Reset or Not?

 

On Maya Tau (“MT”), more than 600,000 households have dropped into the bottom 40% of the population. That’s a major blow to the Supreme Council. (MT is a nation in the star Proximas Centauri).

The country has about 7 million households and at least 10% have dropped below the bottom 40% threshold limit of about 5,000 MT Units.

The Economic Council (“EC”) has drawn-up a “Maya Tau: Resetting the Economy” initiative. There are several reset agendas including digital economy; new technology; good governance; sustainability and a host of other possibilities. The EC worked with experts, industry groups and the MT Government officials for this document. The initiative is EC’s “independent study” and has not been endorsed yet.

The real problem or the “elephant in the room” is MT’s affirmative action programme of raising living standards of the majority group. The problem is that there are no elephants in Maya Tau – whatever is left are pigmy elephants – a dying breed!

The plan is to revive an economy devastated by Pokemon-19. It has elements of reform, and without reform revival will remain nascent. So many experts believe this is the way forward.

Other issues not addressed by EC include MT’s education system; religious politics; corruption; brain drain of the brightest citizens; enforcement agencies and infrastructure. Some are really “touchy” subjects which the ruling elite are involved themselves in some of its practices.

But the key belief is that a reset is possible like a computer reset or a video game reset. In a video game reset, one could re-start a game at any point, and play until one wins the game eventually. In a computer re-boot, it requires a total shutdown and then a restart. Can they do that for MT’s economy? Not likely!

https://it.wisc.edu/

Political forces on MT are too engrossed on retaining power rather than focus on the economy. In fact, a long period to overcome Pokemon-19 is most helpful to the ruling government! Many forces, however, are aligned to oppose this undesirable outcome. Hence, a rear-guard action or the so-called “reset” – whatever that means!

The solution is in the face of the Maya Tau government – respect the people; restore democratic institutions; start a consensus/ confidence building program of reforms with revival and revision of affirmative actions that are now targeted at needs rather than a group. Then more investments will flow from foreign and local investors.

 So, is it a reset, restart, reform, revival or none of the above?

(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.)

Solar Panel Prices Have Soared?

Sudden and steep rise of prices of solar panels may have impacted severely the solar power industry. For decades the trend had been the lowering of costs which explained the rapid growth of solar power in the world. But new solar panels or module prices have risen by 18% since January 2021 (Starbizweek, 5 June 2021).

A recent report said that the higher prices may be due to Joe Biden’s Infrastructure Plan. The price of components – polysilicon, copper, iron and aluminium have soared with the recovery of some economies from the pandemic. Price of polysilicon, for example, has jumped from USD 6.19 per kg to USD 25.88 per kg in less than a year.

Malaysia’s installed solar power capacity has had an annual growth of more than 50% over the last five years. This is according to a Kenanga research report. By 2025, the country is targeted to achieve 31% RE in the power capacity mix, higher than 20% - which was the earlier stated goal. This capacity mix is to increase to 40% by 2035. (Peninsular Malaysia Generation Development Plan 2021-2039, Energy Commission).

To achieve the 31% goal, 1,178MW of new RE capacities will be developed in Peninsular Malaysia from 2021. The additional capacities will consist of 1,098MW of solar and 80MW of non-solar.

Currently, RE contributes 15% of the energy mix in Peninsular Malaysia or 22% for the whole of Malaysia.

Tariffs have dropped from LSS1 to LSS4 (awarded in April 2021).

	Tariffs (Lowest/Range)   [Sen per kWh]
LSS1	39
LSS2	33.98
LSS3	17.78
LSS4	17.68 to 24.81

 

For LSS4, expectations are IRR to be in the mid to high single digits with capex at RM3 mil to RM4 mil per MW. The beneficiaries of LSS4 include:

1.     Tan Chong Consortium;

2.     TNB;

3.     Ranhill Utilities Bhd;

4.     Uzma Bhd;

5.     JAKS Resources Bhd;

6.     Gopeng Bhd;

7.     KPower Bhd;

8.     Solarvest Holdings Bhd;

9.     Advancecon Holdings Bhd; and

10.  MK Land

Many see the price hike as a temporary phenomenon and conditions may improve by 2022/23. All the LSS4 projects are scheduled to come on stream by 2022 or 2023. So, is the price rise just a temporary phenomenon? May not be if economies recover substantially and demand outstrips supply on panel components. Then there is greater awareness of RE as a solution to carbon neutrality and governments provide incentives for RE projects over thermal ones. So, in the medium- term price maybe higher and will hold until supply side matches-up.  What do you think?

Reference:

Gurmeet Kaur, Making cents out of solar, 5 Jun 2021, Starbizweek

Tata Steel’s Support for Covid Victims’ Families in India

 

In a BBC report on 25 May 2021, Tata Steel said it will compensate the families of its workers in India that die of Covid-19. The firm said it will pay deceased employees' salaries, housing and medical benefits until what would have been their retirement at the age of 60. It also pledged to cover the education costs of the children of dead frontline workers until they graduate.

 

This week (3^rd week in May) India officially counted 300,000 dead from the virus, though experts warn the number could be higher.

 

Tata Steel is the latest major employer in India to announce financial support plans for the families of its workers that have lost their lives to Covid-19.

 

Last week (2^nd week in May), hospitality group Oyo Rooms said it would help the families of its workers who have died of the coronavirus in a number of ways, including eight months' pay and support for their children's education for five years.

 

Earlier in May 2021, glass manufacturer Borosil said it would pay the salaries of workers that died of Covid for the next two years. In a LinkedIn post, Borosil Limited's Managing Director Shreevar Kheruka also said the company would cover the education costs of the deceased workers' children.

 

Source: https://www.business-standard.com

 

A second wave of the virus has ravaged the country's healthcare system in April and May. Hospitals filled to capacity have been forced to turn away patients. Critical medicines and oxygen have run out in several areas. Even crematoriums have run out of space.

 

By the 3^rd week of May India became only the third country in the world to record more than 300,000 deaths - behind the US and Brazil. It has recorded 26 million cases - second only to the US - and is now the epicentre of the global pandemic.

 

Malaysia’s large corporate institutions can afford to support welfare of employees and their families due to Covid-19. It cannot be the sole responsibility of the Government. Surely, banks and glove manufacturers can create a support fund for employees’ salaries, medical costs and scholarships for children who are distraught about their future with no parents.

 

Reference:

Tata Steel to continue salaries for Covid victims’ families in India, BBC, 25 May 2021

Bitcoin vs. Ether: Which One?

Down from roughly 70% of the total crypto market value at the start of the year, Bitcoin now accounts for about 40-45%. It once held about 90% of market value before 2017, but the competition is heating up now.

Source: CoinMarketCap

It all started when a 20-year-old Russian-Canadian named Vitalik Buterin won a grant of $100,000 from the Thiel Fellowship. As a result, he dropped out of college and launched a platform that allows app development on the blockchain known as a “daap”. This platform is now called Ethereum. Ethereum shot up to become a serious competitor, and in only five months, captured a big chunk of the market share in cryptocurrency.

Ethereum is used by the likes of Microsoft Corp for its blockchain offering and has powered the explosive growth in non-fungible tokens. Ether is a blockchain platform that functions like the Apple store or Android app store, whereas Bitcoin is a commodity like gold, or a store of value, said Pat LaVecchia, CEO of Oasis Pro Markets.

Unlike Bitcoin, where many of its core features like its supply cap are baked into the design, the Ethereum platform is evolving. It’s currently going through upgrades that should improve the network, with even a change that will reduce supply. Through offering a greater appeal while limiting its supply, the price of Ether could go up.

Despite the days when Bitcoin was the only crypto option, and which are long gone, it is still the biggest single coin by far. Its market capital is more than USD 1 trillion compared to Ethereum’s USD 400 billion, according to CoinGecko. And it’s still the choice of more big corporates like Tesla Inc and MicroStrategy Inc.

The Risk?

Cornerstone Macro strategists studied how Bitcoin and Ether would likely perform in a downturn. With a slide of 20% in the Bloomberg Galaxy Crypto Index, there’s notably more downside risk to Ether than its larger compatriot. But with a rise of 20%, you don’t really get the concomitant upside to Ether compared to Bitcoin, according to strategist Benson Durham.

Joanna Ossinger from Bloomberg advises that anyone who goes into cryptocurrencies needs to be comfortable with the price swings, which can be substantial even with the most-established ones. There have also been periodic issues with exchanges being hacked or going under. Regulation risk needed to be considered, which may affect its prices. Still, for those wanting to invest in crypto, there’s an argument to buy both as part of the age-old search for diversification and hedges. But be clear that this is a highly volatile asset class and we are not advocating for you to invest or otherwise.

 

Disclaimer: Information contained on this article is not intended as, and shall not be understood or construed as, investment advice. We are not recommending any investment nor accept any liability or loss for the cryptocurrencies mentioned above.

 

Reference:

1.     Joanna Ossinger, How to decide whether to invest in Bitcoin or Ether, 6 May 2021, Bloomberg

2.     Bitcoin or Ether: Which Crypto Is a Better Investment? 11 May 2021, Nasdaq

 

Greensill Capital: A Story of Debt Destroying Debt?

 

Greensill Capital (“Greensill”) provided payment services including “factoring” and “supply chain financing”. The company projected itself as a “fintech” – there was neither a fin nor a tech here!

Supply chain financing (or “reverse-factoring”) solves a common payment problem. Firms supply goods and services to a customer and issue an invoice for payment. But customer may want a delay in payment for reasons of cash flow. That’s where a financial institution steps in to pay the supplier sooner on customer’s behalf and then secures a discount for a fee. Customer will then settle with the finance provider say, in 4-5 months. On paper everyone wins and there are no risks.

But that’s textbook. Not quite true in the real world. Here is where creative accounting comes in. Creative accounting has blossomed with the fair value revolution – a more market-based approach. This approach to accounting actually creates scope for discretion, subjectivity and speculation. It actually makes it easier for firms to “recognise” profits than to generate actual cashflows that support them. And this is where supply chain financing can be misused.

The gap between cashflow and profit was what caused Carillion, a construction group in the U.K., to collapse in 2018. It had bank debts of £148m in 2016 but supply chain financing liability of £498m. That made Carillion look much healthier than it should. If you can move income and costs in time and space based on projections, then your economic fortunes could always be made or lost.

Coming back to Greensill, as it pushed forward on growth, collateral became speculative. It would lend against transactions not occurred and may never occur with companies that had never done business with as its clients.

The Greensill model was unsustainable because at some point in the future debts need to be settled like a “Bernie Madoff” scam.

At the centre of all this, is Lex Greensill, an Australian farmer turned banker. He founded Greensill Capital in London in 2011. He turned supply chain financing into an “art” by turning invoices into short-term assets and placed them into funds that investors could buy. And he sold them through Credit Suisse and GAM – a Swiss management firm. The money from investors helped to pay back suppliers. It had echoes of asset securitization. Then he helped David Cameron in 2012 to set-up a supply chain finance program. Even Softbank was an investor.

The whole thing unravelled this year when Greensill could not get Tokio Marine to continue to extend two policies that were underwriting Greensill’s clients – buyers in the supply chain. With no insurer to replace, Credit Suisse pulled the plug on the Greensill funds of USD 10 billion. And the whole “pack of cards” collapsed.

What does it take? Creative accounting; an entrepreneur with flair; perceived opportunity to fill a finance “gap”; “investors” convinced of infinite growth; and, insurers unwittingly or otherwise support the funding scam.

 It takes all that, and “hatched” brilliantly by someone with drive and ambition!

 

Reference:

1.     Greensill Capital: The Collapse of a Company Built on Debt, 21 April 2021, New York Times

2.     Adam Leaver, What did Greensill Capital actually do? 15 April 2021, The Guardian

 

Celcom-Digi Merger: What’s Next?

Axiata Group Bhd. and Norway’s Telenor ASA signed a definitive agreement to combine their Malaysian mobile operations in what is the biggest telecom transaction in the country.

Axiata will transfer its stake in Celcom Axiata Bhd. to Digi.com Bhd. for RM17.8 billion, according to a filing today. In return, it will get new shares and RM1.7 billion in cash from Digi, and close to RM300 million from Telenor. The merged entity will have a “pre-synergy equity value” of close to RM 50 billion (Bloomberg, June 21).

The proposed merger of Celcom Axiata Bhd and DiGi.Com Bhd is driven by demand for network capacity and benefits to be gained from the enlarged scale. Increasing demand for network coverage with the highest speed and the competition among service providers have pushed down the prices for the services. Axiata and Telenor will have an equal ownership of 33.1% each in the merged entity, Celcom Digi Bhd.

Source: The Star & KLIA2

Celcom Digi Bhd will have a proforma revenue of RM12.4 billion in financial year 2020, ushing its position to the top of the list compared to other telecommunications companies. Would the merger lead to a monopoly? A source close to Celcom told The Malaysian Reserve (April 14) that he does not think so. The difference in revenue between Celcom Digi and Telekom Malaysia Bhd (TM), which came in second, is only around RM2 billion. And there are at least five other strong players in the industry to ensure healthy competition.

M Shanmugam in his article Alternative Views: Celcom-Digi merger: A test of cultures stated that takeovers of companies usually produce better results than mergers. In takeovers, there is a clear leader who sets the pace of the merger between the acquirer and the target company, drives the operations of the merged entity, and shapes a single culture. Mergers of equals, especially between two strong companies, do not necessarily produce the desired results.

Both Celcom and Digi have their strengths and weakness. The ideal merger would be to take advantage of the strengths of both and minimise the weaknesses.

Digi, due to the technical and marketing strength of its major shareholder Telenor, is known for its innovation in marketing its products. Its marketing strength and product pricing have positioned it as a leader to serve the lower-income users. Digi has positioned itself well among college students and migrant workers, who are mainly prepaid customers.

As for Celcom, it has a steady pool of customers because of the strength of its network and reach. Compared to the other mobile operators, Celcom’s mobile network is more extensive and robust, and its consumers generally encounter fewer problems. Celcom’s network strength is also a reason why it is favoured by mobile virtual network operators (MVNOs).

In relation to an integration of the two mobile telco providers, there is an abundance of consultants who can facilitate the merger. But the actual integration to make this merger work needs to be executed by employees of both companies. Normally, this is the period when the work cultures of Celcom Axiata and Digi would be put to the test. An advantage is that both entities already share infrastructure.

And the gap in the culture of both companies is not that big, unlike in the case of Malaysia Airlines and AirAsia, M Shanmugam believes. The Malaysia Airlines-AirAsia proposed merger was doomed to fail right from the start because, apart from culture differences, both companies have been competing aggressively for market share in the domestic aviation sector. The years of competition have created an enormous amount of distrust between them.

In the case of Celcom-Digi, the distrust is less. Both companies compete in an environment that is dominated by the likes of Maxis in the area of mobile services, and Telekom Malaysia Bhd is in the broadband segment.

The experts are banking on the merged entity to be able to come up with products and services at competitive prices. For this to be achieved, the cultures of Celcom and Digi need to melt into one big pot. If, the process becomes too hot to handle, the merger will fail dismally. But usually one party is dominant even though it is a so-called merger of equals. Then that culture will become the new culture of the merged entity. Anything otherwise is wishful thinking!

Reference:

1.     Ahmad Naqib Idris, Axiata: Due diligence for Celcom-Digi merger completed, to sign definitive agreements ‘soon’, 15 June 2021, The Edge

2.     Aila Jalil, Celcom, Digi merge to gain financial power, 14 April 2021, The Malaysian Reserve

3.     M Shanmugam, Alternative Views: Celcom-Digi merger: A test of cultures, 19 April 2021, The Edge

Will Auto-Vehicle Sales Be 600,000?

 

The sales tax holiday has been extended to end 2021. Under this initiative, locally assembled cars are fully-exempted from sales tax, while imported cars have sales tax reduced from 10% to 5%.

Under the present FMCO, auto vehicle and component manufacturing facilities are only allowed to operate at 10% work-force capacity. That means a backlog of deliveries, perhaps up to four months.

The Malaysian Automotive Association (MAA) projects total industry volume (TIV) at 570,000 for 2021, an 8% growth. In July, MAA may revise this forecast. Meanwhile, Maybank IB is maintaining its estimate of 600,000 units for the year.

Then there is the much-delayed electric vehicle policy. To be a success it needs charging stations, incentives to keep prices attractive and adequate promotion by dealers.

China wants to dominate the global electric vehicle market. It has invested USD60 billion to support the EV industry. All vehicles in China will be electric or hybrid by 2035.

China has sold 1 million more vehicles than the U.S. in 2020. The U.S. is to reach a net-zero emissions by 2050 at the earliest.

Bloomberg

Since last July, a little-known automaker in China’s south-west dominated the largest electric car market. It outsold bigger players and Tesla Inc. every month with a bare-bones EV at just USD4,500.

The Hongguang Mini is the brainchild of SAIC-GM-Wuling Automobile Co., a joint-venture between SAIC Motor Corp., Guangxi Automobile Group Co., and General Motors. The venture is based in the city of Liuzhou. In nine months, it sold 270,000 units making it the bestselling EV in China. It plans to sell 1.2 million vehicles in 2022 – the same as all EVs produced in China in 2020.

The car’s key selling points are price and its ability to customize vehicles for consumers benefit. Car panels and body can be transformed to Nike Swoosh, Hello Kitty or Doraemon.

Outside of Liuzhou, EV penetration in China is only 6% and competition is fierce. BYD and Daimler are expected to provide that competition!

For Wuling Motors and the Hongguang Mini it is price, customization, quality, marketing and supply chain management.

Will we see the Hongguang mini in Malaysia or wait for Geely to decide? The Government too has to play a direct role to incentivise EV sales, like in China and the U.S. Will we do that?

So, will we have 600,000 sales in 2021? Well it depends on further lockdowns, vaccinations, EV policy and whether people have disposable income for cars.

 

Reference:

1.     Eugene Mahalingam, Bolstering vehicle sales, 8 Jun 2021, The StarBiz.

2.     In China, a little-known EV maker is leaving Tesla in the dust, Bloomberg, 7 June 2021.

To Sell or Not to Sell?

 

ESO/M. KORNMESSER

Since our last report from Maya Tau – the remote nation on the star Proxima Centauri, many readers have asked for a part 2 of “Essential or Not?”

Sadly, we can’t do that as our editors are very strict on sequels. Hence, the above title.

Over the last two weeks, Pavisatu, a resident of Maya Tau has been having a hard time. He and his wife sell flowers to worshippers of Mahione. They buy the flowers from Pavisatu before going to the Mahione Temple. Under the ‘No Movement Order’ (“Nomo”) because of Pokemon 19, flowers and prayer items cannot be sold. Strict enforcement is ensured by MATI – the Ministry of All Trades and Investments. Pavisatu was told by a fellow trader that one could apply for a permit from the Ministry of Homes, Flowers and Unction (“Mohfun”).

https://floranext.com/

Pavisatu, who has weak knees, went to Mohfun with all the documents, only to be told that applications must be made online. Pavisatu pleaded that he doesn’t have the skills to apply online. The robot manning the reception was unmoved. (No robot is a follower of Mahione).

Pavisatu relies on flower sales which gives a meagre 50 Maya Tau units (“MT” units) to survive. His wife, Dua Lupa, used to be a singer but lost her job at a night-club. If there is any consolation, Pavisatu will not qualify because he doesn’t have enough assets to support the application. The flower business is a very asset-based enterprise.

Some other flower sellers informed they were told to close because they were not located close to the Mahione Temple. Many complained that it did not make sense, since all temples were closed under Nomo.

The Supreme Council of Maya Tau officially postulates sale of flowers is allowed, so long as it is in the vicinity of a temple. This is where the confusion lies.

Another wholesaler, known as Dragonking, said his flower business has been reduced to zero with Nomo. All his suppliers are struggling, and the retailers are even worse. Transport vehicles are non-existent with various approvals required.

The tale is the same for those involved in the electrical sales (and repairs), barber shops or hairdressing salons, property agents, tour operators and many others. Without MT units, it is not feasible to survive beyond 1-2 months in Maya Tau. But who cares if Pavisatu (translated means ‘One Sinner’) commits suicide or otherwise? (By the way, price of coffins has shot up – a new growth sector in Maya Tau).

 

(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.)

 

 

Where Will the Ringgit Be If Oil Hits $80?

 

Oil prices rose to the highest in more than two years after a top U.S. diplomat said that even if the United States were to reach a nuclear deal with Iran, hundreds of U.S. sanctions on Tehran would remain in place. That could mean additional Iranian oil supply would not be re-introduced into the market soon (Reuters, 9 Jun 2021).

Oil price appears to have stabilized in the upper 60s with Brent price finding support around $67 per barrel while WTI had support at around $65 per barrel. Brent crude closed at US$74.39 a barrel on 16 June, the highest it has settled since May 2019. U.S. West Texas Intermediate oil settled at $72.15 a barrel on 16 June, highest since October 2018.

The surges were due to expectations of demand returning with some countries vaccinated against COVID-19. Restraint on supply by the Organization of the Petroleum Exporting Countries and allies had also buttressed prices.

U.S. crude oil production is expected to fall by 230,000 barrels per day (bpd) in 2021 to 11.08 million bpd, the U.S. Energy Information Administration (EIA) said. This is a smaller decline than it forecasted last month. Wall Street continues to be largely bullish on the oil sector, with some analysts saying that $80 per barrel in the summer is now in the crosshairs (Alex Kimani, 8 Jun 2021).

Francisco Blanch, global commodities and derivatives strategist at Bank of America thinks we could see $100 per barrel again in the next three years. “Part of it is the fact that we have OPEC kind of holding all the cards, and the market is not particularly price responsive on the supply side and there is a lot of pent-up demand ... We also have a lot of inflation everywhere. Oil has been lagging the rise in prices across the economy,” Blanch said.

 

What happens to the Ringgit if oil price continues to rise?

The above graph shows the regression plot of Brent Oil Price vs. Ringgit with monthly data retrieved from July 2011 to June 2021. The scattered blue dots plot out the historical exchange rate (USD/MYR) corresponding to respective Brent Oil Price. The fitted regression line (the orange line) on the other hand represents the relationship between exchange rate and oil price. In short, the graph shows that the Ringgit strengthens when oil price rise.

Based on our regression model (R² = 0.81), if Brent Oil Price reaches $80 a barrel this summer (as forecasted by a Wall Street analyst), Ringgit could reach 3.6821 against the USD. With Brent Oil Price at $100 per barrel, Ringgit could hit 3.3565 against the USD! The last time we had our Ringgit below USD/MYR 4.0000 was in 2018.

 

 

Note: Our forecast is based on a single dependent variable model where oil price change is the only explanatory variable for any exchange rate change.

 

Reference:

1.     Oil price rises as Iranian supply not seen returning soon, 9 Jun 2021, Reuters

2.     Alex Kimani, Oil Could Reach $80 This Summer, But There’s A Catch, 8 Jun 2021, oilprice.com

Covid-19 Exit Plan: The Road to Recession?

The PM with a new name – Mahiaddin Yasin – announced Malaysia’s Covid-19 exit strategy on 15 June 2021. There is a list of targets to be achieved, not a strategy of how this is achieved nor a plan to assist those who are already vulnerable.

The key criterion for exit must be “herd” immunity not the number of new cases or ICU beds. Look at the U.S. or the U.K. it is the herd immunity – whether it is 60% or 70% of the population (being vaccinated).  Many are not clear if all three conditions – cases, bed usage, vaccinations – must be met before moving into the next phase. Or, is this deliberate? That allows for continuation of a phase by another month or two, if say one condition is not met.

Nonetheless, it has costs. Some have estimated cost of lockdown at RM107 billion for two weeks! (Paulo Casadio and Geoffrey Williams, FMT). And according to them with the new exit strategy the cost will balloon to RM170 billion or about 12% of GDP.

The SME Association had said 100,000 SMEs closed in 2020 and another 50,000 based on current lockdown. The Entrepreneur Development and Cooperatives Ministry (June 4) said more than 90% of micro SMEs risked closure with 54% saying they may only survive 3-6 months and 72% expect to suffer losses. This is now a prophetic statement to be fulfilled by the exit strategy.

What can be done? A further fiscal injection of 10% of GDP (or approximately RM150 billion) will be required. This must focus on the B40, M40 households and the SMEs. In some way, this will reduce the certain disaster faced by hotels, tour operators, airlines ,airports, retailers,  property agents, hair salons, consultancies, training companies and a whole host of other services that are either shut or on Work from Home. Meanwhile, rental, revenue, wages, debt payments remain issues.

Will the MoF now consider a loan moratorium to end 2021? Or, is the Government inducing a recession by its actions?

 

References:

1. Covid-19 exit plan-tipping into a recession, Paolo Casadio and Geoffrey Williams, FreeMalaysiaToday, June 15, 2021

 

2. A look at Muhyiddin’s roadmap to recovery, Imran Ariff, FreeMalaysiaToday, June 15, 2021

Will FDI Roll-In Despite Lockdown?

 

Forbes

UNCTAD determined that Malaysia’s FDI last year (2020) was down by 68% from 2019 and amounted to just USD 2.5 billion. This is compared to the ASEAN’s drop of 31% in 2020.

Globally, all FDI contracted by 42%, dropping from USD 1.5 trillion in 2019 to USD 859 billion in 2020. This is the Covid hit.

Thailand’s FDI contracted by 50% to USD1.5 billion while the Philippines bucked the trend and rose by 29% to USD 6.4 billion. Singapore, Indonesia and Vietnam all registered declines.

UNCTAD has projected 5-10% FDI slide in 2021, as effects of the pandemic will linger.

According to a Standard Chartered report in March, 2021, Malaysia is seen as the second most favourable ASEAN country (after Singapore) for foreign investment (from U.S., U.K., Germany and France). China views Malaysia as its top choice. However, many (investors) are in a state of abeyance because of the Emergency, developments on the 12^th Malaysia Plan (2021-2025) and the unveiling of the New Industrial Master Plan.

Both DDI and FDI need to understand the medium and long-term measures for putting the country on a growth trajectory. New technologies, competitive incentives and domestic challenges will define our future. Manufacturing and services are the main recipients and the main drivers of GDP. Malaysia is a major player in the global E&E supply chain, close to 40% of our overall exports is from this sector.

From an ASEAN perspective, the top economic sectors that FDI will consider are:

−         Logistics;

−         Technology;

−         Manufacturing;

−         Real estate;

−         Financial services;

−         Life sciences;

−         FMCG; and

−         Electronics

Then there is RCEP – which will enable greater trade and investment within the region and with others like India, through FTAs already in place. Of the above, Malaysia needs to focus on those it has a competitive advantage. Hopefully, we are not tied down by legacy issues in moving forward. And the essence is to remain agile and not flip-flop.

 

Reference:

1.     Justin Lim, Malaysia second most favourable country for foreign investment in Southeast Asia — Standard Chartered, The Edge24 March 2021

2.     Daljit Dhesi, FDI rolling in despite lockdown, StarBiz, 7 June 2021

3.     Investing in ASEAN, ASEAN Business Partners, 2021/22

5 Interesting Startups That Make Agriculture Different

Agriculture is one of the more important sectors in Malaysia. According to Department of Statistics Malaysia (2019), agriculture is the third highest GDP contributor with 7.1% or MYR 101.5 billion (USD 24.5 billion) to overall GDP.

From B2B trading platforms to AI-powered plant health monitoring solutions, technologies have been undertaken for many years to boost the agriculture sector. We have picked five interesting startups for a broader list:

(i) Farm from a Box (U.S.)

Farm from a Box sells all-in-one system that provides the easiest and most efficient way to start farming. It built from a modified shipping container, each unit contains a complete ecosystem of smart farm technologies to enhance agricultural productivity; from renewable power and micro-drip irrigation, to Information and Communications Technology. It helps conserve water, improve soil quality, and increase nutrient rich-farm production.

 

(ii) iGrow (Indonesia)

iGrow operates as a crowdfunding platform for farming. Investors can pick whichever projects they like, including different types of vegetables, marine products or aquatic feeds. The proceeds are then utilized by farmers to carry out the entire farming operation and the revenue generated will be shared with the investors. The returns range from 12% to 18% p.a.

(iii) eFishery (Indonesia)

eFishery’s innovative fish-feeding strategy consists of a smart feeder that uses motion sensors to detect a fish’s appetite. If the fishes seem hungry or unsettled, the feeder automatically dispenses food. Farmers can also check in on their fishes through the accompanying platform, and schedule feeding times or regulate the system in real-time if necessary. The overall effect—better risk management and increased production efficiency.

(iv) Pasar Grub (Malaysia)

Malaysian edible food waste can fill the KLCC Tower in 18 days. Vegetables and fruits are thrown away simply because they are not of the right color, shape or weight. Pasar Grub, a platform connects farmers and distributors to people in need and gives the food a 2^nd life. Fruits and vegetables here are selling at affordable price while at the same time helping farmers to reduce fresh produce wastage.

(v) Ecosia (Germany)

Hmm... Not really relevant to agriculture but we found this interesting.

Ecosia is the only search engine in the world that uses ad revenue to plant trees. So far the company claims to have planted over 80 million trees in Ethiopia, Brazil, Indonesia, Spain, and other countries. Ecosia is also now an official search engine option alongside Google Search, Bing, DuckDuckGo, and Yahoo!

 

We listed only five here but there are many more agritech startups out there. With more usage of AI and data, the landscape of the agriculture sector will change. Some global issues such as resource depletion, land insufficiency, and food waste could be solved through these changes. And with digital platforms connecting farms and businesses, trading agents or middlemen may become unnecessary soon. This may reduce costs and better results in the future.

 

Reference:

Official website of companies

Giving Hope in a Lockdown!

 

Covid-19 has been with us since February 2020. Up to June 13 2021, key statistics on cases and deaths are as follows:

·       Coronavirus Cases: 657,508

·       Deaths: 3,908

·       Recovered: 580,276

·       Active Cases: 73,324

Our death rate is about 0.6%, and about 88.3% have recovered from Covid.

Total Coronavirus Cases in Malaysia (Worldometer)

The bulk of the cases are from manufacturing (48%), workplaces and community. The hardest hit is the Bumiputra community – about 58% of all Covid cases (data is based on the first wave and more current statistics by race is not available).

Source: Clinical characteristics and risk factors for severe Covid-19 infections in Malaysia: A nationwide observational study (1 Feb-30 May 2020) published in The Lancet.

Malaysia has ministered at least 3.79 million doses of Covid vaccines so far. Assuming every person needs 2 doses, that suggests 5.9% of the country’s population (Reuters) is vaccinated. During the last week of May, Malaysia averaged about 72,271 doses administered each day. At that rate it will take 89 days to administer enough doses for another 10% of the population.

With a surge of Covid cases, Malaysia entered into FMCO for 2 weeks from June 1, 2021. This is likely to be extended by another 4 weeks. The cost to the economy is probably around RM1.2 billion per day or RM50.4 billion for a 6-week period.

The hardest hit are people in the informal sector, SMEs and workers in the non-essential sectors like gaming, liquor or hairdressing/ saloons.

SMEs are the backbone of the economy.

They contribute substantially in terms of GDP, exports and employment:

During MCO 1.0 (March 18-May 3, 2020) the impact was significant for SMEs:

Under the present FMCO, it is anticipated that 50,000 SMEs may close. SMEs face 4 main issues:

·       Payment of salary;

·       Zero or little revenue;

·       Rental payment; and

·       Loan repayment or interest

So, what practical steps can we do as a community or family?

To help SMEs or individuals in a crisis, we need:

     (i)         Transparency – at least on the cash flow moving forward;

   (ii)         Accountability – to staff, creditors, etc.

If we are comfortable with the honesty, integrity and truthfulness of the situation, then we could do the following:

1)    Food Bank – providing individual family/ies with basic ingredients – rice, eggs, cooking oil, sugar etc. This could be done by one family to another or as a group. Many are doing this, and many will still require support for the next 2-3 months.

2)    Shelter – where people have lost their homes, then others stepping-in to provide short-term accommodation will be helpful.

3)    Job Bank – maintaining a data base of opportunities will be helpful. There are areas in food delivery/ goods delivery; cleaning services; volunteers for vaccination etc.

4)    Short-term Cash Support – this is a short-term measure to meet immediate shortfall on rent or mortgages.

5)    New Business Start-up Capital – where an idea like trading on the internet or something else may require small funding support, which is another avenue for consideration.

6)    Counselling – many will require a listening ear to get over this period. Suicide rates tend to go up in a crisis.

7)    Prayer – many will require prayer support for the problems they face. One can pray for each other without religion getting in the way.

Maybe there are other ideas to giving hope in a lockdown. Do share with us! Be blessed!