Archive for category Finance

Oil slide threatens Malaysia’s fiscal progress

By Andy Mukherjee
Reuters
December 3, 2014

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Just when Malaysia was beginning to plug the holes in its public finances, the prospect of a sharp reduction in oil revenue is threatening to undermine fiscal progress and weaken the currency.

Petronas is playing spoiler. The state energy company recently warned that its contribution to the government’s exchequer – in the form of dividends, taxes and royalties – could slide 37 percent next year from an estimated 68 billion ringgit ($20 billion) in 2014.

Such a shortfall in the main source of government’s oil-and-gas revenue would easily exceed 2 percent of GDP. That would wipe out the 1.7 percent of GDP in annual savings the government hopes to achieve by scrapping domestic fuel subsidies from Dec. 1.

The fiscal hit could be even larger if oil prices next year remain below the $75 a barrel on which Petronas based its forecast. That would threaten the government’s target of reducing the budget deficit to 3 percent of GDP, from an estimated 3.5 percent this year.

The finance ministry is refusing to give up on the 2015 target just yet. It may hope that Petronas can be persuaded to make a less drastic cut in its dividend payment. Read the rest of this entry »

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The politics and business of bank mergers

Terence Gomez
KiniBiz
22 July 2014

Malaysians were informed on July 10, 2014 that a major bank consolidation was in the pipeline, involving CIMB Group Holdings, RHB Capital and Malaysian Building Society. With this union, CIMB will emerge as Malaysia’s largest banking enterprise, in terms of assets, as RHB Capital owns RHB Bank, currently the country’s fourth largest bank.

According to media reports, the merger will enhance CIMB’s goal of becoming Southeast Asia’s leading Islamic finance institution with the capacity to expand its interests in this sector to other parts of the world. However, one core issue remains unmentioned in the press: this consolidation will tightly entwine the interests of political and business elites in the banking sector. Read the rest of this entry »

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Subsidies for the poor or Umno-putras, part 1

— Koon Yew Yin
The Malay Mail Online
June 29, 2014

JUNE 29 — Every now and then we will get statements from government on how much it is spending on subsidies for the poor.

This message is especially loud and clear during vote canvassing in elections or by-elections; or when there is an intended rise in the price of goods and commodities.

A few days ago, the Najib administration announced that it will increase electricity prices by an average 7.12 per cent from 1 June so as to trim the subsidy.

Natural gas prices will also rise by RM3 per mmBtu every six months until it reaches market levels.

So far there has been little public reaction to this price increase partly because it has not been factored yet into the monthly bills of the public.

But be warned that this increase in electricity bills will affect all households — poor, middle class and rich. Even the poorest households spending less than RM20 will be affected as the free service to them will be discontinued at the end of the year. It looks like the children of poor households will have to read by candle light in the night. Read the rest of this entry »

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Rising debts will rob Malaysia of its competitive edge, warns economist

by Eileen Ng
The Malaysian Insider
9 June 2014

Malaysia risks seeing its economy contract and losing its global market share in key export sectors if it fails to tackle its high levels of public and rising external debts, a United Kingdom-based economist has warned.

Sarah Fowler from Oxford Economics said while the nation’s shrinking current account surplus was not a major concern as it was expected to stay in excess in the next few years, there are worries over Malaysia’s capital account due to rising external debt, which has shot up close to 40% of its gross domestic product (GDP) in recent years.

The country’s public debt-to-GDP ratio has been hovering at an all-time high of more than 50% since 2010 because of large fiscal deficits incurred when an aggressive stimulus package was launched to bolster the country’s economy during the global financial crisis.

“Addressing the concerns would enable Malaysia to achieve a higher growth path, reaching a higher per capita income sooner. We expect the economy to grow by just more than 4% over the next five years but if the concerns were addressed growth could exceed 4.5%,” she told The Malaysian Insider in an email.

Fowler, who produced a report on “Why Malaysia is now a more risky prospect than Indonesia” which was highlighted by global financial news site Bloomberg’s columnist William Pasek last week, used 17 indicators to develop a scorecard to assess emerging market vulnerability to external economic and financial shocks. Read the rest of this entry »

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Time to just let MAS crash

– Koon Yew Yin
The Malaysian Insider
February 20, 2014

MAS has just reported a fourth consecutive quarter of losses with a net loss of RM343 million for this last quarter.

For the full financial year 2013, the net loss amounted to RM1.2 billion, compared with a net loss of RM433 in FY12.

The question is whether this eye-popping loss will be the straw that breaks the camel’s back.

In the past, there have been incorrigible cheerleaders for the airline, regularly claiming that the company is in recovery mode and will soon return to profitability.

This time, even the most optimistic experts have given up. Read the rest of this entry »

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Support for Barisan will drop further if it ignores rising cost, says varsity survey

The Malaysian Insider
December 24, 2013

Support for the Barisan Nasional administration will drop further if it fails to deal with the rising cost of living experienced by Malaysians, another study has found today.

At the same time, the study by the Universiti Malaya’s Centre for Democracy and Elections (UMCEDEL) showed that 61% of respondents disagreed with the Government’s plan to introduce a goods and services tax in 2015.

The study showed that only 20% of those polled agreed with the initiative.

UMCEDEL director Prof Datuk Dr Mohammad Redzuan Othman said that the rise in electricty and petrol prices had a severe impact on those polled and that 52% of them felt that the Government’s BR1M (1Malaysia People’s Aid) handouts were inadequate to deal with rising prices. Read the rest of this entry »

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Moody’s has given us a good mood… but is it sustainable?

– Ramon Navaratnam
The Malaysian Insider
November 21, 2013

After the earlier cautious Fitch Rating Report on Malaysia’s sovereign credit outlook, the Moody’s Investors Service’s upgrading of our credit outlook from “stable to positive”, uplifts our mood on our country’s economic prospects.

Yes Moody’s has given us a good mood on our economic prospects. But unfortunately the question lingers as to whether this feel good mood, about our sovereign credit and economic outlook, can be sustained and for how long?

The upgrading had been due to the positive and bold promises made in Budget 2014 Speech by Dato Seri Najib Tun Razak. His speech has obviously made an impact on Moody’s. Read the rest of this entry »

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Business confidence in local economy dropping, survey shows

The Malaysian Insider
November 07, 2013

Business confidence in Malaysia plummeted in the third quarter of this year as the post-election boost has vanished, according to the Global Economic Condition Survey.

In a statement issued today, the Association of Chartered Certified Accountants (ACCA) and the Institute of Management Accountants (IMA) said the survey revealed that 65% of the respondents believed conditions in the Malaysian economy were stagnating in the third quarter of this year.

This is an increase from the 55% of respondents who felt business conditions in Malaysia were deteriorating or stagnating in the second quarter of the year. Only 13% of businesses reported confidence gains in the third quarter, down from 28% in the second quarter. Read the rest of this entry »

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A critique of the 2014 Budget Speech

by Budget analyst

A careful analysis of the 2014 Budget Speech by the Prime Minister-cum-Finance Minister, Datuk Seri Najib Razak is most revealing and disappointing as there is little by way of an exposition of the challenges the economy faces.

The customary presentation of data on the performance, in the current year and prospects in the year ahead, are matters that are dismissed in a few perfunctory sentences.

The speech gives little information on basic macro-economic assumptions used in basing the revenue and expenditure forecasts that make up the Budget.

The speech gives no hint of how the Government proposes to deal with the less than robust external environment in which the key Malaysian export markets – China, US, the EURO zone – will continue to record sluggish demand.

The price for Malaysian oil and gas are likely to be weaker because of increasing supply from US shale oil and the re-entry of Iranian oil into global markets. With greater supply and lower demand, prices are likely to be lower. Malaysian oil and gas exports will undoubtedly feel the impact. Read the rest of this entry »

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GST: killing the golden goose

– Liew Chin Tong
MP for Kluang
The Malaysian Insider
October 25, 2013

The proposed goods and services tax (GST) will tax those who can’t afford to be taxed, i.e. 60% of Malaysians who are eligible for BR1M. These are the people who will soon be taxed by the regressive tax, together with the rest of us who live and stay in this country.

I would like to drop the Orwellian double speak so prevalently employed by many GST apologists who are trying to mask the real issue. I will share my views plainly here.

Flawed arguments

Some argue that the government has to be cruel to be kind. Hence, BN would have us believe that the fuel hike subsidy rationalisation is needed to balance the government’s expenditure and ensure its good financial standing.

In theory, this sounds legit. However, look closer and you will find many flaws in the argument. For one, this argument does not take into account the adverse effects on the man on the street. It also demonstrates an incomplete understanding of how the economy grows or declines.

What is the real reason for the Barisan Nasional government to implement the GST? This tax has hung like a sword of Damocles over our heads since Tun Abdullah Ahmad Badawi’s era in 2005. Read the rest of this entry »

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Malaysia: High Income Nation, but Low Income Rakyat

By Anas Alam Faizli
Oct. 22, 2013

Malaysia’s current socio economic structure can be summed up in four words, “Rich Malaysia, Poor Malaysians.” Malaysia is blessed with abundant natural resources with petroleum being the most precious. Add the land, other commodity resources, large youthful population and the country has all the essential ingredients to flourish. How then did this small nation of 30 million manage to end up with the unsolicited title of among the region’s most unequal nation between the rich and poor. What happened? Read the rest of this entry »

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Defence budget to come under Pakatan scrutiny

G Vinod | October 21, 2013
Free Malaysia Today

Pakatan Rakyat will only reveal details of its alternative budget later on fear that their ideas will be copied by Barisan Nasional

KUALA LUMPUR: A parliamentary select committee will scrutinise the Defence Ministry procurement to curb graft, said Opposition leader Anwar Ibrahim in announcing the Pakatan Rakyat alternative budget 2014 today.

“We will also look into postponing the National Service programme for next year until a review is done by a select committee.

“The programme costs us RM800 million annually. On top of that, 22 trainees have died undergoing the programme and we have cases of female trainees giving birth during their three-month stint,” Anwar said at a press conference at the Parliament lobby.

Also present were DAP secretary-general Lim Guan Eng, PAS’ Kamaruddin Jaafar and several Pakatan parliamentarians. Read the rest of this entry »

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Why this year’s budget would be less interesting

- Muhammad Nazreen
The Malaysian Insider
October 20, 2013

In the next few weeks, everybody is anticipating the key issues that may be highlighted in the 2014 budget. Malaysia’s mounting public debt is at an alarming rate. Recurring deficits over years due to government’s overspending would be a primary reason why is this year’s budget would be less populist. The BN government managed to secure its win during the 13th general election. So, we could expect less windfall subsidies and pay-offs to be distributed. However, the deteriorating condition of Malaysia’s economy might prompt the fact that it is timely for the government to introduce stern fiscal consolidation. Austerity measures are likely the main ingredients of the upcoming budget.

Here are some of the concerns. Read the rest of this entry »

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Najib should present White Paper to Dewan Rakyat when it reconvenes in a fortnight on the initial decisions and actions taken by Special Committee on Auditor-General’s 2012 Report

The Prime Minister and Finance Minister Datuk Seri Najib Razak should present a White Paper to the Dewan Rakyat when it reconvenes in a fortnight’s time on Oct. 21 on the initial actions and decisions taken by the Special Committee set up to scrutinize the 2012 Auditor-General’s Report.

The Special Committee was announced yesterday by the Chief Secretary Tan Sri Dr. Ali Hamsa, who will chair the special committee which will comprise the director-general of the Public Service, the Attorney-General as well as representatives from the Malaysian Anti-Corruption Commission, Finance Ministry and Royal Malaysian Police.

There is widespread skepticism that the Special Committee will be able to make any difference to end the annual tale of horrors in the Auditor-General’s Reports about rampant corruption, wastage of public funds and abuses of power in the public service.

If the government is serious about wanting to stamp out corruption, waste, extravagance and abuses of power running into billions of ringgit of public funds every year, such a high-level government committee should have been formed immediately after the Auditor-General, Tan Sri Ambrin Buang submitted the 2012 Report to the government in July, and not now – only after the spate of adverse publicity in the past week following the tabling of the 2012 Auditor-General’s Report in Parliament on Oct. 1. Read the rest of this entry »

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Why MAS Share Is On Cheap Sale?

by Koon Yew Yin
16th Aug 2013

As a long term serious investor, I have a closer look at the cheap share price of MAS. Why is it selling at 33 sen. about one third of its par value?

Many market analysts have already covered MAS and Idris Jallal has said that the company should be sold off as soon as possible. My intention of writing this piece is to help the BN Government decide to put in the final nail to bury MAS to save tax payers’ money. Obviously the Government did not see my previous article “Why MAS Is Still Flying” which I published about a year ago. It is important and worthwhile to include some of the points I mentioned earlier in my previous article.

The latest 1st quarter 2013 ending March shows that MAS lost Rm 279 million. In 2012, 2011 and 2010 the company lost Rm 433 million, Rm 2.424 billion and Rm 234 million respectively.

As usual, there are the incorrigibly optimistic cheerleaders for the airline who are unable to see the writing on the wall. These ‘experts’ are still touting that the company is in recovery mode and will soon be returning to profitability.

The market however sees the prospects for the airline differently. During the past few days the airline share has been trading around 35 sen level. This is about the lowest share price that the airline share has recorded during the past many years. Without the support of government-linked funds and left to market forces alone, it is possible that the share price of MAS will drop even more. Read the rest of this entry »

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1MDB’s Japan move raises more eyebrows

Jonathan Rogers, IFR Chief Analyst
IFR 1995 3 August to 9 August 2013
IFR Asia

MALAYSIA’S 1MDB CERTAINLY knows how to pull off a surprise. The strategic development company has no shortage of critics, from Asia’s DCM bankers who have so far missed out on a share of its no-doubt lucrative debt market mandates, to ordinary Malaysians who bought into the opposition’s argument prior to May’s general election that 1MDB lacks transparency.

Previous surprises for the DCM community came in the form of two gargantuan private placements of US dollar bonds totalling US$4.75bn, a combined size that could normally only be achieved through the depth of liquidity available in the offshore public markets.

The size and the private placement approach raised eyebrows, but the fact that all of the business went to Goldman Sachs simply added to the bitterness quotient. Ignoring the fact that few international investment banks can deliver private placements in that size and – I believe it’s fair to say – no Malaysian investment bank can, it just didn’t seem fair play. Not to mention the hundreds of millions of dollars in revenue the US house is rumoured to have walked away with thanks to winning the business.
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Fitch pushes Malaysia’s credit rating outlook to negative

The Malaysian Insider
July 31, 2013

Global ratings agency Fitch Ratings has revised Malaysia’s sovereign credit rating outlook from stable to negative as the possibility of addressing public finance weaknesses has deteriorated after Election 2013.

The news comes as the Malaysian ringgit slid to three-year lows against the US dollar and 15-year lows against the Singapore dollar, making imports more expensive while exports would be cheaper although exports have slipped.

But it affirmed the country’s long-term foreign and local currency issuer default ratings at A- and A, respectively.

“Malaysia’s public finances are its key rating weakness. Federal government debt rose to 53.3% of gross domestic product (GDP) at end-2012, up from 51.6 percent at end-2011 and 39.8 percent at end-2008.

“The general government budget deficit (Fitch basis) widened to 4.7 percent of GDP in 2012 from 3.8 percent in 2011, led by a 19 percent rise in spending on public wages in a pre-election year,” it said.

But Fitch believed that it would be difficult for Putrajaya to achieve its interim 3 percent federal government deficit target for 2015 without additional consolidation measures. Read the rest of this entry »

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Malaysian premier shrugs off looming threats to economy

By Stefan Wagstyl in London
Financial Times
July 3, 2013

A slowdown in the Chinese economy, plunging commodity prices and the looming end of US “QE3” quantitative easing might appear to be a perfect economic storm for Malaysia.

The commodity producer exports to China and has benefited handsomely from the cash that washed through emerging markets as a result of the US Federal Reserve’s aggressive bond-buying programme.

In an interview with the Financial Times on Wednesday, however, Najib Razak, Malaysia’s prime minister, played down the likely effects of the threats to growth coming from the world economy. As a leader fresh from an election victory, his confidence is understandable. But some might see it as misplaced.

Mr Najib insisted Malaysia remained on course to grow at 5 to 6 per cent annually and achieve the government’s target of joining the ranks of the world’s high-income countries by 2020.

Mr Najib was speaking during a visit to London, made as his government is settling back into office after the ruling United Malays National Organisation overcame the biggest-ever challenge to its power in May’s parliamentary elections. The opposition won 51 per cent of the vote, but Umno and its partners in the ruling coalition secured 60 per cent of the seats under Malaysia’s constituency-based voting system. Read the rest of this entry »

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Arms deals inked by ‘expired PM’ may not be valid

by Koh Jun Lin
Malaysiakini
Mar 30, 2013

Pakatan Rakyat would review all contracts signed by the federal government after March 8 and possibly cancel them if they are found to be unfair or involved abuse of power, if the coalition takes over Putrajaya, said DAP parliamentary leader Lim Kit Siang.

He said in his speech at Seputeh today that the government has no business signing these deals five years after the last general election; they should be considered interim agreements subject to confirmation by the succeeding government.

Highlighting the RM4.2 billion arms deal signed in Langkawi two days ago, he said: “We will not be bound by these agreements because these are done after March 8, when the prime minister has lost legitimacy and credibility, and is only an ‘expired’ prime minister.

“He cannot sign these agreements,” he said, adding that the federal government should declare every deal it inked since that date because it should not have endorsed them.

Lim was speaking at the official launching of DAP’s Seputeh election operations centre, which occupies a shoplot that local MP Teresa Kok said was let out to the party for free by a supporter. Read the rest of this entry »

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Najib throws more election goodies

Anisah Shukri| March 25, 2013
Free Malaysia Today

The prime minister announces four changes to the 40,000 staff of seven statutory bodies ahead of the polls.

KUALA LUMPUR: Prime Minister Najib Tun Razak today announced sweeping benefits for the 40,000 staff of seven government statutory bodies, ahead of the general election which must be held within weeks.

The benefits to be given to LTAT (Lembaga Tabung Angkatan Tentera), LHDN (Lembaga Hasil Dalam Negeri), EPF (Employees Provident Fund), Tabung Haji, Perkeso, Perhebat (Armed Forces Veteran Affairs Corporation), and Bank Simpanan Nasional are:

*a pension fund set up for all personnel;

*fixed housing allowances equivalent to that of civil servants;

*gratituities for retirees; and

*streamlining employer contribution towards the EPF.

The benefits come in the wake of Najib’s announcement yesterday that the government would award 10,000 individual permits to taxi drivers, in what can be seen as a last-minute attempt to woo voters before polls are held.
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