Why is Madani so Desperate?

The Madani Government seems so desperate to do the following:

1.               Raise electricity tariffs from1 July 2025.

2.               Increase port charges by up to 30%, also starting 1 July 2025.

3.               Expand the sales tax to cover 97% of all goods and impose service tax on education, healthcare, beauty, finance, rentals, and industrial sectors — even fruits, salt, raw sugar and seawater are now taxed; all starting 1 July 2025.

4.               Maintain Petronas’ RM32 billion dividend payouts — same as last year — even though Petronas profits have plunged by 32%, forcing them to retrench over 5,000 employees and freeze all promotions and new hiring until end-2026.

5.               Implement the Stamp Duty Act, 1949 for all contracts; and

6.               Planning to hike RON95 fuel price in the second half of 2025.

The answer is probably “blowing in the wind” (not the Bob Dylan song) but Madani has failed to manage the economy and national debt responsibly. Let’s look at some its actions thus far:

 

(i)              Revenue, Spending & Deficit (Jan–April)

Government Revenue:

 

• 2022 - RM82.0 billion (Q1 still under lockdown, economy reopened in April)
• 2023 - RM98.6 billion
• 2024: RM93.2 billion
• 2025: RM97.1 billion

Even with multiple new and expanded taxes (LVGT, CGT, dividends, SST widening), revenue in 2024 and 2025 is still lower than in 2023.
That means the economy isn’t growing fast enough to generate more tax income or are there leakages?

Next, Government Spending has been on the rise:
• 2022: RM116.5 billion
• 2023: RM122.8 billion
• 2024: RM133.2 billion
• 2025: RM127.8 billion

And the overall budget deficit remains sticky:

• 2022: -RM34.4 billion
• 2023: -RM24.1 billion
• 2024: -RM40.0 billion
• 2025: -RM30.7 billion

The deficits in 2024 and 2025 are worse than in 2023, despite extraordinary one-off support in 2024:

• KWAP dividend: RM5 billion (vs forecast RM3 billion)
• BNM dividend: RM5.25 billion (vs RM2 billion)
• RM2 billion from amendments to the Unclaimed Monies Act
• RM2 billion early payment from Petronas for the Bandar Malaysia land deal

Apart from the final RM4 billion payment from Petronas, most of these revenue windfalls will not recur in 2025.

(ii)       Government Debt and Debt-to-GDP Ratio

As of 16 June 2025, the government has already borrowed a net RM64.28 billion — that’s 79.4% of the RM81 billion debt limit set in Budget 2025, even though only 45.8% of the year has passed.

This means that either they have to cut spending drastically or squeeze the rakyat further to raise more taxes — quickly — because there’s only RM16.7 billion in borrowing room left for the rest of 2025.Due to stagnant revenue and rising spending, government direct debt has soared:

• Nov 2022: RM1.071 trillion
• Jun 2025: RM1.305 trillion
• That’s an increase of RM234.2 billion in just 30 months of Madani.

Debt-to-GDP ratio has also surged from 60.3% to 65.5% by Q1 2025. This shows that debt is rising faster than economic growth. If GDP were truly expanding in a healthy way, this ratio should be going down - not up.

(iii)      Government Debt Servicing Costs (Interest Only)

• 2022: RM41.3 billion
• 2023: RM46.1 billion
• 2024: RM49.8 billion
• 2025: RM54.7 billion

 

 

With an additional RM81 billion in borrowing for 2025, interest payments in 2026 are projected to hit RM63 billion. That’s an increase of RM21.7 billion in annual interest payments in just 3 years — and this is just interest, not even principal repayment. In 2017 under Najib, the total annual debt servicing cost was only RM28 billion.

Bottom Line: Is Madani Squeezing the Rakyat to Cover Their Own Failures?

To preserve their budget targets, slow the debt spiral, and fund ballooning interest payments, the Madani government will continue extracting from the rakyat — through every possible means — to cover up three years of economic mismanagement. When you don’t know how to run a country, everyone else will pay the price. 

As a responsible Government, one would present a reduction in operating expenditure and arrest leakages. Then only attempt to introduce less controversial taxes. But no, they insist on induced inflation especially with tariffs still not sorted. Why can’t you do the Tobin tax (for banks), widen the excess profit tax and increase the “sugar” tax?

“Feels Like Cheating”

Malaysia celebrated a dominant 4-0 victory over Vietnam in the 2027 Asian Cup qualifiers. However, many local fans voiced concerns over the national team's increasing reliance on naturalized players. The most upvoted comment responded to the post: "Oh right. The three key players who scored for Malaysia were Johan Figueiredo, Ramasami Holgado, and Lim Corbin-Ong."

The Football Association of Malaysia (FAM) reportedly plans to naturalize even more players, potentially fielding a squad without any locally raised players, similar to Indonesia's recent policy. This trend has boosted the squad value of Malaysia and Indonesia, putting them ahead of regional rivals like Vietnam and Thailand, who have naturalized some players with foreign blood but still rely primarily on domestic talent.

 

With a squad strengthened by high-quality players of South American and European origins, hosts Malaysia completely dominated Vietnam at the 2027 Asian Cup qualifiers.

Malaysian defender Matthew Davies and head coach Peter Cklamovski remain focused on their upcoming match, dismissing rumours about the alleged illegal naturalization of several new players.

We don’t realise or refuse to accept that on merit, foreign players naturalised are better than local talent. Why are the likes of Akmal not questioning this policy of sidelining local bumiputra talent? Surely, we must limit foreign talent (naturalised) not to exceed say, 4 in a team of 11? What if all 11 are “foreigners”? Could we have Ronaldo playing for us?

If the above is feasible in football, could we apply the same for companies or specific sectors in the economy? What is so different? If we have the best talent to represent Malaysia and work for Malaysia, our GDP will not be RM2.0 trillion but RM4.0 trillion in 10 years. Then the pie is large enough to distribute to the disadvantaged group, and no one will have cause to create tension. Isn’t that brilliant? It’s not cheating but being real in a competitive world. Just do it!

 

Reference:

'Feels like cheating': Malaysian fans express concern over naturalized players despite big win over Vietnam, Hoang An, VnExpress,12 June 2025

Malaysia’s Oil Trade Dynamics

Malaysia is a net exporter of crude oil and condensates, but it imports refined petroleum products (including RON 95) due to insufficient domestic refining capacity for local demand. While Malaysia earns revenue from oil exports, the cost of importing refined fuel (even lower-grade oil) is influenced by global prices.

As of mid-2025, Malaysia's oil export revenue and import costs were influenced by global crude prices, domestic production, and refining capacity. However, official detailed figures for 2024 and H1 2025 are not yet fully published, but we can estimate based on recent trends and available data.

 

Source: https://en.wikipedia.org

·         Key Estimates (2024 & H1 2025):
Petroleum Export Revenue (Crude Oil + LNG + Petroleum Products)
- 2024 (Full Year): ~RM150–170 billion
- Global oil prices averaged $80–85/barrel (Brent) in 2024.
- Malaysia’s crude oil & condensate exports: ~500,000–600,000 barrels/day.
- LNG exports (a major revenue source): ~30 million tonnes/year.
- H1 2025 (Estimate): ~RM75–85 billion
- Oil prices remained $75–82/barrel in early 2025.

·         Petroleum Import Cost (Refined Products + Crude for Refining):
- 2024 (Full Year): ~RM120–140 billion
- Malaysia imports RON 95, diesel, and jet fuel due to refining gaps.
- Net import dependency: ~30–40% of domestic fuel demand.
- H1 2025 (Estimate): ~RM60–70 billion
- Prices moderated slightly compared to 2024.

·         Net Oil Trade Balance (Revenue - Cost)

Year	Export Revenue (RM)	Import Cost (RM)	Net Surplus (RM)
2024	~150-170b	~120-140b	+30-50b
H1 2025	~75-85b	~60-70b	+10-15b

 

Key Takeaways:

·       Malaysia still earns a net surplus from oil & gas trade, but subsidies do consume a large portion.

 

·      Fuel subsidies (RON 95, diesel) cost ~RM30–40B/year, offsets much of the net oil revenue.

·      Global price volatility matters—if oil prices drop, Malaysia’s surplus shrinks, in the converse we have a larger surplus.

There are many economists rushing to state that subsidies must be done away with for greater efficiency. We are a net oil exporter and when prices go up, we are better off. And of course, subsidy for RON95 also goes up. But if you remove the subsidy we will have “amok” inflation. So, what should we do?

Do a subsidy/price range for a tight floating RON95, so within that range we have a fixed subsidy and RON95 prices may move marginally every week. There is full subsidy outside the upper limit while below the lower limit, the Government does not subsidise. Can we do that? This Government’s targeted subsidy scheme is pointless, and without Rafizi it will not work.

 

The Petronas and Petros Feud (Part 2)

1.         Control Over Gas Distribution Rights

·             Sarawak insists that Petros should be the sole gas aggregator in the state, managing gas procurement, pricing, and distribution under the Sarawak Distribution of Gas Ordinance 2016 (DGO).

·             Petronas, governed by the 1974 Petroleum Development Act (PDA), asserts federal control over all oil and gas operations, including exports. 

·             The clash stems from Sarawak’s claim that the PDA does not apply to the state, citing pre-independence laws like the 1958 Oil Mining Ordinance. 

Source; https://ms.m.wikipedia.org

2.         Revenue and Economic Impact

·             If Petros takes full control, Petronas could lose RM10–20 billion annually, affecting federal revenue and subsidies for Malaysians.

·             Sarawak currently receives only 5% royalties but seeks higher returns to fund local development (e.g., free education, infrastructure). 

3.         Legal and Operational Conflicts

·              Petros has sued Petronas over issues like a RM7.95 million bank guarantee and accused it of operating without state licenses.

·             Shell MDS has withheld payments due to the dispute, setting a precedent for other contractors to delay projects. 

4.         Political Tensions

 

·         Sarawak’s ruling coalition (GPS) is a key ally in PM Anwar’s unity government, giving it leverages to push for autonomy.

·         The federal government risks fragmentation if other states (e.g., Sabah) demand similar resource control. 

 

5.         Investor Uncertainty

·              Prolonged disputes have spooked investors, with projects like ConocoPhillips’ Salam-Patawali withdrawal and Shell’s legal challenges. 

Will the Dispute Be Resolved?

(a)        Short-Term:

PM has expressed confidence in a negotiated solution, but talks have stalled multiple times. A May 2025 joint declaration affirmed Petronas’ role in LNG exports while allowing Petros domestic gas control, but enforcement remains unclear. 

(b)        Long-Term: 

                    i.     Political Compromise: Anwar may need to concede greater revenue sharing or operational roles to Sarawak to maintain GPS support. 

 

                 ii.      Legal Clarity: Courts may ultimately decide whether Sarawak’s laws override federal authority, but a Pyrrhic victory for either side could worsen tensions.

 

               iii.      Economic Rebalancing: Federal reforms (e.g., sharing consumption tax revenue) could reduce reliance on Petronas dividends and ease state-federal conflicts. 

The tussle reflects deeper federal-state power struggles and Sarawak’s push for autonomy. While short-term resolutions are possible, lasting peace requires revenue-sharing reforms and clear legal frameworks to balance national and regional interests. The outcome will shape Malaysia’s energy governance and economic stability for decades. 

The Petronas and Petros Feud! (Part 1)

Petronas and Petros have been locking horns for more than a year now over the role of gas aggregator in the state. A resolution was supposed to have been reached on July 1, 2024, but the deadline was extended to Oct 1, 2024. Yet almost a year later, a resolution still seems elusive.

Sarawak is challenging Petronas’ hold over Malaysia’s oil and gas reserves, as stated in the Petroleum Development Act (PDA) of 1974, which gives the national O&G company control of all of Malaysia’s hydrocarbon reserves. However, Sarawak holds about 60% of the country’s gas reserves and accounts for 90% of Malaysia’s liquefied natural gas (LNG) exports — facts that have led state-controlled Petros to clamour for the sole aggregator’s role.

This role would entail Petros acquiring gas from upstream producers and consolidating and selling it to downstream players. Petros would also be tasked with building and managing the requisite infrastructure, including condensing and processing facilities, pipelines and even export terminals. To counter the PDA 1974, Sarawak has amended the state’s Distribution of Gas Ordinance (DGO) 2016 for Petros to be the sole gas aggregator for the state and require any company undertaking gas distribution activities in Sarawak to get a licence.

Petronas and Petros are currently embroiled in a number of legal disputes. Earlier this month, Petronas was slapped with a letter of demand as its exploration subsidiary Petronas Carigali Sdn Bhd’s plant at the Miri Crude Oil Terminal was alleged to be in violation of the DGO 2016, possibly operating without a licence and undertaking gas distribution. 

Sarawak is relying on a pre-independence Oil Mining Ordinance to assert its rights over the state’s oil and gas resources and other land code legislation that stipulates that its continental shelf stretches 200 nautical miles out to the sea, as opposed to the current PDA, which limits the territorial waters to three nautical miles from the coast and assigns all rights beyond that to Petronas.

So, what are the key issues, and can it be resolved? Read Part 2 tomorrow.

References:

O&G industry suffers as Petronas-Petros feud drags on, Jose Barrock / The Edge Malaysia, 2 June 2025

‘Puzzling’: Malaysia’s new rules for Sarawak’s oil and gas sector set to trigger fresh political tensions, Leslie Lopez, Channel News Asia, 10 Feb 2025

Don-Elon: A Bromance with an Explosive End?

A no-holds-barred and very public blow-up between the world’s richest man and the President of the United States has had social media stunned in recent days. Elon Musk appears to have cooled the spat somewhat – deleting some of his more incendiary social media posts but dear Donald appears to be in no mood to make up. 

Tensions erupted over Trump’s “One Big Beautiful Bill” (OBBB). The OBBB proposes extensive tax cuts which could add roughly US$3 trillion (A$4.62 trillion) to the US national debt. Musk criticised the OBBB as “disgusting abomination” that would “burden American citizens with unsustainable debt”. Trump returned fire, suggesting “Elon was ‘wearing thin’.

In a dramatic escalation, Musk responded by calling for Trump’s impeachment. Musk also tweeted allegations that Trump was implicated in the Epstein files related to child sex offender Jeffrey Epstein.

 

Source: https://en.wikipedia.org

Why has the much-hyped “bromance” between Musk and Trump suddenly ended? And what was the basis of their alliance in the first place? 

Like many billionaires, Musk had previously been hesitant to get involved in frontline politics. Across 2020-2024, Musk engaged with accounts sharing MAGA and far-right conspiracy theories. These include the antisemitic Great Replacement Theory, and the related South African white genocide conspiracy. Musk’s posts also show the obsession with opposing diversity, equity and inclusion (DEI) policies characteristic of the MAGA movement. After endorsing Trump, Musk spent US$288 million (A$444 million) supporting Trump’s election and appeared at campaign events around the country. 

There were also clear practical benefits for both men. Trump gained the financial backing of the world’s wealthiest man. Musk gained not only unparalleled access to the US president, but also a role leading the new Department of Government Efficiency (DOGE). 

In the early months of the Trump administration, Musk cut government programs and employees at a remarkable rate. The USAID program was particularly hard hit, as were the Department of Education and the Consumer Financial Protection Bureau.

As the spending cuts picked up pace, Musk began to attract more controversy. Critics questioned the apparent power wielded by the unelected billionaire. Musk’s ties to the far right were also in the spotlight after he appeared to perform two “Roman salutes”, which many observers believed to be a Nazi salute. 

Musk’s apparent rampage through government did not last long. As Trump’s executive appointees assumed control of their departments, Musk and DOGE experienced increasing resistance. After a series of fractious cabinet meetings, Trump reportedly reduced the power of DOGE in March. 

Political attention was also clearly affecting Musk’s businesses. The negative publicity has significantly damaged the Tesla brand, leading to declining sales around the world and repeated falls in Telsa’s share price. 

On May 1, Musk announced he would be leaving DOGE, claiming the department had saved the government US$180 billion (A$277 billion) in spending. This number is likely an exaggeration. Musk departed his role in a muted White House ceremony, where Trump thanked him for his service and presented him with a ceremonial “golden key” to the White House. 

Trump and Musk had originally claimed that the US$2 trillion (A$3.02 trillion) in DOGE savings could be used to fund a substantial tax cut. With the efficiency savings not eventuating, Musk worried the OBBB would significantly increase US public debt. Unable to convince Trump or other Republican legislators, Musk took to X, launching a “Kill the Bill” campaign that ultimately led to his incendiary showdown with Trump. For his part, Trump has belittled Musk, suggesting Musk only opposed the OBBB because it cut subsidies for electric vehicles.

Trump has used and discarded many other powerful figures in his chaotic political career. Musk has more power than most and might be able to strike back at Trump. Yet, with his public reputation and brands already tarnished, Musk would be ill-advised to pick further fights with Trump and his adoring MAGA movement. 

More concerning are the prospects for democracy. With wealth and power continuing to concentrate in a handful of billionaires, voters appear reduced to the role of viewers forced to watch the reality TV drama unfold. If only this would be a TV series, we could have a couple of seasons up to 2028!

 

Reference:

The blow-up between Elon Musk and Donald Trump has been entertaining, but how did things go so bad, so fast? Henry Maher, The Conversation, 8 June 2025

Why are Streets of India Dirty?

Usually what happens in India is a politician wakes up and launches a cleanliness “drive” with fanfare. They ostentatiously start sweeping a street and speak solemnly about civic duty while the media takes photos. The next day it’s over and things go back to how they were before. I was in India recently and the streets of Bangalore were dirty, and traffic was truly unruly. 

But not in Indore in Madhya Pradesh. From 2017, when it won the prize for being the cleanest city in the country, it kept winning for eight straight years, until 2024. “When you come out of the airport, it feels as though you aren’t in India, it’s so clean,” said a corporate executive who travels to Indore frequently for work.

 

Source: https://en.m.wikipedia.org

Before 2017, Indore was ranked 25th of 471 towns and cities in the government’s cleanliness rankings. And AI attributes that cleanliness disparity is because of population density, waste management malpractices, cultural issues, public awareness (or the lack of it), economic factors and urbanisation. 

The transformation for Indore has covered many aspects of public life, from the way waste is removed and treated to the army of about 850 sweepers and the thousands of differently coloured bins that line even the smallest alley. In many cities, families will keep their home scrupulously clean, but a few feet from their front door rubbish is left lying around. That’s someone else’s responsibility. 

Indore was once dotted with fetid garbage dumps where stray cows, pigs and dogs rootled around and added their excrement to the pile, attracting swarms of flies. But now in the early morning, pavements and road dividers are hosed down with recycled water. The garbage vans roll out playing a jingle called Indore Has Become Number One. As the sound approaches, people emerge from their homes with their rubbish. Using GPS tracking, a team of workers monitor the vans’ movements to make sure they are doing their job and not cutting corners. The local government says 100% of household waste is segregated into wet, electronics, plastics, non-plastic, biomedical and hazardous materials. 

Residents have taken up cleanliness as their own personal responsibility, according to a petrol pump owner. “I’ve seen people stopping someone who littered. I’ve seen drivers stop their car when they see rubbish on the street to remove it. It’s become a kind of mission that inspires everyone,” he said. 

It took intensive public awareness campaigns to bring about the new behaviour. Schoolchildren were asked to take oaths to keep the city clean. CCTV cameras were installed and anyone who was identified as having dropped rubbish was fined. Cleanliness competitions were launched. Religious leaders were roped in to invoke religious texts to back up the need for hygiene. During the Hindu festival of Holi, when streets and buildings become stained with bright colours, extra vehicles and water tankers come out to hose the city down. 

Indore’s success could be replicated elsewhere in India if local governments dedicate themselves to it. In Singapore, litterbugs do community service and carry placard to shame them. And it has worked. So, we need reward-penalty mechanism to change behaviour of ordinary folks in Malaysia. And it can be done. 

Reference:

I’ve seen people stop their cars to pick up litter’: how one city cleaned up its streets, Amrit Dhillon, The Guardian, 4 April 2025

Singapore Focuses on AI with 500 Projects

About 800 new training opportunities and 500 new projects will benefit 1,000 enterprises as Singapore doubles down on artificial intelligence (AI). Both mid-career AI novices as well as seasoned practitioners could have a stab at 400 training places at national programme, AI Singapore (AISG) over the next three years. Another 400 training places will be made available by companies ranging from Amazon Web Services (AWS) and Oracle to Microsoft and Singtel. The new places will add to Singapore’s current pool of more than 6,000 AI professionals, said the Infocomm Media Development Authority (IMDA).

To date, at least 26 AI Centres of Excellence have been set up by organisations to drive AI innovation activities. These centres are often hubs for experimentation, training and sandboxing.

Source: https://en.wikiversity.org

About 300 of the new 800 training places will be offered over the next two years through an enhanced AI Apprenticeship Programme (AIAP) under AISG. The six-month curriculum will focus on practical industry needs. Since the programme started in 2018 to groom local AI talent, more than 410 graduates over 16 cohorts have been trained. More than 90% of its trainees were hired after graduation.

AISG will also start the Pinnacle AI Industry Programme, which will train 100 local AI practitioners into “expert model builders” over the next three years. Companies may nominate their AI-functional employees for the six-month programme. These AI professionals will get hands-on training in various stages of a large language model development life cycle, including data management, model training and development, and work on AISG’s regional-focused model, Sea-Lion.

Singapore is on track to triple its pool of tech talent over five years to 15,000 by 2028, boosted by a 25% jump in the past year through various initiatives. More than 20,000 locals have been helped into tech jobs and 320,000 individuals have picked up technology skills.

Enterprises, however, are wishing for a quicker pace. Only 12% of small and medium-sized enterprises (SMEs) are in the intermediate stage of using AI. About 47% of its respondents in a survey say the local AI talent pool is insufficient to meet business needs. Among the recruitment hurdles, 51% noted high salary expectations, and 47% cited skills mismatch. To plug their immediate needs, 62% of the firms were open to hiring talent from abroad.

Will Malaysia be focused? Not likely. Why? We are in the “3R” era, which just raises costs and reduces revenues! 3R here is “retro, rhetoric and reset”. Is running on a treadmill our forte?

 

Reference:

Singapore doubles down on AI with 500 projects, Economy, The Star, 29 May 2025

Progressive SST Framework by 1st July!

The Ministry of Finance (MOF) has announced that the implementation of the expanded Sales and Service Tax (SST) will take effect on 1 July 2025. Under the revised framework, a sales tax of 5% to 10% will be applied to selected non-essential items. 

Concurrently, the service tax (6% or 8%) will be broadened to cover additional service categories, including rental or leasing, construction, financial services, private healthcare, private education and beauty services. The government has expanded the scope of SST to strengthen the fiscal position by increasing and broadening the revenue base. A portion of the additional revenue will be redirected towards enhancing public services, while also creating fiscal space.

 

Source: https://en.wikipedia.org

To support a progressive and targeted approach, the government has structured the SST into two tiers (5%, 10%) based on the nature of necessity. Essential goods such as bread, cooking oil, milk, and medicine will remain exempted from tax. Instead, high value or premium products such as imported seafood (salmon, cod fish) and industrial machinery will be subject to SST. The expansion also targets specific services predominantly consumed by higher-income groups or non-residents. These include selected banking services, private healthcare for foreigners and private education where annual fees exceed RM60k. 

To minimise the impact, the government has introduced several reliefs and facilitative measures. Notably, key exemptions have been granted to business-to-business (B2B) transactions and group relief arrangements. Additionally, construction services, leasing and rental of residential buildings are also exempted. It is still not clear on the exemptions, especially on construction services with 6% SST. It (exemption) is probably on residential buildings. 

The government aims to increase fiscal revenue by RM5 bil, at 0.24% of gross domestic product (GDP), with an annual target of RM10 bil per year (0.48% of GDP). Rather than reintroducing the GST at 6% with an uplift of RM20 bil in revenue, the government has opted to enhance the SST, as it can be implemented quicker. 

The impact on inflation according to MOF is expected to be limited. According to MOF, the consumer price index is projected to remain within the forecast range of 2.0-3.5%. That must be wishful thinking! Once you raise the price for selected items, prices rise for all items! 

With the SST, 2025 fiscal deficit target is maintained at 3.8% of GDP (2024: -4.3% of GDP). 

The real issue will be inflation. While the Government seeks to increase revenue, there is no corresponding reduction in expenditure. Why can’t we have a DOGE or MAMPU or UKAS to review all operating expenditure and pare it down by 10% per annum or at least for one year?

 

References:

MOF rolls out progressive SST framework, aiming to raise RM10 bil annually, CS Ming, Focus Malaysia, 10 June 2025

Sales Tax Revision and Service Tax Expansion 2025, Crowe Malaysia, 10 June 2025