29
Sep
16

Developer loans: A recipe for disaster

Developer loans: A recipe for disaster

Developers would like to sell as many houses as possible and have an incentive to provide financing, but unlike banks, lack expertise in due diligence and credit analysis.

COMMENT
By Lim Mah Hui

The proposal by the Urban Well-being, Housing and Local Government Minister, Tan Sri Noh Omar, to permit developers to be money lenders is fraught with risks.

We all know that the property market is slowing down and developers are doing all they can to resuscitate the languishing market – ranging from giving free trips, cars, paying for settlement expenses; and now a proposal to give loans to buyers who don’t qualify for housing mortgages.

In fact it was reported that house buyers be given loans equivalent to 100% of the house price. In other words, no down payment is needed.

This is a recipe for disaster for a couple of reasons.

First, the normal and prudent down-payment ratio for house purchase in most countries is 20%. This equity contribution by the buyer acts as a safety buffer for bank lending.

Second, zero down-payment is an incentive for a borrower to walk away from his obligations and monthly payment in times of difficulty. Without an equity stake in the house, buyers would hand in their keys and happily walk away in the event of default.

There is an inherent conflict of interest in having developers also provide loans.

Developers would like to sell as many houses as possible and hence are incentivized to provide financing for the products they sell. Developers, unlike banks, do not have expertise to do due diligence and credit analysis.

Developers are not deposit-taking companies that provide financing. They must borrow from banks in order to lend to borrowers, earning a fee in between. This no doubt pushes up interest rates to borrowers (estimated at between 12% and 18%).

Now, if a borrower does not qualify for a bank loan at 5% interest rate, how is she able to service a loan at 12%? It just doesn’t make sense.

Most developers are highly leveraged: they borrow from banks to purchase land and for working capital. To provide loans to buyers, they will also borrow from banks to finance their house buyers and become even more leveraged.

Housing loans, at RM418 billion, now form the largest category of bank lending, accounting for 29% of total outstanding bank loans as of December 2015. By piling more financial risks on to developers who are now more closely connected to banks and the financial system, we are effectively introducing more risks and fragility to the whole financial system. Such lending will be outside the purview of Bank Negara which is in charge of financial stability.

The problem with the lack of sufficient affordable housing available to a large portion of Malaysia’s population is not because of lack of financing. The primary reason is that house prices have run way ahead of income growth.

A healthy and sustainable housing affordability ratio (i.e., median house price divided by median household income), should be in the region of 3 to 4. However, this ratio is over 8 times in the Kuala Lumpur area and over 10 times in Penang island. This is totally unsustainable and must be brought down.

…more
Developer loans: A recipe for disaster
September 10, 2016 – FMT

28
Sep
16

Has Malaysia really escaped the “middle income trap”?

Analysts: Numbers cloak Malaysia’s income quagmire

KUALA LUMPUR, Sept 10 — Malaysia’s underlying structural problems risk being buried by officials citing growth in the average household income as proof the country has escaped the “middle income trap”, several policy and economic experts said.

Income alone cannot indicate if a country is fully developed, the pundits added in their counter-argument to a recent assertion by Datuk Seri Idris Jala, chief executive of the government’s efficiency unit, Pemandu.

They pointed out that Malaysia continues to trail first-world nations in terms of skills, innovation and social well-being.

“The biggest problem with Idris Jala’s narrative is that he’s made the story of economic development rest on macroeconomic fiscal issues: he’s made it about debt, deficits and incomes,” policy analyst Yin Shao Loong told Malay Mail Online when contacted.

“While you can’t entirely set this issue aside, anyone who has studied development economics will tell you this part of the story pales in comparison to the core issues about how successful industries get developed; how workers engage in higher-value, better-paying jobs; and, how the wealth from all this gets more fairly distributed,” he added.

Idris declared last month that Malaysia had escaped the “middle income trap” and is inching closer to a developed country status, based on its growing gross national income.

He reiterated his argument in a September 1 opinion piece in The Star daily and touted various economic reform programmes undertaken by the government which he said has helped narrow the nation’s gross national income (GNI) per capita gap with the standard of the World Bank threshold to 15 per cent last year from 33 per cent in 2009.

But Idris’ assertion does not appear to hold up under scrutiny. A similar point has been noted and acknowledged in a recent State of the Household report by government-linked Khazanah Research Institute which stated that having a high GDP per capita or per household does not always translate into high household income and high average income because GDP per capita can be distorted by the income of the very well-off.

“The better measure is median household income, the halfway mark. Our median household income, like our GDP per person, is one of the highest in Asia after the developed nations [Japan, Singapore, South Korea and Taiwan],” the KRI report said.A researcher with a public institute familiar with the report concurred and pointing to the Gulf countries as an example.

“I would argue that this push for a high income nation is wrong from the beginning. Many countries are high income such as those Gulf countries but they are not developed,” the researcher, who requested anonymity, told Malay Mail Online.

And in Malaysia’s case, income disparity, a key trait for more egalitarian developed economies like the Scandinavian countries, remains a huge problem.

Data from the government’s Economic Planning Unit still indicated persistent disparity of income share for those in the top 20 per cent, middle 40 per cent and bottom 40 per cent.

Although the economy has been growing since the 1970s, the share of income appears to not have trickled down to the bottom 40 enough or towards the middle class.

…more
Analysts: Numbers cloak Malaysia’s income quagmire
September 10, 2016 – MMO

28
Sep
16

‘Umno seeks to end Muhyiddin’s political career through redelineation’

‘Umno seeks to end Muhyiddin’s political career through redelineation’

Umno is hoping that the Electoral Commission’s redelineation exercise will result in the end of Parti Pribumi Bersatu Malaysia president Muhyiddin Yassin’s career, Pakatan Harapan claimed.

Johor leaders for DAP, Liew Chin Tong; PKR, Mohd Khuzzan Abu Bakar; and Amanah, Aminolhuda Hassan, cited as proof the 22.24 percent decrease of voters in Muhyiddin’s parliament seat in Pagoh, from 46,793 in 2013, to 36,387 voters.

“The redelineation of Pagoh is politically motivated. It is understood that Pagoh has around 20,000 Umno members.

“By reducing the number of voters in this constituency, Umno is hoping that Muhyiddin’s political career will end in this (13th) parliament,” they said in a joint statement today.

They highlighted how Pagoh, as a parliament seat, has less voters than 14 state seats in Johor, such as Johor Jaya which has 59,041 voters, and Perling which has 55,810 voters.

Meanwhile, they said DAP parliamentary leader Lim Kit Siang’s seat Gelang Patah has become the largest parliament seat in the state with 112,081 voters.

The trio said the exercise is clearly meant to keep BN in power, and urged the people of Johor to object to the proposal.

…more
‘Umno seeks to end Muhyiddin’s political career through redelineation’
16 Sept 2016 – Malaysiakini

27
Sep
16

So, who is the Malaysian Official 1? – Dr M

So, who is the Malaysian Official 1?

COMMENT It is interesting to note the admission by Umno minister Abdul Rahman Dahlan that ‘Malaysian Official 1’ (MO1) in the report by the Department of Justice, the United States of America is obviously Najib Abdul Razak, the prime minister of Malaysia.

Now, what does the DOJ say about MO1, i.e. about Najib the Malaysian prime minister.

1. On page 13, paragraph 39, the report says, “Upon its formation, MO1 i.e. Najib assumed a position of authority with 1MDB. MO1 (Najib) had the authority to approve all appointments to, and removals from, 1MDB’s board of directors and 1MDB’s senior management team. In addition, any financial commitments by 1MDB, including investments, that were likely to affect a guarantee given by the government of Malaysia for the benefit of 1MDB or any policy of the Malaysian government required the approval of MO1 i.e. Najib.”

2. Page 17 paragraph 50. “A special meeting of 1MDB board was held on Sept 26, 2009. Low (not a board member) also attended this meeting.”

3. Page 11 paragraph 29. “Aziz is a relative of MO1 (Najib) and a friend of Low.”

4. Page 55 paragraph 178. “Once funds were transferred from Aabar-BVI to Blackstone, they were used to make payments to Qubaisi and Husseiny, who served as officers of both Aabar and Aabar-BVI to MO1 (Najib) and to 1MDB Officer 3.”

5. Page 59 paragraph 192. “The MB consulting account received another wire transfer of $1,500,000 from the Blackstone account on or about January 22, 2013.

“Blackstone transferred at least $30 million to an account belonging to MO1 (Najib).”

6. Page 59 paragraph 193. “Blackstone also transferred at least $30,000,000 to an account belonging to MO1 (Najib) shortly after receiving funds from Aabar-BVI.”

7. Page 59 paragraph 194. “On or about Oct 30, 2012 – roughly seven days after Blackstone received $75,000,000 directly from Aabar-BVI and roughly six days after it received $360,000,000 indirectly from Aabar-BVI via Enterprise and Cistenique – Blackstone transferred $5,000,000 into the account at Ambank in Malaysia held in the name of ‘Amprivate Banking MR’.”

8. Page 59 paragraph 195 . “The bank account ‘Amprivate Banking MR’ belongs to MO1 (Najib) and is the same account that received $20,000,000 from the Petrosaudi co-founder in 2011, within days of the receipt by the Petrosaudi co-founder of funds from Good Star, as set forth in Section II.G.”

9. Page 59 paragraph 196. “On or about November 19, 2012 – less than two weeks after Blackstone received $95,000,000 from Aabar-BVI via Enterprise – Blackstone transferred $25,000,000 to the same Amprivate Banking MR account belonging to MO1 (Najib).

10. Page 60 paragraph 200 . “Blackstone was used as an intermediary to obscure the fact that 1MDB bond proceeds were being sent from Aabar-BVI – of which Qubaisi and Husseiny were directors – to accounts that were beneficially owned by Qubaisi, Husseiny, MO1 (Najib) and 1MDB Officer 3.”

11. Page 60 paragraph 201. “The funds sent to accounts belonging to Qubaisi, Husseiny, MO1 (Najib) and 1MDB Officer 3, as described above, were unlawfully misappropriated from 1MDB and/or IPIC.”

12. Page 60 paragraph 202. “Between June 18, 2012 and November 4, 2012 $238,000,000 was transferred directly from Aabar-BVI Swiss Account to an account controlled by Aziz, a relative of MO1 (Najib).”

13. Page 67 paragraph 229. “Funds transferred to the Tanore account were distributed for the benefit of at least one public official associated with 1MDB. More particularly, very shortly after the bond offering closed, between approximately March 21, 2013 and March 25, 2013, $681,000,000 was transferred from the Tanore account to an account belonging to MO1 (Najib). Of this amount, approximately $620 million was returned to the Tanore account on or about August 26, 2013.”

14. Page 71 paragraph 242. “The offering circular also omitted material facts necessary to make its representations regarding the use of the bond proceeds not misleading, in that it failed to disclose that certain individuals related to 1MDB, including MO1 (Najib), would receive hundreds of millions of dollars from the proceeds of the bond sale within days of its closing. This fact would have been material to the bond transaction, as it would have alerted investors to the possibility of conflicts of interest and related-party transactions. The representation that ADMIC had not determined how all of the bond proceeds would be used did not encompass using those funds, beginning almost immediately after the bond issue, for the personal benefit of individuals related to 1MDB and their associates.”

15. Page 74 paragraph 257. “Instead, funds from the Tanore account were sent to an account belonging to MO1 (Najib), and were used by Tan and Low to purchase art. Funds from the Tanore account were also used by Low to acquire a substantial interest in a luxury hotel in New York City. These uses were inconsistent with the intended purpose of the bond proceeds as set forth in the offering circular and the April 23, 2013, 1MDB press release.”

16. Page 75. D. “$681 million was transferred from the Tanore account to an account belonging to MO1 (Najib).”

17. Page 75 paragraph 259. “Shortly after proceeds of the 2013 bond sale were diverted to the Tanore account, $681,000,000 was sent from the Tanore account to a bank account belonging to MO1 (Najib).”

18. Page 75 paragraph 261. “This account belonged to MO1 (Najib) and is the same account that in 2011 received $20 million from the Petrosaudi co-founder that was traceable to the Good Star account, as set forth in Section II.G. It is also the same account in 2012 that received at least $30 million from the Blackstone account that was traceable to the Aabar-BVI Swiss account and the 2012 bond proceeds, as set forth in Section III.E.3.”

19. Page 75 paragraph 262. “On or about August 26, 2013, $620,010,715 was wired from a different account at Ambank to the Tanore account. This AmBank account also belonged to MO1 (Najib), and the transfer represented funds from the $681 million payments that were being returned to Tanore.

20. Page 75 paragraph 263. “The attorney-general of Malaysia publicly stated that he conducted an inquiry into the $681 million in payments. In a press release issued on January 26, 2016, the Malaysian attorney-general confirmed that, “the sum of US$681 million (RM2.08 billion) [was] transferred into the personal account of [MO1 (Najib)] between 22.03.2013 and 10.04.2013,” and that, “in August 2013, a sum of US$620 million (RM2.03 billion) was returned by [MO1 (Najib)] ….” The Malaysian attorney-general ultimately characterised the payment of $681 million as a “personal donation to [MO1 (Najib)] from the Saudi royal family which was given to him without any consideration.”

21. Page 76 paragraph 264. “Bank records associated with the Tanore account show that Tan was the beneficial owner of the Tanore account, from which the $681,000,000 payments to the account of MO1 (Najib) were made, and that 1MDB Officer 3 was added as an authorised signor on the Tanore account roughly one day before the first wire of $620,000,000 was sent from the Tanore account to the account of MO1 (Najib).”

…more
So, who is the Malaysian Official 1?
Dr Mahathir Mohamad
8 Sept 2016 – malaysiakini

26
Sep
16

How EC is tying hands of the opposition

How EC is tying hands of the opposition

The Election Commission (EC), after 13 years and three election cycles, on Thursday announced the commencement of a nationwide redelineation exercise.

Within hours, the opposition rained a torrent of criticism against the EC, accusing the commission of trying to engineer the redelineation in BN’s favour.

Much of these criticisms were focused on Selangor, where the number of voters in the parliamentary seats were dramatically altered.

Malaysiakini looked at the patterns to see if there were any merits to claims that the EC was up to no good.

We first listed all parliamentary seats in Selangor based on the majorities won by BN or the federal opposition, in an ascending order.

This was then compared with how much the respective seats were enlarged, or shrunk, in terms of voters under the latest redelineation exercise.

From the simple analysis, it was found that parliamentary seats in Selangor that were won by the opposition by more than 60 percent of the votes cast, with the exception of Puchong, were all enlarged.

However, all marginal seats won by the opposition with a vote share of between 55 percent and 60 percent were shrunk.

As for high risk opposition seats that were won by less than 55 percent and BN seats, the size were largely unchanged.

Seats with substantial increases in voter size are Petaling Jaya Utara (+76.2 percent), Petaling Jaya Selatan (+62.6 percent), Klang (+45.5 percent), Kelana Jaya (+45.0) and Kota Raja (+14 percent), all of which the opposition won by over 60 percent in the 13th general election.

The only exception was Puchong, which shrunk by 22.7 percent.

Subang (-42.9 percent), Hulu Langat (-34.9 percent), Kapar (-30.3 percent) and Selayang (-11.4 percent) were among the seats that shrank, which the opposition won by 55 to 60 percent of the votes cast in the last general election.

It should be noted that the planned significant change in the size of parliamentary seats in Selangor is in stark contrast with that for the other states, which at most will see an adjustment of around 10 percent for any particular parliamentary seat.

However, in these states, the occasional odd-one-out does raise alarm bells.

For example, in Perak, the Lumut parliamentary seat will shrink by 29.7 percent while the Beruas parliamentary seat will grow by 55.1 percent. So, what’s going on?

Under the redelineation, the opposition-held state seat of Sitiawan will be removed from the Lumut parliamentary constituency and placed under the Beruas parliamentary constituency, a neighbouring seat held by DAP.

PKR’s Mohamad Imran Abd Hamid won the Lumut parliamentary seat with a 8,168-vote majority in the last general election.

The Sitiawan state seat was the only state constituency within Lumut that was won by the opposition, with a 11,820-vote majority.

The other two state constituencies, Pasir Panjang and Pangkor, are both BN seats.

The removal of Sitiawan effectively erases Mohamad Imran’s majority and may even leave him with a deficit, almost guaranteeing defeat if the voting pattern remains the same.

Meanwhile, in Johor, Pagoh was the parliamentary seat with the most drastic change in size – a reduction of 22.2 percent.

Concurrently, the Ledang parliamentary seat will see its size grow by 18.3 percent.

A closer analysis by Malaysiakini found that the polling stations of Umno branch leaders who supported former Umno leader Muhyiddin Yassin are also to be moved out of Pagoh.

These leaders, from Grisek; Parit Medan; Kurnia Sakti and Kundang Ulu, quit their positions in June, to protest Muhyiddin’s sacking from the party with one even torching his uniform.

Kundang Ulu, Parit Medan and Kurnia Sakti fall under the Kundang Ulu polling station while Grisek is under the Grisek polling station.

Both polling stations, and several others, were moved out of Pagoh and placed under the neighbouring Ledang parliamentary seat.

These trends and anomalies highlight legitimate questions on the independence and professionalism of the EC in this redelineation exercise.

…more
How EC is tying hands of the opposition
17 Sept 2016 – Malaysiakini

25
Sep
16

The makings of an electoral grab?

The makings of an electoral grab?

Any act of gerrymandering is grotesque in that it involves disenfranchising voters and forcing them from accessing their elected political representatives.

COMMENT

By Charles Santiago

This is not really a question of whether the Opposition would end up doing better in some Parliamentary constituencies.

The change of constituency boundaries is just to ensure weak Barisan Nasional seats can be strengthened to ensure the victory of the ruling government in the next general election.

We have all been unhappy with the Election Commission (EC) and hundreds of thousands of people have marched on the streets calling for free and fair elections.

But the re-drawing of these Parliamentary boundaries still comes as shocking because it’s blatant.

It’s as if the EC is working overtime to ensure a win for Prime Minister Najib Razak and his coalition.

Any act of gerrymandering is grotesque in that it involves disenfranchising voters and forcing them from accessing their political representatives who have worked in their favour since 2008.

My constituency of Klang is in danger of being parcelled out between my neighbours.

And all of this is being done to keep Najib and Umno in power, despite the growing dissatisfaction against the government brought about primarily by the 1Malaysia Development Berhad financial scandal, rising cost of living, abuse of power and rampant corruption amongst other crucial issues.

The Commission has announced that it would listen to feedback from the public and elected representatives including the town council.

But we all know that this exercise won’t amount to much. As such the EC must scrap this ridiculous suggestion or by default, agree that it’s doing the bidding of Najib and his government.

Charles Santiago is Member of Parliament for Klang.

…more
The makings of an electoral grab?
September 16, 2016 – FMT

24
Sep
16

Gerrymandering and Malapportionment (infographics)

(source: dart.bersih.org)

dart-1

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All that is necessary
for the triumph of evil
is for good men
to do nothing.

- Edmund Burke
Where have 2.6 stars gone?
When the people
fears their government,
there is TYRANNY;
when the government
fears the people,
there is LIBERTY.

- Thomas Jefferson
Do you hear the people sing?

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