Archive for the 'Economy' Category

12
Oct
17

Malaysian housing market “seriously unaffordable”

Here’s why you can’t afford a house, Bank Negara tells Malaysians

KUALA LUMPUR, Oct 11 — Malaysia’s central bank has a response to those saying it needs to do more to spur home loans: houses simply aren’t affordable.

Bank Negara Malaysia has created a website packed with data aimed at debunking the “myth” that access to financing was deterring home ownership, showing that loan approvals for key cities are near 70 per cent or higher.

The central bank has resisted calls to loosen mortgage lending, instead saying the property industry should boost efforts to cut costs and accelerate supply.

Rising home prices have added to the grievances of Malaysians grappling with the cost of living since a goods and services tax started two years ago, and as the government removes subsidies on daily items including petrol and sugar. That’s made affordable housing a key voter issue for Prime Minister Datuk Seri Najib Razak ahead of a general election that must be held by mid-2018.

“It’s a tricky situation,” said Wan Saiful Wan Jan, chief executive officer of the Institute for Democracy and Economic Affairs in Kuala Lumpur. “I don’t think it’s right to say that there’s no problem with financing. But lending rules have to be both strict and balanced at the same time, otherwise we’ll have more non-performing loans and that is not good for anyone in the country.”

The median house price in Malaysia was 4.4 times the median annual household income in latest available data, making the housing market “seriously unaffordable” compared to global standards, according to a 2015 report by state-run Khazanah Research Institute. The report classed an affordable market as one with a median multiple of 3 times.

That still makes Malaysia cheaper than many other markets, with affordable housing in key cities something of a rarity in the 21st century. In the latest Demographia study, Kuala Lumpur had the eighth best housing affordability out of 18 metropolitan regions around the globe, with Hong Kong homes costing 19 times income and Beijing 14.5 times.

Malaysia’s central bank is seeking to strike a balance: its housing website aims to show transparency in the market while the lender also stands firm on stricter financing rules introduced since 2010 to curb speculation, as well as measures to promote responsible lending amid elevated consumer debt.

Household debt as a proportion of gross domestic product fell to 88.4 per cent last year from 89.1 per cent. It’s still one of the region’s highest and the nation needs to be careful of such levels, central bank Governor Muhammad Ibrahim said in July. The central bank has left borrowing costs unchanged at 3 per cent since July last year.

Just 20 per cent of new Malaysian housing launches in the first quarter were priced below RM250,000 (US$59,000), down from 33 per cent between 2010 and 2014, according to the central bank’s “Housing Watch” website. The bulk of new homes cost between RM250,000 and RM500,000. The median annual household income is estimated at around RM63,000.

“It is an issue of not having enough income and houses being too expensive,” Muhammad told a conference in August, reiterating that “the problem is not about access to credit” and the lender “must have the courage to say it loudly and clearly to the public.”

…more
Here’s why you can’t afford a house, Bank Negara tells Malaysians
October 11, 2017 – MMO

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30
Aug
17

How the 1MDB scandal started and RM5 billion Islamic bond issued

1MDB’s ‘original sin’ and Jho Low

The story of 1MDB begins in 2009, in the oil rich east coast state of Terengganu. Flushed with this black gold, the state decides to start a sovereign wealth fund so its riches could last for generations and more.

But what transpired between the formation of Terengganu Investment Authority (TIA) on Feb 27, 2009 and the day it was rebranded 1MDB on July 31, 2009 is not the stuff of fairy tales.

Instead it was a tale of boardroom tussles, menteri besar intervention, royal outrage and a special advisor named Jho Low.

Below is the chronology of events, according to the Public Accounts Committee’s (PAC) report on 1MDB tabled at the Dewan Rakyat yesterday.

Feb 27, 2009 – TIA set up

April 1, 2009 – Cabinet approves government guarantee for TIA to raise RM5 billion through a 30-year Islamic Medium Term Notes.

May 13, 2009 – Menteri Besar Incorporated Terengganu (MBI Terengganu) sends a letter to the Finance Ministry supporting the issuance of the notes according to several terms.

May 15, 2009 – TIA signs agreement with AmInvestment Bank Bhd to raise RM5 billion, but MBI Terengganu opposes, claiming the agreement did not adhere to MBI’s terms. The menteri besar is Ahmad Said.

(TIA chief executive Shahrol Azral Mohd Halmi told PAC later that it was a “bought deal”, where Ambank had a secondary market for the notes.)

May 22, 2009 – TIA board decides to suspend the bond issuance on an urgent basis and revoke all authority given to Shahrol or any director on the Islamic notes issuance.

(Board members are Terengganu princess and sultan’s sister, Tengku Rahimah Puteri, Tabung Haji managing director Ismee Ismail and Shahrol.)

However, the marketing process for the Islamic notes commences on this very day.

May 25, 2009 – Shahrol signs deal with Ambank to issue the Islamic notes.

May 27, 2009 – Shahrol dropped as chief executive through TIA shareholders resolution and Tengku Rahimah resigns from the board.

Shahrol and Ismee use their powers as remaining board members to reinstate Shahrol as chief executive.

The Terengganu government sends a letter instructing a halt on the Islamic notes issuance.

(Shahrol later tells PAC he adhered to TIA Memorandum of Articles of Association, but PAC disagrees. He tells PAC “the train had left the station” and there was no way to stop the Islamic notes issuance.)

May 29, 2009 – Menteri Besar Incorporated Terengganu (MBI Terengganu) sends a letter to Finance Ministry supporting Shahrol’s sacking as chief executive.

It also sends a warning letter to Ambank alleging the bank’s culpability in wrongdoing.

TIA Islamic Medium Term Notes subscription period expires and RM4.835 billion is raised. Ambank pockets RM11.25 million as arranger fee plus RM7.14 million in trustee and agency fee, payable at RM238,000 a year for 30 years.

June 3, 2009 – Cabinet is told that the Terengganu sultan wants a report on “unauthorised issuance of Islamic Medium Term Notes by TIA”.

June 30, 2009 – Shahrol tells a meeting chaired by the Treasury secretary the letter by MBI Terengganu to halt the bond issuance arrived after marketing for the notes started. He says the process went on despite the letter to protect TIA’s credibility.

July 25, 2009 – TIA is rebranded 1Malaysia Development Bhd, with RM1,000,002 paid up capital and allowable capital of RM1 billion. It is fully-owned by the Ministry of Finance Incorporated.

Aug 8, 2009 – Prime Minister Najib Abdul Razak, who is also finance minister and chairperson of 1MDB advisory board, receives a letter from one “Prince Turki”. Along with the letter is an introduction to PetroSaudi International by its chief executive Tarek Obaid.

…more
1MDB’s ‘original sin’ and Jho Low
8 April 2016 – malaysiakini

12
Aug
17

ECRL folly bound to fail and burden the nation

ECRL folly bound to fail and burden the nation

COMMENT | The East Coast Rail Line (ECRL) is being touted to Malaysians as a world-class “game changer” which will accelerate development in the East Coast states of Peninsular Malaysia. Unfortunately, there is little evidence that it will do so, and the rationale for such claims are dubious, to say the least.

We have been told that RM55 billion is being invested in ECRL, which will be completed by 2024. All over the world, such mega-projects are notorious for cost overruns, and there is no reason to believe that this project will be the exception to the rule.

The justification for the ECRL is that it will carry almost 60 million tonnes of freight yearly by 2035. This is incredible because even KTM only carries about 6 million tonnes per annum with its current nationwide network. If the projected massive surge in freight tonnage does not materialise, the project will lose even more, meaning that taxpayers for generations to come will have to massively subsidise the ECRL.

ECRL is supposed to greatly benefit the country in so many incredible ways as to defy simple logic. But will there be enough passenger traffic to support a high-speed rail link? What kind of cargo needs such a costly high-speed haulage connection. And which high-speed railway in the world stimulates so many businesses and jobs in all the towns it will pass through, as claimed.

Will the ECRL be an expensive ‘white elephant’ paid for by Malaysians for many years to come? The Kemaman-Kuantan rail link, completed several years ago, has hardly been used to date. Are we supposed to be thankful that it cost much less than the ECRL?

Even Wan Saiful Wan Jan, the libertarian chief executive of the Institute for Democracy and Economic Affairs (IDEAS) who endorsed the Forest City project in Johor Baru, found the ECRL claims difficult to swallow in a recent article arguing for improved governance generally, especially to manage investments from China.

Honest critics are already being accused of wanting to deprive the East Coast states of development. But those with longer memories know how much Kelantan has been deprived of federal funds by Putrajaya, while Terengganu has been denied petroleum revenues and its investment fund was ‘hijacked’ to become the now notorious 1MDB.

China firms to profit

Of course, the deal will be good for some Chinese state-owned enterprises. The contract was given to the China Communication Construction Company (CCCC) after direct negotiations, without any open tender, although Malaysian companies have delivered on rail projects before. CCCC will be required to subcontract to local firms, but will remain the main contractor.

As we should have learnt from earlier arrangements, foreign firms find ways and means to bring their preferred partners in with them, using local partners to fulfil such requirements as meaningful technology transfer. The international success of Ingress (e.g., in Rayong, the ‘Detroit of Thailand’) contrasts sharply with the minimal development of Malaysian technological capacity and capabilities by many other Proton vendors due to their (mainly Japanese) principals’ practices.

The ECRL will be funded by a loan from China’s state-owned Exim Bank, with the Malaysian government, i.e., taxpayers, serving as guarantor. Thus, the risk and liability will be completely borne by Malaysia.

So, Malaysia will essentially be borrowing money from a China bank to pay a China company to build ECRL. Very little of the loan will get to Malaysia as the Exim Bank loan will be used to pay CCCC. Malaysians will bear all the risks for ECRL while the China firms are guaranteed profits by Malaysians.

Whether or not the ECRL is profitable, we will still have to repay the loan with interest. Malaysia does not have to pay during the first seven years, but after that, we have to settle it within two decades. So financially, this is essentially a loan for which we Malaysians will exclusively bear all the risks.

…more
ECRL folly bound to fail and burden the nation
Jomo KS
11 Aug 2017 – malaysiakini

10
Aug
17

Don’t try to fool Malaysians, public funds used to settle 1MDB debts

Johari should not bluff that government has not given 1MDB public funds to settle debts, says DAP’s Pua

Media Statement by Tony Pua, DAP National Publicity Secretary and Member of Parliament for Petaling Jaya Utara in Kuala Lumpur on Wednesday, 9 August 2017:

Second Finance Minister, Dato’ Seri Johari Abdul Ghani should not bluff Malaysians by stating that the Government “has never given public funds to 1MDB to settle its debts”

According to Bernama yesterday, Second Finance Minister, Dato’ Seri Johari Abdul Ghani said that “the Finance Ministry (MoF) has never given any public funds to 1Malaysia Development Bhd (1MDB) to help settle its debt”.

The Minister must think that Malaysians are complete and utter idiots to be served what is one of biggest piece of cow dung amongst all the attempts to cover up the 1MDB scandal.

The Ministry of Finance has on so many occasions come to the rescue of 1MDB over the past 2 years involving billions of ringgit of tax-payers’ monies, and yet Dato’ Seri Johari has the cheek to tell us that the MoF “has never given any public funds to 1MDB”.

Among the most clear-cut examples are the RM800 million loan from SOCSO and another RM2.4 billion Bandar Malaysia sukuk bond which the MoF have assumed as a result of taking over TRX City Sdn Bhd and Bandar Malaysia Sdn Bhd.

The Auditor-General has reported that nearly all of the above proceeds of the 1MDB borrowings were never used for the development of the 2 property projects above. Hence when MoF agreed to take over the property projects and assumed the liabilities, MoF has effectively “settled” 1MDB’s RM3.2 billion debt problem.

What’s more, when 1MDB had originally sold a 60% stake in Bandar Malaysia to an Iskandar Waterfront Holdings (IWH) Sdn Bhd-led consortium, they had collected, and presumably spent the RM741 million deposit which has been paid upon the signing of the sale and purchase agreement in December 2015.

However, when MoF terminated the sale due to IWH payment defaults, it was MoF who coughed up the RM741 million to refund the deposit paid by the consortium. If the deposit, should have been refunded at all, it should have been by 1MDB, and not by the Malaysian tax-payers.

The above doesn’t yet include MoF subsidiary or subsidiaries which actually acquired properties from 1MDB in TRX at inflated prices. The irony is, it was MoF who sold the land to 1MDB in the first place at dirt cheap prices.

We understand the conundrum Dato’ Seri Johari Abdul Ghani is facing as the 2nd Finance Minister who has fallen out of favour and having to defend the indefensible regain the Prime Minister’s favour. It is now clear that he has been dropped by Dato’ Seri Najib Razak from handling the 1MDB imbroglio, particularly in the company’s multi-billion dollar dispute with Abu Dhabi’s IPIC.

However, the Second Finance Minister should not go to the extent to telling outright lies to pull the wool over the people’s eyes. Dato’ Seri Johari should not forget his role and responsibility to the people of Malaysia by sacrificing his own integrity and honour.

…more
Johari should not bluff that government has not given 1MDB public funds to settle debts, says DAP’s Pua
August 09, 2017 – theedgemarkets.com

09
Aug
17

10 reasons why we don’t need RM55 BILLION ECRL

10 reasons why we don’t need RM55b east coast rail link

A QUESTION OF BUSINESS | Why does the country need a double-tracked, electrified East Coast Rail Line (ECRL) from Port Klang on the west coast of Peninsular Malaysia to Kuantan and Tumpat on the east coast – 688 kilometres, to be built at a massive cost of RM55 billion?

Especially since the earlier double-tracking project from Padang Besar, Perlis to Johor Bharu costing a massive RM36 billion is already one of the greatest, if not the greatest, infrastructure failures in Malaysia ever?

Proceeding with such a dubious project raises many questions over the competency and integrity of the government which awarded this project without a tender process to the China Communications Construction Company (CCCC), a China state-owned company which was barred from World Bank projects in 2009 because of alleged fraudulent practices in other countries.

Also, by now, China’s efforts to further its own interests under the One Belt One Road (OBOR) project is now well-known. Many, including this writer, consider it to be a thinly disguised plan using Chinese and other concessional financings which will strengthen China’s role in international trade, industry and connectivity, often at the expense of other countries.

China’s vision for the ECRL seems to be for the link to provide connectivity via rail between Port Klang and Kuantan for cargo to be moved back and forth which will save transport costs for goods headed to and out of China. But at RM55 billion, the number of goods moved has to be astronomical for it to be economically feasible.

Here are 10 reasons why that ECRL project should absolutely not proceed.

1. Economically not feasible. At RM55 billion, it’s the largest infrastructure project ever for Malaysia. If we assume a required 10 percent rate of return on the investment, the ECRL has to generate an income, not revenue, of RM5.5 billion a year. Assuming income is even 20 percent of revenue, then revenue needs to be a massive RM27.5 billion! The impossible task ahead is illustrated by this: In 2016, Singapore’s port had a turnover of S$3.7 billion (RM11.7 billion) and a profit of S$1.2 billion.

2. Earlier RM36 billion double-tracking has failed spectacularly. Let’s look at the utter failure of the RM36 billion double-tracking venture initiated under the Mahathir regime. Rail operator KTM had a revenue of RM1.1 billion in 2016 from which it obtained a cash flow of a mere RM166 million. Revenue is only 3 percent of the cost of double-tracking while operating cash flow is a mere 0.5 percent, not anywhere near enough to cover even interest expenses. For a 10 percent return on costs, cash flow needs to rise over 20 times to RM3.6 billion a year. This is the backbone north-south route of Peninsular Malaysia. How is the ECRL going to fare any better?

3. Expensive. Not only is the ECRL extremely expensive in absolute terms, it is also very expensive in terms of cost per km at RM80 million compared to the Gemas-Johor Bharu double-tracking stretch of RM45 million per km. However, this is not strictly comparable given that the ECRL goes over hilly terrain. But analysis is seriously hampered by the lack of information.

4. Unnecessary. Such a large investment can only be justified if there is a great economic benefit. Economically it will depend on one major customer – China – which is looking to export and import goods more cheaply by ferrying goods between Kuala Lumpur and Kuantan via a rail to cut shipping costs.

5. Does not serve the country’s purpose. Such a move does not serve the country’s purpose but instead represents the diversion of badly needed and scarce resources to a project that could potentially fail and fail big and will benefit China directly.

6. Opportunity for patronage and corruption. By inflating project costs, there are plenty of opportunities for patronage and outright corruption, representing a huge risk to the country and further erosion of government governance and accountability. Reports have flourished saying that amounts from overpricing the contracts could find its way into 1MDB to fill the hole in its debt obligations. Considering that 1MDB is in a rather bad state and needs rescue, such reports cannot be dismissed outright.

…more
10 reasons why we don’t need RM55b east coast rail link
P Gunasegaram
8 Aug 2017 – malaysiakini

27
Jul
17

Najib pressing the panic button

Najib pressing the panic button

THAT Prime Minister Najib Razak took to running down and lambasting Pakatan Harapan in the presence of some 900 local and foreign business leaders and investors is most unfortunate and smacks of desperation. He has indeed pressed the panic button!

Denouncing Dr Mahathir Mohamad’s legacy as being rife with cronyism and corruption is most ironical. When the entire world watches how puppet master Jho Low embezzled billions of dollars from 1MDB and laundered the proceeds around the globe, Najib should have exhibited more finesse and decorum.

The “bare-faced lies and misinformation” he accused the opposition of having manufactured “to damage Malaysia’s economy” are best rebutted by the conviction of few top bank officials in jurisdiction like Singapore and Abu Dhabi.

The three complaints of the United States Department of Justice speak for all. Lest he chooses to suffer selective amnesia again, will the true MO1 please stand up!

Never mind the pernicious corruption and endemic nepotism that have been very recently exposed locally in FGV and Mar, to cite a few, and the diversion of public funds from the likes KWAP and SRC to cover debt payment gaps. That his administration has a penchant for inflating project cost beyond market norms is an open secret.

In all fairness, we perhaps have no qualm about recognising whatever he has achieved. However, truth be told, his achievement pales and really nothing to shout about, when all the “so-called reforms” were unmistakably short-lived and aborted. Regrettably, it gave way to greed and dishonesty of the oligarchy, and fear of his own party.

…more
Najib pressing the panic button
26 Jul 2017 – Malaysian Insight

25
Jul
17

Is MRT’s true cost RM100 billion and who benefits from it, ask critics

Is MRT’s true cost RM100 billion and who benefits from it, ask critics

TODAY, the first phase of Malaysia’s largest infrastructure project, the MRT Line 1 Sg Buloh-Kajang line becomes fully operational.

But debate continues to rage among lawmakers and the Najib administration about its true cost and whether – with its hefty price tag – it will benefit the public in the end.

As pointed out by Pandan MP Rafizi Ramli, the fact that a dispute has erupted in the first place over the actual cost of the project shows that there is little transparency over something with huge ramifications for the public.

If the Najib administration’s figures on the true cost of the MRT are questionable, what certainty is there that other mammoth projects, such as the KL-Singapore High Speed Rail and the East Coast Railway, will be priced accurately?

When Prime Minister Najib Razak announced the project in his Budget 2011 speech, he quoted a RM40 billion price tag.

It was understood that this was for all three lines – MRT SBK, Serdang-Putrajaya (MRT SSP) and the Circle Line – all of which are slated to be ready by 2020 at a total length of 141 km.

Chapter five of the 2011 Economic Transformation Plan handbook states that a preliminary cost of the whole project would be RM47 billion.

Of that total, RM36 billion would be for infrastructure and RM2 billion for expedited land acquisition. An additional RM9 billion would be needed for operating assets, such as rolling stock.

In October 2015, questions began to be raised over these early RM40-47 billion estimates, when DanaInfra Nasional Bhd (DanaInfra) said the MRT Line 2 alone was estimated at RM42 billion.

DanaInfra is the government’s special funding vehicle for infrastructure projects tasked with raising funds for them. It announced that it was raising RM50 billion through a debt programme to pay for MRT Line 1 and MRT Line 2.

But in December 2016, when Najib launched the MRT Line 1 (SBK), Rafizi said the true cost of the whole scheme would be twice the amount first quoted.

Najib said the 51km MRT Line 1 cost RM21 billion and the government had saved RM2 billion from the original price tag of RM23 billion.

Rafizi said based on calculations from publicly available documents, all three lines could cost a total of RM124 billion. This is a far cry from the RM40 billion first announced by Najib or the RM47 billion stated by the ETP.

On December 24, 2016, the owner of the MRT project, Mass Rapid Transit Corp Sdn Bhd (MRT Corp) released a statement saying that the earlier RM40 billion was “no longer relevant”.

“We wish to make clear that this figure was derived from a conceptualised proposal back in 2010. The amount did not include electric trains and related systems, as well as land acquisition,” MRT Corp said.

The RM40 billion price tag was originally submitted in a 2010 private sector proposal to the government for an MRT project to be built concurrently, based on 2009 prices, the company said.

It said in 2012 the MRT Line 1 would cost RM23 billion and that the second line was estimated at RM32 billion.

Feasibility studies for the MRT Line 3 are still being carried out.

Rafizi is sticking to his original assessment that the total cost of the project would be about RM100 billion.

MRT Corp’s own revelations showed that two out of its three lines are already costing more than the RM40-47 billion announced by the Najib administration.

…more
Is MRT’s true cost RM100 billion and who benefits from it, ask critics
17 Jul 2017 – Malaysian Insight




Nuclear lessons for Malaysia (Part 1) (Part 2)
BN govt is directing attention to distant past and distant future, in order to distract people from present misdeeds and poor governance
Felda - A picture is worth a thousand words
How the 1MDB Scandal Spread Across the World (WSJ)
We cannot afford ridiculously expensive RM55 Billion ECRL!
All that is necessary
for the triumph of evil
is for good men
to do nothing.

- Edmund Burke
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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