EPF Prefers Dividends or Business Expansion?

Recently the Employee Provident Fund (EPF) voted against the proposed share buyback schemes in seven companies, all of which declared lower dividends in 2022. These were Mr DIY Group (M) Bhd, Malakoff Corp Bhd, CTOS Digital Bhd, Genting Plantations Bhd, Pentamaster Corp Bhd, IHH Healthcare Bhd and Tan Chong Motor Holdings Bhd. The pension fund will vote against Sunway Construction Group Bhd’s share buyback resolution as well.

The rationale for opposing these companies' proposed share buyback schemes is that spare cash should be utilised for higher dividends to reward shareholders or for business expansion.

It is worth noting that EPF does not have a blanket policy against share buyback activities. It has voted for the proposed share buyback schemes in companies such as VS Industry Bhd, Fraser & Neave Holdings Bhd (F&N), Kuala Lumpur Kepong Bhd (KLK), CIMB Group Holdings Bhd, MISC Bhd, United Plantations Bhd, UOA Development Bhd, MBM Resources Bhd, Kerjaya Prospek Group Bhd and Oriental Holdings Bhd.

According to data compiled by The Edge, F&N, MISC, KLK, UOA and Oriental maintained their dividend payout in FY2022, while CIMB, MBM, United Plantations and Kerjaya Prospek paid higher dividends during the year. VS Industry, on the other hand, has consistently declared above RM1 in dividends, though the payout was lower in FY2022.

The EPF has substantial stakes of over 5% in about 80 companies on Bursa Malaysia. Genting Plantations, Tan Chong Motor and Mr DIY are the companies that EPF opined should utilise their substantial cash balances to pay higher dividends to shareholders rather than buy back shares. The pension fund also opines that Sunway Construction could utilise its cash balance for business expansion and higher dividends. Also, the EPF believes there could be better utilisation of cash for IHH Healthcare.

In rejecting Pentamaster’s share buyback, the EPF said the semiconductor equipment vendor has weak free cash flow generation with no dividend policy.

Similarly, the EPF said CTOS’ share buyback scheme does not add much value to the pension fund and its shareholders. Instead, it prefers more cash dividends from the credit-reporting agency.

The share buyback scheme has stirred a debate in the US, where President Joe Biden has attacked some companies for spending money on buybacks rather than investing in their operations and called on the Congress to quadruple the tax on such stock repurchases.

Some view cash buy-back as of more value for shareholders versus dividend, as dividend is after tax. Reducing outstanding shares means price should move up. From an economics point of view, dividends and business expansion add value to the economy. A share buy-back scheme is when management has no or little idea of taking the company to the next level. Is it better to get rid of the management with the share buy-back proposal?

Reference:

EPF prefers dividends or business expansion to share buy-back, Anis Hazim, TheEdge CEO Morning Brief, 15 June 2023

Selamat Hari Raya Haji

 

US Inflation Slows, Hence Fed Pauses on Rate Hikes!

Both the consumer price index and the core CPI — which excludes food and energy — decelerated on an annual basis, highlighting inflation’s descent since peaking last year. At 4%, year-over-year inflation is now at its lowest level since March 2021, according to the Bureau of Labor Statistics.

The core CPI however, rose 0.4% for a third straight month, in line with estimates. The overall CPI, however, increased a smaller 0.1%, aided by lower gasoline prices.

Federal Reserve officials paused on Wednesday (June 14) following 15 months of interest-rate hikes. The decision left the benchmark federal funds rate in a target range of 5% to 5.25%. Fresh quarterly Fed forecasts showed borrowing costs rising to 5.6% by year end, according to the median projection, compared with 5.1% in the previous round of projections. Nearly all Fed officials, however, expect it will be appropriate to raise interest rates “somewhat further” in 2023 to bring down inflation. 

Inflation pressures continue to run high and the process of getting inflation back down to 2% has some way to go. The committee “judged it prudent” to hold rates steady this month given how quickly rates have rise.

Meanwhile,  China’s central bank ramped up its monetary stimulus to help spur the economy amid signs of a weakening property market, a slump in business investment and record joblessness among young people. The People’s Bank of China lowered the rate on its one-year loans — or medium-term lending facility — by 10 basis points to 2.65%, the first reduction since August. That will  prompt banks to lower their lending rates soon. The move came shortly before official data showed economic activity weakened in May. Growth in industrial output slowed to 3.5% from 5.6% in April, while retail sales grew 12.7%, below expectations. Fixed asset investment by private businesses contracted in the first five months of the year, while property investment deteriorated further.

The central bank has shifted to an easing mode after the economy lost momentum since the first-quarter’s post-pandemic surge. 

China needs to “focus on repairing and expanding demand” and spur business and market confidence, the National Bureau of Statistics said.

Chinese stocks, which climbed after the rate cut, largely held their advance following the data. A gauge of shares listed in Hong Kong was up 1.3%, still leading gains in Asia. The offshore yuan extended its loss to trade 0.2% weaker at 7.1865 per US dollar.

Key highlights of the data were as follows:

• China’s May Manufacturing Output +4.1% year-on-year (y-o-y); By Industry

• China May Retail Sales +12.7% y-o-y, Autos +24.2%; By Category

• China Jan-May Fixed-Asset Investment +4% y-o-y; Est. +4.4%

• China Jan-May Home Sales +11.9% y-o-y; Property Investment -7.2%

The unemployment rate remained relatively elevated at 5.2% in May, while the jobless rate for young people between the ages of 16 and 24 rose slightly to 20.8%, a new record high since data became available in 2018.

The PBOC timed its easing just as the Federal Reserve paused its rate-hiking cycle for the first time in 15 months, while still signalling further tightening ahead. The widening gap between US and Chinese rates have fuelled capital outflows and put pressure on yuan, which is down more than 3% against the US dollar in 2023.

Historically, in Malaysia, the OPR is 100-150 basis points above the Fed Fund rate. It is still too soon to talk of an OPR cut (from 3.0%) as inflation is still elevated and our differential with the Fed Funds rate which remains above 2%. This (negative differential) is not good news for our exchange rate and is worse with the weakening economic conditions in China. BNM has some tough work to do to keep growth going and “smoothen” the depreciation of the ringgit. If oil prices remain above USD80/barrel for the year, there is hope on the exchange rate front. Depreciation is good news for exporters but not so for importers, students going overseas or those foreign workers remitting funds to their loved ones. Personally, I prefer a stronger exchange rate regime and a higher productivity. If not, we are “masking” our inadequacies through this depreciation strategy.

References:

US inflation slows, giving room for Fed to pause rate hikes, Reade Pickert, TheEdge CEO Morning Brief/Bloomberg, 14 June 2023

Powell says nearly all officials expect “some” further Fed hikes, Jonnelle Marte & Craig Torres. TheEdge CEO Morning Bried/Bloomberg, 16 June 2023

China’s central bank ramps up rate cuts as economy weakens, Bloomberg, 15 June 2023

Khazanah’s New Fiasco?

Not too long after it was reported that Khazanah Nasional Bhd sold Iskandar Malaysia Studios (IMS) for pennies on the dollar, it appears that the same circumstances apply to the sovereign wealth fund’s investment in Kidzania.

Theme park operator Sim Leisure Group (SLG) recently acquired Kidzania Singapore after the children’s theme park went into liquidation in the city-state. SLG obtained all of its non-movable assets from receivers for a mere SG$110,000 (RM379,398).

Source: https://www.thevibes.com

Khazanah and Boustead Holdings Bhd, which launched Kidzania in Singapore in 2016, initially injected SG$48 million (RM165.52 million) into the project. Poor management of the theme park by Khazanah saw it record SG$15 million (RM51.73 million) in revenue and SG$8.3 million (RM28.63 million) in losses after tax, according to a Singapore Business Times report. Further, Kidzania Singapore also owed SG$53.4 million (RM184.17 million) to creditors, with as much as 93% of the debt owed to Theme Attractions Resorts & Hotels Sdn Bhd (TARH), a subsidiary of Khazanah.

TARH owns an 80% stake in Rakan Riang Pte Ltd (Rakan Riang Singapore), which operates Kidzania through a joint venture with Boustead Curve – a subsidiary of Bousted Holdings. Rakan Riang Singapore has a paid-up capital of SG$24 million (RM82.78 million) in ordinary and preference shares. It also showed that Rakan Riang Singapore’s total assets in 2017, which were valued at SG$50 million, depreciated to SG$6.578 million in 2019. By the end of 2019, the company had recorded a total of SG$87.839 million in recorded losses.

Based on the shareholder structure alone, it is believed that Khazanah, through TARH, injected at least SG$4.512 million into Rakan Riang Singapore, while Bousted contributed at least SG$1.128 million. Further, there are also three charges attached to the company, which have already been satisfied, with the chargee being Malayan Banking Bhd. It is believed that Khazanah, perhaps through its subsidiaries, obtained a loan with an estimated worth of SG$25 million with regard to its Kidzania Singapore investment.

However, this failed investment venture by Khazanah is not limited to its activities in Singapore; it appears the same circumstances apply to the Kidzania theme park in Malaysia, which was also purchased by Sim Leisure Group in 2020. TARH sold its 24.48 million shares to Sim Leisure Escape Sdn Bhd in 2021. Although it was reported that the Sim Leisure Group acquired Kidzania Malaysia for RM3.8 million, it is believed that this project, which involved Khazanah and Boustead Holdings, required an initial injection of RM90 million for construction and pre-operating costs. Kidzania Malaysia, which was operated by Rakan Riang Sdn Bhd (Rakan Riang Malaysia), also received a RM26 million loan from CIMB, which was fully satisfied in 2016.

Could Khazanah have leased out the operations of the theme park to other companies instead of selling it outright or going into receivership?

According to a report by South China Morning Post, by the close of 2022, Kidzania Malaysia, which never made any money under its former management – had brought in RM6.46 million in profits for its new owners. Meanwhile, according to reports, the Sim Leisure Group plans to refurbish Kidzania Singapore on Sentosa Island and begin operations by the first quarter of 2024.

The Malaysian-grown Sim Leisure Group, which is also listed on the Singaporean stock exchange, is in fact one of the world’s leading theme park developers, with Escape Penang, Kidzania, the John Wick ride in Dubai, and Six Flags Saudi Arabia among the 300 projects under their belt.

Why does Khazanah invest in a project with public funds and divest at a very low price, taking losses as a result? Why can’t they examine some serious options without any further funds injected? We have the best “brains” in Khazanah and this is the result? Will any “heads roll”? Please don’t hold your breath!

Reference:

Khazanah’s RM165 mil Kidzania S’pore sells for RM370,000, The Vibes, 16 June 2023

SPM 2022: Was it a Disaster?

The SPM results for 2022 revealed that 77% of candidates either failed or received a Grade E. Of the 373,974 candidates who sat for the exam, only 10,109 received straight As, 2.7% of the total candidates. Overall, Untuk Malaysia reported that 42.9% of the candidates, or 160,435 students, failed at least one subject. Over 33,900 candidates did not get their certificates as they failed the Bahasa Malaysia or History paper.

The high percentage of candidates who received a Grade E or failed has raised concerns about the education system in Malaysia.

A breakdown of the key statistics in the latest SPM result. (Pix: Ministry Of Education)

Many have called on the Ministry of Education to be more transparent about the minimum passing marks for all SPM subjects and the mark percentage required to qualify for an A+ or an A. To pass Additional Maths it was 8 marks!

Critics argue that having many citizens with higher intellectual and academic training is crucial for developing the economy and society.

The results also highlight the need for more examinations to monitor future citizens’ progress in their academic training.

The abolishment of UPSR and PMR exams has also come under scrutiny, with many suggesting that more public examinations are needed to gauge how students progress throughout their academic journey.

While there were reportedly 10,000 students who received straight A’s, there were also a total of 89,752 candidates (24.3%) failed Mathematics and 52,674 candidates (14.3%) failed English. Untuk Malaysia also reported that 27,621 candidates failed Science (compared with 56,624 who obtained grade A or A+ or A-); 23,358 candidates failed History (94,402 with grade A or A+ or A-); 9,642 candidates failed Bahasa Malaysia, (118,297 with grade A or A+ or A-); and 24,304 candidates failed Islamic Education (69,005 with grade A or A+ or A-).

Despite efforts to improve the curriculum and support students, many still struggle with basic reading, spelling and mathematics making it difficult for them to succeed.

This issue has been a concern for many educators and parents, as it can have long-term consequences for students’ academic and professional prospects. One possible solution that has been suggested is to simplify the curriculum and focus on core skills such as reading, spelling, and arithmetic in the early years of primary school and beyond. This approach could help ensure students have a strong foundation.

There are other factors may contribute to these subjects’ high failure rates. For example, economic and social factors, cultural or linguistic barriers or Covid crisis.

It is time to revamp the thinking in educating our future citizens. Bring back elite schools – RMC, VI, MCKK and others. These schools have been “dampened-down” with the silly, socialist idea from Animal Farm. Please reverse now for the future of Malaysia. I hope Sarawak goes on its own and shows others how it should be done.

Reference:

77% of SPM candidates fail or receive Grade E in 2022 results, Fernando Fong, The Rakyat Post, 17 June 2023

What Ails The Bursa?

Over the past decade, if one were to measure the performance of the local bourse by taking the FBM KLCI as a reference point, an investor may be disappointed. (That’s the view expressed by Pankaj C. Kumar, Starbiz 10 June 2023).

The FBM KLCI ended May 2023 at 1,387 points and fell further in the first five trading days in June and was last seen at just under 1,375 points on Thursday, 8 June 2023. Over the past 10 years, the FBM KLCI has dropped almost 400 points or 22.5%. This is against the peak of 1,893 points that was achieved in July 2014. This is 27.4% lower.

The local bourse has been an unloved market among foreign investors for a while. Foreign holding is down to just 20% as at the end of May 2023 from 25.2% exactly ten years ago.

Between 2013 and Thursday’s closing market data, foreigners have been net sellers in the market to the tune of RM65.9bil. Other than the 2013 net inflow of RM2.6bil and last year’s net inflow of RM4.4bil, foreigners have been net sellers in the market every year with an average net outflow of RM8.7bil a year between 2014 and 2021. Year-to-date, net foreign selling amounted to RM3.32bil. If the pressure persist, foreign shareholding may dip below the 20% threshold.

According to the Securities Commission’s Capital Market Stability Review 2022 report, as at the end of September 2022, foreign shareholding on the market stood at 20.6%, of which some 68.7% of that are those related to strategic interest, leaving behind non-strategic stakes or those that trade in the market at 31.3% of the total foreign shareholding.

The immediate concern for the market will be the upcoming six state elections with expectations that these will be held between the end of July to early August.

Into June 2023, the issue as to where inflation and interest rates are heading remains a concern for markets. Inflation globally remains stubbornly sticky and elevated despite the numerous tightening measures. 

Although the US Federal Reserve may hold rates in its meeting scheduled for mid-June, there is still a probability that it may still raise rates in its July meeting. Members of the Federal Open Market Committee (FOMC) remain divided if further rate hikes are necessary to cool down inflationary pressure as Core Personal Consumption Expenditure Index has remained elevated (between 4.6% and 4.7% for the past six months).

Bank Negara’s 25 basis points hike in May was essentially a pre-emptive strike ahead of the curve should inflation pressure persist.  Nevertheless, the rate hike did little to help the ringgit to recover the lost ground, which is down 4.9% year-to-date. Among Asian currencies, other than the yen’s year-to-date decline of 6.3%, the ringgit’s weakness seems to be correlated to the yuan’s weakness, which has dropped 3.2% year-to-date.

With the FBM KLCI’s year-to-date decline of 8.1%, the local bourse is the worst-performing market among Asia-Pacific countries, not only in local currency terms, but also in dollar terms, as it is now down by 13% year-to-date.

The poor 1Q23 earnings report card, the political climate, external uncertainties with respect to rate hikes and the relative strength of the dollar vis-à-vis the ringgit, may take a toll before the market finds its footing. This is despite price-to-earnings ratio is just under 13.5 times for 2023. Many view both performances of the Bursa and the ringgit as barometers of a vibrant, confident economy. We need to drill-down the reasons and work constructively to rectify the present situation.

Reference:

Another washout quarter, Pankaj C. Kumar, The Star, 10 June 2023

Are The New MM2H Rules Really Paying Dividends?

The Home Minister has defended the stricter requirements for a long-term residency programme for foreigners. He expressed it netted nearly RM1.0 billion. The Malaysia My Second Home (MM2H) programme has had its financial requirements tightened and the country has attracted some 800 “quality” applicants.

In April, FMT reported that the MM2H programme saw a 90% drop in the number of applicants because of tougher conditions imposed. Applicants are now required to have permanent savings of at least RM1 million and liquid assets of at least RM1.5 million. Previously, they only needed savings of between RM300,000 and RM500,000. They must now also show an offshore income of at least RM40,000 a month, up from RM10,000. Why not go under the Premium Visa Programme (PVP) which has similar requirements (or even better features) and you could stay for 20 years (option of another 20 years) instead of 5 years under MM2H?

Let’s look with a bit more in-depth at the recent statement and numbers (This was reviewed by Andy Davison on ExpatGo). The Minister said 375 MM2H visas were approved under the revised programme. This was since it was launched some 20 months ago. During its peak time in 2017 and 2018 the programme generated some 6,000 approvals a year so during a 20-month period, it could have theoretically approved over 9,000 applicants had the requirements remained the same.

The spending contribution of those 9,000 people would have far exceeded that of the 375 approved under the new version of MM2H. The main contribution under MM2H has always come from the participants’ annual spending and the purchase of capital items like homes and cars.

Research among English-speaking MM2H visa holders who came from over 30 different countries was conducted by ExpatGo. Their average monthly spend was a little over RM10,000 a month and about 60 percent of them purchased houses and even more acquired local cars. That was a valuable contribution to the country. They were also overwhelmingly positive about the programme and Malaysia.

The Home Minister is looking only at the data on the positive side; if 375 new applications were approved but 2,000 participants have left the programme, there is a huge net loss. The Minister was also quoted as saying under the former programme some applicants were actually spies. Raising the income and fixed deposit requirements cannot reduce the risk of “spies” being approved. Vetting applicants is a security function, not a financial one.

Several countries have identified the benefits of attracting foreigners with reasonable incomes and offer attractive residency programmes with far less stringent conditions. Not only have people left Malaysia and gone to these countries (Thailand, Indonesia or Vietnam), but many potential applicants have selected other countries because they were considered not welcome anymore. The well-respected annual index of ‘best places to retire’ published by International Living dropped Malaysia from the top of the list in Asia after the new rules were announced.

According to the last Home Minister, some Malaysians were concerned about large numbers of foreigners moving into the country. Hence, the cap on the total number of approved applicants to one percent of the population. Approving some 6,000 people a year could hardly be that disruptive, especially when the Malaysian population has been increasing by roughly 500,000 a year.

If the Malaysian government wants to attract foreigners to the country, then please re-do the MM2H. Otherwise, the PVIP is a better programme or for that matter the one from Sarawak. Perhaps, the Minister may want to give each state the ability to design their own “MM2H” programme. And if the ringgit is depreciating, the Minister could make his small contribution and improve matters by a well crafted MM2H that brings in FDI. If not, he is proven to be no better than the previous Home Minister!

References:

New MM2H rules paying dividends, say Home Minister, Pradeep Nambiar, FMT, 

7 June 2023

Minister claims new MM2H programme working well. We don’t agree, Andy Davison, ExpatGo, 8 June 2023

Unrealistic for Ringgit to Hit RM5 to USD1?

Bank Negara Malaysia (BNM) has dismissed concerns of the ringgit hitting RM5 against the US dollar. They view it as unrealistic as there is no crisis at hand. When the ringgit levels moved from RM2.5 to RM3 to RM4, there were issues like the Asian Financial Crisis. BNM remains confident in its ability to manage fluctuations in the currency. In fact, BNM sees the ringgit may strengthen to RM4 against the US dollar if the uncertainty recovers quickly. 

But what ails the ringgit?

The economy grew at an average annual growth rate of 7.3% from 2000 until 2020. Isn’t that a factor for exchange rate appreciation? What is most disappointing to the man on the street is that after 25 years since the Asian Financial Crisis (AFC), the local currency is now weaker than what it was during that turbulent period. To many on the street, the sustained weakness of the local unit is perplexing, given the local economy has recovered from the crisis and the gross domestic product (GDP) had grown steadily from RM356.4bil in 2000 to RM1.4 trillion in 2020, an average annual growth rate of about 7.3%.

Some say the uncertainty over the US debt ceiling drove forex traders to bid up the greenback to a six-month high against the local unit at RM4.6366 at the end of May despite Bank Negara raising its overnight policy rate by 25 basis points to 3% in early May. That helped narrow interest rate differentials and support the ringgit but not for long. 

In the near term, the country’s trade balance hasn’t improved as much as what Malaysia’s terms of trade indicated in 2022 due to a surge in domestic demand for imports.

Moderating commodity terms-of-trade are likely to impact commodity exports, while manufactured goods exports have moderated due to slower global growth. The local unit initially appreciated on China’s reopening optimism but growth momentum there has softened compared to market expectations. Interest-rate differentials continue to widen against the ringgit. There is also some political uncertainty heading into key state elections in July and investors might wait for more clarity on politics and fiscal reforms post-elections before turning more positive on the ringgit.

While it is undeniable the ringgit’s weakness against the US dollar is due to a cocktail of factors, its sustained decline over the past decades is beyond Bank Negara’s control.

Concerns about political stability, the delayed overhang reforms, worries about fiscal and debt sustainability push up not only the currency and equity risk premium, but also the volatilities of the ringgit induced by a two-way capital flow on the back of investors concerned about the government’s political commitment of making the reforms happen. (This is the view expressed by the executive director of the Socio Economic Research Centre.)

Malaysia has a managed floating exchange rate, which means that movements in the ringgit exchange rates are determined by the demand and supply of the ringgit in the forex market. Hence, on a cross-rate basis, the ringgit has weakened more against some regional peers, as they have weakened relatively less against the US dollar compared to the ringgit. Its weakening against the Singapore dollar has gained particular attention, as some 40 years ago, the exchange rate was almost at parity.

The current administration should work towards reform of the political system, institutional and economic revamp to enhance Malaysia’s resilience and competitiveness in trade, doing business and attracting investment.  That, in turn, would help make the ringgit a far more stable and stronger currency in the future. Meanwhile, parents who have kids studying abroad have to fork-out more and so do importers of good items and intermediate goods.

References:

BNM: Unrealistic for ringgit to hit RM5 against US dollar, S Birruntha, New Straits Times, 

8 June 2023

What ails the ringgit, Bhupinder Singh, The Star, 3 June 2023

Is Indonesia’s HSR Delayed Further?

Indonesia's transport ministry and three consultants have pushed back on a China-funded consortium's plan to start full commercial operations of the country's $7.3 billion first high-speed train service in August.

The 142 km (88 miles) line from capital Jakarta to Bandung is being built by a consortium of Indonesian and Chinese state firms and is already $1.2 billion over the initial budget and four years behind schedule.

A smooth opening of the railway line, the most high-profile BRI project in Southeast Asia's largest economy, as part of Independence Day celebrations would be a boost for its ruling party ahead of a general election next year.

Source: https://en.wikipedia.org

Months before its proposed commercial launch in August, the showpiece project is beset by fresh problems. The consortium's Chinese participants want a full operational worthiness certificate for the line despite an incomplete station.  Instead, the transport ministry and consultants Mott MacDonald, PwC and local law firm Umbra have suggested that full-fledged commercial operations could start in January 2024.

Indonesia is negotiating with China on an additional $560 million loan and asking for an interest rate of 2.8% for the portion of the loan in yuan, which is lower than the China Development Bank (CDB) offer of 3.46%. Debt negotiations underway with CDB is focused on the interest rate. 

The railway plans to begin a free trial with passengers in mid-August, with paid trips expected in September and the incomplete station likely finished by November. The fresh loan is needed to help cover a $1.2 billion cost overrun.

PT KCIC expects it will take 40 years for its investment to become profitable, twice as long as initial estimates. One-way tickets on the line will cost up to 350,000 rupiah ($23.56) depending on the distance travelled. The planned 45-minute train ride between Jakarta and Bandung compares with a car journey of two to three hours or the current three-hour rail trip. But with the terminal stations located outside the city centres, the high-speed rail line could struggle to attract the business passengers being targeted.

Whatever the case, at least this HSR is near completion. We could learn some valuable lessons for the proposed HSR from KL to Singapore. Cost, financing, tenure of debt, equity level business model and project management are all key points for the success of a project of this nature.

Reference:

Indonesia’s delayed China-funded rail project beset by fresh problems, Stefanno Sulaiman, Reuters, 8 June 2023

Is The Quality of Education System of Concern?

A former vice-chancellor of Universiti Kebangsaan Malaysia (UKM) has questioned whether the 2022 SPM examination results released recently reflects the actual quality of the nation’s education system. The 2022 SPM results showed an improvement in the country’s education.

At the higher education level, public universities such as UKM, Universiti Malaya (UM), Universiti Putra Malaysia (UPM), and Universiti Sains Malaysia (USM) all fared well in the Quacquarelli Symonds’ (QS) World University Rankings. 

But Malaysia was lagging behind in the context of global competitiveness. In the International Institute for Management Development (IMD) World Competitiveness Ranking, the quality of Malaysian talent has been declining every year. In 2013, Malaysia was ranked among the top 14 in the world. However, in the latest ranking, it has dropped to 36. 

Source: https://www.wikiimpact.com

In early 2023, the statistics department stated that 170,000 primary school students lacked proficiency in reading. In May 2023, the education ministry reported that nearly 50% (180,680 students) of the 2021 SPM graduates were not interested in pursuing further studies. The extreme lack of interest in pursuing further studies is even more concerning because currently, only 28% of Malaysia’s workforce consists of skilled workers. This is significantly lower compared with the average of several developed countries, which is around 53%.

We are in a comfort zone on education. Every year we bask in the “glory” of better SPM results. The reality is different. Ask the parents, the employers or the lecturers in universities, especially the foreign ones. If you don’t acknowledge there is a problem, then how can you fix it? Education has a myriad of issues – curriculum, teacher quality, students’ interests, numerous pathways-national, private, vernacular, home schooling, tahfiz and everything in between. We don’t seem to know what we want – it is like going to a fusion restaurant and hoping for a miracle of sorts! The nationalists want only one pathway – the national schools, period. The vernacular groups want their language stream; the private schools “dish-out” the curriculum from their country of origin and that too at a price one may not be able to afford; the Islamists are proud of their religious schools of many shapes and sizes. What a potpourri of colour and spice!

I have said this before and I will say it again unapologetically, there are three ingredients required – languages (more than 2), mathematics (including IT and coding) and the sciences. If you want to be a developed nation, then the curriculum has to revolve around these three ingredients. If not, we will always remain a “potential” developed nation!

Reference:

Quality of education system is a concern, says former UKM VC, FMT reporters, FMT, 9 June 2023

The 80:20 Workforce (ruling) by End-2024 is Not Achievable!

A government ruling requiring at least 80% of the workforce in manufacturing companies to comprise locals by the end of 2024 is impossible to achieve. This is according to the Malaysian Employers Federation (MEF). There has been progress in meeting the target but it still remains very challenging. A review of the policy is required because it is not possible to achieve the 80% target any time soon.

For manufacturing employers to digitalise processes and automate production, there is a whole host of incentives that is needed. In 2016, the deadline was originally set for Dec 31, 2022.

Source: https://www.wikiimpact.com

It is easy to set a policy and suggest a deadline, but hard work is getting local workers to accept the change in job landscape. Many locals tend to seek out easier jobs, with air-conditioned environments and higher pay. Who wants dirty, difficult and dangerous jobs? Only foreigners! It is the same in other parts of Asia, Europe or America.

Federation of Malaysian Manufacturers (FMM) president said the new deadline would be achievable if industry and government worked hand-in-hand to increase dependence on technology. The FMM has been a strong supporter of a market-based levy mechanism and since 2009, been proposing the government introduce a multi-tier levy mechanism (MTLM) as a means to reduce the dependence on foreign workers. 

Just take plantations, we have a shortage of labour. What innovations have been done to reduce labour force? 

Or, look at restaurants, we rely on Bangladeshis, Indians or Sri Lankans for labour. We have seen robots being used but once the Government approves more foreign labour, the robots are sidelined. The process from taking orders, cooking, serving and finally payment could be fully automated. You may only need one or two persons per restaurant. Just create a few “model” restaurants and others will follow!

Reference:

Employers say 80:20 workforce ruling by end-2024 not achievable, Tsubasa Nair, FMT, 

3 June 2023

The “Trans-Confusion” of Gender, Race and Everything Else!

Thanks to Bruce “Caitlyn” Jenner and many others, we’re all familiar with the concept of being transgender. But what about being transabled or transracial or transspecies or transage? Are these all valid and real? Or are all of them — including being transgender — based primarily on mental or emotional disorders?

We are also conditioned by media propaganda to accept the idea that transgenderism is here to stay.  One of the ways the “trans” rights movement does this is to attempt to show us that we are helpless to stop it. But transgenderism is not the end of the endless progression of new victim groups demanding special rights; it is only the beginning.  

Source: https://www.hli.org

1. Transableism

Even other “trans” people consider the “transabled” movement to be the strangest of all — and some of the other “trans” rights movements oppose it.  Transableism is, in fact, the precise opposite of transhumanism and might be seen as a form of negative eugenics.  Transableism seems opposed to transhumanism in principle because the goals of the two movements seem diametrically opposed.  However, in reality, transableism is just another movement that insists that people may do whatever they want with their own bodies, and so it is helping to set the stage for transhumanism.

Transabled people are otherwise healthy, but they desire to be mutilated or crippled in some way in order to eliminate what they feel is a foreign limb or ability.  Usually this means the person wants to be blinded, paralyzed or have one or more limbs amputated.

Motivations for such drastic mutilations stem from the actual feeling that one is not at home in one’s own healthy body, or from an unhealthy desire for the sympathy and help that crippled people receive from others.

2. Transethnicity

It is an oddity that transgenderism is accepted by a large portion of the population, but that “transethnicity” or “transracialism” is not.  

Rachel Dolezal is white woman who was born of white parents.  But she calls herself “unapologetically black.” Her thesis is comically out of touch with reality: “What I believe about race is that race is not real.  It’s not a biological reality.  It’s a hierarchical system that was created to leverage power and privilege between different groups of people.”

She began masquerading as black in 2004 and eventually became the head of the Spokane chapter of the NAACP.  But her parents, growing tired of her public attacks on them, “outed” her as White in 2015.  She subsequently lost her NAACP leadership position and her position teaching African Studies at a local college and eventually became an object of derision across the political spectrum.  Despite nearly universal condemnation, she still insists that race is a social construct, comparing herself to Bruce/Caitlyn Jenner.

3. Trans-speciesism

Some people suffer from what psychologists now politely call “gender dysphoria” — when a person’s mental sex does not match his or her physical sex.  But what do we do with someone who claims to have “species dysphoria,” who believes that they are a non-human species trapped in a human body?

Some people are so preoccupied with certain species of animals that they have an obsession to become one of them.  There are no authoritative studies on the motivations behind such mutilations, which usually require hundreds of thousands of dollars of complicated surgery and which appear to be an obsession with body modification that is the province solely of the distracted rich.  

All of this silliness may be very amusing — for the moment.  But I can guarantee that, within ten years, it will be defined as a “basic human right,” and liberal politicians will be demanding that those who laugh at people who mutilate themselves to look like animals be charged with hate crimes, and that “furries” and others be a protected class.  And why should the taxpayer not foot the bill?  

There are other variations of this concept that attempt to bridge the gap between some of the other “trans” movements and transhumanism.  They are so bizarre that they do not even have names yet.

The great danger of such people is that their ideas may seem silly to us now, but the more people hear about a new idea, the more they get desensitized to it.  After all, shortly before the turn of the millennium, we laughed at the absurdity of two people of the same sex getting married to each other.  And now we have homosexual “marriage” legalized in many nations. Even the Church of England wants to bless same sex couples. So, where do we go from here? The Bible does not support the “trans” development and the destruction of Sodom and Gomorrah is a good testimony of God’s wrath on such deviations. Yes, there are a small number of people who may feel “queer” which may require some special attention. But not this fad thing of being a “Trans”!

References:

Bridging the gap between transgenderism and transhumanism, Brian Clowes, lifeissues.net, 23 June 2020

What’s the difference between transgender, transabled, transracial, transspecies and transage? Michael Brown, The Stream, 2 February 2018

Are We Drowning in Debt?

Malaysia’s debt-to-GDP ratio is projected to increase if there are no major fiscal reforms. (This is according to RHB Research group chief economist Sailesh K. Jha). The annual debt/GDP ratio, including general government debt and contingent liabilities, is estimated to reach 109% in 2025 and 116% in 2026, up from 81% in 2022. The increasing debt-to-GDP ratio is driven by rising contingent liabilities, falling federal government tax effort ratio since 2012, and rising federal government expenditures such as subsidies, emoluments, and development expenditures since 2017.

The declining non-petroleum related revenues share of total revenues since 2017, may lead to a worse-case scenario where the debt-to-GDP ratio could reach around 145% of GDP in 2026. Significant tax enhancement and expenditure reduction policies by 2024 are needed to address this issue. GST is not the solution. Fiscal reforms that prioritise expenditure rationalisation, revenue enhancement, and debt management must be implemented.

Source:https://themalaysianreserve.com

A major drop in contingent liabilities, subsidies, emoluments, or development expenditures is necessary to ensure that the debt-to-GDP ratio is on a declining trend from 2025

Malaysia cannot grow itself out of its debt problem, and GDP growth has been driven primarily by labour force expansion and capital accumulation. These are both unsustainable sources of growth in the long run. Malaysia has four ministries responsible for the economy – Finance; Economy; Investment, Trade and Industry; and Domestic Trade and Cost of Living Ministries. Isn’t there an overlap of functions? And all these amid poor global outlook, drop in trade surplus, crash of the ringgit, increase in poverty and income inequality amongst others. Business outlook remains cautious with political stability under pressure. The PM has his hands full and has promised resolution of water woes in Kelantan and Sabah, energy in Sabah and other mundane things like potholes on major roads.

Structural weaknesses in the economy has to be addressed by investing in human capital development, enhancing digital infrastructure, and diversifying the economic base, enhancing food production, improving FDI and DDI landscape and removing outdated policies that restrain growth and revenue flows. Unless we are prepared to address this seriously with immediate and long-term measures, we will be unwittingly following the U.S. Congress in raising debt ceiling.

Reference:

Malaysia’s debt-to-GDP ratio to reach alarming heights without significant fiscal reforms, Rupinder Singh, The Malaysian Reserve, 12 May 2023

T20 Households to Lose Benefits in 2024?

In its bid to uplift low-income citizens ever since it came into power, the Anwar administration has set its sights on the top 20 per cent households, also known as the T20. Several perks may no longer be available to the T20 from 2024. The bulk of it would be restructuring blanket subsidies, which critics claimed have disproportionately benefited higher-income individuals who consume more.

The classification of T20, the middle 40 per cent (M40) and the bottom 40 per cent (B40) is in itself problematic as it does not account for costs of living — therefore does not quite accurately portray the supposed wealth of those in the upper bracket.

For example, if a household is earning RM8,000 in total, it would be considered T20 in Kelantan — but in Kuala Lumpur, it would not even be considered M40. Instead, it would be considered B40 in Kuala Lumpur. But nationwide, it would be considered M40 — more accurately in the M3 sub-category.

Below is the a list of subsidies that the T20 will not be able to utilise soon:

Fuel

During 2022, the government spent RM50.8 billion on fuel subsidies. Of that amount, approximately 35 per cent, or RM17 billion, was used by the T20.

A targeted subsidy, meant to benefit the poor more than the wealthy, has been talked about since 2018, when Pakatan Harapan got control of the government after the 14th general election. However, the initiative was delayed several times as stakeholders did not come to an agreement on the best method of implementation.

On May 19, Deputy Finance Minister announced that the T20 will no longer be given subsidies starting next year. The mechanism for implementation is yet to be revealed, but it was announced that a newly created organisation called the Central Database Hub or Padu, will be in charge of figuring out how the targeted subsidies will work. It could be in the form of identifying one’s MyKad, a new system of cards altogether, or based on the engine capacity of their automobiles — which would mean that a high-earner using a 1,000cc car would still be liable for subsidised fuel.

Electricity

Electricity subsidies for T20 households will also end in 2024.  This comes after the government in January decided to stop electricity subsidies for medium voltage and high voltage users — which are mostly non-residential premises such as factories or large office buildings — until June 30. At the time, farmers and animal breeders however were told that they would continue to benefit from a subsidy of two sen per kWH, which is the same amount enjoyed by domestic users.

In March, Natural Resources, Environment and Climate Change Minister told Parliament that the government had set aside RM10.76 billion for the expected cost of its electricity subsidies for the first half of 2023.

Haj aid

In March, Tabung Haji chief executive officer Datuk Seri Amrin Awaluddin said that the cost of performing the Islamic pilgrimage of Haj had increased to RM30,850 in 2023, up from RM28,632 last year. The government would be bearing an additional RM1,000 in Haj subsidies for the B40, and would halt subsidies for the T20. Haj subsidies for the T20 once again will be stopped.

In April 2022, then minister in the prime minister’s department Datuk Idris Ahmad said that the government spends between RM300 million and RM400 million per year on Haj subsidies.

Tax

The government is to raise the income tax rate of those earning between RM100,000 and RM1 million between 0.5 to 2 percentage points — the higher the income bracket, the larger the increase. Additionally, the government is working on imposing a tax on luxury goods, such as luxury watches and luxury clothing.

In Budget 2023, the government projected earnings of RM995 million from income tax and an additional RM7 million from other direct taxes for the current year. Indirect taxes — such as sales tax and excise duties — was estimated to provide approximately RM248.9 million.

The huge disparity in who counts as T20 across the country has since fuelled debate on how Putrajaya will classify who belongs in the T20 group that would no longer receive subsidies in 2024.

If you drop subsidies for the T20, you must be prepared to run the risk of more loopholes being exploited. How do you prevent someone in M40 or B40 assisting the T20 in some areas like fuel? Or, will you be able to prevent a M40 buying luxury goods on behalf of the T20? Malaysians are creative people; they will always find ways to go around obstacles.

Isn’t it better to do direct transfers to the B40 from any tax increase to the T20? In addition, this (transfer) will enhance consumption and may lead to a higher GDP growth. Otherwise, the T20 is going to suffer a double “whammy” – no subsidies and an increase in tax rate. The other idea of using “household net disposable income” is laudable but very difficult to implement – data is weak for “disposable income” as I see it.

References:

Putrajaya tightens purse strings, here’s what T20 households won’t get to enjoy starting next year, Keertan Ayamany, The Malay Mail, 7 June 2023

No more B40, M40, T20? Economists welcome govt’s move to “household net disposable income” for targeted subsidies, Keertan Ayamany, The Malay Mail, 8 June 2023

Was Prasarana, Rapid Negligent in the 2021 LRT Crash?

Prasarana Malaysia Bhd (Prasarana) and Rapid Rail Sdn Bhd (Rapid Rail) have denied allegations of negligence over the Kelana Jaya Line LRT crash in 2021 which left 47 commuters seriously injured. In the accident on May 24, 2021, a total of 47 train passengers were reported to be seriously injured, while 166 suffered minor injuries when a head-on collision occurred between a manually driven empty train and an automated driverless train carrying passengers on the Kelana Jaya Line between the Kampung Baru and KLCC stations.

The statement by Prasarana and Rapid Rail was in response to a lawsuit filed by eight commuters who alleged the defendants’ negligence had resulted in injuries they sustained in the crash. This was reported by The Vibes. Though both companies admitted that a crash did occur, however the claims of negligence by the plaintiffs must be proven with “concrete evidence”.

https://www.freemalaysiatoday.com / Twitter pic

Prasarana and Rapid Rail said that the injuries suffered by the eight plaintiffs were “caused wholly and/or in the alternative, partially by the negligence of the plaintiffs in all material times.”

“Failing to stand or sit at the locations designated for passengers, failing to hold the straphangers provided by the defendants, with negligence and/or purposely caused and/or allowed themselves to experience the injuries to which they have claimed,” the companies were quoted as saying.

Prasarana and Rapid Rail went on to request that the court strike out the claims. In a statement of reply, the eight said they will furnish medical reports to back their claims that the injuries they suffered were caused by Prasarana and Rapid Rail’s negligence. The commuters also dismissed the claim that they were negligent and brought the injuries upon themselves, saying that Prasarana and Rapid Rail were responsible for the safety of passengers.

In the suit filed in March, the plaintiffs said they were physically and mentally healthy prior to the incident. All of them claimed to have suffered physical injuries and other losses as a result of the crash. They are seeking more than RM860,000 in special, general and exemplary damages, as well as 5% interest, costs and other relief deemed fit by the court.

How do we get people to travel on trains when the operator is not responsible for its operations? It is like having food in a good restaurant but if you get a tummy ache, the restaurant or cook was not held responsible? Or, like the Minister of Education in the Democratic Republic of Congo who said he impregnated his deputy by accident?

Perhaps we should buy the “kiss” train insurance for travel on our trains?

Reference:

Prasarana, Rapid deny negligence in May 2021 LRT crash, FMT, 29 May 2023

Consequences of Rent-Seeking

The phenomenon of rent-seeking in connection with monopolies was first formally identified in 1967 by Gordon Tullock. A 2013 study by the World Bank showed that the incentives for policy-makers to engage in rent-provision is conditional on the institutional incentives they face, with elected officials in stable high-income democracies the least likely to indulge in such activities vis-à-vis entrenched bureaucrats and/or their counterparts in young and quasi-democracies. In the 1980s, critiques of rent-seeking theory began to emerge, questioning the ambiguity of the concept of "wasted resources" and the reliability of the assumptions being made from it.

From a theoretical standpoint, the moral hazard of rent-seeking can be considerable. If "buying" a favourable regulatory environment seems cheaper than building more efficient production, a firm may choose the former option, reaping incomes entirely unrelated to any contribution to total wealth or well-being. This results in a sub-optimal allocation of resources – money spent on lobbyists and counter-lobbyists rather than on research and development, on improved business practices, on employee training, or on additional capital goods – which slows economic growth. Claims that a firm is rent-seeking therefore often accompany allegations of government corruption, or the undue influence of special interests.

Source: https://corporatefinanceinstitute.com

Rent-seeking can prove costly to economic growth; high rent-seeking activity makes more rent-seeking attractive because of the natural and growing returns that one sees as a result of rent-seeking. Thus organizations value rent-seeking over productivity. In this case, there are very high levels of rent-seeking with very low levels of output. Rent-seeking may grow at the cost of economic growth because rent-seeking by the state can easily hurt innovation. Ultimately, public rent-seeking hurts the economy the most because innovation drives economic growth.

Government agents may initiate rent-seeking, as by soliciting bribes or other favours from the individuals or firms that stand to gain from having special economic privileges, which opens up the possibility of exploitation of the consumer. It has been shown that rent-seeking by bureaucracy can push up the cost of production of public goods. It has also been shown that rent-seeking by tax officials may cause loss in revenue to the public exchequer.

A study by Laband and John Sophocleus in 1988 estimated that rent-seeking had decreased total income in the US by 45 percent. Both Dougan and Tullock affirm the difficulty of finding the cost of rent-seeking. Rent-seekers of government-provided benefits will in turn spend up to that amount of benefit in order to gain those benefits, in the absence of, for example, the collective-action constraints highlighted by Olson. Similarly, taxpayers lobby for loopholes and will spend the value of those loopholes, again, to obtain those loopholes (again absent collective-action constraints). The total of wastes from rent-seeking is then the total amount from the government-provided benefits and instances of tax avoidance (valuing benefits and avoided taxes at zero). 

Political rent-seeking can also affect immigration. Welfare states incentivise unproductive migration and can create continuation of past behaviour of not accumulating personal wealth and being dependent on government transfers. Alternatively, productive migrants are incentivised to leave rent-seeking societies, possibly resulting in further economic decline. 

The Nobel Memorial Prize-winning economist Joseph Stiglitz has argued that rent-seeking contributes significantly to income inequality in the United States through lobbying for government policies that let the wealthy and powerful get income, not as a reward for creating wealth, but by grabbing a larger share of the wealth that would otherwise have been produced without their effort. Thomas Piketty, Emmanuel Saez, and Stefanie Stantcheva have analyzed international economies and their changes in tax rates to conclude that much of income inequality is a result of rent-seeking among wealthy tax payers.

Rent-seeking has been a complex problem all around the world for a very long time, plaguing many economies. It is very unlikely that we will ever see rent-seeking behavior completely eliminated around the world, but there are some potential solutions which were highlighted last week and stated briefly below:

• bi-partisan Parliamentary oversight on all concession, permits and other such licenses that say, exceed RM50m;

• greater transparency and accountability;

• more competition in a sector and reduction of barriers to entry;

• create an additional tax structure for rent-seekers, including revenue and sharing; and

• strengthen existing institutions tasked with stamping-out or reducing corrupt practices.

Reference:

Rent Seeking, Wikipedia

Wake-Up Calls for Our Lives!

Remember, too many people wait all day for 5pm, all week for Friday, all year for the holidays, all their lives for happiness. Don’t wait until your life is almost over to realize how good it has been, or how much potential you had literally every step of the way. 

Here are ten quick wake-up calls you need to receive today, before it’s too late:

1. This moment is your real life.

Your real life is not between the moments of your birth and death. Your real life is between now and your next breath. The present — the here and now. So practice living each moment in full, in kindness and peace, without fear and regret. And do the best you can with what you have in this moment; because that is all you can ever expect of anyone. 

2. A lifetime isn’t very long.

Eighty years isn’t guaranteed. Many people get far less. Again, today is your life and you’ve got to fight for it! Fight for what’s right. Fight for what you believe in. Fight for what’s important to you. Fight for the people you love, and never forget to tell them how much they mean to you. Realize that right now you’re lucky because you still have a chance. So stop for a moment and think. Whatever you still need to do, start doing it today — take the next step. 

Source: YouTube (The Gaia Foundation)

3. The sacrifices you make today will pay dividends in the future.

When it comes to working hard to achieve a dream — earning a degree, building a business, or any other personal achievement that takes time and commitment — one thing you have to ask yourself is: “Am I willing to live a few years of my life like many people won’t, so I can spend the rest of my life like many people can’t?”  May your dreams be bigger than your fears. May your actions speak louder than words. May your life preach louder than your lips… and may success be your noise in the end.

4. When you procrastinate, you become a victim to yesterday.

But when you are proactive and productive, it’s as if yesterday is a kind friend that helps take a load off your back. So do something right now that your future self will thank you for. Trust me, tomorrow you’ll be happy you started today. 

5. Failures are only lessons.

Good things come to those who still hope even though they’ve been disappointed, to those who still believe even though they’ve tasted failure, to those who still love even though they’ve been hurt. So give yourself grace, and grow from the situations that didn’t work out. Remind yourself that you can disappoint people and still be good enough. You can fail and still be smart, capable and talented. You can let people down and still be worthwhile and deserving of love and admiration. We all make mistakes sometimes. Take a deep breath. You are allowed to be human, and learn the way on the way.

6. You are your most valuable relationship.

Sometimes we try to show the world we are flawless in hopes that we will be liked and accepted by everyone. But we can’t please everyone and we shouldn’t try. The beauty of us lies in our vulnerability, our complex emotions, and our authentic imperfections. When we embrace who we are and decide to be authentic, instead of who we think others want us to be, we open ourselves up to real relationships, real happiness, and real success.

7. A person’s actions speak the truth.

You’re going to come across people in your life who will say all the right words at all the right times; but in the end, it’s always their actions you should judge them by. So pay attention to what people do. Their actions will tell you almost everything you need to know. And remember that today is too important to waste. Count your blessings, value the people who truly matter, and move on from the drama with your head held high. Remind yourself that the strongest sign of your growth is knowing you’re no longer bothered by the trivial things that once used to drain you.

8. Small acts of kindness can make the world a better place.

Just keep reminding yourself that everyone you see around you is a human being who dreams of something, fears something, loves someone, and has lost someone. And… just keep being kind. Kindness is the only investment that never fails in the long run. And wherever there is a human being, there’s an opportunity for kindness. Learn to give, even if it’s just a smile, not because you have too much, but because you understand there are so many others who feel like they have nothing at all.

9. Behind every beautiful life, there has been some kind of worthwhile pain.

You trip and you fall, you make mistakes and you fail, but you stand strong through it all — you live and you learn. You’re human, not perfect. You been wounded, not defeated. Think of what a priceless gift it is to grow through these experiences — to breathe, to think, to struggle, and to overcome challenges in the pursuit of the things you love. Yes, sometimes you will encounter heartache along the way, but that’s a small price to pay for immeasurable moments of love and joy. Which is why you must keep stepping forward even when it hurts, because you know the inner strength that has carried you this far can carry you the rest of the way.

10. Time and experience heals pain, and it can’t be rushed.

Your negative event seems much larger to you because it is a greater percentage of your total life experiences. What you need to understand is that an overwhelmingly painful event in your life right now will one day be part of your much larger past and not nearly as significant as it seems.

So I hope you will have another inspired day today, that you will dream boldly and dangerously, that you will make some progress that didn’t exist before you took action, that you will love and be loved in return, and that you will find the strength to accept and grow from the troubles you can’t change. And, most importantly, that you will, when you must, be wise with your decisions, and that you will always be extra kind to yourself and others. And don’t have regrets of what could be, or could have been or should have been whether it was in relation to your career, life partner, work-mates or religion. There are no u-turns if you are on the last lap of your life.

Reference:

10 wake-up calls people receive too late in life, Angel Chernoff, www.marcandangel.com, 23 May 2023

When Can Malaysia Reach High-Income Status? 2026, 2028 or 2030?

Malaysia should be able to leap from being a middle-income nation to a high-income one by 2028,  said the Economy Minister, Rafizi, in a recent press report. In February2023, Rafizi had said that Malaysia will cross the high-income threshold by 2026 if growth rate stays above 4 per cent for the next three years. That also assumes population growth remains below 1%. The resulting per capita income growth of around 3% will enable the country’s per capita income level to rise above the projected high income threshold, as defined by the World Bank. That’s the view expressed by Dr Yeah Kim Leng. In addition, the country’s exchange rate must perform well. Why?  If exchange rate depreciates, the threshold (in USD) will require more ringgit per capita.

Dr Yeah also pointed out that besides growth, “the country’s inflation and currency also need to perform well against the global average.” Malaysia’s economic growth is heavily reliant on domestic consumption while investments have been lacking.

Investments are just 20% of the GDP now (4.5% government investments and 15.5% private investments). In Indonesia, investments remain stably above 30% of GDP. This is the key for building a path to sustainable growth –strengthening investments rather than consumption.

The World Bank defines high-income countries as those with gross national income per capita of $12,536. Malaysia is classified as an upper middle-income country, based on GNI per capita of $11,230 in 2019.

Malaysia has aspired to leap to the next tier for some time. Back in 2009, then-Prime Minister sought to build a high-income economy by 2020 through a national transformation plan. Then in October 2019, Mahathir set a new high-income target as part of what he called the Shared Prosperity Vision 2030. The 10-year initiative was to guide the Malaysian economy toward sustainable growth with fair and equitable distribution across income groups, ethnicities, regions and supply chains, providing a decent standard of living for all citizens in 2020. In 1991, Malaysians were introduced to Vision 2020, which aimed to build a self-sufficient industrialised nation. But that has not happened.

So is it by 2026, 2028 or 2030? The safest bet is 2030. The optimistic case is 2026 and a more conservative view is 2028. Why? Nothing is predictable. But we could improve the climate for investments – DDI and FDI; we could reform our tax structure; we could encourage more foreign residents under a revamped MM2H; we could focus on new technologies and renewable; we could suggest more R&D and collaboration with universities; we could appreciate the ringgit to RM3.50 to the dollar; we could do structural reforms and effect many other such initiatives.

The key question is do we have the guts and gumption to follow through? Many times we start well but end-up with a whimper because we lack the stamina of a marathon runner. The fixation of a developed nation is not just income per capita but a sense of equality, fairness and justice for all. And that should be our objective.

References:

Rafizi: Malaysia can reach high-income status in next five years, if all goes well, Zarrah Morden, The Malay Mail, 18 May 2023

Conditions for achieving a high-income nation possible, say economists, Thomas Huong, The Star, 17 Feb 2023

Malaysia to renew push for high-income goal by 2030 despite Covid, P Prem Kumar, Nikkei, 26 Feb 2021

Rehabilitation Hospitals in Malaysia: A New Avenue in Healthcare?

In 2018, Khazanah Nasional Bhd launched Malaysia’s first 96-bedded rehab hospital in the heart of Petaling Jaya, Selangor, called the Regen Rehabilitation Hospital. The hospital is owned by Khazanah (60%) and New York Stock Exchange-listed Select Medical Holdings Corp (40%) with an initial investment of RM100mil.

It provides crucial tertiary treatment not presently covered in acute care hospitals for patients such as those who are bedridden or who have had a stroke to enable them to regain their mobility. Among the rehab programmes offered by the hospital is neuro rehabilitation, where patients with conditions such as brain injury and trauma, spinal cord injury, Parkinson's disease and motor neuron disease are treated. This programme also offers post-coma rehab as well as cognitive and behavioural therapy, robotic and virtual reality therapy, and non-invasive brain stimulation and balance training services.

Source: Daehan

Regen Rehab expects to record positive earnings before interest, taxes, depreciation and amortisation in two years and to break even in 4½ to 5 years. Daehan Rehabilitation Hospital Putrajaya is the first hospital in Southeast Asia to provide intensive integrated Korean rehabilitative care.

Beyond hospitals are healthcare centres for those who are not able to afford them. These centres are supported by a social security organisation with facilities comparable to hospitals. Access to rehabilitation cannot be for the T20 or the foreign tourists only but to low income workers who have been impacted by industrial/work accidents. Hopefully we will have more such centres in the future.

References:

First rehabilitation hospital in Malaysia, PharmLinked/The Star -21/9/2018

Opening ceremony, www.daehanrehab.com

Advancing Malaysia’s medical rehabilitation care, Bernama / Sinar Daily, 11 Oct 2022

What is Rent-Seeking?

Rent-seeking is the act of growing one's existing wealth by manipulating the social or political environment without creating new wealth. Rent-seeking activities have negative effects on the rest of society. They result in reduced economic efficiency through misallocation of resources, reduced wealth creation, lost government revenue, heightened income inequality, risk of growing political bribery, and potential national decline.

In many market-driven economies, much of the competition for rents is legal, regardless of any harm it may do to an economy. However, various rent-seeking behaviours are illegal, such as the forming of cartels or the bribing of politicians.

Rent-seeking is distinguished in theory from profit-seeking, in which entities seek to extract value by engaging in mutually beneficial transactions. Profit-seeking in this sense is the creation of wealth, while rent-seeking is "profiteering" by using social institutions, such as the power of the state, to redistribute wealth among different groups without creating new wealth. In a practical context, income obtained through rent-seeking may contribute to profits in the standard, accounting sense of the word.

Source: https://corporatefinanceinstitute.com

The Tullock paradox (by Gordon Tullock) is the apparent paradox on the low costs of rent-seeking relative to the gains from rent-seeking. The paradox is that rent-seekers wanting political favours can bribe politicians at a cost much lower than the value of the favour to the rent-seeker. For instance, a rent seeker who hopes to gain a billion dollars from a particular political policy may need to bribe politicians with merely ten million dollars, which is about 1% of the gain to the rent-seeker.

The classic example of rent-seeking, according to Robert Shiller, is that of a property owner who installs a chain across a river that flows through his land and then hires a collector to charge passing boats a fee to lower the chain. There is nothing productive about the chain or the collector, nor do passing boats get anything in return. The owner has made no improvements to the river and is not adding value in any way, directly or indirectly, except for himself. All he is doing is finding a way to obtain money from something that used to be free.

An example of rent-seeking in a modern economy is spending money on lobbying for government subsidies in order to be given wealth that has already been created, or to impose regulations on competitors, in order to increase one's own market share.

The concept of rent-seeking would also apply to corruption of bureaucrats who solicit and extract "bribe" or "rent" for applying their legal but discretionary authority for awarding legitimate or illegitimate benefits to clients. For example, taxpayers may bribe officials to lessen their tax burden.

Rent-seeking is not limited to any singular country or region. Rent-seeking manifests and impacts many different societies and economies. 

The oil industry in Nigeria is heavily impacted by rent-seeking. Nigeria is a rich in oil reserves, but sees a large amount of its profits siphoned of by corrupt officials and individuals who are engaging in rent-seeking behaviour, leading to a wide income gap between the wealthy and the poor, as well as widespread poverty and political instability.

Malaysia too suffers from the disease of rent-seeking. And the possible solutions to this problem include:

• Having a bipartisan Parliamentary Oversight Committee on all concessions, subsidies, monopolies, permits and the like;

• More transparency and accountability in Government and companies;

• Reduce barriers to entry, i.e. create more competition; and

• Implement a special tax on rent-seekers beyond and above corporate tax.

Reference:

Rent Seeking, Wikipedia