Thursday, October 01, 2015

You got it all wrong, GSIAC

Two days ago, I came across headlines that said Malaysia's GDP per capita in 2014 has exceeded world average for the first time.

This little piece of happy news was splashed across all print and digital news agencies, both local and international.

I wasn't too excited about this piece of news because the key focus now should be the compensation of employees as a percentage of GDP.

That matters more to the people. That's income into our pockets and we should speed up the progress.

The contribution of Compensation of Employees to Malaysia’s economy accounted for 34.3 percent only in 2014. Out of a RM1.1 trillion economy, people like me and you received only 34.3 per cent of it.

Anyway, I began to have doubts on the news when I found out that it was the Global Science and Innovation Advisory Council who came up with a statement on the economy.

GSIAC and MiGHT claimed that:
  1. Malaysia's GDP per capita in 2014 exceeded the average of all countries worldwide for the first time

  2. Malaysia's GDP per capita was at US$10,830 in 2014 while the average of all nations worldwide stood at US$10,804.

  3. In 2010 national per capita GDP was US$8,752, some 8% below the then-world average of US$9,513

And apparently the numbers came from World Bank.

Since World Bank data is one of the most easily obtained, I dug up the spreadsheet and cross checked the numbers in less than 5 minutes.

I was shocked when I saw the numbers. The following table is an extract from World Bank's GDP per capita spreadsheet.

GDP per capita (USD current prices)

So here are the facts:
  1. Malaysia's GDP per capita exceeded world average in 2012, not 2014 as claimed by GSIAC and MiGHT.

  2. Malaysia's GDP per capita in 2014 was US$10,933 and not US$10,830 while World average of GDP per capita in 2014 was US$10,725 and not US$10,804 as claimed by GSIAC and MiGHT.

  3. Malaysia's GDP per capita In 2010 was US$8,803 and not US$8,752 while the then-world average was USD9,458 and not US$9,513 as claimed by GSIAC and MiGHT.

Now, where did you get your numbers from, GSIAC and MiGHT? Who did the research?

Surely your numbers can't be from the World Bank, I am looking at the latest official spreadsheet that was downloaded from 

If you don't already know this, Wrong decisions can be made with imperfect or misrepresented information.

Numbers can affect investment decisions and in your case, strategic planning or at the micro level the scientific conclusion.

As a responsible council and Government agency, we must always be careful when we go public with numbers. You lose credibility easily unless you can defend them.

This celebrations and news on 'first time ever in 2014' should end now.

Monday, August 31, 2015

What's next, BERSIH?

The weekend’s yellow themed rally is over now. It was a very peaceful, disciplined rally I must say.

People expected tear gas and water cannons to be used on the BERSIH participants but none of that happened.

In fact, the police were there to ensure everyone's safety - divert traffic, gave advice to organisers and participants etc.

This, we should look at positively. Thumbs up to the police!

But there is a bigger picture to this that we must not miss.

Now that the 2-day BERSIH rally is over, to those who wore yellow shirts in KL and other cities, those who changed their Facebook profiles to yellow, those who stayed at home, we as Malaysians must all ask the hard questions now.

Where do we go from here? What's next? What do we want to achieve by the next General Elections?

We must not forget that BERSIH is about clean and fair elections. It is about reforms to the system.

One of the primary reasons people marched over the weekend was because of the USD680 million 'political donation' which went into Najib's account.

People demand transparency, people want him to resign because of it.

No one knows from whom it came from and people demand a tell-all answer from Najib despite MACC's statement that it wasn't from 1MDB but from the Middle East.

No one knows how it was spent on elections and let’s not beat around the bush, the people want answers. The full version.

But we can prevent all these from happening again and secure the better, brighter and transparent future that we all want, if BERSIH is willing to return to the objective of the movement and stay true to it.

A few weeks back, on 14 August, the Government announced the establishment of the National Consultative Committee on Political Funding.

The members of the committee include Akhbar Satar who is the President of Transparency International Malaysia, Wan Saiful from IDEAS, as well as activist Richard Yeoh.

This committee was set up to examine and evaluate legal mechanisms and rules used in other countries to curb and prevent corruption in political funding.

They will also be drafting the legal and regulatory requirements to facilitate the monitoring, transparency and accountability in political parties funding.

They have a year to complete this task, way before the 14th General Election is due. Whether anything will come out of it, I don’t know.

There’s always the ballot box where we can exercise our right to vote if we are disappointed with the outcome.

But before it even kicked off, Opposition leaders like Nurul Izzah were quick to throw in conditions and said "we cannot and should not proceed with such discussions".

Why not?

Let’s face it. Elected reps earn between RM5,000 – RM15,000 depending on whether you are an MP or ADUN and which state, plus the annual allocation of RM200,000 or more for the constituency.

Do you think that’s enough to feed a family, send kids to school, pay for political operations, contribute to local community, donate a token back to your party, fund programmes and the politician’s election campaign and at the end of the day, still have some savings for retirement?

Political parties receive political donations to fund programmes, operations and elections.

No politician or political party will unconditionally deny that they received donation from any individual or company.

Nothing is free and funds must come from somewhere.

Do we not want to know who or which company donated to UMNO, BN, DAP, PKR, PAS and the politicians, if any?

How much was given to them, what was the political donation spent on and why did they contribute to the party?

This is a grey area. An unsupervised, unlegislated space.

Questions like “why don’t you show your accounts first?”, “who donated that RM 1mil and expects nothing in return, seriously?” or “who funds your party? How did you manage to build a new office? Crony gave you money?” will never end.

These sort of quarrel between supporters of both sides will continue for eternity unless the element of transparency, through legislation, kicks in.

Let’s push for reforms, BERSIH. That was what you were meant to do.

The BERSIH rally was a movement, a symbolic action which is over now.

But the actual cause, the true objective, and the real work must go on. Surely, it can’t be just about anger, hatred, vuvuzelas, coloured shirts and placards.

So, let’s pressure our politicians from both sides of the political divide to back the political financing reforms.

Take the first step, support it. Will that be your next move, BERSIH?

Sunday, August 16, 2015

Are you bankrupt of ideas, Chin Tong?

YB Liew Chin Tong's piece - Five ways to save the Malaysian economy – is good but the recommendations are flawed, if not full of rhetoric.

Let's talk about numbers and not play with politics or emotions.

Because when we become emotional, we lose our ability to make rational judgement or decisions.

After my first article - Malaysians are now currency experts? - I have been labelled with all sorts of profanities when in fact the key message was Malaysia is not the only country that weakened against the US Dollars.

There are multiple factors for the weaker Ringgit which I've shown in my 2nd article ( Export-commodity prices and the Ringgit ) and the obvious factor of all is commodities prices - oil, palm oil and rubber - that crashed from their respective highs in 2011.

This is not about Government, Opposition or politics. We talk about facts, policies and numbers, and numbers don't lie.

Now, back to Liew Chin Tong's recipe to save Malaysia.

(1) Get Najib to quit as Prime Minister and (2) Name a new and competent Finance Minister

Let’s evaluate on how the Government handled this ‘crisis’.

Leave 1MDB aside for now, which let me be clear that I have slammed the Government and supporters since May 2015 in blogs and social media and I will continue to do so depending on the Auditor General's Report.

In a letter dated 26 December 2014, the Government ordered all Government departments, statutory bodies, GLCs and GICs to adhere to the following:

".. syarikat milik dan berkaitan Kerajaan serta badan berkanun dan syarikat subsidiarinya perlu memberi keutaman kepada pelaburan domestik serta menangguhkan serta merta pembelian aset di luar negara bagi mengurangkan pengaliran keluar dana"

Here's the letter:

The Government knew what was coming. Indicators were clear especially from the crash in commodity prices.

Three weeks later on 19 January 2015, the Prime Minister, Treasurer General and Governor of the Central Bank addressed the nation, analysts and media.

The Government slashed their operating expenditure and announced new measures to continue to boost the domestic economy.

As a result, look at our Q1 and Q2 GDP figures. Our economy grew at 5.6% in the first quarter, 4.9% in the second quarter.

Malaysia performed better than many other economies and we beat analysts' forecasts.

What would you have done differently, Chin Tong?

But if you ask me, if there’s something I’m unhappy about, it is the fact that some GLCs clearly ignored the Treasury Instruction and are actively scouting for, if not buying, properties and companies to acquire overseas. This puts pressure on the Ringgit, so, where’s the whip? I blame this on the weak leadership.

(3) Set GST at zero rate

GST is expected to contribute RM23.3 bil to Government. But we have abolished Sales and Services Tax that gave us RM17.2 bil last year.

We have also reduced both individual and corporate tax rates which will cost us perhaps RM1 bil - RM 2 bil in revenue.

We can expect lower revenue from the oil and gas sector of approximately RM27 bil.

So, by setting GST to zero, it will cause the Government to be short of close to RM70 bil for Budget 2016 and years to come if commodity prices stay at current levels.

Why make populist but irresponsible recommendations like this, Chin Tong?

(4) Halt big ticket crony projects

I am shocked that you want the Government to halt projects like Malaysia-Singapore High Speed Rail and MRT. We all thought you wanted better public transportation.

Of course, if Government cancels these projects that were meant for the people, it will be additional political capital for you.

You can then accuse the Government of wasting money on compensation and accuse the Government of not doing enough to improve public transportation.

By the way, which crony was awarded or won the contracts unfairly in both the projects - High Speed Rail and MRT?

You say there are other ways to boost the economy. If not infrastructure for the people, what are they?

(5) Halt intake of unskilled foreign labor

I like your recommendation that Malaysia must reduce foreign labour and push for mechanisation and automation.

But 70% of foreign labor work as maids, work in plantations, in constructions, in agriculture and services. Approximately 30% in manufacturing.

Government tried to limit the intake of foreign labour in 2010-2013 period and 'encouraged' automation in both plantations and manufacturing such as rubber gloves.

The Government communicates and work closely with the industries all the time and even gave incentives and organized international competitions just to source for ideas from the best.

But there are multiple factors that put off automation efforts especially terrain and costs.

And, we can't automate and mechanise maids, builders, or farmers, can we?

These are not excuses but innovation, mechanisation and automation are long term policies and they are already on the table, without even you suggesting them.

So, Chin Tong, any better ideas?

Wednesday, August 12, 2015

Export-commodity prices and the Ringgit

1.    If we look at the big picture, the Ringgit has been badly affected by confirmed as well as expected macroeconomic decisions in two of our major trading partners.

2.    The possible increase in US interest rates around September will strengthen the dollar further – theoretically investors will pull money out of other countries and invest in US securities with higher returns now.

3.    And yesterday when China devalued yuan against the dollar, Ringgit went down further.

4.    But our Ringgit to Dollar exchange rate has been declining since the good days in 2010/11.

5.    Commodities prices do contribute to the strength of our currency, especially when a significant percentage of our industries are either directly or indirectly linked to oil, palm oil and rubber.

6.    Since 2010/11, the prices of the most important commodities that we produce and export crashed. These commodities are crude oil, palm oil and rubber.

7.    Price of crude palm oil fell 47% since 2011. Palm oil peaked and was traded at RM3,811 per tonne in February 2011. In August this year, it is traded at RM2,034 per tonne.

8.    Price of SMR20 rubber fell 69% since 2011. At its peak, SMR20 rubber was traded at RM16.89 per kilo in February 2011. In August this year, it is at RM5.16 per kilo.

9.    As we all know by now, price of crude oil (Tapis Blend) crashed as well. For the period 2011-2014, crude oil was traded at above USD 100 per barrel, peaked at USD 119 per barrel in 2012. In July this year, it was USD 59 per barrel, which represents a 50% drop in crude oil prices.

10.    Notice how the change in prices of our commodities relate to the exchange rate.

11.    In 2011 when crude palm oil price was trading at a high of RM3,811 per tonne and rubber was RM16.89 per kilo, the value of exports from these two commodities alone were RM74 billion.

12.    Again, today, the prices of both commodities - palm oil and rubber - are 47% and 69% lower.

13.    When crude oil was above USD100 per barrel in years 2008, 2011, 2012, 2013 and 2014, the value of our crude oil and condensates export were between RM32 bil - RM 44bil.

14.    Again, the price of crude oil per barrel in July has halved from the previous years, and should come in a few percentage lower in August.

15.    The above does not include export value of derivatives and value added products as well as supporting and related industries that supply goods and services to other commodities-producing countries also.

16.    Prices of commodities are not the sole factor for the fall in Ringgit value against USD but it is a contributing factor.

17.    You may continue to read and believe emotional posts on social media and the politicians that by removing Najib or Barisan Nasional, things will be better. That is your democratic right.

18.    But the next time you see such posts online, why not ask yourself, your Facebook friend or the politicians a few questions?

19.    If you are sworn in as Prime Minister tomorrow, will the Ringgit strengthen by itself, will commodities prices swing upwards or what exactly are your plans to strengthen the Ringgit?

20.    Discuss or have a good laugh.

Tuesday, August 11, 2015

Malaysians are now currency experts?

Today, the Ringgit breached RM4.00 for a dollar.

When I logged in to my Facebook and Twitter accounts, 9 out of 10 posts that appeared on my timeline were slamming the Government on the Ringgit.

To sum them up, youths who dominate social media today were posting comments as though tomorrow spells the end for Malaysia.

And in just the past month, I saw how Malaysians transform from being constitutional experts, to aviation analysts and now economics.

Some even went as far as pushing the blame on UMNO and Najib. There's this group called Suara Rakyat who likes to say "other countries are doing better because UMNO is not there in their country".

Of course, when you have a narrow, myopic view, you will tend to miss out the fact that over the 5 year period,

•    Russian Roubles lost 114% against USD
•    Indonesian Rupiah lost 51% against USD
•    Indian Rupees lost 38% against USD
•    Norwegian Krone lost 37% against USD
•    Australian Dollars lost 24% against USD
•    Euro lost 20% against USD
•    Thai Baht lost 10% against USD

Do I need to go on?

One of the contributing factors faced by these countries is the drop in oil prices. Crude oil was trading at US$70-80 / bbl few years ago and today it has fallen below US$ 50 per bbl.

Also, US is not our only trading partner and the performance of our Ringgit is not measured against US dollars alone. When we look at the Ringgit, 

•    we strengthened against Canadian Dollars (2%)
•    we strengthened against Indian Rupees (10%)
•    we strengthened against Japanese Yen (14%)
•    we strengthened against Indonesian Rupiah (18%)

I don't need to name more currencies, do I?

Do you know that the value of our trade with India, Japan and Indonesia is close to 20%?

Understandably, we are quick to feed on negative news and quick to comment like an expert on our Facebook and Twitter. That's how things work these days.

Of course, none of you made reference to 1998.

No one remembered the time when the Ringgit crashed to as low as RM4.725 for a dollar on 7 January 1998 (BNM selling rate, over the counter was more than RM4.80).

All of you, who were quick to comment about the state of our economy on your Facebook, were still in school.

So none of you knew, none of you remembered, none of you experienced what happened in 1998 when Anwar Ibrahim was Finance Minister.

Back then

a)    People were losing jobs or had difficulty in getting jobs
b)    Households were squeezed
b)    average lending rate was 12.16%
c)    Inflation was close to 3% without subsidy removals.

If any of you doubt the 2-3% inflation numbers today and felt it is way higher, apply the same thought to 1998-1999.

And yes, average lending rate was over 12%. Those were the days.

You may say it is history and you may continue to slam the Prime Minister, the Central Bank and the Government for today's numbers.

But the next time before you get upset and share your anger on Facebook or Twitter, ask yourself whether or not the Ringgit - Dollar exchange rate affects you, and how.

1.    Do you shop online from US websites?
2.    Are you planning to fly over to US for a holiday?
3.    Are you a Malaysian studying in the US?
4.    Do you import goods to be resold in Malaysia?
5.    Do you buy necessities and food from the US to use here?
6.    Do you at all use the US dollar in your daily life?

Because my dear, only if you answer yes to the above, you are affected. Otherwise, what are you shouting and so worried about?

Your salary is still denominated in Ringgit and you don’t buy necessities with US dollars.

Sure, no one can deny that it has some impact to some segments especially imports and our plans to travel to US, UK etc. I am also of the opinion that there are many things Najib can do (which he isn't at all now) and I will share more soon.

And guys, the international ratings agencies - Fitch, Moody's and S&P - have all maintained Malaysia's outlook as stable. There are no economists out there who are saying that Malaysia's economy will collapse, only politicians are saying this.

PART 2: Read Export-Commodity Prices and Ringgit

Wednesday, June 24, 2015

The RM22 bil 'hole'

Budget 2016 is not too far away and Government agencies - especially Treasury and the Economic Planning unit - have begun the preparations since March. It should be tabled in Parliament in 4 months time in October.

I decided to look at some numbers and back of the envelope calculation, I found a RM22 bil 'hole' or deficit.

No, I am not even talking about the annual budget deficits at over RM30 bil.

I believe we are short of RM22 billion for 2016 just by looking at the Government's revenue which will be affected as a result of GST and crude oil prices, ceteris paribus.

And I hope the Government is aware of this. I stand corrected.

GST Revenue
  1. This year, GST revenue is expected to contribute RM23.3 billion (that's what the Government said before so many other things were exempted from GST)

  2. And with GST in place, we must not forget that the Government has agreed to forego some revenue.

  3. The abolished Sales and Services Tax gave us RM17.2 billion last year.

  4. The Government announced that individual income tax rates will be slashed by 1-3 percent. Let's just assume it is a 1% reduction, that's estimated to be a loss of revenue of RM260 million.

  5. Companies will enjoy a 1% tax reduction. That's another RM728 million gone.

  6. The net gain from GST implementation stands at no more than RM5 billion.

Petroleum Revenue

  1. The Federal Government's dependence on oil has been declining from RM64.2 bil or 40.2% of total revenue in 2008 to just RM67 bil or 29.7% of total revenue in 2014.

  2. But note that in 2014, Brent Crude oil averaged at USD100 per barrel.

  3. However in 2015, the average Brent crude oil price is expected to be at USD61 per barrel. That's a 40% drop.

  4. PETRONAS' contributions to Government is calculated based on previous year's price, ie in 2016, dividends are calculated based on 2015 crude oil price.

  5. If we assume that crude oil prices throughout 2016 and dividends are down by say 40%, that means the oil revenue to Government will also be down by 40%.

  6. That's approximately RM27 bil.

Net position
  1. The Government's tax revenue has always been enough to cover operating expenditure but never enough for development expenditure - agricultural subsidies, grants for smallholders, build schools and roads, etc.

  2. In the past 5 years, the Government's budget deficit averages at around RM36.5 bil, all due to if not mainly because of borrowings for Development Expenditure.

  3. Now with GST and lower crude oil prices, the Government stands to gain an extra RM5 bil from GST policy but face a shortfall of RM27 bil from petroleum revenue - in net terms, that's a RM22 bil hole.

  4. This hole could be bigger if GST revenue targets are not met.

  5. So where's the money going to come from?

  6. Does it mean the Government have to slash the development expenditure budget? I don't think so. This affects a lot of votes especially in rural areas or states such as Sabah and Sarawak.

  7. Can the Government afford to cover this with borrowings? I am not sure.

  8. RM22 bil is approximately 2 percent of GDP. Malaysia's 2014 debt to GDP ratio closed at 53% in 2014 and we have a debt ceiling of 55%.

Perhaps, it is time for GLCs to pay some dividends, if they are making money and not giving extra headache to the Government.

We'll see. I am looking forward to October when the Government tables the Budget 2016.

Sunday, May 24, 2015

1MDB saved us money?

I've not penned my thoughts down in an article about 1MDB since this circus began.

Most of us are short of filing for a missing persons report on 1MDB management. You run the operations on a daily basis, not the Prime Minister. Leaving the Prime Minister and the Government alone when under attacked for your mess is definitely not professional, what more to say with the flip-flop Parliamentary replies that were based on points submitted to the Ministry.

Anyway, after reading the arguments written by independent parties who 'defended' 1MDB recently on online news portals and social media, my fingers became itchy and here I am typing this.

I read that the arguments supporting 1MDB's existence and its hands in the takeover of the IPPs were:

a) 1MDB bought the IPPs.

b) There is a revised power purchase agreement.

c) TNB registers higher profit as a result

d) Malaysian consumers benefit from lower tariff

e) Petronas will not have to incur higher subsidy which benefits only these private companies

f) Consumers are the ultimate winner

g) We should thank 1MDB for saving our country from excessive subsidy granted to IPPs from the earlier regime

I'm not sure if these people are actually experts or consultants but as much as I know with my amateurish knowledge, PETRONAS subsidies do not benefit only these private companies or IPPs. The Government subsidises gas at approximately RM10bil a year annually, depending on gas prices, through Petronas by keeping gas prices below market rates. These subsidies are enjoyed by everyone who uses gas such as the manufacturing sector and of course including TNB and the IPPs.

What's the agenda of these people by singling out that only the IPPs benefited with words like 'mistake done since 1990s' and throwing shots at Tun?

I will give in if you say the point of controversy here is the quantum which TNB pays to the IPPs.

The electricity sector is broken down into three parts - generation, transmission and distribution. Back in the 1990s, Tun wanted to break down the monopoly of electricity generation by TNB after the nationwide blackout.

The only issue was, who was willing to come in to a highly regulated industry? Let's not beat around the bush. When we mix government regulations, politics, and the magic word "demi rakyat" together, it's a no-go zone basically for any investors. I think some of the telco CEOs are hating their jobs now, if you know what I mean.

I've read somewhere that the IPPs were allowed to have returns on investment of 20%. Was that excessive or fair I leave it to you. But just to highlight, the average lending rate in the 1990s were between 8-12% and investors were able to get annualized returns of about 18% from investing in stocks. I don't even want to talk about opportunity costs in construction and properties at a time when Malaysia was booming. While we are on this, isn't it true that TNB also owned shares in the IPPs?

Going back to the 1MDB argument, it seems to me that 1MDB has two objectives only -

(1) to buy over IPPs, sell electricity cheaper to TNB, TNB make more profits

(2) properties such as the development of TRX

I will leave point 2 for another day.

I find it rather amusing to see how 1MDB is being marketed or positioned to be the saviour of the energy sector. Hilarious when I read that because of 1MDB's takeover of the IPPs, the Government saved money and 1MDB charges lower rates to TNB which then increased TNB's net profits. And along the way, the rakyat enjoyed low electricity tariffs.

If that is the case,

(a) At what rates are the IPPs (under 1MDB now) selling to TNB? I take it as 'at a lower rate', but what is it? Cost price, with a profit?

(b) Why are IPPs and Tun branded as though they are the devils while 1MDB are the saviors and TNB the model GLC company? Why do we need to go so far? So, can the rakyat enjoy even cheaper electricity tariffs since TNB is making more money nowadays?

(c) What did 1MDB tell their institutional investors - both local and foreign - whom they sold their bonds to and whom they borrowed money from? Did 1MDB tell them that they are taking their money for them to buy power plants just to earn lesser (kalau ada lah) by selling energy at a cheaper rate to another unrelated company so that it makes more profits and the rakyat pays the same tariff as before? If not, that's a crime. What's that called, intentional criminal breach of trust?

(b) Why did we raise funds by selling bonds to KWAP, EPF and others? So, we actually borrowed money from the rakyat, to buy IPPs, charge lower rates to TNB, suffer losses and liquidity issues, so that TNB makes more profits and maintain the tariff for the rakyat's benefit? I don't get it.

Perhaps a consultant, preferably a financial consultant, and the Treasury can enlighten us on how do we expect to raise funds by selling securities - MGS, GLC bonds, Sukuk etc - in future?

Go back to the drawing back, you. And come back with better answers and argument.

Otherwise, all of us should just shut up and wait for the Auditor General's Report, the single most credible voice in this country which the Prime Minister has tasked to leave no stone unturned in this mess. That's when we talk.

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) (newbie and trilingual, makes you understand from the simplest perspective)

b) (all that you need to know, textbook-ish)




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
Inter-company borrowing in foreign currencies
Bonds issued abroad
Other loans in foreign currencies
Trade credits
Non resident holdings of domestic money market instruments
Non resident holding of domestic bonds
Current and deposits
Other liabilities by non resident
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.