Friday, 4 December 2020

Malaysia Spent Below 1% of GDP on R&D Expenditure

World Bank senior economist Smita Kuriakose, pointed out that R&D expenditure in Malaysia increased to about 1.4% of GDP in 2016 from below 0.7% in 2006, but has since declined to slightly below 1% as at 2018.

For comparison, Singapore, China, France and the US' R&D spend in 2020 was more than 2% of their respective GDP, while Germany and Japan's R&D spend was above 3% of GDP. South Korea led the basket of nations, with an R&D spend of almost 5% of GDP. 

In terms of expenditure by research orientation (in Malaysia) between 2014 and 2018, the percentage of basic research increased from 16.9% to 39.3% of total expenditure and experimental research increased from 7.5% to 24.5%. The portion of spending on applied research, on the other hand, declined from 75.5% in 2016 to 36.2% in 2018.

University research centres, which also receive government funding, are also seeing a larger proportion of funding coming from the private sector, which could be a result of these research centres having insufficient funds from the government.

World Bank country manager (Malaysia) Firas Raad said with multiple actors namely ministries, agencies and research organisations, and the varying nature of research, the landscape of research institutions is highly complex. This situation, he said has led to a lack of coordination in facilitating and encouraging research commercialisation, and the transfer of new knowledge and technology. Other key challenges most cited in the field include funding inconsistencies, mismatched incentives and differing expectations between academia and industry.

While the GDP growth rate has proven resilient in recent years, declining oil and gas output coupled with economic shocks, including the recent Covid-19 pandemic, have dented the growth momentum.

Khairy Jamaluddin said the key challenge for Malaysia now is how to facilitate and accelerate the transition to this innovation-based growth model in the country. A sustained increase in private investment, coupled with improvements in productivity will be necessary to maintain a sustainable economic growth trajectory that enables Malaysia to reach high-income status.

As such, World Bank recommended for greater coordination and long-term strategic planning across the research and innovation ecosystem in Malaysia, which is paramount now than before. The transition to a more innovation-based growth model is urgent in the current uncertain global context. We need commitment of no less than 3% of GDP for Malaysia to progress with focus on applied research in resource-based industries, medical physics, robotics, automation, electronics and cybersecurity. We also need a more merit-oriented ecosystem for research to flourish.



1.     Assessing the Effectiveness of Public Research Institutions (2020), World Bank Group

2.     Malaysia R&D spend has been declining since 2016 — World Bank, The Edge, 19 Nov 2020

3.     Better coordination in R&D crucial, The Malaysian Reserve, 24 Nov 2020

Thursday, 3 December 2020

Five Ways to Pivot Your Business during the Pandemic

Business landscape has radically changed in the past several months due to the coronavirus. While many are closing or laying off workers, some are growing with the new landscape. These businesses have seen success because they have adapted to the pandemic. Here are five ways suggested by Brian Soo (FocusMalaysia) to pivot your business and help you weather this economic downturn:

1. The best time to digitalise your business

Digitalisation has proven not only effective but essential to businesses these days to stay relevant. When things are digital and goes into the cloud where it is readily accessible, there is little need to be physically at a location to get data. With the Government pushing for more work from home orders, this will be essential to maintain an efficient workflow.

2. Have a 24/7 business model

Due to restricted movement, people are spending their time online and most importantly, spending their money online. By bringing your business online, you are not limited to office hours anymore. A 24/7 business model allows you to compete anytime and anywhere.

Online store can be set up in-house or outsourced. E-commerce platforms these days make it very easy to set up online stores, even for the older generation business owners.

3. Re-evaluating your business model

Some businesses are fixated on their products and services, without wanting to change anything. This is the main reason why smaller, more nimble companies are able to survive the pandemic.

With less of a ‘core’ to uphold, they are able to change and tweak their business models. While it may be difficult for some larger businesses to do so, there is still a solution. For example, businesses can package their products towards a more B2C focus.

4. Reassess your business’ finances

If you changed your business model, you should work out a cash flow budget for the coming one to two quarters and assess your business’ financial position.

Knowing the length of this projected runway is crucial to ensure you are able to meet any financial commitments your business may have, such as purchase agreements for company vehicles. Missed payments will affect your business’ credit report, leaving a negative mark on CCRIS. This reduces the business’ chance of future financing application being approved.

5. Find out what assistance is available to you

In these challenging times, the Government and the banking industry have many forms of assistance available for businesses. The Government’s SME-focused Penjana economic stimulus package offers various industry-specific financing options that businesses can tap into at a fixed subsidised rate.

For example, there are financing options specifically for SMEs (Penjana SME Financing) as well as for micro-SMEs (PENJANA Microfinancing Fund). In total, the Government has allocated RM35 billion in the Penjana economic stimulus package.

Following the tabling of Budget 2021 recently, microenterprises with original facility financing of up to RM150,000 are eligible for the Enhanced Targeted Repayment Assistance Programme, with options of a deferment of repayment for three months or a 50% reduction in monthly repayments for six months.

Meanwhile, the banking industry remains prepared and ready to assist SME customers affected by COVID-19. Some banks may offer new financing terms with lower monthly repayments spread over a longer tenure.


If your business is still suffering financially from the pandemic, speak to your bank and seek available options. This is a critical period for all businesses. If you need further assistance, do contact us!



Brian Soo, Keeping your head above water during a pandemic

Wednesday, 2 December 2020

Tax Base in Malaysia Narrow?

Many governments have undertaken pump priming measures in 2020 to lift their economies out of lockdown. Globally, the figure suggested is USD12 trillion.

Some results are positive with GDPs showing improvement. Malaysia is in a technical recession. But the concern in any turnaround is the fiscal deficit and national debt. Revenue, for Malaysia, is on a narrow base.

Developing economies have a tax to GDP ratio of around 15, while developed countries average around 40. For Malaysia, it was 12 in 2019 and with Covid it is expected to be 10.6 in 2020 and 11.1 in 2021. Other countries show the following:



Tax to GDP ratio

New Zealand













About 62.4% of 1.25 million companies are registered with Inland Revenue Board (end 2017). Of this, only 7.8% pay taxes. And of the 15 million workforce only 16.5% are subjected to income tax.

Source: (Bernama pic)


So what could be done? GST? That’s not feasible with wide income disparity between T20 and B40, between states and between rural and urban areas. One could widen the scope of the sales tax to include property developers, contractors, utilities, trading companies and others. Other ideas bandied about include inheritance tax, capital gains tax and the windfall tax. All of which require comprehensive study and feedback. Meanwhile, improving income levels and tax threshold are other means to widen the base. Albeit, no one likes tax or death – both of which are certain!



The tax net, Royce Tan, The Star, 28 Nov 2020

Tuesday, 1 December 2020

Top Glove Hits Speed Bump?

On November 24, Top Glove became the biggest single-day contributor of new Covid-19 cases in Malaysia – 1,511 cases of total 2,188 recorded nationwide. It had to close 28 of its factories in Klang, which represents 50% of the rubber glove manufacturer’s production capacity. Delays in delivery will now be four weeks, depending (of course) on length of EMCO. Of its 11,215 workers, 2,684 were tested positive. This is the Teratai Cluster.

The Human Resources Minister told the Star, “I have visited the hostels and the conditions are terrible...”. This is the world’s largest manufacturer of rubber gloves with over 21,000 workers nationwide. One worker said, “only the production line was shut down, but packaging and container loading continues”. What about construction, other manufacturing or processing sites? Has the Minister visited them?

The global demand for gloves will touch 360 billion pieces in 2020 with Malaysia supplying 250-270 billion pieces. Of this, Top Glove has over 26% market share. Its production capacity with 750 production lines is 90 billion pieces per annum.

If factories close for 2 weeks, a drop in net income of 4% for FY21E is estimated, assuming average selling price (ASP) remains unchanged. If operations are impacted by a month, then impact could be 8%. But it is possible for ASP to increase that will cushion the bump. ASPs are increasing 10% month-on-month up to January 2021. Financial forecast summary done by Hong Leong Investment Bank is as follows:

The exceptional years seem to be 2020-2022. Profit before tax is expected to be 5-15x that of 2019. All because of Covid!

Meanwhile, the Company has been busy buying-up its own shares. Up to November 2020 it has spent RM1.1 billion in this exercise. Why do you do this? To support price (or value) of the company – the counter is up by over 300% since January (from RM1.55 to around RM6.80 per share currently).

So, is maintaining price (through share buy-backs) more important than lives of workers? Couldn’t this sum (RM1.1 billion) be used to improve workers’ hostel conditions (than shareholders’ interest)? Or, couldn’t this sum be donated to the Covid-19 fund? How will the nation benefit from the multiple increases in PBT owing to Covid? Yes, Top Glove pays income tax, after providing for statutory allowances. But why not pay a windfall tax? The MoF thinks it will spook investors! The "hantus" of instability, discrimination, flip-flop policies spook investors more than windfall tax.

 Or, are we treating glove manufacturers with kid gloves?



1.     Top Glove’s share buyback tops RM1b as over RM12b market cap wiped off amid rise in Covid-19 cases among workers, the Edge, 25 Nov 2020

2.     Top Glove estimates dividend yield to be more than 6% in FY21 – chairman, the Edge, 26 Nov 2020

3.     Report: ‘Entire Labour Dept’ will investigate conditions at Top Glove factories, says HR minister, Malay Mail, 25 Nov 2020

4.     Top Glove Called Out Again for Unsanitary & Terrible Conditions in Quarantine Centres for Foreign Workers, World of Buzz, 25 Nov 2020

5.     Top Glove Brief Takeaways, Hong Leong Investment Bank Research, 25 Nov 2020


Monday, 30 November 2020

Corruption As A Way Of Life

In a land far, far away, they worked hard to stop corrupt practices. They set-up an Anti-Graft Agency. They had Parliamentary Committees to examine transactions. They had Integrity Units in every organisation. They increased penalties including death sentence for some. They taught in schools “Moral Studies” and why corruption will drain an economy. They had religious leaders giving sermons on the wayward ways which is not right in the sight of their Creator. They had award ceremonies for those who “saved” an organisation from corruption. They implemented “Whistle Blowers Act” but many who blew their whistles ended up in jail or exiled like Edward Snowden.




Their leader committed the biggest heist on the nation. But he claimed it was a donation from a very friendly leader. His supporters said it was not corruption because the funds were for the poor and needy, including designer handbags and jewellery for his wife. Poor wife, what tribulation? The courts were told to find ways to drop the charges.

What would they do now? They thought hard and said, “Let’s embrace corruption”. It increases domestic consumption if goods are purchased like a Bentley or a Rolls Royce. The crime is to keep it (corrupt funds) in a bank. Money laundering is only applicable if for some reason funds obtained are kept in banks or saved in a suitcase or safe deposit box. If it is spent then there is economic growth. That is economic theory 101.

It is better than “helicopter” money – printing and distributing currency to the poor. Because if printing is required, then it is better to give the printing machines to the poor. That whole process may end up like Zimbabwe. So, that’s not on! Hyper-inflation is not for us!

So they went ahead with a campaign on corruption, why it is so good! Everyone wins! We will have corruption awards and even a “Corruption Day Holiday”, so everyone enjoys the benefit. The land moved up the ranks to be No. 1 corrupt nation on the planet. Many other leaders came to learn the “joys of corruption”. And everybody lived happily ever after.


(The above article is entirely fabricated. Any resemblance to the truth is purely coincidental and not intended to be or construed to be as facts. As the purpose is to entertain or amuse, no malice is intended on anyone or anything.)


Friday, 27 November 2020

Hedge Fund: Larger Doesn’t Mean Better

Hedge funds continued to face performance declines for a second consecutive month in October. The tough Q1 of the year and the past two months have left the industry at only +1.20 per cent return year to date (16 Nov 2020). The S&P500 return year to date in contrast is +10.97 per cent.

Source: Hedge Fund Research (as at 16 Nov 2020)

Size matters. Large hedge funds have traditionally been more stable in down markets. But as measured by HFRI’s asset weighted index, large hedge funds showed negative return of -4.34%. The sheer size of some funds makes them harder to react by switching in and out of bets. So, when volatility roiled stocks, bonds, currencies and commodities earlier this year, many giant players lost record sums of money.

According to Nishant Kumar from Bloomberg, not all large hedge funds have disappointed. Multi-strategy firms such as Citadel, Balyasny Asset Management and Millennium Management, which rely on dozens of traders to generate profits, are having one of their best years. Such funds are typically dominated by trading-oriented strategies and volatility tends to create more opportunities for them.

One reason why smaller funds are doing better is that they’re jumping on very niche trading opportunities.

“The irony is that the hedge fund industry was built on investing with small, nimble managers who could exploit esoteric investment opportunities,” said Andrew Beer, founder of New York-based Dynamic Beta investments. “The last several years have shown that sometimes big might be too big, especially when fees consume most performance.”

Stepping into Q4, PivotalPath notes that presidential elections have historically removed uncertainty from the markets, no matter which party wins. Hedge funds’ performance could be better in this quarter as generally, the funds outperform in the three months after an election compared to their performance in the three months before the election. Nonetheless, staying nimble is the way forward.



1.     Nishant Kumar, Hedge Fund Giants Lose Their Appeal as Havens in Global Turmoil, 26 Oct 2020, Bloomberg

2.     Jacob Wolinsky, Smaller Hedge Funds Are Outpacing Their Larger Rivals, 23 Oct 2020, Forbes

3.     Hedge funds see second consecutive month of average performance decline, 12 Nov 2020,



Thursday, 26 November 2020

Organic Food: Really? Or Just a Marketing Ploy?

Organic food is the fastest growing area of the American food industry, and its price is just too high. Many buy organic because they want to avoid pesticides. But organic systems in fact cannot ensure that their products are entirely free of pesticides.

According to the National Standard, “by themselves, organic practices cannot ensure that organic products are entirely free of residues of prohibited substances and other contaminants, since exposure to such compounds from the atmosphere, soil, ground water and other sources may be well beyond the control of the operator.”

Most organic growers rarely use natural or biological pesticides, preferring to mitigate pests and disease with mechanical and cultural means, such as insect predators, use of disease-resistant plant varietals, and beneficial soil micro-organisms. However, a study found that some pesticides used in organic farming could have a bad effect to our health. According to, the most used pesticide in organic farming (about 90%) is Bt (the bacterium Bacillus thuringiensis) which could attack the cells in our gut, piercing holes in our intestines. Another insecticide that is also very commonly used is Spinosad which can cause irritation.

The studies on health benefits in consuming organic food show mixed results. Some studies have found that biological food can contain a small amounts of vitamin C and omega-3 fatty acids, while others do not show significant differences. In fact, a Danish study in 2018 found that the risk of insecticides was like drinking a glass of wine every three months. The toxicity of any substance usually depends on its concentration, it does not matter whether it is natural.

Some support organic because they believe organic is more environmentally friendly. Organic systems use less energy, but greenhouse gas emissions are similar with conventional farming. Despite using fewer pesticides, more land is needed for organic farming to produce the same output of crops.

Despite all the cons listed so far, organic food is still believed to be more beneficial to our health than conventional produce given the lower level of pesticide residues contained. Sometimes, what you eat is more important than how it is produced. If you want to eat healthier, eat a balanced diet. Or, pick the food with lower pesticides as shown below: 

Choose the clean 15 or live dangerously with the dirty dozen?


Ashutosh Viramgama, Reality About Organic Food – Healthier Or Just A Scam?

Susan Safyan, Organics: Hype or Hope?