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Sunday, March 16, 2014

#MH370 Incident and its impact to Malaysia

PFA Asia financial planners on #MH370 incident and impact to Malaysia

For the past 9 days, the 5-star rated Malaysia Airlines(MAS) and Malaysia government has become the world focus because of a flight bound from KL-Beijing vanished and lost contact. (at the time of writing, the latest report suggested the flight could be hijacked and search still carries on)

While there have been numerous theories or conspiracies towards the MH370, which we feel it is only appropriate left it to the capable hands of investigators. This article is written with the objective to discuss or evaluate the impact of this incident to the economy or a country as a whole.

With more than 200+ passengers on board of the Boeing 777-200, the impact is huge and it can be categorised as intangible or tangible impact.

Intangible impact (qualitative aspect)
1. Undue psychological and emotional stress imposed on the :
  • relatives and family members who are worrying on the safety of the passengers
  • ground crew and air line staff in handling the media, questions fired by the relatives
  • search & rescue crews who are restlessly looking for the clues
  • media and press personnels who are competing for the 1st hand news

2. The multiple press conferences answered by different heads from military, Dept of Civil
    Aviation(DCA) and Ministry of transport have lead to contradicting statements. 
    Furthermore, 2 stolen passports were used to board the air plane. This security breach,
    coupled with the capability to handle Major Crisis has tarnished Malaysia reputation.

3.  MAS has a solid in flight service & safety record and is awarded 5 star airline by
     Skytrax. Will this incident affect MAS brand in passenger safety ?
Tangible impact (quantifiable economic value)
1. Search and operation cost for the past 7 days, involving 43 ships, 58 air crafts, sea, 
    air personnels from 14 countries,all over the regions. 

PFA Asia financial planners on #MH370 incident and impact to Malaysia
Courtesy Star online Malaysia
2. Economic output of the passengers who are elite, professionals, business people that
    would contribute to the economic human capital of the countries concerned.

3. Potential claim provisions by the insurance companies. Life insurance and General 
    insurance companies are likely to be hit with the claims from plane, cargo, travel cover, 
    group term, individual life and personal accident insurance.
4. Since Malaysia is a signatory to Montreal Convention in 2008, which controls ticketed
    international travel.This means MAS being the airline are subjected to the automatic 
    compensation scheme as well. (Montreal Convention provide 2 tier claims by airline : 
    155,000 International Monetary Standard per passenger and 25,000 advance to 
    each family members after 15 days of the incident) 

5. Potential lawsuits claims brought forward by the relatives or family members of
    passengers against Malaysia government due to security breach as the plane is
    potentially hijacked. And likely this claims will have to be compensated by the tax payers

In this time of need, it is touching to realise Malaysia have many friends near and far in the regions and around the globe like US, China, India, Japan, South Korea, Singapore, Vietnam, Thailand, Phillippines, Indonesia, Bangladesh who have extend help and support of the search operations. The only words can be expressed now is THANK YOU.

PFA Asia financial planners on #MH370 incident and impact to Malaysia

While it is premature to fully quantify the impact to the country as a whole, let take this incident as a learning and improve from here. It is still our hope the MH370 passengers and crew are safe and landed. The lost of money can be recovered but not the lost of lives. #Pray ForMH370.

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