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.

Sunday, March 08, 2015

Gender Inequality and Women in Malaysia

It might sound awkward that a man is talking about gender equality but just to clear this, in Emma Watson’s words, “Men, gender equality is your issue too”. I will take that invitation and begin to talk about gender inequality and women in Malaysia.

Let’s look at the Gender Gap Report which first started in 2006 and look at how we fared in 2014.


Gender Gap Report
Ranking (Malaysia)
Rankings – categories
2006
2009
2014
Overall
72
100
107
Economic participation and opportunity
68
103
104
Educational attainment
62
77
100
Health and survival
80
103
102
Political empowerment
90
113
132

I am not sure how to explain the rankings nor do I have the time to go through the complex methodologies used but in relative terms against other countries, perhaps what I can conclude is
  • we are progressing but at a slow pace
  • male domination and chauvinism still exists

Let’s try to have a fair assessment on where we stand with local statistics.

In our workforce, Malaysia has come a long way since 1982. There were less than 1.8 mil women employed in 1982 with a labour force participation rate of 44.5% and unemployment rate of 4.6%.

But in the most recent 2013 statistics, we saw the number of women employed almost tripled to about 5 mil with a labour force participation rate of 52.4% and unemployment rate of 3.4%.

This means that more than half of women of working age are employed and this is a first in the Najib Administration and the only time we have breached 50% since 1982.

I believe it will most likely remain at this band of 50%-60%.

Another recent encouraging news we read was from Hays Asia Salary Guide 2015. The employment of women in senior management roles in Malaysia has actually increased from 29 per cent in 2014 to 34 percent in 2015.

But if anyone wants to be negative about this, we can. Put this in another way, after so long, we still see men dominating the senior management roles.

In political leadership, the numbers are disappointing. I realized that there are only two women Ministers in our Cabinet - Nancy Shukri (Minister in PM's Department) and Rohani Abd Karim (Women, Family and Community Development Minister). In Penang's State Exco, there's only Chong Eng. In Selangor's State Exco, they have two - Daroyah Alwi and Elizabeth Wong. In Kelantan's State Exco, they have one women Exco - Mumtaz Md Nawi.

We can perhaps understand why if we look at the pattern in the GE 13 election results. In the recent 13th General Election, we saw a total of 168 female candidates named out of the 727 Parliament and State Seats. 71 women candidates were from Barisan Nasional, 77 from Pakatan Rakyat while the rest were independents or non BN and non PR. That is just 23%.

The results? 80 female elected representatives only. That’s a winning rate of 48% and participation rate of 11% in our houses of representatives. That’s not good. How did this happen?

Here’s my message to the voters. If gender was a key criterion when you voted in the 13th GE, perhaps you should do us a favour and stay at home in the next election.

In the Federal Government, we have seen a marked improvement where women today hold almost all of the key posts - from international trade and economic planning to welfare, education and healthcare. We have a total of 11 top ranked women in Government today. Perhaps, I should name them here:


Name
Position
Tan Sri Mazidah Abd Majid
Deputy Secretary General
Cabinet, Prime Minister’s Department
Tan Sri Madinah Mohamad
Secretary General
Education
Datuk Farida Mohd Ali
Secretary General
Health
Datuk Dr Rebecca Fatima Sta Maria
Secretary General
International Trade and Industry
Datuk Loo Took Gee
Secretary General
Energy, Green Technology and Water
Datuk Seri Dr Rahamat Bivi binti Yusof
Director General
Economic Planning Unit
Dato' Sri Noorul Ainur Mohd Nur
Secretary General
Science, Technology and Innovation
Dato' Sri Dr Sharifah Zarah Syed Ahmad
Secretary General
Communications and Multimedia
Dato' Seri Arpah Abd Razak
Secretary General
Housing and Local Government
Dato' Hasanah Ab Hamid
Director General
Research, Prime Minister's Department
Dato' Sabariah Hassan
Secretary General
Women, Family & Community Development


I have personally worked with a few of them in the list above plus a few other Director Generals of other Federal Government agencies. They are more than capable to lead!

But the Government can’t do this alone. It is as good as banking on only one sports legend – Nicol David – to carry the Jalur Gemilang in the sports arena when there are dozens if not a hundred different types of sport.

Based on a 2013 survey by Talent Corp, only 8% of board members of all listed companies were women and this is a long way off the Government's target of 30% by 2016. Why is it a Government target, I’m not sure, but although we must not forego meritocracy for the sake of meeting the numbers, any form of gender inequality on equal merits must not be tolerated especially by the private sector.

Perhaps what is lacking in Malaysia is an inspirational icon who can lead, educate and champion the cause for equality.

The fight against gender inequality must go on, especially in Malaysia. We cannot afford to slide further in the Gender Gap Report or slack in other initiatives.

Not just because Kofi Annan said that, “Gender equality is a precondition for meeting the challenge of reducing poverty, promoting sustainable development and building good governance”.

To me, it is about respect.

Happy International Women’s Day. #makeithappen