Is Luxury Goods Tax a Good Way to Raise Revenue?

The Finance Ministry is finalising several policies related to the high-value goods tax, including the type of items that would be levied.  An economist described the tax on luxury goods, which was expected to be implemented on May 1, an effective way to expand the government’s tax base. It will not burden the B40 lower-income group.

The luxury tax was expected to apply on items such as jewellery and watches that exceed a certain price threshold. It was expected to earn the government RM700 million annually.

The proposed rate of between 5% and 10% was viewed as reasonable, when compared to other countries like China and Indonesia. China’s luxury tax is reported to be between 30% and 40% on imported high-end goods, with the Chinese government considering lowering it by 10%. In Indonesia, the tax ranges from 10% to 95%.

Source: https://www.linkedin.com

Tax revenue-to-GDP ratio for Malaysia has been declining steadily over the decades. In 2021, the Organization for Economic Cooperation and Development (OECD) reported that Malaysia’s tax revenue-to-GDP ratio stood at just 11.8%, lower than Thailand (16.4%), the Philippines (18.1%) and Vietnam (18.2%).

Expanding the tax base is important. Hence, the view by some, to re-introduce the GST. That’s silly! Net receipts from GST will only make sense if it is 6% or above. That will drive inflation up. Then again, we are not a developed nation nor our Gini-coefficient below 0.35 (it is currently hovering around 0.4). So, if not for GST what else? We could do a Tobin tax, broaden the excess profit tax or consider an inheritance or wealth tax!

Reference:

Luxury goods tax a good way to raise govt revenue, says economist, Ameer Fakhri, FMT, 

23 March 2024

Shameful or Shameless?

An elderly woman and her husband who spent Ramadan and Hari Raya on the streets of Kuala Lumpur were threatened and verbally abused by two officers from the Social Welfare Department (JKM). They had responded to a MalaysiaNow report on their misfortune.

Zainab and her husband were forced into a life of homelessness after being kicked out by their own son from his house in Kulim, Kedah. The story of the woman, whose real name is Zaleha Haron, and her husband, who suffers from depression, went viral, with calls and emails from the public asking for more details in order to raise funds for the couple. 

Source: https://www.dagangnews.com

The overwhelming public sympathy was in stark contrast with the attitude of the JKM officers, who came to Zaleha on the third day of Hari Raya after the authorities were alerted of her plight. But instead of helping the couple, the officers threatened them and told them to pack their belongings and leave Kuala Lumpur. They were taken by car to the Integrated Transport Terminal (TBS) in Bandar Tasik Selatan and told to board a bus to Muar, Johor – a place where they had once lived but where they no longer have any family ties. 

Zaleha told the officers that they had no one in Muar, which they had left a long time ago.  Neither are they open to returning to their son, who threw them out of his home in November 2023.  Zaleha also told the officers that she had a job as a dishwasher at a nearby restaurant in the capital city, but her explanation fell on deaf ears. 

Zaleha had in fact applied for JKM’s assistance in renting a room. However, she was told to submit water and electricity bills – documents which, living on the streets, she did not have.  

Despite Zaleha's pleas, she and her husband were taken to TBS along with their meagre belongings. During the journey, her mobile phone was confiscated by the officers who monitored all incoming and outgoing calls. However, Zaleha had made contact with an acquaintance during the officers' initial confrontation. Her friend, together with her husband, rushed to TBS where they were able to intercept the group. 

There, an argument ensued with the officers who refused to let Zaleha go. Eventually, she and her husband were taken to a beat base at the bus terminal where they were detained.  It was not until her friend questioned the officers for confiscating Zaleha's phone that it was returned.  Zaleha said the officers warned her not to tell anyone about the incident, and threatened to revoke her husband's permanent resident status. For now, Zaleha's friend has arranged for her and her husband to stay at a flat. 

This is not a new phenomenon in Malaysia. It also happens in the Chinese or Indian communities. I know of a case of an elderly couple abandoned in a hotel. They were taken to the hotel by the son. Then they were moved to a welfare home after the hotel stay was over and son was not to be found. The husband was too traumatised to speak. Then there was an Indian couple abandoned at a bus stop. Something akin to getting rid of your unwanted cat or dog!

How society has changed? If you are over 60, please retain whatever cash and a home in your old age. Children may change. You need to remain independent. The problem starts when all your savings has been used to educate the children. In turn, you expect them to pay or take care of you. If they give you RM100 per month, how do you survive? Beg, borrow or steal? A modest sum computed by EPF is about RM2,000 per month per person for 10 years. That works out to RM240,000. Many don’t have it! And what more if you live to be 70!

I don’t have solutions but love of family and God will see you through (hopefully!) In the case of Zaleha and her husband, it is shameful on our part that they are treated in this manner and shameless on the government officers who just want to get rid of a problem!

Reference:

Welfare officers threaten elderly couple forced to spend Raya on KL streets, MalaysiaNow, 16 April 2024

Interest Rate, Exchange Rate and GDP Growth

 BNM’s point of view on its Monetary Policy measures for 2024 are shown in info-graphics below:

Comparative Policy Rate Change and Impact on MYR Exchange Rate

The above two charts relate to interest rate change by Malaysia vis-a-vis with other nations and its impact on MYR. Only against Japan and China have we had positive development on exchange rate. Otherwise we have failed to move in tandem with others, especially the U.S.

The above charts do not incorporate inflation. The real differentials are important and on that score we are negative to the U.S. real rate [approx. 2.05 (U.S.) to 0.5% (for Malaysia)], which explains fund outflow!

Gradual recovery of the ringgit in 2024?

The above is really predicated on monetary policy easing in the U.S. For so long as the Fed believes inflation is still persistent and sticky, aggressive rate cuts will not happen. That is not good for MYR.

Is the currency undervalued?

BNM believes currency is undervalued. And what does that mean? Should it be RM4.40 to 1 USD? We are left to make our conclusions. The fundamentals are positive but it is the perception of speculators, traders, investors that really matters.

Reference:

BNM Annual Report 2023

Is 30% Realisation of Approved Investments Reasonable?

Malaysia’s progress in realising RM46.1 billion or nearly one-third of the total RM152 billion approved investments for the manufacturing sector in 2023 was deemed reasonable by some economists.

The Ministry of Investment, Trade and Industry (Miti) has also been improving its information tracking system over the years to ensure that agencies like the Malaysian Investment Development Authority (Mida) is capable of providing timely assistance to businesses in implementing their capital expenditure in the manufacturing sector. 

Source: https://en.wikipedia.org

Data from Mida in 2023 showed that for the period 2016-June 2023, a total of 6,103 manufacturing projects had been approved, of which 5,202 projects or 85.2% had been implemented.

Miti told Dewan Negara recently that the RM46.1 billion of realised investment involved 445 projects and created 29,693 jobs. The ministry said this is encouraging, considering that the projects had been implemented in less than the usual 18-to-24-month period. Miti also said approved investment refers to investment planning for the capital expenditure of a project in the long term, including the cost of purchasing land, factories, machines, machinery and others.

The PM’s administration has been touting that approved investment rose 23% to a record high of RM329.5 billion in 2023, of which 57.2% was from foreign capital while 42.8% was from domestic sources. The services sector constituted the largest portion of total approved investment in 2023, amounting to RM168.4 billion or 51.1%, followed by the manufacturing sector’s RM152 billion or 46.1% and the primary sector's RM9.1 billion or 2.8%.

As the first quarter of 2024 came to a close, economic trackers are keen to watch if the country could beat its record in 2023, amid a mixed of external geopolitical uncertainties, weakening ringgit, expectations towards government’s austerity measures and the several boycott initiatives against certain businesses over the past few months.

Reference:

Economists deem 30% realisation of approved investments in manufacturing sector in 2023 reasonable? Chester Tay, theedgemalaysia.com, 2 April 2024

Do European “Virgins” Want to Dictate Rules?

The European Union’s upcoming ban on imports linked to deforestation has been hailed as a “gold standard” in climate policy. It is viewed as a meaningful step to protect the world’s forests. And it my help remove planet-killing greenhouse gases from the atmosphere.

The law requires traders to trace the origins of a head-spinning variety of products – beef to books, chocolate and charcoal, lipstick and leather. To the European Union, the mandate, set to take effect in 2025, is a testament to the bloc’s role as a global leader on climate change.

Developing countries have expressed outrage – with Malaysia and Indonesia among the most vocal. Together, the two nations supply 85 per cent of the world’s palm oil, one of seven critical commodities covered by the European Union’s ban. And they maintain that the law puts their economies at risk.

Source: https://en.wikipedia.org

In their eyes, rich, technologically advanced countries – and former colonial powers – are yet again dictating terms and changing the rules of trade when it suits them. The view fits with complaints from developing countries that the reigning international order neglects their concerns.

The palm oil dispute also encapsulates a central tension in the economics of climate change. Lower- and middle-income nations are being compelled to bear the cost of ruinous environmental shifts caused mostly by the world’s wealthiest nations.

“We’re not questioning the need to fight deforestation,” said Mr Nik Nazmi Nik Ahmad, Malaysia’s Minister of Natural Resources and Environmental Sustainability of Malaysia. Countries that have deforested their own land for centuries, or are responsible for much of our deforestation, are unilaterally imposing conditions on the lower and middle income nations.

In addition, many government officials, industry representatives and farmers contend that the European Union’s rules are really a form of economic protectionism.  This is a way to shield European farmers who grow competing oilseed crops like rapeseed or soybeans.

The European Union’s law, which was passed in 2023, bars products that use palm oil and other commodities like rubber and wood that come from forestland that was converted to agriculture after 2020.

Smallholders – defined in Malaysia as farmers who own fewer than 40 hectares – grow 27 per cent of the country’s oil palms. The palm oil gold rush has helped to reduce rural poverty, build wealth from exports and create jobs. Roughly 4.5 million people in Malaysia and Indonesia work in the industry, according to the World Economic Forum. For a while the oil was even promoted as environmentally friendly, a “supercrop.” One hectare can produce four to 10 times as much oil as the same area of soybeans, rapeseed or sunflowers.

In Malaysia, government officials complain the European Union’s law ignores the licensing and deforestation rules that the country already has. Since Jan 1, 2020, all growers and businesses have been required to be certified by the Malaysian Sustainable Palm Oil board. The standards match many set by the European Union, although there is no requirement for geolocation mapping. The effort has had some success. In its annual 2022 survey, the World Resources Institute found that Malaysia was one of the few places where deforestation did not get worse. 

A new task force that includes the European Commission and government ministers from Malaysia and Indonesia is meeting to work on putting the deforestation rules into practice. Malaysian officials have asked the commission to accept the country’s own certification system, and to exempt smallholders from the law. Still, the perception that European powers are dictating to their governments stings.

That’s what imperialists do – destroy their country and resources including forests while others pay for their profligation. For over 200 years, the Industrial Revolution in the West didn’t have rules on carbon emissions. If they had they would not become developed countries. Today, they want to play the righteous “virgin” demanding others not be involved in any promiscuous activity.

Reference:

Can Europe save forests without killing jobs in Malaysia? The Straits Times, 14 March 2024

Is Luxury Goods Tax a Good Way to Raise Revenue?

The Finance Ministry is finalising several policies related to the high-value goods tax, including the type of items that would be levied.  An economist described the tax on luxury goods, which was expected to be implemented on May 1, an effective way to expand the government’s tax base. It will not burden the B40 lower-income group.

The luxury tax was expected to apply on items such as jewellery and watches that exceed a certain price threshold. It was expected to earn the government RM700 million annually.

The proposed rate of between 5% and 10% was viewed as reasonable, when compared to other countries like China and Indonesia. China’s luxury tax is reported to be between 30% and 40% on imported high-end goods, with the Chinese government considering lowering it by 10%. In Indonesia, the tax ranges from 10% to 95%.

Source: https://www.linkedin.com

Tax revenue-to-GDP ratio for Malaysia has been declining steadily over the decades. In 2021, the Organization for Economic Cooperation and Development (OECD) reported that Malaysia’s tax revenue-to-GDP ratio stood at just 11.8%, lower than Thailand (16.4%), the Philippines (18.1%) and Vietnam (18.2%).

Expanding the tax base is important. Hence, the view by some, to re-introduce the GST. That’s silly! Net receipts from GST will only make sense if it is 6% or above. That will drive inflation up. Then again, we are not a developed nation nor our Gini-coefficient below 0.35 (it is currently hovering around 0.4). So, if not for GST what else? We could do a Tobin tax, broaden the excess profit tax or consider an inheritance or wealth tax!

Reference:

Luxury goods tax a good way to raise govt revenue, says economist, Ameer Fakhri, FMT, 

23 March 2024

Why Are Many Older Adults in Malaysia Unhappy?

 The annual celebration of the International Day of Happiness fell on 20 March. This day was defined by a resolution in the UN General Assembly in 2012. A day decreed to be observed annually on 20 March because happiness and wellbeing are universal goals and aspirations around the world.  

This year’s theme “Reconnecting for Happiness: Building Resilient Communities” aims at happiness for the young, the old and everyone in between. As of 2024, Malaysia was ranked 58th out of 143 countries in life evaluation 2021-2023. The rankings for other Asean member countries were Singapore (30th), the Philippines (53rd), Vietnam (54th), Thailand (57th), Indonesia (80th), Laos (104th), Myanmar (118th) and Cambodia (119th).

Source: https://www.un.org

Among the criteria used include GDP per capita, social support, healthy life expectancy, freedom, generosity and corruption.

 Malaysia stood at 64th among those aged below 30 (Thailand was 45th) and 71st among those aged above 60 (Thailand 41st, Philippines 43rd and Singapore 26th).

So Malaysian citizens aged 60 and above were the least happy in the country, while those below 30 were the happiest. The “World Happiness Report 2024” quotes from the “Seven Ages of Man” in Shakespeare’s As You Like It: “the later stages of life are portrayed as deeply depressing.” This quote may well describe the state of mind of many older Malaysian adults.

Some factors that may contribute to older adults being the least happy group in the country include:

• Financial insecurity, which can result from ineffective financial management after retirement, insufficient savings, low retirement benefits and lack of awareness, thus limiting access to various pension schemes which are only available in more recent years.

• Limited access to healthcare facilities, long waiting times, and high out-of-pocket expenses.

• Social isolation and loneliness are common among older adults in Malaysia, especially those who live alone or have limited social support networks. 

• Age discrimination in employment and societal attitudes can limit opportunities for older adults to remain active and engaged in the workforce and community life. 

• The lack of affordable and suitable housing options that are age-friendly and accessible is a challenge for many older adults in Malaysia. 

• Older adults in Malaysia are at risk of various forms of mistreatment, including financial exploitation, neglect, and physical or emotional abuse.

• Transport and mobility are a problem for many older adults due to limited access to reliable and affordable transport options. 

• The digital divide limits many older individuals’ access to digital technologies and the internet. This restricts their ability to stay connected, access information and take advantage of online services, such as telemedicine and e-commerce

By identifying these factors, we may improve the happiness of older adults in Malaysia. This will assist local authorities, planners and welfare organisations in formulating targeted strategies to create a more inclusive society by studying the inequality of happiness.

Reference:

Why are so many older adults in Malaysia unhappy? Goh Hong Ching, ALIRAN, 30 March 2024

The Malaysian Economy to Grow 4.0% - 5.0% in 2024

The info-graphics below are from BNM’s Annual Report dated 20 March 2024, a snapshot of possible growth prospects in 2024.

It seems 2024 is a better year! But I wonder, if they (BNM) have simulated a worse-case scenario – unwarranted political instability, slow pick-up on exports, subdued domestic consumption due to lower disposable income, deferment by FDIs and DDIs due to less than attractive investment climate and lower government spending owing to fiscal constraints? I am not a “prophet of doom” but a good presentation will carry a worse-case scenario and an optimistic case, and you may still believe a base case that lies somewhere in between. All I am going to say is “hope for the best”!

Reference:

BNM Annual Report 2023

Ripple Effect of Court Decision on Healthcare Industry

 The operational and ethical frameworks governing the medical practice are set to experience a ripple effect following a recent landmark ruling on healthcare accountability. The Association of Private Hospitals Malaysia president said the Federal Court has decided to hold Columbia Asia Sdn Bhd and an anaesthetist jointly responsible for the tragic medical outcome of Siow Ching Yee. The decision compels the hospital and its staff to compensate Siow nearly RM4 million for negligence that led to severe brain damage.

This ruling will have ripple effects across the Malaysian medical community, potentially influencing practitioners to adopt a more cautious approach to clinical procedures. The court judgment has economic ramifications, particularly in increased insurance premiums for medical facilities. That may challenge the affordability and accessibility of healthcare. Escalated insurance premiums for medical facilities further exacerbates concerns.

Source: https://en.wikipedia.org

Nevertheless, Malaysia's private healthcare industry has long been lauded for its high-quality services at competitive prices, making it a preferred destination for medical tourists in the region. The value-driven healthcare has only strengthened in the post-pandemic era.

Recognising the gravity of this ruling, other jurisdictions in the region could take proactive measures to ensure fair assignment of liabilities and reasonable compensations. A nuanced dialogue among all healthcare stakeholders as a follow-up to the court ruling could act as a reflective examination.

The dialogue could include regulators and legal experts, aimed at reconciling the drive for medical advancement with importance of patient welfare while balancing the cost and access to care. The likely people to benefit from all of this, is the insurance companies and the legal profession. So long as we don’t become the likes of the USA, we may hold costs, patient care in intricate balance, we then could advance affordable medical care.

Reference:

Healthcare community will experience ripple effect following court decision on hospital accountability, Luqman Hakim, New Straits Times,18 March 2024

MMC: What Is Going On?

The corporatized medical regulator, MMC, is making decisions which appear to be contradictory to the path taken by the health ministry on recognition of specialist programmes.

The management of Malaysia’s healthcare system is showing some serious cracks. Some are saying it is now under the high dependency unit. Quick action has to be taken before it lands itself in the intensive care unit.

Pressing matters are not being given the attention that is due. More than 6,000 contract doctors have left government service in the past six years, mostly due to long waits for permanent employment. Some threw in the towel after claiming they have been overworked and underpaid. The number is set to grow.

Source: https://mmc.gov.my

The most telling figure that ought to have jolted the authorities is that about 1,500 heart and lung disease patients in government hospitals are forced to wait up to a year for life-saving surgeries. All because of a serious lack of qualified surgeons. The Malaysian Association for Thoracic and Cardiovascular Surgery which gave this figure has estimated that two patients die each week. There are only 14 cardiothoracic surgeons left in public hospitals, working against time to save the lives of these patients.

Surgery in private hospitals can cost at least RM80,000. In government hospitals, patients pay only about RM500.

Despite this utmost urgency, the medical council, MMC, has taken a questionable stand by refusing to recognise cardiothoracic surgeons who were trained at the Royal College of Surgeons of Edinburgh under the health ministry’s parallel pathway programme.

The Edinburgh programme is recognised by the rest of the world. Without this accreditation, the specialists cannot be placed in the national specialist register, and cannot practice, either in the public or private sector. Right now, there are four cardiothoracic surgeons who have completed the course and 28 more in various stages of completion.

What many find hard to fathom is that the MMC chief and the director-general of health are one and the same person – Dr Radzi Abu Hassan. And yet a recent ministry circular made people wonder if he knew what he was doing. The ministry invited those with specialist training in the fields of cardiothoracic surgery, family medicine and plastic surgery from Edinburgh and two other royal colleges to apply for the minimum six-month gazettement programme. This is a path for those in the parallel pathway to practise as specialists.

How can this happen when the MMC is refusing to recognise the very qualification for registration as specialists? 

Recently, Radzi announced that a special task force is to be set up to re-evaluate the recognition issue. Based on the names of the members in the seven-man special committee, there is no cardiothoracic surgeon among them. The fraternity holds this to be indeed very odd as a major issue involves the recognition of these specialists.

If the MMC cares to look around, there are scores of experienced cardiothoracic surgeons who have retired or are still practising in Malaysia with qualifications from the Edinburgh college.

The MMC is a body entrusted with powers to ensure medical professionals give their best to their patients and the nation. It also introduced the Code of Professional Conduct, providing the yardstick for the proper conduct and behaviour of doctors in their clinical practices. But is the MMC practising what it preaches?

Reference:

Hs the MMC gone rogue in the recognition of specialists? K. Parkaran, FMT, 1 April 2024

CEOs Will Balance Cost and Growth in 2024!

 The info-graphics below is extracted from The Star, 16 March 2024.

Chief executive officers (CEOs) will have to make some tough decisions in 2024 in managing costs and growing their businesses. Growth is an important factor and they remain cautious about the uncertain outlook for recession, inflation and rising interest rates.

About 65% of CEOs globally believe their companies are prepared for any additional global shocks in 2024 and 70% have enough visibility to make long-term capital-investment decisions. They are prioritising overall cost management, with a special interest in supply chain and manufacturing costs, according to a survey report from Boston Consulting Group (BCG) involving over 600 global CEOs.

Following cost management, growth is the next priority for executives. Globally, growth via geographic expansion is a priority, especially for consumer, infrastructure and logistics executives.

More than 50% of them believe accessing talent will remain a challenge this year amid digital disruption, cyber risks, higher cost of energy, access to capital/financing and meeting climate commitments.

Artificial intelligence has great potential, growing demands for sustainability offer business opportunities and early investments can boost revenue, reduce costs and enhance brand reputation, BCG said. Exploring new markets and product/service segments can help unlock new sources of top line growth amid shifting global economic and geopolitical dynamics, the report said.

The key for companies, as I have said before, is to remain lean and nimble. Those who have got into trouble had to carry-out painful redundancies and other cost cutting measures. Too much optimism and wanton hiring generally leads to difficult choices when things are no longer good. Being cautious in people hiring helps to keep stability for companies and lives.

Reference:

CEO to balance cost and growth in 2024, B.K. Sidhu, The Star, 16 March 2024

Selamat Hari Raya

 

Malaysia’s Semiconductor Sector to Pick Up Steam?

Malaysia’s semiconductor sector is forecast to shine by the second half of 2024. Malaysia Semiconductor Industry Association’s (MSIA) confidence was based on World Semiconductor Trade Statistics (WSTS) on its prediction that the world semiconductor market would rebound by 13.1 per cent in 2024 to reach US$588 billion (RM2.8 trillion).

MSIA president said the global semiconductor sales dipped 8.2 per cent to US$527 billion in 2023, but the Malaysian market was able to retain its strength throughout the year. The evidence can be seen in last year’s electrical and electronics (E&E) sector, where exports decreased by only 3.0 per cent to RM575.45 billion after 2022’s record year of 30 per cent growth to RM593 billion.

Source: https://simple.wikipedia.org

According to 2023’s full-year print, exports of semiconductor devices and integrated circuits (ICs) attained a growth of 0.03 per cent to RM387.45 billion in 2023. The E&E products dominated Malaysia’s total exports in 2023, accounting for 40.4 per cent share comprising products such as photosensitive semiconductor devices, batteries and electric accumulators, static converters, electric control panels, parts for switching apparatus and electric control panels as well as parts for diodes, transistors, piezoelectric crystals and other semiconductor devices.

The current prolonged geopolitical fragmentations are sending investors in search of new production homes or moving to trusted countries. Many multinational companies (MNCs) in China diverted part of their production and supply chain as a mitigating strategy by selecting Malaysia as their ‘Plus One’ location. The “China Plus One” strategy emerged as a critical policy for companies to reduce their reliance on China by diversifying their supply chain activities to other markets.

WSTS highlighted that all markets are poised for ongoing expansion in 2024 with the Americas and Asia Pacific, in particular, forecast to demonstrate significant double-digit growth on a year-on-year basis. In its December report, WSTS said the industry growth is expected to be primarily fuelled by the memory chip sector, which is set to soar 40 per cent to around US$130 billion in 2024. The majority of other principal segments, including discrete, sensors, analogue, logic and micro, are also expected to record single-digit growth rates.

Malaysia can play a critical role in the global supply chain, riding on its position as the 6th largest exporter of semiconductors in the world. The country also controls 13 per cent of the global market for packaging, assembly and testing services for semiconductors.

Given the importance of the E&E sector to the Malaysian economy and its place in the global supply chain, the need for collaboration among all parties involved to optimise Malaysia’s potential in the E&E sector is important. The country needs to improve its world competitive ranking, improve ease of doing business (some programmes are ongoing), enhance the E&E ecosystem including incentives in light of the global minimum tax implementation in 2025. Malaysia should continue to attract companies with state-of-the-art technology and encourage existing companies to go up the value chain. Malaysia could enhance its ecosystem by attracting more wafer fabs, establishing both local and foreign direct investments in IC design companies, advancing packaging in assembly and testing, and creating Malaysian global champions in automation.

Reference:

Malaysia’s semiconductor sector seen to pick up steam in second half, Bernama, 18 February 2024

Non Revenue Water Loss of RM15 Billion Over 10 Years?

SPAN chairman said Perlis loses more than 63% of drinking water before it reaches the tap. He has called on Malaysia to look at water as a “matter of national security”, saying the country stands to lose RM15 billion worth of drinking water over the next 10 years through sheer neglect. The national water services commission (SPAN) chairman says the country must make upgrading the nation’s water infrastructure as a priority. Poor water infrastructure and management cost the country RM8 billion in non-revenue water (NRW) between 2018 and 2022.

Source: https://en.wikipedia.org

Presently, Perlis is losing 63.3% of its water to NRW, followed by Kedah (58%) and Kelantan (52.6%). Meanwhile, Penang’s loss – at 23.6% – is the lowest, followed by Johor (25%) and Selangor, (27.5%). The national NRW average is at 37%, with pipes of between 30 to 50 years old needing replacement. Only RM1.9 billion was set aside for NRW-related matters by the 11th Malaysia Plan (2016-2020), which was insufficient.

Internet-linked devices to monitor water leaks, similar to tech used in China, can help reduce waste more efficiently. Urgent fixes may cost RM30 billion over 3 years but will ensure water security and avert water supply crisis. There are technologies available to identify where the loss occurs, but we are not inclined to use them because the existing cartel prefers the “cut and cover “method.

Reference:

Water leaks will cost us RM15bil over 10 years, says Santiago, Predeep Nambiar, FMT, 

23 March 2024

Tobin Tax: What Is It?

The Tobin tax is a tax levied on spot currency conversion, with the intention of disincentivizing short-term currency speculation. This tax is named after economist James Tobin.

When fixed exchange rates under the Breton Woods system were replaced with flexible exchange rates in 1971, there was a massive movement of funds. Short-term currency speculation commenced then. 

Source: https://www.bernama.com

The Tobin tax seeks to mitigate or eliminate these issues. The tax has been adopted by a number of European countries and the European Commission to discourage short-term currency speculation and stabilize currency markets.

The currency transactions tax does not impact long-term investments. It is only imposed on the excessive flow of money that moves regularly between financial markets through the actions of speculators in search of high short-term interest rates. The tax is paid by banks and financial institutions that profit from market volatility by taking excessive short-term speculative positions in the currency markets.

According to Tobin, to work effectively such a tax should be adopted internationally and be uniform, and the proceeds donated to developing countries. Although Tobin suggested a rate of 0.5%, other economists have put forward rates ranging from 0.1% to 1%. But even at a low rate, if every financial transaction taking place globally was subject to the tax, billions in revenue could be raised.

The Tobin tax has been controversial since its introduction. Opponents of the tax indicate it would eliminate any profit potential for currency markets as it is likely to decrease the volume of financial transactions, slowing global economic growth and development in the long run. Proponents state that the tax would help stabilize currency and interest rates because many countries' central banks do not have the cash in reserve that would be needed to balance a currency selloff.

In Malaysia’s case, the daily FX turnover was USD12.6 billion for 1 April 2024. It averages around USD12-15 billion per day. If we only tax one side of the trade, say the “sell ringgit” transaction, then it is USD6-7 billion per day. And if we tax that at 0.1%, revenue would be USD6-7 million per day, or USD120-140 million per month (assuming 20 working days) or say USD1.56 billion per annum (or approximately RM8 billion per year). That will reduce our borrowings and meet part of our development expenses. This is a simple, efficient tax system compared to GST. Isn’t this better?

Reference:

Tobin Tax: What it is, how it works, examples, Julia Kagan, Investopedia, updated 30 August 2022

Longevity: 150-Year-Old Humans!

The world is changing – with more people living longer and falling birth rates. That trend has triggered a new dawn of longevity science, which aims to enable more of us to live healthier, for longer. The Middle East is investing heavily in the science of longevity that could make reaching 90 years of age an expected part of lifespan.

If current trends continue, those aged over 50 in the GCC will comprise 18.5 per cent of the population by 2025, up from 14.2 per cent in 2020. Limited availability of specialised treatment centres, insufficient local specialist health practitioners and over-reliance on expatriate labour could lead to a growing burden on Middle East healthcare systems.

Source: https://en.wikipedia.org

The World Health Organisation is predicting the number of people living beyond 60 will double by 2050, and triple by 2100. Rapid developments in stem cells suggest humanity is fully capable of surviving and even working well beyond present expectations, with 150 years old becoming the norm by the end of the century

Some may be fortunate to enjoy good health and mobility well into their 80s. But the majority will already have experienced physical and cognitive decline. Lifestyle choices play a significant role. Researchers believe an ability to capture a cellular state known as senescence – where damaged cells resist removal causing inflammation – could provide the answer to slowing down natural ageing. When inflammation becomes chronic, it can negatively affect the body, damaging tissue and impairing healing, while accelerating ageing and neurodegenerative disease. Ozone therapy is another alternative medicine treatment that projects ozone gas into the body to treat various conditions and reduce inflammation. By improving oxygenation and reducing oxidative stress, ozone therapy is believed to have potential anti-ageing effects.

Lifestyle factors such as diet, exercise, stress management, and avoiding exposure to toxins play a significant part in modulating inflammation. Anti-inflammatory diets rich in fruits, vegetables, and omega-3 fatty acids, regular physical activity and adequate sleep can all cut the risk of chronic inflammation and the rate of ageing.

The UAE is positioning itself at the regional forefront of longevity and anti-ageing preventive care. Alongside an anti-obesity drive to stem spiralling rates of overweight people, specialist centres are opening to focus on healthy ageing. They include the Sharjah Research Technology and Innovation Park (SRTIP) and Deep Knowledge Analytics (DKA) joint venture in mapping the UAE’s longevity industry.

Since 2019, the Abu Dhabi Stem Cell Centre’s (ADSCC), ongoing research has examined tissue regeneration and rejuvenation of ageing cells for its potential to increase longevity. In Masdar City, a biocomputing innovation research laboratory – a partnership between Abu Dhabi’s Mohamed bin Zayed University of Artificial Intelligence and AI modellers BioMap is focusing on age-related illnesses.

According to the Office of National Statistics in Britain, a third of babies born in 2013 are predicted to reach the age of 100, while the US Census Bureau predicts the number of people aged over 85 will triple by 2060. With the advances in healthcare, living to be 120 years old has now become an imaginable prospect.

Rapid developments in stem cells suggest humanity is fully capable of surviving and even working well beyond present expectations, with 150 years old becoming the norm by the end of the century. That has ramifications on work, health, education and societal behaviour. Older, but healthier people could continue to contribute to society. Retirement age could now be set at 100. Our Tun M is an example of working at 98!

Reference:

Longevity: how science is pushing the boundaries for the first 150-year-old human, Nick Webster, The National News, 16 March 2024

World’s Top Economies in 2023

 

The above is a snapshot of nominal GDP of 50 countries. We are now behind Indonesia, Thailand, Singapore and even Vietnam. Not too far forward, the Philippines will overtake us. Could we try to re-draw our plans and become more competitive? Several areas need improvement: education; civil service/Government agencies (response time); corruption; enforcement and execution of plans. Or, are we are satisfied that we are ahead of Myanmar, Laos, Cambodia and Timor Leste?

Are We a Land of Bailouts? (Part 2)

Further to Part 1 (as highlighted yesterday), the AG’s report also found that the Armed Forces Fund Board (LTAT) had failed to account for a total of RM812 million in impairments on investments at its subsidiaries, that is, a RM768 million investment in Boustead Holdings Bhd and a RM44 million investment in pharmaceutical company Pharmaniaga Bhd. This resulted in the fund overstating its net profit and investments in subsidiaries by RM812 million in 2022. 

In other words, LTAT would have made a RM379 million net loss for 2022 if the RM812 million impairment is considered. Instead, the LTAT reported a 13.1% increase in net profit to RM433 million in 2022 from RM383 million in 2021. The fund also saw its revenue rise 27% to RM653 million in 2022, from RM514 million in the previous year.

Source: https://en.wikipedia.org

According to the report, LTAT had made an investment of RM5.29 billion in 13 subsidiaries in 2022, including investment costs of RM2.55 billion in Boustead and RM106 million in Pharmaniaga. In June last year, LTAT completed the takeover of Boustead, making the latter a wholly-owned subsidiary of the fund. LTAT directly owns an 8.615% stake in Pharmaniaga and indirectly hold 51.835% via Boustead as at end-March 2023.

Additionally, the report found that LTAT divested its holdings in Perumahan Kinrara Bhd and Tanah Sutera Development Sdn Bhd, selling them for a total of RM43 million to Perbadanan Perwira Harta Sdn Bhd (PPHSB). In return, LTAT received PPHSB shares valued at RM232 million. From this transaction, LTAT recorded a non-cash profit of RM189 million, forming the basis for dividend payments in 2022 to its 122,936 contributors. In 2022, LTAT paid dividends totalling RM476 million (5%), utilising both its net profit and accumulated gains, the report stated. That’s financial engineering!

State-owned agencies continue to rely on government bailouts to stay afloat and remain viable. Should they continue to be bailed out, or should they be allowed to fail?

For one, the National Audit Department is concerned about FELDA’s heavy reliance on financial aid to keep operating and has advised the agency to chart a clear direction without further financial assistance from Putrajaya. In the recovery plan, the government has agreed to inject RM1 billion for a period of seven years for FELDA to settle its debts and government guarantee revolving credit. Still, FELDA’s huge debt places a substantial burden on an already-strained national budget and further increases the growing debt bubble. 

Following the latest findings from the AG’s report, it remains to be seen how agencies like FELDA and PR1MA will resolve their pile of debt without resorting to major bailouts. 

For PR1MA, it can take a leaf out of the success of Singapore’s Housing and Development Board’s (HDB) book. It was reported that HDB flats house 80% of the city state’s resident population, of whom about 90% own their home.

We are in dire need of solutions that can create viable government entities. Unless we are prepared to remove politicians from being involved in the Board or Management of these entities, we will have difficulty in ending bailouts. In the private sector, very seldom there are bailouts. It is only when the organisation is “too big to fail” that a bailout is considered.

The U.S. did this in the Great Recession of 2008/9, saving major banks. It was a surprise for a capitalist system which normally touts market forces. In the end it was seen as a systemic risk or a personal “injury” for some vested interests – not unlike Malaysia! Seriously, we need to get a handle on this, if not we may have dire consequences.

Reference:

Malaysia-land of endless bailouts, Kang Siew Li, The Edge Malaysia, 18 March 2024

Are We a Land of Bailouts? (Part 1)

The Federal Land Development Authority (FELDA), the government agency that owns FGV Holdings Bhd, is one of the largest producers of oil palm in the world.  It is also one of the country’s biggest beneficiaries of government bailouts.  It still owes more than RM8 billion, according to the latest Auditor-¬General’s Report (AG’s report).

A recovery plan aimed at turning it around included a RM6.23 billion bailout from the government in 2019 which failed to deliver anticipated results. The agency has not reported an annual profit since 2013.

In 2022, the government awarded grants of RM214 million to FELDA. This was down by 37.4% from the RM342 million provided in 2021. The drop in grant was mainly due to lower allocation from the Ministry of Finance (MoF) in 2022. However, FELDA, which falls under the purview of the Prime Minister’s Department, remains in crisis mode and continues to rely on federal funding through grants to continue its operations and service its debt. But how much taxpayer’s money will be used to resolve its crisis?

The National Audit Department said the agency owes RM7.97 billion to a number of lenders, and some RM686 million to the federal government. These loans were part of measures to restructure its debt from 2018 to 2022.

FELDA is not alone in its struggle with debt. Of the 24 federal agencies with loan balances totalling RM123.14 billion in 2022, FELDA’s loan balance of RM8.66 billion is the third highest, after the Public Sector Home Financing Board’s RM62.08 billion and the National Higher Education Fund Corp’s RM41.5 billion.

The National Audit Department also flagged FELDA’s ability to continue as a going concern. It pointed to the agency’s cash balance of RM808 million as at end-December 2022, against its commitments totalling RM1.561 billion. These include commitments amounting to RM50 million per year under a Tawarruq Financing Facility agreement entered into by FELDA’s subsidiary FIC Properties Sdn Bhd in 2017 with Govco Holdings Bhd (GovCo), a company under the Minister of Finance Inc, for the first five years, starting in 2024, with the outstanding amount of RM2.595 billion scheduled over 15 years beginning in 2029. FIC Properties has been making losses from 2020 to 2022.

FELDA had secured the loan to support its US$680 million purchase of a 37% stake in Indonesia’s PT Eagle High Plantations Tbk from Indonesian tycoon Tan Sri Peter Sondakh’s Rajawali Group in 2015. That deal that raised a lot of questions as FELDA’s 81.9%-owned unit FGV had scrapped plans to buy the same block of shares upon the advice of two separate advisers, Bank of America and JP Morgan.

According to the AG’s Report, FELDA’s net loss was mainly attributable to impairments amounting to RM742 million on investments, outstanding amounts from subsidiaries and settlers’ debt.

With a loss of RM990 million in 2022, the Electricity Industry Fund was the second largest loss-making federal agency, followed by Railway Assets Corp (net loss of RM484 million), Kumpulan Wang Amanah Negara (KWAN) (RM353 million) and Kuala Lumpur City Hall (RM283 million).

The AG’s report also flagged uncertainty around state-owned PR1MA Corp Malaysia’s (PR1MA) status as a going concern.

The National Audit Department warned that PR1MA would not be able to meet all its impending Islamic bond (sukuk) repayments on time based on its liquidity position.

The agency’s cash balance as at Dec 31, 2022, fell to RM428 million from RM820 million a year earlier. It lost RM257 million in 2022, as its residential and commercial sales revenue fell 33.7% to RM857 million in 2022 from RM1.292 billion in the previous year.

PR1MA, which is under the purview of the housing and local government ministry, will have to repay sukuk worth a total of RM3.79 billion up to 2027. This includes Tranche 2 of a sukuk amounting to RM1.75 billion due to mature in October 2024.

There is a need for some third-party to assist MoF to sort out all these problems. Otherwise, we are waiting for a blow-up not a bailout!

Reference:

Malaysia-land of endless bailouts, Kang Siew Li, The Edge Malaysia, 18 March 2024

Indonesia’s Tax Ratio is Underperforming!

Indonesia’s tax system that has been underperforming for many years as it does not collect as much as it should. Indonesia consistently ranks near the bottom in regional and global comparisons of the so-called tax ratio, or tax revenues as a percentage of gross domestic product (GDP). Currently, this is about 10%.

The number of staff working in the tax administration is too few. Then, the operating budget is too low. The Organisation of Economic Co-operation and Development (OECD) Tax Administration 2023 report shows the number of staff working in a tax administration and the amount of revenue that it collects has a relationship, the higher the number of staff, the higher the revenue. 

In countries with a tax ratio lower than 14%, one tax officer is employed for every 2,000 taxpayers. In countries with a tax ratio between 15% and 20%, there is one taxman for every 1,500 taxpayers. And if a country has one tax officer for every 680 taxpayers, then, statistically speaking, that country is in the big league: its tax ratio is more than 20%. The trend is clear: the more tax officers there are, the higher the revenue collection.

Source: https://ringgitplus.com

For a country with a labour force of “only” 13.8 million, Australia employs around 18,000 tax officers. Indonesia, a country 10 times the size of Australia in terms of the labour force, employs “only” 45,000 tax officers or just 2.5 times Australia’s figure. This analysis suggests that there is a need to significantly increase the number of tax officers.

The number of employees working in the tax administration is but a representation of the bigger picture: the amount of money spent on the tax administration system itself. In other words, the budget allocated to the tax agency. The data is quite clear: the more money spent on the tax administration, the higher the level of tax revenue. For countries in the big league, or those with tax ratios more than 20%, they spent, on average, the equivalent of 0.2% of their GDP for their tax agencies’ operating expenditures. Indonesia allocates only the equivalent of 0.04% of its GDP to the tax administration. 

Malaysia too has one of the lowest tax to GDP ratio of 11.8%. The Federal Government has projected its revenue collection in 2024 to grow 1.5% to RM307.6 billion. So, we need to have two strategies:

(i) broaden the tax base, with Tobin tax, remittance tax, inheritance tax or “excess” profit tax for new sectors; and

(ii) improve collection with more enforcement officers.

Reference:

Investment in people, tech to increase tax revenue, Glenn Polii, The Star, 16 March 2024

No Link Between Falling Ringgit and Profligate Money Printing?

An economist has dismissed a suggestion that the decline in the value of the ringgit is attributable to profligate money printing. The Malaysian Institute of Economic Research (MIER) said France in 1981, and Germany in 1988, reversed policies premised on modern monetary theory (MMT) due to their inability to cover their respective domestic currency liabilities. The MMT is a fiscal policy model which allows a government to print money needed for spending, instead of being restricted to using money raised by taxation and borrowings.

Bank Negara Malaysia would not venture into money printing as a policy measure to cover deficits.  Previously, FMT columnist K Kathirgugan had suggested that a significant increase in the supply of ringgit over the years had led to a substantial decrease in purchasing power. He said the ringgit’s money supply surged from RM4.1 billion in 1970 to RM2.4 trillion over 54 years. This does not correlate with GDP growth and GDP itself, as velocity of money is usually measured as a ratio of GDP to money supply (M2). Under monetary theory, it is usually viewed as constant.

Source: https://www.thetruenet.com

UCSI University associate professor of finance attributed the decline to illicit capital outflows, where Malaysia ranks fifth globally with an outflow of US$291 billion based on a report by Global Financial Integrity.

Tighter regulations on transfer pricing is a possible solution, but could discourage foreign investments. Then there are remittances by documented and undocumented workers which amounted to RM9 billion in 2022.

Money printing (forget about MMT) in line with GDP growth will not cause inflation. But where it is printed profligately to cover deficits, then inflation or hyperinflation will arise. Currency movements are a mixture of:

• Relative GDP growth;

• Comparative inflation between countries;

• Portfolio flows, FDIs and remittances;

• Interest rate differentials;

• Trade surpluses/deficits;

• Fiscal deficits (or otherwise);

• Political and societal stability; and

• Speculative forces

That is what the Madani Government has to focus on, not speak about “fundamentals are good” – and what exactly does that mean?

Reference:

No link between falling ringgit and profligate money printing, says economist, Lynelle Tham, FreeMalaysiaToday, 16 March 2024

Is the Property Overhang Clearing Up?

 

The recent statistics released by the National Property Information Centre (Napic) exhibits a positive trend for the industry as far as the overhang is concerned as both volume and value of transactions surged to an all-time high of over 399,000 units, worth a staggering RM196.8bil, transacted in 2023. The pick-up in activities was evident in states like Johor, where transactions jumped by more than 44% y-o-y, accounting for 16.2% of volume and 18% of the value nationwide. Nevertheless, Selangor remains Malaysia’s favourite property hot spot, accounting for 22% and 30% of the nation’s total transaction volume and value, respectively. In addition, according to the Napic report, some 21.5% of market transactions were purchases made directly from developers while the balance was sub-sale volume.

The biggest positive from Napic’s annual data was the significant reduction in overhang properties. The total overhang volume fell by 9.8% y-o-y to 46,641 units while in terms of value, there was an 11.1% decline to RM34.3bil. This is the lowest overhang volume since the 47,806 units that were observed at the end of 2019, and in terms of value, it is just RM4.5bil above the level seen in the same year.

Serviced apartment overhang fell sharply with the number of units and value dropping by 13.1% and 17.7% y-o-y to 20,825 units and RM23.8bil, respectively. Geographically, serviced apartment overhang saw a significant reduction in Johor as there was a 17.1% and 20.6% drop in volume and value to 14,132 units and RM9.7bil, respectively. Selangor and Kuala Lumpur too saw steep declines, with both witnessing 29.4% and 20.1% fall in the number of units and 33.9% and 16.5% decline in terms of value, respectively.

In the residential segment, as seen in Chart 1, the total overhang has dropped 30% from the peak of 36,863 units two years ago while in terms of value, some RM5.1bil worth of overhang has been removed. In the serviced apartment segment, overhang units have been reduced by 14.1% or 3,470 units while in terms of value, some RM4.1bil was cleared.

As the market seems to be “tighter” with less overhang, developers too have seen a good pick-up in sales last year and at the same time, the increase in transaction volume has caused prices to increase across the board.

Overall, the Malaysian house price index (HPI) rose by 3.2% y-o-y, slightly ahead of the increase in the Malaysian consumer price index, which rose by 2.5% in 2023, as can be seen in Chart 2.

In the fourth quarter of 2023 period alone, HPI rose by 3.9% quarter-on-quarter (q-o-q) and 3.7% y-o-y.

As prices rise and supply tightens due to lower overhangs, it will be interesting to see how 2024 will pan out. But this is a positive development for the property sector and hopefully developers and local authorities remain selective and cautious in their projects.

Reference:

Property overhang clearing up, Pankaj C. Kumar, The Star, 16 March 2024

Why More Malay Parents Choose Vernacular Schools?

Over the last decade, the enrolment of non-Chinese students, particularly Malay students, in Chinese vernacular schools has increased steadily, climbing from 9.5% in 2010 to 15.33% in 2020. In Chinese vernacular schools, the ethnic breakdown was 15.33% Malays, 80.25% Chinese and 2.75% Indians. In Tamil schools, 99% of the pupils were Indians. Private schools are gaining popularity. The enrollees constitute 65.88% Chinese, 26.96% Malays and bumiputras, 4% Indians and 3.17% others. But these schools are only for the privileged.

The proportion of Malay students enrolled at Sekolah Kebangsaan (SK) or national schools has remained stable, hovering at around 93 to 94% from 2010 to 2020. The increasing willingness among Malay parents to enrol their children in vernacular schools rather than national schools is due to several factors. These include the desire for their children to learn Mandarin, the comprehensive facilities provided by vernacular schools, and the improved quality of teaching and learning. Vernacular schools are also perceived to offer many advantages over national schools, such as better facilities, a more dedicated and organised alumni network, and a strong focus on mastering Mandarin and English. Many parents are also drawn to the strong academic reputation of these institutions.

Source: https://en.wikipedia.org

The four main reasons for the increase in Malay enrolment at SJKCs include:

1. Language mastery for a better future

Parents recognise the value of multilingualism in a globalised world.

And Mandarin, with China’s economic power, offers exciting career prospects. Vernacular schools provide an immersive environment for mastering this language, thereby giving students a competitive edge.

2. Better facilities and learning environment

In addition to language, parents are attracted to the well-equipped infrastructure and organised alumni support. These factors contribute to a conducive learning environment, fostering better engagement and potentially leading to improved academic performance.

3. Quality teaching and diverse learning approaches

The improved quality of teaching and learning (PnP) in science and mathematics has motivated parents to choose vernacular schools over SKs for their children.

4. Fostering cultural understanding and openness

Many Malay parents also realise that attending a vernacular school will expose their children to different cultures and languages fostering understanding and appreciation for diversity and preparing them for a better life in a multicultural society like Malaysia.

So, if Malay parents realise the benefits of vernacular schools, shouldn’t the MoE do something about it? Or, learn a thing or two? You don’t have to be an educator to know what the ingredients are – product, value, content and outcome. If you are a businessman you will appreciate this more. I am from the “boomer” generation. For us it was the great teachers; good syllabus; fantastic school environment – even if the headmaster is a strict disciplinarian; and meritocracy. You rise to be top based on your ability, not on your father’s background or title or racial origin! You had elite schools like VI, RMC or MCKK. They provided cohesion, pride and motivation to compete well. All the ingredients for a good future.

Today students are so “spoon-fed”, they come into the workplace looking for model answers to reply to a simple letter. Language and maths are much to be desired. The damage done to the education system will only be seen in 30 years time. I won’t be around to see it! Good luck Malaysia!

References:

4 reasons why more Malay parents are choosing vernacular schools over national schools, Sadho Ram, www.says.com, 22 February 2024

Respecting pluralism and diversity, Shad Saleem Faruqi, The Star, 18 March 2024

Fintech Outfit That Is Changing Women’s Lives!

Many businesses were on their knees during the Covid pandemic. But it was a period of significant growth for a group of remarkable women entrepreneurs.

As the pandemic turned the world upside down, an engineer launched a Nyonya food paste business, a pharmacist introduced an Ayurvedic beauty product range, and a housewife cultivated western herbs. Today, they are all thriving businesspersons.

The thread that goes through all their success stories is MADCash, a microfinance scheme launched by 52-year-old Nuraizah Shamsul Baharin. MADCash is an acronym for Multiply-Assist-Donate.

Source: Malaysiakini

MADCash is a platform which turns public donations into interest-free microloans of up to

RM5,000 to women entrepreneurs, who would otherwise not have access to credit through conventional means.

Not only does MADCash maintain the fintech microloan platform, it also does the data analysis to vet the microloan applicants to determine their bankability within two years of the loan extension.

It also provides business coaching to ensure the entrepreneurs have a higher chance of repaying the loans within the 10-month credit term and growing their businesses further.

In 2022, MADCash extended RM54,000 in loans to 33 women, while this grew by five folds with a total of 157 women receiving RM354,000 in 2023. The loans have a 98 percent repayment rate.

MADCash is launching the same scheme in Singapore in April and is also in talks with potential partners in Tajikistan. This year, Nuraizah hopes MADCash can extend loans to

800 women, a move she expects will have a compounding impact on the community.

This is a success story like Grameen Bank (“GB”) in Bangladesh. GB started as a pilot project in 1976. In 1983, it became a bank. The aim is to alleviate poverty and empower the marginalised poor through micro-credit. The MADCash scheme could take a similar path from a platform to a bank!

Reference:

Mad about growing cash: Fintech outfit is changing women’s lives, S. Vinothaa, Malaysiakini, 1 March 2024

Are Muslims Prohibited from Working in Premises Selling Alcoholic Beverages?

The Department of Islamic Development Malaysia (JAKIM) has stressed the need to take a holistic and comprehensive approach as opposed to imposing an outright ban to prevent Muslims from working in premises selling alcohol beverages.

The Central PAS Ulamak Council deputy head wanted to know if JAKIM has also held an engagement session with the state government and industry players involved on the framework of the State Syariah Criminal Enactment to identify efforts to prevent Muslims from seeking employment at premises selling alcohol beverages.

Source: https://en.wikipedia.org

To quell doubts and confusion over the matter, the Federal Territory Mufti’s Office had on Jan 9, 2017 addressed the issue of working in a convenience store – as in the case of 7-Eleven, 99 Speedmart and others – that sell alcoholic beverages.

Below are its three viewpoints:

• If the income is derived from the sale of both from the permissible and the prohibited, then the wage is not prohibited but makruh (undesirable).

• If the worker himself is involved with the sale – i.e. he is working as the cashier – then it is prohibited although the prohibition is not the same as consuming the alcohol beverage.

• It is best to separate between the counters of permissible and prohibited products in accordance with the work shift of the employees; this is deemed the responsibility of the employer to protect the welfare of their Muslim staff.

“We would advise the employees concerned to try and find work at places where there are no elements of doubt for that is safer and calms one’s heart,” the Federal Territory Mufti’s Office advised.

I think working in a store that sells alcohol is not the only issue – what about where packaged pork or other non-halal goods are sold? To have separate counters is a burden on employers. Is it better to employ Nons for this purpose? In fact, it may also be a problem to work in an environment with too many Non-Muslims. Or, live in an area surrounded by Non-Muslims? The list is endless and are we moving into a segregated society?

Reference:

So are Muslims prohibited from working in premises that sell alcoholic beverages? Focus Malaysia, 7 March 2024

Bitcoin tops US$72,000!

Bitcoin topped US$72,000 (RM337,320) for the first time recently. In 2024 alone, it has gained 70%. This is on the back of massive inflows into US exchange-traded funds (ETFs).

The original cryptocurrency rose as much as 4% to US$72,234 on 11 March 2024. Smaller tokens like Ether, Solana and Avalanche also advanced. The crypto gains came even as equities traded broadly lower ahead of a key report on US inflation.

The success of the crop of Bitcoin ETFs add to a range of bullish signals for crypto assets. Perhaps the most anticipated milestone is the quadrennial “halving” scheduled for April. A halving event refers to a period every few years when the reward for mining Bitcoin transactions is cut in half. As things stand, those validating Bitcoin transactions currently get 6.25 bitcoins, which could go down to 3.125.

Other technical indicators point to growing interest among both institutional and retail investors. Open interest on Chicago-based CME Group’s Bitcoin futures market has jumped 44% from this year’s low, while a rebound in the so-called funding rate signals that traders are increasingly willing to pay a premium for opening leveraged long positions in Bitcoin.

MicroStrategy Inc, the enterprise software firm that has made buying Bitcoin part of its corporate strategy, said it spent US$822 million purchasing more tokens from Feb 26 through March 10.

UK fintech firm Finder carried out a study based on expert price predictions of 40 crypto industry specialists on how Bitcoin is expected to perform through to 2030. Bitcoin, it found, is likely to hit an average peak price of $87,875 in 2024, with some experts predicting it will climb as high as $200,000. On the flip side, the average lowest price Bitcoin could hit by the end of 2024, is seen as $35,734, the report said, with some predicting it will fall as low as $20,000.

Cryptocurrencies are not regulated in the UK and there is no protection offered by the Financial Ombudsman or the Financial Services Compensation Scheme. 

References:

Bitcoin tops US$72,000 for the first time as rally builds steam, Sidhartha Shukla, Bloomberg, 12 March 2024 / theedgemalaysia.com

Bitcoin price predictions: How much more could cryptocurrency rise in 2024? Doloresz Katanich, Euronews, 6 February 2024