Malaysian 2023 Budget: Selected Highlights

The Malaysian 2023 Budget, which is themed “Developing Malaysia Madani”, was announced on 24 February 2023 by the Minister of Finance. The 2023 Budget has a total allocation of RM388.1 billion (an increase of RM15.8 billion, compared to the Malaysian 2022 Budget). The 2023 Budget has been broadly distributed as follows:

The top two recipients in terms of budget allocations for 2023 are the Education Ministry (RM55.2bil) and Health Ministry (RM36.3bil), constituting 23.6% of total expenditure. A substantial amount of the Government’s operating expenditure has been allocated for debt service charges, emoluments, retirement charges, and subsidies and social assistance.  The economy is expected to grow moderately, with a forecasted growth of 4.5% in 2023.

Several tax measures that will benefit individual taxpayers at large have been introduced, namely the reduction in personal tax rates and the extension of tax reliefs for individuals. 

From a business perspective, various measures have been introduced to support micro, small and medium enterprises, including the provision of various financing facilities with a total value of up to RM40 billion. 

Overview of the revenue and expenditure of the 2023 Budget is graphically depicted below:

Tax Rates for SMEs

Tax rate applicable to SME taxpayers ( i.e. companies and limited liability partnerships) be further reduced with effect from the year of assessment (YA) 2023

The above is a gesture for the M40 with T20 providing support.

Overall, there are several good initiatives for small and medium sized companies and individuals. But there is no single or several large/mega projects that could excite entrepreneurs or business people. In addition, there isn’t something to address inflation, cost of living, affordable housing, senior citizens, detention centres and corruption. Luxury goods tax is shooting one-self in the foot and I don’t understand capital gains on unlisted shares – when it is usually on listed shares. He could have broadened the tax base for SST, imposed a forex transaction tax, an exit tax for remittances above a certain limit, and widened the windfall tax to include banks and energy companies.

Overall, an expansionary budget which was rather tame and bland. It was a blessing he didn’t pursue on GST because we don’t fulfil two conditions – developed nation and Gini coefficient of below 0.3. Perhaps, he was not bold enough so as not to “spook” some before the June state elections?

Reference:

Tricor Insights, Budget Edition, Special Edition: 2023 Budget (Part 1), Tricor Taxand

Is Malaysia’s Education Curriculum Comparable to Others?

Recently, Education Minister said something so mindboggling - that Malaysia’s curriculum is comparable to countries such as Singapore and Japan. She justified it by saying it was based on a comparative study the ministry conducted - which also involved comparing Malaysia’s curriculum to that of Australia, the United Kingdom and Finland.

Just three days earlier, Muar MP cautioned the government by saying that the Malaysian education system is in crisis and needs reforms. The Muda president added that the weaknesses in the education system had caused even Malay middle-class families to send their kids to private or international schools.

Source: https://www.wikiimpact.com

The rot began when the then Abdul Razak Hussein administration started playing the nationalist card. English medium schools were converted to Malay-medium schools. Another issue, behind the problem, was that since Merdeka, many politicians who take on the education portfolio assume they will eventually become prime ministers. As such, our education system is the “playpen” of education ministers.  In the process, they have turned our children’s future into a national nightmare.

The enacting of the Private Higher Education Institutions Act 1996 (Act 555), the government has allowed the creation of private colleges and universities, popularly known as “mushroom colleges”. While these institutions (mainly tertiary ones) charge exorbitant fees, the quality of education may be poor. In some cases, it was so bad that students had to take these establishments to court.

One way to mend the situation is to table a White Paper on education reforms. First, start with reviewing the problem with our education system and what caused it. Engage with all possible interest groups. Then, investigate why non-Malay parents rather send their kids to vernacular schools or pay exorbitant fees to send them to private or international schools.

Finally, determine a way to ensure national schools become a top choice for all Malaysians. Perhaps, English schools are necessary. That’s what the private sector does and even UiTM. Perhaps, it is best the Minister appoints an independent commission to review and recommend the future of education in Malaysia.

The government must realise that the quality of our education system would reflect the employment numbers of the country. Many graduates are struggling to get jobs not only because of a sluggish economy but also due to the education quality. The graduates are not at fault. They definitely did not decide on our education policies. The politicians did.

If the education system was so good... 

• why are graduates retrained by SC, BNM and others?

• why do parents go looking for tuition teachers?

• why do the middle-class Malay parents struggle to send their kids to private schools or Chinese schools?

• why are civil servants today delivering such low-quality output even with a PhD (from a local university)?

I can go on. If you don’t acknowledge your own wretchedness, you will never fix the problem. We can blame Mahathir and all the rest but today is your time Fadhlina, so fix it or move out!

Reference:

Comment: Fadhlina, how’s view from under the sand? G Vinod, Malaysiakini, 19 Feb 2023

Federal Government Revenue: Scope for Improvement?

Federal Government revenue in 2022 has been projected to increase significantly by 22% to RM285.2 billion or 16.7% of GDP contributed by both tax and non-tax revenue. Tax revenue remains as the major contributor at 69.5% of total revenue or 11.6% of GDP, driven by strong economic recovery and higher commodity prices. Non-tax revenue collection is expected to increase its share of total revenue from 25.7% in 2021 to 30.5% in 2022 on account of higher dividend payment.

Tax revenue is projected to grow by 14.1% to RM198.2 billion with both direct tax and indirect tax are estimated to register double-digit growth. Direct tax collection is forecast to grow by 13.1% to RM147.2 billion, contributed mainly by higher companies income tax (CITA) collection at RM84.8 billion resulting from higher corporate earnings following the strong economic recovery.

Non-tax revenue is expected to surge by 44.9% to RM87 billion, largely contributed by higher proceeds from interest and return on investments. The bulk of the proceeds is from PETRONAS dividend totalling RM50 billion, of which RM25 billion is an additional dividend resulting from better profitability, while dividend from Bank Negara Malaysia amounted to RM5 billion.

For 2023, Malaysia’s expected economic growth between 4% to 5% coupled with the anticipated moderation in global commodity prices, will result in a slower growth of the Federal Government’s tax revenue at 3.7% amounting to RM205.6 billion or 11.3% of GDP. However, non-tax revenue is estimated to decline to RM67 billion or 3.7% of GDP, offsetting the increase in tax revenue. Consequently, the Federal Government’s revenue is projected to decline by 4.4% to RM272.6 billion. Direct tax is estimated to increase by 3.5% to RM152.4 billion, representing 74.1% of total tax revenue. The bulk of the increase is attributed to better collection.

Indirect tax is estimated to increase by 4.3% to RM53.2 billion in tandem with steady consumption and trade growth. SST is forecast to record RM32 billion or about 1.8% of GDP.

Non-tax revenue is estimated to decline by 23% to RM67 billion or 3.7% of GDP. The lower collection is due to lower proceeds from investment income, particularly dividend from PETRONAS which is projected to be lower at RM35 billion.

Although our total revenue to GDP is above 15% over last three years, our tax revenue to GDP ratio is below 12%.

According to research conducted by the International Monetary Fund, countries should have a tax-to-GDP ratio of at least 12% in order to experience accelerated economic growth. The countries that are part of the Organisation for Economic Co-operation and Development (OECD) all meet that threshold, with an average tax-to-GDP ratio of 33.8%.

Our ratio of tax revenue to GDP is well below that of a more developed nation. There is scope to improve tax revenue not by way of GST but through new and progressive taxation.

References:

Section 2, Federal Government Revenue, Fiscal Outlook 2003, Ministry of Finance

Tax-to-GDP Ratio – comparing tax systems among OECD countries, www.visualcapitalist.com

Tech Giants Fired 200,000 People!

Why are the world's biggest tech companies laying off employees? And how many more jobs will be affected? Big Silicon Valley tech companies Google, Microsoft, Amazon, and Meta have collectively laid off more than 100,000 employees in recent months. Many believe more layoffs are yet to come. But why are the world's biggest tech companies laying off employees? Tech sector is undergoing a major shift as Microsoft joins Amazon, Meta and Salesforce in announcing major layoffs.

Over-hiring during COVID? During the pandemic, Google made rapid changes to its Google Meet video conferencing platform to accommodate more participants, and Meta made similar changes to WhatsApp's video conferencing product.

Source: https://commons.wikimedia.org

Meta told employees to prepare for a large-scale downsizing in November, cutting 11,000 employees. And Salesforce cut 10% of its employees in January 2023 after the company's chief executive admitted the firm over-hired. Sundar Pichai pointed this out in the letter he sent to employees after announcing the layoffs of 12,000 people. 

Pressure from Investor Fund managers and early investors in big tech companies like Google, Meta, Amazon, Twitter others made management to make quick decisions to counter slowing business growth. 

Several new investment initiatives by Silicon Valley tech titans are also not profitable. Amazon's robotics division, Microsoft's metaverse and virtual reality division AltspaceVR, and Meta's Substack competitor called Bulletin are all verticals that are somewhat futuristic and require a lot of investment and burned a lot of money. Cash burning has also been one of the reasons companies are trying to cut costs. According to top management of big tech companies,  a recession is anticipated shortly. But while Microsoft will continue to spend on the cloud, acquisitions and innovation, it will pull out of non-strategic areas like hardware.

The upshot – Covid (over-hiring), slowing business growth and forecasted recession - are all good reasons but the people impacted are real. Unfortunately, managements seldom get fired. Employees do!

Reference:

Why tech giants Amazon, Google, Meta, and Microsoft fired 200,000 people, Kahekashan, Hans News Service, 30 Jan 2023

2023: What Should We Do?

THE latest Bank Negara briefing presented a mixed bag of economic data for Malaysia. On the bright side, it was announced that Malaysia recorded its strongest annual economic growth in two decades for 2022. With a 8.7% growth, exceeding expectations, the economy surpassed the pre-pandemic level of 2019.The labour market is recovering, domestic demand continues to expand and the country’s headline inflation is averaging  3.3% for 2022. If OPR remains at 2.75%, then we can’t rope-in imported inflation. And exchange rate cannot then be on “a wing and a prayer”.

On a seasonally-adjusted quarter-on-quarter basis, the economy contracted by 2.6% in the fourth quarter of 2022 (4Q22), after slowing down in the previous three quarters.

Three sectors of the economy – construction, agriculture as well as mining and quarrying – remained below the pre-pandemic level. Really, the two sectors to focus on are services and manufacturing. Together they constitute more than 80% of GDP.

Within the services sector, some sub-sectors are also below pre-pandemic levels, namely food and beverage, accommodation, real estate, business services and private education. Underlying or core inflationary pressures have remained stubbornly high at 3% in 2022 and are expected to stay elevated, despite some moderation expected in 2023.

Credit growth also slowed down in 4Q22 as loan repayments outpaced disbursements. Malaysia’s mixed economic performance is not surprising. While the country has recovered well from the effects of Covid-19 restrictions, it had to manage various domestic and external headwinds.

The latest official gross domestic product (GDP) projections would be released in the upcoming Budget 2023 to be tabled on Feb 24. For 4Q22, Bank Negara announced that the GDP expanded by 7% year-on-year. The growth was still above the long-term average of 5.1%. The 4Q22 growth was supported by continued expansion in private consumption and investments, improving labour market conditions, resilient demand for electrical and electronic (E&E) goods as well as the recovery in tourism activities. The services sector grew by 8.9% y-o-y, down from 16.7% in 3Q22.

The manufacturing sector expanded by 3.9% y-o-y in 4Q22, on the back of continued expansion in E&E, primary and consumer clusters. In comparison, the sector grew by 13.2% y-o-y in 3Q22.

MIDF Research anticipates the domestic economy to expand further by 4.2% in 2023. The reopening of China’s economy sooner than predicted is expected to provide extra boost to Malaysia’s services exports as well as tourism activity.

The drivers of growth remain private sector consumption and investment. Spurring consumption may elevate inflation while improving the eco-system for private investment will help us generate GDP above 4-5% in 2023. So, for the Government’s priority is to listen to trade associations, professionals and others on how bureaucracy or “red-tape” that can be undone without compromising quality. For example, a Residence Pass Talent visa is handled jointly by Talent Corp and Immigration. When you need the right professional, why must Immigration be involved as the co-chair of an approval Committee? Simple streamlining of processes and getting “control” out of the way is progress.

Ease of doing business is key to attracting FDIs not just incentives. We may have superior incentives than Singapore but investors still prefer Singapore because of ease of doing business, speed of response by authorities and a “clean” image in getting things done. Our competition – Indonesia, Thailand and Vietnam - are working on improvements year-on-year. Please don’t get into a sleep mode now!

Reference:

“Honeymoon” over as reality sets in, Ganeshwaran Kana, The Star, 11 Feb 2023

What is the Real Property Overhang?

At the recently concluded 15th Malaysian Property Summit 2023, the Director of the National Property Information Centre (Napic) presented a paper on the status of the Malaysian property market up to the third quarter of 2021 (3Q22). The full market report is only expected to be released by the middle of March 2023.

The residential overhang at the end of 3Q22 stood at 29,535 units worth some RM19.95bil. Napic’s website also provided the details of where these overhang properties are located and the three key states – Johor, Selangor, and Penang – are the main hotspots, accounting for some 14,956 units or just over half of the country’s total overhang. In terms of the type of properties, the 3Q22 data showed that high-rises comprise 18,962 units or 64.2% of the total overhang.

In terms of price points, 23.8% of the total overhang was priced at RM300,000 and below, 29.5% was priced between RM300,001 and RM500,000, 31.6% was priced between RM500,001 and RM1mil and the balance was priced above RM1mil. In terms of the total value, the residential overhang is skewed towards the high-end segment with properties worth more than RM1mil accounting for 43.4% of the total overhang value, while those priced between RM500,001 and RM1mil accounted for 31.9% of the total overhang.

Most of these overhangs in the segment are properties priced between RM500,001 and RM1mil, which accounted for two-thirds of the total unit numbers and 58.9% in value of the total overhang.

The key underlying ageing profile of this overhang was as follows:

As seen in Table 1, the key overhang is properties (both residential and service apartments across the four key states) that have been part of the statistics for the last five years and they account for between 51% and 93% of the total overhang units. In total, these properties accounted for 75.7% of the market’s overhang status while properties that have been in the market for the last three years are just over 5% from the key states. Service apartments located in Johor, and those that are in the five to 10 years bucket, account for 26% of the total market overhang.

In terms of prices, most of the overhang is seen in the same five to 10 years category across the board and account for 71% of the total overhang properties in the market.

From Table 2, properties below three years account for less than 5% of the total market overhang. Service apartments that are in the RM500,001 to RM1mil bracket and are in the five to 10 years category as they account for 25% of the total market overhang.

Looking at the ageing profile of the property overhang, those above five years will likely remain unsold for a foreseeable future.  This is mainly due to either being wrongly located and without the proper or good infrastructure to support community living, or untouched by property buyers for being too expensive (especially those beyond the RM500,000 price threshold).

Having identified the issues, regulators and property developers would need to come out with strategies to address them and to attract buyers to these properties via a rehabilitation exercise and with a significant price reduction.

If the banks and developers have fully provided, then it is time to do a major discount (50% or more) for residential and service apartment above 3 years and priced above RM300,000. We could have a graduated discount – with the highest (70%) for those above 5 years and above RM0.5 million in value.

Reference:

Demystifying property market overhang, Pankaj C. Kumar, The Star, 11 Feb 2023

Ukraine: Peace Talks, Not More War!

US and NATO leaders now claim to support a return to the negotiating table they upended in April 2022, with the same goal of achieving a Russian withdrawal from the territory it has occupied. If there is no peace deal in Ukraine, the only logical outcome is ongoing fighting; ongoing fighting will logically lead to escalation, particularly if Russia appears to be losing; and escalation may very well eventually take a nuclear form, at which point a great power nuclear conflict becomes a real possibility.

Instead of just sending more weapons to fuel a war that cannot be won on the battlefield, Western leaders have a grave responsibility to help restart negotiations.

Source:https://peopleint.wordpress.com

 So what can the US bring to the table to help move towards peace in Ukraine and to de-escalate its disastrous Cold War with Russia? Here are 5 steps proposed by writers/political analysts Medea Benjamin and Nicolas J.S. Davies:

1. The US and other Western countries could support Ukrainian neutrality by agreeing to participate in the kind of security guarantees Ukraine and Russia agreed to in March 2022, but which the US and U.K. rejected.

2. The US and its NATO allies could let the Russians know at an early stage in negotiations that they are prepared to lift sanctions against Russia as part of a comprehensive peace agreement. 

3. The US could agree to a significant reduction in the 100,000 troops it now has in Europe, and remove its missiles from Romania and Poland and handing over those bases to their respective nations.

4. The US could commit to working with Russia on an agreement to resume mutual reductions in their nuclear arsenals, and to suspend both nations’ current plans to build even more dangerous weapons. They could also restore the Treaty on Open Skies, from which the US withdrew in 2020, so that both sides can verify that the other is removing and dismantling the weapons they agree to eliminate.

5. The US could open a discussion on the removal of its nuclear weapons from the five European countries where they are presently deployed: Germany, Italy, the Netherlands, Belgium and Turkey.

If the US is willing to put these policy changes on the table in negotiations with Russia, it will make it easier for Russia and Ukraine to reach a mutually acceptable ceasefire agreement, and help to ensure that the peace they negotiate will be stable and lasting. 

Most of the people of the world would breathe a sigh of relief to see progress towards ending the war in Ukraine. This should lead to improved international cooperation on other serious crises facing the world in this century–and may even start to turn back the hands of the Doomsday Clock by making the world a safer place for all. In addition, the U.S. will have funds to commit for the homeless, poor and the marginalised.

Reference:

Five simple steps for US to end toxic Russia-Ukraine War, Medea Benjamin, Nicolas J.S. Davies, www.fairobserver.com, 28 Jan 2023

What Is U.S.’ National Security?

The essential narrative of the West is built into US national security strategy.  The core US idea is that China and Russia are implacable foes that are “attempting to erode American security and prosperity.”  These countries are, according to the US, “determined to make economies less free and less fair, to grow their militaries, and to control information and data to repress their societies and expand their influence.” (A viewpoint put forward by Prof. Jeffrey Sachs).

The irony is that since 1980 the US has been in at least 15 overseas wars of choice (Afghanistan, Iraq, Libya, Panama, Serbia, Syria, and Yemen just to name a few), while China has been in none, and Russia only in one (Syria) beyond the former Soviet Union.  The US has military bases in 85 countries, China in 3, and Russia in 1 (Syria) beyond the former Soviet Union.   

Source: https://en.wikipedia.org

President Joe Biden has promoted this narrative, declaring that the greatest challenge of our time is the competition with the autocracies. These countries “seek to advance their own power, export and expand their influence around the world, and justify their repressive policies and practices as a more efficient way to address today’s challenges.”  US security strategy is not the work of any single US president but of the US security establishment, which is largely autonomous, and operates behind a wall of secrecy.  

 

The unwanted fear of China and Russia is sold to a Western public through manipulation of the facts.  A generation earlier George W. Bush, Jr. sold the public on the idea that America’s greatest threat was Islamic fundamentalism, without mentioning that it was the CIA, with Saudi Arabia and other countries, that had created, funded, and deployed the jihadists in Afghanistan, Syria, and elsewhere to fight America’s wars against Russia and others.

Consider the Soviet Union’s invasion of Afghanistan in 1980, which was painted in the Western media as an act of unprovoked perfidy.  Years later, we know that the Soviet invasion was actually preceded by a CIA operation designed to provoke the Soviet invasion! The same misinformation occurred vis-à-vis Syria.  The Western press is filled with recriminations against Putin’s military assistance to Syria’s Bashar al-Assad beginning in 2015. This is without mentioning that the US supported the overthrow of al-Assad beginning in 2011. The CIA funding a major operation (Timber Sycamore) to overthrow Assad years before Russia arrived.

More recently, US House Speaker Nancy Pelosi recklessly flew to Taiwan despite China’s warnings. The G7 ministers together harshly criticized China’s “overreaction” to Pelosi’s trip. 

The Western narrative about the Ukraine war is that it is an unprovoked attack by Putin in the quest to recreate the Russian empire.  The real history starts with the Western promise to Soviet President Mikhail Gorbachev that NATO would not enlarge to the East. Four waves of NATO aggrandizement: in 1999, incorporating three Central European countries; in 2004, incorporating 7 more, including in the Black Sea and Baltic States; in 2008, committing to enlarge to Ukraine and Georgia; and in 2022, inviting four Asia-Pacific leaders to NATO to take aim at China.

The Western media has not mentioned the US role in the 2014 overthrow of Ukraine’s pro-Russian president Viktor Yanukovych. Also, the failure of the Governments of France and Germany, guarantors of the Minsk II agreement, to press Ukraine to carry out its commitments. The vast US armaments sent to Ukraine during the Trump and Biden Administrations led-up to war. The US refusal to negotiate with Putin over NATO enlargement to Ukraine is not easily understandable.

NATO says its expansion is purely defensive and Putin should have nothing to fear.  In other words, Putin should take no notice of the CIA operations in Afghanistan and Syria; the NATO bombing of Serbia in 1999; the NATO overthrow of Moammar Qaddafi in 2011; the NATO occupation of Afghanistan for 15 years; nor Biden’s “gaffe” calling for Putin’s ouster; nor US Defence Secretary Lloyd Austin stating that the US war aim in Ukraine is the weakening of Russia.   

At the core of all of this is the US attempt to remain the world’s single dominant power, by augmenting military alliances around the world to contain or defeat China and Russia.  It’s a dangerous, delusional, and outmoded idea.  The US has a mere 4.2% of the world’s population, and now a 16% of world’s GDP (measured at international prices).  In fact, the combined GDP of the G7 is now less than that of the BRICS (Brazil, Russia, India, China, and South Africa), while the G7 population is just 6 percent of the world compared with 41 percent in the BRICS. 

There is only one country whose self-declared fantasy is to be the world’s dominant power- the US.  It’s past time that the US recognized the true sources of security: internal social cohesion; responsible cooperation with the rest of the world; and economic cooperation for the good of all. On this basis, the US and its allies could avoid war with China and Russia, and enable the world to face its myriad environment, energy, food and social crises. This will reduce disparities and promote peace.

Encirclement and containment are old strategies of the 20th century – the era of the Cold War. The world has moved on but the US is still stuck in some retro show of its own making.

Reference:

The West’s false narrative about Russia and China, www.jeffsachs.org 

Are High-Net-Worth People Leaving China?

China has the world’s second-largest number of ultra rich, after the US. More than 32,000 persons are holding wealth exceeding US$50 million, according to Credit Suisse Group AG.

About 10,800 rich Chinese migrated in 2022, the most since 2019, and the second most after Russia, according to New World Wealth. Investment migration consultant, Henley & Partners saw inquiries from Chinese individuals on migration more than quadruple in the days after China’s reopening compared to the week before. Emigration was low in the early part of the pandemic, but queries doubled in 2022.

Juwai IQI, a real-estate firm that helps sell international property to customers in Asia, said the number of mainland Chinese buyer inquiries dropped 26% in 2021 and fell 11% in 2022, but it’s gone up 55% in 2023 so far and has stayed at that level. 

Searches and keyword mentioned of “emigration” on Wechat almost quintupled on Dec 26 from a day earlier to 110.7 million, after China downgraded Covid-19 to a lower threat disease class and announced that it would scrap all quarantine measures. As the wealthy look to invest abroad, private banks have been building their desks to deal with the flow of capital. Many have been hired in Singapore to serve wealthy Chinese that are investing in the city state. The flood of money has prompted sky-rocketing prices for mansions, golf memberships to luxury car sales in Singapore.

China has strict capital controls. Citizens can convert only $50,000 worth of yuan into foreign

currencies each year. But despite those restrictions, the reopening of travel is enough to fuel

outflows with tourism alone. Tourism outflows could hit $100 billion to $200 billion in 2023. The outflows should have “some depreciation pressure” on the yuan, but the central bank will intervene if required.

But are we interested? No, our MM2H is off-the-mark. There are other “safe” places with better environment, eco-system and positive outlook. Will we change under the new Government? No, the present Home Minister seems to be a near replica of the old Home Minister!

Reference:

Exodus of wealthy Chinese accelerates with end of Covid Zero, Bloomberg News, 

26 January 2023

Damodaran’s Take on the Adani Crisis

Valuation guru Aswath Damodaran believes that Adani Group, despite all its flaws, remains competent in India's infrastructure space. According to him,  he pegs the fair value for Adani Enterprises at Rs 947.

Hindenburg was indulging in hyperbole when it described Adani to be 'the biggest con' in history.  Hindenburg's short thesis spends as much time as it does trying to convince us that the company is over-levered. Being over-levered is not a con game, but a risk that equity investors in many investments take to increase their returns. So said Damodaran.

While valuing the stock at only Rs 947 apiece, he factored in upbeat assumptions on revenue growth and operating margins. That is a 38 percent downside from the stock's Friday close of Rs 1,531. The reason behind this, he says, is that the company's profitability has lagged, partly because investments take time to pay off and partly because it is in low-margin businesses.

For his calculations, Damodaran has split the past 20-year history into three parts: 2002-2015 - when the company grew its revenues steadily; 2016-2021 - when major restructuring spun off Adani Ports, Adani Power and Adani Transmission; and the recent period, when the group bought Holcim's stake in ACC and Ambuja Cements.

The debt to book capital ratio has stayed high through the period, but the rise in market capitalization in 2021 and 2022 lowered the debt to market capital ratio, he notes.

Consolidating across the Adani companies, the valuation guru explains that the family owns about 73 percent of the outstanding equity in these companies.

Of the 27.5 percent that is not held by the family, a significant percentage is held by foreign institutional investors, largely through index funds holdings. Meanwhile, retail investor presence is small, while some traders have been drawn to the counters due to the surge in pricing over the past two years.

According to the finance professor at the NYU Stern School of Business, investors in family group companies are buying into cross-holdings, opacity and the possibility of wealth transfers across family group companies.

So, it was overvalued, and perhaps by share movements by a select group within the family business. Is this a crime? Even if the intent was to pile on more debt against share value (overvalued), it may not seem a crime unless stock manipulation or insider trading is proven.

But what about Modi’s close association with Adani? This is not new. The Congress party was close with Adani when they were in power – in fact, Adani’s approvals or licenses were initially given by the Congress Government of that time. So, what’s the big deal? Most entrepreneurs are close to the Government of the day whether it is in the U.K., the U.S. or India.

Did Hindenburg Research have an agenda? They are acknowledged short-sellers. Was this their strategy? Piling debt is not a con. Accounting fraud or stock manipulation is. So, let the authorities examine what’s the truth of these allegations.

Meanwhile, Damodaran says he will not buy the stock because he likens buying shares in family group is like getting married and having your in-laws move into your bedroom (not just the house)!

Reference:

Aswath Damodaran dissects Adani crisis: What’s the fair value of this “competent” infra play? Shailaja Mohapatra, Money Control, 6 February 2023

Shell Makes “Obscene” $40bn Profit!

The U.K. government is under pressure to rethink its windfall tax on energy companies after Shell reported one of the largest profits in UK corporate history. With the surge in energy prices sparked by Russia’s invasion of Ukraine, Shell profit reached $40bn (£32bn) for 2022. This bonanza is the biggest in its 115 year history. Some have said it is “outrageous”.

The performance puts Shell on a par with the £38bn British American Tobacco made in 2017, but still behind the £60bn Vodaphone achieved in 2014, when the telecoms group sold its US business.

The stellar annual profits of Shell plc and BP plc — almost US$68 billion combined — are set to intensify the debate on UK taxation as households suffer a cost-of-living crisis driven partly by rocketing oil and gas prices.

Homes in Britain saw energy bills more than double last year, while motorists paid record prices at the pump. The soaring profits of oil and gas producers, and the deluge of cash they channelled to shareholders, have sparked the ire of politicians and unions, many of whom have called for higher windfall taxes.

BP reported full-year adjusted profit of US$27.65 billion, an all-time high, with earnings at its retail division more than tripling as petrol prices surged. The company announced a 10% increase in the dividend and an extra US$2.75 billion of share buybacks.

With Tories in power, increase in taxes is a “No-No” – especially if you the Liz Truss faction campaigning low taxes and high growth. This idea of a tax reduction will stimulate growth or what is sometimes called “trickle-down’ economics, is complete bunkum. This is actually back to the Reagan era with the Laffer curve. If taxation is above 50%, then you may have a positive outcome in increased output or GDP. Otherwise it is as good as singing the benefits of Brexit or that Saddam Hussein has weapons of mass destruction – a whole lot of crap!

So, for now raise the windfall tax and negotiate a fair deal with unions and assist those with cost of living issues.

References:

Calls for bigger windfall tax after Shell makes ‘obscene’ $40bn profit, Alex Lawson, The Guardian, 2 Feb 2023

Oil giants’ US$68b profits set to fuel UK tax debate, Simon Lee, CeoMorningBrief, 7 Feb 2023

Did the Education Minister Fail?

What happened at a secondary school in Johor Bahru should not have happened at all in the first place. This is especially in the context of Malaysia Madani. The impassioned pledges made by Prime Minister in all his campaign speeches in the last general election, declared that all children whether they be Malay, Chinese, Indian, Kadazan or Iban, are his children.

To organise a special workshop for only Muslim SPM students is unbecoming. This is messing around with lives and minds of young Malaysians. To make it worse, the Ministry tried to apologise by coming up with a ridiculous explanation. It had to be for Muslim students first as it was during the Chinese New Year holidays. So why leave out the Indian students then? They were not celebrating the festival. Why can’t we admit our mistake and apologise? Problem is too many are brainwashed by the race and religion mantra.

Source: https://www.malaysianow.com

The session included core subjects like Science and Maths and was not just limited to Islamic studies. In any case, the SPM exams were to start soon, so there was no time for another session for the others. The parents also said their children have not been notified till now of any session for their children.

The Education Minister failed in her first major test. She cannot leave it to the education department to investigate. Education is a federal matter, more so if racism has been found to have crept into the system.

The power to summon the principal and the state education director immediately to explain was required by the Minister. She would have won the hearts of Malaysians if she had decided to go down personally to Johor. 

The anger was not only felt by non-Malays but others too, including the Johor Sultan, who wanted the issue resolved. So, what can the government do to ensure this does not happen again? Simple, actually. Take control and issue a blanket order barring any form of academic workshops based on race and religion, unless done specifically for the subjects of Islamic Studies, Chinese or Tamil. The government should show that there will be no mercy for people in authority who discriminate against people under their charge based on race or religion. Transfer, suspend or sack those who play on the race or religion card.

Many are saying this racist episode is unlikely to be the last, but the PM and his team must put these deviations to bed for a better Malaysia. So, did she fail? Yes, she doesn’t understand reformasi. And she is not alone.

Reference:

Education Minister fails in first major test, K. Parkaran, FMT, 28 Jan 2023

Is There Hope for MAS/MAG?

Loss-making Malaysia Aviation Group Bhd (MAG) — the parent company of national carrier Malaysia Airlines Bhd, FlyFirefly Sdn Bhd and MASwings Sdn Bhd — is sticking to its break-even target in 2023. This is despite managing to deliver a profit in the fourth quarter of 2022. Breaking even will mark a significant milestone in the aviation group’s Long Term Business Plan 2.0.

Its group CEO Captain Izham Ismail believes an inflection point is just around the corner. Two years after MAG successfully emerged from a restructuring involving RM15 billion of debt owed to 75 creditors, the group is expected to report higher revenue and a narrower net loss in the recently ended FY2022. This is largely due to resurgence in air travel resulting from the reopening of borders.

Source: https://www.wikidata.org

Based on preliminary unaudited results for FY2022, MAG posted earnings before interest, taxes, depreciation and amortisation (Ebitda) of more than RM1 billion, a 116% increase over the previous year. The group turned Ebitda positive of RM433 million in FY2021, from a loss or negative Ebitda of RM1.76 billion in FY2020.

The group expects revenue for FY2022 to triple to more than RM10 billion from RM3.96 billion in FY2021 as it adds more capacity and extends coverage. It is also poised to report an unaudited net profit of about RM600 million for 4QFY2022. This would be its first profitable quarter since it underwent a full reset in 2015. Sovereign wealth fund Khazanah Nasional Bhd took Malaysia Airlines private in 2014.

MAG’s operations have remained cash-flow positive in the past 450 days. The group has not draw down the remaining RM2.3 billion of new capital committed by its shareholder Khazanah. In February 2021, the sovereign wealth fund committed to inject a total of RM3.6 billion into MAG to fund the latter’s business until 2025 as part of the debt restructuring deal.

As fuel and other goods get more expensive, analysts have grown more concerned that more consumers could put off discretionary spending, such as travel. In view of this, 2023 offers no respite for the airline industry.

However, the higher airfares and additional revenue from increased capacity weren’t enough to offset headwinds. The group’s profit and loss statement remained in negative territory in 2022. It posted a net loss of RM1.65 billion for FY2021, a significant improvement from the previous year’s net loss of RM4.1 billion, when it was dealing with the effects of travel restrictions and a slowdown in the global economy. The weakening of the ringgit against the US dollar had put pressure on carriers like Malaysia Airlines, with about 50% to 60% of its costs are in US dollars. In 2022, the ringgit lost as much as 14% against the greenback at the peak of the dollar strength in November.

MAG stopped fuel hedging in 2021 and 2022, and instead turned to fuel surcharges to cushion against the increased costs. But for 2023, it is looking to resume its fuel hedging programme.

Meanwhile, aviation consultancy Endau Analytics says 2023 will remain a tough year for Malaysia-based airlines given the “higher jet fuel prices and interest rates, which could be compounded by natural disasters brought about by climate change and new geopolitical conflicts that have far-reaching consequences for the global food chain”. Maybank Investment Bank Research, however, expects airfares to ease a tad as airlines reinstate capacity

Despite the lingering macroeconomic headwinds, China’s reopening on Jan 8 has given the region’s travel industry some hope and optimism. In the three years since China closed its borders, Malaysia Airlines had redeployed its capacity to Doha, Haneda and Bangladesh. In 2019, China accounted for 17% of Malaysia Airlines’ total capacity. Its current capacity into and out of China is running at less than 2% of 2019’s capacity. Under a route rationalisation exercise in 1Q2023, Malaysia Airlines will suspend its Kuala Lumpur-Brisbane direct flights in March, freeing up capacity. It plans to redeploy the aircraft to China. Network-wide, capacity deployed to date has reached 85% of 2019 levels. In 2023, the group’s capacity is to reach 94%.

The group is due to take delivery of 25 Boeing 737 MAX jets from June this year. In August 2022, it acquired 20 new Airbus A330-900 (A330neos), of which 10 were purchased directly from the manufacturer on a sale-and-leaseback arrangement with Avolon. The other 10 aircraft were leased directly from the aircraft leasing company. MAG currently operates a fleet of 100 aircraft, comprising six A350s, twenty-one A330-200s/300s, forty-seven 737-800s, seventeen ATRs, six Twin Otters and three A330 freighters. MAG recently disposed of all six of its A380 superjumbos, grounded by Covid-19 in March 2020, back to Airbus.

What remains to be done is service! What used to be top-notch crew and service, it has now become less than satisfactory. Product quality, service, pricing are key ingredients to match the top airlines in the world like Emirates and Qatar. If they can do that, why can’t we? So, I do hope they will re-focus on the essentials to get their turnaround story real!

Reference:

Cover story: Race to profitability, Kang Siew Li, The Edge Malaysia, 26 Jan 2023

Nurul as Economic Advisor: What’s the Problem?

Nurul Izzah Anwar, the 42-year-old eldest daughter of Malaysian Prime Minister Anwar Ibrahim, has triggered public uproar after her appointment as Senior Advisor to the 10th Prime Minister on Economics and Finance. This was effective January 3, 2023. She is working “pro-bono” or free without any salary or allowances, but it is still raising some brouhaha with people of a “righteous” background. On the surface, it screams “nepotism” – an extremely negative subject in a country where hundreds of billions of Ringgit have been lost through corruption, cronyism, favouritism and nepotism over 60 years under the previous governments. 

Source: https://en.wikipedia.org

Nepotism, in layman terms, means the act of using your power or influence to get good jobs or unfair advantages for members of your own family. Essentially, Bill Gates would have committed nepotism if he appoints any of his three kids, Jennifer, Rory and Phoebe, for top jobs at Microsoft.

So, they attack her qualification. For example, opposition Bersatu deputy president Ahmad Faizal Azumu asked whether she is qualified for the post as she only has a bachelor’s degree in engineering. Azumu should instead look at his own below-average credentials. He only holds a Masters Degree in Political Science from Universiti Teknologi Malaysia. Worse, Ahmad Faizal is tainted with a dubious Business Studies degree from Edith Cowan University, Australia. Nurul did her bachelor’s degree in Electrical and Electronic Engineering from the Universiti Tenaga Nasional. She then furthered her studies in the U.S., graduating with a a Master’s degree in public policy from the Johns Hopkins School of Advanced International Studies.

A so-called think-tank – the Center for Market Education (CME) – has expressed serious concerns about the appointment of PKR vice-president Nurul Izzah, arguing that she does not possess any specific background in economics or finance.  Don’t you have colourful economists like Janet Yellen or Ben Bernanke getting it wrong? Even Alan Greenspan admitted he could be held responsible for the “irrational exuberance” in the markets.

Some might argue why the prime minister can’t appoint an outsider. The question is whether someone without any personal or business agenda would be interested to work as Special Advisor on pro-bono basis – without stirring up racial and religion sentiments.

If there’s such talent, the country would not be in such a mess in the first place. Critics appear to assume the Special Advisor must be a genius in economy and finance to be qualified. In truth, such brilliant economists and financial experts, if they do exist, may have already migrated. 

The Centre to Combat Corruption and Cronyism (C4) similarly condemned Nurul’s appointment as not only nepotism, but a conflict of interest. Do they understand the meaning of conflict of interest? It is a situation in which a person is in a position to derive personal benefit from actions or decisions made in their official capacity. But a conflict cannot happen if there is no interest to begin with.

Some other critics argue that Nurul should join an NGO instead to advise her father. Have  they forgotten how Rosmah Mansor ran the country disguised as the wife of former PM Najib Razak who never interfered in the government affairs? Rosmah too had a special programme called “Permata” which she believed to be a non-profit organization. Yet, the so-called charity organization was allocated million in the Budget 2015 alone. Since its inception in 2007, nobody knows how billions of Ringgit had been spent or channelled from Permata. This shows you don’t need to directly work under the prime minister to steal money.

Ivanka Trump and husband Jared Kushner both served as senior advisors to former U.S. President Donald Trump. Even though the POTUS’ daughter and son-in-law were not paid a salary for their work, they made between US$24 million and US$121 million during their final year working in the White House. 

The scope of economy and finance is very broad. Is Nurul appointed to single-handedly fix the country’s national debt of RM1.5 trillion or to strengthen the Ringgit currency to RM2.50 to a U.S. dollar? Or is she appointed just to channel economic advice based on real problems on the ground because PM Anwar could not fully trust apple polishers or officials with ulterior motives around him?

It’s worth noting that Nurul Izzah, whose journey in politics began in 1998, had resigned as vice president of PKR and announced she would no longer serve the federal government in any capacity back in December 2018 because the principled “Princess of Reformasi” disagreed with how her father ran the party, not to mention how then-PM Mahathir ran the government.

All the best Nurul – just form a small, informed group of well-heeled economists to “bounce-off” ideas. Perhaps, you don’t need that since your father has appointed a small group of economists anyway.

Reference:

Nurul’s appointment as Economic Advisor – here’s why critics might have over-reacted excessively, FinanceTwitter, 31 January 2023

Debt Hangover?

Recently, Prime Minister Datuk Seri Anwar Ibrahim commented that Malaysia’s national debt has now reached RM1.5 trillion. This needs to be addressed urgently. It translates to more than 80% of the nation’s annual economic output or gross domestic product (GDP).

The PM alluded that Malaysia’s RM1.5 trillion debt comprises two parts, with RM1.2 trillion comprising the country’s total debts itself while the balance is related to off-balance sheet liabilities.

Based on the Fiscal Outlook and Federal Government Revenue Estimates 2023 tabled last October, these liabilities include committed guarantees, which stood at almost RM200bil. Other liabilities which are mostly lease payments for private-public partnership, pubic finance incentives and PBLT Sdn Bhd totalled some RM150bil. The remaining principal payments for 1MDB-related debts stood at about RM26bil.

As long as we continue to spend more than what we earn, we will remain in deficit and the nation would have no choice but to borrow and generations beyond us have to meet the obligations.

Under the Federal Constitution, the government is only allowed to borrow for development purposes and not for operating needs. Over the years, as we continued to spend for development expenditure, our debt level has been heading north. Revenue-generating ability has been restricted by a narrow tax base and an over-reliance on Petroliam Nasional Bhd dividends.

Under the Treasury Bills (Local) Act, 1946, the Malaysian Treasury Bills was initially capped at just RM20mil and the ceiling was revised in 1992 to RM10bil. Under the Loan (Local) Act, 1959, which had a cap of RM300mil before, it was revised to RM120bil in the year 2000. The nominal value capped ceiling was kept until March 2003 and thereafter Malaysia introduced a new cap in the form of a percentage of GDP at 40%. This allowed the government to continue to borrow in line with the growth of the economy.

Another two legislation that defines government’s borrowing is the Government Funding Act, 1983, which allowed the government to introduce syariah-based government securities while the External Loans Act, 1963, which allowed the government to seek foreign loans. Both of these acts were revised in 2006 and 2009, which enabled the government to increase the ceiling from RM1bil and RM300mil to RM30bil and RM35bil, respectively.

As Malaysia has been running budget deficits since 1998, the 40% debt-to-GDP ratio was also revised higher to 45% in June 2008 and a year later to 55% due to the Asian Financial Crisis. The debt ceiling was raised to 60% in November 2021 and to 65% now.

Based on the end-September 2022 update, Malaysia’s current statutory debt to GDP stands at 60% of GDP while the federal government debt to GDP was at 62.8%. The base assumption is that the nominal GDP will end the year at RM1,712.3bil (first nine months was at RM1,320.9bil) and there would not be further borrowings in the fourth quarter of 2022.

The Fiscal Responsibility Act (FRA) and the planned Medium-Term Revenue Strategy (MTRS), which the government is expected to table in 2023, are seen as key instruments for reforms.

A debt ceiling will put in place a rigid upper ceiling in terms of how much debt we can assume, be it RM1.2 trillion in statutory debt ceiling or any other figure, which will restrict any future borrowings unless approved by Parliament.

As we have seen in the case of the United States, the world’s largest economy has an absolute debt ceiling and it has also become meaningless as the Congress has no choice but to keep raising the debt ceiling level every time it is breached. Failure to do so will result in a government shutdown as it will be unable to pay its dues, especially salaries to civil servants and other obligations.

Another option is to have a definite debt-to-GDP ratio which will allow the government of the day to continue to borrow in the future as the denominator, which is the GDP, is expected to continue to expand.

Even assuming a 6% nominal GDP growth, which translates to about RM103bil GDP growth in absolute amount, Malaysia can afford to borrow at least RM66bil every year without breaching a debt-to-GDP ceiling of 65%.

The ability to borrow will increase in proportionate to the growth in GDP but capped at 65% of nominal GDP growth.

Both the absolute debt ceiling and the debt-to-GDP can be subject to abuse by a government of the day as it can always request for the ceiling or ratio to be raised. To instill discipline in the government, we must introduce a law that will restrict any government from raising this ceiling as it is detrimental not only to all Malaysians but adds further burden to future generations.

Malaysia should choose a hybrid model. For example, Malaysia can choose to have an absolute debt ceiling but subject to it not exceeding 65% of nominal GDP. If Malaysia intends to achieve a balanced budget within the next five years, the likely debt ceiling, based on the assumption that we would not spend more than 65% of the absolute nominal GDP growth, and assuming the nominal GDP expands by 6% per annum, perhaps a RM1.6 trillion federal government debt ceiling should be introduced.

Thereafter, Malaysia may work towards achieving a balanced budget by 2028, based on nominal GDP of RM2.46 trillion in five years. As for off-balance sheet liabilities, those will remain for now.

The MTRS plan should redefine how taxes are imposed on individuals and businesses. Malaysia is simply not collecting enough tax revenue at just over 11.3% of GDP for 2023 based on the original Budget 2023 that was presented in October 2022.

A new plan to raise taxes to enable Malaysia to achieve a balanced budget by 2028 needs to be presented. New taxes on forex transactions, wider coverage of windfall tax, higher individual tax rates at the top end and a wider SST may be necessary. It is still not right to introduce GST – when we are not a developed nation nor when our Gini coefficient is stuck at 0.4.

By 2028, tax revenue to GDP must reach at least 20%, which will then translate to approximately RM492bil in revenue.

A five-year plan to achieve a balanced budget is not impossible but what is more important is for the government to table a comprehensive plan to raise the government’s coffers, as debt reduction could only come if we can have a surplus budget.

Reference:

A RM1.5 trillion debt hangover, Pankaj C. Kumar, The Star, 28 Jan 2023

Gateway Proposal: Are We Going Retro?

Our MITI Minister made a proposal to make Malaysia the gateway for investments into Asean. The Minister made this statement while speaking to Bernama ahead of the World Economic Forum (WEF) in Davos, Switzerland which he attended as Malaysia’s representative.

Malaysian Institute for Economic Research senior fellow (Geoffrey Williams) described it as “no longer relevant” and a narrative that is already out of date. We may need to step up our pace and attractiveness with the strong competition from Indonesia, Vietnam and Thailand who may have overtaken us. Offshore investments are already flowing directly into the big markets like Indonesia and Vietnam. Most investors are fully aware of these markets and don’t need a gateway. If there is a need, it is more likely to be Singapore acting as the gateway.

Other countries are not only bigger but are also growing faster than Malaysia, with more opportunities for investment. Less corruption, better education and a more welcoming environment will garner new investments. Malaysia is descending into irrelevance with net foreign direct investments (FDIs) to Malaysia falling since 2016. In fact, Malaysian companies are increasingly investing in other countries.

Malaysia needs value added investments in healthcare, the creative industries, leisure-based activities and those in AI and technology. The local R&D scene needs a fresh perspective. The target should be smaller companies that will actually create jobs, offer supply chain opportunities and promote long-term research and development for the country.

It will be useful for the Minister to re-evaluate Malaysia’s strategic positioning after discussing with MIDA and MITI officials. Please re-calibrate with some thought process rather than “off-the-cuff” remarks that remind us of the 70s and 80s.

References:

Zafrul’s “gateway” proposal gets the thumbs down, David Pillai, FMT, 27 Jan 2023

FDIs – more than meets the eye, Pankaj C Kumar, The Star, 27 Mar 2021

Cyberjaya: Malaysia’s Failed Silicon Valley?

Cyberjaya was once the pride of Malaysia, as it was to be the Multimedia Super Corridor’s (MSC) first intelligent digital city, commissioned by the Federal Government of Malaysia in the late 90s. While there have been major improvements to Cyberjaya, it isn’t exactly comparable to Silicon Valley in the United States. An article by Insider was recently published with the following view:

 “Cyberjaya, located just outside of the capital city, Kuala Lumpur, was once dubbed the Silicon Valley of Malaysia. But today, the city has been slammed as a failure by media outlets and think tanks.” This came after the author of the article had visited Cyberjaya late 2022 and reviewed a shipping container hotel there.

While more than 100,000 people live in the city, it doesn’t have the start-ups and big tech headquarters that its California counterpart does. Instead, it’s a place where satellite offices, and data and call centres are set up. Those who work at these places are said to be earning USD$365 (RM1,563.84) a month. Cyberjaya was described as a city with lush greenery, dead malls and a gated community where some of the city’s wealthiest people live.

Source: https://ms.wikipedia.org

In its journey to remain competitive as a Global Tech Hub, Cyberview Sdn Bhd was mandated by the Government to revitalise Cyberjaya through the introduction of a new masterplan in 2019. 

The company has also taken on the role of a tech hub developer which will see the integration of five key elements - facilities, community, activities, experience, and incentives. 

Nevertheless, Cyberjaya has the highest concentration of tech companies, talent and creators in Malaysia owing to its tech ecosystem. Apart from the multinationals (Dell, DHL, Huawei and others) the city has home-grown talents like Aerodyne, IX Telecom, Monsta and Wau Animation. 

The most recent significant entry is Microsoft, who will be developing its data centre with a total investment of USD4.6 billion in new revenues. Additionally, Microsoft and its partners are estimated to contribute more than 19,000 direct and indirect jobs. Microsoft’s presence in Cyberjaya is an encouraging development and certainly provides a boost for the new masterplan that will see the creation of three tech clusters within the South Innovation Zone.

From the total of developable land in Cyberjaya, 1,063 acres or 29% are still available for future development. Cyberjaya is the only location in Malaysia that offers developers attractive potentials that comes with enterprise land category. Enterprise land generally offers lower plot ratio, which provides a distinct advantage for developers in offering office spaces at competitive rates.

In 2017, the World Economic Forum named Bangalore the world’s most dynamic city, based on factors including innovation and technology. Bangalore, the capital of Karnataka is the favorite destination for IT job seekers. It is also known as the “Silicon Valley of India”. The original Silicon Valley, situated in the southern San Francisco Bay Area of California, is home to many start-ups and global technology companies like Apple, Facebook and Google.

Malaysia should learn from Bangalore’s success to become a second Silicon Valley. That’s according to DAP veteran Lim Kit Siang. Bangalore has the highest number of engineering colleges than any other city in the world. Karnataka is a prime centre of learning with 16 universities, 133 medical training institutions, 134 engineering colleges and 712 colleges. It is the ‘science centre’ of India with over 100 research and development centres and has become a hub for Startup culture.

So, is Cyberjaya a failed Silicon Valley? It has facilities, land, pleasing greenery and many homes for the wealthy. But that is not the ingredients for a tech or Silicon Valley. Bangalore is a good example to emulate – we need the ecosystem for top research universities in the sciences and engineering; hub centres for medicine, pharmaceuticals, IT, AI, robotics and the like; the ease of entry for foreigners in these areas and the pursuit of STEM education could provide jobs in Cyberjaya. The “drag” so far has been the “nationalistic” policies. Unfortunately, “real” tech valleys don’t recognise our blinkered views. Good luck Cyberjaya – look at people rather than physical facilities. Start-ups are owned by smart people, not smart buildings!

References:

Cyberjaya dubbed Malaysia’s failed Silicon Valley, Renushara, worldofbuzz.com, 24 January 2023

Cyberjaya: A tech city for all, Cynthia Ignatius, businesstoday.com, 28 Feb 2022

Reflecting on failed MSC plan, Kit Siang urges Malaysia to follow Bangalore’s lead, R. Loheswar, malaysia.news.yahoo.com, 6 Aug 2019