Where is MAVCOM?

Despite the great hue and cry surrounding AirAsia’s refunding policy, especially for abrupt flight delays or even uncompensated cancellations, it seems that investors are least perturbed. 

Easing jet fuel prices coupled with higher fares and more aircraft having returned to service will culminate in Capital A Bhd – operator of the AirAsia fleet and sister airline to long-haul AirAsia X Bhd – to break even some time in 3Q 2023.

FocusM highlighted how a Malaysian couple was forced to tap their Amanah Saham Bumiputera (ASB) savings to cover their living expenses after being left stranded for five days in Melbourne following an AirAsia X’s flight cancellation on Jan 2 prior to their flight home was resumed on Jan 6. Their ordeal did not end there as they only had one meal daily on Jan 1 and 2.

Source: https://www.airasia.com

Mavcom data published in September showed that the most complaints from passengers from January to June 2022 were against AirAsia. A total of 527 complaints (42.1%) were made against the budget airline, followed by 40.7% against Malaysia Airlines. Batik Air received 99 complaints or 7.9%.

Some AirAsia passengers, including from overseas, asked why the Transport Minister had not taken the opportunity to address the issue of flight delays, cancellations and problems with refunds reported since 2020. Some were surprised to see Loke being firm with Batik Air when he had not taken the same approach to AirAsia. 

From a personal perspective, AirAsia in the early days used to compensate for flight delays. I did receive some compensation after an impassioned letter explaining a 12-hour delay I and family had on my return flight from Langkawi. Those days AirAsia did not have enough aircraft. Now it may not have the crew to fly the aircrafts after Covid. Nevertheless, MAVCOM has a duty to resolve disputes and seek settlement form the airline concerned. Ryanair is not a model for any Asian airline to follow!

References:

Passengers crying foul on AirAsia’s refunding, flight cancellation has no bearing on share price prospect, Focus Malaysia, 9 Jan 2023

What about AirAsia, Loke asked after Batik Air rebuke, Azzman Abdul Jamal, MalaysiaNow, 29 Dec 2022

PM’s 7-Point Plan?

The Prime Minister wants to win more people to his side, he needs to show real improvements in several key areas within the next six months. It is not enough to battle corruption. Many want to see how their lives will be improved. Although it will take longer than six months to bring about a real improvement, the government must do some key changes within the next six months.

Several key areas that have a direct impact on people’s lives: food prices; the quality of national schools and public hospitals; public transport; the cleanliness of markets, streets and parks; the experience at key government departments which the public use; transparency and accountability of the police force; and treatment of refugees and stateless people

Source:https://upload.wikimedia.org

1. Control prices of essential items

The authorities must do more to monitor unreasonable price increases and reduce supply constraints. Cartels and monopolies that have been profiteering from essential items need to be dismantled.

We must support farmers and fisherfolk. Rezoning agricultural land to ‘mixed development’ and carrying out land reclamation in prime fishing waters will only undermine food security. Promote cooperatives and fortify existing cooperatives so that low-income citizens can enjoy the benefits.

2. Improve quality of public schools

The government should act fast to improve the infrastructure of our public schools. Smaller classrooms, more dedicated teachers and teaching assistants, less paperwork will raise quality. Strive for 2 or 3 languages and mathematics as core subjects.

The government should also ensure inclusivity and non-discrimination, especially in schools, universities and other public services. We need every child and adult to feel they are part of this nation.

3. Improve public hospitals

The public healthcare budget has to increase from 2% to 4% to immediately. The number of doctors and specialists in government hospitals and clinics has to be increased. New equipment and reduced waiting time will improve outcome for the ordinary person. A people-focused government will improve service for the common man.

4. Expand public transport

To encourage more people to switch from cars to public transport, reliability of service is key. More buses with higher frequency of bus services will improve first and last-mile connectivity. KTM Komuter trains need a revamp to reduce waiting times. Upgrade and improve the railway stations at key stops. 

The government should strive to have a fare-box ratio of 1.0 or above for buses, trains and other public transport services. 

5. Improve amenities and services

Local councils need to focus on cleanliness of parks and beaches and public markets. Enforcement of fines for litterbugs, reduce uneven pavements and remove potholes on local roads are ways to win “hearts and minds” of the people.

All public counters manned by government servants must be mindful of waiting times. There are only 2-3 ways to solve that – technology, hire more public servants or change the process.

Some of the above steps cannot be done in six months but moving in the right direction is a giant step. Show people that things are improving. Then look at affordable housing – which impacts the B40 group. 

It is good for ministers to use public services and see for themselves the problems faced by the ordinary citizen. This has to be incognito not with an entourage and “kompang”.

One quick way to improve public services, especially public education and healthcare, is for the PM to instruct all cabinet ministers to use general hospitals for their medical care, to send their children to national schools and to take public transport to work at least once a week.

6. Transparency/Accountability of the authorities

There are many cases of deaths in lock-ups, missing persons, abuse of remand prisoners and the general lack of discipline in the police, immigration or other government agencies. There is no check and balance. A full fledged independent commission is long overdue. What has happened to the Pastor Raymond Koh, Hilmi, Ruth, Amri and others? And those who died in custody?

7. Treatment of stateless persons/refugees

There is growing disquiet about grievances people face in detention camps. They face horrific conditions with no hope of release. Why can’t we treat these unfortunate people better and provide avenues/alternatives – including working in Malaysia?

If the PM and his team can go beyond optics and make real changes, many will follow a winning bandwagon, especially when elections are due in six states later this year.

Reference:

To win over fence-sitters, Anwar must quickly improve five areas, Anil Netto, ALIRAN, 11 Jan 2023

Serba Dinamik: Is It All Greed?

On January 10, 2023 the High Court granted a petition by six financial institutions to wind up Serba Dinamik Holdings Bhd, and its three units – Serba Dinamik International Ltd (SDIL), Serba Dinamik Sdn Bhd and Serba Dinamik Group Bhd – over debts totalling about RM5 billion.

According to a report by The Edge, judicial commissioner Ahmad Murad Abdul Aziz allowed a petition filed by Standard Chartered Saadiq Bhd, HSBC Amanah Malaysia Bhd, AmBank Islamic Bhd, MIDF Amanah Investment Bank Bhd, United Overseas Bank (Malaysia) Bhd, and Bank Islam Malaysia Bhd, and granted an order to wind up the four companies.

Source: https://www.freemalaysiatoday.com

Upon being wound up, the companies will be placed under a liquidator, Victor Saw, from PricewaterhouseCoopers (PwC).

An application by the companies to postpone the hearing was heard after a legal representative of Efire Capital Holdings Ltd, an Abu Dhabi company that is a 50% joint venture between SDIL and another Abu Dhabi firm — argued that Efire Capital should be allowed to sell its assets first to help repay the debt.

 Efire Capital wanted one to 1.5 months to dispose of the assets to help pay off some of the debts before the winding-up, as it would be harder to sell the assets at a better price after the winding-up. However, the application to adjourn was objected to by Jeyanthini Kannaperan, who represented the syndicated lenders, Benjamin Dawson, representing the bilateral lenders in HSBC Amanah and HSBC Bank, and Karen Tan, who appeared for Hong Leong Islamic Bank.

Previously, the four companies had offered to pay 15% of their debts to the local lenders by Aug 31 2022, and the remaining amount by end of 2022, but had failed to do so.

This is a case of a group of companies which has the largest debt owing in the insolvency court, and does not have a credible restructuring plan. It owes RM1.7 billion to the syndicated lenders, it owes another US$500 million (RM2.18 billion) to the sukuk lenders, RM250 million to Hong Leong Islamic, and to another RM70 million.

Serba Dinamik’s shares on Bursa Malaysia was suspended recently after it failed to submit its annual report for the financial year ended June 2022. It also fell into the Practice Note 17 (PN17) category, issued by Bursa Malaysia in relation to listed companies that are in financial distress.

Established in 1993, Serba Dinamik is an international energy services group providing integrated engineering solutions to the oil and gas, petrochemical, power generation, water and wastewater, and utilities sectors.

Datuk Abdul Karim is now presumed to be residing in Dubai. The Kuala Lumpur Sessions Court had on May 13 2022 freed Karim and three senior officers on charges of submitting a false statement to Bursa Malaysia in 2021 after having imposed compounds amounting to RM16 mil against them.

Deeming Serba Dinamik as “turkey of the year”, theedgemarkets.com has summed up Serba Dinamik’s fall from grace where its market capitalisation today is only worth RM37 mil in stark contrast to a valuation of RM6 billion before accounting issues cropped up in May 2021.

With Serba Dinamik’s stock now suspended and trading at one sen, it is likely that the company will soon be off the radar and forgotten, but it leaves behind a dangerous precedent. The key point how did the lenders fork-out a total of RM5 bil when they have Risk Departments and Market Intelligence or Client Coverage Units. The cycle repeats because of greed by the owners/management, bankers and greed by other vendors/professionals. I know that it is not that simple but the essence of it all is GREED!

References:

Court winds up Serba Dinamik, 3 subsidiaries over RM5bil debt, FMT Business, 10 Jan 2023

Is karim in Dubai as his once high flying Serba Dinamik becomes a worthless stock? Focus Malaysia, 11 Jan 2023

Corporate Malaysia: Moderate Earnings Growth in 4Q22?

Stocks are riding a tentative recovery. The local benchmark index FBM KLCI raising the curtain to a new year. But whether the index could keep up the good momentum will depend on how the upcoming fourth quarter (4Q) corporate earnings season will turn out.

According to Maybank Investment Bank Bhd, in the first nine months of 2022, core profit among companies rose 11% year-on-year (y-o-y) with strong reopening-driven growth recorded in the property (+106%), consumer (+69%), and auto (+35%) sectors, real estate investment trusts (REITs, +56%), as well as construction and infrastructure (+61%) counters.

Meanwhile, big-cap sectors such as banks (+5%), plantation (+14%) and telecommunications (+6%) also showed good traction, despite the Cukai Makmur dragging companies that fall under these sectors.

Geopolitical tensions, poor weather, foreign workers shortage and export restrictions in 2022 continue to weigh on plantation companies. Corporate earnings are likely to be mixed for the oil and gas (O&G) sector. The sector has enjoyed high profits during the first half of 2022 in line with higher crude oil prices.

The semiconductor and technology sectors are expected to continue to see slower growth in earnings during  4Q as demand from advanced economies have slowed.

The main challenges are labour and material shortages, demand uncertainties, and geopolitical tensions. Overall, the sector is still clouded by weakening demand for consumer products — as people have been affected by spiking and rampant inflation, geopolitical tensions, and the impact of China’s lockdowns and weaknesses in Europe.

In the healthcare sector, glove manufacturers will likely continue to report dismal earnings as a result of industry-wide oversupply. The oversupply situation is unlikely to be resolved in the short-term. However, healthcare businesses that focus on hospitals are likely to benefit from the rebound in domestic mobility.

The key is to remain cautious for six months forward. Uncertainties still abound and no one can see how 2023 will pan-out.

Reference:

Corporate Malaysia to see moderate earnings growth in 4Q22, Priyatharisiny Vasu, theEdgemarkets.com, 23/1/23

Malaysia’s GDP Growth at Moderate 4% in 2023

After the strong rebound in 2022, the World Bank sees growth in Malaysia, the Philippines, and Vietnam moderating as the growth of exports to major markets slows. In the Bank’s latest Global Economic Prospects report released on Tuesday, Jan 10, growth is projected at 4% in Malaysia, 5.4% in the Philippines, and 6.3% in Vietnam. It said that in Indonesia, GDP is projected to grow by 4.9% on average in 2023-24, only slightly slower than in 2022, reflecting softening but still robust private spending.

The World Bank said that after a strong rebound in 2021, growth in the East Asia and Pacific (EAP) region slowed markedly in 2022 to an estimated 3.2%, 1.2 percentage point below previous forecasts.

Source: https://www.financialexpress.com

It said the slowdown was almost entirely due to China (which accounts for about 85% of the region’s GDP), where growth slowed sharply to 2.7%, 1.6 percentage points lower than projected in June. The bank said the country faced recurrent Covid-19 outbreaks and mobility restrictions, unprecedented droughts, and prolonged stress in the property sector, all of which restrained consumption, food and energy production, and residential investment. Fiscal and monetary policy support for domestic demand and an easing of restrictions on the real estate sector have only partially offset these headwinds.

In the region excluding China, the pace of growth more than doubled, rising to 5.6% in 2022. The report said activity was supported by a release of pent-up demand as many countries continued to lift pandemic-related mobility restrictions and travel bans. Growth in the region excluding China in 2022 was 0.8 percentage point above the June forecast, reflecting upgrades for Malaysia, the Philippines, Thailand, and Vietnam, most of which also benefited from a strong rebound of goods exports. The World Bank also said consumer price inflation increased across the region in 2022.

Growth in the EAP region is projected to firm to 4.3% in 2023 as easing of pandemic-related restrictions allows activity in China to gradually recover. These projections are below those of last June, where regional growth was expected to surpass 5% in 2023-24. The downward revisions are broad-based and reflect Covid-related disruptions and protracted weakness in the real estate sector in China and weaker-than-expected goods export growth across the region. Inflation is also expected to ease somewhat after peaking in 2022.

It is expected that global GDP growth is only 1.7% in 2023.  This is the slowest pace outside the 2009 and 2020 recessions and since 1993. In its previous Global Economic Prospects report (June 2022), the bank had forecast 2023 global growth at 3%.

Global growth in 2024 is expected to pick up to 2.7% — below the 2.9% estimate for 2022 — and average growth for the 2020-2024 period would be under 2% — the slowest five-year pace since 1960.

Nevertheless, the new Unity Government and the Economics Minister in particular must draw-up good plans to meet the headwinds already expected – some of which are our own creation. Reduce labour shortage, improve exchange rate, reduce red tapes for FDIs and DDIs and increase food supply/security are some of the key measures to overcome possible negative developments in the global economy.

Reference:

Malaysia’s GDP growth to moderate to 4% in 2023, says World Bank, Surin Murugiah, theEdgemarkets.com, 12/1/23

Happy Chinese New Year

 

What Are U.K.’s Economic Problems?

In recent decades, the UK’s GDP growth averaged between the US and the eurozone. But that has changed.  Britain’s post-pandemic recovery has been notably weak.

The UK is now in recession. Britain’s output already shrank by 0.2% in the three months to September. That compares with 0.2% growth in the eurozone, with France and Germany’s output growing by 0.2% and 0.3% respectively. In the US, the economy grew by 0.6% in the same period.

The UK will only return to its pre-pandemic growth level by the end of 2024. Total economic output in the UK was still 0.4% lower than pre-pandemic by the end of September.

 The US economy, by contrast, is already 4.2% above its pre-pandemic level, while eurozone GDP is 2.1% higher relative to the end of 2019.

The UK labour market is “incredibly tight” compared with many of its international counterparts. Having fewer workers to spare may fan the flames of inflation, as employers increase wages to attract and retain staff. But there is another problem in Britain: people of working age falling out of the labour market. And Brexit doesn’t help!

The UK’s latest data for the three months to September showed 3.6% unemployment. It is set to peak at 5% in 2024, according to the International Monetary Fund’s October forecast. This is just under the 5.4% predicted for the US, and lower than expectations for France, Italy and Canada, but higher than the 3.2% expected in Germany.

The inflation game has fundamentally changed. The latest figures show inflation reached a 41-year high to 11.1% in October 2022. Inflation was 10.6% for the eurozone.

Most big central banks are raising interest rates in order to combat global inflationary pressures as Russia’s war in Ukraine has disrupted energy markets, and following the Covid-19 pandemic. Yet while some economists expect the Bank of England to hike its base rate, which feeds through to mortgages to 4% next year, the European Central Bank is set to raise its key deposit rate to only about 2.5%.

The UK is roughly in the middle of the pack if you compare productivity growth to other major economies from 2011 to 2019. This is a measure of the output of a worker per hour. It’s a form of growth that does not drive up inflation, and therefore a top aim for policymakers. The UK’s productivity rose 0.7% from 2011-19, the same as France and Germany, and ahead of Japan at 0.4%, but slightly lower than the US and Spain at 0.8% and 0.9% respectively. But a big driver of sluggish productivity growth has been the catch-22 of the need to boost growth with bold spending commitments. That the U.K. cannot do  because it will rile the markets.

The U.K. under Tories (over 12 years) have seen a drop in the standard of living and an increase in the cost of living. Wage rates have been compressed because of the fallacy that it may accelerate inflation. Wage earners have suffered during Covid-19 with a wage freeze. Now many face double digit inflation. Rishi Sunak has to address wage increases to manageable levels of 5-8% or face continuing industrial action by almost all sectors of the economy. The Tories can’t be right if everyone is suffering! The rich and those businesses making bumper profits must be subject to windfall/higher graduated tax to finance any wage increase. Othewise, it is gloom and doom – and you can have Liz Truss back to bury the U.K. for good!

Reference:

How Britain’s economic woes stack up against Europe’s – a close look at the figures, Anna Isaac, The Observer, 19 November 2022

Poor Attitudes and Habits Will Cost Us!

The Prime Minister (Anwar Ibrahim) called for professionalism and honesty in the single largest workforce, the civil service.  What is stunting and crippling us is the lack of the ‘big A’ factor, ie poor attitudes. Poor attitudes have made us less competitive in so many ways compared to our neighbours – and in the global marketplace. 

Tax and petroleum revenue have been used to finance the building of first world infrastructure, ranging from skyscrapers and modern transport infrastructure to a new administrative capital. 

Source: https://www.b-x.com.au

But aside from an entrenched culture of corruption, poor attitudes are hindering us from becoming one of the most successful financial, economic and cultural hubs in the region. 

Even tourism has suffered. Despite the modern infrastructure and the resorts that have been developed all over the country, many are impacted by poor maintenance. Our Transport Minister  has pointed out how Malaysia, despite all its modern infrastructure, is suffering from a ‘third world’ maintenance culture.  Look at our MRT trains breaking down. These are new trains. Commuters were confused why trains malfunctioned on all lines.

To reshape our future might prove to be a challenging task, given such poor attitudes towards maintenance, accountability and long-term business sustainability. It will require a ‘reform-driven’ revolution to change public attitudes. It is not SOP but attitude. You can have a brilliant SOP but poor attitude will result in a building or asset falling into disrepair. You can have a sub-standard SOP but great attitude will result in good maintenance culture. It is not SOP or system but people that make the difference! Look at Japan or other more developed nations, attitudes keep buildings or assets in top condition. At the recent World Cup in Qatar, the Japanese spectators were cleaning-up the stadium. No coercion, no green wave from PAS, no monetary benefit or religious doctrine, they did it voluntarily and with cheerfulness. But in Malaysia, we rather have the poor Bangladeshi worker pick-up our misdemeanours.

Reference:

Poor attitudes and habits costing Malaysia dearly, JD Lovrenciear, ALIRAN, 16 Dec 2022

How High Should Interest Rates Be?

As can be seen from Chart 1, from the 75 basis points (bps) hike by the Bank of Thailand to the 425 bps hike by the US Federal Reserve (Fed), the year 2022 has certainly been a busy year for central banks.

To fend off inflationary pressure that has been persistent throughout the year, central banks had to hike rates. The Bank of Japan, while not lifting key benchmark rate, allowed its 10-year Japanese government bonds to move 50 bps from its 0% target, instead of 25 bps earlier. It is a move that is seen recognising that inflation is finally biting the Japanese too.

Understanding inflationary pressures and forecasting where it is going is not an easy task. Inflation is a combination of many factors and not just commodity prices and supply chain disruption. Although the global economic momentum has eased, global aggregate demand is still rising and is much higher than it was before the pandemic.

In theory, inflation is tamed by using monetary tightening measures. Essentially, raising interest rates. This impacts consumers and businesses with higher borrowing costs, resulting in lower consumption as well as a slower pace of investments, which in turn will reduce aggregate demand. Nevertheless, rate hikes have also other consequential impacts on the economy in the form of a weaker or a stronger currency.

For example, for the United States, the relentless increase by the Fed has caused a significant rally in the US Dollar Index, which rose to a high of US$114 (RM501) last year, up almost 20%, before easing to close the year at US$103 (RM454), down 9.3% from its peak, but still higher by more than 8%. The surge in the dollar made US imports cheaper from the rest of the world, in particular those from China, even cheaper, which allows the US retail prices at the store to be relatively lower than they used to be before the rally in the dollar.

In essence, while the surge in US interest rates has reduced disposable income due to higher borrowing costs, which in turn lowered consumer demand, it has also caused imported end product prices to be relatively cheaper than before, allowing aggregate prices to be lower as well.

Compared to many central banks in the region or globally, Bank Negara moved to raise the benchmark Overnight Policy Rate (OPR) by 100 bps in 2022. This is a rather muted reaction.

Based on the year-to-date core CPI of 2.9% up to November 2022, the inflationary pressure experienced by Malaysia is not within Bank Negara’s forecast of between 2% to 3% for the year and going into 2023. Core inflation will remain elevated at the beginning of the year but may ease later on.

Bank Negara may leave the OPR unchanged for 2023 at 2.75%. After all, a higher rate of between 25 bps to 50 bps as predicted by many will only result in higher borrowing costs for consumers and businesses, which may accelerate the pace of economic slowdown in 2023. By leaving the OPR unchanged, Bank Negara is signalling that it is done with raising rates.

One of the arguments for higher interest rates is whether depositors are getting positive real returns, which is the difference between fixed deposit rates and inflation. Chart 2 shows that based on November 2022 statistics, the depositors are at the losing end as the 12-month deposit rate was 132 bps lower than the monthly inflation print of 4%.

Many have priced in the scenario that the central bank will raise rates by 50 bps to take the benchmark OPR to 3.25%, the level last seen in March 2019, almost four years ago. That’s before Covid!

The upshot of all this is what is fair to depositors and what is acceptable to borrowers. Without borrowers/consumers economic activity is dampened and hence growth. Without depositors, banks may become illiquid. From a consumer’s point of view, interest on deposits should exceed core inflation of say about 3%. From a borrower’s point of view, the market lending rate for an SME should not exceed 6% p.a. Otherwise, growth is hampered. Here lies the dilemma for BNM.

Reference:

How high is high? Pankaj C Kumar, The Star, 7 Jan 2023

Is Malaysia’s Population Stagnant?

The Department of Statistics tells us that the total population of Malaysia in 2022 inched up to 32.7 million from 32.6 million in 2021, for an annual population growth of only 0.2%. The decline in population growth rate was because of “the lower number of non-citizens from 2.6 million (2021) to 2.4 million (2022)”.

That masks the key factor behind this falling growth rate: the total fertility rate in Malaysia has plunged from 6.7 births per woman in her lifetime in 1957 to just 1.7 in 2021 – below the population replacement rate of 2.1.

Penang’s population actually slid from 1.7404 million in 2020 to 1.74 million in 2021 and was expected to shrink by 0.1% to 1.7386 million in 2022. That is not surprising given that the fertility rate for the state has been following over the years to now only 1.3 – a drop that is even more pronounced than the national rates. It is unlikely that the Penang population will soar to meet an earlier inflated population estimate of 2.45 million by 2030, including 300,000 expected to settle on three artificial islands off southern Penang Island.

More people live on mainland Penang, which has 947,400 people, than on Penang Island, which has 791,200 people, down from 794,313 in 2020. This 791,200 is well short of the draft Penang Island local plan’s projection of 1.033 million by 2030.

The more stringent MM2H eligibility criteria, such as having an offshore income of at least RM40,000 per month, a fixed deposit of RM1m, and liquid assets worth at least RM1.5m will deter retirees from coming to Malaysia.

The declining fertility rates and almost stagnant population have profound implications for housing, education, healthcare, mobility planning and elderly care as the population ages at both the national and state levels. 

Meanwhile, the last census in 2020 revealed that the average size of families in Malaysia has shrunk to 3.8 per household from 4.2 in 2010, even though the number of households rose from 6.4 million to 8.4 million. This rise in households is probably due to rural-urban migration. Some 75.1% of the people now live in urban areas compared to 70.9% in 2010.

Despite the higher number of households in the country, the population of Kuala Lumpur has also shrunk by 1%. Perhaps, like in Penang, people are also finding city housing expensive and are moving to the suburbs?

With the country’s population barely rising, we need to re-examine our economic model, to reduce inequalities and make development more sustainable. So the government should build more affordable homes, encourage house owners to rent out unoccupied property, improve public transport, raise the standard of public hospitals and national schools, and increase food self-sufficiency rather than focus on infrastructure.

Reference:

Is Malaysia’s Population Stagnant? Anil Netto, ALIRAN, 6 Jan 2023

A Green Wave That Needs To Be Stopped!

The green wave unleashed by Perikatan Nasional (PN) intends to get the support of the Malays as much as possible. Pakatan Harapan (PH) and other fraternal political parties must counter this. 

Good governance is not sufficient to counter the untruths and lies perpetrated by PN. The unscrupulous methods of PN in getting the support of Malay Muslims by virtually inventing lies and half truths about PH and others are shameful. If the phenomenon of green wave depends entirely on smearing others – both non-Muslims and Muslims alike – then one can speculate on the longevity of the phenomenon itself.

Source: https://www.malaysia-today.net

More than this, the green wave seems devoid of understanding of the multi-racial and multi-religious character of the country. It merely caters for the particular toxic version of PAS’ political ideology. They are most welcome to go to Pakistan, Afghanistan or Iran.

The newly elected MP Fawwaz Mohamad Jan of the parliamentary constituency of Permatang Pauh, marched with his army of PAS supporters into a shopping mall in mainland Penang’s Seberang Jaya to stop the promotion of alcohol in conjunction with Chinese New Year.

There was no necessity on the part of Fawwaz to march into the mall (with a group of his supporters) to stop the promotion of alcohol. Promotion and sales of alcohol might be offensive to Muslims, but this was meant for the non-Muslims. There was nothing strange or extraordinary about the event itself.

Why lead a group of PAS supporters in demanding the mall management to desist in promotion of alcohol sales? What was done by the mall management was within the ambit of local government rules and regulations. If this was done illegally, Fawwaz had the right to complain to the Sebarang Perai local council (MBSP).

The action by Fawwaz was subsequently uploaded in the social media particularly Tik Tok – the favourite social media platform used by PAS. It is evidently clear that the first-term MP Fawwaz wanted to show his heroism against the promotion of alcohol to push the limits of the green wave.

Isn’t there a better way of promoting PAS? Are non-Muslims the target of PAS’ green wave? There are so many people-related issues in the parliamentary constituency of Permatang Pauh but these are not touched at all by Fawwaz.

Why target the non-Muslims on the matter of promotion of alcohol? Is PAS the undisputed moral guardian of society? Where will it stop? Dress code? Gaming? No Bikinis on beaches?  How about Jakim given powers to enforce moral or sensitive matters? There are serious issues of corruption, quality of service and helping the poor in this cost of living crisis but PN or PAS are busy on non-issues. We will dissipate our resources chasing after the insignificant.

God doesn’t need any help on morality – He sees your heart and knows whether you have lusted, cursed or murdered someone in you heart. Only man judges by outward appearance. So please put a stop to this army of “green” vigilantes lusting for power in the name of God!

Reference:

Pushing for alcohol sale ban is only tip of PAS’ green wave ideology to conquer Penang, Prof. Ramasamy Palanisamy, Focus Malaysia, 11 Jan 2023

Netherlands: A Small Country, A Major Food Exporter

More than two decades ago, the rallying cry in Netherlands was “produce twice as much food using half as many resources”. It is the world’s second largest exporter of agricultural products by value after the United States. The Dutch pioneered on cell-cultured meat, vertical farming, seed technology and robotics in milking and harvesting. Fifteen out of the top 20 largest agrifood businesses have their major research and development centres in the Netherlands. These include Nestle, Coca-Cola, Unilever, Cargill and Kraft Heinze.

Source: https://cdn.britannica.com

The Netherlands produces 4 million cows, 13 million pigs and 104 million chickens annually and is Europe’s biggest meat exporter. But it also provides vegetables for much of Western Europe. The country has nearly 24,000 acres — almost twice the size of Manhattan — of crops growing in greenhouses. These greenhouses, with less fertilizer and water, can grow in a single acre what would take 10 acres of traditional dirt farming to achieve. Dutch farms use only a half-gallon of water to grow about a pound of tomatoes, while the global average is more than 28 gallons.

More than half of the land in the Netherlands is used for agriculture. The Dutch often say their singular focus on food production is born of the harrowing famine the country experienced during World War II. But it could be argued that the preoccupation with food began in the 17th century, when the Dutch were at the centre of the global spice trade.

Surely, we have enough examples from Denmark, Netherlands, Thailand or Singapore to learn and adapt to our needs? Instead of doing another “lawatan sambil belajar”, we could secure services of key people to transform some places into “Agrocities” of the future and become a net food exporter and thereby control imported inflation.

Reference:

Cutting-edge tech made this tiny country a major exporter of food, Laura Reiley, Washington Post, 21 Nov 2022

Should Dubai’s Progressive Policy Be Emulated?

Dubai has suspended a tax of 30% on alcohol and dropped a licence fee previously needed to buy alcohol in the commercial and tourism hub. The move is expected to further boost the appeal of Dubai to tourists and expatriate residents drawn by its more liberal lifestyle, compared to other Gulf cities. The changes took effect for a trial period of a year. But prices would remain subject to a 5% value added tax (VAT).

Dubai's economy has rebounded swiftly from the COVID-19 pandemic, with GDP growing 4.6% on the year for the first nine months of 2022. Tourism is a key pillar of the economy, and tourist numbers grew more than 180% in the first half of 2022 over the corresponding 2021 period.

Source: https://commons.wikimedia.org

While the United Arab Emirates does not impose income tax, it will introduce a 9% corporate tax from June on profits exceeding 375,000 dirhams ($102,100). The first casino in the Gulf, where Islamic rules have long kept gambling off limits, is expected to open in the emirate of Ras Al Khaimah in 2026, at a resort being built and operated by Wynn Resorts. 

Meanwhile, in Malaysia, the tourism industry has been rattled by Kedah’s PAS-led state government suggesting that the sale of alcohol would be controlled on the resort island of Langkawi. This follows its move to shut down gaming outlets in the state. The Kedah chapter of the Malaysian Association of Hotels (MAH) is hoping for clarification over the remarks linked to Kedah Menteri Besar Datuk Seri Muhammad Sanusi Md Nor. The chapter hopes to discuss the matter with the state to ensure a win-win status can emerge in the new year for the tourism industry.

All countries have their tourism assets, but as long as it is not done immorally to an extent it becomes a social ill, tourism should be allowed to flourish as it generates income for the people and the authorities.

The surprise is that progressives are ruling in UAE and other parts of the Arab world while narrow-minded conservatives have gained ground in Malaysia, Iran, Afghanistan and Pakistan. And the outcome in the latter three countries has  been depressing for all!

References:

Dubai scraps 30% tax on alcohol sales amid economic rebound, The Star, 2 January 2023

Alcohol ban in Langkawi will hinder tourists: tourism to guns, Ian McIntyre, The Vibes, 3 January 2023

Will EPF Dividend for 2022 Be Above 6%?

For EPF to generate a 6% dividend for 2022 is tough but not impossible. If the EPF either books a record-breaking fourth quarter or chooses to take profit on more investments in the last three months of 2022, then it may meet the dividend target. The country’s 15.6 million Employees Provident Fund (EPF) members — 8.26 million of whom are still actively contributing to the fund — should receive at least a 5% dividend for 2022.

While the odds of dividends being above 5% had improved from end-June, it is highly likely that 2022 dividends would come in below the 6.1% announced for conventional savings and 5.65% announced for shariah savings in 2021.

Even a 5.5% dividend would require a significantly higher retrun from equities for 4Q2022. Though lower year on year, a 5.5% dividend for conventional savings would still deserve praise in the current environment — being above 5.2% in 2020 and 5.45% in 2019. Dividend for shariah savings was 4.9% in 2020 and 5% in 2019. EPF dividend was last below 5% in 2008, on the back of the global financial crisis (see Chart 1).

There is still a chance for the EPF to see a repeat of the once-in-20-years negative net contribution of 2021 (gross contribution less than gross withdrawals) for the full year of 2022 — though the size of net withdrawals for 2022 should be only a fraction of the RM58.2 billion recorded in 2021.

In a normal year pre-Covid, the EPF generally saw about RM2 billion more coming in (gross contributions) than what went out (gross withdrawals) in a month. 

Net investment income improved to RM12.28 billion in 3Q2022 from RM8.98 billion in 2Q2022 even as gross investment income improved, with write-down of listed equities at only RM36 million in 3Q2022 compared with RM2.15 billion in 2Q2022. In 1Q2022, write-down was RM1.09 billion while net investment income stood at RM14.76 billion.

At RM12.32 billion, gross investment income for 3Q2022 is still about 12% below the five-year quarterly average (see Chart 2).

It is worth noting that quarterly gross investment income for 2Q2022 and 3Q2022 have slipped below the five-year average of about RM14 billion as the EPF netted a smaller income haul from equities.

Contribution from equities to gross investment income may have increased to RM5.49 billion in 3Q2022 from RM4.88 billion in 2Q2022, but it had halved from RM10.46 billion in 1Q2022 and is RM2.5 billion smaller than the quarterly average of RM8 billion for the asset class in the past three years (see Chart 3).

Income contributed by overseas assets has also declined year to date, falling to RM5.28 billion, or 43% of gross investment income, in 3Q2022, from RM5.51 billion, or 49% of gross investment income, in 2Q2022, and RM8.23 billion, or 52% of gross investment income, in 1Q2022.

When the EPF’s quarterly gross investment income hit a record high of RM19.26 billion in 1Q2021, for example, some 74%, or RM14.28 billion, was from equities even though the asset class made up only 44% of total assets as at end-March 2021. A sizeable portion is likely to have come from foreign equities, given that overseas assets generated RM11.15 billion, or 58% of gross investment income, in 1Q2021.

With the RM39.3 billion gross investment income for the first nine months of 2022 being below that of the corresponding period in 2018, 2020 and 2021 (see Chart 4), the pressure for catch-up in 4Q2022 is greater to deliver on expectations of at least 5% dividend from the EPF — even though it only needs to deliver 2.5% dividend per year on savings and beat inflation by 2% on a rolling three-year basis, according to the EPF Act 1991.

There is a chance that the amount the EPF needs to pay every 1% of dividend will be smaller year on year for the first time in at least 20 years, with its assets under management slipping below the RM1 trillion at which it had ended 2020 and 2021. Assets under management were RM961.01 billion as at end-September 2022, slightly above RM957.25 billion as at end-June 2022 — both periods had 36% in foreign assets.

 

It remains to be seen whether the EPF’s fund size can end 2022 above RM1 trillion, but it is only a matter of time before it regains ground. If nothing else, there should be no more Covid-19-related withdrawals: The EPF saw RM14.55 billion withdrawn in 2020, RM86.2 billion in 2021 and RM44.6 billion in 1H2022 — excluding money that did not go into the retirement kitty, as statutory contribution rates were cut during the pandemic.

Seizing the right investment opportunities should help the EPF’s performance rebound stronger, should 2022 turn out to be a blip.

Going by the past 18 years, the EPF could announce 2022 dividends as early as end-January or as late as mid-March but is more likely to do so in the second or third week of February as in pre-Covid years. Hopefully, it will be above 6%!

Reference:

The state of the nation: EPF needs superb 4Q to deliver 6% dividend for 2022, Cindy Yeap, The Edge Malaysia, 19 December 2022

What’s MRT3 For?

To overcome traffic congestion and unbearable commute we have the public transport system in the form of rail services in the Klang Valley.

The key rail lines include the Light Rail Transit Ampang Line (LRT1), LRT Kelana Jaya Line (LRT2), the KL Monorail, the KTM Komuter line, the Mass Rapid Transit Kajang Line (MRT1) and Phase 1 of the Mass Rapid Transit Putrajaya Line (MRT2).

However, these lines are not achieving their desired ridership. Based on the latest data, the ridership of the three main lines – LRT1, LRT2 and MRT1 – is shown in the chart above. Between the period from the second quarter of 2020 (2Q20) and right up to early 3Q21, the nation’s capital was basically in lockdown and fewer commuter movements were seen. From the peak daily ridership of almost 650,000 in 4Q19 for all three lines combined, ridership fell to a low of just under 106,000 in 3Q21. As the economy opened, ridership improved and in 3Q22, ridership more than tripled to about 466,000 per day for the three lines. This is still well below the peak ridership as the recent 3Q22 was just 72% of the daily ridership seen in 4Q19.

There have been comments made by some that the public transportation system has been shunned by commuters due to fears of the Covid-19 spread, as most of our public transport system can be overwhelming at peak hours and the likelihood of close contact is indeed higher. Hence, it has been argued that the public felt more comfortable driving their vehicles to commute and that has also driven the demand for used and new cars.

With petrol subsidised to the tune of more than RM1 per litre, the relatively cheap petrol does not help the situation either, as commuters do not feel the pain of higher transportation costs to the extent they switch to public transportation. However, this may change soon as the newly formed government is looking at various issues, including targeted subsidies.

As we are aware, if fuel prices are increased in line with the actual retail price, there could be some spill-over effect, as commuters may switch to public transport, purely based on cost savings. The Greater Kuala Lumpur (GKL) public transportation system achieved a new milestone as Phase 1 of the MRT2 line was opened in mid-June 2022.

Connecting Kwasa Damansara to Kampong Batu, Phase 1 covers a distance of 17.5km involving 12 stops. The entire MRT2 line, covering a distance of 57.7km, is expected to be ready next month and this will add another 40.2km involving 24 more stations as well as potentially four provisional stations. Early data for the first two weeks of operations showed that ridership for the new line was under 25,000 per day, while in 3Q22, ridership fell to just over 20,000 per day.

According to Mass Rapid Transit Corp Bhd (MRT Corp), the MRT2 construction cost was approximately RM30.5bil, translating to RM529mil/km. In comparison, MRT1, which connects Sungai Buloh to Kajang with a total distance of 46km and with 31 stations, cost RM21bil or RM457mil/km.

We now wish to implement a new Circle Line or MRT3. This line is expected to cover a distance of 51km with another 31 stations. At a construction cost of RM31bil or RM608mil/km, the MRT3 will be the most expensive line to be built. Inclusive of other costs, including the land acquisition cost of RM8bil, the cost per km is expected at RM1bil/km. 

MRT Corp reported a net loss of RM3.67bil in 2021. To date, MRT Corp has accumulated losses to the tune of RM56.66bil, and this was financed by the government’s contribution amounting to RM57.26bil.

The impairment losses are arrived at by writing off whatever investment was made to build the MRT1 and MRT2 lines. Up to the end of December 2021, based on MRT Corp’s financial statements, the rail company has completely written off in its books the RM24.81bil spent on the MRT1 line and RM31.25bil spent on the MRT2 line. MRT Corp’s revenue in 2021 was just RM32.3mil, which was not enough to cover the operational cost of RM67.3mil.

Rail investment and returns are very long-term and may make no good sense for a PFI. For true private sector involvement, it will be in operations of the rail. The model could follow the earlier HSR model with Government as asset-owner and the private sector as operator. The idea is to have a fare box ratio on 1 or above. In this context, shouldn’t we review and defer MRT3?

Reference:

Don’t miss the bus, Pankaj C. Kumar, The Star, 24 Dec 2022

Is Reformasi Merely a Slogan for Regime Change?

Reformasi in Malaysia began with the sacking of Anwar Ibrahim from UMNO in 1998. It was a movement to bring wholesale changes to Malaysia and Malaysian politics. Many bought into its attractive packaging of good governance, corruption free, people-centred policies, defending basic human rights, progressive economic policies and many more. Essentially, it was social equality and social justice for Malaysia.

Now in the Government, surely Reformasi for PH must be more than a slogan for regime change? This is the time for reform-minded Malaysians to reflect on what Reformasi and Bersih is all about. What kind of reforms should we expect? Each Minister and Ministry could draw-up areas for reforms, unless they have no clue or wish to gaslight the rest of us.

Source: https://www.thesundaily.my

When a Minister dismisses ill-treatment of detainees, doesn’t understand SOSMA, or makes no mention of those missing from public life, then Reformasi is dead!

Reformasi is not when electricity tariffs are increased despite the near-monopolist enjoys profits in excess of RM4 billion a year. Reformasi must mean a fresh approach on subsidy for the poor and marginalised. Reformasi is when we are willing to examine every area of our nation, be it the judiciary, the legislative or the executive, and change them for the better. It is an exercise that not one Minister could do. It may require a mechanism or Commission to galvanise change. Change is then welcomed not disdained. Policies are people centric, fair, progressive and unifying.

But before we do that we need to account for misdeeds (if not acknowledge them). There are so many – from corruption over the decades, deaths in lock-ups, to people still missing! If we don’t do that then Reformasi is just a slogan for regime change!

References:

Was the reformasi movement a mere engine for regime change? Kua Kia Soong, The Malaysian Insight, 5 Dec 2022

Custodial abuse claims: LFL calls Saifuddin’s dismissal ‘ridiculous’, Malaysiakini, 12 Dec 2022

Southeast Asia’s Unicorns Suffer!

Global investors who have invested in three of Southeast Asia's high-profile tech start-ups are facing a grim reality that has seen the firms lose US$51 billion (RM225.25 billion) in value in the past year and a half since their equity debuts.

Singapore-based ride-hailing firm Grab Holdings Ltd, which listed in New York about a year ago, has shed over 70% of its market value. It was Southeast Asia's most valuable start-up at the time it merged with Altimeter Growth Corp. Grab lured more than US$4 billion from investors including BlackRock Inc, Fidelity International, and T Rowe Price Group Inc.

Source: Bloomberg, 12 December 2022

PT GoTo Gojek Tokopedia, Indonesia's largest initial public offering (IPO) in 2022,  plunged 74% while PT Bukalapak.com, which listed in 2021, plunged 69% since their first day of trade in Jakarta following widely expected IPOs. Both companies underperformed local benchmarks and about a 30% drop in the Nasdaq 100 since the start of the year. Grab is now worth US$11.6 billion, Bloomberg data showed.

The Southeast Asian newcomers join a slump engulfing recently listed Indian start-ups as investors question their high valuations. The three firms offered investors an exposure to Southeast Asia's booming e-commerce sector. But rising interest rates globally and risks of recession are taking a toll on technology shares.

There are also concerns that early investors will be paring their stakes after initial lock-up periods end. GoTo has lost nearly 60% in market value over the past month amid the expiry of a lock-up on its major shareholders' stakes and as investors fret about the unprofitable Indonesian internet company's prospects.

Online marketplace Sea Ltd, another Singaporean unicorn that was listed in the US back in 2017, lost about US$169 billion in market value since a peak in October 2021.

Most growth stocks are on a downward trend because of recent developments in the global economy. Many have also switched to value stocks in their investment journey.

Reference:

Star Southeast Asia unicorns see US$51 bil gone since listings, Filipe Pacheco & Ishika Mookerjee, Bloomberg, TheEdge CEO Morning Brief, 13 December 2022

2023 Resolutions for Business Owners

 Another year of potential promise is about to begin. For many business owners, it’s time to start thinking about what they want for their companies and teams to accomplish in 2023. Sometimes it’s about launching new products or continuing to build on the success of existing ones. As an entrepreneur, your ambitions might also veer toward reinventing brand and online presence.

While 2023 is just unfolding, current economic predictions and market conditions have shifted many owners’ priorities. Finding ways to attract leads, retain customers and employees and improve efficiency are probably the key. Despite the challenges 2023 may bring, establishing goals now can set your team and company up for success. Here are some resolutions for your business to pursue.

Source: https://www.thehumancapitalhub.com

Set New Growth Goals

Most companies need to keep moving forward to remain relevant. But that progress or growth isn’t always spread evenly across business units or activities. Sometimes growth objectives are concentrated on a market segment, product line, division or strategy. The important thing is to determine what you want to take to the next level and devise a plan to get there.

Setting new growth goals shows you’re invested in the company’s future. The idea of progress can also increase your team’s commitment since it gives them purpose and urgency. Growth objectives often become opportunities to serve customers better, bring innovations to market and establish industry leadership. They demonstrate resilience and persistence, which can contribute to more effective outcomes.

Upgrade Online Marketing Strategies

Compared to traditional advertising, digital marketing is the place for promotional budgets. Surveys show 57% of marketing budgets invests in digital campaign activities. Plus, spending on online marketing is expected to go up by 16% in 2023. However, simply pumping more money into digital strategies doesn’t always bring the hoped-for returns.

Maintaining a website, sending targeted emails and creating pay-per-click ads are often crucial parts of online marketing strategies. So too having a social media presence and engaging with audiences through various platforms. But performing these activities without good data analysis and experimentation won’t get the job done. Designing and implementing strategies that produce results means moving away from what you think you know about your audience.

Keep Employees Happy

Entrepreneurs may come up with business ideas by themselves. But owners and founders usually need a talented team to bring those concepts to life. Employees might join your team because they’re attracted to the ideas behind the company or they feel driven to do the work. 

Yet talented team members often leave when their expectations about the job and company culture don’t match the reality. And those feelings of discontent make it tough for businesses to hold onto valuable employees. 

Improve Efficiency

The phrase “Work smarter, not harder” usually applies to increasing efficiency or productivity. While efficiency improvements sometimes align with saving money, they can also be about using resources better. Maybe processes and workflows could benefit from new technologies or automation. You might also achieve higher productivity by revising project management practices.

Making changes in the efficiency category starts with assessing where bottlenecks or inefficiencies exist. Maybe you already have the tools to enable your employees to execute modern project management practices. However, teams aren’t using those apps to their full potential. Instead, they’re reverting to spreadsheets on a shared network drive that causes access problems.

Learn a New Skill

As an entrepreneur and business owner, you can never absorb enough new knowledge and information. It’s important always to seek out new information and self-education, in order to grow as a person and leader. It can also have a positive impact on your life outside of work.

Many things happen along the way, so stay flexible and adaptable. And may God be with you!

References:

2023 resolutions for business owners, John Hall, Forbes, December 4, 2022

Small business owners: What’s your 2023 New Year Resolution? Freshbooks Blog

2023 Global Macro Outlook

2023 is likely to see weaker growth globally. Maybe less inflation and an end to rate hikes. U.S. may escape a recession while Europe contracts and Asia has green shoots for growth. Morgan Stanley believes global GDP growth will top out at just 2.2%. 

Global inflation is set to peak in the fourth quarter of 2022. Slowing demand, price discounts due to elevated inventories and declining housing prices, among other factors, will help temper inflation. 

The combination of slowing growth and cooling inflation is likely to prompt the Fed to curb its rate hiking. The target range to reach a peak of 4.5% to 4.75% by January 2023, and then decline steadily throughout 2024. In this scenario, the U.S. economy should experience a soft landing and a tepid rebound. In the labour market, companies have slowed hiring, lean payrolls and there is difficulty in filling skilled positions. 

        Source: Bloomberg, Haver Analytics, Morgan Stanley Research forecasts

The euro area economy may contract 0.2% in 2023 on the back of the ongoing energy crisis and tightening monetary policy. Inflation—which surged to an unprecedented annual rate of 10.7% in October 2022 — is expected to remain well above target for the remainder of 2022 as well as 2023.

Asia’s outlook for the year ahead is relatively upbeat, with three of the world’s largest economies helping to lead the way. Here’s a look at what’s ahead in the region:

• In China, recovering private consumption could lead the economy to a modest recovery next year. A 5% growth in 2023 is achievable with most of that coming in the second half of the year. This represents a significant improvement from 3.2% growth for China in 2022.

• In Japan, a well-developed economy and aging population have kept growth relatively tame. Forecast is 1.2% GDP growth for 2023 

• In India, the real outlier, GDP is on track to expand 6.2% in 2023 and 6.4% in 2024, while three megatrends, underpinned by the country’s advanced digital infrastructure, are putting India on a path to surpass Japan and Germany and become the world’s third-largest economy by 2027. 

Malaysia’s GDP growth will moderate to +4.2% for 2023. The softening growth will be mainly due to a deceleration in external trade performances as a result of slower global demand. Malaysia will continue to benefit from commodity exports especially palm oil, petroleum, and LNG as the average prices of CPO and Brent crude oil are forecasted to stay elevated at RM3,500 per tonne and USD96pb for 2023. Agriculture and mining sectors are to record an expansion rate of +1% each while manufacturing output is to grow modestly by +3% for 2023.

The domestic economy will be fuelled by continuous upbeat consumer spending, further improvement in tourism-related activities, and revival of infra projects. Food inflation as well as overall price growth to trend lower following moderation in global commodity prices and a further easing in tight supply chain pressure. CPI is forecasted at +2.3% (2022E: +3.0%). The Ringgit is projected to appreciate to RM4.30 or higher with right policies from the Unity Government. Consumer spending in Malaysia is to stay steady underpinned by a stable inflation rate and the jobless rate is set to decline further to 3.5% (2023). In addition, the trajectory of BNM monetary policy remains supportive of domestic spending and investment activities. The services and construction sectors may grow by +5.3% and +4.8% for 2023 respectively.

With this new government, political temperature will come down, reduce uncertainties, improve market sentiments, and smoothen policy implementation. However, there are risks of political instability in the next five years especially if one of the major political blocs were to leave the government.

External trade is still on positive growth. A slight moderation in the export growth forecast from +28.7%yoy for 2022 to +9.2%yoy for 2023 is anticipated. 

In the above context, it is only for us to lose if we choose to have instability and poor economic policies. Otherwise, we are on the road to a dynamic, vibrant 2024 (while 2023 will set the stage for it). 

Disclaimer: All the projections above were from Morgan Stanley and MIDF and we are not responsible for any shortfall, misgivings or inaccuracies thereto.

References:

2023 Global Macro Outlook: Inflation peaks, growth slows, Morgan Stanley, 

22 November 2022

Malaysia’s economic outlook 2023: MIDF, Business Today, 7 December 2022

Why ESG Matters

 ESG is a term covering the inter-relationship between a business and the stakeholders, communities, and broader environment in which it operates. The term covers a wide range of business policies and practices, including:

• Environmental impacts, driven by the widespread acceptance of climate change and the urgent need to act to limit the severity of climate change. This is the primary reason for the rapid rise in relative importance of ESG in the eyes of regulators, consumers, and investors and, as a result, corporate executives and boards.

• The Social impacts of a business that have come into sharp focus in recent years. Movements like Black Lives Matter and #MeToo have highlighted the role companies have to play in promoting diversity, equality and inclusion, while ensuring that fair labour conditions and living wages are provided within the organisation and the wider supply chain.

• Governance practices that have been a long-standing focus of regulators and investors, and include areas such as risk management, corporate decision-making and business ethics.

The importance of ESG within a corporate environment has risen significantly in recent years as stakeholders have shifted their expectations of corporate behaviour from a “shareholder capital” approach popularised by Milton Friedman in the 1970s – which advocated a sole focus on profit generation1 – towards a more holistic stakeholder capitalism approach, which incorporates the awareness and impact of a business on its broader environment. 

Many businesses are striving for a sustainable business strategy to cover ESG factors while also positively benefitting their shareholders. Another way that business leaders are approaching this is by adapting from a standard ‘bottom line’ to a ‘triple bottom line’ concept: “The triple bottom line is a business concept that posits firms should commit to measuring their social and environmental impact in addition to their financial performance, rather than solely focusing on generating profit. It can be broken down into ‘three Ps’: profit, people, and the planet.”

Basically from my perspective, if we focus on people and planet, profit will follow. Profit, per se, will not happen and is a spurious goal. All our actions will result in profit or loss. More important than profit is cash flow, especially if you have to “weather” through Covid or a recession.

Reference:

ESG in deals and investment (Best-Practice Guideline 69), Deloitte / ICAEW