Is E-Wallet Payment King?

When it comes to cashless payments, e-wallets are Malaysians’ favourite way to pay. Electronic money (e-money), which includes e-wallets and mobile banking apps, has recorded the biggest number of transactions, compared with other electronic payment (e-payment) tools. A total of 3.65 billion financial transactions were done through e-money from January to September this year, based on data from Bank Negara Malaysia. This makes it the most popular e-payment method. Debit cards came in second at 1.45 billion, followed by credit cards at 678.4 million transactions in the same period. Only cheques and charge cards showed a declining trend in usage over the past five years.

E-money is a payment instrument that contains money paid in advance by the user, either in the form of physical cards or online apps. The number of e-money users or cards in circulation shot up by 116% from 78 million in 2019 to 169 million in 2023. As of September, this year, the figures continued to rise to 179.33 million users, according to Bank Negara. 

In 2023, the government rolled out its e-wallet initiative, which saw 10 million eligible adults under the B40 and M40 groups receiving a one-off e-wallet credit worth RM100. The data showed that the increase in e-money usage mainly involved network-based apps, rather than physical prepaid cards.

When it comes to the value of financial transactions, the story is flipped. Cheques had the highest transaction value among other e-payment tools, logging a total of RM681.1bil from January to September this year. In comparison, transactions through e-money only amounted to RM114bil within the same period. Cheques have also consistently recorded the highest cumulative value of transactions throughout the past five years:

 

The reality remains that the usage of cheques is on a decline. The data shows that the value of cheque transactions, although still exceeding the rest, has been shrinking over time. The value involving credit cards, debit cards, e-money and charge cards has kept growing through the years.

Experts believe that going cashless is a good thing for our country. However, cash will likely still be king in the years to come, or at least remain a relevant form of payment in Malaysia. It was reported that Malaysia aims to achieve 90% cashless payments by 2025, but some consumer groups have urged businesses to maintain cash payment options. And there are retail businesses that have “outlawed” cash payments. In other words, the ringgit is now not accepted as legal tender  – this cannot be the case! BNM must act on it no matter its preoccupation to be a cashless society.

That may be quite an achievement if we could raise the portion of total financial transactions to being 50% cashless by 2030. Cashless transactions rose by 32% in 2022 and 21% to RM11.5bil in 2023. Despite the double-digit growth, cashless transactions accounted for only 1% of the country’s total consumption spending in 2023.

For now, the data shows that the amount of cold, hard cash withdrawn from automated teller machines (ATMs) has dropped compared with 2019, before the Covid-19 pandemic. The amount shrank by 7.3% from RM427.8bil in 2019 to RM396.4bil in 2023. Fewer transactions are also being performed through ATMs, with 797.7 million cash withdrawals last year compared with 845.9 million in 2019.

The drawbacks of e-payments include technology outages, cybersecurity issues and scammers. From my perspective, cash and cheques will remain unless BNM “outlaws” them and moves into bitcoin! That’s hara-kiri for BNM!

Reference:

INTERACTIVE: When Malaysians go cashless, e-wallet is king, Yuen Meikeng, The Star, 

28 Nov 2024

17 Deaths A Day!

According to Deputy Transport Minister, 5,364 people died in road accidents in the first 10 months of 2024. That translates to an average of 17 people dying on our roads daily. That figure does not even include those who are injured, hospitalised or maimed for life.

Do we now treat these 5,364 deaths as just another statistic and move on? Why does the government’s response leave much to be desired? The death rates, injuries and vehicle damage have been rising despite numerous road safety campaigns. 

The Road Transport Department’s measures to upgrade and tighten the licensing syllabus, has no effect because we see more and more motorists disregarding traffic rules. In many reported road accidents, we often hear of “faulty brakes” and “loss of vehicle control” as the cause of accidents. 

 

Source: https://en.wikipedia.org

Netizens have extensively expressed their concerns and offered suggestions regarding the alarming number of accidents and unsafe conditions. 

So, do we continue to launch more campaigns? Or do we acknowledge this as a serious problem?

We need well-coordinated, sustainable enforcement over lengthy periods to instil fear and respect for the rule of law. Our antiquated road traffic laws must be changed to effectively punish vehicle owners and vehicle operators. We need to reshape our road works and raise maintenance standards to meet the ever-increasing traffic volume. We also need to tackle the problem of imitation, poor quality and substandard motor spare parts flooding the country. 

Motorists much be disciplined without fear. We must stop giving ‘discounts’ to law breakers. Such ‘pardoning’ will only further erode our societal value system.  Highway and road concessionaires, both private and government, must be exposed and severely punished whenever they fail to maintain their road stretches. If nothing meaningful is done, the statistic of 532,125 road accidents will remain just another number.

Of the total, the bulk is motorcyclists. They have no regard for life! Some wish to die! And if you happen to be at fault or otherwise, the motorcyclist is always right! How can we change? It is a behavioural problem that can only be fixed by incentives for good behaviour and deterrents for bad. And the MOT knows what to do but may lack the political will.

Reference:

7 deaths a day! Do something now about Malaysia’s road accidents crisis, JD Lovrenciear, Aliran, 21 November 2024

Petronas vs Petros: Who wins?

Malaysia’s national oil-and-gas company Petroliam Nasional Bhd, or Petronas, may lose a portion of revenue following the appointment of Petroleum Sarawak Bhd (Petros) as the sole gas aggregator in Sarawak.

The earnings impact to Petronas remains uncertain. Depending on the loss, the shift could affect its ability to keep up capital spending in the long term. Its current balance sheet remains solid, even with dividend commitment to the federal government.

The gas segment contributed about RM101 billion, or 30% to Petronas’ revenue in 2023. Petronas also delivered 403 liquefied natural gas (LNG) cargoes from its LNG complex and 38 LNG cargoes from two floating LNGs (FLNG) and 2.2 billion standard cubic feet per day of average sales gas volume in Peninsular Malaysia. 

On May 13, Sarawak announced that Petros will take over Petronas' role in all-natural gas trading activities in the state effective July 1. Petros and Petronas also agreed to sign a definitive agreement where Petronas will acknowledge Petros as the sole gas aggregator.

The agreement allows Petros to conclude gas purchase agreements with all upstream producers involved in the production of natural gas in Sarawak and gas sales agreements with all downstream buyers, foreign or domestic.

Consequently, Petronas will cease all buying and selling activities of the product in the state and hand over its natural gas distribution network and system to Petros. The gas business took up 22% of Petronas’ domestic capital expenditure, and the transfer to Petros may lead to a “more prominent” cut in the segment.

The Petroleum Development Act (PDA) of 1974 was an agreement made by all states, including Sarawak led by then Chief Minister Rahman Ya’kub. The deal was simple: if oil was found in waters adjacent to a state, that state would receive a 5% royalty.

This isn’t just about oil and gas—it’s about the future of Malaysia. If the current trajectory continues, we could see the collapse of one of the nation’s most valuable assets, dragging down the hopes and dreams of millions with it. The nation stands at a crossroads, and the decisions made soon will determine whether we remain united and prosperous, or whether we splinter, to everyone’s detriment. The solution isn’t simple, but it is clear: find a way to balance Sarawak’s rightful demands with the broader needs of the Federation. On 12 December, Bernama reported that the Federal Government and the Sarawak administration have decided on the gas distribution in the state between Petronas and Petros. Details are being fine-tuned. If that is the case, it is good!

Reference:

Petronas may lose part of revenue to Petros, capex may be hit — RHB IB, Jason Ng/  theedgemalaysia.com, 22 Jul 2024

PM announces gas distribution issue between Petronas, Petros settled, Bernama, 12 December 2024

                             

Water, Water, Everywhere!

Floods play out the same every year. The initial stories we see are about heavy rains and rising river water levels. Then we start seeing videos and photos of water flowing into the front gates and doors of houses, which is usually followed by social media postings of cars door -deep in water in the cities and towns. The cities and towns are the same too, usually in Kelantan, Terengganu, Johor, Kedah, and Perlis. Then our political leaders will release statements of how they have ordered the different assets available to focus on rescue and evacuation.

 

Source: https://www.wikiimpact.com

The authorities will also start updating the public on different sets of data like weather reports, the number of households affected, the number of evacuation centres being set up, and sometimes the death toll. 

What comes next is predictable. The same political leaders will start visiting the affected areas and promise cash aid of RM1,000 or something like that for each household. Photos and videos of them in life jackets on boats, or wearing boots wading through knee-high flood waters in between kampung houses will start appearing in the news.

As the days go by, resilient stories start appearing in the media. There will be photo essays and videos of children playing in the flood waters like it’s swimming pool, diving off roofs or traffic light posts and motorcycles dragging children in makeshift water skis usually made of basins. And stories of villagers fixing empty barrels to the bottom of beds and home appliances to keep them afloat will also appear.

Why can’t there be more steps that will help prevent the floods from ever happening? Or, at least from getting worse each year? Can’t our government and authorities spend more resources on thinking about proactive measures rather than reactive efforts? Don’t we have the technology to develop and improve our drainage systems? Can’t we build better flood- preventing dams and levees.

How about ceasing indiscriminate logging? We should have the capability of determining areas that are prone to flooding and just simply not build homes! What the country needs is a proper, long-term flood mitigation effort where all the relevant parties like the state and federal governments and communities involved work together more efficiently and effectively. We should put as much resources as possible into prevention and proactive efforts as we do for our annual rescue and evacuation efforts. Then, there is, of course, Kelantan which is resigned to its fate and is now planning to monetise its monsoon season into a tourism product!

Reference:

Comment: It’s flood season… again! Zan Azlee, Malaysiakini, 1 December 2024

Exams Abolished to Reduce Stress?

The abolishment of exams and exam-oriented learning in schools aims at reducing academic stress among students. That is our Education Minister’s statement recently. The Education Ministry is adopting an approach where the focus of learning in schools will be based on inquiry, exploration, experience, context and assessments that take into account the holistic development of students, she said.

The new approach aims to shift away from an exam-focused system and reduce stress on students, adding that it would offer a much more engaging learning ecosystem. The ministry prioritises the welfare and well-being of students, including their psychosocial and mental health.

 

Source: https://www.wikiimpact.com

Several initiatives have been implemented to identify students who are suffering from emotional disturbance issues. The Saringan Minda Sihat (Depression Anxiety Stress Scale test) is conducted once a year for pupils from Year 5 to students in Form Six, with students identified with severe emotional disturbance issues undergoing the screening twice a year. The ministry also provides access to psychoeducational materials through infographics, short videos, healthy mind pages, and self-wellness guides across various social media platforms.

Students identified with severe or very severe levels of depression, the school will hold a consultation session with the parents or guardians before referring the student to a medical specialist for the necessary treatment.

We don’t want stress. So remove exams. Why do we need SPM, STPM or university exams? Isn’t it stressful? How about in the work environment? Shouldn’t we work as and when we can? Because it is too stressful! How about marriage or family? Isn’t that stressful?

This idea of abolishing exams because of stress is plain silly! Granted there are people who have a problem with stress, but this is a fraction of the total. Couldn’t we cater for them while the vast majority are prepared to work through exams? It is a measure, it is a standard. Just look at Singapore, South Korea, Japan or developed nations, do they abolish exams? And why are they developed? Because exams and meritocracy leads them to progress!

Reference:

Exams abolished to reduce academic stress, says Fadhlina, Nor Ain Mohamed Radhi/Qistina Sallehuddin, New Straits Times, 26 November 2024

State-Owned Enterprises in Indonesia: Are Profits Important?

According to Leigh McKiernon in a blog, profits take a backseat for State-Owned Enterprises (SOEs) in Indonesia. Unlike their capitalist cousins, SOEs don’t waste their energy on objectives like shareholder value or profitability. Such pursuits are for mere mortals. Here, the goal is loftier: making the powers-that-be appear as the saviours of the nation.

It’s a theatrical production of epic proportions. Imagine governance colliding with the artistry of wayang kulit, where CEOs aren’t leaders but puppets, dancing to the rhythm of political masters. Politicians whose true performance metrics lie not in fiscal prudence but in the effusive applause of their social media followers. 

 

Source: https://en.wikipedia.org

To grasp the mystique of Indonesian SOEs, you must first abandon the quaint, colonial-era notion that businesses exist to generate profit. That’s the kind of capitalist propaganda you’d expect from people who still think ROI matters. Here, profitability isn’t just a secondary concern—it’s barely on the syllabus. For an Indonesian SOE, profit is like a decorative fruit bowl: nice to look at, but hardly integral to the feast.

What truly matters is alignment with the grand narrative. These enterprises aren’t judged on trivialities like efficiency or solvency. Is the SOE orchestrating a massive infrastructure project in time for election season? Marvelous. Is it creating jobs that look good on PowerPoint slides, even if those jobs involve six people supervising one shovel? Perfect. And if these initiatives rack up losses large enough to make a Big Four auditor break into a cold sweat? Well, that’s just a necessary sacrifice on the altar of prestasi.

If you think CEOs of SOEs in Indonesia are chosen for their visionary leadership or business acumen, think again. Forget meritocracy. The selection process here is more nuanced, a delicate balance of political connections, unwavering loyalty, and the rare gift of looking serene in the face of financial catastrophe.

Once installed, these CEOs aren’t bogged down by pedestrian goals like increasing revenue or trimming inefficiencies. No, their primary mission is far more important: ensuring that the ministry’s reputation shines like a freshly polished keris. The company’s survival? A secondary concern, at best. After all, if the enterprise falters, there’s always another bailout waiting around the corner.

Despite their well-documented inefficiencies, persistent losses, and occasional flirtations with outright chaos, SOEs in Indonesia excel in one area: public relations. Where some see failure, these organizations see opportunity. Where others see calamity, they craft a feel-good narrative. Every catastrophe is a “learning experience,” every misstep a “building block,” and every fiasco a mere “temporary glitch” on the sacred path to national greatness.

The genius here isn’t just in spin—it’s in the absolute commitment to spin. Public relations aren’t a side hustle; it’s their raison d'être. The business model may resemble a poorly built sandcastle enduring a typhoon, but if the narrative is intact, who’s keeping score?

In the end, the story sells. And in this game, perception isn’t just reality—it’s the only reality that matters. So, what if the company’s finances are in freefall? If the hashtags are trending, the mission is accomplished.

In Malaysia, are we trending towards that?

Reference:

State-Owned Enterprises in Indonesia: Where Profits Take a Backseat to Publicity, Leigh, McKiernon, www.linkedin.com, 4 December 2024

Employers Hesitant on PWP!

Lack of awareness and incentives on the progressive wage policy (PWP) are among the main reasons why it remains unattractive to employers, says the Malaysian Employers Federation (MEF).

About 60% of companies involved in the latest survey conducted by MEF on PWP admitted that they have limited awareness of various aspects of the policy. Only 11% of companies considered the incentives offered as being attractive, while 38% responded no, and the remaining 51% were uncertain according to MEF’s latest survey. Only five companies or 2% of the 262 that participated in the survey had applied for the pilot PWP that was held last June to August.

 

Source: https://www.wikiimpact.com

The recent allocation of RM200mil announced by the Prime Minister would only benefit about 60,000 employees, while the Malaysian workforce comprises about 4.5 million people.

Many business owners will be affected with the new policy, especially with over 90% of businesses in Malaysia being small and medium enterprises. If the business cannot afford it and such a policy is made compulsory, you would see a lot of businesses having to shut down, said the MEF president.

According to the New Industrial Master Plan 2030, SMEs contributed to 38.1% of gross domestic product (GDP), 13.5% to exports and employed 48% of the country’s workforce in 2020, which was below the targets set under the SME Masterplan 2012-2020.

SMEs make up some 97% of business establishments in the country. They are integral to the economy and are major employers, which is why they are crucial to the fixing of the problem.

A total of RM50mil was allocated for the implementation of the PWP pilot project, where participating firms receive a monthly incentive, with a maximum of RM200 per entry-level employee and up to RM300 for those who have been with the company for over a year.

I don’t know if the Human Resources Ministry (or Economy Ministry) worked-out this scheme with stakeholders. On the surface, it looks like they did not. And the PM made a budget point which looked good for a small proportion of workers and not helpful to the employers (and SMEs) or most employees.

Convincing any business to pay higher wages is never an easy task. Many business owners are not against the principle of what the government wants to implement under its Madani Economy framework. The reality on the ground is that not all industries are the same, not all companies are the same and there will always be challenges in implementing the Progressive Wage Policy (PWP), let alone adjusting the minimum wage higher. 

Shouldn’t the Government focus on growing the economy and let market forces dictate wages?

References:

MEF: Employers hesitant about PWP implementation, The Star, 28 November 2024

Reform wages now, not later, Fintan Ng, The Star, 9 November 2024

Leasing or Debt Financing for Choppers?

The government’s decision to obtain 28 helicopters for the country’s security forces via a leasing arrangement with Italian defence firm Leonardo under a 15-year contract valued at RM16.8 bil (or average RM1.07 billion a year) is under question.

Some pointed out that the maintenance contract for the Royal Malaysian Air Forces’ (TUDM) EC725 choppers was RM378 mil for five years for 12 helicopters. Boustead Heavy Industries Corp Bhd had on Aug 15 unveiled that its 51%-owned joint venture BHIC AeroServices Sdn Bhd has secured a RM378 mil contract to provide in-service support and performance for TUDM’s EC725 helicopters. If we extrapolate for 28 helicopters for a year it is just RM176.4 mil. 

 

Source: https://en.wikipedia.org

The Finance Minister justified that the leasing arrangement helped alleviate the burden of maintenance which had become a significant issue with billions spent annually on upkeep, materials and natural wear and tear.

What about buying the helicopter outright? The BOMBA (Fire and Rescue Department of Malaysia) also recently bought four AW189 (variant of AW149 for civil use) for almost RM530 mil. Extrapolate that for 28 it is RM3.7 bil.

Isn’t it better to “buy outright” and self-maintain the helicopters? So, buy outright + maintenance for 15 years is RM3.7 bil + (0.176x15) = RM6.34 bil, which is significantly lower !

As a netizen pointed out, Poland established a production line, R&D (research & development) for armed versions, overhauls, upgrades, training till end of service life (not just 15 years) for just RM8.03 bil for 32 units of AW149! That is just half of the Malaysian lease cost. So, is leasing another BS?

Reference:

“Something amiss about PMX’s defence of RM16.8b cost for 15-year maintenance-free leasing of 28 choppers”, Focus Malaysia, 1 December 2024

Soaring Costs, Fruitless Returns?

A contrasting narrative has emerged within Malaysia’s fresh fruit market, highlighting the complexities of the agricultural sector. Government agencies said there has been enough of an uptick in fruit production to enhance self-sufficiency and export capabilities. However, wholesalers offered a different perspective, saying there is a decline in the local fruit supply due to rising costs and increased import dependence.

According to the Agriculture Department, Malaysia’s fruit production reached 1,889,000 tonnes last year, marking continued growth. Overall production has steadily increased from 1,827,000 tonnes in 2022 to 1,889,000 tonnes last year. This is a 3.34% rise.

Durian is the top-produced fruit with 529,000 tonnes harvested. The self-sufficiency rate of certain fruits also improved from 78.1% in 2022 to 79.8% last year, with langsat recording the highest rate at 135.3%.

However, not all fruits experienced gains. Mango production dipped slightly by 0.06% from 2022 to 2023, while mangosteen saw a more significant 6.11% decrease. There are also diverging trends depending on the area. While durian and pineapple saw modest increases, jackfruit nearly doubled in planted areas, driven by new market opportunities or favourable agricultural policies.

 

Last year, the supply of 10 selected fruits such as papaya, watermelon, star fruit, jackfruit, durian, pineapple, guava and rambutan was sufficient to meet domestic demand, with self-sufficiency rates exceeding 100%.

The main reasons are the low demand for these two types of fruit and the high cost of cultivation. Fruit suppliers seldom offer these kinds of fruits now. Such fruits are now mostly homegrown or harvested from orchards. They are usually sold at roadside stalls only. The decline in rambutan production is due to farmers struggling to make a profit as the wholesale price is only 50sen to RM1. This low return has led many farmers to stop growing rambutan trees.

As for mangosteen, they are primarily grown on the hills, so harvesting requires manual labour. The selling price ranges from RM1.50 to RM2, which has led to a gradual reduction in its cultivation by farmers.

Federation of Malaysian Fruit Farmers Association president said high operational costs have pushed Malaysian fruit prices higher than in other countries. Citing papaya as an example, the wholesale price was RM2 before the pandemic but has now doubled to RM4.

Farming on hilly terrain requires specialised machinery but current agricultural equipment is mostly designed for flat landscapes, hindering their plans for mechanisation. Furthermore, fruit farming is government-subsidised in some countries. This is not so in Malaysia. We need to focus on agriculture for self-sufficiency and other related reasons.

Reference:

Soaring costs, fruitless returns: While govt assures local production, farmers beg to differ, Khoo Gek San, The Star, 2 December 2024

“We Need Our Privileges”!

 A recent Merdeka Centre survey revealed a stark generational divide in Malaysia’s racial politics, with 73% of young Malays supporting the continuation of Bumiputera privileges. In a revealing snapshot of Malaysia’s racial divide, 73% of young Malays have voted to maintain their special privileges. That effectively endorses unequal treatment of their fellow citizens in a country where they form 60% of the 32 million population. The Merdeka Centre’s recent survey of 1,605 young people aged 18 to 30 lays bare an uncomfortable truth.

While respondents across all ethnicities were evenly split on equal rights, with 48% supporting equality and 49% favouring special privileges, the breakdown among Malay respondents tells a different story. An overwhelming 73% backed continuing Bumiputera privileges, with only 24% supporting equal rights for all Malaysians.

Source: https://en.wikipedia.org

This stance effectively endorses a system where university admissions, housing rates, government positions, and business opportunities are allocated based on ethnicity rather than merit. While defenders frame it as protection for disadvantaged communities, critics see it as institutionalized inequality that divides modern Malaysia.

The survey findings appear to reflect deeper concerns about economic security and cultural heritage rather than racial prejudice. Young Malays consistently express concern about maintaining Bumiputera representation and protecting disadvantaged members of their community. After over half a century of affirmative action, the policy’s effectiveness remains questionable.

From Melaka, where over 70% of the population is Malay/Muslim, to the bustling streets of Kuala Lumpur, where diverse communities intersect, the sentiment remains surprisingly consistent among young Malays.

Their strong support for continued privileges suggests Malaysia’s racial divide may persist well into the future, even as the country aspires to compete in an increasingly merit-based global economy.

The findings present a challenging paradox for Malaysia’s future: how can a nation progress while its majority youth population actively supports unequal treatment based on ethnicity? Yet despite these challenges, Malaysia has emerged as a model of multicultural harmony in Southeast Asia. Different ethnic groups, religions, and cultures coexist peacefully.

With that as a backdrop, it is no wonder you find young Malaysians of other ethnicities leave, and never to return. As a good measure, it is better for Madani to shut-down Talent Corp or any other institution that are trying to woo back young Malaysians! It is just a waste of resources and time!

Reference:

Young Malays reject equal rights: “We need our privileges”, Fernando Fong, The Rakyat Post, 

25 November 2024

Next Generation Employees Will Work 3.5 Days a Week and Live to 100 Years Old?

JPMorgan CEO Jamie Dimon sees technology vastly improving businesses and the work-life balance of their employees. He sees the working week shrink from five to three and a half days a week. Dimon also predicts that staff in the future could live to 100 years of age.

Thousands of people at America’s biggest bank are already using the technology and artificial intelligence is a “living breathing thing” that will shift over the course of history, according him. The technology may be utilized by JPMorgan for a vast range of areas—errors, trading, research, and hedging to name a few—arguably illustrating fears that AI will take the jobs of human counterparts.

Goldman Sachs predicts that approximately 300 million jobs will be lost to the technology, with around a quarter of the American workforce fearing in the future they will lose their roles to artificial intelligence.

 

Source: https://en.wikipedia.org

But the advance of technology is also something societies have grappled with before, Dimon pointed out, adding that with AI and large language models are also huge opportunities to improve living standards.

Employees could scale back on their working hours, thanks to the technology being used to automate some of their activities, McKinsey found in a report published in 2023. The report also found that generative AI and other emerging technologies have the potential to automate the tasks which take up 60% to 70% of employees’ time at the moment—adding between $2.6 trillion to $4.4 trillion to the global economy every year.

And while businesses are still grappling with how quickly AI will transform their sector, arguments are already being made to reduce the number of days in the current working week.

A British study of 61 organizations, carried out by the University of Cambridge, saw a 65% reduction in sick days during a four-day working week, while 71% of employees said they had reduced levels of burnout. As a result, 92% of the companies on the program said they’d be keeping a three-day weekend.

Dimon and McKinsey are not the only leaders to predict that technology will lead to a shorter workweek. In a 1930 essay titled “Economic Possibilities for our Grandchildren,” the economist John Maynard Keynes predicted that his grandchildren’s generation would be working 15-hour weeks because of increased productivity. The current average in Keynes’s U.K. is 36.4 hours.

Like many other thought leaders, Dimon is aware that the technology could prove to be a powerful weapon if it fell into the wrong hands. This echoes concerns made by Apple cofounder Steve Wozniak and Microsoft cofounder Bill Gates.

Like Sam Altman, the CEO of ChatGPT maker OpenAI, Dimon also says he hopes to see guardrails introduced to the sector, but acknowledged this may take some time to come to fruition because the technology is relatively new.

I believe we are all in transition just like computers which became available to each staff by the 90s. So, we too must embrace AI with guardrails in place.

Reference:

Jamin Dimon says the next generation of employees will work 3.5 days a week and live to 100 years old, Eleanor Pringle, Fortune, 24 November 2024

Medical Insurance Premiums to Go Up By 40-70%?

The rising cost of healthcare at private hospitals will reportedly lead to an increase in medical insurance premiums in 2025. Medical insurance premiums are expected to rise by 40-70% next year, with some policyholders choosing to terminate their policies as they are unable to bear the escalating cost of the monthly fees.

Utusan Malaysia reported the impending increase based on notices sent by insurance providers to policyholders, citing the rising cost of healthcare at private hospitals. A policyholder received a letter from his insurance provider stating that the new rates would take effect from next February. Another policyholder, said his insurance premium had increased by RM133, from RM244 to RM377 per month.

 

Source: https://en.wikipedia.org

Recently, a group of PKR MPs claimed that the rising cost of private healthcare services was forcing the middle class to seek treatment at government hospitals and clinics, exacerbating the problem of overcrowding at these facilities.

As mentioned previously in this blog, medical costs in Malaysia rose by 10% in 2022 and 12.6% in 2023. This is higher than the global average of 5% in 2022 and 5.6% in 2023. The reasons are several, costs of supplies, services, drug prices, elective medical procedures and so forth. But if a treatment is done and paid out one’s pocket then it is lower by 15% to 20% compared to under insurance. 

Maybe a National Health Fund (NHF) could provide the cover. And it is funded by both government and consumer. That will subsidise healthcare in Malaysia. If not, medical inflation will drive more into government hospitals! And where is Bank Negara in all of this? Protecting the insurance companies or the consumer?

Reference:

Medical insurance premiums reportedly set for 40-70% rise, FMT Reporters, FMT, 26 Nov 2024

Global Airfares Set to Rise in 2025!

Global airfares are set to become more expensive in 2025, according to an American Express Global Business Travel Group Inc forecast. Ticket prices will reflect higher costs and lingering supply-chain disruptions.

Fares on most routes will rise, though the size of the increases will likely vary greatly by region. North America and Europe are expected to see more “modest” increases of around 2% while Asia and Australasia, among the last regions to unwind pandemic curbs, are set to see rises of close to 14%.

While airlines are largely more bullish about demand in 2025, their near-term efforts to add capacity remain hampered by delays in both new Airbus SE and Boeing Co planes, as well as longer servicing of jet engines that prevent more aircraft from taking to the skies.

Increases in ticket prices in 2025 are likely to more than erase any decreases before 2024, meaning some fares may return to post-pandemic highs.

The key drivers pushing up airfares include rising wages and staffing shortages, particularly with the ongoing labour disputes in North America and the cost of fuel amid ongoing geopolitical tensions. In addition, airlines continue to add new surcharges and low-cost carriers have invested in expensive extras like airport lounges and better seats.

Routes between Europe and Asia will likely see a 6.6% jump for economy travel and 8.2% in business, driven largely by the higher costs associated with avoiding Russian airspace and curtailed supply, and as several European carriers pull out of China.

Australia is forecast to see the largest increases especially for domestic travel. Qantas Airways Ltd and Virgin Australia are set to consolidate their effective duopoly in the market following the collapse of smaller carriers Rex and Bonza.

That’s bad news for travellers and businesspeople. Alternatives like cruise holidays may bloom but these are for leisure travellers. Businessmen will still need air travel for their meetings. So, perhaps one other way is to look at zoom or such other avenue to reach out to businesspeople overseas. Anyway, decide your options wisely.

Reference:

Global airfares set to rise yet again in 2025, Amex report says, Adrian Wong & Danny Lee / Bloomberg, 25 Nov 2024

Use BM for Signages!

As many of us are aware, UMNO is the acronym for United Malays National Organisation. But Dr M in his 22 years as  the President of UMNO, did not insist for the party to be identified and referred to officially and publicly in Bahasa Malaysia, Pertubuhan Kebangsaan Melayu Bersatu (PEKEMBAR) instead of UMNO. 

Dr M recently called for the prioritisation of Bahasa Malaysia on business premises in the city.

When he was the President of UMNO, he didn’t refer to UMNO’s HQ, to its name in Bahasa Malaysia Pusat Dagangan Dunia Putra instead of PWTC which is the acronym for Putra World Trade Centre. He said English on the signboards, he can understand but not why the Chinese language which was displayed prominently. This should be limited to translations in smaller characters.

 

Source: https://commons.wikimedia.org

The last time, a non halal beverage (Timah whisky) used a Bahasa Malaysia term for its brand with English in smaller characters, it caused an uproar, and some called for the manufacturer to be banned. 

If he is sincere and concerned about the lack of usage of Bahasa Malaysia in signages, take the public transport and go around Kuala Lumpur. He will find himself in Pakistan with the big Pakistan bazaar at Masjid Jamek station. Take a stroll slowly to Leboh Ampang and he will find himself in India. Proceed to Jalan Silang and he will be entering Nepal, Myanmar and Vietnam at one go. There is no country border here. All of them mixed in one place. 

Quickly take a bus or monorail to Jalan Bukit Bintang. Here he will enter Africa, Middle East, China and Uzbekistan in one place. It’s a food haven. Then take the bus to Jalan Chow Kit. He will now enter Indonesia. There is Jawa Timur, Jawa Barat, Madura, Bali and particularly all parts of Indonesia at one place. He won't find this even if he goes to Indonesia itself. 

Not only are we part of China now. We are also part of Pakistan, Nepal, Myanmar, Vietnam, Africa, Uzbekistan, India and Indonesia. Does he welcome the presence of these various nationalities in the country’s capital? 

As with every business, the owners will try and push their luck in their application for permits / licences. If those who approved the licences and permits for them to operate are strict in their approval process and enforcement, do you think these business owners would have done anything different? All these didn’t drop from the sky suddenly. Who monitors them and carries out enforcement to ensure they operates within the confines of their approved permits and licensing? Who collects the fees for the licensing and permits? 

So, why don’t we just celebrate under the slogan “Live and Let Live”!

 

Reference:

Use BM for Timah whisky you complain, use English for buildings you complain, use Chinese for a non halal edible eat…, Opinion, https://newswav.com, 24 November 2024

Do 5G Signals Transmit Confusion?

It began in 2021 when the-then government decided on a Single Wholesale Network (SWN) model for 5G. This led to the creation of DNB as the sole provider responsible for rolling out the 5G network across the country.

It was premised on the idea that with a SWN, telcos in Malaysia needn’t duplicate their 5G infrastructure investments and instead compete on their services, all with the idea that it would jumpstart Malaysia’s foray into 5G and lead the country into becoming more competitive.

It was a weak idea, as telcos do rely on their own networks to form their competitive advantages. Furthermore, the billions that the major telcos had spent on their 3G and 4G networks meant that they needed to top up those networks with 5G equipment in order to garner their total return on investment.

 

Source: https://www.wikidata.org

As it stands now, Maxis Bhd, CelcomDigi Bhd, YTL Communications Sdn Bhd and U Mobile each hold a 16.3% stake in DNB. Following the MCMC’s announcement, it wasn’t clear if U Mobile was being awarded the 5G spectrum directly or that it needs to find consortium partners.

MCMC has since clarified that U Mobile itself will be assigned the 5G spectrum for the deployment and that it will be charged the relevant fees in accordance with current laws. MCMC also said that the second 5G network will be fully funded by the private sector.

The big telcos CelcomDigi and Maxis, who themselves are rivals, have a common plight now.

U Mobile did not mention Maxis as a possible collaboration partner. That could stem from a recent failed deal. In July, it was speculated that Maxis was in talks to buy U Mobile. Bloomberg reported that U Mobile’s owners were seeking a valuation of more than RM10bil. That hefty price tag may have killed the deal. It isn’t clear yet if CelcomDigi has initiated any serious discussion with U Mobile.

Telco officials in the country are still trying to seek clarity on this: how did U Mobile fare better than them in the selection criteria for the second 5G network award?

The idea of a second 5G network, as explained by the MCMC is because it “encourages competition, strengthens industry resilience and enables Malaysians to enjoy high-speed connectivity at affordable prices”. Isn’t this BS?

For U Mobile, it will need to build a network at a competitive price. It would also have to do so quickly, considering that DNB’s network already has significant coverage. What if U Mobile builds it and no one comes? This is why U Mobile is interested in some form of partnership with CelcomDigi or Maxis!

Going forward, a lot of how the 5G infrastructure rolls out will depend on how the MCMC plays its role. If the government’s rationale for having the second 5G network is to ensure that there will be competition, then it needs to ensure that there will not be any collusion between U Mobile and DNB in the future. Being a duopoly, there will always be that fear and if such unfair practices happen, it will be yet another backstep for Malaysia’s telecommunications sector.

Reference:

5G saga transmits mixed signals, Risen Jayaseelan, The Star, 9 November 2024

Impact of New Taxes for Real Estate Companies

The recent tax reforms and budget changes have implications for the real estate industry, particularly for property developers, investors and small-to- medium businesses. On the surface, their impact may seem minimal, but the ramifications may be far worse.

For example, the introduction of a 2% tax on dividends affects small and medium enterprises (SMEs). Owners who draw profits in the form of dividends are now impacted. Many property developments companies and family-owned real estate businesses rely on dividends to pay its shareholders after the company has been taxed on profits. The fear is that this tax introduces double taxation, meaning that after a property development company pays corporate tax, shareholders will now pay an additional 2% on the dividends received that exceed RM100,000 annually.

 

Source: https://en.wikipedia.org

This could lead property owners and developers to rethink their strategies for profit distribution, which may include:

• Reinvest in properties instead of taking dividends to avoid the double-tax effect.

• Increase reinvestment in property improvements or new developments, which could sustain or                 increase property values.

• Explore different compensation structures that balance between dividends and salary.

The foreign source income exemption extension benefits individual investors in real estate who have income from properties outside of Malaysia. For high-net-worth individuals and real estate investors with overseas holdings, the exemption allows them to retain rental income or property sale gains from foreign properties without facing Malaysian tax liabilities. The 10-year extension of the foreign source income tax exemption for individuals may appear to offer short-term benefits. This exemption allows individuals to remit back their foreign income without contributing to the Malaysian tax base.

While this is positive for those with international portfolios, it could impact the Malaysian real estate market by:

• Potentially decreasing the appeal of local real estate investments among Malaysian investors who             might find better returns abroad with this exemption.

• Encourage Malaysian investors to diversify geographically, possibly diverting capital that could             otherwise bolster the local real estate sector.

• Create a potential imbalance in the local property market, as local investments may see less                     individual investor activity than global markets, where there’s the added benefit of tax exemptions.

However, it could also mean that more investors with foreign holdings may choose to bring profits back into the Malaysian economy indirectly, especially if foreign returns are reinvested locally.

The budget’s RM18.6bil allocation to SMEs across various financing programmes provides substantial support for real estate-related businesses. Through grants and loans provided by agencies like SME Bank and BSN, property development firms, especially small- to medium-sized ones, can access capital that might otherwise be difficult to secure through traditional bank loans.

While the recent tax reforms and budget updates add some financial strain to real estate players, they also offer a variety of opportunities.

Property developers and real estate SMEs that adjust their tax planning, leverage new financing options and adopt a long-term investment perspective are likely to benefit most from these changes.

For investors, the combination of new taxes and expanded exemptions presents both risks and opportunities. By staying adaptive and strategically focusing on growth, these reforms could be turned into profitable outcomes.

Reference:

Beware the tax, Joseph Wong, The Star, 17 November 2024

Malaysia’s Cost of Living!

According to the Statistics Department, it costs around RM1,487 for a household with an average of 3.2 members to meet the required monthly nutrient intake standards set by the Health Ministry. This is cheaper than in Melaka (RM1,810), Johor (RM1,751), Sarawak (RM1,795), Sabah (RM1,747) and Pahang (RM1,642). The state with the highest monthly food expenditure per household is Selangor at RM1,881, with Terengganu coming in second at RM1,842.

However, these figures only measure food items. When the total cost of food and non-food items is calculated, the Klang Valley, comprising Kuala Lumpur and Selangor, has the highest monthly cost of living.

 

Source: https://en.wikipedia.org

These figures are available through the Statistics Department’s newly launched “Basic Expenditure for Decent Living Indicator or PAKW”. The PAKW allows the public to measure monthly expenditures for essential goods and services according to geography, household size and age group. This new tool can offer a clearer perspective for families planning their monthly budgets and for policymakers seeking to address regional disparities.

While debt levels can vary greatly, the data can still provide a guide to general averages for individuals’ expense estimation or benchmarking purposes; and if data variation is large, the distribution of the data can also be published for users’ reference. To improve the tool’s information value, the inclusion of more detailed expense categories within food and non-food expenses, such as discretionary food, medical and education.

While the PAKW offers a robust foundation for assessing living costs, the tool could include non-essential but common expenditures like entertainment, dining out, or personal development such as education courses and hobbies. While these may not be ‘essential’, they are often part of a household’s spending and contribute to the overall quality of life.

The tool could be more interactive and dynamic by including real-time updates or quarterly revisions that reflect changes in prices due to inflation, local economic conditions, or sudden shifts like those seen during a pandemic. 

With enhancements like expanded expenditure categories, dynamic updates and a user-friendly interface, the tool could become a more powerful instrument for understanding the economics of daily life in Malaysia.

Reference:

Decoding Malaysia’s cost of living, Doreenn Leong, The Star, 11 November 2024

First Solid-State Hydrogen Reactor in 2025?

Malaysia’s first solid-state hydrogen reactor for sustainable electricity generation in rural areas will be launched in the first quarter of 2025. That is according to the Science, Technology and Innovation Ministry (Mosti). A 5kW reactor will be deployed in Tanjung Malim, Perak. The hydrogen reactor is intended to power the community hall for the Orang Asli, with expansion to clinics if the deployment is successful.

If Malaysia succeeds in its hydrogen roadmap, it could enter the international green hydrogen market, securing a strong global position. Sarawak is leading in efforts to promote hydrogen vehicles, having established multi-fuel refuelling stations offering consumers options of conventional fossil fuels, electricity for EV charging and hydrogen refuelling.

 

Source: https://upload.wikimedia.org

The state government intends to set up six multi-fuel stations with facilities already operational in Kuching and the Daro District. Currently, there are five hydrogen cars in Sarawak, and the state government has launched a hydrogen-powered “smart tram” and hydrogen buses.

Sarawak has established two clean hydrogen production plants. One is a joint venture with (South) Korea, and the other with Japan. The green hydrogen produced there is exported to Japan and (South) Korea. Mosti said NanoMalaysia Bhd (NMB), which is under the ministry, has signed a memorandum of understanding with Australia’s Fortescue to explore collaboration opportunities in research and development in Malaysia’s green hydrogen industry. The NMB Hydrogen HyPEReactor (5kW) would produce hydrogen gas to be fed into a fuel cell to generate electricity and that the system’s input material could be recycled up to 500 times.

The HyPEReactor will be deployed in Pos Tibang, Perak, and Kampung Tekam, Johor, with a project investment cost of RM2mil. With additional budget allocation, expansion could include powering lighting for food trucks, night markets and Ramadan bazaars as an alternative to diesel generators. Budget 2025 will fund operations and maintenance and upgrade the HyPEReactor to include automation.

As end 2023, Sarawak’s power generation capacity stood at 5,675MW, with hydroelectric plants contributing 3,452MW. Studies indicate that Sarawak has the potential to harness up to 20,000MW of hydropower across 52 sites.

Reference:

First solid-state hydrogen reactor launching next year, The Star, 15 November 2024

Donald Trump is Back!

With Donald Trump back, what is the impact on Malaysia? Countries, including Malaysia, are trying to anticipate the impact of protectionist and punitive measures under a second Trump administration.

The immediate worry is the impact of tariffs that will be imposed, with the most punitive ones on China. Malaysia and others will not be spared based on what has been said so far. The impact, however, may not be significant for Malaysia. Why?  Our trade surplus with the U.S. is small compared with other countries in the region. In South-East Asia, Vietnam and Thailand have far larger surpluses than Malaysia, while China is way ahead overall. 

Source: https://en.m.wikipedia.org

Malaysia stands out in its surplus in electrical and electronic (E&E) goods, an area of focus for the United States in terms of growing its domestic industry. As Malaysia plays an important role in the E&E supply chain ecosystem, there is little risk of the US targeting such exports.

Malaysia stands to gain from the China+1 policy being adopted by a growing number of companies. In the years following Trump’s first term, Chinese companies have been actively looking for offshore manufacturing bases to deflect the full brunt of US tariffs.

From 2016 to 2023, approved FDI rose from RM21.6bil to RM128.4bil, bolstered by the ongoing US-China trade war. The ongoing push by foreign investors to re-shore their production facilities augurs well for Malaysia, and FDI is envisaged to increase as a result of Trump’s economic policy.

Malaysia will gain from this primarily through the creation of jobs and an increase in its gross domestic product in the years to come as a result of increased domestic production and exports.

Global trade grew during Trump’s first term but at a slower rate. The tariffs he imposes will surely take some time to adjust to, but growth will slow in his second term. Also, will there be retaliatory tariff? The US economy will then be affected.

Trump’s planned tax cuts will certainly lift growth in the United States like it did during his first term. Despite Covid-19, the United States saw higher growth rates and a repeat of that will only increase demand for goods and services, which will help Malaysia’s trade.

As a result of Malaysia’s diversified exports, its reliance on China, may somewhat cushion the impact from higher tariffs.

One knee-jerk reaction from Trump’s election win is the fillip for the US dollar. A stronger greenback could mean pressure on Malaysia’s foreign reserves as in Trump’s first term, but conditions are different now. Back then, pressure from the 1MDB scandal dragged down the ringgit. The currency did rebound strongly on the back of increased investment, stable interest rates and anticipated fall in US interest rates. But the ringgit’s sensitivity to the yuan and any delay in the decline in the Fed Fund rate will impact its performance.

While lower oil and gas prices will hurt Malaysia, there is possibly a silver lining. Malaysia is projected to spend RM52.8bil this year on RON95 subsidies and lower crude oil prices will only lessen that burden. It will also enable the government to rationalise RON95 subsidies by a higher amount.

It is envisaged that the government may save RM8bil from the rationalisation plan that will see the top 15% of income earners not receiving any petrol subsidy. Lower crude oil prices can allow the government to consider a full float and cut subsidies entirely or have a more limited scheme than what has been planned.

Lower crude oil prices will also bring down broader inflation as prices in Malaysia are sensitive to transportation charges, which are predominantly linked to the price of petrol at the pump.

Malaysia will have to institute its own changes to improve productivity and efficiency based on what Trump does. Cost and price pressure on our exports to the US will give companies here the opportunity to make broad changes in the way they operate. By enhancing automation and productivity, firms here can only benefit themselves and the country in the long run.

So, is Trump policies good for us? Hopefully, the impact will be minimal and more rational thinking may prevail with his economic advisers.

Reference:

Boon or bane? Jagdev Singh Sidhu, The Star, 18 November 2024

Why Warren Buffett Is Raising So Much Cash?

Warren Buffett’s Berkshire Hathaway is selling more shares in Apple and other companies and trimming Berkshire’s stock buybacks — ending September with $352.2 billion in cash, according to CNBC.

This raises many questions:

• Why is Berkshire raising so much cash?

• As stocks hit new record highs — with the S&P 500 up 20% so far in 2024 — should investors head for the hills or keep buying?

 

Source: https://www.investopedia.com

Buffett says he is selling because he thinks stocks are trading above their intrinsic value and capital gains taxes are likely to rise. Berkshire Hathaway is piling up cash. More specifically, between the second and third quarters of 2024, the company’s cash pile increased 17.4% to $325.2 billion.

Overall, Berkshire sold $36.1 billion worth of stock in the quarter. Much of the proceeds came from unloading shares of its two biggest holdings: Apple and Bank of America. More specifically, Berkshire sold roughly 25% of its Apple holdings in the third quarter — marking the fourth quarter in a row Buffett has dumped the iPhone maker’s stock.

Since the end of 2023, Berkshire has sold 605 million Apple shares — or about 70% of its holdings. The company unloaded 115 million in the first quarter and 390 million in the second quarter.

In the third quarter, Buffett’s company dumped another 100 million Apple shares, according to the Wall Street Journal, leaving Berkshire with about $70 billion worth of the iPhone maker’s stock. Since the end of September, Apple stock has lost 4.3% of its value.

Berkshire has also sold about $10 billion worth of Bank of America stock since the middle of July. For the first time since 2018, Buffett’s company didn’t buy back any stock in the quarter.

Buffett has stated two reasons for raising so much cash: Stocks are overpriced, and capital gains taxes must rise. The idea that Buffett sees stocks in general as over-valued has been around for many months. In May, he told investors to expect him to sell shares and build up reserves. Another reported reason why he is selling stocks is he anticipates higher capital gains taxes. 

If Buffett’s cash-raising strategies signal a stock market drop is imminent, investors who follow that index investing strategy will be able to buy stocks at lower prices every month until they bottom out. So, do we cash out now or hold on?

Reference:

Why Warren Buffett sold more Apple stock and is raising so much cash? Peter Cohan, Forbes, 4 November 2024

Rich Malaysians Want RM3.6Mil For Retirement?

While many Malaysians earn barely enough to make ends meet, their more affluent countrymen are putting aside millions to ensure they enjoy their golden years. A recently concluded survey by global financial institution HSBC shows that at least half of wealthy Malaysians already have a plan in place to meet their financial needs post-retirement.

HSBC refers to them as “power planners”. This was reported in the second edition of its Global Quality of Life Report. For each of these wealthy individuals, nothing less than US$830,000 (RM3.61 million) is adequate. About 73% of them say they are already on track to meet their retirement goals.

 

Source: https://en.wikipedia.org

On average, wealthy Malaysians are also more committed to ensuring the success of their retirement plan than their peers elsewhere. The survey shows that 84% of Malaysians already have a comprehensive financial plan for retirement, compared with the global survey average of 72%.

The HSBC survey covered 11,230 affluent individuals across 11 markets, out of whom 499 are Malaysians. Only those who have assets of US$100,000 to US$2 million (RM434,000 to RM8.68 million) were covered in the survey.

The survey was conducted to explore what quality of life means for affluent individuals across different generations and investigated the relationship between physical and mental wellness and financial fitness. Affluent Malaysians also worry a lot about physical health, the cost of healthcare and inflation. A total of 44% rank having adequate insurance coverage as a top financial goal. On average, affluent Malaysians put aside at least 24% of their monthly income towards investment. A survey early this year by another financial institution, Hong Leong Bank, showed that only 12% of Malaysians considered themselves well-off.

It all depends on lifestyle. Retirement lifestyle and legacy funds for the next generation are the key concerns. In essence, if you have RM10k per month as “passive” income you could be fine. That assumes you are debt-free and have a dwelling place. But not many are in this situation because of Covid. And so may depend on the next generation for some form of financial support. As you grow older, health issues and costs become central. So, if you have adequate insurance you may have mitigated the risk. No matter what, do try to enjoy life and make every moment count.

Reference:

Rich Malaysians want at least RM3.6mil in the nest egg, FMT Reporters, FMT, 

4 November 2024

How Inflation Impacts Life in Malaysia

 Inflation affects everyone, but not equally. Most people feel that the cost of living is getting more expensive every year. That is true, but some items are more affected than others.

 

The general definition of inflation: The decline of purchasing power of your money over time. In other words, what can you buy with RM10 today will be less than what it could buy you 10 years ago? Look even further back and the difference can be surprising.

The inflation figures are calculated using a weighted average price level of a basket of selected goods and services over a set period: this is the Consumer Price Index or CPI. It is a national average — therefore, the prices in an urban area are likely to be higher than in rural areas. Also, this ‘basket of goods’ only contains primary consumer goods, not luxury or premium goods.

Top 3 contributors to Malaysian CPI weightage:

 

According to the Department of Statistics Malaysia, prices were taken from 17,000 retail outlets in states of Peninsular Malaysia, 2,500 outlets in Sabah and 2,300 outlets in Sarawak. This may not reflect where you live, your consumption habits, and what you choose to spend your money on. The important thing to remember here is the CPI is used to paint a picture of the current trends and at least give you an idea of what you need to prepare for in the future or to adjust your spending habits.

There are several factors that drive inflation — some are easy to manage, while others are ingrained in our society’s structure and will likely be around for a while. 

1. Demand-Pull Inflation

The ‘good times’ indicator: Usually seen in times of strong economic growth, when demand surpasses supply, forcing an increase in the cost of living. It may be a sign of rising salaries, lower unemployment and a growing desire for better standards of living.

Real-life example: It’s like what happens to hotel room rates (and even certain food types for festive occasions) during peak and off-peak seasons. 

2. Cost-Push Inflation

Higher costs of goods sold: Increased production cost due to rising raw material costs driven by global shocks, geopolitical unrest and trade wars. A blockage of shipping routes (like 2021’s Suez canal obstruction) can do the same. Real-life example: Due to global geopolitical issues, climate change and other factors, the prices of fertiliser, flour and grain have risen due to supply shortages.

3. Built-In Inflation

It keeps spiralling, and is hard to reverse: Even expectations that inflation will persist into the future can drive prices; workers will demand higher wages to maintain their standard of living, leading to even higher production costs, driving an upward wage-price spiral. Real-life example: While property prices rise due to construction costs (raw materials and labour), it still remains an attractive investment vehicle for many who accept higher prices as a reality that they have to live with.

Malaysia’s Food Inflation; a breakdown

Which food items are actually driving inflation in Malaysia?

 

Heavy rains throughout December 2021 directly impacted the supply of vegetables, fish and other seafood – the most common foods for Malaysians. External factors such as global prices of animal feed and other grains ended up driving chicken prices, while the ongoing Ukraine war is driving oil, gas, grains and fertilisers – bad news for agriculture. 

So, what is the cost of living? This is when wages or income have not kept pace with inflation. Your purchasing power has declined, and you have to do two jobs just to meet the bills. This is what happened in the U.S.

Many were unhappy with the current U.S. Administration even though the inflation rate was brought down to 2%. Why? Because many face stagnant wages to costs driven up by supply chain issues after Covid. They wanted wages to go up or prices deflated so that they could enjoy a standard of living they were used to. Trump seems to have addressed their concerns.

It is good for the Madani Government to learn from the Biden Administration’s failure to address this issue (of cost of living). How? Higher cash transfers for the B40, more subsidies for essential goods, productivity improvements, strengthening the Ringgit, wage improvements and better communication on steps being taken. These are important if you want to remain in power. Not some other wasted effort like medical treatment for people from Gaza or monetary contribution to Lebanon!

Reference:

Fresh Take - How inflation impacts life in Malaysia, Hong Leong Bank

Reforms for the Healthcare Sector?

Major transactions have taken shape in the hospital sector by large market players. Acquisitions made were clearly either expanding network or getting ready for an initial public offering (IPO).

Two key assets changed hands in the past year, and they include the acquisition of Island Hospital, which was completed recently, by IHH Healthcare (IHH) for RM3.92bil. The Penang-based hospital was valued at RM3.92mil per bed based on its planned expansion to a 1,000-bed hospital. Measured by enterprise value to earnings before interest, tax, depreciation and amortisation (EV/Ebitda), the deal was done at a staggering 24.6 times multiple.

Then in 2023, Sime Darby and AH Holdings Health Care Pty Ltd sold Ramsay Sime Darby Hospital (RSDH) to Columbia Asia for RM5.68bil, valuing the Subang Jaya-based hospital at 20.1 times EV/Ebitda and at RM3.71mil per bed based on RSDH’s 1,530 total beds capacity across seven hospitals in Malaysia and Indonesia.

Private hospitals trade at a premium valuation to other industries due to the cash-generating ability of the business model as well as the strong growth of the industry itself due to multiple factors such as higher life expectancy, rise in non-communal diseases (NCD) as well as demand for personalised and timely care for those who can afford them.

 

Source: https://en.wikipedia.org

According to the Health Ministry, as disclosed in the Health White Paper (HWP), Malaysia has a hybrid healthcare system, comprising a public and a private healthcare system. The public sector seeks to provide widespread coverage of universal healthcare for the population, delivering virtually near-free primary healthcare services and heavily subsidised secondary and tertiary care services which are largely funded by federal government revenues. The private sector seeks to provide healthcare services to the public on a fee-for-service basis which is predominantly funded by individual out-of-pocket payments and private health insurance products.

In terms of numbers, based on the ministry’s 2023 Health Facts report, Malaysia had some 148 government hospitals, inclusive of 11 special medical institutions, with some 45,167 beds at the end of 2022. Over at the private sector, the number of private hospitals stood at 207 with some 17,781 beds. Hence, while the public sector has a 41.7% share in terms of the number of hospitals, they represent 71.8% of the total number of beds.

The Health Ministry has one of the highest allocations of RM45.3bil in Budget 2025. The amount comprises RM38.5bil for operating expenses and RM6.7bil development expenditure. Emoluments supply and services are the bulk of the government’s expenditure for the ministry, accounting for 53.3% and 37.3% of total expenditure next year respectively.

According to the Global Medical Trend Rates Reports by Aon, medical costs in Malaysia rose by 10% in 2022 and 12.6% in 2023, which is higher than the global average of 5% in 2022, and 5.6% in 2023.

Among the key factors contributing to the rise in medical cost inflation is the increase in costs of hospital supplies and services, including drug prices, advancements in medical technologies, and the increase in the utilisation of health services following the resumption of elective medical procedures following the Covid-19 pandemic.

One of the most important questions patients get at a hospital is whether they are insured or not. An insured patient will be covered by his/her insurance company but with the co-payment in place, the insurance company’s outlay is reduced by the agreed co-payment amount, either in percentage or the absolute amount. Still, the medical bill can be rather substantial, and this drives insurance costs higher over time.

Medical inflation via insurance coverage is also rather obvious as there are cases where a treatment done and paid out of one’s pocket is lower by 15% to 20% than if covered under insurance. Why is this so? It is widely believed that the pure reason for this is that since it is covered by insurance, it is a blank cheque for the hospitals to charge what they can.

The recent comment by the Health Minister on the proposal to set up a National Health Fund (NHF) is positive for the healthcare industry to ensure we have adequate cover for all Malaysians. The NHF should be funded not only via contributions from the government but also perhaps via a defined contribution mechanism from both employers and employees that could mitigate some of the rising healthcare costs. This can be like the Employees Provident Fund but obviously with a lower contribution ratio. Even a 2% contribution each by both parties can easily add more than RM20bil into the NHF, which can then be used to subsidise healthcare costs for all Malaysians.

The Malaysian healthcare sector is at a crucial point whereby intervention by the government is necessary to reduce medical inflation in the private sector for the benefit of all.

Reference:

Healthcare sector needs a dose of reforms, Pankaj C. Kumar, The Star, 9 November 2024