BNM Holds Interest Rates Steady!

The Monetary Policy Committee (MPC) of Bank Negara Malaysia (BNM) has chosen to maintain the Overnight Policy Rate (OPR) at 3%. The decision comes against the backdrop of a global economy experiencing expansion, primarily driven by robust domestic demand amidst favourable labour market conditions.

While signs of recovery are evident in the electrical and electronics (E&E) sector, global trade remains subdued due to the ongoing shift from goods to services and persistent trade restrictions. Despite China showing improvement in its economy, the recovery remains modest, largely influenced by weaknesses in the property market.

Notably, monetary policies worldwide are expected to remain relatively tight in the near term, even as most central banks have peaked in their tightening cycles. The global growth outlook, however, remains susceptible to risks, particularly from geopolitical tensions, unexpected inflation spikes and increased volatility in global financial markets.

For Malaysia, the fourth-quarter advance estimates for gross domestic product (GDP) indicate overall growth for 2023 at 3.8% (DOSM). Looking ahead to 2024, growth is anticipated to improve to 4%-5%, buoyed by export recovery and resilient domestic expenditure. Positive factors include sustained employment and wage growth, expected improvement in tourist arrivals and spending, and continued progress in multi-year projects in both private and public sectors.

Inflation in Malaysia moderated in the fourth quarter, driven by lower cost pressures amid stabilising demand conditions. Headline and core inflation for 2023 averaged at 2.5% and 3.0%, respectively. The outlook for 2024 suggests modest inflation at 2.1% to 3.6%, influenced by stable cost and demand conditions. However, risks to the inflation outlook remain, contingent on changes in domestic policy, global commodity prices and financial market developments.

The key setbacks are exchange rate and cost of living issues. Exchange rate should improve to RM4.40 to USD1, if developed countries ease their tightening efforts. And cost of living issues are compounded by self-inflicted wounds like increase in water tariffs, electricity and perhaps petrol. The current government needs to learn to introduce new tariffs gradually and in a measured way so as to survive politically.

Reference:

BNM holds interest rates steady amid global economic trends, Eynez Syazmeena, Focus Malaysia, 24 January 2024

Is Southeast Asia’s Sea in Trouble?

Two billionaire cofounders of Singapore-based Sea Ltd. saw their estimated net worth’s slump by $995 million overnight after the New York-listed internet giant swung to a loss in the third quarter of 2023 amid intensifying competition in the Southeast Asian e-commerce market.

The fall of Sea’s shares wiped out roughly $643 million off chairman and CEO Forrest Li’s fortune and bringing his net worth to $2.2 billion, according to Forbes’ real-time billionaire tracker. The share price drop also erased around $352 million from COO Gang Ye’s fortune, bringing his net worth to $1.7 billion. Li, Ye and former billionaire David Chen founded Sea in 2009. 

Source: https://en.wikipedia.org

Sea reported third-quarter revenue of $3.3 billion, a year-over-year increase of 4.9%, but posted a net loss of $144 million. This is returning to the red after three consecutive quarters of profits. Revenue from its e-commerce business Shopee, which contributes about two-thirds of the company’s top line, increased by 16.2% year-over-year to $2.2 billion, its slowest growth rate to date. The entrance of new players has intensified competition in our markets, said Forrest

Sea’s cash-cow gaming unit, which helped fund the company’s expansion in e-commerce and digital financial services, saw its revenue fall by 33.7% year-over-year to $592 million, while Sea’s nascent digital financial services arm saw its revenue rise by 36.5% year-over-year to $446 million.

Shopee has faced ongoing competition from rivals like Alibaba’s Lazada and ByteDance’s TikTok. An emerging opponent is Temu, the online marketplace arm of billionaire Colin Huang’s Chinese e-commerce giant PDD, which launched in the Philippines in August. 

Beyond deep-pocketed competitors Alibaba and ByteDance, local rivals such as GoTo Group are also piling the pressure on Sea. GoTo, owner of Indonesian e-commerce contender Tokopedia, almost doubled its net revenue during the June quarter.

Bloomberg Intelligence noted that Sea’s marketing costs surged 12.4 per cent year on year in the third quarter, after declining for a fourth consecutive quarter in the second quarter of 2023.

E-commerce across Southeast Asia is set to reach $139 billion in gross merchandise value (GMV) in 2023, up 6% from 2022, according to a report jointly prepared by Google, Temasek and Bain. With GMV expected to increase by 16% to reach $186 billion by 2025, the report said market leaders “have expressed willingness to begin re-investing profits to defend their market share,” as new entrants “have grown rapidly, gaining market share at an incredible rate”.

At one point in 2021, Sea was the world’s best-performing stock during the height of the Covid-19 pandemic. That year, Sea expanded its fintech ventures through its payments division SeaMoney, including launching a digital bank in Indonesia. In the pandemic’s aftermath and hiking interest rates, Sea’s market cap has fallen nearly 90% from its all-time high.

So, is Sea in trouble? No, it is of concern but Forrest Li is an adept entrepreneur who can work this through and come-out stronger and better!

References:

Southeast Asia’s Sea Swings To Loss Amid Intense E-Commerce Competition, Billionaire Cofounders See Wealth Drop $995 Million,  Catherine Wang, Forbes, 15 November 2023

Shopee-owner Sea shares plunge after company posts surprise loss of $202.8 million, The Straits Times, 15 November 2023

Is UPM’s Defence a Joke?

A French historian has hit out at Universiti Putra Malaysia’s (UPM) defence of two of its academics accused of misrepresenting facts about Malay maritime history, calling it a “joke”. Serge Jardin also challenged the expertise of those who conducted the blind peer review for the duo’s paper, saying UPM’s defence could be easily disproved. “How is it possible for an expert not to see the difference between a Chinese junk and a Malay jong? Have you ever seen a Malay boat with a pair of eyes at the bow, which clearly belongs to Chinese culture?” he was quoted as saying. Jardin was responding to UPM, which defended the research on Malay maritime history by two of its academics after they were accused of distorting facts.

Rozita Che Rodi and Hashim Musa wrote “The Jongs and The Galleys: Traditional Ships of The Past Malay Maritime Civilization” which was published in the International Journal of Academic Research in Business and Social Sciences, Vol 13, Issue 11, 2023.

Source: https://en.wikipedia.org

Jardin questioned the journal, saying it was a “pay to publish” journal and that its publisher, Human Resource Management Academic Research Society, was listed as predatory in Beall’s List. Beall’s List, originally created by University of Colorado librarian and researcher Jeffrey Beall, is a widely used and referenced list that identifies potential predatory publishers and journals.

The Royal Museums Greenwich (“RMG”) in London said that the photograph of a ship model in its collection is correctly attributed as “Foochow junk”. However, there is likely to be cross-pollination of junk designs in Southeast Asia, according to RMG. That means a copy? According to RMG, “The evidence of marine archaeology is that the seas of Southeast Asia were dominated in the 16th century by large cargo ships of a common type, showing features predominantly Southeast Asian but with Chinese admixture”.

The re-writing of history is becoming a “fashion” in some local universities. That’s why we have Siti Mastura and the likes, who are championing the political or “ketuanan” concept. And so it is when we examine “murukku” or Proton X70 or X50. Wholly Malay invention? Integrity is important whether it is in academia, government or business.

References:

What a joke, says French historian on UPM’s defence in academic paper dispute, Free Malaysia Today, 25 January 2024

UK Museum says ship model’s Chinese, but designs similar across region, Aidila Razak, Malaysiakini, 26 January 2024

Impact of Electricity Tariff Adjustment

The electricity tariff was increased for 1.2 million households from 1 Jan 2024. This is expected to influence the country's inflation rate and contribute to a marginal increase in the cost of living.

From Jan 1, approximately 1.2 million households with a monthly electricity bill of at least RM220 will experience a rise in their bills by 4.2 to six per cent. This adjustment is part of the government's strategy to implement the so called targeted subsidies. As a result, affected households should anticipate an additional monthly expenditure ranging from RM12 to RM32 for electricity.

Source: https://en.wikipedia.org

The government anticipates savings of RM266.2 million in subsidies through this measure.

The Energy Transition and Public Utilities Ministry's announcement specifies that domestic consumers using 601 to 1,500 kilowatt-hours (kWh) per month will no longer qualify for the two-sen per kWh rebate under the Imbalance Cost Pass-Through (ICPT) mechanism from Jan 1 to June 30, 2024.

The recent tariff adjustments supposedly would leave a majority of electricity consumers - 85 per cent - in Peninsular Malaysia, unaffected. Users with electricity consumption up to 600kWh or a bill of RM219.80 and below will continue to enjoy a two-sen per kWh rebate.

The government will still pay out subsidies of RM1.9 billion to maintain the status quo for the 85 per cent. Meanwhile, the RM40 Electricity Bill Rebate Programme for the hardcore poor will continue in 2024.

The ministry also encouraged consumers to explore solar options for personal use or joining the Net Energy Metering 3.0 (NEM 3.0) Programme. In line with these efforts, the Sustainability Achieved via Energy Efficiency (SAVE) 4.0 Programme initiative has been introduced, offering e-rebates for the purchase of energy-efficient equipment with a rating of 4 and 5 stars. This programme aims to incentivise the adoption of environmentally friendly appliances, further aligning the nation with global sustainability goals.

The cost of these devices ranges from RM10k to RM20k. If TNB/Government could subsidise 50% then there will be takers. TNB benefits, because it does not have to invest in new power plants and indirectly will promote “Green” energy. So, how about a one-time subsidy for residential solar panels?

Reference:

Electricity tariff adjustment: Expert says households will need to go bigger on energy efficient appliances, S. Birruntha, New Straits Times, 22 December 2023

Inflation (3.3%) for Malaysia in 2024!

RHB Research has predicted an uptick in Malaysia's headline inflation to 3.3% in 2024, against an estimate of 2.6% in 2023. This is amid a rise in Asean consumer prices. The research house said the inflationary pressures domestically stem from policy changes, costlier commodity and food, and heightened demand-side pressure.

Meanwhile, RHB Research said it is seeing persistent signals for Asean consumer prices to accelerate higher in 1Q2024. It attributed the reasons for the inflation heat in the Asean region to stronger demand-pull drivers, adverse weather and geopolitical conditions, as well as China’s economic recovery.

Source: https://hmarkets.com

The research house is relatively sanguine regarding global economic growth in 2024, stating that catalysts for its view included rate normalisation which may materialise in 2H2024, dissipation of inflation risks over the same period towards key central banks’ objectives, and China’s potential economic recovery in 2024.

It looks for an acceleration in global growth this year, led by further recovery in the US and China economies. US and China GDP (gross domestic product) growth to come above consensus at 2.2% and 5.0%, respectively. 

According to RHB Research, the higher commodity prices are underpinned by China’s economic recovery, which surpassed market estimates when its GDP growth for 3Q2023 rose 1.3% quarter-on-quarter on a seasonally adjusted growth basis, translating to a 4.9% year-on-year growth over the same period.

Malaysia, Vietnam, Singapore, and Thailand are likely to experience improved trade and tourism opportunities, particularly in the electrical and electronics (E&E) trade, due to China's economic momentum recovering in 2024.

Food prices will likely point higher, exacerbated by India’s rice export ban and El Nino weather conditions, which threaten favourable harvesting conditions.

In addition, depreciation of ringgit elevates cost of food imports of about RM70-75 billion a year. The Government requires a multi-pronged strategy to dampen inflation – from monetary to fiscal policies that could help cost of living to be bearable!

Reference:

RHB forecasts 3.3% inflation for Malaysia in 2024 amid persistent price surge in Asean,

Lee Ming Hui, The Edge Malaysia, 18 Jan 2024

Average Water Tariffs to Rise!

The National Water Services Commission (SPAN) has announced that water tariffs for domestic users in Peninsula and Labuan will increase by an average of 22 sen per cubic meter (cu m), effective from Feb 1. The new water tariff is expected to involve an increase in bill charges ranging from RM1.60 to RM8 for each home, or five to 27 sen per day for household usage of 20 cubic metres per month. In a statement, SPAN said this water tariff adjustment is implemented in response to the needs and requests of the state governments. 

SPAN said the water tariff adjustments, governed by the Tariff Setting Mechanism (TSM), will standardise the tariff structure and components for the states in the Peninsula and Labuan, with a three-year review cycle to maintain consistency in fee determination. SPAN added that this increase in water tariff is still insufficient to cover the actual cost of providing water supply services, amounting to RM1.75 per cu m based on the actual record of 2022.

In contrast, the average revenue per cubic metre is only RM1.43, meaning a shortfall of 32 sen per cubic metre. A cubic metre is equivalent to 1,000 litres. For context, these territories collectively consume 15.6 billion litres of water per day. For domestic consumption alone, each person is using 237 litres per day, according to Span’s 2022 fact book.

Source: https://commons.wikimedia.org

However, through this tariff review, SPAN highlighted that water operators are better prepared to make continuous investments in developing water supply infrastructure, including building or upgrading water treatment plants, replacing obsolete pipes, conducting regular maintenance, and efficiently addressing complaints.

To mitigate the impact of the increase on people's monthly water bills, SPAN advised water supply operators in each state to continue existing initiatives, such as providing targeted assistance, including rebates to the B40 group. SPAN also emphasised that adjusting water tariffs to reflect the cost of water supply is crucial for enabling water operators to enhance the level of service in supplying continuous, high-quality water.

Domestic water consumers in Penang will have to pay double beginning Feb 1 as the state water authority increases its tariffs. Those who use more than 20 cubic metres a month will also see an increase in tariff rate, with the Penang Water Supply Corporation (PBAPP) charging RM1.10 for every cubic metre for the next 15 cubic metres; and RM2 for every cubic metre beyond 35 cubic metres a month.

Despite the adjustment, he said 77 percent of domestic water consumers in Penang would still be paying tariffs less than RM10.85 per month. In Negeri Sembilan, the state government is taking a similar move as Penang, where it is increasing the state water tariffs by close to 30 percent. Meanwhile, the Sabah government will maintain its water tariffs despite Span’s adjustment announcement.

The effect of this is that other costs including food items will move up while wages remain stagnant. We need alternatives--- but for a tropical country water should not be problem. The real issue is NRW which is over 34% nationwide. If you can halve this, then the rates need not move. How do we do that? There is technology available to detect and rectify, but we don’t want that route because there are interested parties who prefer the traditional contract repair works--- more lucrative for all!  

References:

Average water tariffs rise by 22 sen/cu m in Peninsular Malaysia, Labuan from Feb 1, Choy Nyen Yiau, The Edge Malaysia, 18 Jan 2024

Water tariff issue: Residents advised to optimise usage at home, Malaysiakini, 18 Jan 202

Penang water tariffs to double, no rate hike in Sabah, Malaysiakini, 17 Jan 2024

Why Do “Good” People Steal, Kill and Destroy?

You can take almost any country in the world, and you will find in its history (or currently) they have done all three – steal, kill and destroy.

It is not necessary to look at the Roman Empire or the Mongol hordes, although they have exhibited the worst in humanity. But there are the British, French, German, Belgian, Dutch, Portuguese, Russian, Spanish, Japanese and many more who have oppressed, stole, killed and destroyed.

So why this madness? There is a “group” think or an “elite” think that justifies the superiority of one race over the other. But each race, civilisation, empire has fallen. Just like the British or the French.

God created humans with diversity in mind. He enjoys colour and intellect. But some of us prefer homogeneity and mono-chrome. Isn’t it better to have a high-definition colour television than a black and white set?

Source: https://www.wikiimpact.com

Are we in Malaysia removed from this curse? No! We have “Ketuanan Melayu”, not too different from a racial bigot of a German origin. Malaysians love each other and will help one another in times of need, like the “white flag” movement during the Covid-19 pandemic. But politicians don’t like this. They want to divide and rule. Superiority of one over the other.

Discrimination defies logic, that is if you believe in God. Surprisingly, even atheists cannot tolerate discrimination! For over 50 years, we have lived with the NEP. What has it brought us? More discrimination, more inequality and more unhappiness. More Nons are opting out. Instead of harnessing the best, we are happy if they leave!

It is the same if you walk into France, Germany or England. It is more subtle of course. In Malaysia we are more overt. It is the DAP or haram activities, or not being Malay enough like the former PM of 22 years says. So, do we follow him?

No, we need a new roadmap. Not done by the Nons but by the majority race. Tell us why we should remain. Make history inclusive, drop quotas by race, accept and celebrate each other and show a future for all – no one is left behind.

The Madani Government is better than the alternative, but it is a long road! And only those who could endure may stay! It is difficult to turn an aircraft carrier around but what else have we got? Remember the devil will rejoice when we steal, kill and destroy, not God!

Brexit Cost UK enonomy £140b?

The London mayor recently blamed Brexit for costing the UK economy £140 billion (US$178 billion or RM828.58 billion). The government, he said should “urgently” rebuild relations with the European Union (EU) to stem further decline. 

Britain’s EU divorce has also meant there are two million fewer jobs nationwide than there otherwise would have been, including 290,000 lost positions in London. This is according to research by Cambridge Econometrics commissioned by City Hall. Half of the total job losses are in financial services and construction.

Britain’s economic output would have hit £2.34 trillion in 2023 if the nation had remained inside the EU, 6% more than the £2.2 trillion it logged, according to Cambridge Econometrics. It predicted that the impact will worsen, shaving £311 billion off projected output in 2035 compared to a non-Brexit scenario, equivalent to a 10.1% hit. The analysis used historical data to predict how the economy of a non-Brexit “counterfactual UK” would have performed.

The report also suggested London’s economy was £30 billion smaller than it would have been without Brexit. The average Londoner was £3,400 worse off in 2023 due to the vote, compared to the £2,000 estimate for the average Briton.

Bloomberg had reported that Brexit will impact the U.K. economy by £100 billion per year. U.K. trade with rest of the world and the E.U. have fallen. “Global” Britain has become less open. Trade deals have been signed with 71 countries but impact is tiny. Investment has stalled. In terms of workers, there are 330,000 fewer workers in the U.K. It may only be 1% of total workforce but transport, hospitality and retail have been hard hit.

The office for Budget Responsibility thinks the U.K. is 4% worse than if it had voted “No”. So much for Boris and Farage and their deceit.

Reference:

Brexit cost UK enonomy £140b, London mayor says, Irina Anghel/Bloomberg, The Edge Malaysia, 12 Jan 2024

Forest City a Smuggling Hotspot?

Smuggling duty-free alcoholic beverages and cigarettes out of Forest City in Gelang Patah  has become a rampant affair. The New Straits Times (“NST”) revealed the presence of "agents" at the Forest City duty-free complex, who are willing to spirit out duty-free items purchased by customers, for the right price. These so-called agents would have no qualms about approaching potential customers to strike up a deal to bring out the items and evade checks by the Customs Department.

The rate for smuggling beer out of Forest City is a minimum of RM25 per crate, while there are different rates for liquor and cigarettes. The NST, upon being alerted to the practice, recently visited the duty-free complex, which houses more than 10 duty-free shops.

Source: https://en.wikipedia.org

Under the law, customers can buy up to three crates of beer (24 cans per crate), five litres of liquor, and three cartons of cigarettes (200 sticks per carton) at duty-free prices. There is no purchase limit on duty-free chocolates.

However, the alcoholic beverages and cigarettes must be consumed only within Forest City and cannot be taken out. To purchase the items, foreigners need to hand over their identification documents, while Malaysians must present their MyKad.

Forest City residents, meanwhile, have a special card which they are required to produce. This was confirmed by checks with a number of duty-free store salespersons.

Outside a store, the NST reporter was approached by a young man who claimed to be a runner who could help bring goods out of Forest City. Dressed in a black T-shirt, jeans and cap, he said he charged RM25 per crate of beer.

A crate of Tiger beer, usually retails at RM143.90, is sold at RM74.30 at the duty-free store. As such, even with the RM25 fee added on, it would still be cheaper than the regular retail price. Asked how this would be done, he said the customer could meet him at the complex's basement car park where the goods would be handed over discreetly. The agent would place the goods in his car and drive out of the complex, which is manned by a Customs officer and a Forest City security guard.

Asked about the risk of the agent driving off with the goods, he gave his assurance that it had never happened before and that he had been "in business" for three years. Queried on the dangers of getting caught, he replied that he was on "good terms" with the Customs officers.

"If I bring out 30 crates at a time, I would be charged for just one or two to meet the tax quota. "But otherwise, I can just drive through," he said, adding that there weren't many visitors to the complex and as such, his services contributed towards the livelihood of the duty-free operators.

Malaysian ingenuity, corruption and lack of enforcement are key for the “success” of a smuggling hotspot. NST reporters did their work on an operation that has been going on for three years. Will the authorities act?

Reference:

Forest City a smuggling hotspot, New Straits Times, Jassmine Shadiqe, 5 Jan 2024

Consumer spending to slow in 2024!

The Socio-Economic Research Centre (SERC) has forecasted private consumption to moderate to 4.6% in 2024 from 5.3% in 2023, due to re-emergence of inflation risks, driven by new taxes and targeted subsidy rationalisation which is expected to take place in the second half of the year

The labour market is expected to maintain full employment conditions with an unemployment rate of 3.3% in 2024 and real wage is expected to grow by 5%, consumers will remain cautious with their spending, particularly on necessities.

SERC remains cautiously optimistic about Malaysia’s economic outlook in 2024 with a forecasted gross domestic product (GDP) growth of 4.5% supported by the continuous growth in domestic demand and a recovery in exports.

This comes within Malaysia’s official forecasted GDP of 4.0% to 5.0% in 2024. For the first nine months of 2023, Malaysia recorded a GDP growth of 3.9%.

SERC said export growth will be supported by a gradual improvement in global demand, a recovery from the downturn in the tech cycle, and an increase in demand for chips for electric vehicles, artificial intelligence and 5G technologies.

Furthermore, the research house has projected an inflation rate of between 2.8% and 3.5% due to subsidy rationalisation, on top of currency risks and uncertainties linked to supply-related factors such as global commodity prices and geopolitical tensions.

On the local currency, SERC has forecasted the ringgit to appreciate to the 4.40 level against the US dollar by the end of 2024.

The US Federal Reserve will likely cut the federal funds rate to a range of between 4.50% and 4.75% in the second half of 2024, while Bank Negara Malaysia may keep the overnight policy rate at 3% throughout the year. That reduces the differential.

If some of those MOUs signed in 2023 turns real, then there is a hope of higher FDI inflows. And if some politicians don’t go off the handle, investors may not be spooked to stay away!

Reference

Consumer spending to slow in 2024 as inflation may re-emerge; ringgit to strengthen against USD, SGD – SERC, Hee En Qi, The Edge Malaysia, 12/1/24

Sectors to Keep an Eye On in 2024?

As the post-pandemic boom subsides, attention is turning to sectors with long-awaited project roll-outs, such as oil and gas, construction and power.

The Edge Malaysia had  a brief look at the key sectors to watch out for:

(i) O&G: Sustained activities?

Upstream oil and gas (O&G) companies in Bursa Malaysia are anticipated to continue benefiting from elevated activity levels. This is despite pressure on oil prices to go below US$80 per barrel, compared with over US$100 in 2022.

The Petronas Activity Outlook 2024-2026 report, which lays out the national oil company's expected activity levels in the next three years, suggests sustained or higher capex spending as it targets a production of two million barrels per day by 2025, up from 1.7 million currently.

As to whether oil prices can stay around US$80 per barrel will depend on whether OPEC+ members will undertake voluntary cuts, as was done in 2023, in anticipation of some demand headwinds — which have emerged in the downstream segment.

Source: https://www.upstreamonline.com

(ii) Power: Anticipating new quota, project roll-outs

Power sector players such as local utility companies, solar asset owners and contractors, saw strong share price gains in 2023 due to a boost in sentiment. The government's adoption of policies to accelerate RE adoption through bigger RE projects and exports of low-carbon electricity to neighbouring Singapore  were added boost.

All eyes will be on the roll-out of new projects and quota, including the Net Energy Metering (NEM) quota required for rooftop solar installations, as well as upcoming large-scale solar (LSS) projects to cope with the very high demand anticipated in Malaysia and its neighbouring countries.

Ahead of the rollout of new LSS projects, implementation of the corporate green power programme (CCGP) would see an estimated RM2.7 billion to RM3 billion of contracts to come.

(iii) Healthcare: Opportunities aplenty 

Even as the Covid-19 pandemic reaches manageable levels globally, the fear of new virus variants and the disease's lingering effects still looms, especially among the elderly, which provides opportunities to healthcare players.

Concurrently, the recent spike in Covid-19 cases has rekindled investors' interest in rubber glove stocks that recorded a spectacular outperformance in 2020-2021.

(iv) Construction: Hope on project flows

Sentiment is bullish in the construction sector for 2024, backed by a strong pipeline of infrastructure projects, and rising demand for industrial buildings such as warehouses, data centres and semiconductor plants.

Mega projects that the market is anticipating include the RM45 billion MRT3 Circle Line, for which the MRT Corp recently sought a three-month extension till March to finalise tenders for the project and the RM9.5 billion Bayan Lepas LRT in Penang that will receive financial backing from the federal government.

On top of that, there will be the rollout of six flood mitigation projects reportedly to be worth RM13 billion including in Johor, Selangor and Kelantan.

(v) Property: Infra boom to rejuvenate demand

Catalysts for the property sector in 2024 include signals from Bank Negara Malaysia to continue pausing rate hikes, potential rate cuts by the US Federal Reserve, the slew of major infrastructure projects and favourable government policies.

Major projects present opportunities for developers to launch high-value transit oriented developments, including the Bayan Lepas Light Rail Transit (LRT), the Johor Bahru-Singapore Rapid Transit System or RTS Link, and a potential revival of the Kuala Lumpur-Singapore High Speed Rail project. 

Government measures that are a boon for the sector include the formation of a Johor-Singapore Special Economic Zone (JSSEZ) down south that is intended to support Singapore’s industrial sector with an emphasis on renewable energy, which has spurred interest in real estate within Iskandar Puteri.

In addition, the revamped multi-tier Malaysia My Second Home (MM2H) programme could boost demand for more premium homes in Kuala Lumpur, Penang and Johor.

(vi) Tourism: Higher tourist arrivals

Malaysia’s tourism industry is expected to continue its recovery and surpass pre-pandemic levels in 2024, analysts said. The recent relaxation of visa entry for tourists from China, India and Middle East countries and better flight connectivity will also drive the resurgence in Malaysian tourism.

(vii) Aviation: Encouraging signs 

With the continued revival of the tourism sector, the aviation industry has continued to rebound. MIDF Research predicts a surge in Malaysia's airline traffic, lifted by visa-free deals with China, India and the Middle East.

(viii) Plantation: El Niño seen slashing production, lifting prices

The El Niño is expected to reduce crude palm oil (CPO) production, which could lead to a subsequent increase in CPO prices by 2024. This typically creates favorable conditions for plantation companies but analysts remain neutral on the sector, saying the wider impact of the weather phenomenon has to be closely monitored. CIMB research forecasts that average CPO prices will increase by 5% to RM4,000 per tonne in 2024 from RM3,800 per tonne in 2023.

(ix) Technology: After a dismal 2023, observers eye upcycle

Outlook “may remain tepid in 1H2024 before picking up in 2H”, while some suggest “the great rebound could only be seen in 2025,”  MIDF Research said. The pace of recovery for different semiconductor subsectors and firms may vary.

(x) Automotive: Uncertainty?

After two years of strong sales, the automotive industry is facing uncertainty in 2024 with analysts foreseeing challenges as the country overhauls its fuel subsidies, potentially impacting the sector's growth. 

Many sector analysts are optimistic but some remain rather cautious. The larger play remains global geo-politics, local sentiments and regional political changes expected in neighbouring countries.

Reference:

Sectors to keep an eye out for in 2024 as post-pandemic boom subsides, Adam Aziz, Emir Zainul, Lam Jian Wyn, Anis Hazim, Syafiqah Salim, Izzul Ikram, Isabelle Francis and Chester Tay, The Edge Malaysia, 4 January 2024

Government’s Additional Contribution: A Populist Move?

The Employees Provident Fund (EPF) recently announced the disbursement of a RM708 million government additional contribution incentive to its 1.4 million members aged between 40 and under 55. The incentive was allocated to individuals with EPF savings of RM10,000 and below in their Account 1 as of Feb 24, 2023.

Source: https://ms.wikipedia.org

The one-off RM500 contribution incentive seeks to encourage EPF members with low savings and nearing retirement age to continue to save and accelerate the accumulation of their retirement savings.

If the RM500 stays for 20 years and dividend is at 5% p.a., the money may grow to over RM1,300. Is this enough to retire? Isn’t this just a populist move?

And the Government pumps in RM500 for each account of the 1.4 million members, hoping they will accelerate their savings with this incentive! Don’t get that? They will be encouraged to wait for another pump-in next year and the year after that and so on. Each year more than the previous year. How can they be responsible savers?

The issue of insufficient savings in EPF is a serious matter. Over 6.3 million members under 55 – or about 48% of total members have less than RM10,000 in their accounts up to September 2023. This requires a holistic, comprehensive work by MOF, EPF, employers, employees, not a piecemeal, populist step!

Reference:

EPF pays out RM708m govt additional contribution to 1.4m members, Malaysiakini, 10 January 2024

Will Raising Petrol Prices Reduce Fiscal Deficit?

A gradual increase in petrol prices is the answer to reducing Malaysia’s fiscal deficit compared to targeted subsidies. This is the view of some economists. This exercise will then allow the government to directly assist the lower-income groups.

The approach involves gradually increasing petrol prices every quarter by 20 sen per litre, or to reach RM1 above the market price within the next two years. 

Regional comparisons also reveal a reality that fuel prices in some neighbouring countries have gone past the RM5 per litre mark. In Singapore, the price of 95-octane petrol (equivalent to RON95) is S$2.88 or a mind-blowing RM10 per litre compared to Malaysia’s RM2.05.

Malaysia is listed as the country with the 9th lowest fuel price globally. The country is expected to spend RM81 billion for subsidies in 2023. In 2022, it was RM62 billion of which RM45 billion was related to fuel subsidy.

Source: https://en.wikipedia.org

Malaysia’s subsidies bill constituted 23% of the federal government’s operating expenditure in 2022, versus an average of 10% over the previous five years. Fiscal consolidation is defined as policies and plans aimed at reducing government deficits and debt accumulation.

The consequence of this is that inflation will rise, cash transfers to the poor may increase further. This will not be a popular move but will satisfy analysts, credit rating agencies that the Government’s fiscal deficit will come down.

There must be a better way!

Gradual fuel rise (or as some others suggest targeted subsidies) will not solve fiscal deficit. What you need is a “Robin Hood” tax – Tobin tax on forex or widening tax base on “excess” profits to plug the deficit. Don’t dig a hole to fill another one!

Reference:

Raise petrol prices to reduce fiscal deficit, says think tank, FMT, 11 October 2023

Learning Poverty- An Issue for Building Human Capital

In 2017, the United Nations Educational, Scientific and Cultural Organisation's Institute for Statistics reported that 617 million children and adolescents worldwide were not achieving minimum proficiency levels in reading and mathematics. The World Bank in 2019 estimated that about half the children in low- and lower-middle income countries could not read a simple paragraph at age 10. Learning poverty is based on the notion that every child should be in school and be able to read an age-appropriate text by age 10. 

Studies have also shown that children who are not reading at grade level are more likely to drop out of school. This is even more so for children experiencing poverty as low proficiency in reading means they are unable to use reading skills to excel in other subjects.

Source: https://www.worldbank.org

A United Nations Children's Fund study on urban child poverty in Kuala Lumpur in 2018 found that 51 per cent who are 5 and 6 are not attending preschool and 13 per cent who are at the end of their lower secondary school age are not proficient in reading. Due to Covid-19, an additional 10 per cent of children globally will fall into learning poverty.

The disruptions to education systems worldwide reinforce the societal divide among students, especially those who are from vulnerable communities as they lack digital infrastructure and their home environments are not conducive to learning. This can be seen in Pahang, Kelantan, Sabah and Sarawak. About 52 per cent of students in Sabah did not have access to the Internet, smartphones, computers or mobile gadgets for online learning. More than 50 per cent of students in Sarawak had no Internet access or electronic devices to follow online learning at home during the lockdown. Even in the Klang Valley, many are struggling because of the lack of a conducive home environment and suitable resources.

A survey by the Education Ministry on teaching and learning online involving 670,000 parents with 900,000 pupils found 6.0 per cent had personal computers, 5.67 per cent had tablets, 9.0 per cent had laptops and 46 per cent had smartphones. While some are fortunate to have their own space, devices, connectivity and other facilities, others continue to lack the same.

The inability to read slams the learning gate shut; students will face hardship in learning other areas, such as math, science and humanities. The pandemic has forced the most vulnerable students into the least desirable learning situations as they face challenges in receiving the quality education they deserve. We need to address these challenges today to build a better future for the youth of tomorrow.

In addition, progress in reducing learning poverty is far too slow to meet the Sustainable Development Goals (“SDG”) aspirations.  At the current rate of improvement, in 2030 about 43% of children will still be learning-poor. Even if countries reduce their learning poverty at the fastest rates we have seen so far in this century, the goal of ending it will not be attained by 2030.

There is an urgent need for a society-wide commitment to invest more. If children cannot read, all education SDGs are at risk. Eliminating learning poverty is as important as eliminating extreme monetary poverty, stunting, or hunger. To achieve it in the foreseeable future requires far more rapid progress at scale than we have yet seen.

References:

We need to work together to address learning poverty, Hema Letchamanan, New Straits Times, 20 January 2022

What is learning poverty? The World Bank, 28 April 2021

Are Exports Set To Rebound in 2024?

Malaysia's exports are set to rebound to positive territory in 2024. This is supported by a re-acceleration in the global technology cycle as well as better economic prospects of major trade partners. The November export data was worse than consensus expectations, but this maybe a blink.

The Department of Statistics Malaysia (DOSM) reported that the country's exports decreased 5.9% to RM122.1 billion in November, due mainly to lower demand for electrical and electronic products.

The contraction was worse than Bloomberg consensus estimate of a 5.2% decline, and RHB's projection of a 4.0% decline. The November export performance was worse than expected due to weakness in electrical and electronic shipments as well as a sharper fall in exports to major destinations like China and the US.

Meanwhile, overall trade saw a moderate decrease of 2.4% year-on-year (y-o-y) to RM231.79 billion in November, said the Ministry of Investment, Trade and Industry.

However, Malaysia maintained its trade surplus during the month, valued at RM12.41 billion, making it the 43rd consecutive month of trade surplus since May 2020, albeit the smallest surplus in the three and a half years. MIDF Research expects the momentum for external trade recovery to continue into 2024, following an upside bias in 4Q2023.

It maintained its forecast that exports and imports will recover next year, a pick-up from projected declines of 7.6% for exports and 7.0% for imports y-o-y, in 2023.

Similarly, UOB expects an export growth rebound of 3.5% in 2024, reinforced by signs of a further recovery in the global tech cycle, an expected improvement in China’s economy and a projected soft landing in the advanced economies with gradual monetary policy loosening going into next year.

Hopefully, 2024 will be a year of better exports and trade surpluses, and a more positive outcome in GDP. Business sentiment remains cautious. It is for the Madani Government to harness further private sector initiative without focussing on some political irritants like race and religion.

Reference:

Exports set to rebound in 2024, economists say after November’s drop. Emir Zainul

Theedgemalaysia.com, 20 December 2023

‘A Grade’ for Madani Economic Policies?

A survey by Universiti Utara Malaysia (UUM) and two NGOs indicated that most Malaysians approved of “30 economic initiatives” by the Madani administration.

The people behind the survey seem to be linked to the ultra-right or the previous government’s administration. Notably, Kamarul Zaman was once a special officer to former prime minister Ismail Sabri Yaakob.

This survey purportedly involved 4,606 respondents chosen through random stratified sampling, representing 21.5 million voters. Established commercial market survey firms typically use 1,400 respondents.

Source: https://en.wikipedia.org

The report does not list the total number chosen from each stratum - typical in surveys by market research firms – nor the two NGOs involved in the survey. The scoring method and how the 3,000 points are divided are not clear. The margin of error is not stated.

The respondents were interviewed face-to-face and were asked 30 questions where they could choose one of the following responses: “strongly agree”, “agree”, “disagree”, “strongly disagree”, and “not sure”.

The question that had the most negative responses (62 percent disapproval) was when respondents were asked if they agreed with the government’s decision to lift chicken and egg subsidies. It is unsure if the respondents were briefed that while price controls for dressed chicken were lifted, subsidies for chicken eggs nationwide are still in place.

Strangely, 53 percent of respondents did not agree with the government’s policy to remove subsidies for the top 10 percent of electricity users, while maintaining subsidies for the rest.

In terms of positives, the Madani administration scored best (92 percent approval) in “incentivising” Padiberas Nasional Bhd (Bernas) to disburse RM60 million to poor farmers last December. Bernas is owned by business tycoon Syed Mokhtar Albukhary’s Perspective Lane (M) Sdn Bhd, with one golden share held by the government. In 2020, the previous administration extended Bernas’ concession to import rice until Jan 15, 2031. The company enjoys a monopoly in rice imports.

Statistics and some survey results are like wearing a bikini - it shows you many interesting things but not the vital parts! The size of a survey is important as much as its stratification. But if you already have the conclusion and work backwards to justify the results you want, then it is a question of integrity.

I am for surveys and research but the Madani government should engage good, independent third parties to evaluate and “tweak” its policies with survey results. Many (policies) are great on paper but lacks “bite” at the street level!

Reference:

UUM survey: M’sians gave Madani economic policies an ‘A grade’, Malaysiakini, 8 December 2023

Can We Use English in Malaysia?

In the immediate period  post-independence,  there were no fears about English being used in government or the private sector.  But all that changed as politicians capitalised on ethnic Malay sentiment for political leverage. The debate over whether to teach maths and science in English lingers to this day. Often, politicians leverage on this debate more to consolidate their own political power than for the betterment of the nation. Most of the professional knowledge houses use English. Many websites and search engines that keep people informed provide or point to information that is in English.

Source: https://fluencycorp.com

English is the official language in 67 different countries and 27 non-sovereign entities around the world. English is the most widely spoken language in the world, including by non-native speakers. Speaking English is an essential requirement worldwide. This is due to the importance of the language in the modern professional and business world and in international interactions. Much of Europe is becoming proficient in English. For instance, the Netherlands, Portugal, Spain, Germany and France have their own national languages, yet  many in these countries acknowledge that English proficiency is important for them to remain competitive. Much of Asia is also embracing and fast mastering the use of English as an important medium for change and progress.

But in Malaysia, English is politically weaponised. Anyone seeking to have English as an accepted medium is perceived as “unpatriotic” or worse. The fear is that the use of English will erode the position of the national language, Malay or destroy a “race”.

But many of us wear ‘English’ attire including black tie or formal suits. Many eat ‘English’ bread. Many turn to fountains of knowledge in English on the internet and from libraries to advance our education and enhance our professional excellence.

However, teaching maths and science in English is deemed as a deviation from the national language policy. The idea of allowing English-medium schools (other than the private schools) is seen as regressive and therefore will not be approved. Only Sarawak sees otherwise. And I dare say Sarawak will progress ahead of Peninsular or Sabah.

Will Malaysia be able to join the league of progressive nations that have no political, social, economic or religious problem with English? Remember our economy is really tiny in the context of the world, less than 0.5% of the world’s GDP. We are a trading nation not a giant economy with homogenous population base like China or Japan – even they are learning English. What’s our “baggage’? We actually need Malay, English, Mandarin and Tamil/Hindi if we are to progress – just check-out more progressive-minded countries like Singapore or Saudi Arabia.

Reference:

Why the insecurity over the use of English in Malaysia? JD Lovrenciear, Aliran, 15 Dec 2023

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