Should Directors Be Remunerated in Loss Incurring Companies?

The annual reports for the financial year ended Dec 31, 2020 (FY20) for AirAsia Group Bhd, now known as Capital A Bhd, and AirAsia X (AAX), show that Tony Fernandes and Kamaruddin Meranun received an annual salary of RM4.8 million each. Board members were given fees ranging from RM150,000 – RM401,500 even as the airline dealt with the impact of Covid-19 following the worldwide freeze on air travel.

Source: https://en.wikipedia.org

In September 2021, AAX posted a record quarterly loss of RM24.6 billion for the April-June period, eight times more than the previous year. It was the airline’s ninth successive loss.

In 2021, the group posted a net loss RM887 million for the third quarter ended Sept 30, 2021, up 4% from RM851.78 million in the corresponding quarter in 2020.

AAX, meanwhile, faces the issue of refunds demanded by passengers whose flights were cancelled over the past two years since the onset of the Covid-19 crisis. In April 2021, Fernandes assured some 450,000 customers waiting for refunds would get their money back, adding that AAX had been facing financial problems. According to the CEO of Capital A Bhd, AirAsia has settled over 90% of passenger refunds (as at 28 March 2022).

On Nov 12 last year, AirAsia said that its RM33.65 billion debt settlement scheme for AAX had been approved by 99% of its creditors through a vote at a meeting held that day.

On March 16, AAX in a separate statement said the company had lodged a sanction order for its debt restructuring with the Registrar of Companies with the formalities of the restructuring now completed. It said the lodgement of the sanction order meant that the financial effects could be recognised in the financial statements of the company and that, as a result, AAX would be able to reverse RM33 billion in liabilities and provisions for liabilities which have been waived under the scheme.

This is not the only anomaly. Sapura Energy’s CEO got RM71.9 million for FY2018 and RM84.2 million for FY2017. (It has been above RM80 million band between 2014 and 2017).

Another O&G company, Serba Dinamik Holdings Berhad has its principal executive director earning close to RM5 million in FY2021 while the company incurred a loss of over RM171 million in financial year 2021.

Should directors or CEOs of loss incurring PLCs be highly paid while the company is bleeding? Doesn’t make sense, does it?

References:

90% of AirAsia passenger refunds settled, says Tony Fernandes, Bernama/FMT, 

28 March 2022

AirAsia top duo paid RM4.8 million each in 2020, www.malaysianow.com, 26 March 2022

Sapura Energy CEO’s salary is being paid averaged RM72 million to RM85 million a year despite company losing billions, www.thecoverage.my, 23 March 2022

Serba Dinamik Holdings Berhad 2021 Annual Report

Will Recovery Take Us To End 2024?

Over 40% of large, micro, small and medium enterprises (MSMEs) are expecting business recovery beginning end 2022 to end 2024. This is according to a recent EY business pulse survey of over 500 companies.

Almost half of the large companies (46%) and one-third of MSMEs (33%) indicated they had adapted well (positive to very positive) to the Covid-19 pandemic. However, 25% of Malaysian companies had been adversely impacted (negative to very negative).

The EY survey also noted that the majority of Malaysian businesses were prepared to live with Covid-19 (86%) and were prioritising technology adoption in the immediate term (77%) as they fast-tracked their adaptation to the new normal. The movement restrictions in the wake of the pandemic had accelerated the companies’ adoption of technology and their transition to a digitally-enabled work environment.

In contrast, the respondents experienced more negative impact in the financial (44% of large companies; 63% of MSMEs) and supply chain (54% of large companies; 44% of MSMEs) areas.

In the short term, 85% of the respondents were prioritising the improvement of employee safety and the implementation of standard operating procedures (SOPs) including flexible work arrangements, while 77% were focused on enhancing digitalisation to facilitate contactless information technology or IT infrastructure.

Moving forward, the key business priorities will be on re-skilling people (74%) and adopting digitalisation (74%).

At the same time, a higher proportion of MSMEs were paying greater attention to readapting the business size, changing the business model or entering new business ventures (58%) and improving their financial position (48%). Also, the survey respondents indicated that they required further support in upgrading digital technology (51%), adapting the business to be more resilient (47%), accessing resources for business recovery (42%) and redesigning physical premises (40%), to help them better prepare to live with Covid-19.

Beyond the recovery and improvement phase, the respondents indicated that they needed guidance in finding new markets (58%), forging new partnerships (54%), accessing digital skillsets and talent (53%) and developing new business models, products and services (53%).

The upshot is recovery to 2019 level will take up to two years from end 2022. The Government needs to re-calibrate support packages and economic measures for companies to survive in the next 24 months or so. Meanwhile, companies will need to redesign business model, innovate and re-skill employees and pray for the best!

Reference:

Large proportion of firms expecting recovery, The Star, 24 March 2022

(https://www.thestar.com.my) 

MySejahtera: Is The Government Paying RM338m for the App?

The all pervasive MySejahtera application may not be free of charge eventually. There are many questions over who gets the contract to manage the application - which logs personal details, health status and whereabouts of 38 million users.

Source: https://en.wikipedia.org

Details on the deal would not have come to light had it not been for the Public Accounts Committee, who questioned the Finance Ministry and Health Ministry (MOH) on March 8.

Health Minister Khairy Jamaluddin said the MOH owns the rights to the MySejahtera smartphone application. 

However, a written reply by the Science, Technology and Innovation Ministry (Mosti) and MOH to the Public Accounts Committee (PAC) suggested that things are a bit more complicated. 

The MOH has formed a “MySejahtera Steering Committee”, chaired by Khairy, to decide on the management and direction of MySejahtera while considering the cost-benefit of a “complete” takeover of the application. While the Government may own the MySejahtera base application, they may not own some additional modules.

KPISoft Sdn Bhd was engaged by the Health Ministry to develop MySejahtera as a form of corporate social responsibility (CSR) from March 27, 2020, until March 31, 2021. Putrajaya was not charged for this period. 

According to the Mosti/MOH reply to the PAC, Putrajaya decided that KPISoft Sdn Bhd has to be paid from April 1, 2021, because of all the additional components added to MySejahtera which was not in the original 2020 agreement.

The deputy secretary at the Finance Ministry's Government Procurement Division, told the PAC that on Nov 26 last year, Putrajaya greenlit the MOH’s decision to appoint MYSJ Sdn Bhd to manage MySejahtera. This procurement was to be done without an open tender process.

The PAC chairperson pointed out during the proceedings that KPISoft’s directors were Rekhta Mani and Yogaraj Thuraisingam. 

As for MYSJ, the directors are Heah Kok Boon, Raveenderan Ramamoothie, Anuar Rozhan, Liew Kee Sin, Shahril Shamsuddin and Megat Najmuddin Megat Khas. Anuar is the brother to former Astro Malaysia Holdings Bhd CEO Rohana Rozhan, while Shahril is best known for being the Sapura Energy CEO and shareholder.

Megat Najmuddin was a long-time Umno member who joined Bersatu in 2018. Currently, he chairs Bersatu’s disciplinary board.

MYSJ is a brand new company incorporated in September 2020. As for KPISoft, they have been around since 2005 and are based out of Singapore, with a Malaysian presence. Their Malaysian outfit changed its name to Entomo Malaysia in May 2020.

According to a report by Code Blue, MySJ Sdn Bhd is Entomo Malaysia’s special purpose vehicle created for a public-private partnership (PPP) project.

According to Code Blue, citing court documents, Entomo Malaysia had proposed to the Government in Dec 2020 to pay them to expand the scope of MySejahtera beyond the Covid-19 pandemic.

The report said Entomo Malaysia proposed that MySejahtera can be used to track other vaccination distribution, manage other infectious diseases, conduct predictive analysis and integrate with other existing government health systems.

Entomo Malaysia proposed that the PPP contract would last 15 years and cost the government about RM138.9 million annually. 

In a turn of events, a new report by CodeBlue claims that there’s actually already been a deal between Entomo Malaysia Sdn Bhd (formerly known as KPISoft Malaysia) and MySJ Sdn Bhd, with the latter agreeing to pay Entomo RM338.6 million for MySejahtera’s intellectual property and software license.

The license agreement saw MySJ paying Entomo RM38.6 million for the last quarter of 2020 as a transfer of IP fee and a service fee, with further sums to be paid to Entomo annually for a total of RM338.6 million. According to Code Blue, MySJ would be paying Entomo RM60 million each year from 2021 onwards, with the last payment happening on 1 March 2025. This payment covers the first 24 million users of the MySejahtera app only though, with users exceeding 1% from 24 million users to cost MySJ a further RM1.50 per user per annum. Yesterday, Khairy had stated that there are over 38 million registered users on MySejahtera. This means that MySJ could end up forking another RM21 million per year on top of the agreed sum between them and Entomo. 

This deal has not been finalised.

Transparency is the real issue. Is the Government purchasing MySejahtera? At what price? RM338m?  Why no procurement tender? Why the denial by the Minister of Health? Will the data be eventually be sold to third parties? Security of data? Can the Government do a “White Paper” on this? Why can’t we be transparent and follow a tender process? Is doing a CSR the gateway to an exclusive contract?

References:

What PAC uncovered about MySejahtera, 28 March 2022 (www.malaysiakini.com)

Report: MySJ Sdn Bhd agreed to pay RM388.6 million for MySejahtera IP and software license, Raymond Saw, 28 March 2022 (https://soyacincau.com)

Do Poor Countries Develop Rich Countries?

The story is told that the rich nations of the OECD give generously of their wealth to the poorer nations of the global south. This is to help them eradicate poverty and push them up the development ladder. During colonialism western powers may have enriched themselves by extracting resources and slave labour from their colonies. These days, they give more than $125bn (£102bn) in aid each year – solid evidence of their benevolent goodwill. That’s the story.

Source:https://www.gfmag.com

The US-based Global Financial Integrity (GFI) and the Centre for Applied Research at the Norwegian School of Economics recently published some fascinating data. What they discovered is that the flow of money from rich countries to poor countries pales in comparison to the flow that runs in the other direction.

In 2012, the last year of recorded data, developing countries received a total of $1.3tn, including all aid, investment, and income from abroad. But that same year some $3.3tn flowed out of them. In other words, developing countries sent $2tn more to the rest of the world than they received. Since 1980, these net outflows add up to $16.3tn – that’s how much money has been drained out of the global south over the past few decades. To get a sense for the scale of this, $16.3tn is is nearly close to the GDP of the United States

What this means is that the usual development narrative has it backwards. Aid is effectively flowing in reverse. Rich countries aren’t developing poor countries; poor countries are developing rich ones.

What do these large outflows consist of? Developing countries have forked out over $4.2tn in interest payments alone since 1980 – a direct cash transfer to big banks in New York and London, on a scale that dwarfs the aid that they received during the same period. Another big contributor is the income that foreigners make on their investments in developing countries and then repatriate back home. Think of all the profits that BP extracts from Nigeria’s oil reserves, for example, or that Anglo-American pulls out of South Africa’s gold mines.

But by far the biggest chunk of outflows has to do with unrecorded – and usually illicit – capital flight. GFI calculates that developing countries have lost a total of $13.4tn through unrecorded capital flight since 1980.

Multinational companies also “steal” money from developing countries through “same-invoice faking”, shifting profits illegally between their own subsidiaries by mutually faking trade invoice prices on both sides. For example, a subsidiary in Nigeria might dodge local taxes by shifting money to a related subsidiary in the British Virgin Islands, where the tax rate is effectively zero and where stolen funds can’t be traced.

Who is to blame for this disaster? Since illegal capital flight is such a big chunk of the problem, that’s a good place to start. Companies that lie on their trade invoices are clearly at fault; but why is it so easy for them to get away with it? In the past, customs officials could hold up transactions that looked dodgy, making it nearly impossible for anyone to cheat. But the World Trade Organisation claimed that this made trade inefficient, and since 1994 customs officials have been required to accept invoiced prices at face value except in very suspicious circumstances, making it difficult for them to seize illicit outflows.

Poor countries don’t need charity. They need justice. And justice is not difficult to deliver. But doing so would run up against the interests of powerful banks and corporations that extract significant material benefit from the existing system. The question is, does anyone have the courage?

Reference:

Aid in reverse: how poor countries develop rich countries, Jason Hickel (https://www.theguardian.com )

Much Ado About RM63 Billion “Arbitration Award”?

Spanish arbitrator Gonzalo Stampa recently ordered Malaysia to pay US$14.92 billion (RM62.56 billion) plus interest and costs to the heirs to the Sulu sultanate. According to the Global Arbitration Review, the arbitrator further criticised Malaysia’s “intimidatory and coercive” tactics when issuing the award in Paris and directed the Malaysian government to pay the amount.

The families of the Sulu descendants who had been receiving an annual payment of RM5,300 for 135 years under the agreement signed during the British era had threatened legal action against Malaysia. But this was not taken seriously by the past administration. However, in 2019, the government was served demand letters which were sent by lawyers from London, acting on behalf of the descendants, seeking Malaysia’s participation in arbitration proceedings before a single Spanish arbitrator in Spain.

Map showing the extent of the Sultanate of Sulu in 1822 with borders of modern nation states

(Source: https://en.wikipedia.org)

Since there was no arbitration agreement in the 1878 and 1903 documents pertaining to their claims, the Sulu heirs had applied to the courts in Spain, which appointed a Spanish arbitrator to determine a dispute between Philippine citizens and Malaysia.

The Sabah Law Society offered an insightful and detailed legal opinion on the latest development.

The Sultan signed an agreement in 1878 with a group of British and German entrepreneurs for the exploitation of minerals and forest products in territory under his control, in return for annual payments.  The entrepreneurs’ rights were passed to Sabah state upon its independence in 1963. 

Malaysia continued to make annual payments of approximately US$1,000 (RM4,190) but stopped making payments in 2013. The claimants pointed out that Malaysia’s ex-attorney general Tan Sri Tommy Thomas admitted in his autobiography that there were no legal grounds for Malaysia to refuse to continue making the payments and that Sabah was in breach of the agreement.

The tribunal, consisting of sole arbitrator Gonzalo Stampa, held that the 1878 agreement was an international private lease agreement of a commercial nature. He found that the arbitration agreement was reflected in the arbitration clause contained in the deed. 

On March 29, 2019, the Civil and Criminal Chamber of the Superior Court of Justice of Madrid rendered Judgement 11/2019 had earlier also upheld the arbitration agreement. The arbitrator found that Malaysia had breached the agreement by not continuing to make payments as of January 2012 and that the contract was terminated. The tribunal held that the claimants were entitled to recover the restitution value of the rights over the leased territory. 

This sum amounted to US$14.92 billion (RM62.56 billion) including pre-award interest.

As Malaysia is a member of the New York Convention, it is obliged to enforce the award, but has the option of making an application to set the award aside in France, where the award was rendered. If Malaysia refuses to make payment, the claimants will have the right under the New York Convention to enforce the award against Malaysian state assets in any of the 167 signatory state parties around the world.

There will be a very interesting situation if the claimants decide to enforce the award. If anything we only have to blame ourselves. So is Sabah part of Malaysia? Yes it is, as this is not on sovereignty but commercial interests signed over by the Sultan. Should we have come to this? Of course not if we had wisdom to re-negotiate things!

Reference:

Much ado about RM63 bil “arbitration award’ to Sulu Sultan’s descendants – Sabah Law Society, 1 March 2022, www.thevibes.com

Sapura Energy Berhad: Bailout by Najib?

Sapura Energy Berhad posted RM8.9 billion loss after taxation and minority interests (LATAMI) for the financial year ended 31 January 2022 (FY2022). The Group announced that it also recorded an operating loss of RM2.2 billion on the back of RM4.1 billion revenue. The Group recognised a RM3.3 billion provision for impairment on goodwill on consolidation and a RM2.3 billion provision for impairment on property, plant and equipment in FY 2022.

Its FY 2022 revenue of RM4.1 billion was 22.8 percent lower than the RM5.3 billion recorded in financial year 2021 (‘FY 2021”) primarily due to lower contributions from the Engineering & Construction (E&C) segment.

5-Year Group Financial Highlights

Source: Sapura Energy Berhad Annual Report 2021

The Group has embarked on a series of negotiations with clients on legacy contracts for amicable solutions to recover or limit losses.

To address its unsustainable debt and settle outstanding claims to vendors, Sapura Energy successfully applied for and was granted two Orders by the High Court of Malaya, which allows it to begin a court - sanctioned debt restructuring exercise with creditors. The Orders, which include a Restraining Order, will help create a stable platform for the Group to negotiate with creditors while its operations can continue.

Sapura Energy is in talks with lenders to restructure its long-term debt and will begin scheme of arrangement briefings soon. The Group is also seeking sources of new funds to finance its business plan as it restructures its business and streamlines its operations.

In FY 2023 revenue from secured projects attributable to legacy contracts will be reduced to about 25 percent. With an average of nine rigs expected to be in operation in FY 2023 compared to an average of seven in FY 2022, its Drilling segment will continue to generate stable cash flow under better market conditions.

Najib Razak has urged the government to protect Sapura Energy Bhd from bankruptcy by providing loans or instructing Petronas or Khazanah Nasional to take over ownership from Permodalan Nasional Bhd (PNB). The former prime minister was critical of PNB for failing to take action. Najib also said nearly 10,000 high-paying jobs would be lost and around 4,500 vendors or suppliers would be affected. He urged the government to act immediately by providing easy interest loans or loan guarantees to Sapura to solve its cash flow problems. Alternatively, he said, the government could direct Petronas or Khazanah Nasional Bhd to take over ownership of Sapura.

Although PNB conducted a reshuffling of Sapura’s management in early 2021, Najib said PNB no longer wanted to help the company with a new loan but instructed Sapura to dispose of its assets to solve its cash flow problem.

What is Najib’s problem? Did Shahril (and the former team) run the Company to the ground? Banks are not in favour of them, PNB is against them, Khazanah is not interested. So, where does Sharil go to? Government? Najib? Perhaps Najib could advance USD756m from his loot to meet cash flow until he becomes the next PM?

References:

Sapura Energy posts RM8.9bil loss, reviews biz direction, Azreen Hani,

https://themalaysianreserve.com 

Protect Sapura from bankruptcy, urges Najib, FMT Reporters, 20 March 2022

Why Are We Doing MRT3?

 The Ministry of Finance (MOF) has committed up to RM50 billion (or roughly RM1 billion per km) in financing for the Mass Rapid Transit 3 (MRT3) Circle Line project. The initial construction cost estimated was at RM31 billion plus RM8 billion for land acquisitions.

The MOF will issue government-guaranteed Islamic bonds to raise the required funds for the massive rail project. The extra RM11 billion is to be set aside as contingency.

The construction cost of RM31 billion, is similar to the cost of MRT2, which is expected to commence operation in the next quarter. In comparison, the first MRT1 Sungai Buloh-Kajang Line cost RM21 billion while the second MRT2 Sungai Buloh-Serdang- Putrajaya Line also cost RM31 billion, according to MRT Corp’s official numbers.

The tender for the construction works on MRT3 Circle Line project will be opened in May.

The jobs will be awarded in the fourth quarter of 2022.

The construction activities will be monitored directly by MRT Corp as the project developer and it will be assisted by a project management consultant (PMC).

The MRT3 Circle Line is scheduled to be fully operational by 2030 with the first phase’s completion expected to conclude in 2028, subject to land acquisition process.

The third MRT line will have a circular alignment running along the perimeter of Kuala Lumpur City with about 51 kilometres (km) in length, split between 40km of elevated tracks and 11km of underground tunnels, according to MRT Corp.

The current proposed alignment of MRT3 Circle Line will have 31 stations, 10 of them serving as interchange stations with the eight existing rail lines in the Klang Valley.

Contractors are expected to also shoulder the responsibilities of funding the project whenever there is shortage of funds from the MOF.

The hybrid funding model, including the issuance of sukuk, is to keep MRT Corp’s financing

options open, adding that the MOF will finalise the details of the issuance of the green sukuk under the Securities Commission Malaysia’s Sustainable & Responsible Investment Sukuk framework.

A spokesperson from MRT Corp pointed out that the proposed hybrid funding model will see a public-private partnership with contractors of the project contributing to the upfront construction cost and receive deferred payments as the project progresses.

What is the urgency of this project? Why do we need a Circle Line? Is it to assist some “valued” contractors? We have no money to pay the B40 or M40 who need RM10,000 and we allow withdrawals from EPF? Isn’t this a contradiction, Zafrul? Will Zafrul resign, since he could not accept any further withdrawals from EPF? But please, don’t hold your breath! In Malaysia, nobody resigns, even convicts can go campaigning freely.

To be financially feasible, i.e. Fare box ratio of 1, ridership numbers must exceed one million passengers per day (with an average fare of say, RM10 per passenger per direction) – a rough estimate. This excludes repayment, which may suggest a much higher ridership or other income stream to meet annual debt obligation. When is this feasible? Probably in a 100 years’ time – 2130. By then, new technologies will arise – tele-transportation. So, why do this?

Reference:

MOF to raise up to RM50 billion for MRT3: tender to be called in May, Seah Eu Hen and Shazni Ong, theedgemarkets.com, March 16, 2022

AirAsia X Writes Back RM33bil to Profit?

AirAsia X (“AAX”) said on 16 March 2022 it had completed its debt restructuring, and will write RM33bil back to profits in the next quarter.

Under the airline's restructuring proposal, it would pay just 0.5% of debt owed and end its existing contracts. It was approved by its creditors and the High Court of Malaya in 2021. The restructuring was proposed to avoid liquidation after the long-haul low-cost airline posted a record quarterly loss last September. It is one of many carriers in the Asia-Pacific region to have entered a court-overseen debt restructuring process to survive the pandemic.

Social media users expressed frustration over low cost carrier AirAsia X Bhd’s proposal to pay only 0.5% of RM33 billion debt owed to each of its creditors and passengers. That works out to just 5 sen for every RM10 and RM50 for anyone who had bought tickets for RM10,000. 

Source: https://www.airasia.com

For first half of 2021, MAVCOM said of the complaints received, 41.4% of that total was against AirAsia, 28.7% on MAS and 12.1% for Malindo Air.

By 2026, AirAsia Group aims to connect more than 1 billion passengers in Southeast Asia via its aviation unit, which is expected to include a new joint venture airline after restructuring the firm into an investment holding company called Capital A.

Capital A chief executive Tony Fernandes said because AirAsia's load factor and flights in the fourth quarter posted record highs, its furlough policy is expected to be terminated shortly.

One social media user called Retweeter said the move was unfair to other businesses as the move is to prevent liquidation of the company.

Could I could take huge loans/mortgages & just pay 0.5% to my lenders... not going to happen for an ordinary person? Now every creditor can enjoy 0.5%!

Isn’t this exercise of write-down/restructuring like a sleight of the hand by David Copperfield? The losers are the creditors! How could they settle for 0.5%? Shareholders are in a great position, to reap the benefit from future cash flows.

The missing link in the restructuring is the RM500 million facility to be guaranteed by Danajamin. Will Danajamin issue their guarantee without the principal shareholders commitment or guarantee? No ordinary company or person could do this “magic”! Don’t try it at home!

References:

AirAsia X completes debt restructure, to write back RM33bil to profit, The Star, 16 March 2022

AirAsia eyes 1bn flyers by 2026, Dusida Worrachaddejchai Bangkok Post, 29 January 2022

Fury over 0.5% payment to AsiaAsia X passengers, creditors, FMT Reporters, FreeMalaysiaToday, 21 October 2021

The World of 1MDB Crooks!

Fugitive financier Low Taek Jho (Jho Low), the alleged mastermind of the 1Malaysia Development Bhd (1MDB) scandal, obtained US$1.42 billion from three bond transactions that Goldman Sachs Group Inc arranged for the Malaysian wealth fund. This is from the FBI.

The former Malaysian prime minister Datuk Seri Najib Razak secured US$756 million of the US$6.5 billion raised in the bond offerings, while his stepson, Riza Aziz, pocketed US$238 million.

Khadem al-Qubaisi, a former managing director of Abu Dhabi’s state-owned International Petroleum Investment Co (IPIC), which guaranteed the 1MDB transactions, received US$472.8 million. And another Abu Dhabi official who worked with IPIC’s subsidiary received US$76.6 million. Aziz invested at least US$60 million of his 1MDB money to produce The Wolf of Wall Street. Aziz was a friend of Jho Low. 

Red Granite Inc production company agreed to pay US$60 million to settle US claims that Wolf was financed with stolen 1MDB money. In 2020, Aziz resolved a separate government suit by agreeing to drop claims to tens of millions of dollars in US and UK real estate without admitting wrongdoing. Ng got US$35.1 million from two of the three bond transactions, while Leissner received US$73.4 million during the scheme.

At the time of his 2018 plea, Leissner agreed to forfeit just US$43.7 million which the US said was the money he earned in the scheme. It’s unclear why Leissner is forfeiting a lesser amount. 

Najib was convicted in Malaysia and sentenced to 12 years in prison and is appealing.

Meanwhile, Al-Qubaisi was sentenced in Abu Dhabi in 2019 to serve 15 years in prison and ordered along with the other IPIC executive to repay US$336 million, according to The Wall Street Journal.

This not the only scandal (shit) to “hit the fan” in Malaysia. We have more than our fair share compared to other countries in the region – Maminco, BMF, Perwaja, MARA, Tabung Haji, MAS and the list goes on. When can we stop this? When we have a leadership that is committed to integrity, honesty and service to the people; when people involved are held accountable; when the checks and balances do work? Is that too much to ask?

Reference:

FBI agent tells court how Jho Low stole US$1.4b of 1MDB money and Najib received US$756m, Patricia Hurtado (Bloomberg), TheEdge CEO Morning Brief, March 16, 2022

Sanctions Could Shrink Russian Economy By 7%

Russia’s economy is expected to plunge into a deeper recession than the one caused by Covid-19 as a result of Western sanctions and the country’s increasing isolation after invading Ukraine.

Economists said measures imposed on Russian banks and companies by the US, EU, UK and their allies were having a severe impact on financial markets in Moscow. It could inflict more damage on Russia’s wider economy over time. Analysts at Goldman Sachs said it had cut its forecast for Russian gross domestic product for 2022 from 2% to a 7% decline.

Source: https://intellinews.com

Russia’s economy was estimated to have grown by 4.5% last year (2021) after having shrunk by almost 3% in 2020, the worst year of the pandemic for the global economy.

Analysts said the Ukraine war may have a limited impact on the global economy because trade links between Russia and the rest of the world were limited. The country accounts for 1.5% of global GDP, and for 2.9% and 0.9% goods exports from the eurozone and Britain respectively.

However, oil prices rose to more than $120 a barrel, the highest level since 2014, as the prospect of disruption in supplies from Russia sent energy markets surging further. Russia is the world’s second biggest oil exporter and its largest in natural gas.

Should recent increases in oil and gas prices be sustained, economists forecast higher inflation will hit households and businesses, and trigger a slowdown in economies across the world.

Analysts at the consultancy Oxford Economics said the pressure on Russian financial markets would damage Russia’s GDP significantly, by as much as 6% relative to a pre-crisis forecast in a “plausible downside scenario”.

The economic repercussions for Ukraine, as it suffers massive infrastructure damage and disruption from the Russian bombardment, is expected to be worse still. Evidence from previous war-hit countries suggests a slump of up to 60%. Eurozone and UK GDP could be about 0.5 percentage points lower than previously expected owing to the impact from soaring gas prices.

However, the analysts warned that a war lasting into 2023 with tougher sanctions from western governments and Russia retaliating by restricting gas supplies would cause a sharper fall of 7% in Russian GDP in 2023..

What are the repercussions for Malaysia? Impact will be on inflation, lower FDI, reduced tempo on domestic investments and consumption as investors/consumers defer investments or purchases. And instead of recovery in 2022/23, we will have some prolonged agony to 2024. IATA forecasts suggest that travel will only recover to 2019 levels by 2024.

Reference:

Russian economy could shrink by 7% as result of Ukraine sanctions, Richard Partington, 2 March 2022 (https://www.theguardian.com) 

EPF: Is it a Retirement or “Emergency” Fund?

The Employees Provident Fund (EPF) will open applications for a new round of special withdrawals from April 1 to April 30. In a statement, it said members aged below 55 years old will be eligible to apply, with payments starting April 20.

A maximum withdrawal amount of RM10,000 and minimum RM50 and this must fully utilise their savings balance in Account 2 first before accessing their Account 1. Over 6.3 million people will qualify.

This is the fourth special withdrawal scheme since 2020. Over RM101 billion has been withdrawn from the previous three schemes. Pakatan Harapan had also urged Putrajaya to allow more withdrawals.

Source: https://ms.wikipedia.org

A maximum of RM63 billion can be withdrawn and this will force EPF to sell off some of its assets. EPF’s dividend for conventional savings for 2021 could have reached 6.7 percent, but only 6.1 percent was declared due to the earlier withdrawals. This means RM5.4 billion in terms of the additional dividend could have been distributed to all EPF members if those withdrawals had not been made. The “loss” of RM5.4 billion from the dividend has caused about 5.3 million members, who had not withdrawn their savings ever are forced to accept lower returns on their savings. Is this fair?

Last week, in pushing for another iCitra EPF withdrawal of RM10,000, Najib Razak proposed the fund introduce a multi-tiered dividend payout, among others.

This means that those with lower savings get a higher percentage while those with higher savings will get a lower percentage. Those with higher savings are already paying higher taxes  - is this fair?

The Director of the Institute of Malaysian and International Studies at Universiti Kebangsaan Malaysia, Sufian Jusoh, who specialises in development economics said the government would be seen as unfair for putting the burden on this group of Malaysians.

Why can’t the Minister of Finance provide a term loan through EPF against the EPF savings in accounts 1 and 2? Basic features are as follows:

        Short-term Loan : 100% of amount in Accounts 1 and 2

        Security                 : A charge on Accounts 1 and 2 (for those who borrow)

        Interest rate         : 0%

        Repayment         :10 years, by way of dividends declared by EPF

For EPF, the Government will pay an interest of 2% p.a. on the facility. (If you can do MRT3 for RM50 billion, you can pay the interest).

In the above manner, the B40 or M40 will get their emergency fund and still retain their savings. In addition, the repayment is from future dividends.

For EPF, it does not have to dispose any of its assets but extend a new loan scheme (new asset) for qualified and needy members. There is no liquidity “crunch” on its cash flow. Interest is set at 2% p.a. because that’s the minimum EPF (Act) promises to pay contributors.

For the Government, it is only interest over 10 years and not the “principal”.

Pray tell me why this cannot be done? Instead of “hair-brained” schemes from Najib Razak who has cash of USD756 million (from 1MDB). And Najib please use your cash as third party pledge? After all isn’t it all from Rakyat Malaysia?

References:

Putrajaya allows another round of EPF withdrawals, Malaysiakini, March 16, 2022

Multi-tiered EPF dividends will see exodus of funds, warns experts, K. Parkaran, FreeMalaysiaToday (FMT), March 16, 2022

Superb Dividend Declaration by EPF!

The Employees Provident Fund (EPF) declared a 6.10% dividend for conventional savings and 5.65% dividend for shariah savings for 2021— better than the 5.45% (conventional) and 5% (shariah) declared in pre-pandemic 2019. 

Total dividends declared amounted to RM56.72 billion (RM50.45 billion conventional and RM6.27 billion shariah) despite unprecedented Covid- 19-related withdrawals hitting growth in its fund size. This exceeded the previous all-time high of RM48.13 billion in 2017. Total distributable income was RM57.1 billion (RM50.8 billion conventional and RM6.3 billion shariah).

The EPF’s 2021 dividend rate is not only significantly higher than 2020’s rate of 5.2% and 4.9% but also exceeds the five sen per unit income distribution by Permodalan Nasional Bhd’s flagship Amanah Saham Bumiputera (ASB) for 2021.

According to the EPF, its overall investment assets grew to RM1.008 trillion in 2021, up 0.8% year-on-year from RM1 trillion in 2020. The significantly slower growth in its total investment assets, despite strong investment performance, was owing to Covid- 19-related withdrawals, including the unprecedented i-Sinar Account 1 withdrawals totalling RM58.7 billion.

In its statement, the EPF said it saw its first-ever negative net contributions (where withdrawals exceeded contributions) in 20 years of RM58.2 billion in 2021 but did not provide a breakdown of gross contributions and withdrawals for the year. 

Some 7.3 million EPF members had applied for at least one or all three of the Covid-19-related special withdrawals — i-Lestari, i-Sinar and i-Citra — that collectively saw RM100.9 billion withdrawn from the EPF between April 2020 and February 2022. The amount not saved with the EPF rises to RM110 billion when including the RM9 billion that was released to members because of the reduction in employees’ statutory contribution rate (from 11% to 7% from April to December 2020, and from 11% to 9% from January 2021 to June 2022).

About 48% of EPF members having less than RM10,000 in their accounts (with the withdrawals). For a three-year period, real (inflation-adjusted) returns were 4.91% for its conventional portfolio and 4.51% for shariah savings — surpassing its target of beating inflation by 2% over a rolling three-year period. 

Total gross investment income was RM67.06 billion in 2021, up 6% from RM63.45 billion

in 2020, “driven by a progressive recovery in the equities market and most asset classes amid the global rebound”.

Overseas investments, which account for 37% of its assets but contributed 56% of overall returns, “were critical contributors to its overall performance”.

The continued market recovery in 2021, particularly in developed markets, provided EPF the opportunity to realise some profits. Equities, particularly foreign-listed equities, continued to be a key driver for returns — delivering RM38.93 billion or 58% of the EPF’s gross investment income last year. In line with the broad recovery in the equities market, the EPF said it only saw the need to write down RM1.15 billion from its listed equity portfolio in 2021, significantly lower than RM7.71 billion in 2020. 

Fixed income, which made up 45% of its investment assets, contributed RM19.5 billion or 29% of the EPF’s gross investment income in 2021. Its real estate and infrastructure portfolio, which accounted for 6% of its asset base but 12% of gross investment income, continued to be a good inflation hedge. Return on investment (ROI) for the segment was 6.53%, 184 basis points above the 4.69% ROI for its fixed-income portfolio.

Conversely, money markets, which account for 5% of investment assets and allow liquidity management, only brought in 1% of gross investment income in 2021.

It is important for the Government not to allow this retirement fund (EPF) be used for “emergency” purposes. Contributors are aware of their obligations and should abide them. Requests for withdrawals to meet emergencies must be met by alternative Government funding under its own loan/grant programme. A dangerous precedent has been set recently with massive withdrawals.

To restore contributors’ funds, many “hair-brained” schemes have been suggested – tiering dividends, taxing the “rich” contributors to subsidise the “poor” and so forth. None of these should be considered. Responsibility and accountability are key to EPF’s survival, otherwise we face massive withdrawals to the detriment of the fund and the nation.

Reference:

EPF declares dividend of 6.10% for 2021, above the pre-pandemic 2019, Cindy Yeap, TheEdge CEO Morning Brief, March 3, 2022

After first net withdrawal in 20 years of RM58b in 2021, EPF vows to go back to rebuilding members’ savings, Adam Aziz, TheEdge CEO Morning Brief, March 3, 2022

Is There No Hope For The Future?

The Johor state elections reflected a sentiment expressed in the Malacca polls. Reforms are not necessary for the future. Money politics, kleptocrats and court clusters are fine with us!

Voter turnout was slightly above 50%. Apathy? Why? A fractured opposition is great for BN. BN promises “stability for the future”.

Source: https://umno-online.my

What about the youth vote? Unimportant, only 20% of total turnout. So who is the opposition? DAP. PKR performed just like in Malacca- badly! It is not the logo, it is not that it is multi-racial, it just has a leader from a previous era! A reformist party that fails to reform. The leader only has one thing to say – “I have the numbers”.

Bersatu or Perikatan Nasional is like a spent mistress. No one believes in them. Not even UMNO. Another going to the grave! Forget about Warisan and Pejuang.

But what motivates the N-Z gang? Both need power to turn their cases to history the “juice of freedom” is more powerful than doing what is right. And sadly they know what it takes!.

There is a whole spectrum of local and national issues to exploit – inequality, religious intolerance, 2nd rate education, floods, corruption and many more! Just focus on what the rakyat need – higher wages, more money transfers, opportunities for employment, healthcare and better delivery of services. Where was data analytics? And Invoke?

Do we have to wait for an UMNO infighting? Are there no leaders/leadership to bring change? Can’t we get a local Zelensky to do it? Unless we do, there is little hope of a change in GE15.

Was Britain Alone in WW2?

The colonial forces that dotted the battle maps of World War II were crucial for the Allies to fill out their ranks and keep up their momentum. While India contributed the largest number of volunteers, at some 2.5 million troops, Africans, Arabs and others fought and died for the freedom of the Allied powers. This is still under the yoke of colonial rule. 

About 15 percent of all the Victoria Crosses — Britain’s highest decoration for valour — awarded during the Second World War went to Indian and Nepalese troops. The honour was bestowed upon service members from other colonies as well. While these colonial forces are often forgotten or overshadowed, they not only helped the Allied powers win their war, they also set in motion events that would eventually lead to some of the colonies’ independence.

Source: https://russellphillips.uk

Despite their sacrifices, these troops were never treated as equals. They were largely under the command of European or American officers, although they were skilled fighters. It was difficult for them to rise up the ranks and become officers. Their compensation was far less than that of their white peers. It worsened if their skin colour was darker.  As poorly as Indian soldiers were treated, their African peers fared far worse.

Their skill on the battlefield helped stoke nationalism at home; however, the colonial forces were in many ways helping Britain maintain its crumbling empire, as it came under onslaught by Japanese, Italian and German forces.

Although the battlefronts of Europe are romanticized in novels, history books and films, much of the war was fought in and over British (and to a lesser extent, French) colonies. In June 1940, the Axis powers launched the North Africa campaign and fighting broke out across Algeria, Morocco, Egypt and Tunisia as they tried to wrest those colonies from British and French rule. Japan snatched up British colonies like Singapore, Malaya and Burma (now Myanmar) and tried to invade India.

It would be the entry of the world’s most vocal supporter of liberty and self-determination, the United States, that would help the Allies restore their momentum and shift the tide against the Axis.

But the alliance between the United States and Britain was forged in tension. Why? Opposing stances on colonialism. While the United States remained on the sidelines for nearly half of the war, its calls to end colonialism irked Britain. The colonies were needed as Britain’s financial reserves were nearly exhausted.

Indians were angry when Britain, which ruled them, declared war on Nazi Germany in 1939 and exploited their resources to support the conflict. Some Indians who were loyal to the raj, fought enthusiastically for the Allies, but the vast majority volunteered because they were offered land, a stable salary and steady meals. Others joined to refine their technical or engineering skills.

In August 1941, Prime Minister Winston Churchill and President Franklin D. Roosevelt signed what became known as the Atlantic Charter, a new vision for the postwar world, highlighting the right of all people to self-determination.  The Atlantic Charter spurred hopes of independence among the British colonies. But a month after the charter was signed, Churchill clarified that the right to self-determination outlined in the document applied only to countries under German occupation.

A significant consequence of the war (WW2) was the rise of independence movement across Asia and Africa. Many gained confidence to end colonialism and had America’s tacit support. So, did Britain fight alone? No, it was the British Empire, be it from Canada, Australia, India or the African states that provided resources and manpower to defeat the Axis powers.

A sad state is when “Remembrance Sunday” is observed, not much credit is given to the colonies who fought alongside the “mother” country. Some of the great battles at Imphal or Kohima are hardly heard in the light of victories at El-Alamein or the European theatre. Why can’t Britain address that?

Reference:

The forgotten colonial forces of World War II, Maria Abi-Habib, Sept 1, 2020

(https://www.nytimes.com)

Oligarchic Economics and Nationalist Populism

 The United States presents itself as the beacon of democracy. This is in contrast to the autocracies of China and Russia. Yet American democracy is in danger of succumbing to the same sort of oligarchic economics and populist nationalism in both these powers.

U.S. Republicans are busily suppressing votes of people of color and paving the way for a possible anti-democratic coup. The national Republican party excuses the attack on the Capitol – calling it “legitimate political discourse”. Representatives Liz Cheney and Adam Kinzinger, are the only two congressional Republicans serving on the panel investigating that attack.

Source: https://www.anews.com

America’s oligarchic wealth, meanwhile, has reached levels rivaling or exceeding those of Russia and China. During the pandemic, America’s 745 billionaires increased their holdings by 70%, adding $2.1tn to their wealth in just over a year.

A portion of this wealth is going into politics. As early as 2012, more than 40% of all money spent in federal elections came from the wealthiest of the wealthiest – not the top 1% or even the top tenth of the 1%, but from the top 1% of the 1%. Peter Thiel, a staunch Trump supporter whose net worth is estimated by Forbes to be $2.6bn, has become one of the Republican party’s largest donors.

Last year, Thiel gave $10m each to the campaigns of two protégés – Blake Masters, who is running for the Senate from Arizona, and JD Vance, from Ohio. Thiel is also backing 12 House candidates, three of whom are running primary challenges to Republicans who voted to impeach Trump for the events of January 6.

The combination of oligarchic wealth and populist nationalism is dangerous for democratic institutions in the US and elsewhere. Capitalism is consistent with democracy only if democracy reduces the inequalities, insecurities, joblessness, and poverty that accompany unbridled profit-seeking.

For the first three decades after the second world war, democracy did this. The US and war-ravaged western Europe built the largest middle classes the world had ever seen.

The arrangement was far from perfect, but with the addition of civil rights and voting rights, subsidized healthcare (in the US, Medicare and Medicaid), and a vast expansion of public education, democracy was on the way to making capitalism work for the vast majority.

Then came a giant U-turn by Ronald Reagan in America and Margaret Thatcher in Europe. Deregulation, privatization, globalization, and the unleashing of finance created the Full Monty: abandoned factories and communities, stagnant wages, widening inequality, a shrinking middle class, political corruption and shredded social support.

The result has been widespread anger and cynicism. Even before the pandemic, most people were working harder than ever but couldn’t get ahead. Their children’s prospects weren’t any better. More than one out of every six American children was impoverished and the typical American family was living from paycheck to paycheck. 

Starting last July, America did an experiment that might have limited these extremes and reduced the lure of nationalism. That’s when 36 million American families began receiving pandemic payments of up to $3,000 per child ($3,600 for each child under six).

But this successful experiment ended abruptly in December when Senator Joe Manchin joined 50 Republican senators in rejecting President Biden’s Build Back Better Act, which would have continued it.

They cited concerns over the experiment’s cost – an estimated $100bn per year, or $1.6tn over 10 years. The cost is also less than the increase in the wealth of America’s 745 billionaires during the pandemic. Why not a wealth tax?

The experiment died because the oligarchy didn’t want to pay for it.

Oligarchic economics coupled with populist nationalism marks the ultimate failure of progressive politics. When the people are no longer defended against the powerful, they look elsewhere for succour.

In Malaysia, the 10% taxpayers substantially foot the bill for Government’s expenditure. The rich (top 1%) in the same light as America have grown in number and wealth during this pandemic. Couldn’t we reform the tax system to make it more egalitarian and reduce inequalities in the system? Otherwise, we will continue to see our Gini coefficient remaining firmly fixed at 0.40.

Reference:

Beware of this deadly mix: oligarchic economics and racist, nationalist populism, Robert Reich, The Guardian (https://www.theguardian.com)

Menara TM for Sale at RM700mil?

The entire Menara TM development in Lembah Pantai is up for sale at a price tag of about RM700 million. The development consists of the 55-storey Menara TM with helipad, an adjacent office building, a 92,431 sq ft convention centre, a multi-purpose hall, a sports complex, clinics and land. The closing date for the first stage of the sale is March 18 at 12 noon.

Source: https://en.wikipedia.org

Shaped to represent a sprouting "bamboo shoot", Menara TM is located along the Federal Highway, Sprint Expressway and Jalan Pantai Baharu. The building was designed by Hijjas Kasturi Associates for Telekom Malaysia Bhd and was constructed between 1998 and 2001 by Daewoo Construction.  It was officially opened by Tun Dr. Mahathir Mohamad on February 11, 2003. 

In 2008, Telekom Malaysia sold Menara TM and it has been occupying the building on a lease arrangement since then. The telco had entered into a conditional sale and purchase agreement and master ijarah agreement with Menara ABS Bhd (MAB) on January 2, 2008 to sell Menara TM, Wisma TM Taman Desa, Cyberjaya Complex and Menara Celcom that involved the issuance of RM1 billion of Islamic asset-backed sukuk Ijarah.  

MAB is a trust-owned special purpose entity sponsored by Telekom Malaysia to facilitate the securitisation of the four properties, via a sale and leaseback or master Ijarah arrangement. 

It issued three classes of sukuk namely Class A totalled RM345 million, Class B RM155 million and Class C totalled RM500 million. 

Media reports had said that institutional investors like the EPF, KWAP and TH were asked to

support the sukuk sale. Under the deal, the iconic Menara TM and three other buildings were used as a “security” for the debt that was raised. Fast forward 13 years later, who would have known that COVID-19 would rear its ugly head. Covid made matters worse to a property industry that is already grappling with an oversupply situation.

TM is the main anchor tenant of Menara TM, occupying 70 percent of the 92,000 sq feet of space spanning 55 floors. It would be able to save on rental costs if it moved out of its own landmark building. It swiftly confirmed this in its statement; it is moving employees to other TM-owned buildings as part of an optimisation programme. Naturally, the institutional investors are unhappy as TM has decided not to re-acquire Menara TM, which is an option under the securitisation deal. This leaves EPF, KWAP and TH in a bind as they need to recover their investment.

It is understood that the EPF, which had over 50% or majority voting rights among the sukukholders, pushed for the sale of Menara TM. However, TH was still trying to convince TM to remain as the anchor tenant and negotiations are still ongoing. 

In years gone by, the investors rallied to TM’s call in its time of need, but the favour was not returned. And now, after two years of lockdown and the new normal of Work-From-Home, Menara TM faces the unenviable task of finding new tenants.

The priority for the EPF, KWAP and TH, which have forked out RM1 billion, is to recoup their investment as it is dutybound to do so to protect its members and depositors.

It is understood that there are already 5 bidders for the landmark with a price tag of RM700

million.

The question is should the properties be sold? Invariably TM will build another HQ in due course with shareholders’ funds or debt. What’s the purpose? Synergy or bringing everyone under “one roof”. It is best for TM to stay and settle outstanding bonds/acquire the building. But will it do that? Not on present sentiments.

References:

Menara TM & nearby assets for sale at RM700m? Shareen Kaur, New Straits Times, Feb 10, 2022 (https://www.nst.com.my)

Menara TM: The real story behind the sale of a landmark building, Zaidi Isham Ismail, DagangNews.com

Trust-owned Menara TM is up for sale, Sulhi Khalid, TheEdgeMarkets, Feb 9, 2022

What’s Behind Facebook’s Plunge in Value of USD232 Billion?

Facebook parent Meta lost more than $232 billion in value on 3 February 2022. That's the biggest one-day drop in value in the history of the U.S. stock market. Meta's plunge, based on a weaker-than-expected revenue forecast, topped the prior record set by Apple, when it lost $182 billion in market value in September 2020. The seven biggest drops in stock market history have all occurred in the last two years, as Apple, Microsoft, Tesla andAmazon have ballooned in valuation. Prior to 2020, the largest drop was from Facebook — a $119 billion decline in 2018. That also occurred after Facebook forecast revenue was below analyst estimates.

Meta's drop in value comes as the company is looking past its current businesses, such as Facebook, Instagram and WhatsApp, and toward the metaverse, a virtual world based on new technology. Chief Executive Officer Mark Zuckerberg announced Wednesday Meta had a net loss of $10 billion in 2021 attributable to Meta's investment in the metaverse.

The following is a chart of the largest one-day valuation drops in U.S. stock market history since July 2018:

Other reasons cited for the huge one-day drop include:

• Challenges to its core advertising business;

• Decline of Facebook activity by users in the U.S. and Canada; and

• Young people are less likely to be use Facebook

Meta’s lost market value is more than total market capitalisation of companies like Oracle and Cisco. Mark Zuckerberg’s personal loss was more than USD30 billion.

The wild swings on prices could be the early signs of a major market correction (or collapse) but Meta for now looks like a value stock then a growth stock!

Reference:

Facebook’s $232 billion fall sets record for largest one-day value drop in stock market history, Alex Sherman, CNBC, Feb 3, 2022 (https://www.cnbc.com)

Office Space: Is There an Oversupply in KL/Klang Valley?

The Klang Valley office market is in a state of oversupply. The pandemic has made it worse. But landlords have been trying to get creative to maximise the value of their assets.

CBRE|WTW in its 2022 Market Outlook Report says the Klang Valley office sector is a tenants’ market, with landlords focusing on tenant retention via cost-cutting, asset enhancement and leasing strategies. Companies are benefitting from the current market to secure more favourable leasing terms. Landlords are enhancing building specs and offering more flexible leasing arrangements to drive or retain the occupancy.

According to Knight Frank Research, the average rental rate of office space in the Kuala Lumpur City (KL City) area retreated to RM6.79 per sq ft per month in the second half of 2021 (compared with RM6.87 in the first half), as the pandemic continued to impact the economy and businesses.

Similar to KL City, Knight Frank Research says the average office rent within the KL fringe area in the second half of 2021 was also lower at RM5.60 per sq ft per month (compared with RM5.69 per sq ft during the first half of the year).

In Selangor, it declined marginally to RM4.10 per sq ft per month during the period under review (from RM4.15 per sq ft per month in the first half).

During the review period, Knight Frank Research says asking rents of Prime A+ and Grade A office space within the KL City area ranged from RM5 per sq ft to RM12 per sq ft per month, depending on location. Within the new central business district (CBD), rentals ranged between RM7 per sq ft and RM12 per sq ft per month, while in the old CBD, it ranged from RM5 per sq ft to RM6.50 per sq ft per month.

According to Knight Frank Research in its Real Estate Highlights for the second half of 2021, the cumulative supply of office space in Klang Valley stood at around 112.6 million sq ft during the period under review, following the completions of Plaza Conlay@Conlay 301 and Imazium@Uptown in Selangor.

It adds that there are nine office buildings scheduled for completion by the first half of 2022, with five located in KL City and two each within the KL fringe area and Selangor. Upcoming completions in KL City are Menara Affin, PNB 1194, The Stride@Bukit Bintang City Centre (BBCC), Merdeka 118 Tower and UOB Tower 2.

In the KL fringe area, the upcoming buildings are The MET Corporate Towers and Aspire Tower. The impending completions in Selangor are Empire City Block J and Block G. Collectively, these completions will add around 5.2 million sq ft of space to Klang Valley’s existing cumulative office stock.

Amid growing challenges in the office market, Knight Frank Research says the overall occupancy rate of purpose-built office space in the KL City area dipped further to record at 65.5% during the second half of 2021. Similarly, the occupational demand in Selangor was also under pressure at 74.2%, compared with 75.8% in the first half of last year. Meanwhile, the overall occupancy rate within the KL fringe area remained resilient during the review period at 86.1%, compared with 85.9% in the first half of 2021.

Setting new benchmarks in sustainability, Knight Frank Research says the Merdeka 118 tower will be the first building in the country to earn platinum rating with international sustainability certification. “The tower includes 1.7 million sq ft of net lettable area of premium Grade A rentable office space, while the top 17 floors will house the first and only Park Hyatt Hotel in Malaysia. Knight Frank Research notes that the Merdeka 118 tower, which is 85% completed, is on track for completion by this year.

With the onset of the pandemic, CBRE|WTW says the movement control order in June last year prolonged companies’ work-from-home (WFH) arrangements and delayed the return to offices. Depending on the nature of work, CBRE|WTW says most organisations are likely to adopt a hybrid working mode.

Another notable trend is the conversion of office buildings into hotels as an alternative way to maximise asset value.

Many factors are at play in development of office space – general market conditions, flow of foreign direct investment, demand for office space, attitudes towards work in a confined space, travel time and amenities provided (gym, restaurants, newsstands etc). The best approach is to hedge “bets” with office space, hotel and other services in a building that straddles a transport hub?

Reference:

Landlords maximising value amid Covid and oversupply, Eugene Mahalingam, The Star, 

19 Feb 2022

Are We “Shameless” Malaysians?

In an article by JD Lovrenciear in Aliran (24 Feb 2022) a similar topic as above was posted. As he sees it, shame can be best described as a painful feeling of humiliation or distress caused by the consciousness of wrong or foolish behaviour. Shame manifests human thinking and a feeling of deep regret over a situation or action.

All major religions provide immense teachings and emphasis on shame. Voluminous psychological studies are on shame abound. Philosophers have also expressed their thoughts on this emotion throughout human civilisation.

Source: https://www.gottman.com

With the 1MDB case panning-out in a New York courtroom, we may have a sense of shame. But its true meaning is lost in Malaysia. Many are not ashamed of the sordid details spewed out in the courtroom. They are not ashamed that someone who was already convicted in our own court remains free “pending appeal”.

They are not even ashamed to parade with pride in large gatherings and chant, “Malu apa, bossku?!” (What’s there to be ashamed of, boss).

They are not ashamed that there is still one person at large, whom the authorities are helplessly unable to extradite and bring back to Malaysia to be tried.

Not just that. They are not ashamed that prestigious titles given out in good faith and with dignity and honour are not withdrawn, when the whole world knows the sins of the personalities associated with the 1MDB sovereign fund debacle.

Malaysian businesses are not ashamed when they are punished severely by foreign authorities for violating human rights and flouting rules against forced labour.  They deny first, accept under duress and re-dress when given little choice.

Some top civil servants have hit the headlines for questionable conduct. But, to them, the public shaming is often like water off a duck’s back. We have heard about cartel operatives within our police force. We have also heard about court clusters in the country. We have the top graft buster busted from charges. Where is the sense of shame?

The ultimate shame is that these sins of commission and omission and the mismanagement of the country’s wealth have resulted in a colossal loss for the people of Malaysia.

The obvious failure in stopping the rape of natural forest reserves and its plunder provide a clear barometer of the levels of shamelessness that have taken root – from the highest authority to greedy business tycoons acting with impunity. The ‘elite’ have lost their moral compass and behave like Vikings.

Our national shamelessness is also on display when many of us throw up our hands up and say, “What can we do lah?”

When shame has left the nation, we have sold the nation’s soul. When shame is no more a vital consideration to measure our progress and successes, we have pawned the country into a vulnerable spot that makes it easy meat for rogue nations to exploit. So, it was for Ukraine, corrupt to the core.

The question is, why are we increasingly becoming shameless?

We hear of many leaders elsewhere who resigned on their own volition to register their sense of shame and to save their respective nations from being shamed. But no more in Britain, with Boris hanging on despite parties during lockdown.

We hear of corporate magnates confessing and regretting their shameful actions in many places around the world and even stepping down from their positions. May be true in Japan or South Korea but not in Malaysia.

Do we have no sense of shame? Do we no longer fear God? Are we numb to those who commit crimes and get away scot-free? What can we do lah?

We can pray for righteous people rising to take the country forward. We can express our disgust in social media (or other medium). We can act to restore “Dignity, Integrity and Remorsefulness” by observing a day of fasting and prayer? We could get our religious leaders (and others) to organise a peaceful gathering to raise consciousness and change the current malaise? This has to be a “grass-root” movement not from the current leadership/elite who are mired in controversy.

Reference:

1MDB and beyond: When shame has lost its meaning in Malaysia, JD Lovrenciear, Aliran, 24 Feb 2022