Tuesday, April 14, 2015

I believe

I believe Tun Dr Mahathir had noble intentions when he raised a few questions publicly to the Prime Minister. At his age, what else could he possibly want? Tun spent 3 decades of his life in Government (22 years as PM) and continue to give advice on issues even after his retirement. He only wants what is best for the party and the soil that we stand on today - Malaysia.

I believe the Prime Minister still has the highest level of respect for Tun, judging from his tone and angle during the Soal Jawab. The sacrifices and contributions Tun made in developing unity and growing our economy throughout his years as Prime Minister are engraved in the hearts and memories of many of us. He gave the good years of his life to this country.

I believe Tun's questions on 1MDB were fair. Many are confused with what's happening. But the confusion stem from the complexity of the topic (money markets and corporate finance are dry topics to many) and further complicated by the many statements out there. There have been too many contradicting statements including those from the Treasury and 1MDB CEO. Let's not forget the fact that people also read Sarawak Report and The Edge's stories on this topic. I wonder why the Government or Treasury hasn't setup a 1MDB Taskforce (Comms) just like we always do with other issues. If we are gonna talk, shouldn't we have just one source, one voice and one storyline with solid facts?

I believe that the RM50 billion assets and RM42 billion liabilities are on the table as audited. But we must understand also that 1MDB is losing money with these assets and investments. Soon, the net assets will become net liabilities if we do not restructure not just the debt but also the subsidiaries and the operating procedures soon enough. We cannot depend only on monetizing some of the 'idle' assets quickly, such as Tun Razak Exchange. We must never forget those companies and transactions that cause 1MDB to be in the red. Otherwise, profits from TRX will just end up covering the losses elsewhere. I know we have the expertise in Government, Treasury and other investment arms to help turnaround this into a success and I believe we can.

I believe the Prime Minister has taken bold steps and was being transparent in his actions on 1MDB. He made the right move when he ordered the Auditor General to verify 1MDB accounts after which the report will be passed on to the Public Accounts Committee which comprises of Opposition leaders like Tony Pua. Let's be fair and honest here. Did you expect the Prime Minister to make this move? Surely not if you think he has something to hide. Whatever reasons or explanation the Prime Minister gives on 1MDB will never be accepted by critics now. As supporters of the Government, the party and as concerned citizens, we should wait for the Auditor General's Report on 1MDB before we comment further.

I believe we should applaud the Prime Minister when he agreed with UMNO Youth's request that the audit should be thorough and completed as soon as possible. This is the single, most credible piece of document that could answer all questions out there, hopefully, and we must have it on the table fast.

I believe the Economic Planning Unit of both Federal and State Government of Johor should come out publicly to share and explain the cost benefit analysis for the proposed crooked bridge (within the borders of Malaysia). The Government can afford a bridge but the benefits must far outweigh the costs for anyone to invest in it. Besides environmental and legal issues, of course. Surely someone has done some studies on this project, no? We have heard the argument that the bridge will allow ships of certain sizes to pass the Straits of Johor and it could boost the shipment volume in Tanjung Pelepas, Pasir Gudang and perhaps Kuantan. But there might be other issues and challenges that we don't know and the agencies should not leave the Prime Minister in the shooting range. Speak up!

I believe the Prime Minister when he said that he did not order anyone to kill Altantuya and he has never met or known her. Swearing on the Quran is not a small matter. It is a grave and heinous sin if the truth is otherwise. And there is not a shred of evidence which links the victim to the Prime Minister. The closest we have seen was the doctored photo by an Opposition leader.

I believe Tun still cares for the Prime Minister and perhaps wanted to see a different side of him. The Prime Minister and Barisan Nasional must enter into the combative mode - attack and not back paddle to defend ourselves all the time. We must make a stand on policies and key issues, make it loud and clear. We need to focus on the details in whatever we do and whenever we communicate. After all, in this age of digital and social media where information flows freely and perception is key in politics, we should be detailed, fast, strong and articulate or risk falling behind.

I believe with Tun's vast experience in politics and Government, if both could still work with each other, Barisan Nasional will be at its strongest when that happens.

Saturday, March 21, 2015

11 Days from GST

We are 11 days away from the implementation of GST. You might think that the Government is going to make more money out of you. But did you know that, as a trade off, the Government stands to lose about RM20 bil from you for the implementation of GST? I will explain more later.

Actually, we have been talking about introducing a new, fairer tax system since the days when "someone" was Finance Minister in 1990s but I guess he had other ambition and priorities.

It stayed as nothing more than mere talk till one day in 2013.

On 29 August 2013 in Securities Commission, Treasurer General Tan Sri Irwan Serigar's announcement set off a media frenzy and those of us who were there saw journalists and analysts busy typing on their smartphones.

I can still recall the exact words. Tan Sri said, "GST is a must, no longer an option."

Ever since then, there are so many tax experts and web portals out there explaining about GST. I did a quick search and found the following links. Some are newcomers with easy to understand graphics:

a) www.apaitugst.com (newbie and trilingual, makes you understand from the simplest perspective)

b) www.gst.customs.gov.my (all that you need to know, textbook-ish)

c) www.loanstreet.com.my/learning-centre/GST-In-Malaysia-Explained

d) www.imoney.my/articles/why-malaysia-needs-gst

e) www.gst.com.my

There's no excuse in terms of implementation or knowledge. Every single piece of info, in whatever form, they are all out there.

From the point that it was formally announced in Parliament in Oct 2013 till today in March 2015, the entire economy and population had more than 500 days or 17 months to learn about GST and to adjust to the forthcoming GST.

It is either you want to do it and understand it, or you just can’t be bothered and prefer to be abusive and grumpy.

Over the past week, I saw and heard so many excited chatter among friends and relatives about the holiday they just booked in MATTA Fair and when the conversation moved on to politics, it was all guns blazing at GST.

It shows how ignorant we Malaysians are. The countries that you are traveling to have GST too, you know? China’s GST rate is at 17%, Korea (10%), Indonesia (10%), Thailand (7%), Vietnam (10%). Even Burkina Faso and Burundi have GST!

A total of 6.3 billion people lives under a GST regime in the 169 countries. Surely, there’s a reason why countries implement this tax system.

In Malaysia, we have over 6 mil registered taxpayers but only less than 2 mil actually pay taxes. We have over 500,000 registered tax paying companies but less than 110,000 pay taxes,

Any country in our position would have thought about GST. But it wasn't an easy move for the Government in today’s political climate.

The Government had to give something back in return for people to accept GST and these are not small sums. Take a look:

(a)   Government will abolish the Sales and Services Tax (SST). And did you know that in 2014, Government received RM17.8 bil from SST? They are gonna lose this.

(b)   Those who earn RM4,000 per month and below will no longer need to pay income tax. For the rest, it will be a 1-3% reduction in tax rate. The Government received RM26.7 bil in 2014 and just a 2% reduction means the Government is letting go RM530 million.

(c)   Government is reducing corporate, cooperative and SME income taxes. In 2014, the Government received RM68 bil. At 1% reduction, that's another RM680 million gone from Government revenue.

Welfare and cash handouts have also gone up. Just BR1M alone costs the Government RM4.9 bil for over 7 mil people.

We have not even touched public hospitals and education costs borne by the Government. They are not cheap. Medical services and facilities cost the Government RM23.3 bil per year.

Government must pay these bills. How?

There’s no other option but to re-engineer the wealth of the society and channel taxes from high end consumers back to the bottom 40% households. The more you consume, the more you pay, the more the Government has to give back to the bottom 40% households.

GST is a must, no longer an option.

Thursday, March 12, 2015

Malaysia's RM 744.7b external debt

I have not read what the Ministry of Finance prepared for the Prime Minister in Parliament. But media outlets, both print and online media, went out with headlines like "Malaysia's external debt tripled to RM740 billion".

I won’t blame the media here and I must say this - Treasury should be more politically sensitive in future.

The statement gave naughty ideas to poster boys like Suara Rakyat to go all out by pushing content such as “Hutang Negara RM744.7 billion - Hutang negara di era pemerintahan PM Najib Razak!”

Some even went as far as saying that the Government was hiding numbers and massaging statistics in the past few years.

In actual fact, it was in 2013 when the International Monetary Fund (IMF) proposed a wider coverage for external debt. The international standards was prescribed to all member countries to comply with. This redefinition of external debt was to include several more items that were not covered before.

External debt now takes into account the non-resident holdings of local-currency denominated debt, deposits, loans, liabilities etc irrespective of the currency denomination of the debt.


External debt by maturity and instruments
Old definition
New definition
Inter-bank borrowing in foreign currencies
Maintain
Inter-company borrowing in foreign currencies
Maintain
Bonds issued abroad
Maintain
Other loans in foreign currencies
Maintain
Trade credits
-
NEW
Non resident holdings of domestic money market instruments
-
NEW
Non resident holding of domestic bonds
-
NEW
Current and deposits
-
NEW
Other liabilities by non resident
-
NEW
Source: BNM Q1 Bulletin - Economic and Financial Developments in the Malaysian Economy

In Q1 2014, BNM adopted this new definition of external debt and the first redefined external debt number was published. That was one year ago! So before anyone gets excited, please don't. Sudah basi, old news!

BNM’s Q1 2014 bulletin reported that our country's external debt (both private and public) was RM700.1 billion and the higher external debt was attributed largely to higher offshore borrowings by the private sector and non-resident holdings of ringgit denominated debt securities.

It is related to the company that many of you work with, it is related to the Mat Salleh in your company HQ with an account here, it is related to your Japanese banker whom your company owe money to.

If anyone actually bothered to dig further by clicking and opening BNM's External Debt report on their website, you will notice that

Federal Government debt - medium and long term offshore borrowings - have remained stable and low. It was RM13.8 bil in 2009 and for the financial year ending 2014, it only increased marginally to RM16.8 bil.

-  In terms of ringgit denominated Government securities held by non-residents, it currently stands at RM151.4 bil.

If you add both up, the total debt exposure of Federal Government 'externally' is just RM168.2 bil (22.6 percent of total external debt).

The balance here which is RM744.7 bil - RM168.2 bil = RM576.5 bil, this is not Government's debt at all. These belong to the private sector, the banking sector, and others such as deposits held by non-residents.

To pin the whole country's external debt on Najib is unfair.

It is clear to many that debt is not necessarily a bad thing as long as you have growth. You borrow to grow your wealth through strategic investments, just like how we borrow money to buy properties.
As long as Najib and Zeti sets the right policies for sustainable economic growth and solid fundamentals in our financial systems, debt and debt repayment should not be a concern.

By the way, there are easily 30 countries, if not more, with external debt higher than us such as South Korea (Q3 2014: USD65.8 bil, General Government) and Japan (Q3 2014: USD926 bil, General Government).

But of course, it is too late now for anyone to reach out to the masses who don’t understand the national accounting and economic terms. Damage has been done. Ini semua salah Najib, kan?

This is perhaps the most disastrous year in terms of communications for the Government.