demand for talent will persist as existing and new players continue to expand their operations locally as well as regionally. Having the right talent and qualified employees in the financial industry is critical for the industry to grow and compete successfully in a rapidly changing financial services market.

In Malaysia, while both private and public universities churn more than 30,000 graduates in banking and finance yearly; there is a limited supply of ‘high quality’ and ‘qualified’ talent. Hence, the issue of employability amongst these graduates remains high due to talent misalignment. An issue we need to resolve. A report titled Graduate Employability in Asia which was released by UNESCO recently, highlighted that majority of graduates were not employable due to lack of generic skills and serious inadequacy in terms of work-related competencies. Herein lies the paradox of scarcity amidst plenty. The problem does not lie in the skills shortage but more of skills gaps. The latter refers to a situation where recruits are available, but they do not have the required skills demanded by the industry. Concerted efforts and collaborations between relevant stakeholders are needed to address the issue of skills gaps. Stakeholders need to up their game in developing the right talent and going as far as detecting skills requirement, even at the recruitment stage. They also need to consider new approaches such as internships and apprenticeships to help fill the talent gap.

Efforts to upskill the workforce in the financial services industry in Malaysia were given a boost when the Asian Institute of Finance (AIF) was established. Although AIF focuses on human capital development in the financial services industry, it is fully committed to elevating Malaysia’s role as a premier provider of comprehensive solutions for industry across Asia. These include driving the talent management agenda; develop, implement and harmonise professional standards across the financial industry; develop and monitor capacity building initiatives; and produce high quality internationally recognised applied research with an industry focus. As part of its talent development strategies, AIF plans to play a prominent role in the Financial Services Talent Council in providing strategic leadership on human capital development of the financial services industry and realising Malaysia’s growth ambitions.

With the imminent establishment of ASEAN Economic Community by 2015, greater integration and competition amongst ASEAN member countries will also result in greater demand for and mobility of talent. AIF is poised to lead the next talent transformation by redefining the ‘talent game’.

Dr Raymond MaddenChief Editor

“Each generation

imagines itself

to be more

intelligent than

the one that went

before it, and

wiser than the one

that comes after

it.” George Orwell

3 Asian Link

Asian Link 4

Generation Y or Gen Y for short, has been referred to with many names – millennial, echo boomers, me first, first digital and net generation. This cohort of individuals is born between 1978 and 1995. Unlike the generations before them, this group of employees comes with pre-honed technology skills and ingrained multi-tasking skills (refer to Table 1). However, they remain an enigma to many organisations. Lindsay Pollack, author and Gen Y theorist, said that when it comes to dealing with Gen Y, “what used to be common sense isn’t common sense anymore”. She suggested for organisations to rethink their approach to training Gen Y.

By Dr Raymond Madden & Dr Sofiza Azmi

EngagingnEw Kidson thEblocK

the

5 Asian Link

Silent Generation Baby Boomers Generation X Generations Y

Who they areBorn between1925-1945

Born between 1946-1964 Born between 1965 - 1977 Born between1978-1995

Tagline(s)

“When in command, take charge. When in doubt, do what’s right.”

• “Livetowork”• “Willingtogotheextra

mile” for an employer

• “Worktolive”• “Originallatchkeykids”• “Vanguardofthefreeagent

workforce”

“Like Xers on steroids”

Values

• Workitselfandthepeople they work with.

• Command-and-control mindset

• Respect,empowerment,challenge and growth

• Work/lifebalance;family• Individualism;Entrepreneurial• Technology;creativity• Diversityandtransparency

• Immediatefeedbackandpayoff

•Hardworkpaysoff.• Technology;creativity

Preferences

To work with strong leaders with proven track records

• Workenvironmentconducive to results-orientation

• Jobstabilityandsecurity

• Demandsimmediaterewardsforcontributions

• Flexibility,moneyandportablebenefits, harmonious work environments and fulfillment

• Workenvironmentconducivetorelationship building

• Highexpectationsofpersonal and financial success

• Seekchallenging,meaningful work that impacts their world

• Donotlikebeingtreatedas the new kid on the block

Relationship to Employer

Willing to learn new skills to be more effective in their current job

• Includethemindecision-making, give clear goals and responsibilities and then get out of their way and let them get the job done”

• Alwayslookingfor“bigger/betterdeal”

• Lessloyaltytoanemployer;notintimidated by authority

• Morewillingtomakelateralmovesto add to their skill sets

• Moreself-reliantandmoreself-directed

• Mosthigh-maintenancegeneration to ever enter the work force

• Littleloyaltytoanemployer; not intimidated by authority

Table 1: Four Generations at Work

Source: Bruce Tulgan; Rainmaker Thinking

Gen Y is the largest age group to emerge

since the baby boom generation. And

as this generation grows to become a

significant proportion of the workforce,

recognising the unique forces that shape

this misunderstood generation requires

insights and a fine sense of balance.

According to the Minister of International

Trade and Industry, Dato’ Sri Mustapa

Mohamed in an interview last week, Gen

Y currently makes up about 40% of the

Malaysian workforce. “It was important for

Gen Y workers to have access to companies

with good training, exposure and salaries,”

he was quoted as saying.1 A Graduate Employability Blueprint which is set to be launched by the end of the year is expected to greatly emphasise on developing

training programmes that hone new skills for youths in tandem with the future need of the country as a developed economy.

Malaysia is not alone in her quest to develop Gen Y and prepare them for workforce entry. Representing the future of Asia’s workforce; countries like Singapore, Hong Kong, India and China are also putting their resources in harnessing the potential of Gen Y workforce. In Singapore, there are about 400,000 Gen Y in the workforce, forming about 20% of the economically active population. By 2015, this number is estimated to reach about 30%. In China and India, this demographic cohort makes up about 600 million and 500 million of the labour market, respectively. As Gen Y is set to become the largest

1 The Star, October 6, 20122 Raymond Madden, Britain’s Got Talent Leadership Lessons and Drive, Changeboard, Top Story, 2010.

proportion of the workforce, the primary source of competitive differentiation for organisations will be human capital.

This is a uniquely global phenomenon and affects developed as well as emerging economies. “Britain’s got talent”, a popular TV talent program in the UK and around the world has strong parallels for multinational corporations who need to be aware of the generational differences of their employees if they are to maintain performance and sustain employee engagement.2 Hence, it is strategically imperative for organisations to understand the environmental influences of Gen Y including understanding who they are and what has defined their experience. This is particularly more important and relevant for the financial

Asian Link 6

industry in Malaysia as Mercer’s survey on Total Remuneration reported that finance jobs are one of the top three categories of ‘jobs most difficult to retain’.3

Unlock the Values

According to the Robert Half survey of 300 CFOs and finance directors, nearly half of employees said Gen Y were the hardest to retain compared with Gen X and baby boomers. More than 60% of them attributed this to high expectations among Gen Y employees for career advancement, expectations for remunerations and work life balance. A joint report by ACCA and Mercer offers interesting insights into the aspirations and traits of Gen Y finance professionals.4 The report highlighted that a dynamic career progression is key to attracting, developing and retaining them. And this entails ambitious, fluid and continuously evolving career paths.

It is even more interesting to note that almost half of Gen Y finance professionals surveyed had diverging career expectations. Dubbed as “a tale of two career paths”, the report contended that 40% of young finance professionals wished to pursue a traditional career in finance whilst the rest are seeking careers outside mainstream finance roles (see Table 2).

Those who wanted to remain in finance are looking for vertical career progression and to develop specialisation in finance field. Gen Y professionals seeking non-traditional finance roles prefer to build their financial management capacity in business and eventually expand their career beyond finance function. The findings of the survey have huge implications on the strategies of financial institutions on talent management. Bottom line, Gen Y expects institutions

to provide a number of career options as opposed to specialising in specific areas of finance.

However, many institutions and organisations are still wrapping their heads around what makes Gen Y ticks and how to effectively engage and leverage the newest entrants to the workplace. Why should organisations care? Understanding what shapes Gen Y is valuable to employers if they want to successfully attract, develop and retain this newest talent. Some of the major characteristics of Gen Y are described below:

• Gen Y is the first generation to grow up with technology and rely on it to perform their work better.

The explosion of technology has shaped Gen Y’s values and attitudes both in their personal and work life. Being digital native, this tech savvy workforce is accustomed to real time information anytime and anywhere. For them, gadgets like iPad, tablets and smartphones or android phones are regarded as status symbols. Armed with these high-tech gadgets, Gen Y is plugged-in 24 hours a day, 7 days a week and is very good at multi-tasking – they talk on the phone while surfing on the net and text messages while listening to music. This ability to multi-task can challenge the way baby boomers perceive their younger colleagues. And because of their deep reliance on technology, they believe in workplace flexibility and that they should be evaluated on their work output rather than on how, when or where the work is being done.

• Gen Y’s life is on social networks. Social media plays a dominant role in Gen Y’s personal

and professional life. Unlike other demographic cohorts

3 Total Remuneration Survey, Mercer 20094 Generation Y: Realising the Potential, ACCA and Mercer 2010.

Table 2: Career Expectations of Gen Y Finance Professionals

Traditional Finance Career New Career Pathway

Traditional finance roles Broader business goals

Depth of finance knowledge Breadth of knowledge outside of finance

Career paths within finance roles Career paths outside of finance roles

Quick vertical progression early in career Slow vertical progression early in career

Source: Generation Y: Realising the Potential, ACCA & Mercer 2010

7 Asian Link

5 Acquisition and Retention in the War for Talent, 2012 Kelly Global Workforce Index.

who use social networking mainly for entertaining and socialising, Gen Y is using this platform in more diverse ways. Between Facebook, Twitter, Instagram, LinkedIn and WhatsApp in Asia; these digital natives use social media sites to connect and communicate with their friends, colleagues and superiors. To them, social media goes beyond making contacts, updating status and discussing life as well as topics of interest. Social and professional networking sites have evolved to become a platform for them to expand their professional network and mine for job prospects. Gen Y is inadvertently blending social and professional life; blurring the lines between the two. The Cisco’s Connected World Technology Report revealed that more than half of Gen Y respondents said that they “will not accept a job that bans social media”. The fact that Gen Y prioritized social media access at work over salary speaks volume! But the financial services industry is not responding to this need. Most banks ban social media as they are concerned about open access to their IT infrastructure.

• Gen Y puts personal fulfilment ahead of pay. In another study, personal growth and work life balance

were found to be important considerations over pay rates for Gen Y when choosing a job. These results as reported by Kelly Global Workforce Index (KGWI) survey provide a startling revelation on the motivations of Gen Y.5 They have a deep-seated desire for work to be personally enriching and rewarding. More than any other generations, Gen Y professionals are attuned to the bigger picture; seeing everything as connected. They want to see how their work contributes to the larger corporate objectives. Essentially, Gen Y seeks greater engagement and “meaning” from their work. The Asian culture of working long hours and long term loyalty is also fast becoming a passé as Gen Y values work life balance over career. Like their peers in other regions, Gen Ys in Asia are rejecting the traditional “work hard and get rich” mentality in favour of a lifestyle devoted to personal satisfaction.

• Gen Y is achievement-oriented. Gen Y professionals grew up with the entitlement

mindset.JeanTwenge,authorofthebook Generation Me, describes them as “smart, brash, arrogant, and endowed with a commanding sense of entitlement’. Nurtured and pampered by parents to believe in themselves and their abilities, Gen Y-ers are confident with strong self-esteem. Such strong self-confidence, she argues, “is what allows them to accomplish great things and can keep companies

progressing”. Gen Y’s so-called ‘helicopter parents” tend to hover over their kids, dote on them, and protect them from criticism and disappointment with constant positive reinforcement. As a result of such upbringing, these trophy kids display an abundance of self-confidence and are very ambitious. Likewise, they are particularly achievement-oriented, thanks to video games that have taught them to constantly advance to the next level.

• Gen Y craves for immediate feedbacks. The same electronic games that they grew up with also

trained them to receive immediate feedbacks, rewards and recognitions on their performance. In the workplace; they favour the same constant and consistent feedbacks from their managers but in a non-formal fashion. In this sense, the traditional annual, semi-annual or even quarterly performance review is not effective with Gen Y. In a report produced by Kelly Services titled Gen Y at Work, employers are recommended to “provide regular feedback sessions and lesser performance review cycles supported by mentoring or coaching” to retain Gen Y at the workplace.

Conclusion

With Gen Y employees poised to become future managers and leaders, employers and HR practitioners need to have a better understanding of how to work with them and manage them. It is also important to develop effective strategies to attract, retain and motivate Gen Y employees from the start. An important step to attract Gen Y finance professionals is to clearly communicate with them what career paths and associated time-lines are available. Since lifestyle is also an essential consideration, organisation’s brand value is the key to attract these young finance professionals. In developing these young professionals, organisations should provide a host of well-coordinated opportunities for experiential learning. Organisations should also design learning interventions that are most suited to Gen Y based on their unique predilections such as interactive features and social characteristics. The final challenge is retention. The key here is to offer a compelling career that matches their dynamic and trendy lifestyles. If in doubt, ask Gen Y’s themselves. They will tell you what they want.

Dr Raymond Madden is Chief Executive Officer at the Asian Institute of Finance and Dr Sofiza Azmi is a Senior Research Fellow and Head of Policy Studies at the Asian Institute of Finance.

Asian Link 8

The global financial crisis had taught us many

valuable lessons; it provided unexpected and sudden

deviation in the financial and economic paths and

called for unprecedented remedial actions. Various

policy responses, which had been proven effective in

the past, may have been pro-cyclical this time around.

Mistakes were made along the way and we acquired

new lessons in the process. Businesses too were not

immune from facing the same consequences, and

unless human capital or talents are trained and armed

with the required skills and knowledge for prompt

actions during these uncalled crises, recovery will

take longer and we may well lose the opportunities

to take advantage of the shift in business needs and

demands.

As a result of the recent global financial and economic

crises, unemployment rates have remained at higher

levels especially in developed countries. The demand

for talents has also shifted accordingly as countries

Managing

Fast ChangingEnvironment

Talentin a

By Dr Zamros Dzulkafli

began to undergo economic transformation so as to

create a better platform that will allow them to adapt

to new challenges and the changing dynamics in

the global economic environment. Talents must be

ready to change and equip themselves with the latest

required competencies and skills as the evolution of the

human capital demand continues to move in tandem

with the changing dynamics in the global economic

environment.

Hence, talent development will continue to be the

subject of interest in the foreseeable future; from the

formal education delivered at schools and universities,

to on-the-job training and experience gained from the

work place. This is more so as employers are expected to

continue to demand suitable and ideal employees that

can fit well into their organisations and business plans.

Therefore, the question whether our graduates are able

to quickly adjust themselves from being in a theoretical

environment typical of most universities, to being in

9 Asian Link

a fast-moving and demanding working

environment, is another concern that

requires immediate attention. Certainly,

both the universities and the industry have

to position themselves in addressing this

issue and to come up with a concrete long-

term solution for their mutual benefits. To

that end, the Asian Institute of Finance (AIF)

will continue to support the university-

industry collaboration and welcome

engagements that would enhance this

partnership.

Interestingly, despite the rapid exponential

technology advancement, human capital

is still a much sought after asset by

most organisations. As cleverly put by

the management guru Peter Ducker

way back in 1992: “The most valuable

assets of a 20th century company were its

equipment. The most valuable asset of a

21st century institution, whether business or

non-business, will be its knowledge workers

and their productivity”. The compounding

effects from both human and technology

enhancements have produced the positive

synergy that led to the tremendous

growth witnessed during the last few

decades, which also saw an increase in

productivity and efficiency. While research

and development continue to be given an

emphasis in the field of technology, the

same level of importance should also be

placed on producing and managing the

best talents to ensure sustainable growth,

not just for the current but also for the

future generation.

The recently concluded sports event, the

Euro 2012 held in Poland and Ukraine

where 16 European teams took part in

competitive football, is a good case study

to understand the dynamics of managing

talent in the real working environment.

Undoubtedly, all 16 teams have the best

talents available in Europe with their

high-level of skills and lucrative pay. These

talents were managed by their managers

who were entrusted with the task of

ensuring that all players within the team

are able to understand and execute the

intended game plan. The vision is to be

the best football team in Europe and

the mission is to score as many goals as

possible as well as to avoid conceding

goals; however, not all managers were

successful in achieving this. We have seen

high profile teams such as Holland, the

runner’s up during the World Cup 2010

in South Africa, unable to progress into

Asian Link 10

the quarterfinal of Euro 2012. This was despite them having among the best talents in the world. Team spirit was low and the hunger to win was lacking. In the end, of all the 16 teams, Spain had proven to be the best and emerged as the European champion. One could certainly argue that the reason for this was the excellent work of the manager in managing the team particularly the players - and of course, with the help of a little bit of luck.

Another clear example of a team that possesses great talents but failed to live up to expectations is Chelsea FC under the management of Andre Villas-Boas (AVB). Players did not perform well during his watch and fans sensed that there was something not quite right with the manager-player relationship, management style and communication. The team was fast losing its grip on the English Premiere League, and consequently, AVB was replaced with Roberto Di Matteo. Under Di Matteo’s watch, Chelsea seemed to be re-energised and with the same pool of talents, managed to win the UEFA Champions League title forthe2011/12season.

These situations are real and could also be observed unfolding in the workplace. Sometimes, we have talents who have the competencies and ability to execute the business plan or perform their daily duties; we have talents with different roles in the company in which each needs to work together and bond as a team to ensure company’s success and to be the best in the industry; and we also have supervisors or heads to supervise the team and ensure that everything runs smoothly and according to plans; but somehow, success still seems to elude us. This is because, merely having good talents without also having effective leaders who have the capability to encourage positive thinking and maintain a positive team spirit would cause things to not work out as expected. Moreover, under the

current challenging economic and

corporate environment, having highly

qualified and certified talents with

the required skills to perform their

jobs are necessary but not necessarily

sufficient to ensure success. There are

other essential soft skills required such

as creativity, critical thinking, effective

communication and continuous talent

improvement.

Maybe it is time for both the university

and industry to give more emphasis

and focus on developing the talents’

soft skills. It may be the case that too

much weight was given to developing

the technical skills and that the soft

skills have been neglected and more

often than not, taken for granted. How

many times have we come across

communication breakdowns at the

workplace? These are costly errors

that may result in giving the wrong

message and is certainly unhealthy

for the organisation. What is more

important is that communication

is a two-way street; it requires both

speaking and listening.

The recent financial and economic

crises had again demanded us to put

on our creative and critical thinking

hats. Our immediate responses and

strategies should not only be aimed at

recovering from the current crises, but

also to prepare ourselves for possible

future shocks and opportunities.

Hence, the mandate is now to produce

a continuous supply of talents who

are well equipped with both technical

and soft skills. The challenges are

real; so let us work together as a

team to create better synergy and

share the understanding on the new

prospects and risks from the effect of

globalization.

This article was featured in the Malaysian Reserve, 6th July 2012 . Dr Zamros Dzulkafli is a Research Fellow at the Applied Finance Research and Publication Centre, at the Asian Institute of Finance

The demand

for talents has

also shifted

accordingly as

countries began to

undergo economic

transformation

so as to create a

better platform

that will allow

them to adapt to

new challenges

and the changing

dynamics in the

global economic

environment

11 Asian Link

Islamic FinanceHuman ResourceChallenges:

By Dr Wafica Ali Ghoul

Truth or Myth?

and

The International Centre for Education

in Islamic Finance (INCEIF) in Malaysia

projects that 50,000 Islamic finance (IF)

experts are needed in the next decade,

30,000 of whom are needed in GCC

countr ies, whereas only 1000 new

graduates currently enter the job market

annually (cited by Khnifer 2010).

Impact of Human Capital Deficiency on the IF Industry

The scarcity of skilled IF human resources

has been causing an unjustifiably high

inflation in compensation packages and

a high turnover rate. In addition, the

prevalent hiring of conventional finance

personnel has been taking the Islamic

finance industry away from its right path;

it is hindering innovation, and it involves

a high cost of training these people in

Shari’ah and its application in Islamic

finance.

Main Causes of the Human Capital Deficiency

In Islam there are different schools of thought and religious sects which exist across the various Muslim countries, a fact that results in different interpretations of Shari’ah. This difference impacts the IF education and training programs and makes it harder to match the supply of IF graduates from a country such as Malaysia, with the demand for IF experts in GCC, for instance KPMG (2007) notes that the sector

The current global financial crisis has alerted the international financial community to the distinct nature

and inbuilt strengths of Islamic finance, as pointed out by Muhammad bin Ibrahim (2010) Deputy Governor of the Central Bank of Malaysia, who adds that the crisis thus has provided an opportunity for Islamic finance “to strategically position itself as a stable form of financial intermediation, .”

The continued growth of the lucrative Islamic financial industry is currently hindered by a global deficiency of qualified personnel who have a thorough knowledge of finance as well as Shari’ah. This fact serves as an indication that the growth of the industry is faster by far than the emergence of adequate Islamic finance expertise.

Asian Link 12

lacks a global industry body that oversees the standardization of continuous education and training. The problem is that many academic programs are producing mostly “unemployable” IF graduates, who usually have to compete with experienced people from the conventional banking sector. Parker (2011b) claims that most IF programs are “ordinary and mediocre”. Opportunist universities and professional training companies all over the world have been jumping on the bandwagon to benefit from the rising demand for IF degrees and certificates; the credibility of most of them is questionable due to the absence of a global accreditation body thus far.

Others have criticized ‘textbook-based’ as opposed to ‘expert-taught’ online as well as on-ground degrees which might be questionable in terms of the quality of the education and training.

One would expect people from the conventional sector to be able to teach themselves enough about IF, if it was not for the shortage of adequate textbooks on Islamic finance, the scarcity of published research, and the inaccessibility of most Islamic finance journals.

Another factor that adds to IF human resource shortages is the frequent emergence of new IF institutions, due to low barriers to entry and weak government regulations of the IF industry in most countries. These institutions are constantly on the prowl, seeking to lure away IF professionals without being limited by geographic borders, which plagues the industry with a high turnover rate and unjustified high wages.

Other critics lament the fact that what is claimed to be an Islamic finance degree program in most cases is a conventional finance program with a few Islamic finance classes that are taught by conventionally trained professionals (Ghoul 2012).

There are also some claims of preference being given to Muslims when hiring, even if they are less qualified, or to put it another way, discrimination against non-Muslims even if they are more qualified. This is inconsistent with the observation that Western names dominate large IF institutions in Muslim countries as well as many conferences.

Critics of the progress of the IF industry have expressed some disapproval of the first generation of Islamic bankers who for the most part came to Islamic banking from the conventional sector and who learned the IF jargon in a haste, without fully understanding the field.

Another contributor to the personnel shortage is the fact that IF graduates may be requiring a higher starting salary which might be justified due to their highly specialized skills which are in demand, but which may be making them too expensive to hire.

The IF industry is also criticized for following the example of its conventional counterparts by being unfair to women when

13 Asian Link

recruiting, and for having a similar glass ceiling, since women have not thus far been given senior position at IF institutions, with Malaysia being an exception.

Another topic which has been discussed extensively is the shortage of Shari’ah scholars, the reliance by most IF institutions on a select small number of highly visible scholars, who end up serving on an excessively high number of Shari’ah supervisory boards (SSB). This raises concerns about the independence and objectivity of scholars who get paid by the financial institutions to issue opinions and certify products as Shari’ah compliant (Ghoul 2008). A recent survey by Funds@Work found that the top 20 scholars accounted for over 619 board positions, over half of the 1,141 positions available. Two of those scholars held 85 positions each and four held 14 board positions each. In Malaysia a Shari’ah scholar may serve on only one SSB at a time, whereas there is no such restriction in the GCC region.

Are the Shortages True or Mythical?There have been some allegations of a lack of proper recruitment policies, namely that the human resources (HR) departments at some IF institutions may not be very familiar with the skills that are needed when selecting IF recruits, that their employment selection criteria may be biased towards hiring from the conventional finance sector, and that they are less likely to hire fresh graduates even those from top IF programs, many of whom are eliminated by computer programs that sift through stacks of applications.

According to Khnifer(2010) , “many Islamic banks prefer experience from a conventional background”, instead of recruiting IF graduates, they look for people

with a solid background in conventional finance who are familiar with Islamic finance.

Khnifer quotes graduates from some top programs who point out that the shortage of personnel in IF is a “propaganda”, Khnifer quotes John Board, Dean of HenleyBusiness School “Our students are finding that searching for jobs in IF has never been harder at a time when demand for IF services has never been stronger”.

Khnifer also notes that the embedded ‘indiscriminate hiring’ policies have resulted in hiring people who are not qualified in IF, he quotes Gilles Rollet, Head of Swiss Bank Mirabaud’s Middle East unit who notes that a “possible shake-out of less qualified people would benefit the nascent sector, I wouldn’t be surprised in a year’s or two year’s time if some of these people will be on the street, .”

Main Centers for Islamic Finance Human Capital TrainingMalaysia has been playing a leading role in the development of human capital for Islamic finance which will be discussed further below. The next main player is the United Kingdom where successive governments have been introducing legislation that helps facil itate the introduction of Islamic financial products, for the purpose of developing London into a major international Islamic trade, investment and finance centre.

The United Kingdom is also home for the leading Islamic finance university degree programs with Durham, Reading, Bangor, and Aston universities, and the Markfield Institute of Higher Education. In the Middle East the Islamic Development Bank which is based in Saudi Arabia leads the human capital development efforts through organizing conferences,

training workshops, promoting research, and offering scholarships for doctoral candidates.

Malaysia’s Efforts to Rectify the Human Capital DeficiencyMalaysia has been known as the benchmark for the Islamic finance industry in the areas of regulation and product innovation. However, despite having some of the top Academic Islamic finance degree programs in the world, Malaysia is currently suffering from a flight of Islamic finance talent to GCC countries, where Islamic finance is experiencing extraordinary growth (KFH 2010).

In response to the brain drain issue, Bank Negara Malaysia (BNM) has been trying to restore the balance between the talent supply and demand for Shari’ah-qualified banking professionals. BNM has established the Asian Institute of Finance as well as the International Centre for Education in Islamic Finance (INCEIF) to continuously develop new talent in the industry. INCEIF offers programs for practitioners and post-graduate studies. Halim (2011) points out that Malaysia faces the challenge of retaining and nurturing the current Islamic finance talent pool in the country, especially with many global players pursuing Malaysian IF experts who are eager to venture abroad in hopes of new experiences and more generous compensation packages, while not being prepared for the cultural issues, language barriers, and inadequate family support systems (Thomson Reuters 2011).

As a step towards stopping the brain drain crisis and in order to bring experienced Malaysian personnel back home, Malaysia has established the Talent Development Corporation in 2011.

Moreover, Malaysia’s Prime Minister Mohd Najib Abdul Razak has launched the

In Islam there are different schools of thought and religious sects which exist across the various Muslim countries, a fact

that results in different interpretations of Shari’ah

Asian Link 14

Economic Transformation Program the objective of which is to transform Malaysia into a global leader for Islamic finance education hubs. This sector is expected to contribute RM1.2 billion to gross national income and to create 4,300 related jobs by 2020.

Malaysia has also initiated the Association for Islamic Finance Advancement (AIFA), an accreditation body for Islamic finance programs worldwide which was recently authorized by Bank Negara Malaysia (BNM). The International Islamic University of Malaysia (IIUM) is leading the AIFA initiative. AIFA aims to develop a program that sets quality standards as well as the practical relevance of Islamic finance education and related fields. Its plans include collaboration with the USA-based Association to Advance Collegiate Schools of Business (AACSB) and other international accreditation bodies to help Malaysian universities in developing curricula and quality measures. Additionally, five standard Islamic finance textbooks are plannedbyJohnWileytheUSApublishingcompany.

Recommendations to Help Offset the Human Resources Bottleneck In the IndustryThe Islamic finance industry needs long-term strategic plans that produce an appropriate pool of skilled talent to maintain the sustainable long-term growth of Islamic finance. IF institutions need to invest time and capital in designing appropriate HR policies; unfortunately their main priority is typically the meeting of profit targets.

Islamic financial institutions may also want to consider the allocation of resources to launch graduate training programs or at least partnering with academic institutions for that purpose. Universities are well advised to consider exerting more effort to develop placement services for their IF graduates, at least with the same vigor that they show in “dishing out” expensive IF degree programs and certifications. If that does not happen soon enough, universities are likely to experience a loss of interest from potential IF applicants. Additionally, instead of focusing on pure IF specialization, universities may want to develop dual degree programs which emphasize IF and conventional courses equally, since some parts of the world such as Hong Kong for instance, might require less IF expertise.

As for IF graduates, Islamic finance expertise in one jurisdiction is no longer sufficient to catch head-hunters’ attention, graduates could differentiate themselves through seeking an internationalexperienceand/ortraining.

Conclusion Sami Al-Suwailem (2006) of the Islamic Development Bank reminds us that Islamic finance is not only for Muslims, it is for the entire humanity. Al-Suwailem adds that this presents a

serious challenge to Muslim economists, namely to successfully deliver Allah’s message to humanity, and positively contribute to world economic stability and prosperity. At a recent World Bank conference, The Islamic Development Bank President Ali noted that “the main message of Islamic finance, while ethical, is also universal; at a time when world leaders are calling for financial reforms, it is appropriate to have our financial systems rebuilt on widely accepted ethical and moral bases to serve the common good of humanity”(cited by Parker 2011a).

Now that Islamic finance has started making headway around the globe, it would be a great shame to let this golden opportunity slip away due to the short sightedness inherent in Islamic financial institutions, governments and universities, if they were to allow the shortage of human capital to be able to change the course of the industry or slow it down!

ReferencesAl-Suwailem,Sami(2006),“HedginginIslamicFinance”,Jeddah,

150 p; ISBN: 9960-32-160-6.Bin Ibrahim Muhammad (2010), “Evolving the Next Frontier Of

Islamic Finance Development Through Innovation” Speech at the Mock Cheque Exchange Ceremony between (INCEIF) and Bank Islam, Maybank Islamic and Affin Islamic, KualaLumpur,15June,BISReview87/2010

Ghoul Wafica Ali(2008), “Shariah Scholars and Islamic Finance: Towards A More Objective and Independent Shariah-Compliance Certification of Islamic Financial Products”. Review of Islamic Economics, Vol. 12, No. 2, page 87-104, December, 2008, UK.

www.sbp.org.pk/library/ContentsJuly2009.pdfGhoul Wafica Ali(2012), “Islamic Finance in the GCC Region:

Human Capital Challenges and the Role of Universities”, PresentedatThe2012GulfResearchMeeting,July11–14,2012, University of Cambridge, United Kingdom

Halim Nazneen(2011), “The Talent Tussle”, Islamic Finance News, October

Khnifer Mohammed (2010), “The Human Remains of Islamic finance”, available at www.cpifinancial.net DECEMBER 2010 | Islamic Business & Finance 37, and www.ssrn.com

KPMG(2007), “Growth and Diversification in Islamic Finance”, http://ribh.files.wordpress.com/2008/05/growth__diversification_in_islamic_finance_reported_by_kpmg_.pdf

Kuwait Finance House(KFH) Research Ltd. (2010)”Islamic Finance Research”.

Parker Mushtak(2011a), “ World Bank Meet Fails To Address Islamic Finance Role In Development”, Arab News, Oct 2

Parker Mushtak (2011b), “Madrid aims to become education hub of Europe”, ARAB NEWS, Dec 12.

Thomson Reuters(2011), ‘Cross pollinating’ Islamic finance in GCC, Malaysia”, available at http://al i farabia.com/2011/11/30/cross-pollinating-islamic-finance-in-gcc-malaysia/

Dr Wafica Ali Ghoul is a Professor of Finance at the Lebanese International University.

15 Asian Link

There have been and will continue

to be buckets of ink spilt about “talent

development” and shortages of “human

capital”. Risk management is often singled

out as an important area where there will

be a growing requirement for competent

risk managers if Malaysia’s ambitious

economic development plans (particularly

in the financial sector) are to be realized.

It is easy to understand why there is a

focus on risk management. Even as this

is being written, once again one of the

world’s leading banking institutions has

hit the headlines for all the wrong reasons.

JPMorganChase’sshockandawetactics

in the derivatives markets have resulted in

losses which were initially stated to be $2b

but soon sparked feverish speculation in

the blogosphere as to when they will hit

$5bn or $10bn or possibly even more. This

is a significant case because it is not a lone

“rogue trader” behind the disaster, but a

whole department.

By Dr David Bobker

hUMancaPital

You Can Lead a Horse to Water

Is JPMorganChase (JPM) shortof risk

managers?One assumesnot. Just as

the other hitherto blue chip institutions

which blew up in the crisis (AIG, UBS,

HBOS, Lehmans, Bear Stearns, RBS etc)

all had armies of rocket scientist, - PhD

risk managers. These disasters happened

because either the risk managers, following

standard practices, got their models wrong

or because the decision makers knew

better and ignored the risk managers’

advice. Either way, it seems clear that

lots of risk managers trained in standard

methodologies are not a complete solution

to the ongoing litany of disasters in the

banking industry.

Ultimately all the failures are primarily that

of the CEO either for poor strategy, poor

executionor,asitappearstobeintheJPM

case, poor control. It was also very much

the board’s failure in each case for not

exercising their responsibility to supervise

the executive.

The episode has clearly dented the

reputationofJPM’swell-knownCEO,Jamie

Dimon. But it is significant that Dimon

isbothChairmanandCEOofJPMorgan

Chase. This contravenes the very first rule

of almost every corporate governance

code (except in the US) and is just plain

prohibited for banks in Malaysia. And for

good reason: an executive chairman has

far too much power which means there is

no effective check and balance on his or

her actions.

So what can we learn from this latest

episode? Actually not much more than

we should have learned from previous

40-50 episodes but apparently did not!

But just to spell it out one more time:

First, over-confident individuals with too

much power and influence over decision

making, without sufficient checks and

balances pose intolerable risk in a bank.

This particularly applies to “star” traders

and some CEOs. The only potential check

and balance on the CEO is the board of

dEVEloPMEnt

Asian Link 16

directors, a responsibility it is generally reluctant

to assume, and is almost impossible if the CEO is

also chairman of the board.

Second, standard risk methodologies which

depend fundamentally on the continuation of

historic market patterns cannot be relied upon

to manage very large risks and in particular, many

economic capital models are fundamentally

flawed.

By this time the reader is doubtless wondering

what all this has to do with the development of

risk management talent in the financial sector. In

fact there is an underlying theme relating talent

development to the many episodes of company

failure, namely attitude and culture.

First, it is generally accepted that risk management

is primarily the responsibility of management

and the board, and only secondarily that of the

risk support functions (risk management, internal

audit, compliance, etc). Therefore, training

in risk management needs to be directed to

all senior managers and board members in

financial institutions, not just risk managers.

In terms of bang per buck, getting deeper

understanding of financial risk into the thinking

of top management will pay off far more than

concentrating solely on risk managers.

However, here we run up against the attitude

problem. Senior executive managers tend to

be highly business delivery focused. Anything

which diverts them from delivering results tends

to be sidelined, dismissed, or at the very least,

not embraced with enthusiasm. Because risk

management falls right into that category it is

difficult to get risk management messages across

to top management.

An experienced, senior loan or insurance

salesman, or a results-driven CEO is not usually

the sort of person that likes to dwell for too long,

if at all, on the potential disastrous consequences

of their actions. We have termed this condition

“risk blindness” and it is precisely those at the

top of an organization who seem to suffer most

from it.

Second, a similar problem affects risk managers

themselves. Again being KPI and target driven,

when it comes to training there seems to

be general resistance. Any attempt to move

beyond the comfort zone and the day job is

met with “how will this help me do my work?”

Unfortunately this laudable focus on the job in

hand leaves neither room for thinking as well

as just doing, nor for self development. It also

missesthepointthat,asinJPM,justdoingwhat

you have done before is not enough in risk

management. Unfortunately the incentives do

not appear to be there to go against the grain,

challenge conventional wisdom and, in short,

innovate. And effective risk management above

all requires an ability to think well outside the box

about things which may never have happened

before, such as the breakdown of long term

patterns and relationships or the emergence of

threatening new trends.

These issues are indicative of a general cultural

issue and seem to be common, to a greater

or lesser extent, globally. Management theory

is partly to blame, having brought about a

general belief that success invariably follows a

set formula of writing down clear objectives,

formulating strategy, getting buy-in and then,

almost robotically carrying out the plan while

monitoring performance and so on. For example,

it is common to hear at conferences on talent

development many managers bemoaning the

work un-readiness of new graduates as if the

work of a university is to produce ready-made

little robots who can be programmed to carry

out instructions and deliver his or her KPIs in the

most cost effective manner, thus achieving the

grand plan. The job of universities is primarily to

educate and above all to teach students to think

and to understand that most real life problems

do not have text book answers but require

the ability to analyse a problem in the round

considering it from all angles.

We run across a similar negative attitude to self-

development in those risk managers who say, “I

do not need to know any theory – the system

does everything”. In risk management this

attitude is more than a little scary and also makes

one want to ask “if the system does everything,

what are we paying you for?”

The truth is that to develop talent there needs

to be, above all, a willingness constantly to learn

and change and adapt. In other words, talent

17 Asian Link

development, especially in an area like

risk management, requires people with

the right attitude to be developed. It has

long been recognized that the learning

organization, one which innovates and

adapts quickly to changing conditions is

the one to succeed. But all this requires a

significant change in attitude from top to

bottom in many organizations.

How can this be brought about? As

in any type of change, until the need

for the change is accepted in a critical

mass of people, change will not occur.

Move towards change can be via push

or pull or a combination of both. Push

towards increased learning could come

from regulatory requirements for risk

certification both for senior managers in

financial services institutions and for risk

managers. We do not however see any

current moves towards that anywhere

even though it would have obvious

advantages.

Pull towards change would be to encourage

upward salary movement for certified

managers and fast track promotion paths.

This is essential incentivisation without

which learning more than the essentials

of a specific job, being more analytic and

broad thinking just does not in itself appear,

to be a sufficiently attractive proposition to

the majority.

Given that certification seems ultimately

to be one of the most effective ways of

achieving any significant movement, at the

Asian Institute of Finance we are currently

working on a certification programme for

risk managers, - designed to contain the

essential, common core elements. This

certification will be a suitable foundation

both for specialist risk managers (from

any industry) and, equally important, it

should be an attractive qualification for any

aspiring senior manager.

The intention will be to cover not only the

essential, core, elements of risk, but also

lay equal emphasis on enhancing strategic

and analytical thinking skills to ensure the

risk or the general manager of tomorrow

is much better equipped to succeed in a

world of ever more rapid change.

Dr David Bobker is Deputy Director of Risk Management at the Asian Institute of Finance and may be contacted on dbobker@aif.org.my

Management theory is partly to blame, having brought about a general belief that success invariably follows a set formula of writing down clear

objectives, formulating strategy, getting buy-in and then, almost robotically carrying out the plan while monitoring performance and so on and so on.

Asian Link 18

By Dr. Haniff Ahamat & Norhisham Abd Bahrin

The Competition Act 2010 of Malaysia (CA 2010) is the first comprehensive competition policy in

Malaysia.CA2010whichwaspassedinJune2010andcameintoforceon1January2012hasputan

end to the piecemeal approach to competition regulation in Malaysia. As of this date, CA 2010 has

provisions regulating market behaviour by prohibiting anti-competitive agreement and abuse of dominant

position. However, CA 2010 does not specifically address market structure as it lacks clearly stipulated rules

controlling or prohibiting anti-competitive mergers and acquisitions.

To many, Malaysia does not need competition law that regulates market structure as yet. Economies that

have not really matured may need a legal regime that is conducive for firms and companies to consolidate

their market power in order to compete with foreign players on the level playing field. Some far more

developed jurisdictions like the EU took more than 20 years to introduce a merger control

regime. However, it is important to note that some neighbouring countries the likes

of Indonesia and Singapore have enforced merger control regulation. Thus,

prompting the question whether Malaysia is indeed actually lagging

behind in introducing its own merger control regulation. The

focus of this article is to see how far the application of CA

2010 affects the activity of mergers and acquisitions

in Malaysia. It is to be noted that the term

mergers and acquisitions are used in

their general parlance and not

intended to constitute their

technical meaning.

Mergers and Acquisitions

of

in

Potential Risks

Malaysia

Competition Law Infringement

in

19 Asian Link

Mergers and Acquisitions in Malaysia

There is no statutory definition of a take-

over under the Companies Act 1965 or

the Capital Markets and Services Act 2007

(CMSA). However, Section 216 of the CMSA

defines a take-over offer to mean an offer

made to acquire all or part of the voting

shares or voting rights, or any class or

classes of voting shares or voting rights,

in a company. Since there is no statutory

concept of mergers in Malaysia, hence

merger activities typically involve an

acquisition of shares and business assets

and liabilities of companies.

Sections 216, 217, 218, 219, 220 and 221 of

the CMSA contain the provisions governing

takeovers, mergers and compulsory

acquisitions in Malaysia. Apart from these

provisions, takeovers and mergers are also

governed by provisions of the Malaysian

Code on Take-Overs and Mergers 2010, the

Listing Requirements of Bursa Malaysia (to

the extent that a listed entity in involved)

as well as the Equity Guidelines issued by

the Securities Commission (SC).

At the moment, Malaysia has no merger

control regulations and as a result, no pre-

merger competition clearance is required

to be complied with. Although the CA

2010 has no provisions for merger control,

it does prohibit anti-competitive practices

and abuse of dominant market position.

Despite the absence of a comprehensive

regime in controll ing mergers and

acquisitions, Malaysia has a number of

sectoral regulators (which include Bank

Negara Malaysia, Energy Commission,

the National Water Services Commission

and the Malaysian Communication

and Multimedia Commission) who are

responsible for issuing operating licenses

covering various industries including

banking and insurance, power, water and

telecommunications.

A takeover offer may therefore be subject

to prior approval from such a regulator.

For example, the approval of Bank Negara

Malaysia is required if a financial institution

changes its shareholding by 5% or more.

In the event a mandatory offer requires

the approval of a sectoral regulator, it then

becomes a requirement for the bidder to

procure all the necessary approval of such

sectoral regulators.

It is important to note that competition

regulation of mergers and acquisitions

is wider in scope than the regulation of

mergers and acquisitions by the SC. In

defining “concentration”,1 the EU Merger

Control Regulation (Regulations) stipulates

that a concentration arises when there

is a change of control on a lasting basis

resulting from:

the merger of two or more previously (a)

i n d e p e n d e n t u n d e r t a k i n g s

(“enterprises” in Malaysia) or parts of

undertakings, or

the acquisition of control of whole or (b)

parts of an undertaking by person(s)

controlling another undertaking, or

by that other undertaking whether

by purchase of securities or assets, by

contract or by any other means.

The Regulation further provides that control

can be constituted by the ability to exercise

decisive influence on an undertaking via:

ownership of or the right to use the (a)

assets of an undertaking, or

rights or contracts that give decisive (b)

influence on the composition, voting

or decisions of the organs of an

undertaking.

This means the extent to which competition

law will be applied in relation to mergers

and acquisitions goes beyond the realms

of securities law which are concerned with

the creation of an independent company

1 Concentration is the term used in the EU to mean both merger and acquisition.

Economies that have

not really matured may

need a legal regime

that is conducive for

firms and companies

to consolidate their

market power in order

to compete with foreign

players on the level

playing field

Asian Link 20

(enterprise) out of the merger of smaller companies or the carving out of a parent company’s division, or with the purchase of one company by another company (normally via transfer of shares).

Thus the purchase of assets of one company by another company will have different impact under securities law and competition law. While such purchase does not invoke the regulatory powers of the SC, it will be subject to legal scrutiny in accordance with competition law. A similar situationoccurs ina jointventure(JV)betweentwo enterprises which does not result in the establishment of an independent entity.

Since the current CA 2010 does not have merger control provisions, this article will emphasise on the risks of enterprises infringing CA 2010, by them participating in a merger or acquisition. As said, merger and acquisition here is broader in scope than merger and acquisition regulated by the Malaysian securities laws and regulations.

What are the Risks When Mergers and Acquisitions Take Place?

It is important to note that the risks identified

above refer to the possible infringements by the

participants of a merger or acquisition of Chapter

1and/orChapter2CA2010thatprohibitsanti-

competitive agreement and abuse of dominant

position respectively.

Parties to a merger or acquisition may risk

breaching the said provisions of CA 2010 in 2

ways: (1) they risk infringing CA 2010 before the

merger or acquisition is completed, and (2) they

incur liability upon the completion of the merger

or acquisition.

Before Merger or Acquisition is Completed

Like other corporate transactions, the conduct of merger and acquisition by the relevant parties require them to go through a process by which a potential buyer of a company, potential merging companies, or potential parent company which seeks to reduce its holding of a subsidiary, will get pertinent information that will influence the decision to proceed with the merger or acquisition in question. The process is known as due diligence.

Infringements of CA 2010 can be a valid concern as one looks at the conduct of the parties during due diligence. It is normal for the parties to exchange the information that they hold before reaching a deal. If the information exchanged falls within the category of market sensitive information, the exchanging parties and other enterprises that have knowledge of the information must be cautious as they may get involved in anti-competitive agreement.

Parties involved in the due diligence process may exchange documents such as purchase orders, balance sheets etc. If these documents contain “market sensitive information”, they may be liable of information sharing. Market sensitive information refers to information that an enterprise will not, in the normal course of business, sharewith itscompetitorsand/orbusiness partners.

CA 2010 does not explicitly prohibit information sharing but as stated in the Malaysian Competition Commission’s (MyCC) Guidelines on the Chapter 1 Prohibition (Guidelines), the sharing of price information could fall within the conduct that has the object of significantly preventing, restricting or distorting

21 Asian Link

competition in the market. However not

all pricing information, if shared will result

in a prohibition. The risk of infringement is

high if the conduct involves the sharing

of current and future price information.

However, the risk of infringement in the

exchange of historic prices and other

historic information is likely to be low.

As regards non-price information, the

exchange of information concerning

future sales or output also has high risk of

infringing CA 2010, in particular Section 4.

The documents exchanged in a due

diligence exercise may contain price

and non-price information. Caution

must be exercised by the exchanging

parties if the documents indicate future

prices, sales, output and other market

sensitive information. Thus efforts must

be taken to ensure that only historic data

is exchanged. Nevertheless there is still

risk of infringement if the exchange of

the historic data still allows a competitor

to detect the strategy of an enterprise it

may not be genuinely historic making it

market sensitive.

After Merger or Acquisition is Completed

Section 10 CA 2010 prohibits abuse of dominant position. Based on this prohibition an enterprise emerging from merged enterprises or an enterprise which has successfully acquired another enterprise’s assets or shares, will incur extra obligation under CA 2010 if it becomes a dominant player in the market. The obligation is that the enterprise should not abuse its dominant position in the market.

Merely being dominant in the market is not prohibited. In the absence of merger control regulations in Malaysia, competition law scrutiny over a merger or acquisition will not look at the legality of the merger or acquisition per se, but will consider the ex post effect of the merger or acquisition. MyCC will not decide whetherornota JV forexample, is tobe cleared on competition law grounds. Instead it will evaluate the conduct of the partiestotheJV insofarastheywouldpossibly engage in abusive conduct. As enumerated in Section 10(2) CA 2010, the

conduct includes but is not limited to: imposing unfair trading conditions on (a)

suppliers or customers limiting production and market access (b)

to the prejudice of consumers refusing to supply(c) buying up a scarce supply of (d)

intermediate goods or resources required by a competitor without reasonable commercial justification.

Apart from abuse of dominant position, parties to a merger or acquisition must be aware that the merger or acquisition can lead to a cartel. Cartel refers to an agreement between competitors and based on Section 4 CA 2010, it is per se prohibited for having the object of restricting competition in the market. An acquisition may open a window of opportunity to parties to know more about each other’s market share, prices, outputs etc. In case they acquire each other’s subsidiary(ies), it is possible for the acquisition to facilitate the sharing of the markets held by both enterprises or the reduction of output by either or both of the enterprises. If this happens, the parties to the acquisition may risk infringing Section 4 CA 2010 without MyCC having to establish the deleterious effect of the acquisition on

competition in the market.

ConclusionAt present, Malaysian competition law has no merger control regulations. However this article has illustrated that the spill-over effects of a merger or acquisition can still trigger an action based on Chapter 1 (anti-competitive agreement) or Chapter 2 (abuse of dominant position) or both. Thus, it is advisable for parties to such corporate transactions to reform their practice to minimise the risks of infringing CA 2010.

Dr Haniff Ahamat is an Assistant Professor at the Ahmad Ibrahim K u l l i y y a h ( F a c u l t y ) o f L a w s , International Islamic University Malaysia (IIUM). Norhisham Abd Bahrin is a Senior Associate 1 at Azmi & Associates, Advocates & Solicitors, Kuala Lumpur. Dr Haniff Ahamat can be contacted at ahaniff@iium.edu.my and Norhisham Abd Bahrin at norhisham@azmilaw.com).

Asian Link 22

cUstoMErsatisfactionindEx

The Asian Institute of Finance (AIF) had conducted a Customer Satisfaction Survey, carried out in August 2011. Feedbacks were obtained from

respondents from a total of 17 banks in the Klang Valley area (12 local banks and 5 foreign banks). The survey is designed to measure the level of customer satisfaction of products and services provided by the banks. Customer satisfaction is defined as the degree of optimism and satisfaction of the services provided by the financial institutions that customers are expressing through their banking activities.

Findings from the survey deliver valuable inputs for AIF and the industry as they provide quantitative measurements indicating customer ’s level of confidence in the financial institutions, providing

For Banks in Malaysia

industry benchmarks from which financial institutions can measure themselves against in terms of service quality of their respective institutions and henceforth identifying best practices that can help improve the service quality of financial institutions. The survey looks at six main features of customers’ level of satisfaction related to their banking experiences. The main features looked at ‘Bank Staff’, ‘Service Counter’, ‘ATM Service’, ‘Products and Services’, ‘Bank Image’ and ‘The Environment’.

Customer satisfaction in the banking industry has always been an important issue. In the long run, customer satisfaction has effects on customer loyalty and overall profitability. It is also crucial as an input for success in the very competitive business

By Dr Zamros Dzulkafli

23 Asian Link

environment within the banking industry. As the retail banking industry goes through transformations and changes, in addition to increased competitiveness, studies in customer satisfaction, especially in gauging satisfaction levels, are important for customer retention. Furthermore, as the retail banking industry involves frequent customer interactions, service quality and customer satisfaction are instrumental in ensuring enhanced customer satisfaction and consequently, customer loyalty as well.

To achieve the aims, the survey conducted has the following specific objectives :a. To identify factors that influence customer

satisfaction in retail banking in Malaysia.b. To assess the relative importance of these factors

on the overall satisfaction.c. To determine the customer satisfaction index of

retail banking.

What is Customer SatisfactionCustomer satisfaction is the feeling or perceived reaction followed by the attitude of a customer towards a product or service after it has been utilised. Most researchers agree that customer satisfaction refers to an attitude or evaluation formed by a customer comparing pre-purchase expectations of what they would receive from the product or service to their subjective perceptions of the performance they actually did receive (Oliver, R. L. (1980)1 and Soderlund, (2006)2). Past researchers have noted that customer satisfaction serves as a link to critical

consumer behaviours, such as cross-buying of financial services, positive word-of-mouth expressions, willingness to pay a premium-price, and tendency to see one’s bank as a ‘‘relationship’’ bank.

It is also a central element in customer loyalty, which subsequently contributes to improving the financial performance of a store, or a company. Customer satisfaction has a positive impact on key corporate outcomes, such as retention rates, average deposit amounts, cost to the bank in providing services, and future earnings. Some had also established the idea that unsatisfactory customer service could lead to a drop in customer satisfaction and willingness to recommend the service to a friend. This would lead to an increase in switching by customers to other banks.

The Survey

The study was conducted in two phases; focus group discussions (as well as a pilot survey) and the actual survey. Based on the feedbacks received from the pilot survey, the survey questionnaire was revised to ensure that the questions would truly reflect measurements of customer satisfaction. A focus group discussion session was held with participants representing several banks in the country. Subsequently, the pilot test was performed with data collected using mall intercept i.e. face to face approach in several banks. The final revised questionnaire was set in the English language, and consisted of four sections comprising close-ended questions. The customers were selected based on quota sampling involving age, ethnic group and banks patronized.

Summary of the Questionnaire

Section Items Details

Section 1 Respondent Background Details on respondent background

Section 2 Banking InformationName of bank, type of bank, facilities and frequency of using internet banking.

Section 3 Banking ExperienceRanking of customer satisfaction features and criteria based on Likert scale of 1 to 5.

Section 4 Overall Satisfaction Level Level of overall satisfaction of the banking service.

1 Oliver,R.L.(1980a),“Acognitivemodeloftheantecedentsandconsequencesofsatisfactiondecisions”,JournalofMarketingResearch,vol. 17(November), pp. 460-469.2 Soderlund,M.(2006),“Measuringcustomerloyaltywithmulti-itemscales:acaseforcaution”,InternationalJournalofServiceIndustryManagement, vol. 17, no. 1, pp. 76-98

Asian Link 24

The Customer Satisfaction Index

The Customers’ Satisfaction Index is computed based on coefficients obtained from the regression of all six dimensions on the ‘Overall Satisfaction’ level. The “Environment”, “Staff” and “Image” are found to be the three most important factors influencing overall customer satisfaction, followed by “Counter” and “Products and Services” while ‘ATM’ services was marked as being of least importance.

The industry Customers’ Satisfaction Index is estimated at 69.83% (100% being fully satisfied customers). Seven of the 17 banks are found to have performance index below the industrial index with the highest and lowest being 73.21% and 65.27% respectively. The range difference is about 8% which, for practical purposes may not be of much significance. The calculated figure indicates that customers are moderately satisfied with the products and services of banks in Malaysia. In addition, customer satisfaction does not correlate strongly with bank size. It seems that the smaller, more specialised banks are able to satisfy the customers better. Six of the smaller banks are placed in the top 10.

The Six Dimensions of Customer Satisfaction

1) Bank Staff 2) Service Counter

1. Level of banking knowledge and skills 1. Waiting time before you are served

2. Warm and friendly gestures 2. Operational hours of the bank

3. Appropriate solution and feedback to customer’s problem or problems

3. Handling the banking transaction accurately

4. Respect to customers 4. Number of operating counters at any point of time

5. Understanding banking needs of customers 5. Overall online banking services

6. Delivery of services promised 6. Bank call-centre services

3) ATM Service 4) Products and Services

1. Safety of ATM location 1. Financing charges

2. Waiting time at ATMs 2. Variety of product offering

3. Availability of ATM machines 3. Hiddencost/fee

4. Conducting banking transactions through ATMs 4. Quality of products and services

5. Availability of cheque deposit machines 5. Customised products and services

6. Security transaction at ATM machine

5) Bank Image 6) Environment

1. Trustworthy bank 1. Location of the bank

2. Competent bank 2. Parking facilities

3. Financially sound bank (solvency, liquidity, quality of assets)

3. Quality of promotional materials

4. Customer orientation 4. Information provided by the bank

5. Technology excellence 6. Appearance of the premises

Takeaway for the Industry

The study has revealed exciting inputs, by investigating

factors which customers perceived as important to their

satisfaction level in dealing with banking services. Results

from the survey give valuable inputs for the industry in

strategizing their position to increase their service level and

be ready to face the competitive environment in attracting

customers. Our interest in this study focused on identifying

factors that influence customer satisfaction in retail banking

in Malaysia and developing the customer satisfaction index

of banking institutions in Malaysia which can be called as

the Malaysia Banking Customer Satisfaction Index (MBCSI).

Hence, based on the study, the most important results

include:

A total of 9 of 17 banks have their highest score for •

‘Staff’, whereas 7 of the 17 banks have ‘Image’ as their

highest score.

The MBCSI is estimated at 69.83%, which can serve as •

the industry benchmark. Seven of the 17 banks are

found to have performance index below the industrial

25 Asian Link

index with the highest and lowest being 73.21% and 65.27% respectively. The range difference is about 8% which, for practical purposes may not be significant. The domestic banks posted lower average score for •‘Products and Services’ and “Counter” as compared to the foreign banks. These show that respondents are more satisfied with products and services as well as counter services offered by foreign banks. “Staff”, “Image”• and “Environment” were the three most important factors used by banks’ customers to be engaged with satisfaction. These factors are perceptual and subjective, thus, banks need to make sure that factors contributing to the build-up of these perceptual images are taken care of.“Image”• and “Staff” are the top two dimensions that received the highest score in terms of satisfaction by customers. This bodes well with the efforts taken by Bank Negara Malaysia in improving the image and perception of customers on the banking industry in Malaysia and the continuous enhancement in the quality of talent in the industry. ‘Service Counter’ • and ‘Products & Services’ received the least score in terms of satisfaction by customers. Customers are relatively less satisfied with the level of services provided on items such as waiting time, operational hours, transaction accuracy, online services and call centre performance. There is also a need for further improvements in areas involving financing charges, products, information on possible hidden cost or fees, quality of products and customised products and services.Even though the relatively more tangible aspects •(i.e.products/servicesofferedandATMservices)arenot considered as of much significance, these factors

are still important as they actually contribute to the actual determination of the image perception by the customers.

It is vital to understand that customer satisfaction is a dynamic parameter of the well-being of the business organisation. Therefore, changes in the current market may affect customers’ preferences and expectations and as a result, some satisfaction dimensions may become more important in the near future if customers give more importance to them such as in the case of usage of internet banking.

Dr Zamros Dzulkafli is a Research Fellow at the Applied Finance Research and Publication Centre at the Asian Institute of Finance

Banks Average Score Based on Dimensions of Customer Satisfaction

Score3.2

All Banks

Domestic Banks

Foreign Banks

Overall

Image

Staff

Environment

ATM

Product and Services

Counter

3.3 3.4 3.5 3.6

Asian Link 26

Once in every four years, the world comes

together to share in the excitement of a

sporting event that binds people in a spirit

of competitiveness, excellence and camaraderie. The

Olympic creed which appears on the scoreboard during

the Opening Ceremony of each Olympic reads, “The

most important thing in the Olympic Games is not to win

but to take part, just as the most important thing in life is

not the triumph but the struggle. The essential thing is not

to have conquered but to have fought well.”

In a greatly competitive world, we wonder whether the

Olympic motto of ‘Citius, Altius, Fortius’ (Swifter, Higher,

Stronger) still rings true not only in the sporting arena

but also in the larger walks of life. It should be noted

that the call is not be to be ‘swiftest, highest, strongest’

as the Olympic ideal encourages athletes to view

success in terms of effort and the constant striving for

improvement to achieve one’s personal best.

With the Olympics as a background, the world’s biggest

sports stage can indeed teach talent managers a great

deal of lessons that are not only applicable in the sports

arena but also in the corporate minefield. The business

battlefield is getting extremely competitive and talent

scarcity is the common buzzword in the corporate

By Joyce Nesamani Simson

Really Now?

WinnerAll

The

Takes it

Discovering Talent Lessons from the Olympics

Asian Link 26

27 Asian Link

scene as businesses acknowledge their competitive advantage is derived by a well-managed talent pool. As talent becomes more mobile while brain drain and brain gain can be seen as the two-faces of the same coin, talent managers need to master the skills to choreograph an environment conducive for talents to thrive and grow. Employees too can be regarded as athletes whereby without continuous communication, coaching and opportunity, talent cannot improve.

Set short, mid and long term goals

Organising the Olympics is a huge project which takes at least a decade of planning. There are various elements that have to be considered before a nation can bid for the honour of hosting the Games. Much like the Olympics, talent leaders must be able to strategically plan and set short, mid and long term goals for the organisation. They must be able to visualise where the organisation will be headed towards and the talent needs of the organisation in the future. Clear and compelling goals certainly provide focus and direction for the organisation.

It is often said ‘Failing to plan is planning to fail ’. Though this may seem like an overused phrase, the truth of this statement cannot be denied. Organising the Olympics as well as preparing to compete for the Olympics is a long-term goal. What we see during the two weeks of action is a culmination of a decade of planning and the success of the actual event resounds from the detailed planning and intensity of execution. This certainly rings true in organisations whereby the leaders must have clarity of vision and detailed plan set in motion to chart the organisation through the turbulent business currents.

Constantly coach employees to be on the top of their game

Training is extremely important for a world class athlete. Each athlete who

qualifies for the Olympics has to undergo

rigorous training to reach the world stage.

Talent managers must constantly coach

employees to be on the top of their

game. The business world certainly can

learn valuable lessons from the sporting

arena whereby coaching plays paramount

importance in enabling the athlete to push

his boundaries and perform extraordinary

feats.

Talent managers must view coaching as an

important organisation tool to build their

talent pool. Training and development

is needed to expand and polish the

employees’ capabilities. Training and

development enables the employees

to keep abreast with the competition

around them and develop their personal

capabilities. Coaching has to become

more than just a buzzword and needs to

be weaved into the organisation as a way

of life to produce talent who will be able

to perform beyond borders.

Communicate the employees fit in the bigger picture

Thousands of hands are involved in the

production process of any Olympic Games,

from planning staff to construction workers

and even volunteers. It has been reported

that his this year’s London Olympics will

include 70,000 volunteers who will work

8 million hours over the 17-day event. In

a corporate organisation, employees must

understand and appreciate how they fit in

the bigger picture. This will enable them

to view themselves as worthy contributors

towards the organisation’s goals and

mission.

Just like at theOlympics, not every

person is called to be an athlete or the

construction worker or the planner, yet no

role is less important or less worthy. Each

person is needed to make the Olympics

a success. In the same manner, each

employee brings his own strength and

capability into an organisation and the

organisation relies on this talent pool to

take it to the next sphere of success. The

talent managers must communicate the distinct role each employee plays in the organisation to enable the employees to feel a sense of belonging towards the organisation as well as contribute to its success.

Tailor motivation needs to the individual

At the Olympics, each athlete has a different training agenda and dietary requirement as required by the respective sport they are involved in. The training and dietary requirements for a swimmer certainly differ from the requirements for a gymnast. Though both compete for the gold medal in their sport, the means to achieve this goal is not the same. With this, it will certainly be unwise to attempt to use the same training methodologies for both the swimmer and the gymnast.

In the same manner, talent managers must be able to ascertain the strength and motivation of their employees and tailor the motivational needs to the respective individual. The diversity of today ’s workforce which constitute various generations working together and the blend of different personalities and nationalities in the workplace creates a unique challenge for the talent managers to provide the relevant motivation for theiremployees.Justastherighttrainingis vital in the athlete’s quest for gold, the right motivation is vital for the employees’ quest for professional excellence.

Though much has changed since the inception of the Games in Greece, the spirit of sportsmanship still rings loud and clear each time the nations gather for the Games. The sight of our fellow human beings accomplishing great physical and mental feats can inspire nations and individuals to strive for excellence. Translating this analogy into the corporate world, talent when managed at its best can deliver world class results.

Joyce Nesamani Simson is a Manager, Programme Development at the Asian Institute of Finance.

Asian Link 28

The Asian Institute of Finance (AIF), in

collaborations with the Compliance

Officer Networking Group (CONG)

and the Institute of Bankers Malaysia (IBBM),

has successfully organized the International

Conference on Financial Crime and Terrorism

Financing (IFCTF) 2012.

Held on September 24 and 25, 2012 at the

Shangri La Hotel Kuala Lumpur, the 4th edition

of the IFCTF saw a record number of 600

InternationalConferenceFinancial Crime

The

and

on

By Fara Iza Abdul Rahim

delegates from across the financial industry,

government bodies, policymakers, regulators

as well as foreign and local universities.

Themed “Compliance, Chal lenges and

Effectiveness: The Next Level”, the Conference

was a cont inuance f rom the previous

edition’s “Raising the Bar in Compliance and

Enforcement”. While the past 3 years had

emphasised more on awareness and creating

understanding, this year the conference

TerrorismFinancing 2012

29 Asian Link

focused on measuring the effectiveness of our effort and help prepare Malaysia for the assessment by international bodies such as the World Bank, Asia Pacific Group and the International Monetary Fund.

The event was officially graced by the Deputy Inspector of Police, YBhg Tan Sri Khalid Abu Bakar. Tan Sri Khalid had emphasized the need for enforcement agencies such as the Royal Malaysia Police (PDRM) to continuously keep abreast with new technologies. In his speech, Tan Sri Khalid stressed that the police must also keep pace with the latest financial crime tactics.

The Plenary Session which followed the Opening Ceremony, had showcased several international experts discussing on “risk-based assessment”, measuring the “effectiveness of compliance”and corporate as vehicle for money laundering.

Focus was also on the implementation of the new guidelines by the Financial Action Task Force (FATF), an international body to develop policies to combat money laundering and terrorism financing. This is eminent as on Feb 16, 2012, the FATF issued revised guidelines to strengthen global safeguards and further protect the integrity of the financial system. Four key issues addressed by the guidelines were financing of proliferation, corruption and politically exposed persons, tax crimes and terrorist financing.

In summarising the 1st day of the Conference, Dato’ Latifah Merican Cheong, Advisor, Chairman’s Office, Securities Commission Malaysia, had stressed the importance of collaborations between authorities in the region to tackle money laundering and financial crime in order to boost investors’ confidence.

The IFCTF 2012 also addressed the frightening increasing

trend in cyber security issues as well as insurance fraud.

CONG Chairman who is also the Conference Chairman,

Encik Mad Yusof Yazid had said that the inclusion of

cyber security was due to the growing threat especially

of Internet scams in the country involving financial

institutions. This helps to increase awareness as well

as able to share the best practices from other parts of

the world in terms of managing and detecting fraud

and money laundering.

Supported by BNM, the 2-Day Conference featured

prominent speakers and personalities from around

the world, sharing their views and experiences. Over

40 speakers spoken at the 2-day Conference, including

from the U.S. Department of the Treasury, Federal Bureau

of Investigation (FBI), The Government of the Hong

Kong Special Administrative Region of the People’s

Republic of China, Austrac Australia, Royal Customs of

United Kingdom, Bank Negara Malaysia (BNM), Royal

Malaysian Customs, Security Commission, Malaysian

Anti-Corruption Commission as well representatives

from universities and notable compliance officers and

authorities from other parts of the world.

Overall, the Conference was a huge success and has

helped to enhance knowledge and capabilities of the

compliance officers in Malaysia and increased the level

of understanding as well as cooperation with other

parts of the world in our efforts to combat financial

crime and terrorism financing.

Fara Iza Abdul Rahim is a Manager at the Applied Finance Research and Publication Centre, Asian Institute of Finance.

Asian Link 30

ForumSymposium 2011

4th International Conference on Financial Crime and Terrorism Financing 2012

31 Asian Link

Asian Link 32