Pricing Properties and Construction Costs

Real Estate and Housing Developers’ Association (Rehda) deputy president Datuk N K Tong said the latest survey conducted by the association showed that some developers expect housing prices to rise with increased construction costs. Respondents in the survey expect construction costs to surge on average of 19% in 2022 due to rise in prices of building materials, wages and financing costs. However, Tong said it is challenging for property developers to raise their property prices.

Additionally, Rehda vice president Zaini Yusoff noted that increasing property prices for future launches will be a difficult task for developers as this may curb housing demand. He also warned that the costs will rise further in view of the current inflationary environment.

Source: https://www.propertyguru.com.my 

Respondents to Rehda’s Property Industry Survey for the second half of 2021 (2H21) revealed that 79% of respondents remarked that overall cost of doing business had increased by up to 18% in 2021, the highest over the past five years. The average cost of doing business was up 8% in 2017 and steadily rose to 11% in 2020. To reduce operation costs, the respondents said they will freeze new recruitment, give less benefit/perks as well as undertake salary reduction. They will also reschedule the launching of planned projects, reduce the scale of launches and delay some projects. Additionally, 49% of the respondents stated they are not launching any property in 1H22, with most citing unfavourable market conditions (29%) and being affected by Covid-19/movement control order (26%) as the top reasons. 

Another 51% of the respondents said they are planning to launch projects in 1H22, totalling 24,557 units comprising 17,969 strata residential units, 5,997 landed residential units and 591 commercial units. Of those with planned launches, 77% of them were anticipating their sales performance to be 50% and below for 1H22. Most states aimed to launch residential units within the RM250,001 and RM500,000 price range. Johor, Selangor and Penang, on the other hand, will have mostly units priced between RM500,001 and RM700,000 in their 2022 offerings. Meanwhile, 96% of the respondents reported they will be affected by the current economic scenario, with the top three components affecting cash flow being material and labour costs, compliance costs as well as financing and land costs. Overall, the outlook for 2022 is largely neutral, but respondents are more optimistic for 2H22.

The other factor not mentioned is whether financing and financing cost remain unchanged. Access to finance for some potential buyers may be curtailed because of economic conditions. In addition, rise in OPR is envisaged in 2022, which will raise financing costs for purchasers.

What can the Government do? Labour cost need to be reduced with more automation/robotics; material cost could be reduced with alternatives; and land cost could be controlled by releasing agricultural land (or others) from Government ownership to developers at reasonable rates. The ultimate is always supply exceeds demand to curb prices. Is that possible?

Reference:

Rehda: Developers face balancing act in pricing properties as construction costs expected to spike 19%, Justin Lim, theedgearkets.com, 16March 2022

Why Sanctions Don’t Work?

Economic sanctions have been used as a tool of war for centuries. In 17th- and 18th-century Europe, economic sanctions were frequently implemented by countries at war. They included prohibitions on trade, the closure of ports against enemies, and bans on trade in certain commodities. Economic sanctions continue to play an important role in the response to terrorism, nuclear proliferation, military conflicts, and other foreign policy crises.

The United States and its western European allies repeatedly increased economic sanctions against the Russian regime and also on millions of ordinary Russians.

Source: https://www.acamstoday.org

This is by excluding Russian trade and Russian finance out of international markets. Moody's and S&P Global have both downgraded Russia's credit rating. The US has frozen Russian reserves and cut many Russian banks off from SWIFT. Europe is planning on big cuts to its purchases of natural gas from Russia. The ruble has fallen to a record low against the dollar. Russia is at risk of defaulting on its foreign debts for the first time in more than a century. Many of the sanctions appear targeted at only certain wealthy Russians, but these moves greatly increase perceptions of geopolitical risk for anyone invested in Russian investments, or investments connected to Russia. That means many investors and corporations will "voluntarily" cut back their activities in Russia.

Ground-up pressure is mounting also: corporations like Coca-Cola and McDonald's are being pressured to close their operations - and thus lay off all their workers - in Russia. This means a real decline in overall investment in Russia far beyond just some Russian banks and oligarchs.

The trickle-down effect to ordinary Russians is immense. Purchasing power, income and employment will be significantly impacted. Many Russians will suffer serious setbacks to their standards of living. The Russian ruling class will be affected too, but given they live much further from subsistence levels, they'll fare much better overall.

And yet, if history is any guide, sanctions won't work. The idea behind sanctions has long been to make the population suffer so that "the people" will revolt against the ruling regime. In many cases, the stated goal is regime change. It's essentially the same philosophy behind Allied efforts to bomb German civilians during World War II.

Instead of convincing the domestic population to abandon their own regime, foreign attacks on civilians - whether military or economic - often cause the domestic population to double down on their opposition to foreign powers.

There are at least three reasons they (sanctions) fail:-

(i) Unless there is near-universal cooperation from other states.

Cuba is an example where U.S. sanctions has been on for decades but other states continue to

        trade with Cuba.

The situation with Russian sanctions is likely to lie between Cuba and Iran. While several key

        Western states like the US and the UK have taken a hard line against Russia, many others have

        been reluctant to impose similar sanctions. Germany, for example, has refused to impose sanctions

        in the near term.Most importantly, China has not cooperated with US-led sanction efforts.

So long as Russia can continue to trade with sizable states like China, Mexico, Brazil, and possibly

        India, Russia will not face the sort of isolation the US hopes to impose.

(ii) Nationalism - a potent force among most populations - tends to impel sanctioned populations to

        support the regime when threatened.

As Robert Keohane has noted, even in non-crisis situations, nationalism can be a general source of

       strength for a state since nationalism can unify populations behind the regime. Moreover, as John

       Mearsheimer shows inThe Great Delusion: Liberal Dreams and International Realities:

      "Nationalism is an enormously powerful political ideology. ...There is no question that liberalism

       and nationalism can coexist, but when they clash, nationalism almost always wins."

US sanctions have not exactly invigorated pro-American or anti-regime efforts in Cuba, Iran,

        North Korea or Venezuela.

(iii) If sanctions "worked" that would be insufficient to justify their use. 

Sanctions remain popular because they placate the voters who insist "we" must "do something". And government officials are more than happy to engage in policies that grow state power.

But having the regime "do something" is a dangerous game.  If the voters want to signal their virtuous opposition to perceived foreign enemies, voters can always take action on their own. If Americans don't like Russian goods and services, they're free to boycott these goods. But embracing yet more federal power in the name of teaching foreign regimes a lesson tends to harm ordinary people in many ways. 

Instead of sanctions, why can’t we “kill them with kindness”? That sounds odd but that’s the title of a song by Selena Gomez. We can amaze the opposition/autocracies with kindness. Will they not react differently? Biden says it’s a clash between democracies and autocracies – and, of course, democracies are the “good’ guys. But the U.S. supports selected autocracies – Egypt, Saudi Arabia, Brazil and a slew of African states. Why? Because it is in the strategic interest of the U.S. All its adventures to propagate democracy in Iraq, Afghanistan or Libya have seen dismal results. So, try a little kindness, and overlook the blindness, we may have a better and peaceful world (paraphrased from Glen Campbell).

References:

Why sanctions don’t work, and why they mostly hurt ordinary people, Ryan McMaken, 

10 March 2022 (https://seekingalpha.com )

What do sanctions help achieve? An expert explains, World Economic News, 24 March 2022-03-28  (https://www.hellenicshippingnews.com)

Humorous Quotes by the Late Robert Mugabe

Today is 1 April! Instead of the usual serious articles, let’s have some humorous quotes by the late Robert Mugabe:

• “Dating a slim/slender guy is cool. The problem is when you are lying on his chest   then his ribs draw Adidas lines on your face.”

• “Nothing makes a woman more confused than being in a relationship with a "broke" man who's extremely good in bed.”

• “It's hard to bewitch African girls these days. Every time you take a piece from her hair to the witch doctor, either a Brazilian innocent woman gets mad or a factory in China catches fire.”

• “If you are ugly, you are ugly. Stop talking about inner beauty because men don't walk around with X-rays to see inner beauty.”

 

Source: https://commons.wikimedia.org

Respect pregnant women because it's not easy walking around with evidence that you've had s*x.”

• “Whenever things seem to start going well in your life, the Devil comes along and gives you a 'girlfriend'.”

• “Dear sisters, don't be deceived by a man who texts you "I miss you" only when it's raining because you are not an umbrella.”

• “Don’t fight even over girlfriends. The country is full of beautiful women. If you can’t get one, come to Mugabe for assistance.”

• “Sometimes you look back at girls you spent money on rather than send it to your mum and you realize witchcraft is real.”

https://tenor.com

“If President Barack Obama wants me to allow marriage for same-sex couples in my country (Zimbabwe), he must come here so that I marry him first

• “Don’t drink at all, don’t smoke, you must exercise and eat vegetables and fruit.”

• “If you take men and lock them in a house for five years and tell them to come up with two children and they fail to do that, then we will chop off their heads.”

• “If your man is cheating on you don't argue with him my sister because you will not win. Save yourself from High blood pressure, just change all the names of the girls on his phone, do not delete the numbers. Mix them, replace Natasha with Lisa, Nikki with Grace so on and on, wait the moment he's gonna call or sms them one by one. Make yourself a cup of coffee and relax, you'll thank me later.”

• “Some girls don’t attend the gym but look physically fit because of running from one man to another.”

• “When your girlfriend meets a Rich man you say she's a gold digger, but when your sister meets a Rich man you say she's blessed, my brother the thunder that will strike you is coming from India.”

• “Help a girl when she is in trouble and she will surely remember you when she is in trouble again”

• “A woman that loves you will stick with you no matter how much a player you are. And that “woman” is your mother.”

• “If a guy dumps or breaks your heart, take his phone and leave. Call his Mother and tell her the guy is dead. Tell her you’re actually calling from the accident scene, then switch off that phone. You cannot be crying alone. She must also feel the pain for not raising him well.”

Have a lovely day and apologies if any of his jokes sound distasteful, we are sure he meant no harm!

Source: https://www.tripboba.com 

Should Directors Be Remunerated in Loss Incurring Companies?

The annual reports for the financial year ended Dec 31, 2020 (FY20) for AirAsia Group Bhd, now known as Capital A Bhd, and AirAsia X (AAX), show that Tony Fernandes and Kamaruddin Meranun received an annual salary of RM4.8 million each. Board members were given fees ranging from RM150,000 – RM401,500 even as the airline dealt with the impact of Covid-19 following the worldwide freeze on air travel.

Source: https://en.wikipedia.org

In September 2021, AAX posted a record quarterly loss of RM24.6 billion for the April-June period, eight times more than the previous year. It was the airline’s ninth successive loss.

In 2021, the group posted a net loss RM887 million for the third quarter ended Sept 30, 2021, up 4% from RM851.78 million in the corresponding quarter in 2020.

AAX, meanwhile, faces the issue of refunds demanded by passengers whose flights were cancelled over the past two years since the onset of the Covid-19 crisis. In April 2021, Fernandes assured some 450,000 customers waiting for refunds would get their money back, adding that AAX had been facing financial problems. According to the CEO of Capital A Bhd, AirAsia has settled over 90% of passenger refunds (as at 28 March 2022).

On Nov 12 last year, AirAsia said that its RM33.65 billion debt settlement scheme for AAX had been approved by 99% of its creditors through a vote at a meeting held that day.

On March 16, AAX in a separate statement said the company had lodged a sanction order for its debt restructuring with the Registrar of Companies with the formalities of the restructuring now completed. It said the lodgement of the sanction order meant that the financial effects could be recognised in the financial statements of the company and that, as a result, AAX would be able to reverse RM33 billion in liabilities and provisions for liabilities which have been waived under the scheme.

This is not the only anomaly. Sapura Energy’s CEO got RM71.9 million for FY2018 and RM84.2 million for FY2017. (It has been above RM80 million band between 2014 and 2017).

Another O&G company, Serba Dinamik Holdings Berhad has its principal executive director earning close to RM5 million in FY2021 while the company incurred a loss of over RM171 million in financial year 2021.

Should directors or CEOs of loss incurring PLCs be highly paid while the company is bleeding? Doesn’t make sense, does it?

References:

90% of AirAsia passenger refunds settled, says Tony Fernandes, Bernama/FMT, 

28 March 2022

AirAsia top duo paid RM4.8 million each in 2020, www.malaysianow.com, 26 March 2022

Sapura Energy CEO’s salary is being paid averaged RM72 million to RM85 million a year despite company losing billions, www.thecoverage.my, 23 March 2022

Serba Dinamik Holdings Berhad 2021 Annual Report

Will Recovery Take Us To End 2024?

Over 40% of large, micro, small and medium enterprises (MSMEs) are expecting business recovery beginning end 2022 to end 2024. This is according to a recent EY business pulse survey of over 500 companies.

Almost half of the large companies (46%) and one-third of MSMEs (33%) indicated they had adapted well (positive to very positive) to the Covid-19 pandemic. However, 25% of Malaysian companies had been adversely impacted (negative to very negative).

The EY survey also noted that the majority of Malaysian businesses were prepared to live with Covid-19 (86%) and were prioritising technology adoption in the immediate term (77%) as they fast-tracked their adaptation to the new normal. The movement restrictions in the wake of the pandemic had accelerated the companies’ adoption of technology and their transition to a digitally-enabled work environment.

In contrast, the respondents experienced more negative impact in the financial (44% of large companies; 63% of MSMEs) and supply chain (54% of large companies; 44% of MSMEs) areas.

In the short term, 85% of the respondents were prioritising the improvement of employee safety and the implementation of standard operating procedures (SOPs) including flexible work arrangements, while 77% were focused on enhancing digitalisation to facilitate contactless information technology or IT infrastructure.

Moving forward, the key business priorities will be on re-skilling people (74%) and adopting digitalisation (74%).

At the same time, a higher proportion of MSMEs were paying greater attention to readapting the business size, changing the business model or entering new business ventures (58%) and improving their financial position (48%). Also, the survey respondents indicated that they required further support in upgrading digital technology (51%), adapting the business to be more resilient (47%), accessing resources for business recovery (42%) and redesigning physical premises (40%), to help them better prepare to live with Covid-19.

Beyond the recovery and improvement phase, the respondents indicated that they needed guidance in finding new markets (58%), forging new partnerships (54%), accessing digital skillsets and talent (53%) and developing new business models, products and services (53%).

The upshot is recovery to 2019 level will take up to two years from end 2022. The Government needs to re-calibrate support packages and economic measures for companies to survive in the next 24 months or so. Meanwhile, companies will need to redesign business model, innovate and re-skill employees and pray for the best!

Reference:

Large proportion of firms expecting recovery, The Star, 24 March 2022

(https://www.thestar.com.my) 

MySejahtera: Is The Government Paying RM338m for the App?

The all pervasive MySejahtera application may not be free of charge eventually. There are many questions over who gets the contract to manage the application - which logs personal details, health status and whereabouts of 38 million users.

Source: https://en.wikipedia.org

Details on the deal would not have come to light had it not been for the Public Accounts Committee, who questioned the Finance Ministry and Health Ministry (MOH) on March 8.

Health Minister Khairy Jamaluddin said the MOH owns the rights to the MySejahtera smartphone application. 

However, a written reply by the Science, Technology and Innovation Ministry (Mosti) and MOH to the Public Accounts Committee (PAC) suggested that things are a bit more complicated. 

The MOH has formed a “MySejahtera Steering Committee”, chaired by Khairy, to decide on the management and direction of MySejahtera while considering the cost-benefit of a “complete” takeover of the application. While the Government may own the MySejahtera base application, they may not own some additional modules.

KPISoft Sdn Bhd was engaged by the Health Ministry to develop MySejahtera as a form of corporate social responsibility (CSR) from March 27, 2020, until March 31, 2021. Putrajaya was not charged for this period. 

According to the Mosti/MOH reply to the PAC, Putrajaya decided that KPISoft Sdn Bhd has to be paid from April 1, 2021, because of all the additional components added to MySejahtera which was not in the original 2020 agreement.

The deputy secretary at the Finance Ministry's Government Procurement Division, told the PAC that on Nov 26 last year, Putrajaya greenlit the MOH’s decision to appoint MYSJ Sdn Bhd to manage MySejahtera. This procurement was to be done without an open tender process.

The PAC chairperson pointed out during the proceedings that KPISoft’s directors were Rekhta Mani and Yogaraj Thuraisingam. 

As for MYSJ, the directors are Heah Kok Boon, Raveenderan Ramamoothie, Anuar Rozhan, Liew Kee Sin, Shahril Shamsuddin and Megat Najmuddin Megat Khas. Anuar is the brother to former Astro Malaysia Holdings Bhd CEO Rohana Rozhan, while Shahril is best known for being the Sapura Energy CEO and shareholder.

Megat Najmuddin was a long-time Umno member who joined Bersatu in 2018. Currently, he chairs Bersatu’s disciplinary board.

MYSJ is a brand new company incorporated in September 2020. As for KPISoft, they have been around since 2005 and are based out of Singapore, with a Malaysian presence. Their Malaysian outfit changed its name to Entomo Malaysia in May 2020.

According to a report by Code Blue, MySJ Sdn Bhd is Entomo Malaysia’s special purpose vehicle created for a public-private partnership (PPP) project.

According to Code Blue, citing court documents, Entomo Malaysia had proposed to the Government in Dec 2020 to pay them to expand the scope of MySejahtera beyond the Covid-19 pandemic.

The report said Entomo Malaysia proposed that MySejahtera can be used to track other vaccination distribution, manage other infectious diseases, conduct predictive analysis and integrate with other existing government health systems.

Entomo Malaysia proposed that the PPP contract would last 15 years and cost the government about RM138.9 million annually. 

In a turn of events, a new report by CodeBlue claims that there’s actually already been a deal between Entomo Malaysia Sdn Bhd (formerly known as KPISoft Malaysia) and MySJ Sdn Bhd, with the latter agreeing to pay Entomo RM338.6 million for MySejahtera’s intellectual property and software license.

The license agreement saw MySJ paying Entomo RM38.6 million for the last quarter of 2020 as a transfer of IP fee and a service fee, with further sums to be paid to Entomo annually for a total of RM338.6 million. According to Code Blue, MySJ would be paying Entomo RM60 million each year from 2021 onwards, with the last payment happening on 1 March 2025. This payment covers the first 24 million users of the MySejahtera app only though, with users exceeding 1% from 24 million users to cost MySJ a further RM1.50 per user per annum. Yesterday, Khairy had stated that there are over 38 million registered users on MySejahtera. This means that MySJ could end up forking another RM21 million per year on top of the agreed sum between them and Entomo. 

This deal has not been finalised.

Transparency is the real issue. Is the Government purchasing MySejahtera? At what price? RM338m?  Why no procurement tender? Why the denial by the Minister of Health? Will the data be eventually be sold to third parties? Security of data? Can the Government do a “White Paper” on this? Why can’t we be transparent and follow a tender process? Is doing a CSR the gateway to an exclusive contract?

References:

What PAC uncovered about MySejahtera, 28 March 2022 (www.malaysiakini.com)

Report: MySJ Sdn Bhd agreed to pay RM388.6 million for MySejahtera IP and software license, Raymond Saw, 28 March 2022 (https://soyacincau.com)

Do Poor Countries Develop Rich Countries?

The story is told that the rich nations of the OECD give generously of their wealth to the poorer nations of the global south. This is to help them eradicate poverty and push them up the development ladder. During colonialism western powers may have enriched themselves by extracting resources and slave labour from their colonies. These days, they give more than $125bn (£102bn) in aid each year – solid evidence of their benevolent goodwill. That’s the story.

Source:https://www.gfmag.com

The US-based Global Financial Integrity (GFI) and the Centre for Applied Research at the Norwegian School of Economics recently published some fascinating data. What they discovered is that the flow of money from rich countries to poor countries pales in comparison to the flow that runs in the other direction.

In 2012, the last year of recorded data, developing countries received a total of $1.3tn, including all aid, investment, and income from abroad. But that same year some $3.3tn flowed out of them. In other words, developing countries sent $2tn more to the rest of the world than they received. Since 1980, these net outflows add up to $16.3tn – that’s how much money has been drained out of the global south over the past few decades. To get a sense for the scale of this, $16.3tn is is nearly close to the GDP of the United States

What this means is that the usual development narrative has it backwards. Aid is effectively flowing in reverse. Rich countries aren’t developing poor countries; poor countries are developing rich ones.

What do these large outflows consist of? Developing countries have forked out over $4.2tn in interest payments alone since 1980 – a direct cash transfer to big banks in New York and London, on a scale that dwarfs the aid that they received during the same period. Another big contributor is the income that foreigners make on their investments in developing countries and then repatriate back home. Think of all the profits that BP extracts from Nigeria’s oil reserves, for example, or that Anglo-American pulls out of South Africa’s gold mines.

But by far the biggest chunk of outflows has to do with unrecorded – and usually illicit – capital flight. GFI calculates that developing countries have lost a total of $13.4tn through unrecorded capital flight since 1980.

Multinational companies also “steal” money from developing countries through “same-invoice faking”, shifting profits illegally between their own subsidiaries by mutually faking trade invoice prices on both sides. For example, a subsidiary in Nigeria might dodge local taxes by shifting money to a related subsidiary in the British Virgin Islands, where the tax rate is effectively zero and where stolen funds can’t be traced.

Who is to blame for this disaster? Since illegal capital flight is such a big chunk of the problem, that’s a good place to start. Companies that lie on their trade invoices are clearly at fault; but why is it so easy for them to get away with it? In the past, customs officials could hold up transactions that looked dodgy, making it nearly impossible for anyone to cheat. But the World Trade Organisation claimed that this made trade inefficient, and since 1994 customs officials have been required to accept invoiced prices at face value except in very suspicious circumstances, making it difficult for them to seize illicit outflows.

Poor countries don’t need charity. They need justice. And justice is not difficult to deliver. But doing so would run up against the interests of powerful banks and corporations that extract significant material benefit from the existing system. The question is, does anyone have the courage?

Reference:

Aid in reverse: how poor countries develop rich countries, Jason Hickel (https://www.theguardian.com )