Ban Hospital IPOs?

Malaysia’s medical cost inflation of 12.6% in 2023 is significantly higher than the global average of 5.6%. However, banning private hospitals from going public may not be the solution to rising medical costs. This idea was mooted by Bayan Baru Member of Parliament Sim Tze Tzin, who urged the government to prevent private hospitals from going public to curb profit-driven healthcare. He also suggested that Khazanah Nasional Bhd and the Employees Provident Fund consider delisting the private hospitals that they have stakes in, making them fully government-owned. 

Sim cited South Korea’s ban on hospital operators from undertaking initial public offerings (IPOs) as an example, stating that hospitals should prioritise saving lives rather than pursuing higher profits. Granted that South Korea’s ban on hospital operators going public has allowed its citizens access to high-quality healthcare services and low insurance premiums. But the country has its own set of problems too, primarily low reimbursements that make many hospitals financially inoperable.

 Source: https://en.wikipedia.org

 

In Malaysia, many Bursa Malaysia-listed healthcare providers are raking in record profits, leading to increased scrutiny over rising medical costs. For instance, shares of KPJ Healthcare Bhd recently hit an all-time high after posting record profits in financial year 2024 and rewarding shareholders with a special dividend. In contrast, IHH Healthcare Bhd saw a decline in its full-year results, dragged by foreign-exchange losses, higher staff costs and increased depreciation charges. Regardless of their financial conditions, it may not be wise to penalise hospitals for doing well.

 

No hospital, whether public-listed or privately held, would provide healthcare services without profitability driving it. Only government hospitals can do so, but they are unable to cope. Doctors and nurses at public hospitals are reportedly overworked and underpaid, often turning to private hospitals for better pay.

 

The government should consider building more hospitals and raising the wages of medical practitioners. But where will the money come from, as this can further strain the country’s finances? It can do a private-public partnership and set a new network of hospitals that are between public and fully private, a modified UMSC model.

 

Like education, medical care is a basic necessity provided by the government. Ideally, these social services should not be privatised. But for efficiency, ingenuity, innovation, private sector participation is helpful. Getting the balance right is the key.

 

Reference:

Banning hospital IPOs won’t curb rising costs, The Star, 8 Mar 2025

Keeping Confidences

 \Can you keep a secret? Be honest, now. When privileged information passes through one of the gates of your senses, does it remain within the walls of your mind? Or is it only a matter of time before a leak occurs? When the grapevine requests your attention from time to time, do you refuse to help it climb higher, or do you encourage its rapid growth, fertilizing it by your tongue? When someone says, "Now this is confidential," do you respect their trust or ignore it . . . either instantly or ultimately? 

Source: https://commons.wikimedia.org

The longer we live, the more we realize the scarcity of people who can be fully trusted with confidential information. The longer we live, the more we value those rare souls who fall into that category! As a matter of fact, if we were asked to list the essential characteristics that should be found in any member of a staff or officer . . . the ability to maintain confidences would rank very near the top. No leader deserves the respect of the people if he or she cannot restrain information that is shared in private. 

Our minds might be compared to a cemetery, filled with graves that refuse to be opened. The information, no matter how juicy or dry, must rest in peace in its coffin, sealed in silence beneath the epitaph "Shared in confidence—Kept in confidence." 

No business ever grows and remains strong unless those in leadership are people of confidence. No school maintains public respect without an administration and faculty committed to the mutual guarding of one another's worlds. When leaks occur, it is often a sign of character weakness, and action is usually taken to discover the person who has allowed his or her mental coffin to be exhumed and examined. 

Information is powerful. The person who receives it and dispenses it bit by bit often does it so that others might be impressed because he or she is "in the know." Few things are more satisfying to the old ego than having others stare wide-eyed, drop open the jaw, and say, "My, I didn't know that!" or "Why, that's hard to believe!" or "How in the world did you find that out?" 

From now on, let's establish four practical ground rules as Ps. Charles Swindoll says:

 

1.     Whatever you're told in confidence, do not repeat.

2.     Whenever you're tempted to talk, do not yield.

3.     Whenever you're discussing people, do not gossip.

4.     However you're prone to disagree, do not slander. 

Honestly now, can you keep a secret?

 

Reference:

Excerpt taken from Come before Winter and Share My Hope by Charles R. Swindoll.

Feb 2025 Palm Oil Stock Falls by 4.3%!

Palm oil stock level fell for the fifth consecutive month, by -4.3% month-on-month (MoM) to 1.51 mil tonnes in Feb-25, as weaker exports were more than offset by lower imports and output, as well as higher domestic consumption.  

Palm oil production remained on downtrend, falling by -4.2% MoM to 1.19 mil tonnes in Feb-25, as seasonally low cropping pattern was exacerbated by excessive rain. Exports fell further, by -16.3% MoM to 1.0 mil tonnes in Feb-25, due to demand rationing, palm’s weak price competitiveness against other competing oils, and seasonality, in our opinion. This is according to a Hong Leong Investment Bank (“HLIB”) report. 

Cargo surveyor Intertek Services indicated that palm oil shipment from Malaysia fell -12.0% MoM to 141k tonnes during the first 5 days of Mar-25, dragged mainly by lower shipments to Africa, India and Middle East.

 

The downtrend in palm oil stock level will likely persist into Mar-25, mainly on the back of less favourable weather conditions, which will likely suppress palm production further. 

Demand rationing, on the other hand, will likely persist into Mar-25. This will cap restocking activities. YTD, CPO price averaged at RM4,709 per mt. 

 

Crude palm oil (CPO) price will remain at elevated level in the near term, and CPO price strength to dissipate post quarter one 2025. That’s according to HLB Research. 

HLIB is keeping their 2025-26 CPO price assumptions of RM4,000 per mt and RM3,800 per mt unchanged. Costs can be improved with automation and innovation. Large oil palm companies must take the lead! That will also reduce foreign labour force. 

Reference:

Feb 2025 palm oil stock falls 4.3% amid weaker exports, higher consumption, CS Ming, Focus Malaysia, 11 March 2025

Semiconductor Industry: Prospects and Challenges

The semiconductor industry is key to the global technology sector, and its prospects are closely tied to advancements in various fields such as artificial intelligence, 5G, the Internet of Things (IoT), and electric vehicles (EVs). As for Malaysia, its role in this industry is significant, and its future may seem promising due to several factors:

1. Strategic Location

Malaysia is geographically well-positioned in Southeast Asia, providing easy access to major markets like China, India, and other ASEAN countries.

2. Established Ecosystem

The country has a well-established semiconductor manufacturing ecosystem, with a strong presence of multinational corporations and local players involved in various stages of the semiconductor supply chain, from wafer fabrication to assembly and testing. 

Source: https://commons.wikimedia.org

3. Skilled Workforce

Malaysia has been investing in education and training to develop a skilled workforce capable of supporting high-tech industries. This includes specialized programs in engineering and technology fields relevant to semiconductor manufacturing.

4. Government Support

The Malaysian government has been supportive of the semiconductor industry through various initiatives, including tax incentives, grants, and the development of specialized industrial parks like the Kulim Hi-Tech Park.

5. Diversification

Malaysia is looking to diversify its semiconductor industry by moving up the value chain. This includes efforts to attract investments in higher-value activities such as integrated circuit design and the manufacture of more sophisticated components.

6. Global Demand

The global demand for semiconductors is expected to continue growing, driven by the proliferation of smart devices, the expansion of IoT, and the transition to greener technologies. This bodes well for Malaysia's semiconductor industry.

7. Trade Agreements

Malaysia is part of various trade agreements that can benefit its semiconductor industry, such as the Regional Comprehensive Economic Partnership (RCEP), which can enhance trade flows and reduce tariffs among member countries.

8. Challenges

Despite the positive outlook, Malaysia faces challenges such as competition from other countries, the need for continuous technological innovation, and the impact of global economic fluctuations on the semiconductor market. 

Malaysia has been one of the largest exporters of semiconductor devices and integrated circuits. The semiconductor industry is one of the largest employers in Malaysia's electrical and electronics (E&E) sector. The global semiconductor industry has seen a CAGR of around 4-6% over the past decade, and Malaysia's growth has been somewhat aligned with global trends.

Looking ahead to 2030, several factors could influence the value, workforce size, and CAGR of Malaysia's semiconductor industry:

1. Industry Value

The value of the semiconductor industry is expected to grow as demand for semiconductors continues to rise with the expansion of 5G, AI, IoT, and EVs. Malaysia's industry value could potentially increase proportionally with global growth, which some estimates suggest could see the global semiconductor market reach over $1 trillion by 2030.

2. Number of Workers

The number of workers may not grow at the same rate as the industry's value due to automation and the adoption of more advanced manufacturing technologies. However, there will still be a need for skilled workers, particularly in high-value areas such as semiconductor design and R&D. 

3. CAGR

The CAGR for Malaysia's semiconductor industry could remain steady or increase if the country successfully moves up the value chain and captures more of the global market share in higher-value semiconductor activities. The CAGR will depend on Malaysia's ability to innovate, attract investment, and navigate global competition.

A lot of work needs to be done between MITI, the Association and various large market players. We have Vietnam, Taiwan, India and Singapore as our competitors, and they don’t have other peripheral issues to contend with!

Is this the End for the US Dollar?

Professor Robert Wade writes that the weaponization of the dollar and the dollar payments system against countries such as Russia and Iran over the past decade has incentivised others to find ways to escape the dominance of the US dollar.

The US government’s overt “weaponization” of the dollar and the dollar payments system in the past few years, to sanction enemies like Iran, Cuba, Venezuela, Afghanistan, North Korea, and China has made them look for new ways to conduct trade. The US has used the dollar payments system to freeze Russia’ s access to $300 billion in liquid foreign exchange reserves. This is in the wake of Russia’ s invasion of Ukraine in February 2022. Some are urging the US government to go further and appropriate those reserves and give them to the government of Ukraine for post-war reconstruction.

Source: Wikipedia

Confidence is an indispensable requirement for a currency. Beyond a certain point of weaponization the US undermines international confidence in the dollar. The more talk there is of appropriating Russia’s reserves the more countries like China fear their reserves held in dollars or euros may no longer be safe.

So, BRICS (Brazil, Russia, India, China, and South Africa), led by Russia, are discussing how to escape dollar dominance. Even the European Union has recently shown signs of wanting to escape dollar dominance.

But people have been forecasting the end of dollar hegemony for half a century. This issue led economist Robert Triffin in 1960 to warn of an “imminent threat to the once-mighty US dollar” (his argument came to be known as “the Triffin Dilemma”). Economic historian Charles Kindleberger declared in 1976 that “the dollar is finished as international money”.

The dollar and dollar payment system remain overwhelmingly dominant. According to the Bank for International Settlements’ latest triennial survey, the dollar as of 2022 was part of 88 percent of all international transactions. That percentage is only slightly lower than in 1989, testimony to the dollar’s resilience. Meanwhile, the euro accounts for 31 percent of international transactions, the yen 17 percent, the pound 13 percent, the renminbi (RMB) only 7 percent, up from 4 percent in 2019.

As a share of global foreign exchange reserves, the dollar now accounts for around 60 percent, down from 72 percent in 2000. Over this period the RMB share grew from zero to 2.6 percent.

Dollar dominance allows the US to sustain large current account deficits – importing much more than it earns from exports, thereby “artificially” boost living standards for a large subset of Americans. Also, it lowers US corporations’ cost of foreign direct investment (FDI), fuelling their expansion around the world. And it allows the US to easily finance its military activities around the world.

Dollar hegemony will surely end – but not in the foreseeable future. Most of the world has no prospect of an alternative to the international dollar to be used at scale in the next two decades or so.

 

Reference:

Long Read: The beginning of the end for the US dollar’s global dominance, Professor Robert Wade, LSE Blog

Will Spending Cuts Fix Inflation?

 

Does government spending cause inflation? Pankaj C. Kumar believes, yes! He hastily adds that other factors too cause inflation to rise. Higher spending means the government is raising the aggregate demand in the economy. Budget deficit balloons and they are funded by borrowings. 

What is the threshold level that will be inflationary to the economy due to government spending? Based on the indicators like budget deficit as a percentage of gross domestic product (GDP), the government’s debt-to-GDP ratio, as well as debt service charge as a percentage of total expenditure remain as pointers to any potential inflation increase.

 

Source: Investopedia

There are two components of CPI – the headline CPI and the core CPI, which excludes volatile prices of fresh food and items that are under price control by the government. A CPI measurement is also referenced against a base year, which in Malaysia’s case is the year 2010.

For example, in the case of Malaysia, the CPI reading for January 2025 stood at 133.60 points, which suggests that the cost of living has risen by about 33% over the past 15 years. 

For the US Federal Reserve, the preferred inflation gauge is the core personal consumption expenditure (PCE), which is more comprehensive than the CPI as it includes a broader subset of goods and services prices, including substitutions based on price changes. The central bank uses inflation data to set either interest rate or exchange rate policy. 

In an environment where the inflation rate is rising, a central bank will take steps to raise rates to ensure that is it able to cool down the elevated level of inflation and to bring aggregate prices to a more tolerable level. A central bank will cut rates when inflation levels are low or in a deflationary environment. Inflation and central bank monetary policy have huge implications for capital markets. 

Interest rates, driven by inflation, may also impact currency fluctuations, especially when rate differentials between the United States and domestic considerations are taken into account. Portfolio outflows are common when interest rates are low in a domestic economy, vis-à-vis the United States or other developed economies. 

Inflation can also influence wages as most governments and unions often link minimum wages and annual wages increases to inflation readings. Additionally, inflation affects the input costs of businesses, which in turn influences the prices they set for goods and services. Input costs for the production of goods and services are key in determining aggregate prices in the economy. 

During and after the pandemic, one of the critical factors that drove inflation was the disruption in the supply chains, which caused end-product prices to increase drastically, mainly due to higher commodity prices. 

In the United States, the PCE has been climbing steadily over the past few months, with the December 2024 print at 2.6%, which is 0.5 percentage points higher than September 2024’s low of 2.1%. Core PCE, on the other hand, has remained sticky, remaining at an elevated level of 2.8% for the past three months. (Note: This analysis does not take into account the January 2025 PCE data released yesterday). 

The newly minted Department of Government Efficiency, led by Elon Musk, recently commented that inflation can be lowered to zero if the government can cut its expenditure by US$4bil per day. 

Musk’s idea of inflation is centred on government spending and that by cutting expenditure, the price level of goods and services will normalise. 

Mr Musk is a little naive on, at least, two counts:

 

(i)          1.    It is not easy to cut US government expenditure by almost US$1.5 trillion per year when the government itself has a total budget expenditure of US$6.9 trillion. Healthcare, social security and defence spending account for 58% of the total, while another 28% is related to debt servicing (13%), benefits for veterans and federal retirees (8%), and economic security programmes (7%).

 

    2.    The balance of 16% is spent on education, transport, natural resources and agriculture, science and medical research, law enforcement, international aid and others. The US$4bil a day involves cutting down 21% of the government’s expenditure and that can only come from laying off civil servants and shutting down institutions.

 

(ii)     While aggregate demand will be reduced if the government cuts its expenditure, the impact on the economy as a whole can be significant, leading into a recession. The US government’s expenditure is about 17% of GDP, and a 21% cut may result in a 3.4 percentage point reduction in GDP. 

Much like President Donald Trump’s belief that tariffs can reduce taxes, Musk’s idea that cutting government expenditure will allow inflation to magically evaporate is a unique form of cognitive dissonance! 

Reference:

Spending cuts won’t fix inflation, Pankaj C. Kumar, The Star, 1 March 2025

 

Obesity is Marching Forward!

 

Malaysia will only be able to turn the tide against rising obesity if it can effectively implement health policies. In a report published by World Obesity Foundation in conjunction with World Obesity Day on March 4, the foundation said Malaysia is among 13 countries- representing 7% of nations - with an adequate health system to fight obesity. 

Despite the policies, the report said the number of adults with high BMI in Malaysia will continue to rise from 8.14mil in 2010 to 10.17mil in 2015 and to 17.55mil in 2030. Effective implementation, particularly in resource-limited settings, is crucial. Malaysia currently has four out of five key policies surveyed for addressing obesity. These include taxes on sugar-sweetened drinks, taxes on foods high in fats, saturated fats, sugar and salt, subsidies for healthier foods, and taxes and incentives to promote physical activity. 

The report said that the rise in obesity is especially pronounced in low-and-middle-income countries, which often lack the resources to manage the health system implications.  Southeast Asia, along with Africa and the Western Pacific are witnessing significant increases in obesity with an estimated increase of between 200% to 400% from 2010 to 2030.  Within the Asean region, Malaysia is currently fourth - after Brunei, Thailand and Laos - for adults with high BMI and those living with obesity. 

Singapore is among two thirds of countries (126 out of 194) with none or only one of the five key policies needed to tackle rising obesity levels. However, the proportion of adults living with obesity or are overweight are slightly lower in Singapore than in Malaysia. The number of adults living with obesity in the world is projected to more than double from 524 million in 2010 to 1.13 billion by 2030.  

Obesity is a serious disease and a major driver of noncommunicable diseases including cancer, heart disease, stroke, and type 2 diabetes, with almost 4 million deaths per year attributable to obesity.  

 

Reference:
Interactive: Obesity’s continued rise in Malaysia, Diyana Pfordten, The Star, 5 March 2025

Will Restructuring of Fuel Subsidies Proceed?

The plans to restructure RON 95 fuel subsidies is on course according to Government sources. Its implementation is by the middle of 2025. Consumer groups are urging the govern­ment to defer it due to ­rising costs and economic uncertainties tied to the U.S. tariffs. 

The impact of US tariffs on imports from China, Mexico and Canada is still not felt but remains a risk.

 

The unity government feels that the economic uncertainty due to US policies is not a strong enough reason to delay the subsidy rationalisation. According to research by SME Bank Group, in 2022, the government spent RM23.1bil on subsidies for RON 95 fuel and RM18.7bil for diesel. 

The prospect of a global slowdown has worried consumer associations, unions and small business associations as it could dampen local business sentiment. Such a phenomenon, coupled with a surge in inflation from cutting fuel subsidies, would adversely impact low-income families and micro-entrepreneurs. 

The Socio-Economic Research Centre (SERC) proposed that the government gradually cut back on RON 95 subsidies to soften any impact on consumers. That’s a more rational approach amidst the uncertainties. Why not do a 3-step approach of review every six months? The argument that the rationalisation exercise will provide sufficient funds to subsidise the B40 group, is spurious! It is still a subsidy! The current RON95 price is one of the few benefits that the T20 and M40 get to enjoy. And they pay 85% of the taxes! 

Reference:

Restructuring fuel subsidies to go on, Sheridan Mahavera, The Star, 5 March 2025

Malaysia’s Education Investment Gone South?

Quality human capital investment equips individuals with relevant skills and knowledge, enabling them to drive industrial transformation, technological advancements, and business efficiency. At the macro level, human capital investment is commonly measured by the percentage of education expenditure to gross domestic product (GDP). This indicator reflects the commitment of public, private and international entities to investing in human capital development and is monitored as part of the sustainable development goals (SDGs).

Data from the Unesco Institute for Statistics shows that from 2011 to 2022, Malaysia allocated an average of 4.6% of its GDP to education, notably higher than Singapore and Japan, which allocated 2.8% and 3.3% respectively during the same period. On the other hand, the productivity levels per employee in 2022 were almost three times higher in Japan and almost five times higher in Singapore compared with Malaysia. That year, the productivity level in Malaysia was equivalent to US$22,947. In Japan it was US$67,677 and in Singapore it was a whopping US$114,597. Despite a marginal decline in 2023 to US$113,179, Singapore’s productivity rate was still 4.8 times that of Malaysia’s US$23,298. 

So, how can this higher education expenditure translate into improved productivity in Malaysia? 

A closer analysis of labour productivity trends in relation to education spending reveals an alarming situation that cannot be ignored. This is evident in the graphs below, which depict scatter plots illustrating the relationship between education expenditure and productivity growth in Malaysia, Singapore, and Japan from 2001 to 2022.

 In the case of Malaysia, the trend line suggests a negative correlation between education expenditure and productivity growth. Higher education expenditure does not appear to translate into productivity gains; in fact, there are instances of productivity decline despite increased spending.

In contrast, a clear positive correlation is observed for Singapore and Japan, suggesting that increased education spending tends to be associated with productivity growth. The spread of data points suggests that the relationship is not perfectly linear but generally indicates that investment in education contributes to productivity improvements. Singapore’s model seems to show that effective allocation of education funds leads to economic benefits. 

When education fails to contribute positively to productivity growth, it raises serious concerns about the efficiency and effectiveness of a country’s investment in human capital. Education is widely regarded as a key driver of economic progress, equipping individuals with the skills and knowledge necessary to enhance labour productivity and drive innovation. 

However, when increased education expenditure does not translate into measurable productivity gains, it suggests underlying inefficiencies in the education system, labour market mismatches, or structural economic challenges that hinder the effective utilisation of human capital. The negative correlation between education expenditure and productivity growth underscores the urgent need to reassess education policies. 

Rather than focus solely on increasing funding, policymakers must prioritise the quality of education and its alignment with market demands. A well-functioning education system should equip the workforce with relevant skills that drive innovation and economic efficiency. Without targeted reforms, continued investment in education without measurable productivity gains risks becoming a financial burden rather than a driver of sustainable economic growth. 

With half of the Budget, many can translate a better outcome! We are in denial; the Minister is in denial; PMX is in denial. 

First, please admit you have a problem. Second, sack the Minister of Education (I had hoped Elon Musk will come over and sack the whole MOE lot). Third, engage with all stakeholders. Fourth, devise a simple plan:

 

(i)                  Adopt a two-language policy in all national schools – Bahasa Malaysia and English (options with incentives for Mandarin and Tamil).

(ii)                    Emphasise maths and science not religious knowledge.

(iii)                  Engage competent headmasters.

(iv)                  Re-train and recruit teachers of all races.

(v)                    Re-visit curriculum and adapt from Singapore and Finland.

(vi)                  Collaborate with parents and “win-over” the students.

(vii)                Re-introduce exams at UPSR and PMR (or at least have UPSR).

(viii)               No more regrading/downgrading/special grading for weak students.

(ix)                  More vocational schools with industrial practice on-site; and

(x)                    “Audit” all facilities, headmasters, teachers and support staff annually. How? Use the District Education Officers.

That’s the plan. But key is implementation. And nothing will happen with this lot in power! Good luck Malaysia, you will suffer in 20-30 years from now if you don’t do anything! 

Reference:

Malaysia’s education investment is not paying off. What’s going wrong? Yusof Saari, FMT/Letter to the Editor, 21 Feb 2025