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

5G: Spectrum Value and U Mobile!

Appointing U Mobile as the second operator of the 5G network in Malaysia has raised several issues. The “one service provider” model was agreed upon, signed, and sealed in March 2021. And abandoned in May 2023. U Mobile’s award was announced 17 months later Nov 1, 2024.

U Mobile was launched in 2007 as Malaysia’s fourth-largest telco (before CelcomDigi merger). At the moment, its 4G network has over 9,000 sites nationwide and is said to have over 9 million subscribers in 2023.

As a comparison, Malaysia’s largest mobile telco, CelcomDigi, currently has nearly 25,000 sites post-merger. The telco is currently undergoing an integration and modernisation exercise aimed at providing a combined 18,000 5G-ready sites by the end of 2025. CelcomDigi currently has 20.2 million subscribers based on its Q2 2024 report.

Meanwhile, Maxis recently revealed it has over 11,000 sites as mentioned in its response to the second 5G network bid. The green telco currently has the second most mobile users in Malaysia with over 12.7 million subscribers according to their Q2 2024 report.

According to a recent report by Macquarie Research, CelcomDigi and Maxis dominate when it comes to revenue share for the Malaysian mobile market. Among the trio, CelcomDigi holds an estimated 50%, followed by Maxis at 37% and U Mobile at 13%.

Shareholders and shareholding as reported by SSM is shown in the Table below:

 

CelcomDigi and Maxis were forerunners in the second 5G network race as both telcos have invested heavily to modernise their existing 4G network to be 5G-ready in the past few years. All they needed was the 700MHz and 3500MHz spectrum to provide 5G coverage using its existing infrastructure.

Ever wondered why telecommunication companies fought tooth and nail against establishing a single network provider for 5G services and lobbied strongly against DNB as the sole provider of such services?

The magic word is spectrum, the frequency band for transmission which in Malaysia is given totally free of charge to the telcos. These are worth billions and because they are given free, telcos can make quite a bundle from them.

In the US, telcos paid US$81 billion for 5G spectrum in 2021, yes, a whopping RM356 billion, but here in Malaysia, we are giving it away for free- for free! In Malaysia, a former minister estimated it could be worth between RM6 billion and RM15 billion!

That’s why a single wholesale network was proposed as the model for Malaysia so that 5G costs to the consumer were the lowest possible. DNB got the contract and was to roll out the services for all. And yes, it got the spectrum for free. 

There are three options the government has in terms of this 5G contract:

1. Retract the award

2. Revise the new award of 5G to a consortium

3. Keep the status quo

Option 3 has no logic, no rhyme or reason! But remember this is Malaysia!

References:

Comment I 5G: Spectrum value, the Singapore link and other issues, P. Gunasegaram, Malaysiakini, 12 November 2024

Who owns U Mobile and how did it beat CelcomDigi and Maxis for second 5G network? Alexander Wong, https://soyacincau.com, 4 November 2024

More Highway Projects?

 

Of the highway projects mentioned in Budget 2025, the West Ipoh Span Expressway (WISE) and the extension of the West Coast Expressway (WCE) have raised some questions. In the case of WISE, concerns revolve around its viability, both financially and operationally. This is partly due to the fact a little-known company called East Coast Road Sdn Bhd (ECR) will be undertaking the RM6.2bil project.

The cost of WISE has increased by almost half-a-billion ringgit from RM5.75bil estimated before. At RM6.2bil for a stretch of 60.88km, this translates to roughly RM101.8mil per kilometre. Expressways typically cost RM30mil to RM40mil per kilometre, although this may vary according to project specifications, the type of terrain as well as land acquisitions. For elevated expressways, the cost will be higher at RM50mil to RM60mil per kilometre.

 

Source: https://en.wikipedia.org

 WISE starts from the North-South Expressway (NSE) in Gopeng, bypasses the accident prone-Menora Tunnel section and then re-joins the NSE in Kuala Kangsar. The traffic projections for WISE are questionable after Works Minister recently said it would reduce congestion along the NSE by up to 40%. The average daily traffic (ADT) economics for WISE does not seem to work out. This is considering WISE’s relatively short distance where traffic volume may not be significant. 

The CA stipulates a fixed toll rate of 23 sen per kilometre throughout the concession period. This is more than double the NSE’s rate of 11 sen per kilometre, set to remain until the end of its concession. 

It was recently reported the government, represented by Works Ministry secretary-general, signed a 55-year CA for WISE with ECR on Sept 5. Interestingly, the secretary general was transferred from the Prime Minister’s Department to the Works Ministry on the same date. ECR will surely rely on external funding in the absence of equity injection by its owners to undertake the project. 

The toll rate for the WCE, on the other hand, is 16 sen per kilometre, which will be revised every three years based on a step-up formula. 

By the time of completion in 2026, the cost of the WCE is expected to exceed RM8bil, according to an earlier report by RAM Ratings. The WCE, which is 94% completed, connects Banting in Selangor to Taiping, Perak. 

The WCE, which is set to be completed in 2026, is also an alternative route to the NSE, connecting Taiping, Perak, to Banting, Selangor. In his Budget 2025 speech, Prime Minister announced the expressway will be extended from Banting to Gelang Patah, Johor. While the extension was briefly mentioned in the Public-Private Partnership Master Plan 2030 released in September, it hardly garnered media attention then. 

With WCE yet to turn profitable, the company may not have the financial muscle to undertake the project without additional equity injection from its shareholders. Shareholders originally injected RM1.2bil into WCE Holdings, including the single-largest shareholder IJM Corp Bhd, which controls a 26.7% stake. 

However, due to project delays, the equity injection has ballooned to RM1.9bil so far.

WCE Holdings also had to sell its 40% stake in the Bandar Rimbayu development to raise cash to meet the funding needs of the coastal expressway. 

The project extension, assuming it is undertaken by WCE Holdings, may extend the break-even period for the expressway. Previously, WCE Holdings chief executive officer said WCE may take five to seven years to break even. This is not inclusive of the proposed extension. WCE Holdings has begun a restructuring exercise with the government and the company’s existing lenders to raise the capital required to complete the project by 2026. 

We need connectivity but do we need more toll highways? The PH or Madani Government was against tolled highways. At one time they wanted the total removal of all tolls. Now the tune is different! What about trains? Malaysia is fixated with cars, like the United States. It’s time for trains whether high-speed or otherwise! 

Reference:

Highway projects at a crossroads? Ganeshwaran Kana, The Star, 4 November 2024

Primary School Dropout Rate Rising in Malaysia?

A growing number of children from marginalised and vulnerable communities are dropping out of primary school in Malaysia, according to United Nations (UN) data. The UN’s Educational, Scientific and Cultural Organisation (Unesco) show a 20% increase in the number of out-of-school primary school students in the country for 2022, at 145,204 persons, compared with 121,231 in 2021. Experts say the rise in the dropout rate was due to the impact of the Covid-19 pandemic. 

Poverty and financial instability had been exacerbated by the pandemic, leading families to prioritise work over education,” said Universiti Sains Malaysia (USM) School of Educational Studies Professor in Curriculum Studies and Education Policy, Prof Dr Hazri Jamil (and as reported in the Star (28 October 2024).

 

The pandemic led to a shift to learning online, which highlighted the digital divide and inequities where students without reliable Internet access or devices struggled to participate in schooling, leading to disengagement. 

Some parents are also not enrolling their children in school due to a lack of awareness about the importance of education or cultural practices that prioritise other activities over schooling.

According to the Khazanah Research Institute, Malaysia saw a total of 41.5 weeks of full school closures between mid-February 2020 to July 1, 2022, which led to several types of losses, including psychological, academic, skill development, and equal education access. “Countries that had longer school closures also saw a greater decrease in their Pisa 2022 score outcomes,” its Households and the Pandemic 2019-2022: The State of Households 2024 (SoH 2024) report.

Malaysia had also seen its Pisa scores drop more intensely compared with other countries in the region, with our students faring the worst in reading in 2022.

 

Malaysia’s rapid population ageing is another factor that affects school enrolment. According to the Statistics Department, primary school enrolment shrunk to 3.02 million in 2022, a drop of 63,420 persons from the previous year. The moderating rate of school enrolment can be attributed to shrinking birth rates. 

The growth in school enrolment in the country started to slow down in 2014 as shown below:

What does it mean? The future is bleak for some kids, social discontent will rise, criminal activities could increase, and the nation’s future is impacted. But we have a woeful MoE that cannot see, hear or speak! 

Reference:

Interactive: Primary school dropout rate rising in Malaysia, Diyana Pfordten and Rebecca Rajaendram, The Star, 28 October 2024

Inflation to Return?

It wasn’t too long ago that Malaysia was moderating high inflation like many other countries. Inflation has cooled and is expected to be stable till year-end. (Although cost of living may not be addressed). In 2022, the pace of consumer price increases was at about 4.2% but latest data puts it at 1.8%. 

Easing global supply chain disruptions, for one, has been responsible for this ease in price spikes. However, for 2025, the risk of inflationary pressure will be back, due largely to the implementation of key economic reforms or removal of subsidies and increase in public/private sector wages. 

Socio-Economic Research Centre (SERC) reckons there are upside risks to headline inflation next year given the anticipated fuel subsidy rationalisation as well as higher private and public sector wages. Inflation will increase by 2.5% to 3% in 2025 compared with the estimated 1.9% for 2024 according to SERC.

 

Malaysia’s current inflation rate of below 2%, reflects the easing of price pressures. The current low and stable inflation is also supported by the ringgit’s strength. 

Since March 2020, prices have collectively risen by 10.17%. Food and beverage prices rose by 15.73%, transport prices by 17.21% and restaurant and accommodation services by 15.32%. That’s cost of living!

Bank Negara is expected to keep the benchmark overnight policy rate at 3% for the rest of 2024 and into the new year, to curb the anticipated inflationary pressure and to continue to support the ringgit. But more needs to be done if the Feds fail to cut the Fed Fund rate in the U.S. And with Trump’s victory, tariffs will now be in place and inflation will spike in the U.S. and other parts of the world. So, brace for a crash! 

Reference:

Inflation woes to return, Yvonne Tan, The Star, 4 November 2024

Are Homes Beyond the Reach of Most Malaysians?

Soaring property prices in city areas, coupled with their low salaries, have made owning a home at their preferred locations an unattainable dream for young people. That explains why many continue to rent or live with their parents. 

According to the National Property Information Centre, the average price of a condominium or apartment in the Batu district in Kuala Lumpur is RM735,000, while a similar property in the Setapak district, also in Kuala Lumpur, costs RM430,000. In Selangor, a terrace house in the Petaling district costs RM750,000, while the same property type in Sabak Bernam, which is on the outskirts, is priced at RM330,000. 

Source: https://www.wikiimpact.com

 Workers aged between 24 and 30 typically have lower incomes and cannot afford to buy properties in central areas. Working in Kuala Lumpur and looking to buy a property nearby but are earnings, say between RM2,400 and RM4,000 (monthly), you could not afford any property. If the price of the house is around RM500,000, you must earn at least RM4,600 to own it. Banks usually request that they apply for a joint loan with their partner or parents. The maximum loan eligibility is up to 70% of their monthly income, which is rather high. But some may have a car loan, a student loan and a credit card (debt). So, what’s left of their income for loan eligibility for a house priced between RM350,000 and RM400,000. These houses are located further away from the city centre but would cost more to travel to their workplace. 

The government should come up with rent-to-own schemes so that young people can afford to buy property closer to their workplace. Banks would also consider the person’s working tenure, which must be at least two years, the type of company and the industry they are working in. Those working as gig workers or on a contract basis are not so favoured by banks. Then there is CTOS. 

So, the Government must work with REHDA in incentivising building affordable houses, releasing land by states or converting some land from agriculture to residential. There are several other steps that need to be included and the Government is fully aware of them! 

Reference:

Homes beyond the reach of most M’sians, Diyana Pfordten, The Star, 30 October 2024

PMX and the Politics of Power and Patronage?

PMX made it to power through elite deal-making. PMX and his coalition did not win a majority at the last election. (This article is based on Bridget Welsh’s comments on 26 October 2024 in Malaysiakini).

Deal-making continues to reshape political alliances in this “unity” coalition, (the Madani government). Those who wanted a different government from that of Umno now have the same party and practices in power. PMX has provided the means for the party’s leaders and their family members to be rehabilitated, including through taxpayer-funded patronage. 

Political charges are being granted a discharge not amounting to an acquittal (DNAA) and halved for political support for loyalty and political support as part of deals. Latest is the groundwork for house arrest. 

Source: https://en.wikipedia.org

Reformasi is seen to be ending at the hands of the person who used it to gain political power. Little meaningful changes have been made to address electoral reform, expand political rights, bolster the judiciary, improve race relations, curb corruption and check abuses of power and patronage. 

Rather than strengthening political accountability, political institutions and building inclusion across groups in Malaysia, the focus remains on maintaining political power, to even include a personal mention of house arrest in a budget speech. 

The “attack the rich” Budget 2025 targeting the notion of Top 15, a concept that does not account for the spending needs of families, especially in urban areas, is feeding discontent and feelings of betrayal. This group pays 80 percent of Malaysian income taxes, funding infrastructure and increased salaries/bonuses of civil servants. Negative sentiments will only worsen. 

There are better ways to increase revenue fairly and less divisively. Taxes on the rich should focus on the super-wealthy, the top one percent and those who have taken advantage of patronage. Malaysian political history (or that of other nations) shows that alienating your political base comes with political peril. 

For now, the negative sentiment among the public has been evident in greater political disengagement and ambivalence, with fewer people voting especially. As in 2018, one should not underestimate the politics of quiet disappointment and frustration. 

Courage is not an ingredient with PMX. That is surprising, after all the jail term he has been through. If he is truly courageous then go for all the reformasi steps and see if his partners will walk away. Then face the consequences. At least the people will support him for the next GE! 

Reference:

Comment: Politics of betrayal? Bridget Welsh, 26 October 2024, Malaysiakini

George Muller: A Changed Man of God!

George Müller is said to have read the Bible more than two hundred times, many of which on his knees. Before his death, asked by a reporter what he would still like to do, he, on his knees, replied, "To read more of the Bible because I know too little about the excellence of Christ."

This was an Evangelical Christian, director of the Ashley Down orphanage in Bristol, England, where he cared for 10,024 orphans throughout his life based on God's promise found in Psalm 68:5 “God is a Father to the orphans". Known as a figure wholly involved in the education of the children he cared for; he was even accused of providing an education beyond the usual norm for those times. He founded 117 schools that offered Christian education to 120,000 children, many of them without parents.

 

Source: https://en.wikipedia.org

 He said, “If I, a poor man, can build and administer an orphanage without asking anyone for money or assistance, only through prayer and faith, this, together with the blessing of the Lord, could encourage God’s children in faith, being, also a powerful testimony to the unbelievers about existence of God."

The famous writer Charles Dickens himself visited George Müller to see himself the treatment offered to children. Dickens was so impressed that he wrote articles for several newspapers, an advertisement money can’t buy.

Thus, even after the age of 70, Müller travelled intensely, reaching 42 countries, speaking even to White House authorities, sharing with others his rich experience with God.

On the day of Müller's funeral, the Bristol factories shut down. Thousands of people came to pay their last respects to the man who was transformed by God from a thief who betrayed his closest friends, to a man who put himself at God's disposal and raised the equivalent of 180 million dollars through prayer and faith in Jesus.

Müller wrote of his conversion: “When I surrendered myself totally to God, the love of money was gone, the love of a home was gone, the affection of wealth was gone, the Love of worldly things was gone. God has become my everything I found everything in Him, there is nothing else I wanted. And I stayed with Him, a happy man, a very happy man, seeking to only accomplish the things of God."

Many more lives have been transformed because of Müller's faith and courage. Even if he is no longer among us, the work initiated by him still exists, and Müller's message echoes today: "God is real, He is a God in whom you can trust!"

It is enough to trust in the living God, Müller said, and not worry about earthly things, for the beginning of worry is the end of faith; and the beginning of faith is the end of worry. What a life well lived. We come with nothing and leave with nothing! And in between, we gather for whom? 

Reference:

Paul Dakessian’s Post, Linkedin

Budget 2025: Was it Just “Song and Dance”?

When the unity government was formed post-2022 general election, the first window of opportunity for reforms was presented when the government tabled Budget 2024. While some new taxes were announced and a move to address Malaysia’s subsidy problem was also made, more concrete measures were required. 

In this Budget, the FM has suggested top-tier households are those in the top 15% (T15)! The government proposed a two-tier pricing mechanism whereby 85% of households will continue to enjoy the subsidised RON95 at RM2.05, while the T15s will pay market prices.

 

Source: https://www.malaysianwireless.com

Many questions have been raised on the implementation. Some households may hit T15 with a larger share of working adults in one household while in some households, the T15 may represented by just a sole breadwinner or even by a smaller household size.

Post-budget, many comments have been made that the T15 category will be fine-tuned to include actual expenditure patterns of households.

Attempting to differentiate and ensure only the real B85 will enjoy the fuel subsidies is futile as it will only complicate matters and backfire on the government. Either we float the RON95 price or we don’t! If we float, then the cash transfers to B40 is higher. That seems a simpler solution to remove subsidies and RON95 is floated progressively over a period of 12-18 months.

On minimum wage, a two-tier increase in minimum wage with the first increase to RM1,700 effective 2025 and RM2,000 with effect from January 2026 would have been better. That would also address Malaysia’s low-wage structure and be on course in achieving the income share of gross domestic product (GDP) to 45% set under the Madani Economy framework. “Heavy” resistance will be seen by SMEs and others who view this as added costs with no measurable improvement in productivity. It may also lead to higher inflation.

The 2% tax on dividend income in excess of RM100,000 is perhaps a “testing the water” initiative. While this opens up potential higher rates, wider scope and lower threshold levels in the future, the move, seen in isolation, is not significant.

Even if an individual earns RM10mil in divided income, the tax is less than RM200,000, while those who have a portfolio of RM2.5mil in investments and earning some RM125,000 in dividends (assuming a dividend rate), will only pay some RM500 in tax, which is clearly not material as it is only 0.4% of total dividend income. This is clearly targeted towards individuals with a valuable portfolio and likely enjoyed by households in the T15 category.

After falling to 10.9% in 2020, tax revenue to GDP ratio rose to 12.6% in 2023 and is expected to fall to 12.4% this year. The Government could have created a bi-partisan, private sector driven tax reform committee to examine existing piecemeal efforts with a more comprehensive tax framework with growth and inequality addressed. That could have presented a longer-term strategy to reduce debts, improve implementation and create greater efficiencies. Alas, our FM is more into “song and dance” than in substance!

Reference:

Budget 2025 – a missed opportunity, Pankaj C. Kumar, The Star, 26 October 2024