Update 7

The following is the speech made by the President recently in Beijing:

Speech delivered at the China Appraisal Society (CAS) Valuation Standards Advisory Committee Meeting at Beijing on 11 September 2010

(The speech was accompanied by a number of documents that are referred to herein, and included in a bundle)

The recent global financial crisis, like many other crises in the past, was one where real estate played a central, complicit role. The crisis itself brought the United States and the rest of the world to almost a "depression deeper that the Great Depression", as narrated by Andrew Ross Sorkin in his Bestseller “Too Big To Fail”. The United States economy and the economy of the world was saved only because they managed to act boldly, as they did, in a coordinated manner, and supported by many other countries from around the world, by pumping billions in stimulus money into the world economy.

The stimulus money was at best a Keynesian measure as when it is withdrawn or as the flow ebbs, the world economy will still need to adjust to a new, sustainable level of consumption and supply of goods and services.

Many eminent authors including Nobel laureates have, since the crisis, dwelt into the causes of the crisis and from the many books that have been published, including "The Great Inflation and its Aftermath" by Robert Samuelson, “The Crash of 2008 and what it means” by George Soros, "Fool's Gold" by Gillian Tett, "Freefall" by Joseph Stiglitz, "The Meltdown Years" by Wolfgang Munchau, "Crisis Economics" by Nouriel Roubini with Stephen Mihm, and "Fault Lines" by Raghuram Rajan, it is clear as to the complicit role of real estate in the crisis, and there are hints that valuations need to be better conducted in a reconstituted new global financial architecture.

To the valuation profession, it must be a cause for concern that real estate played a large and complicit role in the crisis and that it was not just in this financial crisis, but in many or most financial crises of the past. The valuation profession is a profession that operates in the real estate markets, notwithstanding the recent, yet insignificant, efforts to enlarge its role to businesses and financial interests.

Post the crisis, in the search for measures to recalibrate the financial system, or at least to make a start to such an effort, the rating agencies have been singled out because their ratings of the collateralised debt obligations that were built up from mortgages were not accurate enough. It may be noteworthy that light has not been shone at the valuation profession for supporting values for lending purposes that were, with the benefit of hindsight, clearly in bubble territory. Not yet anyway. But that prospect is worth being concerned about, at least as an internal examination within the Valuation Profession. For example, is the mere, timely, opinions of market value sufficient as a support mechanism for lending based on the collateral of real estate? Should not the Valuation Profession contemplate other options such as market worth calculations as well, and for project financing insist on proper and detailed market and feasibility studies as undertaken by Valuers acting also as property consultants, as they do in some jurisdictions?

Valuation Standards can be, and ought to be, substantially strengthened from the current levels to emphasise a clear distinction between market value on the one hand and market worth on the other, and the need for both estimates to be undertaken for effective decision making in the real estate markets. The requirement that market value derives only from valuation models whose inputs (including discount rates) come from market derived data must be given greater emphasis than as is required now. If the inputs are not market derived you cannot call the end result a market value. Valuation Standards especially for more important valuations, for example public domain valuations, must require explicit and substantial justification and substantiation and where required, reconciliation between comparables or between approaches. Valuation models that are developed to estimate the market value of properties for various purposes must be calibrated to the market. Whilst valuation processes for real estate are made more rigorous, similar substantial, justification and reporting requirements must be demanded from Valuers of businesses, including intangibles and financial interests.

The Malaysian real estate valuation framework is fairly robust because:

At the apex, it is overseen by an Act of Parliament, The Valuers, Appraisers and Estate Agents Act 1981 (as amended and as being amended again currently) - See a copy of the Act and Rules in the bundle that accompanies this paper.

The Act is supported by The Valuers, Appraisers and Estate Agents Rules 1986, that can be amended from time to time by the Minister of Finance, usually with advise from the Board of Valuers, Appraisers and Estate Agents. It is expected to be further amended once the amendments to the Act go through the current session of Parliament.

Both, the Act and Rules are further supported by The Malaysian Valuation Standards that is set by the Board of Valuers, Appraisers and Estate Agent under powers conferred by the Act. The Standards are clearly not just principles based but rules based as well and it enables disciplinary action to be taken quickly and arising from any complaint from the public. There is a due process before any punishment is meted out. The Standards are in the process of being amended.

In the Asian context, in particular, purely principle based standards are inadequate for regulating the profession. There is a need for rules bases standards as well and this may come in the form of Best Practice guidelines.

The Securities Commission of Malaysia has much stricter, user guidelines, for public domain valuations. There is also a set of Best Practice Guidelines. See copies of the Asset Guidelines and Best Practice Guidelines in the bundle.

Valuers in Malaysia are usually also professional members of the Institution of Surveyors Malaysia. The Board is the regulatory authority whilst the ISM is the professional body. See www.ism.org.my

Valuers in private practice in Malaysia are usually also members of The Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector, Malaysia. See www.peps.org.my

The Valuation and Property Services Department of the Ministry of Finance is a 2,000 strong public sector valuation organisation that undertakes valuations for taxation purposes as well as many other public sector related valuations and property consultancies. See www.jpph.gov.my. The Department is supported by two bodies (a) the National Institute of Valuation (INSPEN) (www.inspen.gov.my) and (b) the National Property Information Centre (NAPIC) (www.jpph.gov.my). The property sales data and property market data assist Valuers in Malaysia (public and private sector Valuers) in undertaking valuations, property consultancy, property management, estate agency, investment advisory and market and feasibility studies, the latter of which is a

requirement for any project financing by banks. The mere dissemination of substantial real estate data and information results in a more efficient real estate market which leads to a more efficient economy since real estate is a major pillar of any modern economy.

Malaysia is part of the 10 member South East Asian group of countries known as ASEAN. ASEAN has a current population of about 580 million and it is strategically located between the two emerging economic superpowers, China and India. For the past 30 years the ASEAN countries have had a valuation organisation known as the ASEAN Valuers Association or AVA. AVA is now poised for further, rapid growth as the forces of liberalisation sweep through the region, in line with an accelerated agenda that is driven by the governments of the 10 member countries of ASEAN. See www.aseansec.org and www.aseanvaluers.org

The Valuation profession is an infant, in a sunrise industry.

It has miles to go before it sleeps - to part quote Robert Frost.

"It does not matter how slowly you go so long as you do not stop." - Confucius.

This speech was been prepared by:

Elvin Fernandez, FISM, FRICS

President, Institution of Surveyors Malaysia (ISM)

All Rights Reserved

Copyright @ 2010 Elvin Fernandez

September 2010

Update 6

At the recent Council Meeting on 26 August we have decided, after debate, that we need to act on our agenda on internationalisation. We propose to create a new class of membership for Surveyors who are not members of ISM and who are practising Surveyors, particularly in countries around the region such as ASEAN, China, India, Pakistan and the Middle East. Such members however cannot practice in Malaysia and can join ISM and use the ISM letters after their name and follow the developments in the profession though the dissemination of information through ISM channels and take part from time to time in ISM activities. Our journal is at the same time being upgraded and our website is becoming more and more state-of-the-art. Members are welcome to comment on this and start the debate. On 18 December 2010 we shall have an EGM in Kuala Lumpur to debate and if thought fit, pass the amendments to the Constitution to effect the changes.

We are also preparing to invite a very prominent personality on that day of the EGM to give us a talk on liberalisation.

The Sarawak Branch will be having a one day event on 20 October to get all the 400 ISM members in Sarawak to come together and take part in a whole day seminar. Members for other parts of Malaysia who want to take part are welcome to contact the Sarawak Branch.

The Technical Tour cum sightseeing trip to India (New Delhi, Mumbai and optionally Goa) for 7 and 10 days respectively is gathering steam. So far 45 persons have signed up. We can accommodate more. For more information please see details on this website.

Plans for our Pan-Malaysia celebrations for our 50th Year in 2011 are also gaining momentum and throughout next year we will celebrate our successes of the past 50 years as we pledge to rebrand and continue our services as Surveyors to the Malaysian public. The Commerative Book is in the final stages of preparation and hopefully will be unveiled on the 18th of December at our EGM.

Update 5

On 8 July 2010, a small delegation went to meet with the Secretary General of the Ministry of Works, Y. Bhg. Datuk Thomas George was discussed at length and the issues surrounding the proposed Building Surveyors Act. We believe it was a fruitful meeting where many important issues were resolved. We brought clarity to some of the issues that have been holding up the Act and we remain hopeful that the proposed Act can be passed soon.

The 14th PAQS Congress was held in Singapore from 24th – 27th July 2010, by the Singapore Institution of Surveyors and Valuers (SISV), jointly with the International Cost Engineering Council (ICEC) 7th Congress. A total of 49 Malaysian delegates attended the Congress led by our council member and Chief Delegate, Dato’ Sr Abdull Manaf. The theme of the Congress was ‘Sustainable Cost Management: Borderless Innovation’ and the quality papers delivered along this theme were indeed invigorating.

At the same time, the 16th ASEAN Valuers Association (AVA) Congress, under the theme “Towards a New Era of Valuation Development” was held from 22 – 24 July 2010 at Dusit Thani Hotel, Bangkok, Thailand. It was well attended by more than 300 persons and extremely well organised by our Thai counterpart. At this Congress, the Governing Council of AVA met, and Malaysia made a bid for the Secretariat to be moved to Malaysia along with a bid for the posts of Secretary-General and Treasurer. We succeeded in the bid and I am now the Secretary General, and Faizan Bin Abdul Rahman, the Treasurer.

Our first Council Meeting for the 50th Session was held on 28 July 2010 and we have established a new item in the agenda, i.e. to discuss at some length one topic rather than go through just the usual agenda. At the meeting we discussed the issue of liberalisation and, after some debate, decided that as a common stand, we hold that it would be best serve in the interest of the surveying profession for liberalisation to be proceeded on a measured basis, and for equity participation to be not more than 49%.

It is likely that at the next Council meeting, the special issue to be discussed will be Green Issues. All ISM members are invited to write in, in advance of our Council Meeting, regarding their opinions as to the green movement, from their own Divisional Perception or from the point of view of surveying as a whole.

The 21st National Real Estate Convention Malaysia was held at the Istana Hotel on 3 & 4 August 2010 with the theme “Opportunities in the New Decade” and is timely in view of the 10th Malaysia Plan (10MP) recently tabled at Parliament and officially opened by YB Tan Sri Nor Mohamed Yakcop, Minister in the Prime Minister’s Department.

Update 4

In the weeks ahead, before the start of the fasting month, the activities at the ISM HQ include the meeting of the Special Committee set up to organise activities for the 50 Year celebrations in 2011, The Management Committee meeting on 20 July and the First Council Meeting for Session 50 on 28 July. Divisional, Branch and other subcommittee meetings are also being held.

The 14th PAQS Congress and Board meeting are to be held in Singapore from 23 to 27 July 2010. The venue is the Resorts World Sentosa, Singapore and the hosts are the Singapore Institute of Surveyors and Valuers (SISV) with the congress theme, Sustainable Cost Management: Borderless Innovation. Kindly view this website for registration - http://paqs2010.com.sg. The PAQS website is www.paqs.net.

The 16th ASEAN Valuers Congress with the Theme "Toward a New Era of Valuation Development" is being held at the Dusit Thani Hotel in Bangkok from the 22 to 24 July 2010. On the day before, on 21 July, in the evening the AVA Governing Council meets. The Asean Valuation Association (AVA) was established in June 1981 with five founding members namely, Singapore, Malaysia, Indonesia, Philippines and Thailand. In 1990s, AVA was extended to include Brunei and Vietnam. Cambodia is the new member joined in 2009. Two other Asean countries namely Laos and Myanmar are not officially members yet as there are no formal valuation professions in these countries. They are now having observer status in AVA. Each country is represented by seven valuers from the public and private sectors and the academia to form the Governing Council. The AVA holds a congress once every two years on a rotating basis among the ASEAN member countries. The congress provides a valuable platform to share views, networking, interaction, a place to learn and exchange knowledge and information and foster comradeship and fellowship. Between congresses, there is a pre-congress meeting to prepare for the congress. The AVA website is www.aseanvaluers.com

On the 3rd and 4th August, ISM and PEPS are jointly organising the 21st National Real Estate Convention at Istana Hotel, Kuala Lumpur. The Theme: Opportunities in the New Decade. For details of the programme please see the full brochure elsewhere in this website.

We also welcome our first overseas Chapter, the UK Chapter and for some information on this see the "ISM News & Events" in our website. See also under "Institution Information - ISM Branches - UK Chapter" and we are inserting here a paper entitled "The Relevance of ISM's Global Presence" by Sr. Faisal Ahmad Zaidin who is the present Chairman of the UK Chapter.

I have been invited to attend the annual dinner of the Johor branch on 30 July 2010 and hope to see as many ISM members in Johor as possible.

Comments from followers of this blog are welcome on any matter.

Update 3

Dear Members,

This morning I attended, together with immediate Past President Associate Professor Sr Dr Hjh Wan Maimun Wan Abdullah, the 2011 Budget Dialogue, chaired by the Prime Minister YAB Dato' Sri Mohd Najib bin Tun Razak. It was a well attended session, at the Ministry of Finance, and there were 455 participants, from 175 organisations. The session which started at 9 am ended at 12 noon, was divided into three major parts, the Macro Issues, the Sectorial issues and the Social Issues. There were selected speakers for each part and at the end of each part a brief question and answer session ensued.

Prior to going for the Dialogue, ISM did submit a memorandum to the Ministry and did raise a number of issues obtained from some discussions with our various Divisions and Council members. However with more inputs from Divisions, Branches, Council members and members, our submission next year could be made even more comprehensive and focused. At the coming Council meeting we hope to set up a special committee that will be tasked with starting on the next submission, early, and once that committee is set up, it is hoped that members will support by contributing views and opinions.

The coming budget which is the first Budget post the release of the New Economic Model and the 10th Malaysia Plan, will be tabled in Parliament on 15 October.


Elvin.