Harith

Petronas MARCH 2020 PP19507/11/2019 (035148) Iskander 03 reveals the to pay serious RM24 bil in OF business dividends behind to govt comedy.

P. 4 ous ri d Read about it e se hin th s be ls nes edy vea usi m in PURSUIT re b co 03 PP 19339/05/2018(034908)

9 772289 234001 www.focusmalaysia.my MONTHLY MARCH 2020 RM8 | ISSUE 03 The high Focus List Why is a Why a cost of richest PDP for shadow ‘iconic’ women in RM46 bil economy pylons Malaysia PTMP okay? matters P.15 P.18&20 P.46 P.59

The economic cost of political TURBULENCE P.6-8

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10 Prolonged political tumult will take its toll on the markets P.6-8

26 Mainstream 37 Tax expert: Make it a law to pay interest on GST refunds 4 ’ FY19 net profit down 27% to RM40.5 bil 38 A broad-based stimulus package may be needed

10 Pharmaniaga expects to return to the black in FY20 38 GreyMatters: Should EPF rate be cut to stimulate the economy? 12 Nathan’s related party transaction in Eversendai raises questions 39 Lifting the Fog: The race towards infrastructural sustainability 14 TA Enterprise’s offer for TA Global deemed too low 40 AirAsia-Airbus deals in spotlight amid RM205 mil 15 Up to RM200 mil more for Guan Eng’s ‘iconic’ pylons bribe probe

16 The political dimensions of AirAsia 40 Past controversies around Fernandes, Kamarudin

18-20 FocusList: Slight increase in wealth seen 41 Cronyism, patronage concerns in Mahathir’s Malaysia Inc 2.0 34 22-24 Conversations, former Health Minister Dr : Pursuing sustainable healthcare reforms 42 We cannot control share price movements, says C&C (interview was done before the political crisis) Bintang CEO

26 Poh Kong benefits from gold as a safe haven asset 43 Confusion over container deposits collection

28 Waiting game looms for AirAsia shareholders 44 How has the Covid-19 eroded consumer confidence? 29 PDP for RM46 bil Transport Master Plan might be delayed Property 30-31 Is 2020 a good year to buy a house? 29 Lifting the Fog: Gig economy or full-time jobs? 32-33 PKNS primed for RM26 bil launches over next five to 37 OPR cut to have marginal impact on banks’ 10 years profitability 39

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Happenings 2 For crustacean lovers Celebrating 30 years with a Kurosawa classic Electrifying lineup at Wired Music Week Illuminating music festival 59 in Beauty 4 Caring for the body Sephora Fahrenheit 88 is a hub for personalisation Repairs and strengthens your skin Fashion 6 Military style for modern explorers Nike at its most futuristic 63 Versatility and elegance A fresh restart for Pedro 8-9

Cover Story 34-35 Eight things to watch out for in Malaysia’s rental 55 QuestionTime: A temporary reprieve from rising car 8-9 Life as a humorist market in 2020 prices Lifestyle 36 Schedule of Parcels and ‘SiFUS’ to achieve the 56 Regulate vaping rationally 10 The way he made ultimate goal us feel 57 Lifting the Fog: When everyone wants to be THE Flexible meeting auto hub Columns packages From ordinary 45 QuestionTime: PAS sets a trap for Mahathir 57 Wake-up call for the Chinese and will Jho Low be back? to ‘goddess’ 58 Global economy still slowing, dangerously vulnerable 46 QuestionTime: Why is a PDP for RM46 bil PTMP OK? 11 Eye on the big picture 46 PDP accord might be delayed as state govt works to Scream your smooth out issues Markets heart out 47 Facing the challenging arithmetic of climate action 59 Shadow economy – Why does it matter? Gourmet 12 Nyonya nosh at 48 Fantasy fiscal policy 60 Covid-19: How much economic pain can Malaysia endure? its best 49 Intellectual property raises costs of living The pinnacle of winemaking 50 Promoting export-led growth with exchange rate Enterprise 13 When art meets undervaluation whisky 61 MYTHEO for investors to get started 51 Plantations and advances in technology Stay 52 Breach of confidence: The public interest defence Income+ 14 Where the world comes together 53 Cleaning up corruption in Malaysia 62 Credit card users need to be aware of charges on top of interest 54 Fancy a foreign trademark? Now it’s cheaper 63 E-wallets: Boon or bane?

EDITORIAL ADVERTISING CUSTOMER HOTLINES Editor-in-Chief: P Gunasegaram Sales Director: Pearly Ng (012) 201 2139 Tel: 603-7710 3883 Executive Editors: Amie Ong, Doreenn Leong Sales Support Executive: Parimala Devi (012) 242 4122 Fax: 603-7710 3882 Senior Writers: Emmanuel Samarathisa, Ranjit Singh Account Manager: Aznul Faizal Ahmad (019) 395 3552 Writers: Xavier Kong, Sharina Ahmad, Chee Jo-Ey Editorial: Ext 106 Sub- Editor: Geraldine Tan Email: [email protected] EVENTS & MARKETING Senior Designers: Eugnice Han, Quek Chun Leng Advertising: Ext 107 12 Sales Director: Jasmine Cheng (017) 271 7722 Designer: Purvinn Raj Chai Email: [email protected] Photographer: Iqbal Ismail Senior Manager: Terry Chong (012) 708 6833 Account Manager: Matthew Foo (012) 480 3141 Circulation: Ext 122 Email: [email protected] CORPORATE Subscription: Ext 122 & 101 CIRCULATION & PRODUCTION Executive Director, Business Development: Email: [email protected] Christopher Ang Manager: Kanna Matthew (012) 507 0750 Executive: Silas Emmanuel (014) 640 4733

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by Emmanuel Petronas’ FY19 net profit Samarathisa

ational oil company Petroliam Nasional down 27% to RM40.5 bil Bhd (Petronas) posted a 27% lower net profit of RM40.5 bil for the Nfinancial year ended Dec 31, 2019 included an RM30 bil special challenges, Petronas remains (FY19), compared to RM55.3 bil dividend, to the government. focused on delivering operational last year. According to Petronas, the excellence and remains commit- Softer earnings came on the company was able to sustain ted to our three-pronged strategy back of “lower revenue as well healthy levels of cash flow from of maximising cash generation, as net impairment on assets operations as well as free cash expanding core business, and amounting to RM7.3 bil,” the flows, “despite the softer results.” stepping out into new ventures,” company said in a Feb 26 state- Operating cash flow increased to he added. ment. But “these were partially RM90.8 bil from RM86.3 bil, while This year, Petronas is esti- offset by lower tax expenses.” free cash flow rose 9% to RM43 bil mating an increase in Malaysian Petronas registered RM240.3 from RM39.4 bil. production by about 5%, as it bil in revenue for FY19 or 4% In terms of margins and oper- raises its domestic capital ex- lower than the RM251 bil for the ating cash flow, Petronas claims Wan Zulkiflee says Petronas Tengku Muhammad Taufik says penditure (capex) allocation to previous financial year, “mainly to have outperformed its global will pay RM24 bil in dividends 2020 will be a tough year for the between RM26 bil and RM28 bil due to lower average realised peers. According to the company, to govt this year national oil company this year. The emphasis will be on prices for major products.” its profit-after-tax margin stood upstream projects, the company The company said the drop at 17% in 2019 against under 10% said. was “partially offset by the impact for international oil majors, swan event,” Wan Zulkiflee financial officer Tengku It is also maintaining its of higher sales volume, mainly for while cash flow from operations said that while the whole Muhammad Taufik Tengku Aziz overall capex estimate at RM50 petroleum products and LNG, expanded to 38% of total revenue, industry was not prepared for also said this year would be a tough bil for 2020. It spent RM47.8 bil coupled with the effect of the which the company says puts it the outbreak of the virus, “this one. He cited the ongoing geopolit- in capex last year, up from RM46.9 weakening of the ringgit against far ahead of industry peers. is not the first time that we ical uncertainties, prolonged trade bil in 2018. Petronas would be also the US dollar.” Moving forward, the company go through this kind of price tensions and near-term demand allocating 5% or around RM2.5 bil Meanwhile, Petronas pres- expects the outlook to “remain volatility. What is important for disruptions mainly due to the for renewable energy ventures. ident and CEO Tan Sri Wan uncertain” this year with Petronas is to have a resilient Covid-19 epidemic. The oil company last year Zulkiflee Wan Ariffin told a press “headwinds from the impact of business model which can “The board expects that the launched its own rooftop solar conference that the company Covid-19, coupled with weak- handle these headwinds,” he financial performance for the solution in the country, a result of would pay RM24 bil in dividends er-than-expected demand and said. According to Wan Zulki- year 2020 will be affected by these its acquisition of Singapore-based to the government this year. an over-supplied market,” Wan flee, China contributes about factors,” he told the press confer- solar energy services provider Last year, Petronas declared Zulkiflee said. 6% of the group’s revenue. ence that day. Amplus Energy Solutions Pte Ltd a dividend of RM54 bil, which Dubbing the Covid-19 a “black Petronas group chief “Notwithstanding these on April 15. March 2020 | FocusM | 5 6 lead FocusM | March 2020 Prolonged political tumult will take its toll on the markets

Mahathir waves to media by reps as he leaves Istana Doreenn Leong Negara on Feb 24

tock markets around the world took a dive on Feb 24 on the back of heightened fears over the surge in Covid-19 Scases in Italy and South Korea. The Dow closed 3.6% lower, South Korea’s Kospi fell 3.9% while Italy’s main index ended the day 5.4% lower. Malaysia is not immune to the onslaught of the virus. But what is plaguing the local bourse is the political tumult following the self-inflicted collapse of the Pakatan Harapan (PH) gov- ernment, which took over the administration of the country following its win at the 14th General Election in May 2018. The PH government was disbanded on Feb 24 when Tun Dr resigned as prime minister. He was subsequently appointed the interim prime minister while awaiting the appointment of a new premier. It appears like Mahathir already has the numbers to form the government, judging from the announcements made by against the US dollar was on Nov Does Anwar the various political parties. So 17, 2016, when it depreciated by still have a far PKR (39), DAP (42), Amanah 1.03%. chance to be (11), the Azmin Ali camp (11) and The bellwether FBM KLCI PM? Bersatu (26) – the original coali- rebounded the following day as tion – give 129, a clear majority. bargain hunting lifted the local They need 112 seats. With GPS bourse. (18) expressing support for the Such uncertainties do not interim PM, the number goes up augur well for investors who to 147, just short of two-thirds of prefer to stay on the sidelines the 222 seats. If Sabah’s Warisan while waiting for clarity. comes in with its nine seats, “Certainly, the economy will then it rises to a massive 156. be impacted by such uncer- At the time of writing, it is tainties. Just the loss of time for likely that Mahathir will be able decision making between now to form a cabinet soon. and when the cabinet is formed The FTSE will have a negative impact. At a KLCI fell 2.7% to 1,490.06 points time when the stimulus package on Feb 24, extending the drop is needed to counter the effect from its April 2018 all-time high of Covid-19, it is hoped that the to 21%. The ringgit weakened as uncertainty can be removed much as 0.9% to 4.2271 per dollar. quickly,” Etiqa Insurance and The last time the ringgit posted Takaful chief strategy officer a sharper intra-day decline Chris Eng tells FocusM.

3-year movements of the FBM KLCI

2000

1800 “Certainty is always better markets,” he adds. demonstrated their effective- than uncertainty. So, in that According to Sunway Univer- ness and mobilising experienced 1600 sense given that a return to sity Business School Economics and capable former ministers to 1400 power of Tun Mahathir and most Professor Dr Yeah Kim Leng, the replace the ones found wanting 1200 of the cabinet members will give financial and currency markets in the previous line-up.

1000 a sense of more certainty. had been spooked by the “This could quickly regain “If there is a major change collapse of the PH government public confidence and reverse 800 in the cabinet, whether due to although it has since recovered the slide in the financial and 600 PH failing to return to power or slightly. currency markets. If the political 400 due to Tun Mahathir appointing “Since Tun Dr Mahathir situation is resolved quickly over a very different set of ministers as the interim PM has the the next few days, the economic 200 that would lead to more uncer- support of both sides of the impact will be minimal, other- 0 tainty. divide, he is presented with wise there could be the double “And if Tun Mahathir does an opportunity to appoint a barrel negative effects of the 2/7/19 6/6/18 11/5/17 8/11/18 25/1/19 3/12/19 12/4/19 19/3/18 19/9/19 27/7/17 24/2/17 18/2/20 20/8/18 13/10/17 29/12/17 not return as the PM that would stronger PH 2.0 cabinet line-up Covid-19 epidemic and political be even greater uncertainty for by retaining ministers who have turbulence. March 2020 | FocusM lead 7

Latest Muhyiddin is the front-runner for PM

However, this person must eventually command the confidence of Parliament. Section 43 (4) says: “If the Prime Minister by ceases to command the confidence of the P Gunasegaram majority of the members of the House of Representatives, then, unless at his request BERSATU’S support for its president Tan the Yang di-Pertuan Agong dissolves Sri to be PM and the Parliament, the Prime Minister shall tender Zuraida and Azmin were sacked from PKR on Feb 23 anticipated support too from Umno and the resignation of the Cabinet.” PAS appears to have given him an edge While there are no constitutional over Pakatan Harapan’s Datuk Seri Anwar precedents for the current situation in Ibrahim. Malaysia, there are cases of this in other on weakness undervalued blue The King’s admission that he has not yet countries. The convention or usual practice RM/US$ 3-year chips and beaten-up blue chips identified an MP that has majority support in other countries is to give the chance to movements and stocks in selected sectors to form a new government means that he form a minority government to the group like construction, gaming, has passed the decision back to MPs and which has the highest support in terms of 4.5 brewery and consumer. their political parties to come up with an MPs. “We maintain our end-2020 arrangement. 4.4 FBM KLCI target at 1,680 based He said that he will also contact the 4.3 on CY21 PER of 16x for now and leaders of the political parties that have will closely monitor the political representatives in the , to give 4.2 development (to see if) gthere be them the chance to nominate an MP as the 4.1 a need to downgrade it to our next prime minister. This means that this worst-case target of 1,500,” the weekend and the days ahead will see intense 4 research house says. activity by the factions to get the necessary 3.9 UOBKayHian Malaysia numbers. Research says the political un- At the time of writing, the two contenders 3.8 certainties could lead to further 27/2/17 24/2/20 are Harapan’s Anwar and Bersatu’s Muhyiddin significant outflow of foreign who was proposed by Bersatu after the King’s equity investments. announcement. This marks the demise of It is estimated that foreign Mahathir’s unity government. “Should the political tussles investors hold 15% to 16% of The highest support, going by current continue to distract policy- Malaysian equities. Including known alignments, is Muhyiddin (Umno 39, makers from the focus on the strategic shareholdings, the Bersatu 26, PAS 18, Datuk Seri Azmin Ali’s economy, it is likely that both the overall foreign ownership is faction 10, MCA 2 and MIC 1 for a total of 96). country’s short-term and long- about 22%. Anwar commands at least 92 MPs (PKR 39, term GDP growth trajectory will In 2018, foreigners dumped DAP 42 and Amanah 11). Sarawak (GPS 18) see a decline,” Yeah says. RM11.69 bil net of local equities. and Sabah (Warisan 9) hold the balance. If Meanwhile, about RM11.14 bil GPS goes with Muhyiddin, he becomes PM. Slowing economy worth of net local equities were Harapan needs GPS plus two more MPs for a Already, the economy grew at a sold by foreign investors in 2019. simple majority. GPS is expected to make an slower-than-anticipated rate of “Nevertheless, the market announcement on this on March 1. 4.3% in 2019 versus 4.7% in the may quickly snap back if the The decision of the Parliament Speaker previous year. new ruling coalition swiftly not to call for a meeting of the House on This was the slowest pace implements sensible business March 2, as intended by interim Prime since the global financial crisis policies,” says UOBKayHian, Minister Tun Dr Mahathir Mohamad and the Muhyiddin has the support of Umno and PAS in 2009, Bank Negara said, noting that there can be a few support for the decision by the King means for PM attributing it to lower output of quick fixes to improve senti- that an early decision will not be forced upon palm oil, crude oil and natural ment. Parliament soon. According to Wikipedia, in the 2017 gas, and a fall in exports amid “However, it remains to be Mahathir had said on Feb 27 that election in the UK, the Conservatives won the US-China trade war. seen whether the backdoor Parliament will be convened on March 2 the most seats but lost their majority in With that, investment banks coalition (if it comes to power) to see if there is anyone who has majority the House of Commons. The Conservative have trimmed their forecast of would still adopt some of PH’s support from MPs, failing which he Party, led by Theresa May, formed a Malaysia’s GDP growth for this policies, for example anti-mo- presumably will advise the King to dissolve minority government, with 317 seats, on year to between 4% and 4.4% nopoly and open tenders for Parliament and call for fresh elections. June 9, 2017. due to the Covid-19 outbreak, government contracts.” With the latest developments, there will On June 26 the same year, the commodity price fluctuations be more time before the King makes a final Conservatives did a deal with the Democratic and the US-China trade tensions New ruling coalition will decision on who can likely form a government. Unionist Party for a “confidence and supply” The bleaker growth pros- boost some stocks Under the Federal Constitution, the King can arrangement. For much of Boris Johnson’s pects have also caused further The research house adds that pick a person who he thinks is likely to be able prime ministership up until the 2019 general strain on the FBM KLCI this year the scenario of a new ruling to form a government. election, the government was a minority after a 6% fall in 2019, which coalition should be uplifting for Section 43 (2) says: “The Cabinet shall be government. was the worst performance by a a handful of stocks. appointed as follows, that is to say: (a) the In an earlier instance, according to major Asian stock market. This could be possible if the Yang di-Pertuan Agong shall first appoint as Wikipedia, the Labour Party, led by Harold According to TA Securities new government unlocks some Perdana Menteri (Prime Minister) to preside Wilson, formed a minority government Research, with the nation’s of PH’s policy implementation over the Cabinet a member of the House for seven months after the elections of leadership in a limbo, it expects constipation, such as expediting of Representatives who in his judgment is February 1974. That situation lasted until the current downside volatility the implementation of already likely to command the confidence of the the prime minister called another election in the equity market to prevail. approved mega construction majority of the members of that House; in October that year, following which the “The current fiasco will lead projects and thawing the hiring and (b) he shall on the advice of the Prime Labour Government obtained a tiny majority to further delays in implemen- of foreign workers. Minister appoint other Menteri (Ministers) of three. tation of policy measures and “Lowering our FBM KLCI from among the members of either House of The following administration also became affect economic growth. In the trough valuation to 1,480 points Parliament.” a minority government after the collapse of meantime any corrections in the based on 15 times 2020 price to The person picked need not necessarily the pact between the Labour Party and the FBM KLCI towards our strong earnings (PE) ratio. be one who has an outright majority but can Liberal Party in 1977. The then British premier support of 1,405, based on minus “We will be reviewing our be one in the judgment of the King “who is James Callaghan’s government fell in March one standard deviation from current end-2020 FBM KLCI likely to command the confidence of the 1979 as the result of a vote of no-confidence long-term mean of 15.3x, due to target of 1,650 points, which majority of the members.” which was carried by a single vote. near-term uncertainty should pegs the market at 16.8 times be a good opportunity to buy Continues next page 8 lead FocusM | March 2020

Mahathir’s long and winding road Sandakan federal seat by- election. July 11, 2019 – Datuk Mukhriz by Mahathir, Kedah Menteri Besar Ranjit Singh and Mahathir’s son, denies there is a timeline to hand over INTERIM Prime Minister Tun the prime minister’s post. Dr Mahathir Mohamad has the Sept 26, 2019 – Mahathir says rare distinction of being a prime in New York that he may have at minister thrice – including as most, three years for his prime interim prime minister – and ministership. also the oldest PM in the world Oct 28, 2019 – Anwar says at the ripe old age of 94. there are “treacherous He has fought many battles attempts” to stop him from and one that will be most replacing Mahathir. remembered is when he led a Nov 5, 2019 – Mahathir tells coalition of parties under the Financial Times “there was Pakatan Harapan (PH) banner no actual time date or time to unseat the mentioned” for his handover of government in 2018 which had power to Anwar. been in power for 62 years. Nov 20, 2019 – Mahathir Coalition head Datuk Seri effectively rules out stepping was in jail then. down in 2020. He says a cabinet The shrewd politician has reshuffle may be forthcoming seen it all in his long career. but rules out drastic changes in However, he faces one of his duties of his Cabinet ministers. toughest tests as interim prime Dec 10, 2019 – Mahathir minister of a nation which is pledges to step down for facing a multitude of challenges Anwar but not before the APEC on the political and economic meeting in November 2020. Anwar (left) and Mahathir in their younger days fronts. Jan 16, 2020 – Mahathir On Feb 24, the nation assumes the portfolio of was shocked by his abrupt then prime minister Datuk Seri unseating the BN government in Selangor but loses the one in education minister after resignation and also political on his involvement which has been in power for Tanjong Piai. removing the incumbent Dr manoeuvrings of certain in the 1MDB fiasco. 61 years. However, his party, Aug 5, 2018 – Anwar wins the Mazlee Malik. politicians which saw the Bersatu, won only 13 seats out presidency of PKR uncontested. Feb 14, 2020 – Anwar tells collapse of the PH government. June 2016 – Mahathir of 52 contested, for a win rate PKR is the largest component Straits Times Singapore that Mahathir’s political career campaigns for Amanah’s of only 25%, the poorest among party of PH. he will take over as PM after started in 1946 when he joined candidate in the Sungei the coalition partners. He is Sept 8, 2018 – PH wins by- the APEC meeting and the PH Umno which was fighting for Besar by-election. He wants hailed as the hero of the day. elections in the state seats of presidential meeting on Feb 21 independence from the British. Najib to step down due to his May 10, 2018 – Mahathir Seri Setia and , both in will decide on the date. In 1964, he stood for the involvement with the 1MDB is appointed as Malaysia’s Selangor. Feb 21, 2020 – PH Presidential Kota Star parliament seat scandal. seventh prime minister in Oct 13, 2018 – Anwar returns to Council decides that Mahathir under an Alliance party ticket July 2016 – Mahathir leaves his second innings and also Parliament by winning the Port will determine when he wants and won. He lost the seat in Umno in protest against Najib’s as the world’s oldest head of Dickson by-election. to let go of the PM’s position. 1969 and was a fierce critic leadership, and forms a new government. Jan 26, 2019 – PH suffers Feb 22, 2020 – Meeting at of then prime minister Tunku political party, Parti Pribumi May 15, 2018 – Mahathir its first by-election defeat in Sheraton Hotel, Petaling Jaya Abdul Rahman, claiming that Bersatu Malaysia (PPBM or says he will hold the prime the federal seat of Cameron attended by Datuk Seri Azmin Tunku had practised policies Bersatu). ministership for a period of one Highlands, Pahang. Mohd Ali, Zuraida Kamarudin, that ignored the Malays. July 2017 – At the age of 92, or two years. Feb 14, 2019 – Anwar tells and Umno and PAS leaders fuel He wrote the book entitled he re-enters the political May 16, 2018 – The then Yang Bloomberg that he will be PM talk there will be a change in Malay Dilemma which pushed fray, this time as leader of di-Pertuan Agong Sultan within two years. government. for affirmative action for the the Opposition pact, Pakatan Muhammad V grants a royal March 2, 2019 – PH suffers Feb 23, 2020 – Azmin and Malays in the wake of the New Harapan (PH) which is a pardon to Anwar. second by-election in the state Zuraida are sacked from PKR Economic Plan (NEP) being coalition of DAP, PKR, Amanah May 17, 2018 – Anwar seat of , Selangor. and later announce they are drafted. and his party, Bersatu. reiterates in media interviews April 13, 2019 – PH suffers forming an independent bloc In 1981, he was appointed as Jan 7, 2018 – PH announces that he will take over the prime third defeat in the Rantau, in Parliament with 11 other the fourth prime minister and Mahathir as its prime ministership in two years. Negeri Sembilan state seat MPs from PKR, including four reigned for 22 years until 2003 ministerial candidate for GE14. June 9, 2018 – Mahathir says in by-election. ministers. when he retired. The coalition agrees that Anwar an interview that the handover May 9, 2019 – PH Feb 24, 2020 – Mahathir Here is the chronology of will replace him when he is timeline is not fixed, and that “it commemorates its first year announces his resignation as events pertaining to Mahathir pardoned and able to. could be earlier or later”. in power and Mahathir says “I PM and as chair of Bersatu. He from 2016 when he announced May 9, 2018 – PH pulls a Aug 4, 2018 – PH wins the think I can last for another year”. is appointed as interim PM and his vehement opposition to spectacular victory in GE14, Sungai Kandis state by-election May 11, 2019 – PH wins the the government of PH falls.

All eyes on when stimulus package will materialise

From previous page political scenario would continue to The research house points out that market to see more selling pressure. It 2020 PE, to adequately incorporate the weigh on the markets. the local bond market witnessed a strong is looking at another 2-4% drop on the impact of Covid-19 on market earnings “As the interim prime minister, there sell-off at the initial period of the day, back of uncertainties on the interim and assess the country’s political and will be no time frame for how long he with the MGS curve up 18 to 20bps. government and the Covid-19 outbreak. policy landscape,” says UOBKayHian. (Mahathir) can be the prime minister. However, the market recovered by about “At the same time, bond yield curves Similarly, AmBank Research expects With all the powers attached to the office 12bps at midday on Feb 25. will also be on the upside at between five volatility on Bursa Malaysia to remain of the prime minister, it includes being The MGS curve ended 5-11bps higher. and 15bps. On the ringgit outlook, it is strongly driven by the global spread of able to appoint cabinet members if he As for the closely watched 10-year MGS expected to trade between the 4.23 and the Covid-19 and the collapse of the PH chooses to do so,” it adds. yields, it rose 11.5bps to 3.03%. 4.25 levels with the upside touching 4.30,” government. Besides the focus on the political In contrast, global bond demand rose it says. “With the continued fear that a scenario, the Covid-19 pandemic fear firmly in view of the risk-off environment It is clear that the country needs to Covid-19 pandemic would disrupt global has also raised eyebrows as to whether with the UST10-year nosediving by resolve the political uncertainties fast as supply chains, global growth as well the stimulus package supposed to 10.08bps to 1.37%. Hence, the domestic the new government needs to focus its as trade, this will further rattle global be unveiled on Feb 27 to address the political scenario outweighed the fear of attention on dealing with external factors markets including our market,” it says. ongoing impact from the virus outbreak coronavirus resulting in higher yields. that are weighing on the economy and af- The research house says the ongoing will materialise. AmBank Research expects the local fecting the livelihood of the people. March 2020 | FocusM | 09 Forging partnership with SMEs to counter underinsurance risk Allianz Malaysia is offering a no-obligation one-year premium exemption (except for fire insurance) for business start-ups registered in 2019 and 2020 to drive awareness level

POOR risk management understand- Three types of existing commercial ing and assumption of prohibitive insurance offerings by Allianz Malaysia cost are two primary reasons why many small and medium enterprises ASSETS (SMEs) are shying away or not getting a) Fire & Property adequate insurance coverage to protect 1. Fire Insurance their businesses. 2. Fire Consequential Loss Insurance In fact, awareness is lacking on 3. Allianz Property All Risks the role of insurance in mitigating 4. All Risks Insurance threats by means of indemnifying 5. Burglary Insurance entrepreneurs against financial or 6. Glass Insurance asset losses as well as to ensure 7. Money Insurance business sustainability. 8. Fidelity Guarantee SMEs generally can ill-afford 9. Smart Retail Shield Package Insurance massive losses caused by business 10. Allianz Hotel Shield Package Insurance interruptions or closures, loss of 11. Smart Shield Package Insurance income, supply-chain delays or damage (Apartment JMB Insurance) to neighbouring properties. 12. Hole-In-One Insurance Moreover, only insurance is able 13. Allianz Misc Combo to provide the much-needed financial b) Marine support for complex business risk 1. Marine Cargo Insurance exposure such as reputational risk, 2. Marine Hull Insurance trade secret risk, political or regulatory 3. Trade Credit Insurance risk. To convey the message that ade- c) Engineering & Machines quate insurance protection is vital for 1. Contractors’ All Risks Insurance a business to thrive, Allianz Malaysia Habbig: Customisation will reduce premium on unnecessary coverage 2. Erection All Risks Insurance Berhad (Allianz Malaysia) is gearing 3. Boiler & Pressure Vessel Insurance up to unveil its SME-friendly insurance 4. Machinery & Equipment Insurance package that encompasses 27 business vendors fail to deliver supplies to wipe out a company’s earnings or 5. Machinery Breakdown Insurance types in April. the store in a timely manner) is even personal savings of the business 6. Civil Engineering Completed Aside from emphasising the afforda- more suited for the F&B and grocery proprietor,” reveals Habbig. Risks Insurance bility aspect, Allianz Malaysia will businesses. “In this regard, entrepreneurs must 7. Contractors’ Plant & Machinery Insurance embark on a partnership approach A trade credit coverage which view insurance as an essential safety 8. Deterioration of Stock in to clarify misconception among the provides protection against losses net to safeguard their businesses from Cold Storage Insurance SME fraternity that it costs a bomb due to credit risks such as customer’s all forms of calamities.” 9. Electronic Shield Insurance to get their businesses insured. insolvency, bankruptcy and failure 10. Machinery Breakdown Loss of By so doing, Allianz Malaysia to meet agreed payment terms and Face-to-face selling Profit Insurance through its general insurance arm, conditions may appeal to boutique Currently, the commercial insurance 11. Mobile Plant & Equipment Insurance Allianz General Insurance Company operators and other fashion-oriented segment (which encompasses SMEs 12. Storage Tank Insurance (Malaysia) Berhad (Allianz General), retailers. to large industrial risks) made up ap- aspires to improve the current estimat- “The rationale behind our custo- proximately 25% of Allianz Malaysia’s EMPLOYEES ed awareness level of just 51% among misation exercise is to bring down annual premium. a) Workers & Employees the 900,000 SMEs in the country on the premium,” explains Habbig. “We Realising that entrepreneurs are 1. Foreign Workers’ Insurance the need to insure their businesses. fully understand financial constraints not insurance experts – and most 2. Workmen’s Compensation “The beauty of our SME-friendly encountered by SMES, i.e. the need importantly to ensure both parties are 3. Allianz Care SMI (Company) package is that we shall treat every to reduce overheads and expenses.” on the same page with regard to the 4. Allianz SME Choice Plus SME as our business partner as op- In fact, it is not expensive for SMEs product pricing or accorded coverage 5. Group Hospitalisation and Surgical posed to the typical one-off customer “to invest” in insurance. As an illus- – the SME-friendly package will only 6. Group Term Life relationship,” Allianz General chief tration, the existing Allianz Malaysia be sold by Allianz Malaysia’s agents 7. Group Outpatient Clinical sales officer Horst Habbig said. Smart Retail Shield Package which on a “face-to-face” basis, according b) Group Personal Accident Types “Regardless of the reality that 70% comes with a six-in-one insurance to Habbig. 1. Group Personal Accident of SMEs close down within three years plan that covers risks of fire (and other “This is despite the online channel 2. Drive Smart Shield of operation, we will do everything perils), burglary, money, (shattered) being the much preferred avenue to 3. Special Occupation Group within our capacity to grow with glass, public liability and employer’s sell/market insurance products today,” Personal Accident them while building customer loyalty liability can be purchased in the he justifies. “It also makes better sense 4. Timber Workers’ Group Personal Accident so that they continue to do business RM1,000-1,5000 price range (subject in that our trained agents are able 5. Fishermen’s Group Personal Accident with us.” to the sum insured which takes into to make the right on-site evaluation account company size, nature of thus preventing any confusion or BUSINESS RISK Tailor-made protection business and number of employees, misunderstanding during the claim a) Liability In line with perceiving SMEs as its among others) filing stage.” 1. Public Liability business partners, the SME-friendly To incentivise SMEs to get them- Understanding the plight of SMEs, 2. Product Liability package by Allianz Malaysia will first selves protected, Allianz Malaysia Allianz Malaysia also pledges to ad- 3. Professional Indemnity Insurance dispel generic features by customising is offering a no-obligation one-year vance an interim payment within 4. Professional Indemnity Excess Layer coverage according to the nature of premium exemption (except for fire seven days upon the filing of claims for Lawyers business. insurance) to all business start-ups although the industry norm can be 5. Comprehensive General Liability Insurance “Certain types of coverage may suit which are registered in 2019 and 2020. anything from a fortnight to one 6. Clinical Trial Insurance certain businesses but not compatible On top of that, the leading insurer month or more. 7. Employer’s Liability Insurance to other businesses, thus incurring also allows “the partners” to tap its “This is very much aligned to our 8. Directors & Officers Liability Insurance wastage and unnecessary cost,” Habbig existing communication channel – both viewing SMEs who signed up with us 9. SME Directors & Officers Liability Insurance points out. He offers three examples: its portal and Facebook site – to market as our ‘partners’ instead of merely 10. Errors & Omissions for Coverage on the malfunctioning of their products or services. customers in the traditional sense,” Management Corporation “At the end of the day, managing enthuses Habbig. “This will come in kitchen equipment or public liability b) Bond (in the event of food poisoning) is and minimising business risk is handy for the SME owner to address 1. Tender Bond more relevant to the food & beverage essential for business survival given the woes he/she is facing, i.e. to repair 2. Performance Bond (F&B) industry. one unforeseeable incident (be it fire, damages or to compensate a third 3. Advance Payment Bond Supplier protection (in the event burglary or legal suit) is enough to party.” 10 mainstream FocusM | March 2020 March 2020 | FocusM PB

by Pharmaniaga expects to Sharina Ahmad

harmaniaga Bhd expects to return to the black in return to the black in FY20 the current financial year ending Dec 31, 2020 given that there Pwill be no more amortisation of Pharmaniaga Bhd its Pharmacy Information System (PhIS) or worldwide product HEALTHCARE recall. KEY BOARD MEMBERS AND Managing director Datuk MANAGEMENT Farshila Emran said the compa- Datuk Hafsah Hashim ny’s profitability was affected by (chairman) the recognition of the remaining Datuk Farshila Emran RM247 mil unamortised PhIS, a (managing director) system developed and managed for the Ministry of Health (MoH) as part of the contractual obligations MAJOR SHAREHOLDERS under the concession agreement Boustead Holdings Bhd which concluded last November. 56% “The amount refers to Armed Forces Fund Board (LTAT) expenses incurred for the provision and supply of certain 11.2% hardware and software for the Farshila says the company has PhIS,” she said at a media briefing got the PhIS amortisation out of MARKET CAP (Feb 24) on Feb 21. the way in the fourth quarter RM478.05m Farshila said following the new Share price (Feb 24) contract arrangement with MoH, the remaining unamortised PhIS Pharmaniaga’s contracts with the government were renewed last year outlook is positive for Pharma- RM1.88 costs were fully recognised in the niaga,” she said. 52-week high (June 24, 2019) fourth quarter. Farshila said the new con- RM2.88 “In addition, there was also tracts from the government are 52-week low (Feb 24) provision for stock write-off on set to be key contributors to the RM1.80 the voluntary Ranitidine product company’s earnings. recall of RM9 mil,” she said. “In tandem, we are strongly FINANCIAL RESULTS In October last year, MoH focused on our continuous drive (4Q ended Dec 31, 2019) recalled 10 drugs containing the to enhance operational efficien- Revenue active ingredient ranitidine that is cies and build up our research used to treat stomach ulcer as they and development capabilities to RM715.7m Net loss were found to contain the impurity tap into new opportunities in the N-Nitrosodimethylamine (NDMA) pharmaceutical industry.” RM178.59m above the permitted level. She adds this will enable Medications containing ran- the company to grow its various One-year price chart itidine are used to treat heartburn business streams as well as its RM

and stomach ulcer by reducing overseas operations, led by its 3 acid production in the stomach. Indonesia division. However, the Indonesia 2.8 Expected to post strong business recorded a deficit of 2.6 sales growth RM1.8 mil, primarily attributable Feb 24 The company plunged into the to higher finance costs. The RM1.88 Pharmaniaga supplies medicines and medical equipment to the 2.4 red with a net loss of RM178.7 Ministry of Health’s hospitals and clinics company has taken the necessary mil in the fourth quarter of FY19 measures to strengthen the 2.2 from a net profit of RM4.4 mil a management of debt payments 2 year ago while revenue rose 20% fourth quarter of 2019,” MIDF said was a challenging quarter as to reduce finance costs. to RM715.7 mil from RM596.6 mil in a note. the company was significantly Pharmaniaga is looking at 1.8 mainly due to improved demand It expects strong sales growth impacted by the recognition of venturing into new markets such 24/2/19 24/2/20 from concession, non-concession from concession and non-conces- the remaining unamortised PhIS. as Europe and other Southeast SOURCE: BLOOMBERG and its Indonesian operations. sion businesses to contribute to Mohamed lqbal Abdul Asian countries. For the full year, Pharmaniaga an improvement in Pharmaniaga’s Rahman, who is the chief operat- According to a company exec- posted a net loss of RM149.2 mil earnings and cash position going ing officer, will assume the role of utive, Pharmaniaga has registered more private hospitals are taking compared with a net profit of forward. It revised the stock’s acting MD of Pharmaniaga, until two products In Portugal. It is also interest.” RM42.5 mil in FY18 despite record- target price (TP) to RM2.35 from such a time an MD is appointed. in the process of registering them Pharmaniaga has 90 vendors ing a higher revenue of RM2.8 bil RM2.27. Datuk Dr Hafsah Hashim took in other countries. under the MoH’s approved versus RM2.4 bil. However, CGS-CIMB Research over as board chairman on July The registration process will product purchase list (APPL), MIDF Research has upgraded has maintained its hold call and 17, 2019. She is a former CEO of take about two years before the supplying drugs and medical Pharmaniaga to a buy as it expects RM2.17 TP on Pharmaniaga, SME Corp Malaysia. Datuk Koo products can be marketed. devices to 1,600 hospitals and the pharmaceutical company to pending the outcome of an analyst Hock Fee, Datuk Mohd Zahir clinics throughout the country. post strong sales growth which briefing with the company. Zahur Hussain, Brig Gen Datuk Reducing dependence Under the concession, the could contribute to improved Hong Leong Investment Bank Mohd Shahrom Mohamad and on govt concessions company purchases, stores, earnings and cash position going analyst Farah Diyana Kamaludin Dr Salmah Bahri were appointed Nevertheless, the pharma- supplies and distributes at least forward. noted that Pharmaniaga’s FY19 as directors. ceutical company is also 700 pharmaceutical products. In November last year, the earnings before interest, tax, “Nevertheless, it is impera- continuously working on lowering The company was awarded the government extended Pharma- depreciation and amortisation tive to note that the company’s its dependency on its government concession in 1994. niaga’s services for the provision (Ebitda) fell 14.9% year-on-year financial performance will not be concession business, for which the It is 56.09%-owned by of medicines and medical supplies due to lower contributions from burdened by the PhIS amortisa- company has been known over the Boustead Holdings Bhd, which to MoH until the end of 2021. its manufacturing segment as tion moving forward,” Farshila years. is the flagship listed vehicle It also renewed the company’s a result of lower take-up by the said. “We are working on lowering of Lembaga Tabung Angkatan contract to provide logistics and government. She stated that the company the dependency. Now it’s Tentera or LTAT. LTAT holds distribution services to over 148 “Coupled with the PhIS am- has continued to register solid about 50:50 for concession and another 11.23% directly in Phar- government hospitals and 1,700 ortisation charge, this resulted in growth in revenue and this is non-concession, that is a drop maniaga. clinics nationwide for five years a core loss of RM123.9 mil (FY18: indeed encouraging and bodes from 70% concession in about In 2011, LTAT via Boustead until the end of 2024. core profit after tax and minority well for its prospects. 2011. The government is still Holdings bought a majority stake “Nonetheless, with the new interests of RM59.5 mil),” she “In the short-term, the offering contracts to us and we in Pharmaniaga from UEM Group contract arrangement, the group said, while maintaining her hold ongoing coronavirus outbreak are more than pleased with this,” Bhd, a Khazanah Nasional Bhd was significantly impacted by the call and a TP of RM2.08 on the remains at the forefront as the Farshila said. subsidiary. Since then, Pharma- recognition of the remaining un- counter. healthcare sector strives to “But we are looking to increase niaga had noticeably increased amortised pharmacy information Farshila, who will leave the contain the disease. our logistics and distribution its dividend payout ratio despite system of RM247 mil which caused company when her contract “From a long-term perspec- business in the private healthcare fluctuations in its annual net the group to report a loss in the expires at end-March, said it tive, we are confident that the space and I’m happy to say that profit. March 2020 | FocusM | 11 12 mainstream FocusM | March 2020 March 2020 | FocusM PB Nathan’s related party transaction in Eversendai raises questions

• Group MD AK Eversendai Corp Nathan is proposing Bhd to inject his private vehicle Vahana BUILDING SUB-CONTRACTOR Offshore into KEY BOARD MEMBERS AND Eversendai MANAGEMENT Tan Sri AK Nathan (chairman, group MD) Narla Srinivasa Rao (executive director) Narish Nathan (executive director) by Ranjit Singh MAJOR SHAREHOLDERS Vahana Holdings Sdn Bhd he proposal by Tan 44.22% Sri AK Nathan, group Urusharta Jamaah Sdn Bhd managing director of Eversendai Corp Bhd, 5.16% to inject his 100% pri- MARKET CAP (Feb 24) Tvately held Vahana Offshore (M) Bhd into the company has raised RM 277.3m some concerns. Share price (Feb 24) One of the main concerns is 35.5 sen whether the minority sharehold- 52-week high (March 6 , 2019) ers of Eversendai will be getting a

fair deal as this is a related party 62 sen 52-week low (Jan 31) transaction between Nathan and Eversendai. Another bone Eversendai has received the letter of offer with regard to the proposed asset injection by its group MD 32 sen of contention is the value of the Redeemable Convertible Prefer- FINANCIAL RESULTS ence Shares (RCPS) to be issued over holders or ordinary shares. that its subsidiary in India had one of the world’s fastest-grow- (3Q ended Sept 30, 2019) to conclude the deal. They can be converted to secured RM330 mil worth of ing economies. Revenue Nathan points out in a media ordinary shares at a future date. projects. Incorporating these RM432.2m briefing that Vahana Offshore Nathan currently owns new contracts would bring its Poorer 9MFY19 results Net profit will be able to provide stable around 71% of Eversendai. One total contract wins to RM653 mil For the nine months ended Sept recurring income to Eversendai of the reasons the deal was to-date for the year 2020 and 30, 2019, Eversendai’s net profit RM13.1m but based on the latest avail- proposed was to enable Eversen- increase its order book to some fell to RM20.9 mil from RM50.5 able filings on the Companies dai to diversify its existing RM2.2 bil. mil a year ago while revenue Commission of Malaysia, business to avail itself of stable The project was for the eased to RM1.19 bil from RM1.21 One-year price chart Vahana Offshore posted a net recurring income. development of an IT Park in bil. RM loss of RM89,301 on the back Vahana Offshore is principally Tharamani, Chennai by DLF Info Its lower revenue was due 0.65 of RM204,000 revenue in the involved in owning and operating Park Developers (Chennai) Ltd. to its mechanical fabrication, 0.6 financial year ended Dec 31, 2015. a liftboat business which is In a statement to Bursa Malaysia, installation & modularisation On Feb 10, Eversendai said also known as a self-propelled the company said the project win segment which saw revenue slide 0.55 Feb 24 it has received a letter of offer jack-up barge. The liftboat is was a major achievement for by 88.5% and losses incurred due 0.5 35.5 sen from Vahana Holdings Bhd for used for maintenance, workover, Eversendai and would further ac- to very low utilisation of the Ras the proposed merger exercise. well service activities, hook-up, celerate its growth momentum. Al Khaimah fabrication yard 0.45 Vahana Offshore owns Ary- commissioning and decommis- The project win would also facility caused by the delay in the 0.4 an-Inspire Pte Ltd, Arjun-Inspire sioning of offshore platforms in improve the company’s chances timing of new project awards by 0.35 Pte Ltd and Vahana Marine the oil and gas industry. It is the to secure additional phases of external parties. Solutions DMCC. first and only Malaysian company future development in the same This resulted in the segment 0.3 24/2/19 24/2/20 The indicative purchase to do this business. project. recording a loss before tax of price will be finalised following The DLF Downtown IT Park RM32.4 mil for the period under SOURCE: BLOOMBERG negotiations between the parties Liftboat contracts project consists of two towers of a review. The group’s core business subject to the completion of due Vahana Offshore states that the commercial building constructed which is the structural steel- diligence. deal would allow Eversendai to using composite structures in works segment had performed Nathan says the transaction benefit from the liftboat business fast-track mode and is expected better, registering a revenue of for the existing projects in will be done via the issuance of which has secured long-term to be completed in a record time RM1.16 bil which is 18.8% higher Malaysia. RCPS to be converted at a later contracts with Saudi Aramco. of 16 months. than for the same period of the Revenue contributed by its date. The merger is expected to Vahana Offshore currently preceding year. India operations was RM162.3 be completed in 30 days. owns a liftboat known as Vahana Introducing innovation The Middle East continued mil, or 13.9% of the group’s struc- Aryan which was constructed at to India construction to contribute the largest share tural steelworks revenue and Lack of info on value of a cost of around US$100 mil. It is industry of the group’s structural steel profit before tax stood at RM8.7 RCPS currently constructing another Eversendai said the project will works revenue at RM719.0 mil, mil largely due to the higher The Minority Shareholders Watch liftboat known as Vahana Arjun set a new benchmark in the or 61.7%, and profit before tax construction progress of existing Group (MSWG) CEO Devaneson which is expected to be com- Indian construction industry. For of RM39.7 mil in the current projects and commencement of Evanson tells FocusM that it pleted by 2021. the record, this is the second job financial period due to the higher construction for new projects would be difficult to assess the The due diligence exercise awarded by DLF to Eversendai. construction progress achieved secured in FY19. impact of the deal on minorities on the deal would take around The first is for a 1.6 million sq for existing projects and com- Its operations in the United as there was a lack of information one month. It has to obtain the ft commercial building project mencement of the construction Kingdom and others registered on the value of the RCPS and approval of shareholders before in Chennai which is nearing for new projects secured in FY19. a loss before tax of RM14.6 mil the potential income of Vahana the deal sees a closure. completion. The operations in Southeast mainly due to finance costs for Offshore from its future projects. The deal should be carefully Eversendai has delivered Asia contributed RM283.7 mil, or the nine-month period. “However, one thing to note is scrutinised to ensure that projects for developers and 24.3%, to the group’s structural TA Research has a sell call on that if the promoter (Nathan) is so minority shareholders will not clients in India for the last 10 steelworks revenue and profit the stock with a target price of confident of the future business lose out. years. before tax stood at RM24.4 mil for 25 sen. Among other things, the of Vahana, he would have opted Since the announcement of The company has introduced the nine-month period, mainly research firm was concerned for ordinary shares instead of the the proposal, Eversendai has to India innovative construction due to the commencement of the with the high gearing of the RCPS issue,” he says. obtained a few projects that have methodologies such as composite construction for a new project company of around 1.5x and its RCPS gives the owners pref- had a positive impact on its share structures for timely project in Singapore in FY19 and higher failure to meet some of its debt erence on dividend payments price.On Feb 17, it announced completion. India continues to be construction progress achieved covenants. March 2020 | FocusM | 13 14 mainstream FocusM | March 2020 March 2020 | FocusM PB TA Enterprise’s offer for TA Global deemed too low

TA Global Bhd

PROPERTY by Xavier Kong KEY BOARD MEMBERS AND MANAGEMENT he latest privatisation Datuk Tiah Thee Kian (executive chairman) exercise of TA Global Datuk Seri Mohamed Abid Bhd by Datuk Tony (executive director) Tiah Thee Kian marks his second attempt to MAJOR SHAREHOLDERS Ttake one of his listed companies TA Enterprise Bhd private. Will minority sharehold- ers bite this time following the 60.17% Datuk Tiah Thee Kian failed privatisation attempt of Tiah’s flagship company TA En- 10.13% Tiah Joo Kim terprise in 2018? Tiah had offered 66 sen each under a takeover offer 5% of TA Enterprise but minority MARKET CAP (Feb 25) shareholders rejected it. On Feb 12, TA Enterprise RM1.41b said it was making a conditional Share price (Feb 25) voluntary offer to buy out 2.12 26.5 sen billion shares or a 39.83% stake in 52-week high (Apr 29, 2019) TA Global that it does not own for

28 sen each. 28 sen 52-week low (Sept 26, 2019) Under the offer, TA Global shareholders can opt to take 22.5 sen cash at 28 sen each or a share swap based on the exchange FINANCIAL RESULTS ratio of 0.4211 new shares in TA (Third Quarter ended Tiah and his wife Alicia. The Tiah family owns over 15% of TA Global Enterprise to be issued at 66.5 sen Sept 30, 2019) each for every TA Global share Revenue surrendered. RM203.59m TA Global. If this succeeds or and this was rejected by share- The rules and regulations It should be pointed out that Net Profit is even partly successful, then holders,” said Evanson. are met, but to what end? the shareholding of TA Global is there will be a second offer for On the surface TA Enterprise Still, the offers are all done such that, of the 39.83%, the Tiah RM6.38m TA Enterprise. The offer price minority shareholders would above board, and follow the family owns over 15%, with 10.13% previously was 66 sen, and now see benefits, as Ng noted that prevailing rules, codes, and held by Tiah himself, and 5% by One-year price chart there is an offer to exchange with the company would see a lower listing requirements. However, Tiah Joo Kim. This does not take RM the shares of TA Enterprise valued gearing and better balance Evanson calls for regulators to into account the mix of shares at 66.5 sen. Tiah plans to use this sheet. consider adopting the practice 0.28 held by other members of the timing when the property market Evanson pointed out that TA in Singapore where offers must Tiah family. 0.27 is not in a good condition as an Global would be consolidated be both fair and reasonable This means that the amount excuse to privatise and increase as a wholly-owned subsidiary before the offer can even be of shares owned by the general 0.26 his controlling stake,” said Ng. of TA Enterprise, leading to TA made.

public, inclusive of institutions, 0.25 According to Evanson, Tiah Enterprise’s earnings per share According to the current comes down to about 23%, and also has a direct interest of 41.92% increasing from 4.49 sen to 5.36 regulations, an offer that is not this leads to a degree of concern 0.24 in TA Enterprise. sen. fair but reasonable can come that this is a rather unfair deal for “To finance the cash offer “TA Enterprise’s non-inter- with advice to accept by the inde- 0.23 Feb 25 minority shareholders. 26.5 sen of 28 sen per share by TA En- ested shareholders, who may not pendent advisers, and is open for William Ng, chief investment/ 0.22 terprise, Tiah will subscribe for be TA Global’s non-interested shareholder acceptance, though research officer at Leinves Plt, told 26/2/19 25/2/20 up to 550.54 million shares in TA shareholders, may view the this would also lead to minority FocusM that the deal is unfair to Enterprise at 66.5 sen per share. privatisation of TA Global at 28 shareholders again getting the SOURCE: BLOOMBERG shareholders, stating that a share This will provide the cash flow sen a share as a good deal to short end of the stick. swap or the cash consideration for TA Enterprise to make the TA Enterprise and beneficial to “MSWG fears that there will cannot be considered good deals, cash offer for TA Global. them,” noted Evanson. be a trend whereby property be it from the angle of TA Global’s of 28 sen is a 74.57% discount to “In turn, Tiah will gain more However, TA Enterprise companies, which typically have net tangible assets, or from the TA Global’s RNAV of RM1.10 per control over TA Enterprise after shareholders would be affected low price-to-book values, will be company’s revised net asset value share which includes the revalu- he subscribes for the shares in as well, considering the fact that privatised at very low offer prices (RNAV). ation surpluses. TA Enterprise by taking up the there will be dilution of their on the premise that it is higher “This is an offer that looks “It must be remembered that share exchange option, under shares in TA Enterprise with the than the share price and thus good from a market price per- investors invest in TA Global for the voluntary takeover offer, share issue of Tiah financing the offers an option for the share- spective, but is extremely bad in the long-term as they understand as a result of his 10.13% direct TA Global offer. holders to exit,” said Evanson, real value,” said Ng, adding that he that the property sector is a interest in TA Global,” said This would mean that, after adding that the offer prices are would reject the offer. cyclical industry. Even if we offer Evanson. the completion of the proposed grossly below the revised net The Minority Shareholders a fire-sale discount of 25% for He also explained that the voluntary takeover offer and asset value and, most of the Watch Group (MSWG) CEO Dev- the RNAV of RM1.10, the fire-sale current offer for TA Global, the subscription exercises, TA time, also below the revised share anesan Evanson concurs. value is 82.5 sen – well above the and how TA Enterprise is being Enterprise’s net assets per share price based on the independent “TA Enterprise was doing offer price of 28 sen by 194%,” financed by Tiah through his will decrease to RM1.17 under adviser’s valuation. about 60 sen per share at last added Evanson. subscription of shares in TA En- the “minimum scenario” from He called for the independent check. The share swap is at a ratio terprise for cash, may result in a RM1.44 per share as of Dec 31, directors on the board to fulfil of 0.4211 shares in TA Enterprise An offer for TA Enterprise mandatory general offer for TA 2018, according to Evanson. their fiduciary duty by asking to be issued at 66.5 sen each for could be on the cards Enterprise as a consequence of “The situation then is similar shareholders to reject offers that every TA Global share surren- Evanson and Ng agree that the the TA Global offer and outcome. to the offer for TA Global, an are not fair to all shareholders, dered. Based on these numbers, voluntary takeover offer is a first “If the mandatory general offer of 28 sen for net assets including the minority share- the cash deal for TA Global seems step in Tiah’s plans to gain a larger offer is triggered at the TA of 60.3 sen per share, which is holders, who he notes are often more attractive. But the point here stake in both TA Global and TA Enterprise level, it would be at offering a price well below the vulnerable due to not having a is not about which is the preferred Enterprise, with an offer for TA 66.5 sen; which would be the net assets. sizeable stake of shares. option – it is about both options Enterprise on the cards should highest share price paid by Tiah “So right now, we should “Nevertheless, all is not lost being unfair to disinterested the offer for TA Global be even under his financing scheme to focus on the imminent offer for minority shareholders as shareholders,” Evanson told partially successful. TA Enterprise. Incidentally, the price of 28 sen for TA Global they can always band together FocusM. “The first offer was for TA previous offer for TA Enterprise shares; which substantially un- to defeat the privatisation deal,” He noted that the offer price Enterprise, now this offer is for was in 2018 at 66 sen per share dervalues TA Global,” he added. added Evanson. March 2020 | FocusM mainstream 15 Up to RM200 mil more for Guan Eng’s ‘iconic’ pylons

the Penang Bridge to meet future power supply demands. He was quoted as saying that the state by was still in discussions with TNB as it needs Sharina Ahmad approval from the Penang Island City Council and Seberang Perai City Council he construction of 27 “iconic” to proceed. pylons suggested by then Penang The new power supply would also help chief minister to with the state’s reclamation works and other bring power from the mainland infrastructure projects, the TNB report said. to Penang will cost an additional There are currently two submarine TRM100-200 mil to take the price up to power cables between the island and RM500-600 mil. The cost is to be borne by Seberang Perai. The island’s gas-based Tenaga Nasional Bhd, sources told FocusM. 300MW power plant at Bukit Dumbar is They said the project was discussed expected to be decommissioned in 2024, before the May 2018 general election. Ap- The iconic pylons (left) and the normal structures according to a report. parently Lim, now Finance Minister, had suggested a special design for the pylons to make them look good because they would run parallel to the (first) Penang Bridge. The project remained in abeyance but was revived after GE14. Design drawings for the pylons by ar- chitects TR Hamzah & Yeang Sdn Bhd and tender documents by TNB seen by FocusM refer to the pylons as the Iconic Towers. When TNB last called for tenders, it said “these iconic towers have a particular shape and form developed for the project that shall not be modified in the contractor’s design”. The TNB tender document said the intent of the pylon project is to create an iconic feature that portrays the identity of TNB and Penang and to display the progres- sive development capabilities of the region. “The concept of the iconic towers is inspired by the sectional portion of an areca nut seedling (buah pokok pinang), a reference to the state of Penang. More than a reference to the seed, it is to signify growth and development while communicating the importance of its origin,” it said. “As the structures are conceptualised from a natural element, thus the overall look is to be smooth, slender and elegant to communicate the idea of natural​​ growth. This is particularly important as the towers will be illuminated with aesthetic lighting at night.” The sources said a project with normal pylons, which may be as much as RM200 mil cheaper, would adequately carry power across to the mainland without any problem and there was no need to locate them next to the Penang Bridge. For the price of the iconic towers, submarine cables could be built but these do require more mainte- nance, they said. “For RM200 mil, TNB could have built many transmission lines all over Malaysia,” one of the sources said. It is understood that bidders for the project are Rohas Tecnic Bhd together with Muhibbah Engineering (M) Bhd, Aus- tralia-based McConnell Dowell Corp Ltd, Larsen & Toubro Ltd, Ingress Corp Bhd together with China Harbour Engineering Co Ltd, and MMC Consortium Ltd together with MRCB’s subsidiary Transmission Technology Sdn Bhd (TTSB). Project consultant for the pylon project is CH2M Services Sdn Bhd which has also been appointed as the technical adviser for the Kuala Lumpur-Singapore High-Speed Rail (HSR) project by MyHSR Corp Sdn Bhd. At the time of writing, TNB had not responded to questions from FocusM while Lim’s press secretary did not respond to phone calls and messages. Last year, Penang Chief Minister said the state government had given “conceptual” approval to TNB to build the 100-metre-high pylons next to 16 mainstream FocusM | March 2020 March 2020 | FocusM PB The political dimensions of AirAsia

by Emmanuel Samarathisa

n May 7, 2018, then prime minister Datuk Seri Najib Razak flew from Kota Kinabalu to Kuala OLumpur on an AirAsia A330-300 jet. This was no ordinary AirAsia aircraft. This had a special livery featuring Barisan Nasional’s (BN) slogan “Hebatkan Negaraku” (Make my country greater); the plane’s cabin crew also donned blue uniforms to match the BN’s iconic colours. The move garnered public outcry. AirAsia founder Tan Sri Tony Fernandes was slammed on social media. Critics charged that he sold out as this happened just two days before the 14th general election on May 9, 2018. And, to many of his fans, Fer- nandes caving in to pressure was confounding as a month earlier Two days before GE14, Fernandes had a A330-300 jet painted in Barisan Nasional blue carrying Najib from Kota Kinabalu to Kuala Lumpur he had announced through a series of tweets that the low-cost carrier was going to put any Meranun, Datuk Aziz Bakar and is in Wisma Tune, one of AirAsia’s unsold seats on May 8 and 9 on Datuk Pahamin Rejab the chance buildings, in Bukit Damansara, low fares, in conjunction with the to start AirAsia. Kuala Lumpur. national polls. “To hear him say such great And who can forget that video “While @AirAsia should things about us, I’ve to say that on Feb 1 last year of Transport not be the only airline doing it’s one of my and AirAsia staff’s Minister boarding this we will help. We will freeze proudest days,” he said in a June a Sibu-bound AirAsia plane whatever seats we have not sold 18, 2011, interview with The Star. to give passengers a “special for [the] day before and, say, Pahamin was a civil servant surprise” (to quote the headline after, and put those seats on low under the Mahathir government of the video) prior to takeoff. fares,” Fernandes tweeted on his before joining AirAsia in 2001 and “Ladies and gentlemen, boys now-defunct Twitter handle. has been seen as a crucial player and girls. This is Flight AK9838. A few days after GE14, which in AirAsia’s success. Welcome on board. This flight saw the defeat of Najib and BN, By Nov 22, 2004, the group is bound for Sibu. While we are Fernandes took to his Facebook listed on Bursa Malaysia with a ready for departure, please get page and launched a melancholic market capitalisation of roughly your seatbelts fastened, sit back video. There he detailed how he RM1 bil. And, by 2006, AirAsia and relax. So we hope you have an was under intense pressure as Fernandes and Najib in AirAsia’s ‘blue’ plane would morph into a fierce com- enjoyable flight. Happy Chinese he had refused to sack Tan Sri petitor to Malaysia Airlines. Year, everyone. Safe journey Rafidah Aziz, the chairman of Indeed, in March that year, home to Sibu.” AirAsia X Bhd. views. I look forward to a fantas- So, the two met in October there was a statement from the How will Fernandes and tic new Malaysia. A Malaysia that 2001. Fernandes told Mahathir Prime Minister’s Department Kamarudin navigate this latest ‘I will forever regret it’ gives everyone a chance.” that a discount carrier could be (PMD) that both Malaysia Airlines scandal with Airbus SE is worth In the run-up to the general The story of AirAsia has two a game-changer, during a time and AirAsia would operate watching. Corporate watchers election, Rafidah had ramped up prongs: entrepreneurial smarts when the aviation industry was “domestic trunk routes” while have always hailed the duo’s her criticism of BN. Fernandes and political manoeuverings. reeling from the impact of the only AirAsia would operate the public relations savvy, having also, in his own words, came Both are inseparable due to Sept 11 terrorist attacks. non-trunk routes. survived three prime ministers under pressure for offering the tight nexus of business and Two months later, on Dec 8, and all the political developments extra flights for cheap during the politics in Malaysia. In fact, in 2001, Fernandes and Kamarudin Close ties with newish attached to each of the country’s election period. the case of AirAsia, a heady mix took over AirAsia for a mere RM1 powerbrokers leaders, including Najib. “So, foolishly, I thought by of business and politics go way from Hicom. What was strange about the state- But Airbus’ bribery admission doing the video, which I felt was back to the time when Fernandes And Fernandes would once ment was that Malaysia Airlines seems to be a sticky situation for fairly neutral and factual and the and his business partner Datuk more rely on Mahathir’s help. would be closed off from non- Fernandes and Kamarudin. The plane from Kota Kinabalu would Kamarudin Meranun wanted According to the Bloomberg trunk routes – against Malaysia European airframer said it paid appease the government and to acquire AirAsia from Hicom article, in 2003, Fernandes Airlines request. Secondly, the directors/employees of AirAsia protect the jobs of our Allstars Holdings Bhd (now DRB-Hicom successively lobbied Mahathir PMD suggested that Malaysia group some US$50 mil (RM204 (AirAsia workers) and more Bhd). to raise the idea with leaders of Airlines and AirAsia cooperate to mil) in the form of a sponsorship importantly, the very essence of According to a July 12, 2004, neighbouring Thailand, Indone- decide what were trunk routes or for a sports team jointly owned allowing more than 80 million Bloomberg Businessweek sia and Singapore. otherwise by March 27, 2006. Tun by two unnamed AirAsia execu- people to fly every year with low article, when Fernandes wanted The result was the granting Abdullah Badawi was then prime tives. Airbus allegedly made the fares,” Fernandes said in his to embark on his plan to launch of landing rights to AirAsia and minister. payment to secure an order for video. Malaysia’s first discount airline, other discount carriers. Prior to Fast forward to post-blue 180 aircraft. “And under the intense he failed to obtain a licence. that, observers say that countries plane and GE14, Fernandes seems Fernandes and Kamarudin pressure, I buckled. It wasn’t Then he chanced upon bankrupt in the region never had an open- to maintain a close relationship have been implicated by way of right, I will forever regret it. But AirAsia, with its two Boeing jets skies agreement. with the newish powerbrokers their ownership of the now-de- it was a decision made at the spur and US$11 mil (then US$40 mil) in Indeed, in a 2011 interview, in Putrajaya. He is the director funct Caterham F1 Team. Both of the moment to protect that debt, which could be bought from Fernandes credited Mahathir for of Emir Research, the think tank men have stepped down from baby that has given so much to the government. having a pivotal role in AirAsia’s founded by Bersatu supreme their executive posts to make Malaysia and will continue to give All that Fernandes needed success. council member Datuk Rais way for investigations, but they so much to Malaysia. to do was pitch a good story to “Tun Dr Mahathir is the Husin. remain on the board as non-ex- “I apologise once again for Prime Minister Tun Dr Mahathir father of modern Malaysia and According to a company filing, ecutive directors. the pain and the hurt I caused. Mohamad. This was during he has been one of Malaysia’s Fernandes joined Emir Research My views, as I said earlier, are Mahathir’s first stint as the greatest visionary leaders. He in August 2018, a few months after This article first appeared on very much the same as all of your country’s leader (1981-2003). gave me, Datuk Kamarudin GE14. And Emir Research’s office focusmalaysia.my March 2020 | FocusM | 17 18 focuslist Top 25 Richest Women FocusM | March 2020 Slight increase in wealth seen

This corresponds with Press Metal’s from a 52-week high of RM1.92 on June 21, strong performance over the past year. 2019. It closed at RM1.75 on Feb 19. The counter reached a 52-week high of Notably missing on the top 25 list is by RM5.24 on Jan 16, 2020 from a low of MyEG Services Bhd and Excel Force MSC Doreenn Leong RM4.06 on Feb 19 last year. It closed at Bhd executive chairman Datuk Norraesah RM4.93 on Feb 19. Mohamad, who took the fifth spot in he richest women of corporate Maintaining her No. 3 position is Puan How we 2019. She held an estimated effective Malaysia saw their combined Sri Tan Kim Tee who holds an estimated stake of 10.89% in MyEG and a 6.58% wealth increase by RM240 mil 3.8% stake in Dialog Group Bhd. Her net ranked them stake in Excel Force which gave her a net or 2.6% to RM9.49 bil as of Feb worth is higher at RM742.9 mil versus worth of RM387.9 mil as at Feb 13, 2019. 6, from RM9.25 bil in 2019. RM643.5 mil last year with no change in However, she ceased to be a substantial TOur Focus List of the 25 richest her shareholding in the company. shareholder of e-government services • This is based on total women is tabulated based on their stakes The oil & gas player’s share price provider, MyEG, on July 25, 2019 when she in Bursa Malaysia listed entities. reached a 52-week high of RM3.57 on July direct and indirect sold 810.11 million shares in the company This rise in the women’s wealth is 16, 2019 versus a low of RM2.95 on May 14, stakes (through or a 0.75% direct stake. more or less in tandem with the increase 2019. It closed at RM3.38 on Feb 19. However, Norraesah still has indirect in the market capitalisation of the com- At fourth position is Puan Sri Tong investment vehicles and stakes in MyEG via Asia Internet Holdings panies they hold stakes in. The market Siew Bee who holds a 3.9% stake in rubber not through spouse/ Sdn Bhd, which has a 21.83% interest in cap of the companies was 2.76% higher at glove manufacturer Top Glove Corp Bhd. MyEG. RM152.37 bil as at Feb 6 versus RM148.28 She moved up two spots from sixth place children) held in a listed Based on the latest available filings on bil in the previous year. last year as her net worth rose to RM557.4 company. the Companies Commission of Malaysia, Of the top 25, six remained at the mil as at Feb 6 from RM350.6 mil last Norraesah holds a 0.51% stake in Asia same spot or ranking this year while eight year with a 2.8% stake. The company saw • They are ranked from Internet while Wong Thean Soon has moved up the rungs. There were four new a good run in its share price following 99.49%. women who made it to the top 25 list. the Covid-19 outbreak which recorded the highest net worth to The same women occupied the top its first case in December last year. The the lowest. The newcomers three spots this time with YTL Corp counter surged to a 52-week high of The debutantes on our top 25 list are Puan Bhd’s Puan Sri Tan Kai Yong taking RM6.10 on Jan 28 from a low of RM4.21 • The cut-off date for Sri Khor Chai Moi, who holds 8.9% in OSK the No. 1 position with a net worth of on Oct 15 last year. tabulating the list was Holdings Bhd and 0.7% in Willowglen RM2.65 bil from an estimated stake of Moving down one spot to fifth place MSC Bhd, Chong Chin Lin and Yong 26.3% in the company. Last year, her net is Puan Sri Tan Kewi Yong who owns Feb 6, 2020. Lai Wah who have a 3.1% and 2.6% stake worth was higher at RM3.1 bil with an an estimated 12% stake in Malton Bhd • We can only calculate respectively in Padini Holdings Bhd. Also estimated stake of 26.5%. The counter and a 9.3% stake in Pavilion Real Estate new on the list is Datuk Seri Loh Cheng reached a 52-week high of RM1.25 on Investment Trust (REIT). Her combined the estimated effective Yean who has a 1.2% stake in Oriental April 15, 2019 before falling to a low of net worth fell to RM515.7 mil from RM529 stakes as we are not Holdings Bhd. 82 sen on Dec 5, 2019. The stock closed mil in 2019. Out of the 25 on the list, 15 hold di- at 97 sen on Feb 19. This corresponds to a drop in share able to calculate the rectorships and/or management roles in Puan Sri Khoo Ee Pheng, who main- prices of both companies over a 52-week shares held through the companies. Notably, Teh Lip Kim, who tained her position at second spot, saw period. Malton shares hit a 52-week high holds a 25.7% stake in Selangor Dredging her net worth increase to RM1.8 bil as at of 69.5 sen on April 25 last year but fell to limited companies or Bhd is the managing director while Kam Feb 6, based on her estimated 8.9% stake a low of 42 sen on Feb 3, 2020. It closed trustees. Foong Keng is the executive chairman in Press Metal Aluminium Holdings Bhd. at 43.5 sen on Feb 19. of New Hoong Fatt Holdings Bhd with a Her net worth was about RM1.4 bil last As for Pavilion REIT, the counter 34.4% stake. year from her 8.64% stake. dropped to a low of RM1.67 on Feb 7, 2020 Continues on page 20 March 2020 | FocusM | 19 20 focuslist Top 25 Richest Women FocusM | March 2020

From page 19 Top 5 Richest Women

Puan Sri Tong Siew Bee, 62 CO-FOUNDER AND NON-EXECUTIVE 4 DIRECTOR, TOP GLOVE CORP BHD Puan Sri Tan Kewi Yong, 64 RM557.4 mil EXECUTIVE DIRECTOR, MALTON BHD AND 5 PAVILION REIT TONG is the wife of Tan Sri Lim Wee Chai, RM515.7 mil who is the executive chairman of Top Glove Corp Bhd. Tong was previously the execu- TAN is involved in the property develop- Puan Sri Tan Kim Tee, 69 tive director of the company before being ment industry in Malaysia via Malton and SHAREHOLDER, DIALOG GROUP BHD redesignated as non-executive director on Pavilion. She is the wife of low-profile 3 RM742.9.5 mil May 8, 2019. tycoon Tan Sri Desmond Lim. Both are She holds a Bachelor of Science in major shareholders of Malton. Tan is TAN is married to Dialog’s executive Computer Science from Universiti Sains actively involved in the businesses and is chairman Tan Sri Ngau Boon Keat Malaysia and Master of Business Adminis- the public face of the companies while her Puan Sri Tan Kai Yong, 88 who is the co-founder and controlling tration from Sul Ross State University, USA. husband stays behind the scene. SHAREHOLDER, YTL CORP BHD shareholder of Dialog. Tan is not directly She has worked in the banking industry in For the first quarter ended Sept 30, 1 RM2.6 bil involved in the company, whose board the information technology field for more 2019, Malton’s net profit fell to RM1.3 mil Ngau helms as executive chairman. than 10 years. from RM4.7 mil a year ago while revenue TAN is the wife of the late Tan Sri Yeoh In the second quarter ended Dec 31, For the first quarter ended Nov 30, 2019, dropped to RM115.9 mil from RM157.9 mil. Tiong Lay, founder and executive chairman 2019, Dialog’s net profit rose to RM158 mil Top Glove registered a higher net profit of Meanwhile, Pavilion REIT posted a of the YTL Group till his demise in October from RM136.8 mil a year ago while revenue RM111.4 mil versus RM110.1 mil a year ago lower net profit of RM74.7 mil from RM100.3 2017. The media-shy matriarch of the Yeoh increased to RM612.3 mil from RM609.6 despite recording a lower revenue of RM1.21 mil a year ago on the back of decreased family is not actively involved in the group mil. bil compared with RM1.26 bil. revenue of RM146 mil versus RM147.1 mil. and does not have a designation, leaving the day-to-day operations to her children and grandchildren instead. Her son, Francis Yeoh and his siblings Top 25 Richest Women

are listed as the 11th richest Malaysians RANK RANK NAME AGE COMPANY NAME DESIGNATION ESTIMATED NET WORTH MARKET based on Forbes 2019 list. Francis is the 2020 2019 EFFECTIVE (RM MIL) CAP FEB 6 eldest of seven and his six siblings are all STAKE (%) (RM MIL) involved in the family business. 1 1 Puan Sri Tan Kai Yong 88 YTL Corp Bhd Shareholder 26.29 2,645.86 10,064.11 Tan is rarely seen at public events, pre- 2 2 Datin Khoo Ee Pheng 49 Press Metal Aluminium Shareholder 8.90 1,826.53 20,513.60 ferring to keep a low profile. Her chosen 3 3 Puan Sri Tan Kim Tee 69 Dialog Group Bhd – 3.83 742.86 19,395.78 career path was education and she was a teacher up till her retirement in 1977. She 4 6 Puan Sri Tong Siew Bee 62 Top Glove Corp Bhd Non-Executive Director 3.87 557.36 14,387.28 & Co-founder is not involved in the daily running of the company. 5 4 Puan Sri Tan Kewi Yong 64 Malton Bhd Executive Director 11.96 515.71 232.38 For the first quarter ended Sept 30, Pavilion REIT Executive Director 9.28 5,257.51 2019, YTL Corp’s net profit plunged to 6 8 Raja Eleena Sultan Azlan Shah 60 Gamuda Bhd Non-Independent Non- 4.7 461.86 9,826.77 RM15.3 mil from RM125.8 mil a year ago Non-Executive Director despite posting a higher revenue of RM5.3 7 7 Datin Seri Tan Bee Geok 59 Supermax Corp Bhd Shareholder 15.83 342.76 2,165.14 bil versus RM4.1 bil. 8 11 Datin Toh Siew Chuon 54 Kerjaya Prospek Executive Director 17.82 315.70 1,613.74 Kerjaya Prospek Property 16.83 167.12 9 9 Loh Wei-Lyn 38 Oriental Holdings Bhd – 7.56 299.02 3,957.91 10 14 Puan Sri Ng Siew Yong Gnanalingam 73 Westports Holdings – 1.55 209.31 13,503.60 11 15 Pang Fong Thau 60 Coastal Contracts Bhd Co-founder & Senior 26.85 192.48 16.98 Management 12 – Puan Sri Khor Chai Moi 67 OSK Holdings Bhd Shareholder 8.91 184.46 2,050.11 Willowglen 0.68 272.49 13 16 Datin Gan Chu Cheng 66 V.S Industry Bhd Executive Director 6.97 183.57 2,631.02 14 12 Datuk Hanifah Hajar Taib-Alsree 48 Cahya Mata Sarawak Bhd Shareholder 6.53 174.29 2,456.31 Puan Sri Khoo Ee Pheng, 49 SIG Gases Bhd – 17.69 77.81 SHAREHOLDER, PRESS METAL ALUMINIUM 15 13 Jamilah Hamidah Taib 60 Cahya Mata Sarawak Bhd Shareholder 6.27 154.13 2,456.31 2 HOLDINGS BHD RM1.8 bil 16 25 Pauline Tan Suat Ming 75 IGB Bhd Shareholder 4.62 106.95 2,317.25 17 17 Tan Lei Cheng 63 IGB Bhd Non-Executive Chairman 1.81 99.27 2,317.25 KHOO is the wife of Press Metal’s co- IGB REIT Director 0.05 6,783.97 founder and group CEO Tan Sri Koon 18 19 Kam Foong Keng 57 New Hoong Fatt Holdings Bhd Executive Chairman 34.36 71.58 208.33 Poh Keong. Poh Keong, together with his 19 – Chong Chin Lin 67 Padini Holdings Bhd Executive Director 3.11 68.62 2,204.00 brothers Poh Ming and Poh Weng are ranked as the joint ninth richest men in 20 18 Lin Chen Jui-Fen 66 Latitude Tree Holdings Deputy Executive 25.54 67.21 263.13 Chairperson/Co-founder Malaysia according to Forbes’ 50 Richest Malaysians 2019 list. Khoo does not hold 21 20 Teh Lip Kim 53 Selangor Dredging Bhd Managing Director 25.71 62.44 242.89 any designation in the company and is not 22 – Yong Lai Wah 70 Padini Holdings Bhd – 2.62 57.83 2,204.00 involved in its operations. 23 22 Yeoh Soo Keng 57 YTL Corp Bhd Director 0.53 53.34 10,064.11 In its latest available results for 3Q ended Sept 30, 2019, Press Metal’s net 24 23 Yeoh Soo Min 64 YTL Corp Bhd Director 0.50 50.32 10,064.11 profit fell to RM121.5 mil from RM162.5 mil 25 – Datuk Seri Loh Cheng Yean 77 Oriental Holdings Bhd – 1.18 46.80 3,957.91 a year ago on the back of lower revenue of RM2.1 bil versus RM2.4 bil. SOURCES: BURSA, BLOOMBERG, RAMCI | RESEARCHED BY MATHENNY K March 2020 | FocusM | 21 22 mainstream FocusM | March 2020 March 2020 | FocusM PB

Conversations: Health Minister Datuk Seri Dr Dzulkefly Ahmad Pursuing sustainable by Emmanuel healthcare reforms Samarathisa

an Malaysia continue to Further, the AG found that the heavily subsidise health- number of patients at four out of care? After all, this is the the 30 hospitals reviewed exceeded land where its citizens the level of care by between 5.7% can enjoy medical care and 95.6% and only 58.7% to 74.5% of Cfor as low as RM1 at the nearest patients were treated within four to public hospital or clinic. Talk about six hours. The audit also found 917 bang for your buck. cases of what it called “access block,” But while Malaysians delight in where patients were unable to be a cheap healthcare scheme, their shifted to medical wards. country is burdened to keep up. The Then there is that privilege of Auditor General’s (AG) Report 2018 Malaysians enjoying charges of Series 1 in its audit on the Ministry between RM1 and RM5 for outpatient of Health (MoH) spells out that hos- and specialist care respectively. pitals are understaffed, underfunded While they might enjoy access and overcrowded. to high quality treatment and care Among others, the auditor at government clinics and hospitals, flagged that the emergency and those rates mean hugely subsidised trauma departments (ETDs) at public charges through the public purse. In hospitals are unable to provide the long run, that is untenable. proper levels of care due to being And cast into the fray to solve short on essentials, from staff to these teething policies is Health equipment to money. Minister Datuk Seri Dr Dzulkefly The AG flagged funding for Ahmad, a toxicologist by training. ETDs as “insufficient” to meet “Failure to deliver could potentially demand. “The provision of financial cost the government of the day to allocation, which is insufficient, may be shown the exit door in the next affect the ETDs’ service efficiency,” general election,” he says. the audit report stated. In this wide-ranging interview The lack of money also means recently, Dzulkefly shares with senior that hospitals have to rely on old writer Emmanuel Samarathisa and equipment. MoH said that between editor-in-chief P. Gunasegaram his 2016 and 2018, it asked for RM96.95 journey in MoH and his approaches mil for newer equipment but only to solving some of the long-standing received RM20.32 mil, not even half and sticky issues that have come to of the requested amount. define the healthcare sector.

You are in charge of a very important aspects of the bureaucracy. council. These are the seven ‘eminent’ failure to deliver could potentially cost the portfolio. How did you get a buy-in from But I’m here to solve the perennial members who form my Health Advisory government of the day to be shown the exit your staff, especially the civil servants? problem of healthcare delivery and I would Council (HAC). And I really wanted to pick door in the next general election. When I was first given this ministry, I want you to come on board to realise my on the brains and talents of those who are That’s how I emphasised to the Cabinet told myself I’d approach the challenges in vision. not from MoH. It took me six months to and to Tun how much I really yearn to the ministry this way: When I first came So those were among the first few things get to that. embark on a reform of the Malaysian in, I gave my speech during the monthly I said and I continue to say these things to The staff at MoH were anxious and healthcare system. meeting with MoH staff and said I’m here them. And I have been working hard to get jittery about getting the private sector But, having said that, my approach in to provide leadership. I’m here to provide both the bureaucrats and technocrats to involved, since it’s all driven by bottomlines handling this ministry will be two-pronged: stewardship in answering the healthcare buy into my vision. and profits. But, finally, I got the HAC up firstly, I’ll need to address what I call delivery system. and running. immediate, acute, perennial problems of I’m not here to pretend that I can And what were some of the first things you And the HAC members are very managing health facilities. These I have to solve your complex medical problems. mooted during the early days in MoH? passionate, productive and engaging. firefight for weeks on end or every other Those are (problems) for you (MoH staff) Among the first things I mooted was the They meet every month. They even have a day and they can come in the form of, for because you are trained both as tech- idea of going beyond the talent in MoH, dedicated WhatsApp group. And I’m very example, addressing long waiting times or nocrats and also in the administrative in the sense of getting my health advisory well aware of the developments going on in overworked staff. There is also the problem the HAC. And from time to time, I engage of old equipment in hospitals. with them, including bouncing some ideas And I’ll be judged by my ability to off them. deal with these perennial problems over So when Tun (Dr Mahathir Mohamad) my idea, my bigger vision of enhancing mooted the idea of Wawasan Kemakmuran healthcare. Bersama 2030 (Shared Prosperity Vision But I also know that on a longer 2030), we wanted to reflect that spirit and timeline, I’ll be judged by what I embark I presented to Tun, together with my HAC, on and am able to execute by way of reform. what is now dubbed as Sihat Bersama 2030 This brings me to this realisation, and (Health Together 2030). by going through whatever literature I And this policy has three pillars: a have, that after 14 studies commissioned sustainable health financing system, public from 1985 right up to latest in 2016 by the sector transformation through corporatisa- Harvard School of Public Health (Malaysia tion and private sector regulatory reform. Health Systems Research), truly there is nothing much by way of reform that we can What’s your approach to dealing with be proud of, there is nothing to shout about Health and medical services by the government are a given for Malaysians of all income some of the challenges? by way of outcome. levels I fully internalise this challenge, because Continues on page 24 March 2020 | FocusM | 23 24 mainstream FocusM | March 2020 March 2020 | FocusM PB

From page 22 And, I am not here to again commission another study to Aging society has to be factored in only expect the same outcome. So back to the two approaches, the first one of acute, perennial healthcare delivery. problems, these I must address The reality is that 38% of but these problems are systemic total healthcare expenditure is in nature. I cannot get these done from out-of-pocket spending. piecemeal. This covers people who are not For example, queuing and employed or fall under an in- congestion. I can have a stag- surance scheme. And this is very gered kind of appointment i.e. inefficient spending, also misdi- 8am, 10am, etc. But then, what rected. So the private sector has to happens? Patients would come in come on board and enhance their at 7am. Why? Because they would delivery. rush for parking. Another thing: By 2035, we So, it is meaningless to have will be an aging society, which a staggered system of appoint- by definition means 70% of the ment because your parking is population is 65 years and older. insufficient. Solving that requires Are we prepared for that by way of a multi-storey car park but that palliative medicine, care, hospice, takes a longer timeline. among others? At the same time, I could have And we are witnessing a amenities such as e-registration healthcare delivery system and digital payments. But, again, ill-suited to managing non-com- I’m not solving this holistically municable diseases (NCDs). And because this is a systemic NCDs are actually a life cost while Health Ministry allocation always takes up a significant chunk of the annual government budget problem. The second prong is what really matters - the longer pool of prepared health financing I have opened up drug procure- reforms. So while I’m solving and to do this in a diversified ment, but then I said, look why are these immediate problems, I’ve manner which is both equitable you going to this Bumiputra agent got to always not lose sight of and affordable for households again? Turns out, the principal where I’m going by way of a longer and employees; and 2) establish only gives it to them as no one timeline, of how I want to enhance a well-governed health financing else is able to compete. healthcare delivery in Malaysia. institution to actually execute this. The system is so skewed. Now, first things first - why So, you would then be able to These middlemen, there are did we come to this state of strategically purchase services 20 of them. But from that 20, affairs? The Auditor-General’s Dzulkefly: where patients are given two only a few of them will either Report stated that MoH is un- The big things: options and value. get selected by the principal or derfunded, understaffed and picture is be the regular ones which bid. overworked because we’ve been to have a But you need both private and There was a tender where I saw underspending for the last many patient- public cooperation. only two, sometimes one, because years, or at least two decades. centric That is why I am working on they aren’t capable of competing And, because we’ve been un- framework strengthening public facilities and with each other by way of price, by derspending, the best healthcare also corporatising them, so that way of accessibility to the drugs. spending in relation to gross they can compete with the private How do you break this? domestic product (GDP) was in communicable diseases (CDs) are this with your attending physician sector. And the private sector 2004 at 2.13% of GDP. Spending episodic and acute like dengue online. must come with value-based But they are middlemen, why dwindled thereafter and as an and malaria or a pandemic. But And, your medicine will be delivery. not deal with them directly? Tell upper middle income economy with diabetes, for example, this delivered to you. So we have them you want so much of this we should be spending around is life-cost treatment, where you upscaled and there is some How would ending monopolies and that … 7% of GDP. But we’ve been under- need a healthcare delivery system semblance of addressing those like that of Pharmaniaga bring They are the middlemen, of spending and this has caused this that is seamless across the health perennial problems such as down cost? course. If the principal can state of affairs. continuum. waiting times because for fol- It does bring down cost but by come directly, they would. But And, worse still, we’ve suffered We need to go onto a low-ups, you don’t have to go to only one-third. But there is this then again you want to nurture a moratorium from 2015, or even platform that will re-enable us the hospital. perception that Pharmaniaga is your own pharmaceutical kind earlier, by way of a hiring freeze by way of healthcare delivery i.e. a monopoly, which is not quite of companies. And that is why for selected appointments. So, we the electronic medical records The ultimate problem with correct. They are managing our we are debating this. Once we have a double whammy: facilities (EMRs). This technology will help healthcare is financing. contracts to the point of spec- dismantle these concessionaires development and human resource us enhance delivery and have That is the third pillar of reform ifications, but the winners are we have to have a better system. capital. a seamless continuum of care under Sihat Bersama. Our determined by us. I’m engaging my consultants to That’s why when I came in, I from clinics to hospitals. You are healthcare financing system They only get to do the address these things. That is why vowed to achieve greater federal looking at horizontal and vertical is predominantly tax-based. distribution because they have we have started with the removal healthcare spending to GDP. integration. We have 2,800 clinics Wanting the government to spend logistics capabilities, including of concessionaires, hence why five all over Malaysia and 144 by way of more … it’s not going to be sus- the infrastructure. They also built years for logistics and two years Does the government have MoH hospitals. tainable to do that in the long run. for us an EMR of sorts. for tendering. That timeline is money? So the direction for the EMR We only need RM1 to see a Personally, I can’t really for us to get into the capability of That is not an easy answer. But is to have seamless integration, doctor and RM5 to see a specialist vouch that prices would be better what they have been doing. one of the success stories here is but most importantly between for outpatient treatment. Nowhere managed if you dismantled these to get the Cabinet and the prime public and private. You are can you get that. Going forward, kinds of concessionaires. But we And what’s the big picture here? minister to commit to giving me talking about having a patient this is not sustainable, especially are not doing that immediately To have a patient-centred frame- more money. master index. A lifetime record. with high out of pocket expend- because we know for a fact the work. Why? Because we are not So for 2019, they gave me So wherever you move, doctors iture. The average household kind of logistics capabilities the only handling the sick, we are RM29 bil and this year, RM30.6 bil. would not need to ask you about spends RM2,837 per year on out Pharmaniaga staff have. They truly handling healthcare. What I But if I want to push healthcare your medical records. Everything, of pocket medical expenditure. are well-equipped to move into mean is, we want to really embody spending to 4% of GDP, based on from your clinical notes to drug Outpatient alone, RM762 per year. remote areas of Keningau, for healthcare where Malaysians come 2019 levels, then I need RM60.7 bil. interaction, these move with you. This is very inefficient. example, cross rivers and deliver to us before they become sick. And there is a shortfall here but at So what I’m looking at is the medication. They have the capabil- So it’s not a reactive, curative least the gap is reduced. You need infrastructure, includ- anchor, which is still tax-based. ities i.e. they can cross-subsidise. process alone. That is why policies ing a dedicated data centre. But now we want to rope in all This is surely not economic. like Peka B40 are important. But you are still halfway off the We have a data warehouse. So we the other sources of funding, But they cross-subsidise for (Peka B40 targets low-in- mark. are already doing data analytics. from state spending to pension the other things. So, with all come households by focusing There is this fiscal space inability. Also, we have already gone live funds to private insurance. If we due respect, people always on non-communicable diseases. I can’t be asking for more from with our five virtual clinics. So could pool all these resources blame Pharmaniaga for being a Some of the benefits include the government knowing that it everything will be raised to the under a national health fund, monopoly, but that is not really health screening, medical is going to be challenging. cloud. then what you would be seeing is quite true. equipment assistance, and in- To address this, we mooted What we are working on is a single-payer system. centives for completing cancer enhanced public-private synergy the legal framework for online Only then would you be able to What about Bumiputera tender treatments.) and collaboration. So when I’m healthcare. So with the virtual have a semblance of reorienting agents? These are middlemen in Once we know they are healthy, strapped for fiscal space, I can clinics, you can do follow up health towards a sustainable tra- the system. we get them into a wellness look to the private sector to come consultations, not first time jectory. There are two purposes That is quite true. But it is the programme. So that continuity is on board and help me achieve appointments, and you can do of health financing: 1) increase the whole system, and not only them. important. March 2020 | FocusM | 25 26 mainstream FocusM | March 2020

by Poh Kong benefits from Ranjit Singh

oh Kong Holdings Bhd, the country’s gold as a safe haven asset largest jewellery and gold retailer with 94 branches, stands to Pgain from the growing appeal Poh Kong Holdings of gold as a safe haven asset among investors. The escalation Bhd in geo-political risks and the JEWELRY AND WATCH STORES outbreak of the Wuhan corona- virus have further accentuated KEY BOARD MEMBERS AND this appeal. MANAGEMENT Poh Kong’s shares hit a Datuk Choon Yee Seiong 52-week high on Jan 8 at 70.5 sen (chairman) amid gnawing tensions between Cheong Teck Chong (ED) Choon Nee Siew (ED) the US and Iran after the US Choon Yee Bin (ED) carried out the assassination of Datin Hon Wee Fong (ED) Iran’s military chief Gen. Qasem Soleimani and Iran’s attack on US MAJOR SHAREHOLDERS military bases in Iraq. Poh Kong Sdn Bhd Gold prices breached the psychological level of US$1,600 per 58.3% ounce on Jan 8 - its highest level Yeoman 3- Right Value Asia since March 2013 - when tensions 7.92% rose as investors sought cover in the safe-haven metal after Iran MARKET CAP (Feb 12) fired rockets at an Iraqi airbase RM238m which hosts US forces, hours Share price (Feb 12) after the funeral of an Iranian 58 sen commander whose killing in a US 52-week high (Jan 8, 2020) drone strike has raised fears of a Business remains lucrative for Poh Kong even after gold prices rise wider conflict in the Middle East. 72 sen Stephen Innes, chief market 52-week low (May 13, 2019) strategist at Axicorp, tells FocusM in the price of gold can lead to in a filing with Bursa Malaysia. With all the data analytics in 46.5 sen that the rally in gold prices still has significant gains in the best gold The decline, it felt, was mainly place, the company will be able to more legs. stocks and owners of gold stocks due to a decrease in demand for improve stock turn, learn of new FINANCIAL RESULTS “I think gold would trade typically obtain a much higher gold jewellery products during the trends in the marketplace and (1Q ended Oct 31, 2019) towards the US$1,700 per ounce return on investment (ROI) than quarter under review. gain better consumer insights to Revenue level as it has more appeal as a safe owners of physical gold. “The soaring gold prices have make more informed decisions. RM205m haven asset regardless of the state a positive impact on our bottom Besides these systems, Poh Net profit of affairs, even if the coronavirus Record profits for Poh Kong line. Sales of gold inventory at Kong has also invested in its spread peaks,” he adds. in 1Q2020 the current retail price pushes physical setup by improving on RM8.08m Gold is seen as an attractive For its first quarter results ended the margin higher as inventories its merchandise displays and asset class and investment Oct 31, 2019, Poh Kong reported were procured at lower prices, upgrading its stores regularly to One-year price chart portfolio among consumers as a jump in earnings boosted by resulting in the Group’s improved add value for customers with a RM well as investors. The World Gold higher gold prices, despite lower profit in the first quarter,” said the fresh change and a more focused Feb 12 0.75 Council (WGC) recommends a gold sales. Net profit in 1QFY20 surged company in an e-mail response to retail experience of its brands. 58 sen holding of between 2% and 10% in 155% to RM8.08 mil compared with FocusM. Among the activities under- 0.7 one’s portfolio value to achieve a RM3.16 mil a year ago despite a 20% On Feb 5, Poh Kong’s shares taken to promote the company’s well-balanced and diversified list decline in revenue to RM205 mil. were trading at 56.5 sen which products are advertising and 0.65 of investment. “The group is positive the represented a 140% discount to its promotion, road shows and Gold stocks are typically more demand for gold-related products net tangible asset (NTA) of RM1.36 events to reinforce the Poh Kong 0.6 appealing to growth investors than will remain resilient amidst global per share for the period ended Oct brand name in the marketplace. 0.55 to income investors. Increases in uncertainties that have encour- 31, 2019. Poh Kong has upgraded its the price of gold are often magni- aged many consumers to change The company has a high website design and web tools to 0.5 fied in gold stock prices. their investment portfolio from holding of inventories at RM591 mil enhance the consumer viewing 0.45 A relatively small increase equities to gold,” Poh Kong said which can be easily liquidated. Its experience and understanding 12/2/19 12/2/20 shares have been trading at a PE of its brands and collections as of 7.5 times. the company stays relevant to SOURCE: BLOOMBERG customer needs. The business dynamics For online shoppers, Poh For FY 2020, it plans to open Kong collections are available at US$1,700 per ounce this year one to two stores with a capital Malaysia’s e-commerce sites - compared to an average of expenditure of RM3 mil to RM5 Lazada, Shopee and Prestomall. US$1,500 in 2019. mil each, including inventories Sales from online shops grew On the outlook for the per store. more than 60% in 2019. company in 2020, Poh Kong says Poh Kong has been adopting Poh Kong carries interna- it is confident that demand for proactive business strategies and tional luxury brands - Schoeffel gold and gold-related products improved systems and processes from Germany as well as Luca will remain resilient. to streamline its operations in Carati and Moraglione 1922 from “Gold is seen as an attractive efforts to enhance customer’s Italy - and many fine jewellery asset class and investment port- shopping experience. pieces from all over the world in folio among both consumers and To respond to the changing its Poh Kong Gallery collection. investors. Poh Kong is optimistic business landscape, the company In saying that the company that Malaysia’s economic growth has streamlined its supply chain passes on any increase in gold will improve progressively management department with prices to its buyers, it notes that although retail sentiments are soft a new system, from ordering to based on its study of purchasing due to the higher cost of living and replenishment, and inventories patterns, demand does not cautious consumer spending. management to capture sales data dampen with the higher prices as “Notwithstanding the volatility in real time. retail investors tend to buy gold of gold prices, Poh Kong will find This innovative platform has wafers and bars when gold prices solutions in overcoming industry enabled Poh Kong to quickly are on an upward trend. challenges, expand at a moderate respond to changes in customers’ The study also showed that pace at strategic locations, demand and spending behaviour, people buy gold for commemo- constantly monitor its costs and resulting in a reduction in pur- rative purposes regardless of the overheads prudently and review chasing and manpower costs as prices. its operational process to improve For families of all income levels, gold jewellery is an asset that is well as easier procurement and Poh Kong expects gold prices the group’s efficiency and perfor- sought after monitoring of inventories. to hover around US$1,600 and mance,” it asserts. March 2020 | FocusM | 27

Secure Your Journey To Digitalisation 28 mainstream FocusM | March 2020 Waiting game looms for AirAsia shareholders

• Denial alone won’t do justice to an allegation coming from a reputable body such as the UK’s Serious Fraud Office

Executive 1” and “AirAsia Exec- utive 2” respectively in the graft allegation which brings back the by memory of “Malaysian Official Lya Rahman 1” – a reference to former prime minister Datuk Seri Najib Razak – o, pressure is mounting during which the US Department for both AirAsia Group of Justice filed a lawsuit to seize Bhd executive chairman assets bought with more than Datuk Kamarudin US$3.5 bil that was stolen from Meranun and CEO Tan national wealth fund 1Malaysia SSri Tony Fernandes to step down Development Bhd. from the budget carrier’s board In this era of social media pending the US$50 mil (RM205 with news travelling at the speed mil) Airbus bribery probe by of light – although truth often Malaysian authorities. gets jumbled up with untruth This is on top of the duo’s in the process – investors are voluntary relinquishment of pretty aware that “leaves simply their executive positions (re-des- won’t move without wind” (the ignated as non-independent Malaysian version of no smoke Fernandes should emulate the precedent set by retired banker Nazir Razak who opted for a voluntary leave non-executive board members) without fire). of absence from his role as CIMB chairman in April 2016 with immediate effect for a two- Henceforth, denial alone month period on Feb 3 to enable won’t do justice to an allegation the company’s Non- Executive coming from a reputable body Tharumalingam Kanagalingam summoned Fernandes and a few to failure of corporate policy Independent Board Committee to such as the UK’s Serious Fraud a.k.a Bo Lingam as AirAsia’s other AirAsia officials for ques- especially when a company has review and act against the bribery Office. acting CEO in the interim tioning over an allegation of trying a head honcho who is highly allegations against them. That the AirAsia saga has considering that our country to manipulate government policies charismatic, witty and ambitious. AirAsia’s sister airline, AirAsia generated quite a gargantuan has been seriously upholding through corrupt means to get an It would be difficult to strictly X Bhd, which is also implicated interest from three major Malay- integrity by combating cor- international licence for its Indian enforce the “no outside interests” in the bribery allegation has also sian authorities – which is rather ruption. venture, AirAsia India Ltd. rule in the event that a conflict of formed a similar committee to a rarity – reflects the severity of This is because Fernandes, The probe was initiated on corporate and personal interests take any necessary action based the case. Bo and a few other AirAsia the basis of ousted Tata Sons Ltd abound. on its review which includes the It has come under the lenses officials had been implicated chairman Cyrus Mistry’s allega- When bad news broke, in- appointment of an independent of the Securities Commission (SC) in connection with a money tions that fraudulent transactions vestors regardless of their size expert. which will scrutinise all available laundering case in 2018 in India. of 220 million rupees (RM12.6 mil) of shareholding would resort to In fact, the AirAsia board evidence to determine if there Recall that India’s Enforce- involving non-existent entities in “share dumping” – most foreign should also consider appoint- was any breach of securities laws. ment Directorate had recently India and Singapore were carried funds/institutional investors have ing an independent expert to out in an instance involving AirAsia. zero tolerance with regard to conduct the review by following On the same note, I hope the ethical issues to safeguard their the footstep of Colombian airline “... my personal reckoning is that statement made by Prime Minister reputation. Avianca Holdings SA which Tun Dr Mahathir Mohamad relating Even research houses are now has appointed an independent both Kamarudin and Fernandes to “offset payments” which was wary over the short-term uncer- law firm to conduct an internal subsequently clarified by the tainties of AirAsia after factoring investigation into the carrier’s – being highly revered Prime Minister’s Office that he in the impact of the Covid-19 relationship with Airbus. did not suggest the allegation of outbreak on the airline industry. While I welcome the boards of individuals in society – should bribery against AirAsia executives “… we choose the ‘sell first, both airlines to conduct reviews was “offset payments” would not in ask questions later’ approach into the bribery allegation, one step aside entirely during the any way influence the outcome of to avoid the uncertainty in cannot help but feel that both internal review period.” investigations being conducted by association with the corruption Kamarudin and Fernandes should the internal committees of AirAsia investigation by MACC, where emulate the precedent set by and AirAsia X or the three authori- the impact on AirAsia could be retired banker Datuk Seri Nazir Under Section 317A of the on Fit and Proper Person. ties comprising the SC, MACC and significant in terms of corporate Razak who opted for a voluntary Capital Markets & Services Act Being holders of air service Mavcom. governance issue,” observed TA leave of absence from his role as 2007 (CMSA), a director of a licences issued by the com- Securities Research in a Feb 3 CIMB Group Holdings Bhd group public listed company (PLC) who mission, the key responsible Bleeding investors’ pocket research note. chairman in April 2016. does anything with the intention persons of both airlines are The investigation should be carried What is unfortunate is that Without their assuming board of causing wrongful loss to the subject to the Act and the guide- out independently in an expedient it would be inadvertent for presence, in whatever capacity, PLC or its related corporation lines, according to Mavcom. manner without fear or favour. many retail investors (especially during the course of internal commits an offence which is As a whole, I see this as a Among the issues that should newbies) to get caught with their investigation is crucial to erase punishable with imprisonment “small victory” for corporate be addressed are whether the pants down. the perception of a possible and fine. Malaysia insofar as the quest to transactions linked to the bribery interference by the implicated Earlier, Malaysian Anti-Cor- uphold corporate governance allegation had been made known The views expressed in the article directors. ruption Commission (MACC) and transparency is concerned. to any of the board members of represent the views of the writer True to the saying of Con- chief commissioner Latheefa Even anti-corruption AirAsia and AirAsia X at that time? and do not necessarily represent fucius, “a gentleman would be Koya said the anti-graft agency is watchdog Transparency Or were they carried out with the official views of the Institutional ashamed should his deeds not in touch with the UK authorities International Malaysia (TI-M) the blessings of any of the board Investors Council of Malaysia match his words”, my personal and is already investigating the has lauded AirAsia board’s members? (IICM). reckoning is that both Kamarudin matter. move to launch independent If the answer is “yes” to any Lya Rahman is the adviser and Fernandes – being highly Also joining the fray as the investigations into the bribery of the two questions, the board to the IICM and was the former revered individuals in society – third authority to investigate both allegations involving AirAsia members who had been made general manager of the Minority should step aside entirely during airlines is the Malaysian Aviation and AirAsia X. aware of the transactions should Shareholders Watch Group. She the internal review period. Commission (Mavcom) which also be held accountable in the can be reached at lyarahman@ would assess whether there is any Biting the bullet scandal and be barred from partici- me.com Serious allegation contravention of the Malaysian Elsewhere, I am of the opinion pating in the internal investigation. Recall the reference of Kamaru- Aviation Commission Act 2015 that a credible individual Very broadly, I attribute the This article first appeared on din and Fernandes as “AirAsia and the commission’s Guidelines should be appointed in place of problems affecting AirAsia today focusmalaysia.my PB FocusM | March 2020 March 2020 | FocusM mainstream 29 PDP for RM46 bil Penang Transport Master Plan might be delayed

signed by late January but it had been delayed to the middle of by February. Emmanuel PTMP, which could be among Samarathisa the most expensive large-scale public projects in the country, he Penang Transport was conceived to achieve a Master Plan (PTMP) public-private transport model might be delayed as share of 40:60 by the year 2030. the state government To that end, the PTMP is working on smooth- envisaged a network consisting Ting out “issues” in the RM46 bil of a light rail transit (LRT) mega project. network, monorail, bus rapid The Penang government transit (BRT), trams, e-hailing was supposed to ink the project services as well as ferry and delivery partner (PDP) agree- water taxies. Also proposed is a ment with SRS Consortium Sdn major highway, PIL1 (Pan Island Bhd before the Chinese New Link 1), and two shorter freeways Year (CNY) celebrations. But it PIL2 and PIL2a. PTMP’s initial cost was RM27 bil and it has ballooned to an estimated RM46 bil seems the agreement will only Gamuda group managing materialise after the festivities. director Datuk Lin Yun Ling said “I have told the press that if on Dec 5 that the construction awarded,” he told reporters that letter received by the state gov- Island A has been designated it can be signed before Chinese giant, which also controls SRS, day as quoted in The Edge. ernment dated Oct 15. as an industrial park where lots New Year, it will be signed. If not, would sign the PDP “in the next “My guess (for the PDP The state government had would be sold to investors to after CNY. Need to tidy up all the few weeks” with the first package agreement to be signed) is next begun talking to several banks raise funds for PTMP. Island B issues,” Penang Chief Minister of the LRT to be awarded in the few weeks.” he said. that could help manage the will cater for high-end support Chow Kon Yeow told FocusM in middle of this year. According to Chow, the LRT funds issued through the bonds, services for the industrial park, a terse message on Feb 5. “Once the PDP agreement system will be financed by the he added. such as financial and business SRS Consortium is a 60:20:20 is signed, the design works Penang government through the Further, there will be the services. Island C will be geared joint venture among Gamuda Bhd will start, from LRT to the first setting up of a special purpose creation of three islands off towards tourism and residential and Penang-based companies (man-made) island, or what we vehicle (SPV) which would issue the southern coast of the main properties. Loh Phoy Yen Holdings Sdn Bhd call Island A, and the Pan Island bonds guaranteed by the federal island. SRS is expected to fork It has been estimated that the and Ideal Property Development Links, and reclamation work for government. out RM11 bil to reclaim the three islands would be able to Sdn Bhd. South Island will all move. We Chow said on Nov 8 that islands – A, B and C – which raise RM70 bil for 1,800ha, more Sources tell FocusM that expect by the middle of 2020, Prime Minister Tun Dr Mahathir would make available a total of than enough to cover the cost of the PDP was supposed to be the first package of LRT will be Mohamad proposed this in a 1,818ha (4,500 acres) of land. the PTMP. Gig economy or full-time jobs?

for hire, along with the rate at Content creators have likened and sparked debates between now-entrepreneur Rafizi Ramli, which they charge, while clients this to paying for groceries or the affordability of businesses on his new venture, adnexio’s, ad Lifting the can sift through the talents for bills with an amount of exposure, and overpaying or underpaying neither local job-seekers nor em- Fog one who meets their budget and and this is blatantly unfair to the talents. The message also un- ployers are choosy with regards job scope. content creators who have spent dermines graphic design talents, to work or employees. This comes This stands as a far cry from time, effort, and resources honing with the underlying message that from “over 300,000 user inter- the days when freelance gigs were their craft. it is not worth the money spent to actions” that he had seen on his offered through word of mouth, The platforms themselves utilise their skills. job-matching platform that was or through a network of contacts, have been embroiled in their own The talents themselves have launched four months ago. which was time-consuming and share of scandals, usually by fa- their own gripes when it comes “We have seen candidates did not really lend itself to a vouring the client more than the to the platforms, as a common willing to switch jobs at an equal by smooth process. The issue of talent. Take Fiverr for example. practice is for the platforms to (sometimes lower) pay; we have Xavier Kong accountability was a matter of In 2014, the Tel Aviv-based extract a fee from the amount seen employers choosing fresh concern as well. gig-matching platform came up transacted between client and graduates quite readily. I am What about the times when with an ad that said clients were talent. However, this can come inclined to believe that a large he idea of freelancing is clients would approach free- being ripped off for paying more up to exorbitant amounts, some- part of the problem is about the nothing new to Malay- lancers and ask them to do a gig than US$5 for design work, with times up to 20% of the amount job-matching marketplace,” said sians, especially now for exposure? The line of “you the tagline: “You’re paying too agreed upon between the client Rafizi. with the advent of the won’t be paid for this gig, but it much for design”. and the talent, according to a But the fact of the matter gig economy. However, will give you great exposure” has This caused an uproar in report by Cryptoground. remains that this would probably Twhile gigs with companies such as been receiving its own share of a community that was already Still, these platforms now work only for full-time positions Grab and FoodPanda see a clear- mockery and criticisms in recent being pushed down and being represent a means for clients and would hardly apply to the cut system in place, what about social media. paid in exposure, as it were, and talents to connect. Not only freelancing community. those who offer their services in do clients get a wider selection Still, the gig economy has other areas of expertise? with a better hope of finding a risen to the point that the This is where the gig-match- match to their needs, gig-seekers Pakatan Harapan government ing platform comes in. Over are able to pitch their skills to a has acknowledged it lends some the past decade, there has wider audience. food for thought. Would it really Unlike other been a rise in the number of Fortunately, or unfortunately, be possible for the world to go fields, there’s platforms on which freelancers depending on who you are asking, back to the days of yore, when a clear-cut can advertise their skills and system in the fact remains that both talents everything was sort of gig-based wares. International platforms, place for and clients have to be discerning and people were not employed such as Freelancer, Fiverr and those who regarding the platforms they but worked piecemeal jobs? Upwork, have been around for opt for choose to operate from. One Or would the world keep years, standing as places where gigs with point to note would be the dif- going on this same trend where small, one-off jobs, or gigs, can companies ference between gig-matching the benefits of full-time employ- be transacted. such as platforms and job-matching ment would continue to outshine Jobseekers can post their Grab and platforms. the lustre of working from gig to contact information, set of skills FoodPanda According to ex-politician gig? 30 property FocusM | March 2020 Is 2020 a good year to buy a house?

• The ones who say aye see increased opportunities for bargain hunting as more properties go on auction, there is more realistic pricing in the secondary market and discounts are offered for completed stock

by Sharina Ahmad

The property market is now better positioned to perform well in the coming years

here are mixed opinions executive director Brian Koh to buy in 2018 and 2019. Last about Malaysia’s says this year will likely see in- year we saw some improve- economic growth and creased opportunities for bargain ment in property sales volume the property market hunting, flowing through from and value. For this year we can in 2020. Many experts the previous two years. expect a slight increase. Tthink there will be a turnaround “There continues to be more “Buyers can buy a good though not exactly a stellar year properties coming for auction, property at a better price, and for the housing market. as well as more realistic pricing on better terms and conditions,” In general, if the country’s in the secondary market as well he says. economy improves, it would as discounts for developers’ This is based on a report translate into a healthier real completed stock. published by Edmund Tie & estate market. “So, for buyers seeking to buy Company (SEA) Pte Ltd, which It is anticipated that there for own occupation, this will be saw a small quarter-to-quarter will be a gradual improvement the right time to seek options in price increase for high-end in the property market in 2020. the market. For investors with condominiums in Kuala Lumpur Demand and prices for property a longer-term view, given the Koh says it is the right time to during the second quarter of will remain flat because of current external uncertainties, buy a home 2018. Rents, on the other hand, market sentiment but selected they can afford to wait a bit more, declined by 6.3%. prime and strategic areas will biding their time to seek better more high-value properties and However, 2019 has shown still attract investors. bargains,” he tells FocusM. land going under the hammer. more positive results than Overall, the property market According to AuctionGuru. The online portal revealed expected and the residential will continue to pose some com.my’s 9M2019 Auction that in 9M2019, there were 3,316 property market has picked up. challenges but it is better po- Report, a total of 26,563 proper- commercial properties (12% It even recorded a higher value of sitioned to perform well in the ties worth RM14.3 bil went under of 26,563 auction properties in transactions by September 2019 coming years. the hammer during the period, 9M2019) and 1,051 land plots (4%) compared to the whole of 2018 for But that’s assuming the an increase of 12% from 23,658 for auction. the primary market. experts’ forecasts are right. properties valued at RM10.9 bil The 3,316 foreclosure com- Siva adds that Malaysia’s (32% rise in terms of value) in mercial properties had a total property market has been in More opportunities in 9M2018. reserve value of RM4.26 bil, an decline since 2012. “Even if prices There has been a auction market The increase is due to the increase of 27% in volume and still rise, we’ve seen modest small increase in Nawawi Tie Leung Real Estate oversupply situation in the 62% in value compared with increases in the past five years. prices for high-end Consultants Sdn Bhd investment property market which has re- 9M2018. “In 2017, prices increased by condominiums in KL flected in the foreclosure market. Auction residential property 5% on average, the lowest rate There has been a significant in 9M2019 was valued at RM8.5 bil since 2009. We see a similar trend increase in the number of prop- or 59%, while the value of auction in the number of transactions, erties put up for auction in the land assets totalled RM1.6 bil or where we only had 311,824 trans- first three quarters of the year – a 11% of the total reservation value. actions in 2017, a record low since sign that property owners are 2012,” he says. losing their holding power. Sales volume and value Siva seconds the Home In the third quarter of 2019, improve Ownership Campaign (HOC) there were a total of 9,294 fore- Rahim & Co International Sdn 2019 which was launched in closure properties, compared Bhd real estate CEO Siva Shanker January 2019. It has cleared 31,415 with 8,760 cases in 3Q2018. says 2020 is a good year to buy residential units worth some The online auction listing a house since the market has RM23.2 bil, surpassing the initial platform’s executive director shown some improvement since target of RM17 bil. But he adds: Gary Chia has observed that the last year. “HOC is not going to be extended. number of auction properties has “This year is a good time to Although the campaign is good, been increasing since 2016 with buy a house. It was even better but we cannot have the subsidy March 2020 | FocusM property 31

This was driven by housing steady at 3.3% in 3Q19. loans that have been made more On the lending front, BNM accessible under various loan maintained the OPR at 3.0% so assistance schemes introduced as to remain accommodative and in recent years. supportive of economic activity. The overall household debt The central bank, however, cut level continued to rise, with the Statutory Reserve Require- housing loans remaining the key ment (SRR) ratio from 3.5% to driver of debt growth. BNM said 3.0% to ensure sufficient li- the overall household debt level quidity in the domestic financial remained elevated at 82.2% of system. gross domestic product (GDP). The report said for supply “Many Malaysians are at risk and demand, the cumulative of being made bankrupt because supply of high-end condomin- they could not pay their housing iums/residences stood at 59,358 loans, business loans and credit units as of 2H19 following the card loans. completion of five projects with “They (Malaysian families) are a total of 2,572 units. spending more than they earn Three of the projects are and have no more spare money located in KL City, namely to pay for a housing loan,” says Tower 1 @ Star Residences (557 Cheong. units), Aria KLCC (598 units) He says with inflation pushing and Stonor 3 (400 units) while up the cost of living, families will Novum Bangsar and Sunway find it more and more difficult Mont Residences on the city to find enough money to pay for fringe contributed 729 and 288 The dream of owning their daily necessities. units respectively. a home remains just “Please tell me how these Another 11 projects are that for 95% of Malaysian families can afford to scheduled for completion by the Malaysian families, buy houses. This is a dream for first half of 2020. Collectively, says consultant 95% of families. they will add 6,151 units to the “This will remain a dream for cumulative stock. They are the next 15 to 20 years, similar to Tower 2 @ Star Residences (482 Japan, Taiwan and Hong Kong,” units), 8 Kia Peng (442 units), Sky he opines. Suites (986 units), The Manor (212 units), Novo Ampang (421 Uncertainty in Malaysia’s units), 18 Madge (50 units), The economic situation Estate (328 units), Agile Mont’ Knight Frank’s Real Estate Kiara (813 units), Arte Mont’ Highlights report for the second Kiara (1,707 units), TWY Mont’ half of 2019 says the Malaysian Kiara (484 units) and One Kiara economy expanded at a slower (226 units). The Home Ownership pace of 4.4% in 3Q19 (2Q19: 4.9%), The survey reported that in Campaign contributed impacted by the ongoing trade KL City, the pricing for newly to reducing the tensions and heightened global launched projects such as Core overhang in residential uncertainty. Residence and Conlay exceeds property last year Economic growth continued the RM2,000 per sq ft mark. to be underpinned by both The gross selling price private consumption and gov- for Core Residence, which is this year, which bodes well for ernment spending as well as located within the TRX precinct, property developers’ housing support from the services and averages RM2,200 per sq ft while sales. manufacturing sectors. for Conlay, it is in the region of There is a possibility of the For the whole of 2019, GDP RM2,050 per sq ft. benchmark interest rate being growth is forecast to range from The newly launched Agile reduced further from 3% to 2.75%. 4.3% to 4.8%. Headline inflation Embassy Garden at Embassy was higher for the third quarter Row has set a new benchmark ‘There might be no at 1.3% (2018: 0.7%) due to the pricing of RM1,900 per sq ft improvement’ lapse in the impact of GST zer- (gross) for the exclusive locality However, Ernest Cheong PTL orisation. of Ampang Hilir/U-Thant, In Chartered Surveyors consultant Labour market conditions comparison, Impression U-Thant and senior partner Dr Ernest remained supportive with the was launched in 2018 at a gross Cheong said the industry might unemployment rate holding pricing of RM1,700 per sq ft. see no improvement this year. “Will 2020 be a good year to Siva says the HOC was a good Cheah says there will be many buy a house, my sincere answer campaign offers for purchasers this year is an emphatical ‘no’. “With the Malaysian and mentality for the rest of our life.” managing director Sarena Cheah global economy heading into, if Housing and Local Gov- says there will be many offers this not already in recession, it would ernment Minister Zuraida year for purchasers who want to be suicidal for anyone to buy a Kamaruddin launched the grab the opportunity to own their house now and commit to 30 programme for residential own homes at competitive prices, years’ slavery to the banks,” he units developed by federal and as well as to take advantage of tells FocusM. state governments, and private good packages from developers He opines that one of the builders. who will be looking to incentivise main reasons for this is that The HOC, which also home ownership. consumers (namely Malaysian provided ancillary support and “For example, Sunway families) are heavily in debt, up services including financing Property will be carrying out to 80-90% of their incomes. schemes and legal assistance for a home ownership campaign, According to Bank Negara property buyers, was designed to “Yours, 2020” which will help the Malaysia (BNM), high property alleviate the RM20 bil overhang people own their dream homes, prices continue to put a heavy in the sluggish residential at the right price and a strategic burden on the lower-income property market. location, coupled with the right group, placing home owners with Under the scheme, which financing support. high mortgages among the most was also supported by various “The home packages we are vulnerable to potential financial home exhibitions throughout the providing will also be customised shocks. nation, houses with HOC certif- to centre on well-being with The central bank’s half-year The icate also enjoyed various stamp personalised financing options,” financial stability review last year overall duty exemptions and discounts. Cheah says. said while the share of household household During the campaign period, LBS Bina Group Bhd debt held by borrowers earning debt participating developers were managing director Tan Sri Lim less than RM3,000 per month has remains also told to sell their houses with Hock San says the market is declined, the leverage of these high at a minimum discount of 10%. anticipating another cut in the borrowers has, however, risen 82.2% Sunway Bhd property division overnight policy rate (OPR) steadily. of GDP 32 property FocusM | March 2020 PKNS primed for RM26 bil launches over next five to 10 years

• The biggest change at the One of PKNS’ many projects state developer is is Antara Gapi in adopting the build- and-sell business model as opposed to the previous sell- and-build concept • It will also collaborate with private companies to develop its land • PKNS will be launching nine projects within a decade

by Sharina Ahmad

he Selangor State Development Cor- poration (PKNS) has tweaked its business model in line with Tchanging times and lined up property launches with a total gross development value (GDV) of RM26 bil over the next five to 10 years. In an exclusive interview with FocusM, PKNS CEO Datuk Mohd Azizi Mohd Zain says the at 1,965.4ha and the largest area is Mohd Azizi is confident that state property developer will be at Bernam Jaya in Hulu Selangor through joint ventures with launching a total of nine projects (764.8ha). private developers, PKNS would within a decade, to be carried Among the projects PKNS will be able to achieve its goal “which out on a joint-venture basis with be undertaking this year is North has been planned for quite a private developers. Lake in Cyber Valley, Selangor while”. “Moving forward, we believe which is slated to bring in anchor “We hope to achieve a profit- the changes made are to drive tenants like AEON. able income for both parties and our operation towards a sustain- Mohd Azizi Others include Selangor it is a new strategy used in this able business model and we will says PKNS’ Business Centre with a GDV of business model, too,” he says. continue to build quality assets new strategy RM36 bil and will comprise a He says the state government that can produce more stable is to develop convention centre, hotel and would consider giving incentives income. land in joint office tower in . Mohd to developers who want to team “Hence, we are now exploring venture Azizi says it is currently looking up with PKNS, but cautioned that more competitive approaches with private for a partner for the develop- the pricing of these homes need through smart collaboration/ developers in ment. to be approved by the Housing joint venture with reputable various parts “This project has a huge and Local Government Ministry. strategic development partners,” of Selangor potential, especially because of PKNS was established in 1964. he shares. its location. It caters to all sorts of It started building single-storey businesses and events. We expect affordable houses that cost less Changing business model “We expect them to give (part also provide a wide variety of to launch this project by March. than RM20,000 in Petaling Jaya Mohd Azizi explains that PKNS of) the returns to PKNS. This is property products to buyers. The site is strategically located decades ago. has changed its business model the kind of business model we near the KL International Airport from the build-and-sell to sell- will use going forward,” he points Nine new launches in the (KLIA) and Selangor Cyber Valley Overhang properties and-build concept. out. pipeline (SCV.) This type of development To date, Mohd Azizi says PKNS “Since I took the helm last Mohd Azizi explains that “To this end, PKNS has identified is a priority for the state and has a total of 2,500 units of year, this is the first time we have because PKNS does not receive nine properties that are proposed PKNS,” Mohd Azizi says. unsold properties worth of changed the old business model grants from the government to to be developed through the Meanwhile, PKNS will RM1.5 bil. that has been practised for the subsidise affordable housing privatisation method over the develop Selgate Medical Centre “Like PKNS, I think most of last 56 years,” says Mohd Azizi, projects, the state body has to next five to 10 years. We need to in Bangi New Town. The 150-bed the private developers have this who was a Petaling Jaya mayor create profits which can only identify our strategic develop- medical centre will sit on 1.21ha overhang issue because they and joined PKNS in March 2019. come from its medium- and ment partners by asking them and the remaining 0.64ha of the cannot sell their product. It is a “For this year, we are not high-end residential and to submit their requests for 1.85ha site will be for commercial direct result of the supply-de- building houses on our own but commercial developments that proposal (RFP),” he notes. development. mand imbalance in the market, we will be looking to privatisation command respectable profit The projects which will Another project in the as developers continue to build and collaboration with other margins. comprise a total of 1,882 units pipeline is Land Devel- properties which buyers cannot private developers. We are the The collaborations, Mohd will be located in Hulu Selangor, opment in Semenyih for which afford. one that would give them the Azizi says, will not only help to , Klang, and PKNS will identify partners to “Other than that, the market land and we would then jointly accelerate real estate develop- Gombak, among others. develop the over 897 acres of remained sluggish hence develop it. ment activities in Selangor but PKNS’ total land bank stands land. it makes it difficult for the March 2020 | FocusM property 33

Bungalows are part of the products in PKNS’ Antara Gapi housing scheme although it prioritises the building of homes for the low- and middle-income groups

Under the new CEO, PKNS will not be undertaking high-end projects potential buyer to get financing industry-based rebranding. high-end project does not mean from the bank,” he opines. Mohd Azizi says this commit- that we are losing our core According to Mohd Azizi, ment is in line with the objectives priority. And even if you look at completed middle-cost of the Ministry of Housing and all of the projects that we have houses priced in the range of Local Government to build one before this, we have only four RM400,000 to RM700,000 end million affordable homes within high-end projects out of all of up being the most unsold type the next 10 years. our projects.” Efforts and initiatives of PKNS property. “PKNS is confident that the Mohd Azizi highlights that THE property overhang in the country shows no signs of abating “Those unsold houses cater affordable homes programme in some situations, the industry as the number of unsold units continues to rise while access to for the middle-income group. which has been branded as needs to evolve to keep up with funding purchases is still a problem for most Malaysians. However, semi-detached houses ‘Rumah Selangorku Idaman the current trend. “Going into 2020, we can see that the government is doing and bungalows are not affected so PKNS’ will provide a better life for “Sometimes you need to its best to solve these issues with the introduction of the Youth much,” he said. the people in the state,” he says. follow the trend in the market. Housing Scheme, Bank Negara Affordable Housing Fund and Last year, PKNS launched He says it is mandatory for We have a demand for high-end Home Ownership Campaign,” PKNS CEO Datuk Mohd Azizi three projects – Selangorku PKNS to build “Rumah Selan- property and potential buyers Mohd Zain says. Idaman Residensi in , gorku” (RSKU) every year and to (bungalow and semi-D),” he He believes these initiatives will help spur the property Widuri Residensi@Antara Gapi make meeting the needs of the says. market this year. in Serendah, Hulu Selangor, and people a priority. He notes the numbers clearly “If you see the trend today, most developers opt for high-end RaudhahVille in Cyberjaya. “PKNS strives to focus on show that PKNS is still on the and luxury housing but that clearly shows the imbalance of RaudhahVille in Selangor developing more RSKU under right track by prioritising the supply-demand in the market because the people are asking for Cyber Valley is Malaysia’s first the brand of ‘Rumah Selangorku building of homes for the low- affordable housing.” city with Islamic characteristics. Idaman PKNS’, specifically for and middle-income groups. This was confirmed last year by the data released by the The project will potentially the low- and medium-income “As I said before, PKNS is National Property Information Centre where properties priced generate GDV of RM12.3 bil on groups.” evolving as a brand where we are between RM150,000 and RM200,000 saw an increase of 13% in the back of RM9.3 bil of gross This is in line with the corpo- not only able to develop low-cost total transaction value compared to properties above RM1 mil development cost (GDC) within ration’s main objective which is houses but also luxurious which saw a decrease of 16% year-on-year. 15 years of its estimated develop- to provide affordable homes for development. It shows that we “Personally, I think the property market will be better by ment period. the people of Selangor as well as are a versatile and sophisticated the third quarter this year due to various incentives from the Meanwhile, Selangorku realising the state government’s property developer in Malaysia.” government, an increase in affordable housing development and Idaman is PKNS’ affordable aim of building 20,000 units of the rise of alternative financing provided by fintech companies,” project in Selangor. It aims to affordable homes in stages by Tough going in 2019 says Mohd Azizi. provide people in the low- and 2020. It is a known fact that 2019 was a medium-income groups with the Since its establishment, PKNS challenging year for the property Marketing strategies chance to own a home. has built 60,907 low-cost homes market due to various factors To boost its sales performance in the current competitive The project, located in Section in Selangor. and PKNS was also affected. market, PKNS has set a few marketing strategies such as 6, Cyberjaya, is a Selangor Cyber It has also built 2,235 units of “Even so, we succeeded in property collection promotion activities, smart ownership Valley (SCV) project and has a affordable homes in Bukit Botak, launching a few projects such scheme, MyPKNS incentive scheme and rent-to-buy (RTB) GDV of RM16.9 bil. There will be , Kota Puteri, as Raudhah City and Rumah scheme. 864 units with built-ups of 1,000 Antara Gapi, Subang Bestari and Idaman Selangorku at Cyberjaya According to the PKNS Annual Report 2018, the corporation sq ft and priced at RM232,000 Shah Alam. and achieved our KPI for last achieved a total revenue of 110% of its target, with the majority each. year. contributed by the sales of building and land leasing. SCV is PKNS’ first smart No more high-end “Plus, we received eight This amount showed an increase of RM2.2 mil (0.4%) to city, sitting on 526ha of land. development awards last year alone and it RM6.26 bil in 2018 from RM6.24 bil in 2017. The smart city concept covers In recent years, PKNS seems to shows that all of our efforts have Meanwhile, the profit before tax and zakat recorded in 2018, the residential area, industrial have lost touch with its roots always translated into results. which amounted to RM116 mil, was RM5 mil (or 4%) higher than park, commercial centres and of being a social builder, and “We have a few plans for the RM111 mil in the previous year. educational institution, uniquely its role to contribute to the 5.79 2020. One of our biggest plans The higher profit was due to the margin from Westport equipped with facilities of high- million people of Selangor when for this year is the launching Holdings Bhd’s land lease, which contributed nearly 100% of the speed fibre-optic cable network it started developing high-end of Selangor Business Capital at total profit of RM115 mil. as well as an environmental de- projects such as the luxury Cyberjaya that will attract local PKNS continues to strengthen its initiative to improve tection device for the purpose of three-storey Hijauan Enklaf and foreign investors to open up property sales performance, which is the core business and the indicating air quality and public Semi-Ds Alam Nusantara in their business here.” main contributor to revenue. amenities. , Shah Alam. Next, Mohd Azizi says PKNS PNS has 11 subsidiary companies – PKNS Engineering & The project is expected to be Mohd Azizi admits it is some- will strengthen its plans to Construction Bhd, De Palma Management Services Sdn Bhd, fully completed by 2027. thing done in the past. “Yes, it is develop more affordable housing Selangor Industrial Corp Sdn Bhd, SACC Convec Sdn Bhd, Previously, SCV was known true that our priority is to cater to help the low- and middle-in- Selgate Corp Sdn Bhd, Datumcorp International Sdn Bhd, PKNS as Selangor Science Park 2. for the low- and middle-income come groups to have their own Real Estate Sdn Bhd, Selaman Sdn Bhd, Worldwide Holdings SCV is consistent with PKNS’ groups by providing them with homes. Bhd, PI Brilliant Bhd and Akademi PKNS Sdn Bhd. objective to drive the growth of affordable housing and I believe “Also, we will look at poten- As of 2018, PKNS has invested a total of RM1.7 bil with PKNS’ newly developed towns. we are still on the right track. tial projects to be redeveloped a return of RM366.5 mil in accumulated dividends via the Moreover, mixed development “Moving forward, there will as a way to increase their value subsidiaries. was also included as part of be no more high-end projects. as well as providing better in- the science and technology However, the launching of our frastructure to its owners.” 34 property FocusM | March 2020 Eight things to watch out for in Malaysia’s rental market in 2020

ILL things change for the Malaysia property market • Stubbornly high in 2020? Have we hit the bottom of the property price housing prices cycle? despite the One thing has changed, though. The stubbornly property glut is high prices of houses - making it prohibitive for young MalaysiansW to buy property - has led to renting becoming the main pushing would-be alternative. buyers to rentals Even then, will rentals go down further this year in the wake of the mighty overhang in the property market? Does Malaysia have in place the foundations for a sustainable renting environment? • Even the rental Here are eight matters concerning the rental market to watch out market is facing for this year: pressure to depress rates Expect rents to units bought under low upfront decline and no interest payment schemes • Government With the release of more in the past, could be under measures to ease property in 2020, everyone pressure to generate income 1is expecting rents to further to service mortgages and they the situation: Are 2020 and beyond will definitely The rental market would go down reduce this year and into 2021. will have a strong motivation be a tenants’ market, says further this year, says Tan they enough? Nawawi Tie Leung Property to secure tenants, even at lower Cheong Consultants Sdn Bhd executive than market rates,” he tells • High-end condo director Brian Koh says rentals FocusM. According to him, apartments would go down further this year. face a strong possibility of de- Ernest Cheong PTL Char- and terrace houses in the Klang “Yes, (particularly) for serviced owners would clining further as supply is seen tered Surveyors consultant and Valley that in 2018 and 2019 would apartments, condos, offices and rather keep the to continue to outstrip demand senior partner Dr Ernest Cheong rent for RM1,000-RM1,500 a retail due to the huge amount of premises vacant considerably. says as more families are not able month would be the most popular already existing supply as well than rent to ‘the “This is because of faster to buy houses, they are looking to for new tenants. as those being completed in the completion of new projects rent homes. “This year, due to increased next two years,” he tells FocusM. wrong crowd’ that will come into the market “For higher-priced condo- demand and relatively short According to the latest data compared to the growth in tenant miniums and detached houses, supply of these houses, the released by the National Property demand. Tenants have lots of rentals of RM3,000-RM4,000 a rents for them would increase Information Centre (Napic) choices, so rental activities are month would likely remain un- to between RM1,500-RM2,000,” which was in September last year, mainly focused on relocation changed, but they could drop as he notes. close to 40% of the overhang in from older to newer units at existing tenants move to cheaper Raine & Horne Interna- residential properties in the by possibly lower rentals. accommodation and new tenants tional Zaki + Partners Sdn Bhd country is made up of high-rise Sharina Ahmad “Owners, especially specu- can’t afford to pay the high rent,” associate director James Tan units priced below RM400,000. lative investors with multiple he points out. agrees that the rental market The data shows that the

The outlook for the property market remains challenging as supply continues to dwarf demand going forward March 2020 | FocusM property 35

not be able to cover the mortgage who want a less costly, smaller resulting in negative cash flow. alternative that matches their With the release of In the latter case, landlords budget. more property in will have to cover the mortgage “When you’re a homeowner, 2020, everyone is themselves. Those who cannot it’s much more difficult to break expecting rents to maintain the house will have no free of an expensive house further reduce this choice but to let go of their units,” because of the fees involved with year and into 2021. it said. buying and selling a home. Also, Raine & Horne Interna- if a homeowner has invested a tional’s Tan says this year will significant amount of money in definitely be one for the tenants. renovations, the selling price “They can pick and choose might not cover these costs, and have many alternatives/ leaving them unable to sell or choices. The issue, especially for move,” says Cheong. offices, is the relocation cost, not He notes that the flexibility so much for residential,” he says. available to a tenant is not available to a homeowner who is saddled with fixed monthly New terms for housing loan payments to the rental payment bank no matter what happens to Expect new ways of rent his personal situation. payments such as direct 3debit monthly payments to become standard in 2020. Healthy balance “There may be some innovative between demand online rent payments, but I think and supply most of the tenants will pay their Developers are expected monthly rent directly to their 7to be more pragmatic when it landlord, who are individuals comes to launching new projects using the old fashioned cash and thus help create a healthy or cheque payment methods,” balance between supply and Cheong notes. demand. They are likely to focus However, Tan says, due to the on creating the right kind of number of overhang residential supply situation, tenants may ask supply that aligns with the aspi- properties as at 1H2019 had for more freebies and flexible rations of a city and its people. accumulated to 32,810 units terms. Some shopping centres Cheong says it must be worth RM19.76 bil, an increase are giving three to six months remembered that supply and of 1.5% in volume while the value Property market to rent-free to lure tenants. demand for properties depend on decreased by 0.5%, as compared the overall economic situation in to 32,313 units worth RM19.86 bil remain challenging Malaysia. “If the economy is bad in 2H2018. No loan default and and people can barely survive Of the ‘overhang’ homes, about KENANGA Research says the outlook for the property market credit score and barely manage to pay for food 43% are condominiums or apart- remains challenging as supply continues to dwarf demand According to Cheong, and rent, they do not have spare ments. Many of these are priced going forward. due to the uncertain money to buy properties.” at RM200,000 to RM300,000 4economic situation and the high He foresees that for the next The research firm argues that as property developers (22.3%), followed by those in the continue to launch new properties to keep their business risk of being unable to make five years at least, 95% of Malay- RM300,001-RM400,000 bracket operations going, the number of unsold units under monthly mortgage payments sian families can only think of (17.5%) and more than RM1 mil construction is expected to add to the already high levels to the banks for the next 30 how to survive day-to-day. They (12.8%). of completed properties. years, it would be preferable dare not think - cannot afford The increased number of On the demand side, there are fewer property buyers for would-be house buyers to to think - of buying properties affordably priced residential as property prices are perceived to be less affordable consider the rental option where because they simply cannot properties that remain unsold relative to the mass market, especially against a soft the would-be tenant has no loan afford them. has also caught the authorities’ economic backdrop, it adds. default worries and would not be “When 95% of Malaysian attention. “In response, we expect property companies to ramp subject to ‘credit score’ financial families cannot afford to buy According to the definition by up their aggressive marketing efforts to help clear the scrutiny. properties, there is no demand Napic, overhang properties are inventory holdings. “Those who rent houses will for properties. It’s obvious that those which have received the “To shore up their bottomline, they may also be looking have no liability and responsibil- when there is no demand and Certificate of Completion and to monetise their non-strategic assets such as disposing ity to the bank,” he says. “When there is an oversupply of proper- Compliance (CCC) but remain of selected land parcels,” says Kenanga Research. the would-be tenant takes the ties, prices will fall. So, property unsold for more than nine It adds that there could be opportunities for investors rental option the person would prices will continue to fall for at months after completion. to bottom fish selective property stocks that are poised to have no loan liability to the bank least the next five years,” Cheong rebound from their overly depressed valuations. as he has no responsibility to concludes. It reckons that the government would continue to pay the bank the fixed monthly Tan sees the property market, It’s a tenant’s encourage house ownership to stimulate the property housing loan payments. The especially rental demand, adjust- market market and economy, after the previous home ownership would-be tenant is completely ing by itself. “In short, supply is There is now more campaign ended in December 2019. free of the banks.” increasing, demand is stable and choice in the market Among the initiatives in Budget 2020, the government rental is likely to consolidate.” 2for tenants in terms of location, has lowered the threshold for high-rise property prices quality and value. Landlords need in urban areas for foreign ownership from RM1 mil to No fixed to keep the property well-main- RM600,000, targeting to ease the overhang of high- commitment Factors affecting tained and attractive to tenants. rise properties and applying only to unsold completed Cheong notes that when rental market Professional property manage- properties in urban developments. the would-be tenant According to Koh, the ment and maintenance services 5takes the rental option and is free main factors that have The government has also introduced a rent-to-own will be in demand to ensure the of the responsibility to make the 8indirectly affected the rental financing scheme to assist first-time prospective buyers highest occupancy rate. of homes below RM500,000 through a five-year rent monthly housing loan payments, market include foreign direct “Yes, 2020 and beyond will agreement with an option to purchase after the first year he is able to respond to changes investment (FDI) growth, definitely be a tenants’ market,” at a fixed price. in his financial situation, say, employment prospects, salary says Cheong. Kenanga Research notes that investors’ focus would when he loses his job. increases, resuming the Malaysia According to online portal be on inventory levels and balance sheet positions as “He therefore avoids the My Second Home (MM2H) ap- iProperty.com.my, the new inventory levels are expected to remain elevated. possibility of having to default on provals for qualifying foreigners, supply of completed units plus “On one hand, property companies are offering housing loan payment and face and the growth of, and rules for, the existing units will lead to a attractive discounts and incentives to improve cash flows bankruptcy.” AirBnB. downward pressure in the rental and reduce the number of unsold completed properties. “Over the short to medium market as would-be tenants will “On the other hand, these entities will still have to term, it will likely be a tenants’ be spoilt for choice while land- continue launching new properties to sustain sales and Flexibility to market. However, there is a lords fight for them. carry on their business activity, as units not taken up from downgrade limit to the downside decline “This will make it ideal for these new launches will subsequently add to the inventory In today’s economy, in rentals for high-end condos would-be renters as landlords of unsold properties,” says the research house. many people struggle as most of these owners have will most likely be open to 6to make ends meet. By renting, greater holding power and there- Against a backdrop of intense competition amid the price negotiations. Meanwhile, property glut, cash flows will be essential especially for people have the option to down- fore have less pressure to reduce landlords will be at the losing property companies with relatively high gearing, it notes. grade to a more affordable living rental to rock bottom; they would end, regardless of whether they space when their lease expires. rather leave them vacant than get manage to secure tenants or not. “Flexibility to downsize is tenants of the wrong profile,” he “The rentals will most likely especially important for retirees opines. 36 property FocusM | March 2020 Schedule of Parcels and ‘SiFUS’ to achieve the ultimate goal

• With the new strata the loopholes) and repealing The owner of regime, purchasers redundant sections of the Acts a penthouse to achieve this much-needed will have bigger share can be confident of transformation. The new salient units, thus getting their strata mechanisms are elaborated more voting titles as developer’s below. rights, but land surveyor and Schedule of Parcels he also has architect have to pay higher To ensure that strata titles can be maintenance to certify on the obtained eventually, Schedule of charges Schedule of Parcels Parcels (SOPs) must be filed with the COB before the developer that the buildings/ can sell any parcel or proposed land can be parcel under S.6(1) SMA 2013. subdivided before The new regime of law requires signing the SPA the developer to comply with all the pre-requisites before proceeding with any sales of • Strata titles must the parcel. be issued before The major pre-requisite re- quirements include the payment delivery of vacant of all premiums and fees to the of a penthouse will have bigger The developer shall let the as developer’s licensed land possession relevant authorities and bodies; share units, thus more voting purchaser into possession of the surveyor and registered architect land and strata title survey; rights (if voting is done by poll) said parcel upon the following: have to certify on the SOP that approval of building plans and as compared to the owner of (a) the issuance of a certificate the buildings/land are capable of allocation of share units. The an intermediate unit. A parcel of completion and compli- being subdivided before signing SOPs are prepared by developer’s owner with a bigger share unit ance; the sale and purchase agreement licensed land surveyor, compris- will have to pay higher mainte- (b) the separate strata title (SPA) and strata titles must be ing of location plan, storey plan nance charges. relating to the parcel issued before delivery of vacant by and delineation plan – drawn has been issued by the possession. Chang Kim Loong based on approved building Better protection for appropriate authority; plans. It shall show all the house buyers (to a certain (c) water and electricity supply The developer has to display ection 6 of the Strata parcels with dimensions, areas, extent) is ready for connection to 9 the Schedule of Parcels chart Management Act, 2013 share units, all accessory parcels, Implications from these new the said parcel. conspicuously/ prominently at (SMA, implemented common properties using the provisions that are beneficial to its sales gallery/office so that on June 1, 2015) makes same format as approved strata purchasers are as follows: Further, the developer cannot purchasers can see all parcel it compulsory that a title plans. Before any sale, the developer 4 claim the next 2.5% progress areas, dimensions, share units Sdeveloper cannot sell any parcel Developers cannot simply 1 must obtain all necessary payment unless the duly executed under S.6(2) SMA 2013 so that (stratified properties, whether carve out any common property approval on land matters with instrument of transfer together they can be well informed before commercial or residential) and accessorize it as they like land premiums, registration of with the original issue document signing the sale and purchase unless the Schedule of Parcels before, or accessorize remaining title fees paid, land title and strata of strata title is delivered to the agreement. This will avoid any has been filed with the Commis- unsold residential car parks to survey fee paid, approved equita- purchaser or the purchaser’s future grievances. sioner of Building (COB). Thus, it developer units. Under S.6(3) ble share unit for all the parcels solicitor under item 4 Third is incumbent upon the develop- SMA, developer’s licensed land including provisional block, Schedule (Schedule of Payment). Under the revised defi- er’s licensed land surveyor and surveyor and registered architect and approved building plans. A 10 nition of “developer” registered architect to certify have to certify on the SOP that the Certificate of Share Unit Formula Developer shall be liable to which includes liquidator under that the building/land can be buildings/lands shall be capable or Sijil Formula Unit Syer or its 5 pay liquidated ascertained HDA (as amended by the 2012 subdivided. of being subdivided. acronym “SiFUS” is a certificate damages (LAD) calculated at the amendments), SMA 2013, de- A developer has to display An SOP shows the proposed issued by Director of Lands and rate of 10% per annum for delays veloper including liquidator for the Schedule of Parcels (SOP) share units of each parcel or Mines (DLM) after all these con- in delivery of vacant possession an existing building must now in a conspicuous location at the proposed parcel and the total ditions are complied with. This beyond the stipulated period of submit for strata title application point of sale so that purchasers share units of all the parcels. new requirement is in line with 36 months if the strata title has within three months after the know what they are getting In the case of a phased devel- the spirit of the Strata Titles Act, not been issued. A new clause enforcement date to avoid being eventually. With the share units opment, the SOP shows the which is to achieve issuance of now allows a purchaser to deduct prosecuted. being calculated according to proposed quantum of provisional strata title simultaneously with such LAD from any instalment the First Schedule of the SMA share units for each provisional delivery of vacant possession. of the purchase price due to the Conclusion 2013, sharing of responsibility block. Total share units of all developer – a set-off or contra. With the mushrooming of in maintaining the common parcels, including provisional For a housing developer high-rise buildings (vertical areas will be more equitable block, is normally referred to as 2 licence and sale/advertise- A developer including liquida- strata titles) and gated/ guarded and transparent and developers the aggregate share unit. ment permit to be issued by 6 tor (as a de-facto developer) housing (horizontal strata titles), are also required to pay main- the licensing department of the for an existing scheme cannot it is inevitable that our country tenance charges, sinking fund Share unit Housing Ministry, the developer sell any parcel or proposed parcel moves towards this improved and other outgoings for their Share unit is the number needs to obtain the “SiFUS” until the SOP has been filed with comprehensive regime of law to unsold units. assigned to each parcel by the de- from DLM and file a copy of the COB under S.6(1) SMA 2013. better govern the fundamental veloper’s licensed land surveyor Schedule of Parcels with the COB. need of modern society – owning Closing the floodgates to determine the maintenance Amendment of building plans a home, forming a community The government has heeded the charges, sinking fund and other To further protect house 7 by a developer will be reduced and living within a shared envi- recommendations of the National outgoings, to be paid by each 3 buyers, the concept of and made tedious by requiring ronment. House Buyers Association (HBA) parcel owner in an equitable “vacant possession (of residential that any proposed amendment The changes led by the new to close the floodgates and and transparent manner. Share parcel property) simultaneously of such building plans, thus strata regime will, to a certain resolve the issue of recalcitrant units are computed based on with strata title” was adopted. It requiring amendments to the extent, address the inadequa- housing developers who deliber- area, usage, size and location of effectively means that a developer SOP, after having filed with the cies and shortcomings faced by ately fail/neglect/refuse to apply the accessory parcel using the cannot deliver vacant possession COB requires the prior written the old strata laws and provide for strata titles and the issue prescribed formula under the and claim 17.5% progress payment consent of all purchasers. Any adequate protection to the of failure to effect subsequent First Schedule of SMA 2013. Share unless the strata title has been refiling whatsoever to COB purchasers of the developer’s transfer of strata titles in pur- units shall be determined before issued. This is the effect of must be made within 30 days products. After all, purchasers chasers’ name, though the full any sale so that purchasers know Clause 27(1) Schedule H of the under Regulation 6(3) (b) Strata are developer’s customers and purchase price has been paid by from the onset their share of Housing Development (Control Management (Maintenance and should be treated with dignity the purchasers. payment, including those of the & Licensing) Regulations 1989 (as Management) Regulations 2015 and not short-changed. It was serious enough for developers for their unsold units. amended in 2015). The new clause (SMR 2015). the government to enact new Each parcel is allocated reads inter-alia: Datuk Chang Kim Loong is statutory provisions, amending with share unit and is shown Clause 27 (1) Manner of delivery Purchasers can be confident secretary-general of the National existing ambiguous laws (to plug on the strata plan. The owner of vacant possession 8 of getting their strata titles House Buyers Association (HBA) March 2020 | FocusM mainstream 37

by OPR cut to have marginal Ranjit Singh

ank Negara Malaysia’s (BNM) decision to impact on banks’ profitability reduce the Overnight Policy Rate (OPR) by 25 basis points to 2.75% rates high and, if there is scope to Bon Jan 22 is expected to cause do so, by reducing deposit rates. a marginal decrease in banks’ Impact of 25bps OPR cut on NIM, net profit , ROE and valuation of banks In markets where intense compe- profitability. tition is also felt from non-bank RM MIL MAYBANK CIMB PUBLIC HONG RHB ABMB BIMB MBSB The last time the central bank BANK LEONG BANK financial institutions, banks will cut rates was in May 2019, where Financial Year End Dec Dec Dec June Dec March Dec Dec be more constrained. the OPR was also cut by 25 basis Gross loans 562,238 381,819 344,843 144,445 185,302 45,294 52,458 37,677 While banks’ pre-tax profits points to 3%. % floating rate loans 72.2% 84.2% 78.2% 81.6% 88.0% 82.9% 92.0% 45.1% have grown steadily, their returns One of the main reasons cited % of domestic loan 59.2% 59.4% 92.8& 94.7% 89.4% 100.0% 100.0% 100.0% on equity (ROE) and assets (ROA) by BNM for the rate cut was the Absolute amount of domestic floating rate loans 240,161 190,896 250,209 111,707 145,758 37,552 48,264 16,992 have largely trended below the heightened volatility on the global 25bps impact of rate cut on interest income 552 439 575 116 335 31 111 39 decade average since 2014. front and as a pre-emptive move Interest income estimate for FY20 (Before) 22,934 21,048 17,186 6,421 8,069 2,028 3,130 153 The bulk (68.5%) of the banks’ to ensure that domestic con- Interest expense estimate for FY20 (After) 22,381 20,609 16,610 6,332 7,734 1,997 3,019 114 gross income is contributed by sumption remained healthy as it interest income from lending 3 months lagged impact of repricing of domestic FD rates 402 320 419 47 244 0 81 28 accounted for more than 50% of activities, reflecting the dominant Interest expence estimate for FY20 (Before) -10,976 -11,230 -9,073 -3,574 -4,476 -1,042 -1,501 -4 the GDP. Interest expense estimate for FY20 (After) -10,573 -10,910 -8,654 -3,528 -4,232 -1,042 -1,420 2 4 role played by banks in financing An analyst with a bank-based the economy. As such, banking Net interest income estimate for FY20 (Before) 11,958 9,818 8,113 2,847 3,593 985 1,629 149 broker tells FocusM that banks’ system income and profitability Net interest income estimate for FY20 (After) 11,808 9,699 7,956 2,805 3,502 955 1,599 138 net interest margin (NIM) would typically moves in tandem with Change (%) -1.3% -1.2% -1.9% -1.5% -2.5% -3.1% -1.9% -7.1% be temporarily affected but the cyclical patterns in financial Change (RM mil) -150 -119 -156 -42 -91 -31 -30 -11 situation would normalise in Assume tax savings (36) (29) (38) (10) (22) (7) (7) (3) intermediation and economic a short time as deposits would Net impact -114 -91 -119 -32 -69 -24 -23 - 8 activities. be repriced to reflect the lower FY20 Net profit after tax (before) 8,345 5,004 5,814 2,772 2,513 442 856 652 interest rate. Lower pace of economic FY20 Net profit after tax (After) 8,231 4,914 5,695 2,740 2,443 419 833 644 “There would be a marginal activity Change (%) -1.4% -1.8% -2.0% -1.1% -2.8% -5.3% -2.7% -1.2% impact on banks’ earnings from The Malaysian economy was FY20 NIM (Before) 2.26% 2.39% 2.12% 1.89% 2.13% 2.43% 2.39% 2.84% the recent 25bps OPR cut. Their affected by domestic and external FY20 NIM (After) 2.24% 2.37% 2.08% 1.86% 2.09% 2.37% 2.35% 2.82% quarterly NIMs are expected factors which saw increased Change (%) -0.02% -0.02% -0.04% -0.02% -0.04% -0.06% -0.04% -0.02% to normalise after three to six non-resident portfolio outflows, months from the repricing of FY20 ROE (Before) 10.8% 9.1% 13.1% 10.4% 9.9% 7.7% 14.1% 8.1% weaker oil prices, escalating FY20 ROE (After) 10.7% 9.0% 12.9% 10.4% 9.7% 7.5% 14.0% 8.1% deposits to a lower rate. In the trade tensions and a lower global Change (%) -0.1% -0.1% -0.2% -0.1% -0.1% -0.2% -0.1% 0.0% last rate cut in May 2019, most growth trajectory in 2019. banks’ NIMs recovered as quickly Fair Value (RM/share) (Before) 9.80 6.00 23.60 18.90 6.50 2.90 4.80 0.95 Correspondingly, there was as three months,” says the analyst. Fair Value (RM/share) (After) 9.70 6.00 21.20 18.90 6.50 2.80 4.70 0.95 lower demand for financing and Bank profitability is pivotal to Change -0.10 - -2.40 - - -0.10 -0.10 - other banking services from financial stability and sustainable SOURCE: COMPANY, AMINVESTMENT BANK BHD businesses in line with the more economic growth. Healthy profits moderate pace of economic among banks is fundamentally unproductive exposures which can low interest rates will erode “By actively managing their activity. important to ensure the financial lead to increased financial fragility. banks’ income by sapping their business lines, banks are expected Moving forward, softer system remains resilient and can Sunway University professor traditional lending activity. This to react to the low interest economic and market conditions support effective credit interme- and a member of BNM’s Monetary will also hurt their franchise rate environment. The actual amid uncertainties in the external diation in the economy. Policy Committee (MPC) Dr Yeah value. response depends on whether environment will continue to According to a BNM report, Kim Leng tells FocusM that banks Compressed bank margins the environment is perceived to weigh on demand for banking stable profits support the ac- could use alternative strategies to and profitability can in turn be long-lasting,” said BIS. services. cumulation of capital buffers address the issue of falling revenues harm their ability to lend by On the income side, banks see Higher impairments from the which enable banks to continue in a low interest rate environment. constraining capital accumu- their profit margins shrinking, vulnerable household segment providing financial services to “Banks could look at increasing lation. particularly in the retail segment and business sector could further consumers even during periods their fee-based income during A second concern is that which generates interest revenue. weigh on profits. However, the of stress, thus acting to dampen periods of low interest rates as a banks may rebalance their The impact depends on the price potential impact of weaker asset the impact of adverse develop- strategy to enhance their revenue portfolios towards fee-related elasticity of loan demand and quality is likely to be muted ments in the real economy. stream,” he says. and trading activities. In the deposit supply. given the more forward-looking Banks that persistently record According to a report by the short term, this may offset BIS added in markets where approach to provisioning already low profits may be incentivised Bank of International Settlement shrinking profits, but once the elasticities of these two adopted by banks following the to take undue risks to improve (BIS) in 2019 entitled “Bank policy rates reverse, the greater functions are low and loan implementation of Malaysian their profitability. For example, Intermediation Activity in Low exposure to financial markets demand is anaemic, banks will Financial Reporting Standards 9: they may be more willing to Interest Rate Environment”, a could weaken the institutions’ counteract the compressed Financial Instruments (MFRS 9) take outsized bets on riskier major concern is that prolonged soundness. interest margin by keeping loan in 2018.

by Ranjit Singh ome RM7.8 bil in Goods Tax expert: Make it a law to and Services Tax (GST) refunds have yet to be paid to taxpayers, ac- cording to news reports, Sand it would only be fair that the pay interest on GST refunds government pays interest on the delayed refunds to aggrieved Department has not done its Malaysian Manufacturers been paid to 54,603 accounts However, the Public Accounts taxpayers as compensation for field audits on the amounts being (FMM) urged the government registered with the Customs. The Committee (PAC) discovered that the loss of usage of their money. claimed,” Veerinderjeet explained. to expedite outstanding GST repayments were made possible there was only RM1.5 bil in GST However, boutique tax Although it seems unfair to the refund payments to taxpayers after the government received the refunds due as of May 31, 2018. advisory firm, Axcelasia Taxand affected taxpayers, he said it was as it severely affects their cash first tranche of special dividends The PAC also said RM9.6 bil Sdn Bhd chairman Dr Veerinder- not a question of what is fair or not flow. of RM8 bil from state-owned oil of refunds were in review while jeet Singh told FocusM that there as the law is silent on the matter. The FMM urged the author- company, Petroliam Nasional Bhd RM3.9 bil were for non-taxable was no provision in the law for That said, he believed that as ities to conduct a verification from a total of RM30 bil. supplies, RM900 mil related to the government to pay interest a reform measure and to keep tax audit based on taxpayer risk In March 2019, Finance exemption issues and RM3.5 bil on delayed GST refunds. agencies on their toes, a provision profile to shorten the process- Minister Lim Guan Eng claimed were being investigated. “There is no provision in the to pay interest to the taxpayer for ing time instead of a field audit. that the unpaid GST refunds stood The GST which was intro- law to pay interest on delayed delayed refunds beyond a specific The authorities have a period of at RM22.14 bil and not RM19.4 bil duced in April 2015 was repealed refunds made by the Customs timeframe should be added into six years to conduct the audit. as earlier declared because there in September 2018. Its abolish- Department. The amounts due the law. As at Feb 28, 2019, a total were additional claims made ment formed part of the Pakatan are all delayed as the Customs Recently, the Federation of of RM4 bil in GST claims had between May and December 2018. Harapan election manifesto. 38 mainstream FocusM | March 2020 A broad-based stimulus package may be needed

• It is a good move and it is optional as members by the government who opted to maintain their contribution rate of 11% would to seek input from need to fill up certain forms. industry players on “The measures will only the likely impact be transitory and the contri- and areas where bution rate will be restored to the original 11% once the government economy recovers. Usually, the assistance is most government will indicate a fixed needed in the event timeline to bring back the con- tribution rate to its original state. of a full-blown The reduction in the contribu- coronavirus crisis, tion rate would help improve says economist disposable income among the working population. “Apart from that, the gov- ernment can accelerate the implementation of infrastructure projects. This will help boost construction activities which by will benefit other sectors such Ranjit Singh as manufacturing and services. “Perhaps speeding up the conomists have lauded implementation of Malaysian@ the move by the Work initiatives can also be Ministry of Finance deemed as a form of economic (MoF) to organise a stimulus as it will encourage the multi-ministry dis- recruitment of more workers. Ecussion to plan for an economic The tourism, retail, airline and transportation industries are likely to be the focus of attention in any Maybe the size can be increased stimulus package amid the novel stimulus package to boost consumer spending in the current context,” added coronavirus outbreak. Afzanizam. “MoF is very concerned with The US subprime crisis the outbreak of the 2019 novel players on the likely impact and stimulus package. market sentiment,” he said. in 2009 saw the government coronavirus which has affected areas where government assis- It was previously reported He added that the government introducing two fiscal stimulus the economy in general, and tance is most needed in the event that due to the virus outbreak, has no control over the external packages. The first one was in especially the tourism industry,” of a full-blown crisis. MoF intended to prepone an sector and the aim of the package November 2008 with a total allo- Minister of Finance Lim Guan “The tourism, retail, airline economic stimulus package would be to ensure that domestic cation of RM7 bil and the second Eng said in a statement on Feb 5. and transportation industries are initially planned to address spending continues to inch was in March 2009 amounting to Dr Yeah Kim Leng, a profes- likely to be the focus of attention the potential impact from the upwards in a manner that will RM60 bil. sor at Sunway University and as far as fiscal and financial US-China trade war. offset the weakness on the external “Back then, the crisis was member of Bank Negara Ma- support is concerned. A broad- Bank Islam Bhd chief econ- front. quite severe and therefore it laysia’s (BNM) Monetary Policy based stimulus package may be omist Afzanizam Abdul Rashid “Consumer spending accounts required a sizeable amount of Committee (MPC), tells FocusM needed to shore up consumer tells FocusM that the need for for more than 50% of the GDP. So fiscal injection. So the fiscal although the outbreak was in its spending to offset the external an economic stimulus package obviously, the immediate priority stimulus package has to be nascent stages, it was a timely headwinds,” said Yeah. has become more critical as is consumer spending will not be tailor-made to the current cir- move by the government. Lim had said the MoF will the external front has become interrupted by the ongoing global cumstances. The impact from “Although it is still too early meet with the ministries of more volatile. events,” said Afzanizam. the fiscal stimulus is immediate to implement a stimulus package Economic Affairs, Tourism, Arts “The goal here is to stimu- He added that measures to as compared to monetary policy. to counter the coronavirus & Culture and International late the domestic economy as stimulate the economy may include So depending on the severity, epidemic as it is still developing, Trade and Industry and related the external sector has become a reduction in EPF members’ fiscal stimulus can be launched it is a good move for the govern- service companies to obtain increasingly volatile and is contribution rate. This was done in order to safeguard economic ment to seek input from industry input in planning the economic affecting the trade sector and before in 2001, 2003, 2009 and 2016 growth,” said Afzanizam.

Grey Matters Should EPF rate be cut to stimulate the economy?

stimulus to the economy in 2009, stimulus to the economy and allowing them to dip into has been proven that government by 2013 and 2016, it had lowered as it was hoped to do. their old age savings does not spending has a large multiplier Ranjit Singh the EPF contribution rate for Studies have shown that Ma- come across as being prudent. effect on the overall economy. employees from 11% to 8% on an laysians are ill-prepared for It would be rather myopic to The government has to be optional basis. retirement as more than 70% assume that reducing the EPF responsible for introduc- here are calls for the The rationale for the move of contributors have less than contribution rate will be the ing measures to address Employees Provident was to enable the employees to RM50,000 in their EPF savings only panacea to overcome a weaknesses in the economy and Fund (EPF) to cut the have more disposable income. when they reach the age of 55. lethargic economy. The govern- resorting to quick fixes is not employees contri- This was hoped to act as a catalyst The question that begs to be ment should look at reducing the way to manage challenges. bution to the fund in to the economy as private con- answered is, will reducing the tax rates as one of the measures We must not allow any moves to Torder to encourage spending sumption accounted for more EPF contribution rate be as a to stimulate the economy. “gamble” with our retirement as part of the government’s than 50% of the country’s Gross wise move as evidence shows Given the government’s precarious funds. For many Malaysians, the move to stimulate the economy. Domestic Product (GDP). a majority of contributors have fiscal position, it does not have EPF is their only source of retire- This is not the first time such However, there is a lack of insufficient retirement funds? much room to manoeuvre. Perhaps, ment savings and any moves to calls were made. Previously, empirical evidence to show The rakyat needs to boost it could also raise public expendi- “threaten” the status quo should when the government provided that the EPF cut provided the their retirement savings ture to stimulate the economy as it be vigorously defended. March 2020 | FocusM mainstream 39 The race towards infrastructural sustainability

construction, as well as the Malaysia Green Highway Index. Lifting the CIDB had recently certified the Fog Light Rail Transit Line 3 (LRT3) project by MRCB George Kent Sdn Bhd with a five-star rating under the Design facet of Sustainable Infrastar, marking it as the first non-pilot project to be evaluated, as well as the first to score such a high certification. by But let’s not look too far for a Xavier Kong comparative measure, as Malaysia already has a friendly Asean-mem- ith consumers of ber neighbour with its own plan the world steadily for national sustainability. Yes, becoming more Singapore has its own plan as well, environmentally called the Singapore Sustainable conscious, it Blueprint, which aims to have 80% standsW to reason that the major of the nation’s buildings achieving industries of the world will a Green Mark Certification by 2030. follow along with the wants of Singapore has been looking at the consumer. As things go, the sustainable development for years, CIDB’s Sustainable Infrastar assesses an infrastructure project on key sustainability factors buildings we inhabit and the culminating in 2005 when the gov- infrastructure surrounding them ernment launched the Building and also form a big part of daily life. Construction Authority (BCA) Green Now, the third iteration, Malaysia’s own Sustainable the world in utilising urban It is only logical that not only Mark scheme, which led to the first which will run concurrently Infrastar. green infrastructure to mitigate will lifestyle choices become more iteration of the city-state’s first with the first two, seeks to A key difference is that the megadroughts. sustainable (no more single-use Green Building Masterplan in 2006, “engage building tenants and BCA Green Mark has an emphasis However, a majority of plastics!) but life choices will which sought to “encourage, enable occupants more actively to on water, which is understand- the core criteria retains the favour the environmentally and engage industry stakeholders to drive energy consumption able considering Singapore same idea of making sure that friendly as well. adopt new green buildings.” behavioural change and to has a lack of water sources, but infrastructure is built with as Enter the Works Ministry The second iteration launched address the well-being of the the city-state’s emphasis on little impact to the environment which, through its agency, in 2009 shifted the focus to people.” resolving this particular issue as possible, while minimising the Construction Industry “greening” the existing building But what we want from has marked them as a “Global wastage and stressing efficiency Development Board (CIDB), has stock, in accordance with the here is the BCA Green Mark’s Hydro-Hub” model, with city in energy and material resources. established the Construction nation’s target of having at least infrastructure criteria, which development portal Smart Cities An emphasis is also placed on the Industry Transformation Pro- 80% of their buildings being green would serve as a benchmark Dive identifying Singapore as an well-being of society, whether it gramme (CITP), a national agenda by 2030. against which we can measure example for other cities around be residents nearby or through to transform the construction social responsibility initiatives. industry through four strategic These are all in line with thrusts: quality, safety and the Sustainable Development professionalism, environmental Core criteria for CIDB’s Sustainable INFRASTAR Goals as put forth by the United sustainability, productivity and Nations in 2015, and each shows internationalisation. But let’s SUSTAINABLE INFRASTAR CRITERIA CRITERIA DESCRIPTION a commendable effort in getting focus on environmental sustain- the respective benchmarks right Pre-design and pre-construction Checks that the project has taken into account environmental, ability for this, considering the and tailored to the needs of the societal, and econominal impacts during its design and topic of this piece. individual nation. implementation phases A key focus about environ- mental sustainability is the means Site land use Checks that the project’s use of land minimises its impact upon Still, will it be soon through which it is measured, residents and the environmental nearby enough? and benchmarks vary far and Ecology and environment Checks that the project minimises impact upon the ecology and “The climate math is brutally wide across the world. Towards environment of the project area clear: While the world can’t be this end, CIDB has established Material resources and waste Checks that the project is managed to reduce waste and healed within the next few years, “Sustainable Infrastar”, an makes full use of material resources it may be fatally wounded by objective and evidence-based Energy performance Checks that the project is energy-efficient negligence until 2020,” said Hans evaluation system that assesses Social and culture Measures the project’s impact from a societal and cultural Joachim Schellnhuber, founder an infrastructure project on key perspective, such as CSR and now director emeritus of sustainability factors, such as land the Potsdam Climate Institute, use, the environmental impact SOURCE: CIDB according to a BBC News report of the equipment used, and the on climate change. management of both resources On that note, should every and waste on construction sites. nation be looking at separate According to CIDB, Sustain- Core criteria for Singapore’s BCA Green Mark benchmarks or guidelines in able Infrastar is based on similar determining what is green and systems such as CEEQUAL in the BCA GREEN MARK CRITERIA CRITERIA DESCRIPTION sustainable and what is not? United Kingdom, Envision in the Consider the fact that all of us Landscape, ecology and land efficiency Checks that the project minimises its impact on the United States, ISCA in , on this good green earth are environment through conservation of the green areas, and whether and Pearl Estidama in the United now in a race against the clock, or not it reuses previously built-on land Arab Emirates, “but with the as the above sentiment has been aspects mixed and matched to be Energy/Renewable energy Checks that the project uses renewable energy, and echoed independently by climate suitable for Malaysia,” according demonstrates that it is energy efficient researchers. to CIDB chief executive Datuk Water Checks that the project is efficient in water use, and that it Feasibility will always Ahmad ‘Asri Abdul Hamid. implements water harvesting and recycling remain an issue, but the idea Launched in March last year, Project management Checks that the project’s management meets certain green that there are still people, and Sustainable Infrastar is meant specifications, consults that relevent agencies, and evaluates worse, people in power, who to cover the gap in addressing the project’s risk and impact to the environment think climate change is a hoax environmental concerns for Waste management and environmental protection Checks that the project has adequate waste management and is horrifying. Here’s hoping that the construction industry and reduction, while using recycled or environment-friendly materials everyone will listen before it complements other tools such as Innovation Awards points for other environment-friendly features that do really is too late. the Malaysian Carbon Reduction not fall into the criteria above and Environmental Sustainability This article first appeared on Tool (MyCREST) for building SOURCE: SINGAPORE BUILDING AND CONSTRUCTION AUTHORITY focusmalaysia.my 40 mainstream FocusM | March 2020 March 2020 | FocusM PB AirAsia-Airbus deals in spotlight amid RM205 mil bribe probe

British controlling shareholders of both companies. prosecutors An industry source believes that there by found that could be “some hiccups” over segments of Airbus Emmanuel the agreement. bribed Samarathisa “What could possibly happen is that executives from the details of the orders and schedule may oncerns are brewing over AirAsia and be revised,” the source tells FocusM on business dealings between the AirAsia X condition of anonymity as investigations AirAsia group and Airbus SE as are ongoing. Another airframer as well as Malaysian investigators move airline “could be roped into” the various in to probe executives from the aerospace initiatives, the source added. Cdiscount airline who are said to be benefi- On Feb 5, AAGB and AAX announced ciaries of a RM205 mil bribe. to Bursa Malaysia that they would form a Industry sources have pointed out that committee to review the SFO findings. there are “worries” that agreements inked Regulators Malaysian Aviation Commis- by AirAsia Group Bhd (AAGB) and Airbus on sion and Securities Commission Malaysia Aug 30 last year may not pan out accordingly as well as enforcement agency Malaysian in the light of investigations into AirAsia. personalities including Malaysian Prime owned by the two AirAsia executives. These Anti-Corruption Commission have launched According to a press release by AAGB Minister Tun Dr Mahathir Mohamad. were among the details Airbus divulged to separate inquiries into the scandal. that day, these agreements entail, among “We do not have any comment,” an authorities as part of a US$4 bil settlement. Fernandes and Kamarudin have others, the purchase of 12 A330neo and 30 Airbus spokesperson tells FocusM. A While these executives were not named, maintained their innocence. “We are all in A321XLR aircraft, Airbus’ expansion of its spokesperson from AirAsia also declined AirAsia founders Tan Sri Tony Fernandes shock. We did nothing wrong. But another maintenance, repair and overhaul presence to comment. and Datuk Kamarudin Meranun had been challenge and we come back stronger,” the in the country and the establishment of the According to UK High Court documents implicated due to their past ownership of duo wrote in a Feb 3 memo to staff. Airbus Malaysia Digital initiative to boost released Jan 31, British prosecutors from the now-defunct Caterham Formula One Tharumalingam Kanagalingam (also the competitiveness of the local aerospace the Serious Fraud Office (SFO) found that team. known as Bo Lingam) has been appointed sector. Airbus bribed executives from AirAsia and Fernandes and Kamarudin have as the acting AAGB CEO in the interim. Spokespeople from Airbus and the its long-haul sister AirAsia X Bhd (AAX) as stepped down from their executive posts AirAsia group declined to comment on the a reward for an order of 135 planes. as of Feb 3 for two months to make way future of a partnership that was signed SFO said Airbus paid US$50 mil (RM205 for investigations. But they remain on the This article first appeared on and witnessed by a string of high-profile mil) in sponsorship to a sports team jointly board as non-executive directors as well as focusmalaysia.my

by Emmanuel Samarathisa ALL eyes are on AirAsia group founders Tan Past controversies around Sri Tony Fernandes and Datuk Kamarudin Meranun. Both men are not only controlling shareholders of AirAsia Group Bhd (AAGB) Fernandes, Kamarudin and AirAsia X Bhd (AAX), but important fixtures in the company – they are the founders. of the AAGB executive in return for his trading. Kamarudin was among them. Alleged RM12.6 mil fraud in But the duo had to relinquish their “showing favour” towards Rolls-Royce in He entered into a settlement on April 2 4 India executive posts on Feb 3 for two months the purchase of products and services, said last year with SC for RM3.64 mil for insider Fernandes, AAGB acting CEO Tharuma- to facilitatew investigations by Malaysian the SFO. trading of MAS shares in August 2011. lingam Kanagalingam (also known as Bo enforcement and regulatory agencies after According to the FT, the US$3.2 mil Kamarudin, who had a 32.18% stake, is a Lingam) and certain people linked to AirAsia Britain’s Serious Fraud Office (SFO) found credits were provided for a Bombardier controlling shareholder of AirAsia through India were summoned by the Enforcement fraudulent business dealings between Global Xpress business jet owned by Tune his investment vehicle Tune Live Sdn Bhd Directorate (ED) on Jan 20. European planemaker Airbus SE and AAGB Group Sdn Bhd, the holding company set and Tune Air Sdn Bhd. This was part of investigations into and AAX. up by Fernandes and Kamarudin. Kamarudin agreed without admission AirAsia India for allegedly lobbying the The agency found that Airbus had Rolls-Royce disclosed these as part of a or denial of liability to settle a claim that the Indian government to secure overseas flight bribed executives of AAGB and AAX RM205 £671 mil settlement where the engineering SC was proposing to institute against him permits and violating rules that bar foreign mil, paid in sponsorship to a sports team firm admitted a string of bribery and cor- for buying 5.66 million MAS shares between airlines from controlling Indian carriers. jointly owned by the duo as a reward for an ruption offences that go as far back as 1994, Aug 1 and 5, 2011. According to news publication Mint in order of 135 planes. involving a dozen countries. a Jan 20 report, ED summoned Fernandes These were among the details Airbus AAGB refuted Rolls-Royce’s admission. RM224.8 mil settlement for and senior officials of AirAsia India under divulged to authorities as part of a US$4 “AirAsia has had no dealings or transactions 3 breaching football rules the Prevention of Money Laundering Act bil settlement. with Rolls-Royce and has no knowledge of Fernandes took over British football team (PMLA). But Fernandes did not show up for While these executives were not named, any matter mentioned in the article,” the Queens Park Rangers (QPR) in 2011 with questioning on Jan 20. Fernandes and Kamarudin had been group said in a Jan 23, 2017, filing with Bursa Kamarudin and Datuk Ruben Gnanalingam ED is also probing irregularities of funds implicated due to their past ownership of Malaysia. of Westports Holdings Bhd. as well as criminal misconduct against the now-defunct Caterham Formula One But the trio would encounter financial AirAsia India when it was lobbying for a team. The two men have maintained their RM3.64 mil settlement for headwinds as QPR had to cough out a £42 licence to start services in India. innocence. 2 insider trading mil (RM224.8 mil) settlement for breaching The ED’s charge against Fernandes, But, this is not the businessmen’s first On Aug 9, 2011, Malaysian Airline System Financial Fair Play rules after the football according to Mint, comes on the heels of a brush with controversy. Below is a list of Bhd (MAS), AirAsia Bhd and AirAsia X club was found to break spending limits for years-long investigation by the ED and the past grievances: Bhd (AAX) entered into a comprehensive the 2013/14 season, upon promotion to the Central Bureau of Investigation which began collaboration framework. Premier League. in May 2018. RM13.23 mil in alleged The agreement, among others, involved A breakdown of the settlement includes: According to The Edge, citing Indian 1 kickbacks from Rolls-Royce Khazanah Nasional Bhd and Tune Air paying the league £17 mil for the fair play media reports, enforcement agents began The Financial Times in January 2017 Sdn Bhd in a share swap agreement that breach and £3 mil for the league’s legal probing into the affair after businessman reported that an AAGB executive received resulted in a cross-holding of shares and costs, and a payment schedule that Press Cyrus Mistry alleged that fraudulent trans- a US$3.2 mil (RM13.23 mil) bribe by Rolls- Tune Air obtaining a 20.5% stake in MAS and Association Sport understands to be 10 actions of 220 million rupees (RM12.6 mil), Royce Holdings in the form of a discount Khazanah getting 10% in AirAsia. years had been agreed. involving non-existent entities in India and for the maintenance of a private jet part- Also on the cards were MAS becoming a The balance of the original fine, £21.96 Singapore, were carried out in an instance owned by Fernandes. full-service premium airline while AirAsia mil, would be borne by QPR’s owners who involving AAGB. SFO charged Rolls-Royce with failing and AAX would be regional low-cost and had to convert outstanding loans to the club But AAGB refuted the allegations in a to stop staff from paying a credit “despite medium-to-long-haul low-cost carriers, into shares. June 2018 statement, calling them “baseless, those employees believing that, in con- respectively. The deal was aborted eight After paying the fine, Fernandes and unsupported and unjustified.” sequence, the AAG executive intended to months later following public outcry. Gnanalingam would step down with Amit perform a relevant function properly.” But, Securities Commission Malaysia Bhatia, a business acquaintance, moving up This article first appeared on This discount was given at the request charged a number of individuals for insider from his role as vice-chairman. focusmalaysia.my PB FocusM | March 2020 March 2020 | FocusM mainstream 41 Cronyism, patronage concerns in Mahathir’s Malaysia Inc 2.0

due to, among others, a high staff cost. by “I think we all acknowledge Emmanuel basically that a company like TM Samarathisa (Telekom) could do a better job in terms of being more efficient rime Minister Tun Dr but a lot of that cost is historial. I Mahathir Mohamad know a lot of that cost basically is may want to revive a essentially people cost [sic]. pet policy synonymous “The reason I said that is with his first stint as because if you think about TM PMalaysia’s leader but political today and where its profit level is observers have raised the spectre after basically the policy changes, of patronage and crony capitalism one of the easiest ways to essen- if the Cabinet followed through Mahathir (left) and Daim remain the powerbrokers tially get back to a reasonable with the plan. now as during the former’s first stint as PM profitability for TM would be to Mahathir said on Feb 10 that essentially do a very large cost the government would be resur- restructuring immediately,” he recting Malaysia Incorporated, a growth was neither based on US$220 mil to buy the shipping was quoted as saying in a Oct 23 public-private partnership policy, entrepreneurship nor merit. assets of Konsortium Perkapalan. PAC report. to provide a stable business en- Some of the conglomerates The perception of a bailout then According to Shahril’s esti- vironment for investors through and corporations “grew by arose as MISC is owned by mates, Telekom would need to a series of “open for business” mergers and acquisitions. They national oil company Petroliam “look straight away at cutting policies. didn’t build new enterprises but Nasional Bhd (Petronas). maybe 40-50% of the workforce Two political analysts have took over companies,” he said, Also, according to a May immediately.” raised concerns over the policy, citing the likes of Malaysia Airlines 1998 Wall Street Journal article, Moving forward, Chin and citing the lack of checks and Bhd and Telekom Malaysia Bhd. accusations of a bailout were also Gomez charge that transparency balances. “The lessons learned As for merit, Gomez high- levelled as Mirzan said the sale had to be front and centre of any do not appear to be applied in lighted that the trouble with would reduce his company’s debt government dealings with the Mahathir’s thinking on his pres- Malaysia Inc happened when to almost zero. private sector. entation of Malaysia Inc as it will it was fused with the National Gomez says Malaysia Inc had Political analyst Professor “All of them, when they be instituted today,” Professor Economic Policy (NEP) which failed on two scores James Chin of the University of (Pakatan Harapan) were in the Edmund Terence Gomez of the led to “unequal redistribution of Tasmania had panned the idea, opposition talked about trans- University of Malaya, a political wealth” and “selective patronage.” and Tan Sri Tajudin Ramli. saying it would be “bad” for the parency and how the previous economy specialist, told FocusM. Malaysia Inc was introduced But other non-Malay busi- country. “It will lead to state crony Barisan Nasional hid everything, “That is my concern.” in 1981 and included a slew of nessmen also benefited from capitalism and bad outcomes for now they are in power, they are Gomez did not deny the measures such as large-scale Malaysia Inc in the early 1990s. all,” he told FocusM. doing the same thing and worse,” rationale behind Mahathir’s first infrastructure projects and a They include Sir Francis Yeoh and Chin said under the Malaysia Chin said. rendition of Malaysia Inc which privatisation programme that ran Ananda Krishnan. Inc policy, only a few businessmen He pointed to the Council of ran throughout his first stint as from 1983. Yeoh’s company YTL Power would be allowed to bid and work Eminent Persons 100-day report prime minister (1981-2003). International Bhd would become on large projects, regardless of which has been stamped an official “The principle behind The same powerbrokers Malaysia’s first independent whether they were “Bumiputera secret. The report is believed Malaysia Inc was because Some of the mega projects that power producer after winning or non-Bumiputera.” to have detailed comments and Mahathir was enamoured by were borne out of Malaysia Inc the concession in 1993 while Mahathir was reviving the findings on institutional reforms the Look East Policy, basically include the North South Ex- Ananda Krishnan would go on to idea because “he thinks he can as well as public mega projects. inspired by the way a country, pressway and Tanjung Pelepas build a multimedia powerhouse succeed, exactly like what he which is Japan, after being dec- Port. Also created were publicly including the likes of Astro did the first time during the Where’s the accountability? imated by World War II, became listed companies Tenaga Nasional Malaysia Holdings Bhd, which was privatisation days of the 1990s,” Gomez questioned whether there an economic powerhouse, second Bhd and Telekom Malaysia Bhd, granted an exclusive licence to be Chin said. “But the good public was sufficient transparency and only to the US at that time,” he monopolies in the energy and the country’s sole pay-television utilities were sold off while the accountability especially with said. telecommunications sectors. provider until 2017. loss-making ones were kept in divestments and future priva- “So there was a logic to his But the beneficiaries of these “Before the 1997-98 Asian the public sector.” tisations. “I am worried about approach at that time,” he added. projects were names with close financial crisis, Mahathir was Ever since he took over the real accountability. That has not “Just like how Japan had its Nissans ties to powerbrokers, which, successful in creating Bumiputera helm after the May 9, 2018 general really come through, that he has and Sonys, so did Mahathir want back then, included Mahathir and corporate captains,” Gomez said. election, Mahathir had evoked recognised the mistakes of the to create strong brand names of former finance minister Tun Daim But it was the same financial Malaysia Inc as an economic past and will not replicate them international repute.” Zainuddin, the same as now. crisis that marked a turning point policy of choice. now.” But Gomez highlighted that Initially the thrust was to where growth based on debt “was On March 12 last year, he said Gomez also highlighted that the policy, “through the benefit of create a class of Bumiputera not sustainable during times of the privatisation policy of Malaysia while the political dynamics hindsight”, failed on two scores: corporate captains. Names that crisis,” he added. Inc was still “relevant” in tackling have changed, where Mahathir made vast inroads in Corporate Critics charge that Mahathir’s “an oversized civil service.” is part of Pakatan Harapan (PH) Malaysia in the late 80s and early policies of patronage led to a He cited the case of Telekom and his party Bersatu is among Permodalan 90s include Tan Sri Halim Saad series of bailouts post-Asian Malaysia Bhd. The telecommu- the smallest in the coalition, the Nasional is one financial crisis, including the likes nications company was made prime minister might have “re- of the largest of Konsortium Perkapalan Bhd, private and subsequently listed acquired the position of having enterprises in which was run by Mahathir’s own on Bursa Malaysia. This led to a hegemonic power in the Cabinet.” the country son Mirzan. reduction in the civil service as The realignment of gov- Maritime giant MISC Bhd paid staff were recategorised as private ernment-linked investment employees. companies and agencies, said “We find that this strategy is Gomez, alludes to the fact that still relevant in tackling the issue other political parties may have of an oversized civil service, been either silent in raising which has burdensome financial questions of Mahathir and implications,” Chin said. “Focus Bersatu consolidating power to must be given to increase in themselves. productivity and optimal use of “Why agree to Mahathir taking labour.” control of Permodalan Nasional But sovereign wealth fund Bhd (PNB) and Khazanah Nasional Khazanah Nasional Bhd managing Bhd? That relinquishes any checks director Datuk Shahril Ridza and balances. And, remember, Ridzuan told the Public Accounts PNB and Khazanah are some of Committee (PAC) last year that the largest enterprises in the Telekom’s earnings had sagged country,” said Gomez. 42 mainstream FocusM | March 2020 March 2020 | FocusM PB We cannot control share price movements, says C&C Bintang CEO

• Company to prioritise customer experience following failed privatisation attempt • It will continue to focus on investing in its sites, systems and people • Its new retail concept adopted at will be replicated at three other sites this year

by Xavier Kong

ycle & Carriage Bintang Bhd (C&C Bintang) CEO Wilfrid Jardine, the largest shareholder in C&C Bintang, says the outlook for C&C Bintang will continue to remain sluggish Foo has affirmed that the company will Ccontinue to prioritise customer 75% needed for the resolution to abovementioned period.” shareholders with a clean cash the offer price is not fair and not experience following the blocked pass, according to a bourse filing “Despite a competitive exit opportunity to realise their in the best interests of minority privatisation by its minority dated Feb 11. product line-up and the tax entire holdings in C&C Bintang shareholders. shareholders. holiday in 2018, C&C Bintang shares at a premium over the A circular dated Jan 14 issued He added that the company’s Background of the offer could not generate satisfactory market price,” said the announce- by Affin Hwang Investment Bank “long-term investor” Jardine The announcement on the priva- sales and returns in the recent ment. Bhd, as an independent adviser, Cycle & Carriage Ltd ( Jardine) tisation exercise came on Nov 11, years,” said the filing, adding With regards to the afore- also deemed the offer price as has reiterated its support for 2019, when Jardine made a filing that Jardine believed the outlook mentioned minimal benefit unfair, with the research house C&C Bintang and its strategic on Bursa Malaysia announcing for C&C Bintang “will continue from the listing status of C&C rejecting the use of the sum- direction. its submission of a proposal to to remain sluggish, and trading Bintang, Jardine noted that C&C of-parts valuation to justify the “C&C Bintang will continue the board of directors of C&C conditions are expected to remain Bintang had not undertaken any valuation of the core business and to prioritise investing in our sites, Bintang “to provide an avenue for challenging with continued fund-raising activities “over the assets of C&C Bintang. systems and people to address the the shareholders of C&C Bintang pressure on profit margins.” past 15 years,” adding that C&C Instead, by taking the challenging trading environment to realise all their holdings in It also stated the need for Bintang was actually incurring approach of looking at the and to position ourselves for the C&C Bintang at one time.” additional long-term capital costs to maintain its listing status revalued net asset value (RNAV), future,” Foo told FocusM. The proposal was for a priva- investments in C&C Bintang. and to comply with the regulatory Affin Hwang noted that the equity He added that the company tisation of C&C Bintang through Jardine said in the announcement requirements as a listed company value of C&C Bintang would be will be implementing the new a selective capital reduction and that Jardine Matheson Holdings on the bourse. approximately RM366.67 mil, automotive retail concept being repayment exercise, with an offer Limited, the ultimate holding “The privatisation of C&C which would translate to about used at its Mutiara Damansara price of RM2.20 per ordinary company of Jardine, “is com- Bintang by way of the proposed RM3.64 per C&C Bintang share. branch in Petaling Jaya at three share in the company, which the mitted to continue investing in selective capital reduction would This places the offer price of other sites this year. announcement called “a premium network upgrades and to operate provide greater flexibility to RM2.20 at a discount of RM1.44. C&C Bintang is a dealer for ranging from 44.24% to 75.52% the dealerships to the required C&C Bintang in managing and However, Affin Hwang also Mercedes-Benz vehicles and above the prevailing market price standards.” developing its existing business noted that the offer is reasonable, provides after-sales services for of C&C Bintang shares.” This required capital in- without the regulatory restric- citing the fact that C&C Bintang the German marque as well as for At the time of the offer, vestments, Jardine had stated, tions and costs associated with shares are “thinly traded”, while Fuso trucks. Jardine stood as a 59.1% stake- were going to be “high with long being listed,” said Jardine via the the proposal also represents the When asked about the failed holder of C&C Bintang. The offer payback periods,” especially in announcement. only available offer, considering privatisation attempt, Foo said: would have cost RM90.64 mil. the “challenging market condi- The announcement of the Jardine remains the single largest “Share price movements are The proposal also stated that the tions” then. Jardine also pointed privatisation offer saw C&C shareholder with 59.1%, in which a result of market forces and remaining 40.9% would have been to other disruptors to the global Bintang’s share price rallying “any alternative proposal will not external market conditions, dissolved upon the successful such as between Nov 11 and 13 last year, be successful without its support.” which we cannot control.” completion of the privatisation. ride-sharing, self-driving cars, staying above the RM2 mark Affin Hwang also pointed out During an extraordinary The offer was rationalised electric vehicles, and the changes throughout the following month that C&C Bintang had not traded general meeting on Feb 11, C&C as being a good opportunity for in consumer demand affecting and January 2020, before begin- above the offer price prior to the Bintang’s privatisation, which shareholders to exit under several the returns of C&C Bintang in ning its decline on Feb 6, 2020. offer itself, and that Jardine, being was through a proposed selective circumstances such as that of the short-term. the holder of such a large stake, is capital reduction and repayment a challenging operating and Shareholders would also The minority coalition able to influence the outcome of exercise at RM2.20 per share, was trading environment. According be able to realise their shares There were shareholders who most resolutions at shareholder blocked by minority sharehold- to the filing, the total industry at a premium compared to the were against the privatisation general meetings anyway. ers, with 13.18% (more than the volume for vehicle sales had average market price of about exercise, and, according to the “Therefore, we recommend threshold of 10%) of disinterested been on the decline from 2014 to RM1.30 then, with the mention sources of The Edge Malaysia the disinterested shareholders shares voting against the resolu- September 2019, on the back of that there was minimal benefit weekly, the most vocal of these of CCB to vote in favour of the tion. the “strong growth of the national in holding on to the listing status. protestors was Muar Ban Lee Special Resolution.” At the same time, the 57.94% car segment, while the non-na- “The cash consideration Group Bhd (MBL), which had ex- that voted in favour of the reso- tional car segment experienced under the proposed selective pressed its intention to scuttle the This article first appeared in lution was not enough to hit the a slowdown of about 18% for the capital reduction presents the privatisation bid, believing that focusmalaysia.my PB FocusM | March 2020 March 2020 | FocusM mainstream 43 Confusion over container deposits collection

• Consignees have the option to use three alternative methods • Ministry of Transport to issue a notice to this effect

by Doreenn Leong

here was some sense of relief when the Malay- sian National Shippers’ Council (MNSC) issued a statement on Feb T13 that shipping lines will no longer be permitted to collect cheque deposits from shippers and have the option to use three alternative methods. The council said the Minister of Transport (MoT) Anthony Loke had requested that shipping lines support and adopt alternative solutions to container deposits. The alternative instruments are non-cheque deposit (NCD) by Selangor Freight Forwarders and Logistics Association (SFFLA), According to the Malaysian National Shippers’ Council, the imposition of container deposit is an unnecessary financial burden for shippers Container Ledger Account (CLA) and iCARGO+ . SFFLA president Datuk Tony and within the free time provided Chia told FocusM that MoT would to the merchant at destination issue a notification to this effect as per their contract to enable and has proposed the date of the consignee to unload their implementation of these alterna- consignment from the container tives to be Feb 1, 2020. However, and the return of the empty box the ministry has yet to issue such to the carrier. a notice. The merchant is fully liable According to MNSC chairman for any damage to the carrier’s Datuk Andy Seo, the imposition container caused by the mer- of container deposit is an un- chant’s cargo operations as well necessary financial burden as it as any detention beyond the free affects the cash flow of shippers. time provided for in the contract. “The Bill of Lading, an agree- Ooi added that there are ment between the shipping carrier many forms of security measures and the shipper, already provides imposed by carriers on im- sufficient liability clauses that porters and it varies from one safeguard shipping lines against carrier to the other and from container damages and losses. each merchant depending on “Further, statistically there are the carrier’s assessment of risks. no figures to show any increase in He had said SFFLA’s NCD the incidents of missing or late scheme as an alternative to return of containers that justify TEU: Twenty-foot equivalent unit FEU: Forty-foot equivalent unit security deposits only saw accept- the imposition of this punitive ance from 272 members out of its measure. Therefore, we strongly SOURCE: FEDERATION OF MALAYSIAN FREIGHT FORWARDERS total membership of 648. There is believe there is no justification to also a big percentage of customs collect container deposits from container deposits anymore. instruments in lieu of the con- or exposure to non-payment of brokers who are not members of Malaysian importers or forward- He told FocusM that shipping tainer deposit to help resolve the container damage recoveries and SFFLA. About 38 carriers have ers,” Seo said. lines still reserve the right to long-drawn impasse between the detention charges. signed up for the scheme. According to MNSC, shipping continue collecting container parties involved. He said this is commonly Insurance is another form lines are currently unregulated cheque deposits from consign- He pointed out that shipping practised by container liner of a security instrument which and shippers continue to be ees who do not have the three lines do grant exemptions to operators worldwide where can be used to secure cargo plagued with the arbitrary and instruments. consignees from having to carriers face risks of non-pay- release without the need to put unilateral imposition of land-side “Shipping lines are forced provide a deposit as long as they ment of detention and container up a security deposit. “Some of charges and fees including high to collect container deposits as have a good track record and damage recoveries due from our members have an insurance terminal handling charges, depot there are delinquent consignees good credit lines. the merchants after the cargo is scheme which can cover con- gate charge and very recently, who return the containers in bad Previously, Shipping Asso- released to them. tainer damage recoveries and the collection of low-sulphur shape and some of them use it ciation Malaysia chairman Ooi Contractually, the merchant there is also a marine insurance surcharge. as a warehouse. As it is, there Lean Hin had said the practice is responsible for delivering cover offered by iCargo+ which A shipping line representative are already huge uncollected of securing a security deposit the empty container back to provides extended cover for said MNSC has made a “sweeping bills due to damages and long against the release of an import the carriers’ designated empty demurrage, detention and con- statement” and it painted a detention of the containers.” consignment is one of the depot (receiving facility) in the tainer damage recoveries without wrong picture of shipping lines He added that the shipping measures taken by container liner same condition as it was released any additional cost to the marine not being permitted to collect lines have accepted the three operators to mitigate their risks to the merchant at the load port cover,” said Ooi. 44 mainstream FocusM | March 2020 March 2020 | FocusM PB How has the Covid-19 eroded consumer confidence?

• With the retail sector badly hit in the last few weeks and anxiety over the global economy, consumer confidence is understandably at a low ebb • It’s very unlikely for consumer confidence to rise above levels seen last year, says an economist • But the swift implementation of a comprehensive stimulus scheme, coupled with measures such as bridging loans for companies and some flexibility in loan repayment, can help save the day

7-Eleven Malaysia Holdings Bhd CEO Colin Harvey agrees that the impact of the Covid-19 by outbreak is likely to be felt later Xavier Kong on. “One risk is that to the global oncerns over the supply chain; imagine China is Covid-19 outbreak shut down, what does that do to have led to sprees manufacturing, what does that of panic buying in do to the flow of goods?” says Singapore, with Harvey, adding that the worry Csupermarket shelves cleared of right now is that the outbreak will stock. Even in Malaysia, we see continue and spread geograph- a distinct lack of stock in face ically, which would also bring masks and sanitisers of any greater impact. The longer the Covid-19 outbreak lasts, the more consumer confidence is going to slip, with the travel and brand. But just how is consumer hospitality industries among those suffering the most confidence looking to shape up Not as calamitous over the coming weeks? That said, consumer confidence Malaysian Institute of moving forward is likely to MIER Consumer Sentiment Index, 2010 to 2019 Economic Research (MIER) remain depressed, but Nambiar senior research fellow Shankaran believes it will not depreciate to 140 Nambiar notes that consumer the point of 2016’s low of 63.8. MIER: Consumer Sentiment Index confidence has not been particu- “I don’t think anything as ca- 130 larly strong, with the institute’s lamitous as that will happen. With Consumer Sentiment Index the swift implementation of a 120 declining over the past three comprehensive stimulus scheme quarters. we can avoid a severe drop in “In the second quarter of consumer sentiments. This has 110 2019, the index recorded 93 to be coupled with measures such points, seven points below as bridging loans for companies 100 the threshold, and it has been and some flexibility in loan re- slipping since then, with 3Q19 payment,” says Nambiar, adding 90 showing 84 points and 4Q19 that the longer the outbreak lasts showing 82 points,” shares the more consumer confidence 80 Nambiar, who also believes that is going to slip. This, in turn, will the low growth rate in the fourth affect business sentiments. quarter of 2019, along with the As such, the Malaysian gov- 70 worries of the Covid-19 outbreak ernment has come to the decision this year, would make it “very that a stimulus package will be 60 unlikely that there is space for introduced to counter the slump 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 consumer confidence to rise in consumer confidence caused above levels seen last year.” by the coronavirus outbreak, and SOURCE: WWW.CEICDATA.COM | MALAYSIAN INSTITUTE OF ECONOMIC RESEARCH “With the outbreak and given Economic Affairs Minister Mohd the way the media has played it Azmin Ali has also promised up, consumers are naturally that there will be no delay in the and Service Tax (SST). also be boosted through the gov- estimated that up to RM2 bil net anxious. The retail sector would implementation of the stimulus The research house believes ernment potentially instructing contributions could be added to have been badly hit the last package. that a reduction of the SST to 3% agencies to hold conferences and the disposable income for house- several weeks. There’s anxiety, At the time of writing, there across all sectors for a six-month meetings in hotels and resorts, to holds. Based on Bank Negara too, about the global economy. are no details on the stimulus period “could provide a huge help mitigate the loss of tourist Malaysia’s estimate of household These factors would dampen package yet, with Azmin noting impetus to private consumption,” revenue. This could also signal consumption multiplier at 1.5 consumer confidence,” explains that the government is still in which in turn could mean a po- a collaboration between the times, we expect this move to Nambiar. the process of “fine-tuning.” tential RM7 bil injected into the government and the Malaysia As- translate into potential additional “Remember, even without Prime Minister Tun Dr Mahathir domestic economy. sociation of Hotels, which would consumption of some RM3 bil.” the outbreak there are concerns Mohamad will be announcing the Another possible option is aid the industry without straining “In light of the already about the Middle East, the details of the stimulus package on the increase in the tax claim for government coffers too much. expansionary Budget 2020 and lower price of oil, and the lower Feb 27. sponsorship of arts, cultural and A voluntary option to cut the impending announcement demand for palm oil from China However, AllianceDBS heritage activities in Malaysia, employee contribution to the of a fiscal stimulus package, and India. The numbers for global Research has come up with a list which could further encourage Employees Provident Fund by we believe that the Malaysian growth are not brimming with of possible measures under the private sector participation in at least 2% to boost household economy, whose domestic growth vitality, in any case. Add to that new stimulus package. The first local arts, cultural and heritage consumption could also be on the is mainly driven by private con- the virus outbreak and you can measure that could potentially activities, thus “spurring a higher cards. According to AllianceDBS sumption, will continue to be see why consumer confidence be a part of the package is the number of tourist arrivals.” Research, “for every 1% cut in EPF well anchored,” says the research will sag,” he adds. temporary reduction of the Sales The local hotel industry could contributions by employees, it is house. March 2020 | FocusM columns 45 PAS sets a trap for Mahathir

A Question of Business

by P Gunasegaram

Mahathir has done his part in helping the transition to a new government and it is time for him to let Anwar take over

ometimes the way to Seri Anwar Ibrahim very little they will if Mahathir does not Mahathir and the rest of the set a trap for a person time to do anything to swing the give Anwar a chance. MPs in Harapan support Anwar with a large ego, who tide of opinion which has firmly Hopefully, Mahathir still as the next Harapan choice for unrealistically believes moved against Harapan as many has the presence of mind and PM – and they have an obligation in his own infallibility opposition polls and the last few a willingness to consider other and duty to the public to do that Sand unflinchingly has faith in his by-elections have amply demon- things and the consequences – that issue does not even arise. own unjustifiable importance strated. of his actions. If the other side If Mahathir knows what is against all facts that point to the If Mahathir thinks that when comes into power, think in good for him, his family and “Hopefully, contrary, is to simply flatter him. the time comes he can jump on terms of former PM Datuk Seri friends and the rest of us, he Mahathir It will lull him into a state to the PAS-Umno bandwagon Najib Razak and his deputy then will do what he promised the of deep complacency and make and do a deal whereby he Datuk Seri electorate. He will announce a still has the him think that he is truly invin- becomes the interim supreme getting a pardon. date soon for his stepping down cible without him pondering far leader for the sake and in the Considering that Mahathir and give and urge unreserved presence of enough into the future to know name of ketuanan Melayu, he has initiated no reforms to limit support for Anwar. And yes, what is the true intention of that will be sadly mistaken. You the powers of the PM and to campaign unconditionally for mind and a praise. By the time he realises it, can’t play that same trick again move towards independence of Harapan too for GE15 with no it will be too late. so soon. institutions, think of changes at thought of influence – 22 +2 willingness to That is the nature of the For PAS and Umno know the top and of retribution moves years is enough. trap that PAS has set for interim that they can win the election towards Mahathir, his trusted consider other prime minister Tun Dr Mahathir without him. Tanjong Piai, lieutenant Tun Daim Zainuddin, His second chance has Mohamad when it proposes a where Bersatu was soundly Mahathir’s children, his friends, gone things and the vote of confidence for him to trounced, has clearly shown key Harapan ministers etc, etc. Mahathir has failed in round continue as prime minister in that with an unprecedentedly Mahathir has to realise or two as PM to do anything major consequences the coming session of Parlia- large loss for a ruling party in a made to realise that it is in his for the country other than help ment. Umno, PAS’ new partner, by-election. own self interest to ensure that the transition process to a new of his actions. remains coy and uncommitted Harapan wins the next general government. His second chance at the time of writing. Angered by PM’s poor election. Otherwise, things of remedying the wrongs he made If the other But whoever heard of a vote showing are going to get very tough for in the first round has gone. He has of confidence when there is no That by-election showed that him, his family and friends and done his part and it is time for side comes into necessity for one? There is no Bersatu, and by implication for the rest of us as a corrupt, him to go and let someone else power, think in point in affirming a status quo. Mahathir, enjoyed neither the kleptocratic government with take over. If Anwar disappoints, If somehow, PAS’ motion gets support of the Malays nor the all key members having received that’s another story but for now, terms of former put on the floor, then it is nearly non-Malays, both sides being kickbacks from Najib returns to he should succeed Mahathir. certain to be passed, at least by angered by his poor showing as power and wreaks its vengeance. Mahathir’s will cannot prevail PM Datuk Seri those who vote – more than that PM and his constant berating That is the trap that has been over that of the people. number can simply abstain. of Malays as lazy and his old set for Mahathir and he seems to The country cannot afford Najib Razak So what is PAS’ aim in exhortations that wealth has to be ready to fall into it and bite its collective will to be changed wanting to affirm Mahathir’s be shared and that the needs of that bait, hook, line and sinker. It by devious deceptions and and his deputy position as PM, in itself a Malays have to be taken care of. does not help that in the face of unholy alliances which produce strange thing for a member of If anything, Mahathir will this kind of seduction by PAS, he outcomes far different from then Datuk Seri the opposition to do? That’s a be a burden to PAS and Umno if rather carelessly says he has no what the electorate intended or ploy to get Mahathir to continue he aligns with them in the next problem handing over power but wanted. Ahmad Zahid as PM as near as possible to the election. All they want is for the next PM must get majority You can’t sleep with the devil next election. him to continue being the poor support from Parliament. and be an angel. Hamidi getting a The way that helps PAS and prime minister that he has been Uh? What’s that again? the opposition is that it will give so far until the next election so Did Harapan lose its majority P Gunasegaram is editor-in-chief pardon.” prime-minister-in-waiting Datuk that they will win after that. And in Parliament? As long as of Focus Malaysia 46 columns FocusM | March 2020

Question Time Why is a PDP for RM46 bil PTMP OK?

by for years and years. At a price of P Gunasegaram RM70 bil, the average price per sq ft works out to about RM357 per sq ft. ecently, Finance Considering that the re- Minister Lim Guan claimed land will involve housing Eng announced that and factories it is terribly uncer- he had saved RM3.1 bil tain whether that kind of price by terminating the Pan can be obtained. Also, no costs RBorneo Highway Sarawak project for land reclamation have been delivery partner (PDP) agreement. projected. The project was to have cost The success of the PTMP RM21.9 bil. hangs by a thread – getting a That immediately raises the hefty net profit from the sale of question of whether a lot of money reclaimed land even after paying can be saved from the termination off PDPs, land reclamation costs of the PDP for the RM46 bil Penang and others which will exceed the Transport Master Plan (PTMP) – PTMP cost of RM46 bil. perhaps more than double the Remember, this project spans RM3.1 bil to over RM6 bil given 30 years and therefore the costs the cost of the project is more Opponents of the Penang Transport Master Plan say it won’t ease congestion, is costly and highly risky could easily double and if the than twice that of the Pan Borneo price of reclaimed land does not project. Lim was the moving force keep up, then this project will go behind the PTMP project when he If we assume the same level engineering and construction and special purpose vehicle which underwater. was chief minister of Penang from of savings can be achieved for property development industry, it can then use to kick-start the The Penang government 2008 to 2018. the PTMP, then the savings from namely publicly-listed Gamuda PTMP. should not only terminate the “The estimated financial dismissing the PDP for the PTMP Bhd (60%), and Penang-based Loh The PTMP is a hugely complex PDP immediately but undertake a implications to the government project can be as high as 14.2% Phoy Yen Holdings Sdn Bhd (20%) and controversial project which comprehensive review of whether with the previous involvement of of the project cost or a massive and Ideal Property Development has been vehemently opposed the PTMP should be undertaken the PDP company amounted to RM6.5 bil. Sdn Bhd (20%),” Lim said in a by civil society groups in Penang which at a cost of RM46 bil rivals RM21.9 bil while the estimated In his reply over the Pan press statement. such as the Penang Forum, which the cost of the Kuala Lumpur financial implications after the Borneo figures, Lim said: “Under But really, the latter two are says it won’t ease congestion, is LRT/MRT system of some RM50 termination of the PDP agree- the PDP model, the overall cost Penang-based companies with costly and highly risky. bil which serves some eight ment would amount to RM18.8 not only involved construction little or no experience in large- Briefly, it has been proposed million people, some nine times bil,” he said on the Pan Borneo costs but also payments to PDP scale construction and certainly that Penang will start the PTMP the number of people on Penang project. companies including reimburs- not as PDPs in any massive infra- via the issue of bonds (figure not island. That is a massive 14.2% reduc- able payments and PDP payment structure project the way Gamuda disclosed) which will be guaran- That should already be a very tion from the original cost which fees (5.5% of the construction has been. teed by the federal government. In clear indication that the PTMP is Lim said was RM21.9 bil. If you do cost),” he explained. But that Interestingly, the finance the longer term, it is anticipated just too large and too expensive away with the PDP, the savings would be pretty much the ar- ministry has a proposal, which that the entire RM46 bil will be for the number of people it serves. should be just 6% of the project rangement for all PDPs. appears stalled, for the purchase financed from reclamation of Remember, too, that more than cost because that’s what the usual Lim himself, then Penang of a series of toll road concessions 1,818ha (4,500 acres) of land from half of the people in Penang live in PDP charges. chief minister, announced the owned by the Gamuda group of the sea which is supposed to be Seberang Perai on the mainland Predictably, Lim’s figures were appointment of the PDP for the companies for RM6.2 bil. sold for RM70 bil. and to concentrate so much of promptly challenged by officials PTMP (then estimated to cost Gamuda is likely to start the But details are rather scant funds on the island will severely from the former government but RM27 bil before rising to RM46 PTMP soon and would probably on this. You really can’t introduce distort future development in his reply still did not explain fully bil later) in August 2015. welcome the injection of cash and 4,500 acres or 196 million sq ft of favour of the islanders, many how the savings were achieved. It “The SRS Consortium com- the reduction in debt from the prime land into a city area and not of whom don’t want the PTMP is important that he does. prises well-known names in the purchase by a finance ministry expect it to depress land prices anyway. PDP accord might be delayed as state govt works to smooth out issues

SRS Consortium is a 60:20:20 joint construction giant, which also controls state government dated Oct 15. venture among Gamuda Bhd and Penang- SRS, would sign the PDP “in the next few The state government had begun by based companies Loh Phoy Yen Holdings weeks” with the first package of the LRT talking to several banks that could help Emmanuel Sdn Bhd and Ideal Property Development to be awarded in the middle of this year. manage the funds issued through the Samarathisa Sdn Bhd. “Once the PDP agreement is signed, bonds, he added. Sources tell FocusM that the PDP was the design works will start, from LRT to Further, there will be the creation of he Penang Transport Master supposed to be signed by late January but the first (man-made) island, or what we three islands off the southern coast of the Plan (PTMP) might be delayed as it had been delayed. call Island A, and the Pan Island Links, and main island. SRS is expected to fork out the state government is working PTMP, which could be among the most reclamation work for South Island will all RM11 bil to reclaim the islands – A, B and on smoothing out “issues” in the expensive large-scale public projects in move. We expect by the middle of 2020, C – which would make available a total of RM46 bil mega project. the country, was conceived to achieve a the first package of LRT will be awarded,” 1,818ha (4,500 acres) of land. TThe Penang government was supposed public-private transport model share of he told reporters that day as quoted in The Island A has been designated as an to ink the project delivery partner (PDP) 40:60 by the year 2030. Edge. industrial park where lots would be sold agreement with SRS Consortium Sdn Bhd To that end, the PTMP envisaged a “My guess (for the PDP agreement to be to investors to raise funds for PTMP. Island before the Chinese New Year celebrations. network consisting of a light rail transit signed) is next few weeks,” he said. B will cater for high-end support services But it seems the agreement will only ma- (LRT) network, monorail, bus rapid According to Chow, the LRT system for the industrial park, such as financial terialise later. transit (BRT), trams, e-hailing services will be financed by the Penang government and business services. Island C will be “I have told the press that if it can be as well as ferry and water taxies. Also through the setting up of a special purpose geared towards tourism and residential signed before Chinese New Year (CNY), proposed is a major highway, PIL1 (Pan vehicle (SPV) which would issue bonds properties. it will be signed. If not, after CNY. Need Island Link 1), and two shorter freeways guaranteed by the federal government. It has been estimated that the three to tidy up all the issues,” Penang Chief PIL2 and PIL2a. Chow said on Nov 8 that Prime islands would be able to raise RM70 bil Minister Chow Kon Yeow told FocusM in Gamuda group managing director Minister Tun Dr Mahathir Mohamad for 1,800ha, more than enough to cover a terse message. Datuk Lin Yun Ling said on Dec 5 that the proposed this in a letter received by the the cost of the PTMP. March 2020 | FocusM columns 47 Facing the challenging arithmetic of climate action

by Michael Spence

limate change was at the forefront of the World Economic Forum meeting in Davos, Switzerland Cin January. Younger participants, in particular, underscored the challenge ahead, with the teenage activist Greta Thunberg delivering a powerful speech on the subject. But they were not in the minority: For the first time ever, climate-related issues dominated the top five positions in the World Economic Forum’s Global Risks Perception Survey. The newfound sense of urgency on climate change comes at a time when the corpo- rate community is increasingly pledging to shift towards a multi-stakeholder model of governance – a transition that would create space for more Climate change was one of the main issues highlighted at the World Economic Forum meeting held in January climate-conscious ways of doing business. But the challenge of creating a sustainable global 10-metric-tonne range a decade zero growth, a 4.8% annual invest substantially in such carbon price that would move economy remains monumental. ago, has done better, with many decline would be needed. infrastructure – adhere to high as the targets were tightened, Each year, the world emits countries nearing five metric Although that goal seems efficiency standards will require leading to effective and efficient over 36 billion metric tonnes – tonnes per capita – a major unachievable, it is useful on an broad access to the relevant international mitigation. or 36 gigatonnes (Gt) – of carbon achievement, but still more than aspirational level. Because the technologies and best practices, as But implementing such a dioxide. That is roughly 2.5 times double the target level. payoff function is continuous, well as to the right incentives and system would require allocating what climate scientists consider Moreover, even as the notwithstanding tipping points financing. International financial credits or licences to countries. a “safe” level of emissions: To advanced economies have and semi-irreversible changes institutions have a crucial role to Probably the fairest way to do keep average global tempera- reduced their emissions, total in dynamics, progress towards play in creating incentives that that would be on the basis of per tures from rising more than 1.5° global emissions have continued the goal will be highly bene- attract private capital. capita emissions, which would Celsius above pre-industrial to rise – by about 6-7 Gt in the ficial, even if we don’t quite Similarly, important gains can imply potentially large transfers levels – the threshold beyond past 15 years. This highlights achieve it. be made in transportation, which of income from countries with which climate change’s impacts another crucial dimension of The world’s CO2 output currently accounts for about 15% high per capita emissions to their would intensify significantly – the challenge: As emerging and is the product of two ratios: of global energy-related CO2 lower-emitting counterparts, or we should be emitting just 14 developing economies – which energy intensity (the amount emissions. (In the US, that figure from richer to poorer countries. Gt annually over the next two represent some 85% of the of primary energy consumed stands at a whopping 29% – slightly This, however, may well prove to decades. That translates to two world’s population – grow, their per unit of GDP) and the higher than electricity.) Advances be an insurmountable barrier, metric tonnes per person each per capita emissions increase. carbon intensity of the energy in electric vehicles – together with especially at a time when even year – far less than the current mix (the amount of CO2 per well-designed, energy-efficient many rich countries are expe- rate, especially in the developed Targeting reduction of unit of energy consumed). public-transportation systems riencing rising inequality in world. carbon dioxide emissions That means that reducing – can go a long way towards income, wealth, opportunity and Progress is being made. If the global economy grows at the global economy’s energy reducing the transport sector’s economic security. Australia, Canada and the United 3% or more over the next few intensity depends on two total emissions. This is just one example of States have all reduced their years – as the International levers: improving energy a broader point. All strategies per capita emissions since the Monetary Fund predicts, at efficiency and expanding the Implementation challenges to mitigate climate change have early 2000s. But they started least for the near term – getting use of clean energy. There Many economists argue that distributive implications that at levels in the high teens in annual CO2 emissions down to are reasons to believe that weaving the full marginal costs cannot be overlooked. If left metric tonnes per person, and 2.5 metric tonnes per person substantial gains can be made of CO2 emissions into the fabric unaddressed, such implications in the US, the rate still stands within the next 20 years would on both fronts. of our economies is essential to will fuel persistent headwinds to at around 15-16 metric tonnes. require carbon intensity to For starters, the costs accelerate progress, as it would progress on the climate change Europe, which was in the decline by 7.8% per year. With of clean renewable energy level the playing field for green and sustainability agenda. have declined dramatically. A technologies, strategies and The bottom line is that while decade ago, the dirtiest source products. That usually involves there is energy, broad engage- of electric power – coal – was putting a price on carbon, either ment, an increased sense of also the cheapest. Renewa- by taxing it or by establishing a urgency, and several promising bles are now comparable in system of tradable carbon credits. trends, the combined effects cost, and by many estimates, But there are serious imple- are not yet powerful enough to cheaper – even without mentation challenges. As the late counter global economic growth accounting for the environ- environmental economist Martin or to produce (or even forecast) mental and health effects. Weitzman showed, because we a downward trend in CO2 emis- Developing countries thus no know more about the quantity sions. The latter needs to happen longer need to choose between targets that need to be met than fairly soon. – Project Syndicate cost-effectiveness and envi- about the marginal costs of ronmental wellbeing when achieving them, we should focus www.project-syndicate.org investing in the enormous on the former. new energy infrastructure By this logic, our best bet Michael Spence, a Nobel laureate that their growing economies may be a global carbon-trading in economics, is Professor of demand. system in which “carbon credits” Economics at New York Univer- Ensuring that developing decline over time, until they reach sity’s Stern School of Business Transportation currently accounts for about 15% of global countries – which, facing an agreed long-term target. This and Senior Fellow at the Hoover energy-related CO2 emissions rapid urbanisation, must would yield a uniform global Institution 48 columns FocusM | March 2020 Fantasy fiscal policy

• As a short-term stabilisation tool, fiscal policy will by inevitably be Kenneth Rogoff difficult to time and calibrate in ill the next re- cession be worse the same way that than you think? central banks have With the major succeeded in doing central banks havingW little space for further with monetary interest-rate cuts, might the policy next cyclical downturn become a crash? In theory, fiscal policy • Fiscal policy is can go far in filling the void. The past decade has seen a rise in far too politicised fiscal evangelism among many to substitute economists and policymakers, consistently and it is indeed likely that fiscal fine-tuning will be widely tested for modern in the next downturn. Are they independent right? technocratic I am skeptical. Fiscal policy central banks. is far too politicised to substitute consistently for modern inde- And yet academic pendent technocratic central depictions of banks, which until now have fiscal policy as largely taken the lead in short- term stabilisation. Fiscal policy an objective takes the lead in fundamental technocratic tool but hugely contentious issues – often make one feel concerning growth, long-term like we are living in stability, and allocation – that need to be decided in a demo- an episode of the cratic fashion, at least in advanced American TV series economies. And yet academic Stabilisers such as social security benefits invariably have incentive effects, and political battles over how ‘The West Wing’ depictions of fiscal policy as an far any should be expanded are inevitable objective technocratic tool often make one feel like we are living an environment of ultra-low policy inevitably involves messy, – are assumed to be totally stable • The right solution in an episode of the American interest rates. Many leading hard-fought compromises – often and predictable. All problems con- is not to cast aside television series The West Wing. central bankers also maintain overturned by future elections cerning credibility and consistency monetary policy, In that critically acclaimed that, instead of just playing anyway – that most countries are assumed away. series, the fictional Democratic its traditional role of deciding have turned to central banks for but to find ways US president, Jed Bartlet, is an the allocation of government short-term stabilisation policy. Political battles inevitable to strengthen its economist by training. A good spending, investment, taxes, The modern, independent, techno- It is possible that in the next effectiveness in a and moral person, supported by and transfers, fiscal policy can cratic central bank is arguably the recession, fiscal policy in some similarly well-intentioned and substitute for monetary policy greatest innovation in macroeco- countries will land a lucky punch, low-interest-rate brilliant staff, Bartlet exhibits a in economic fine-tuning and nomics since John Maynard Keynes getting the calibration and timing environment gift for weighing sophisticated fighting recession. pioneered demand management. just right. And yes, central bankers advice from experts to reach Governments can, and should, sometimes get it wrong. But the nuanced economic-policy Recipe for seesaw policy make the big decisions about the idea that we should cast aside the decisions that strike a balance Touring the economic journals long-term direction of policy, but division of assignments between between efficiency, fairness, and and major meetings of academic anyone who thinks that legislatures the two is naive. So is the idea political realities. Of course, he economists, one sees model can consistently make fine-tuned that strengthening “automatic often faces opposition in getting after model of West Wing fiscal decisions is living in an alternative stabilisers” such as unemployment his legislation passed, but Bartlet policy – thoughtful, reliable, reality. insurance and transfers can solve and his staff generally prevail. It and credible – that seems to The fact is that in most countries all problems of fiscal-policy cred- does not hurt that the ideologues buttress such arguments. But today, economic policy is highly ibility by enabling adjustment to on the right who oppose Bartlet the recent literature and debate polarised, with decisions being occur without political action. The are not only bad people, but also almost completely ignores made by razor-thin majorities. In fact is that stabilisers invariably intellectual lightweights. political-economy issues that the United States, for example, fiscal have incentive effects, and political It is not just academic were studied intensively in the policy for Democrats largely means battles over how far any should be economists who are arguing 1980s and 1990s. The lessons an opportunity to engage in more expanded are inevitable. But the that the time has come for learned then are now largely spending and transfers. For Re- deeper problem is that in any given activist fiscal policy, given the forgotten. publicans, it means cutting taxes in circumstance, policymakers can – limits to monetary policy in It is precisely because fiscal order to downsize government. Such and often do – override automatic differences are a recipe for seesaw stabilisers. policy. As a short-run stabilisation The right solution is not to tool, fiscal policy will inevitably be cast aside monetary policy, but difficult to time and calibrate in the to find ways to strengthen its ef- same way that central banks have fectiveness in a low-interest-rate succeeded in doing with monetary environment, possibly by finding policy. ways to use negative rates more Especially over the past 20 years, fairly and effectively. Until then, central bankers have increasingly with monetary policy hampered recognised that consistent, stable, and fiscal policy the main game and predictable policies are just as in town, we should expect important as any short-term deci- more volatile business cycles. sion-making. Indeed, at conference - project-syndicate after conference, central bankers can be heard weighing the nuances www.project-syndicate.org of slight changes in messaging and their effects on expectations. Kenneth Rogoff, a former chief But in West Wing-style academic economist of the IMF, is Professor The past decade has seen a rise in fiscal evangelism and it is likely that fiscal fine-tuning will be widely papers, fiscal-policy functions – of Economics and Public Policy at tested in the next downturn government spending and tax policy Harvard University March 2020 | FocusM columns 49

• Without the strong private monopolies enabled by IP rules, Intellectual property prices of medicines and other products can be significantly raises costs of living reduced while developing countries will have much better prospects for developing internationally competitive industrial capacities and technological capabilities

Shkreli, the ex-CEO of Turing Pharmaceuticals, was once by Jomo Kwame Sundaram deemed ‘America’s most hated man’ and Claire Lim any medicines and medical tests are sell and distribute turmeric. unaffordable to The Indian Council for Sci- most of humanity entific and Industrial Research owing to the (CSIR) objected, arguing that Mability of typically transnational turmeric had been so used in pharmaceutical giants to abuse India for centuries, providing their monopoly powers, enforced historical references in Sanskrit, by intellectual property laws, to Urdu, Hindi and other languages. set prices to maximise profits The US patent was eventually over the long-term. revoked because it lacked the Most basic research is funded “novelty” element, but it required by government grants, and in Patents are believed by many to be necessary to incentivise innovation, and to recover research and herculean efforts. recent years, by philanthropic development costs initiatives. When a profitable op- Alternatives portunity presents itself, venture Developing countries are no capitalists fund “last leg” efforts to profit from litigation or licens- licence” concession allowing over RM1,000. US big pharma \ longer able to require technol- to patent an innovation and “take ing, without inventing anything governments to license the use has applied pressure on Malaysia ogy transfer, further limiting it to market”, as the patent holder or making products of their own. of a patented invention to a third to stop using its “compulsory their ability to develop their “takes all”. Trolling enables patent owners to party or government agency licence”. own technological capacities Patents, a form of intellec- blackmail those in need of their without the consent of the pat- and capabilities. Hence, many tual property rights (IPRs), are patents, sometimes by creating ent-holder. IP for intellectual piracy developing country governments believed by many to be neces- “patent thickets” – webs of There is moot evidence Developing countries are are told they have no other way sary to incentivise innovation, overlapping IPRs – and related that TRIPS benefits developing generally unable to check to industrialise except by gen- and to recover research and bottlenecks, limiting utilisation countries by attracting foreign the monopolistic practices of erously inducing transnational development costs, by creating a of patented knowledge and investment, promoting techno- transnational pharmaceutical companies to locate parts of their temporary legal monopoly. effectively hindering further logical transfer and increasing conglomerates due to underde- “value-adding” activities in their innovation. innovation. Instead, TRIPS has veloped antitrust regimes, weak economies. IPRs are monopoly rights Before the US withdrew from imposed substantial, avoidable law enforcement capacities and Innovation, Intellectual After securing patents, patent the Trans-Pacific Partnership costs on developing countries. their influential partners. Property and Development, by holders typically take additional (TPP) in January 2017, TPP pro- Where developing coun- Such companies may re- Joseph Stiglitz, Dean Baker and measures to deter and undermine visions would have extended IP tries have made use of TRIPS package medicinal products Arjun Jayadev, suggests alterna- potential competitors, and to protections to cover “biologics”, concessions, they have faced and processes from developing tives to incentivise innovation, consolidate and extend their that is naturally occurring international pressure from countries’ traditional knowl- especially relevant for developed monopoly position for as long as substances, such as insulin for pharmaceutical giants and their edge systems to secure patents economies. These include: cen- possible by any means available. diabetes patients. governments to limit, if not on them, including naturally tralised direct R&D financing; Private companies have then These onerous TPP provi- eliminate the scope of these occurring substances known as decentralised funding through used their monopolies to charge sions have been suspended in exceptions. “‘biologics”. tax breaks for research spending; exorbitant prices. the successor Comprehensive Malaysia is the first country Turmeric is widely used in using prizes to recognise and In 2015, Turing Pharma- and Progressive TPP (CPTPP) to use “compulsory licensing” India for medicine, food and dye, reward innovative research; and ceuticals bought the rights to following US withdrawal, but can under TRIPS to produce sofos- among other things. In 1995, the establishing open source plat- Daraprim – a drug used by cancer easily be reinstated, for example, buvir for Hepatitis C treatment. US granted the University of Mis- forms to promote free knowledge and HIV patients to fight deadly to induce the US to rejoin the TPP. The drug, from patent owner sissippi Medical Center a patent flows. parasitic infections – raising Gilead, costs almost RM300,000 for the use and administration of Without the strong private its price 50-fold from US$13.50 Tripping up public health (US$68,000) for the full course, turmeric powder to heal wounds, monopolies enabled by current IP to US$750! The “price gouging” Through various means, US-style while generic substitutes cost just granting it an exclusive right to rules, the currently unaffordable company was controlled by IPR regimes have spread world- prices of medicines and other Martin Shkreli, dubbed “Pharma wide since adoption of the World products can be significantly Bro” by the US media and once Trade Organization’s (WTO) reduced while developing deemed “America’s most hated agreement on Trade-Related countries will have much better man”. Aspects of Intellectual Property prospects for developing inter- Private companies eager to Rights (TRIPS). nationally competitive industrial The US extend their monopolies try to Under TRIPS, all WTO capacities and technological patented “evergreen” them, by registering members have to provide a capabilities. turmeric at “follow-on” patents involving minimum level of IPR protection one point minor variations closely linked to which includes, among other but it was Claire Lim is a lawyer who used to the original invention. By “ever- things, patent protection for a eventually practise in England. Jomo Kwame greening”, the patents system has minimum of 20 years, including revoked Sundaram was a university pro- been used by companies to create for imported IPRs registered in fessor and senior UN official. Both long-term monopolies. other countries. work with the Khazanah Research Others engage in “patent TRIPS also stipulates condi- Institute, whose views are not trolling”, obtaining many patents tions for using the “compulsory expressed here 50 columns FocusM | March 2020 Promoting export-led growth with exchange rate undervaluation

• Countries with high growth have mostly been net creditors. High domestic savings rates have often supported high investment rates, which usually lead to faster growth • This high correlation between domestic savings and investment, even in economies with relatively open capital accounts, is contrary to the popular presumption that capital would flow to countries with better investment climates and rates of return for investment • Although there were at least three large waves of capital flows to developing countries around the turn of the century, none had led to growth miracles

a blunt, non-selective instrument that can even work in highly corrupt environments or where the requisite competence is not available. Such promotion of by Jomo Kwame Sundaram export production avoids poten- China has been criticised for its ‘industrial policy’ of promoting export-led growth, which benefits and Vladimir Popov tially corruptible, discretionary producers of exports while discouraging imports selection of beneficiaries. ne mercantilist view is that exchange rate Forex reserves reserves accumulation has been the 1990s and its lacklustre growth been increasingly constrained undervaluation – for accumulation as industrial growth promoting by enabling thereafter. by developed countries promoted example, via accu- policy? exchange rate underpricing. In By contrast, Chancellor Helmut free trade mantra, exchange rate mulation of foreign Victor Polterovich and Vladimir fact, however, there has been Kohl avoided a similar fate for the undervaluation is one of the few Oexchange reserves in China’s Popov’s cross-country regres- considerable variation in both deutschemark by “hiding” behind available tools for promoting case – is “industrial policy” to sions for 1960-1999 suggest that exchange rate underpricing and the common European monetary catch-up development. promote export-led growth, foreign exchange (forex) reserves forex reserves accumulation zone currency (euro) and lowering The main analytical argument benefiting producers of exports accumulation contributes to over the last four decades. the national wage rate by acceler- against exchange rate under- while discouraging imports. developing countries’ economic If a country manages to ating “reunification” of West with valuation is “if all developing Taxes and subsidies are tools growth by increasing both capital become internationally com- East Germany. countries were to pursue this of selective industrial policy for productivity and the investment/ petitive – whether via higher policy, there would be a ‘beggar which an efficient and clean GDP ratio. productivity, lower wages, or Capital flowing uphill thy neighbour’ race to the bureaucracy is needed to suc- For them, forex reserves ac- a weak exchange rate – it will Countries achieving high growth bottom.” cessfully use them for growth cumulation causes expansionary export more than it imports, have mostly been net creditors, promotion. real exchange rate (RER) under- developing a trade surplus. not net borrowers, that is, they have Undervaluation without By discouraging imports and valuation in the short run. RER If this surplus is kept as forex saved more than they have invested. reserves accumulation? promoting exports, exchange rate undervaluation enables taking reserves, the exchange rate de- Even controlling for level of devel- Many in developing countries undervaluation enhances cost greater advantage of export ex- preciates and the trade surplus opment, the relationship between consider the policy of forex competitiveness, for example ternalities, boosting export-led may grow. the current account surplus and reserves accumulation to be by keeping wage costs down. growth. Accumulating forex The decade-long strong growth remains positive and sig- wrongheaded. Currency undervaluation is reserves attracts foreign direct yen (endaka) period after the nificant. Forex reserves are a share equivalent to import duties on investment by raising govern- 1985 Plaza Accord may thus This high correlation between of national savings not invested all tradables and export subsidies. ment credibility and lowering have helped end the post-war domestic savings and investment, in the national economy as they But exchange rate underval- dollar costs. Undervaluation may Japanese economic miracle. even in economies with relatively are exported out of the country uation automatically boosts all even improve wealth and social Arguably, the endaka contrib- open capital accounts, is contrary for low returns, usually deployed production and export of “trada- welfare. uted to its financial “big bang” to the popular presumption that to finance consumption and bles” without being selective. It is Hence, they argue that forex and subsequent stagnation in capital would flow to countries investment elsewhere. with better investment climates Forex reserves generally and rates of return to investment. yield low returns if invested in High domestic savings rates safe instruments, such as US have often, but not always sup- Treasury bills and similar debt ported high investment rates, obligations of other Western which usually, if not always, leads governments. Investing these to faster growth. savings inside the country would Paul Krugman noted that yield higher returns. although there were at least three large waves of capital flows to Jomo Kwame Sundaram, a developing countries around the former economics professor, turn of the century, but none had was United Nations Assistant led to growth miracles: “... the point Secretary-General for Economic is that there’s no striking evidence Development, and received that capital flows have been a major the Wassily Leontief Prize for Japan’s decade-long strong yen period from source of economic success.” Advancing the Frontiers of 1985 may have helped end its post-war Hence, many developing coun- Economic Thought. Vladimir economic miracle. Today, its small cities and tries’ apparent policy preference to Popov is research director at towns are dying as people move to an urban- rely on external financing is ironic the Dialogue of Civilizations industrial corridor stretching from Tokyo to as economists puzzle over why Research Institute in Berlin Osaka in search of opportunity “capital is flowing uphill”, from and author of Mixed Fortunes: developing to developed countries. An Economic History of China, As protectionist policies have Russia and the West March 2020 | FocusM columns 51 Plantations and advances in technology

• Drones have come to plantations to help in pest control and water management planning – charting the terrain, the palms per hectare as well as the streams and drains • For a quick inspection, the drone can be sent to check for uncollected loose fruits • Perhaps the industry should form a team of scientists and planters to see how to use Artificial Intelligence, Internet of Things, Big Data, and sensors in order to raise productivity

per hectare, as well as the streams and drains. With that information the team had put in an irrigation by system using solar panels for Mahbob Abdullah energy to pump the water from the pools that have been made, now live in Kuala Lumpur, to go up the slopes in pipes and and having worked for many then flow along the terraces. The years in plantations, it was CEO of the cooperative, Mohd good to ride on the rural Tarmizi, explained the details Water is sent through hoses up the slopes to the palms along the terraces at Koperasi Ladang’s plantation winding road recently going as we went along. In the streams Ifrom Karak to Kemayan, both in were water wheels that sent the Pahang. The road was beside a water through hoses that run on to know how it can be applied. small river, and there were durian the flat land. Perhaps the industry should form farms, all lovely scenery. I passed The palms get the water a team of scientists and planters the rubber trees that belong to a evenly, and does not have to rely to see how to use Artificial Intelli- big company, and then reached only on rain. Irrigation is a big gence, IOT, Big Data, and sensors the oil palm plantation of 500ha factor in raising the crop volume. in order to raise productivity. that is producing a very high crop Although they are over 20 years Perhaps sensors can detect the compared to what it was a few old, the palms have increased right level of ripeness of a bunch years ago. their yield from 19 tonnes per so the harvester would know for I was a guest of Mohd Daman- hectare three years ago to 29 sure it would be the right time huri Mohd Jamli, the chairman of tonnes now. to cut it and not a day sooner, so Koperasi Ladang Bhd that owns that all the oil would have been the plantation. He is a planter As the wheels turn ... formed. with wide experience. After his As an additional measure, the In the same way the plan- team at Ladang Bukit Keramat team is using the “Shakaerator” tation owners may wish to had given me a briefing, we went which is a tractor-mounted set of band together to find a way to to see the palms in the field that blades that cut and turn the soil Solar panels are used to generate energy for the irrigation system mechanise harvesting. It needs a stretched by the mountain range in the interrow so that the water solution urgently. The shortage and for that reason the land was flowing on the ground would seep of labour may get worse if some hilly in many parts. Because of the rapidly into the roots. palms regularly, and the power is estate in a smooth flight and he of the major suppliers of labour rain shadow it did not get much I was, of course, having a virtually free. would be back home for another decide to close their borders. water and the rainfall rarely lot of fun watching the pumps So it is good to see new tech- cup of coffee before driving to In the past we had left the work exceeded 1,500mm a year in the working, and the wheels turning nology that was not there when the spots where he would want mainly to MPOB but we are still last five years. in the stream, sending up water I had started planting all those to have a closer look. far from finding a way, particu- His team had surveyed the through the hoses, just like the years ago. Since then plantations Other plantations and owners larly for tall palms. Now as labour area by drone, done to precision image in my mind but it was the had benefited from research work might want to use similar ways on is scarce and as rates go up, it is by his executive Nor Adzuan. He first time that I saw it happen on which gave improved hybrids and water management, and probably clear the industry will have to had charted the terrain, the palms the ground. The water gets to the clones. And natural pollination by even do fertigation so the palms step up the pace, and go out to get insects imported from Cameroon can get the food and water with the brains and technology even if had made the bunches grow the right timing. There can be they are present only overseas. bigger. more certainty that the fertiliser We have to find ways to Coordination too has gets to the ground and spread improve pollination. The fruit improved. Estates used to have evenly with the water. set is low especially in Sarawak, single phone lines and walk- the fresh fruit bunches do not ie-talkies were not allowed. Now New entrants grow to full size and it reflects with handphones it is much With higher production, the costs on the yield. It was in 1981 that easier to find the drivers and per tonne of palm oil would drop the import was done and the know if a lorry load of fertiliser and the plantations could remain study was only in Cameroon. is on its way to the field. Com- in profit even when the prices are Now, many other countries such munication is so much easier. You low. There is the risk that prices as Gabon and Uganda have large can get your crop reports on your can go down with competition plantations, and they might also handphone at the end of the day. from the increasing volume of have effective pollinators. For a quick inspection, the drone production from Indonesia, and So it was a memorable visit can be sent up to do a check on the entry of other areas such as to the plantation in Pahang. the fields for any bunches that Mindanao and South America. Koperasi Ladang has a bigger should have been picked up but For other vegetable oils, such as plantation near Mersing in Johor still left by the roadside. It saves soya, we read that the costs are where it is doing more innovative time on checking. going down with the use of new work. Perhaps one day I can go A planter who was a pilot technology and automation. and see what they are doing there. used to check his plantation each There are of course many morning by going up on a microl- breakthroughs in other indus- ight, while the air was clear and tries using the latest technology. Mahbob Abdullah is a former The Shakaerator turns the soil so the water can seep into the ground fresh. He would have covered the But in the plantations we are yet planter 52 columns FocusM | March 2020 Breach of confidence: The public interest defence

given pursuant to an express or comprehend and make informed implied duty of confidence on decisions on matters of public by the basis that to do so would be interest that affect their lives.” contrary to other public interests. The Malaysian courts have Jee Keen The approach in England also upheld the importance of the has been to introduce a “public defence of fair comment in defa- ast month, Focus defence.” This requires the courts mation cases in maintaining the Malaysia published a to balance the public interest freedom of speech and to adopt a series of articles about in maintaining the confidence generous approach to ensure the the future of Malaysia against a countervailing public values are safeguarded. Airlines Bhd (MAB). interest in disclosure: S Nantha Balan J (as he then LKhazanah Nasional Bhd then “…although the basis of the was) said in Khairul Azwan bin lodged a police report over the law’s protection of confidence is Harun vs Mohd Rafizi bin Ramli: leakage of information. Focus that there is a public interest that “As for the defence of fair Malaysia explained that the confidences should be protected comment, it was submitted that articles were published because by the law, nevertheless the public the right of fair comment is one they were matters of public interest may be outweighed by of the fundamental rights of free interest. some other countervailing public speech and is of vital importance to Focus Malaysia said Malay- interest which favours disclosure the rule of law on which we depend sians, through Khazanah which (per Lord Goff in what is famously Focus Malaysia’s reporting on MAB raised an important point on the for our personal freedom (Slim is owned by the Malaysian known as the “Spycatcher Case”).” defence of public interest by the media vs Daily Telegraph Ltd [1968] government, are the ultimate 2 QB 157 (CA) at p 170). In this shareholders of MAB. Malaysians The iniquity rule regard, it is said that in a society have a right to know what is hap- The public interest defence the public interest, in which event Constraining effect of which greatly values the freedom of pening to the national carrier. developed out of the “iniquity no confidence can be prayed in informed public opinion on speech and safeguards it by consti- rule” in the 1857 case of Gartside aid to keep them secret.” power abuse tutional guarantee, it is right that Public interest defence to vs Outram: By providing the test of The key reason for the ultimate the courts when considering and breach of confidentiality “The true doctrine is, that there “just cause or excuse”, there balancing exercise to fall in favour developing the common law should claims is no confidence as to the disclosure was no longer a requirement of a publication will usually be the not adopt a narrow approach to the The publication has raised an of iniquity. You cannot make me for the commission of a crime, contribution that the publication defence. The courts should adopt important and interesting point a confidant of a crime or a fraud, fraud or misdeed and that a has made, or is expected to make, a generous approach in its full on the defence of public interest and be entitled to close my lips notion of “public interest” to knowledge on some matter of vigour (Cheng Albert vs Tse Wai by the media in relation to the upon any secret which you have the can justify the breach of the public interest. Chun Paul [2000] 4 HKC 1, Li CJ disclosure of information in audacity to disclose to me relating duty to keep the information In principle, the readily avail- at p 6E-G).” breach of confidential obligations to any fraudulent intention on confidential. ability – often through the media The English courts have by its informants or sources of your part: such a confidence In Malone vs Commissioner – of the fullest range of information developed the defence of public the information. cannot exist.” of Police of the Metropolis (No on matters of public concern and interest to breach of confiden- The court explained that no 2), McGarry VC supported the controversy is presumed to facili- tiality claims. over an extended The importance of media confidence comes into existence extension of the public interest tate the emergence of an informed period of time. The courts in freedom in respect of information of an defence. He decided that the public opinion among members of Malaysia have not had the op- I will not touch on the facts and iniquitous nature. A duty of con- defence is not restricted to the general population. portunity to do the same. issues of the Focus Malaysia’s fidentiality will not arise where cases of the claimant’s acts of Consequently, it promotes It remains to be seen that articles of MAB because the case the information relates to crimes misconduct or misdeeds: a constraining effect of public when such cases do finally reach is under police investigation and or frauds. “There may be cases where opinion on the arbitrary exercise the Malaysian courts, whether is subject to potential litigation. This is based on the public there is no misconduct or of political, economic or cultural our Malaysian judges will adopt a A cursory research showed interest that confidential in- misdeed but yet there is a just power. The concept of the “public similarly robust approach for the there is no Malaysian court formation may be disclosed to cause or excuse for breaking interest” then serves as a measure protection of media freedom and decision touching directly on the prevent the evil from occurring confidence. The confidential of the contribution that publi- public interest. public interest defence to claims or to bring the offender to justice. information may relate to some cations make to the informing Such an approach is neces- for breach of confidentiality. apprehension of an impending of individuals as citizens in the sary because of the “watchdog I wish to highlight some Misdeeds and misconduct chemical or other disaster, democratic polity. function” the media plays for the aspects of this defence’s devel- In 1967, Lord Denning in the arising without misconduct, of The service offered to the greater good of the nation. opment by the English courts case of Initial Services vs Putt- which the authorities are not readers as the recipients of the In the same vein, the media for Malaysians to appreciate its erill introduced the notion of aware, but which ought in the information becomes the primary must also exercise responsible importance for media freedom. “misdeeds” and “misconduct” to public interest to be disclosed to justification for media freedom. journalism. One important way Disclosure of matters of the iniquity rule: them.” of testing by the journalists them- public interest serves to uphold “Counsel suggested that this Malaysian courts and media selves is by asking whether there is democracy. It also acts as a check exception was confined to cases The balancing test freedom a public interest in the journalistic against abuse by those holding where the master has been guilty The public interest defence Although the public interest work to evaluate what the impact economic or political power. It is of a crime or fraud, but I do not has since developed to a stage defence has not been raised in of the publication will be. hoped that the Malaysian courts think that it is so limited. It extends where the courts adopt a new any Malaysian case on claims How will the publication will give similar importance to to any misconduct of such a nature methodology of assessment. for breach of confidentiality, the affect the people – who will suffer media freedom in developing the that it ought in the public interest Once it has been determined defence has been accepted in and who will benefit? Does the public interest defence to breach to be disclosed… that a claimant holds a defamation cases. wider society benefit from the of confidentiality claims. “The exception should extend reasonable expectation of con- The Federal Court in Syarikat publication? to crimes, frauds and misdeeds, fidentiality in the information, Bekalan Air Selangor Sdn Bhd This is a difficult judgement Development of the both those actually committed as the court carries out a second vs Kiam Wee accepted and each case must be judged defence by the English well as those in contemplation, stage of analysis of the claim the defence of qualified privilege carefully on its own facts. At stake courts provided always – and this is by carrying out a balancing of for the publication of defamatory is not just the potential victims The equitable doctrine of essential – that the disclosure is all factors pertinent to the case statements in the public interest. of poor reporting, but also the breach of confidence seeks to justified in the public interest.” to decide whether to maintain Azahar Mohd FCJ said that the reputation of the journalists and protect confidential information the confidentiality or to allow Reynolds privilege defence does the media organisation. provided by one party to another Just cause or excuse publication. not only apply to journalists but In the final analysis, jour- in circumstances which import Lord Denning further extended Lord Philips explained in also to individuals: nalists and media organisations an obligation not to disclose the scope of the public interest HRH Prince of Wales vs Asso- “In our view, the public interest will have to be able to preserve that information or to use it for defence in the case of Frazer vs ciated Newspapers Ltd: defence should by no means be syn- their integrity and maintain their unauthorised purposes. The ra- Evans where he said: “The test to be applied is not onymous with journalists or media ethical balance to justify they tionale underlying the protection “I do not look upon the word simply whether the information publications. On the ground of public are acting in the public interest of relationships is to serve public ‘iniquity’ as expressing a principle. is a matter of public interest but interest, there is a sufficient basis it whether in a court of law or in the interest. It is merely an instance of a just whether, in all the circumstances, should be in the same way extended court of public opinion. There are circumstances, cause or excuse for breaking confi- it is in the public interest that to anyone who publishes or discloses however, in which the courts dence. There are some things which the duty of confidence should be material of public interest in any William Leong Jee Keen is MP for will refuse to protect information may be required to be disclosed in breached.” medium to assist the public better March 2020 | FocusM columns 53

• The CPI has increasingly become a highly Cleaning up corruption regarded and influential survey of good governance and a in Malaysia key marker of complacent with its current international ranking and score but to sustain efforts to fight it is quite difficult looking at the corruption current leadership crisis, too much politicking and uncertain • Malaysia moves future of the country. up 10 spots to Political Donations and No. 51 among 180 Expenditure Act The government should continue countries in the to step up its fight against corrup- rankings and has a tion as there are still promises to score of 53 points be fulfilled, including introducing the Political Donations and Ex- penditure Act (PDEA). According to Delia Ferreira Rubio, Chair of Transparency International, gov- ernments must urgently address by the corrupting role of big money Akhbar Satar in political party financing and New Zealand (above) shares honours with Denmark as the top two least corrupt countries in the world the undue influence it exerts on n Jan 23, global our political systems. anti-corruption co- The other factors that need alition Transparency strength and effectiveness of Least corrupt countries South Sudan. Somalia ranked to be addressed include strong, International (TI) public-sector anti-corruption Globally, Denmark has reclaimed 180 with a score of nine on the sincere political will, freedom of released its Corrup- efforts. its ranking as the least corrupt 2019 CPI. South Sudan ranked information, the independence Otion Perceptions Index (CPI) 2019, The CPI has increasingly country in TI’s international 179th with a score of 12 points. of the Malaysia Anti-Corruption an annual survey that measures become a highly regarded survey. The CPI for 2019 gave Commission (MACC), Auditor the perceived level of corruption and influential survey of good Denmark a score of 87 points Muslim-majority countries General Department and in 180 countries. The annual governance and a key marker out of 100. It thus shares the In Muslim-majority countries, Attorney General and getting CPI has become one of the most in international efforts to fight first spot with New Zealand. the United Arab Emirates is the full support from the civil widely recognised indicators of corruption. Furthermore, These two countries have a cleanest or least corrupt with a servants and the private sectors corruption worldwide. studies show there is a correla- longstanding reputation for score of 71 out of 100 and ranking in the implementation of the More than two-thirds of tion between CPI ranking and having little corruption in the 21st in the world. Meanwhile, National Anti-Corruption Plan. countries surveyed score below economic growth. government and private sectors. Qatar scored 62 points and The upcoming CPI needs to be 50 on the latest CPI, with an CPI standing is an important is ranked No. 30 and Brunei improved or at least sustained. average score of just 43. As in factor and it can influence the Criteria Darussalam followed closely with previous years, the data shows rate of investment as investors Amongst the criteria used to 60 points and No. 35 in ranking. Corrupt culture that despite some progress, a increasingly recognise the evils determine the rankings are Somalia and Syria are perceived We have been warning that cor- majority of the countries still fail of corruption and stay away the presence of robust rule of to be the most corrupt in Mus- ruption is bad and the mother of to tackle public sector corruption from countries suffering from it. law, independent oversight lim-majority countries in 2019. all evils. It is not easy to educate effectively. institutions and a broad societal Countries with lower scores society of the ills of corruption Malaysia, meanwhile, ranked Asean countries consensus against the misuse of are deemed to be more corrupt when bribery has become a 51 among the 180 countries. This Among its Asean peers, Malaysia public office and resources for and there are indications that concept or part of the “corrupt is an improvement of 10 places in was ranked third (51st in the private interests. corruption tends to thrive in culture” that has been planted CPI 2019. Its score was 53 points world) below Brunei (35th) and Denmark and New Zealand’s fragile countries and those in their heads. It is like telling out of 100. In 2018, Malaysia was Singapore (4th) with scores of 60 reputation for honesty, transpar- enmeshed in conflicts, and some corrupt Malaysians not to ranked 61 with a score of 47. There and 85 respectively. ency and justice, strong access to generally characterised by eat rice. was a significant improvement Indonesia took the fourth information systems and rules poor governance in institutions Corruption erodes trust in both in ranking and score this spot in the region with its global governing the behaviour of those and impunity for corruption. government, undermines the year and it was the best score in ranking of 85 and CPI score of in public positions helped them social contract and impedes the last seven years. 40, followed by Vietnam (96, 37), to top the list of the least corrupt 2019 CPI success and investment with consequential A country’s rank indicates Thailand (101, 36), the Philip- countries in the world. Pakatan Harapan effects on growth. Corruption its position relative to the other pines (113, 34), Laos (130, 29), and The countries which scored Malaysia’s 2019 CPI ranking is can further be thwarted on a large countries in the index. The Cambodia (162, 20). the lowest were Somalia and fully indicative of the Pakatan scale if we find out the root cause smaller the ranking the less Harapan administration’s perfor- for the decline in integrity taking corrupt a country is perceived to mance as it took over Putrajaya place in the system. be. On the other hand, the score only in May 2018. The country’s In fact, if the government has indicates the perceived level of Malaysia Corruption Perceptions Index 2014-2019 standing has improved, especially set a key performance indicator public sector corruption on a YEAR 2014 2015 2016 2017 2018 2019 when the majority of the people (KPI) to achieve the 30th or scale of zero (highly corrupt) to voted in favour of the opposition better by 2030 in CPI, it has to be 100 (very clean). Thus, countries Ranking 50 54 55 62 61 51 alliance to serve as the new gov- subjected to significantly closer with a higher score will rank Score 52 50 49 47 47 53 ernment – the Pakatan Harapan scrutiny in the years ahead. much higher in position (as being Countries 175 168 176 180 180 180 (PH) coalition. Given the country’s perfor- less corrupt) compared to the The experts and rakyat mance, if the government wants lower-score countries. SOURCE: TRANSPARENCY INTERNATIONAL JANUARY 2020 were all excited and believed to achieve its target, it needs to be The CPI makes use of surveys that PH will bring forth positive very serious and fully committed done by business people from change. Serious programmes and to combating corruption. The around the world, including policies have been outlined in the challenge for PH is to ensure experts, risk analysts and the- CPI 2019 least corrupt countries new government’s manifesto, that it does not repeat the same general public working in the COUNTRY 2018 2018 2019 2019 which promised to reform the mistakes and wrongdoings of the countries evaluated. The CPI is RANK SCORE RANK SCORE administration, curb corruption previous government. Failing based on at least three independ- especially the prosecution of big this, it will never be a reality. Denmark 1 88 1 87 ent surveys of the perceptions in scandal cases, asset declaration So let’s get on with the great each country. For Malaysia, nine New zealand 2 87 1 87 and politics as well as sus- fight and rid our nation of this out of 13 sources were used. Finland 3 85 3 86 tainable growth and economic great evil of corruption. The data sources used to Singapore 3 85 4 85 development. All this caused the compile the index include ques- rise in the score. This is just the Datuk Seri Akhbar Satar holds tions relating to abuse of public Sweden 3 85 4 85 beginning. The government must HELP University’s Institute of power and focus on bribery of Switzerland 3 85 4 85 continue to work hard towards a Crime & Criminology Professorial public officials, kickbacks in Norway 7 84 7 84 corruption-free nation. Chair. He is also the president of the public procurement, embez- The government should Malaysia Association of Certified zlement of public funds and the SOURCE: TRANSPARENCY INTERNATIONAL 2020 not rest on its laurels or be Fraud Examiners 54 columns FocusM | March 2020 Fancy a foreign trademark? Now it’s cheaper

through the fee calculator on WIPO’s website. by Ramakrishna The downsides Damodharan Though there are a lot of advan- tages to the Madrid Protocol, it N an uncertain economy has a few disadvantages as well. when every ringgit counts It may be fraught with difficulties and time is money, even the if one is not strategic about the smallest increase in revenue Protocol. or reduction in expenses The dependency period and Ican have an impact on company fears of “central attack” have been profitability. frequently cited by trademark The good news is, Malaysian owners as significant barriers to businesses and entrepreneurs the increased use of the Protocol. who want to protect their trade- Their international regis- marks overseas can now rejoice tration is tied to their Office of at the prospect of cutting their Origin registration for five years. costs by up to half in international If at any time during that period, trademark applications, after a the Office of Origin cancels or key regulation in trademark laws rejects the applicant’s trademark was passed by Parliament in 2019. registration, their international Malaysia became the 106th registrations are cancelled or country to embrace the Madrid rejected as well. Protocol trademark filing system. As there are certain disad- This means Malaysian individuals vantages to the Madrid Protocol, and companies can file trademark it is imperative that qualified and applications in foreign countries reliable advice is sought prior under the Protocol which, among MyIPO is seeing more applications for international and Malaysian trademarks to embarking on the Protocol others, streamlines and improves journey. the procedures for the interna- tional registration of marks. Local can be seen as synergistic to It’s no wonder that with over paying one fee in one currency Future-proof your trademark owners who are ex- the government’s initiatives to 1.3 million trademarks registered, (Swiss franc). trademark ploring markets outside Malaysia make Malaysia one of the more the Madrid Protocol is the top An added advantage is the The essential criteria for eligibil- can now dance to a happier tune attractive countries in Asean for choice and a very powerful tool further simplification and effi- ity for businesses in Malaysia is where filings and registrations of foreign investment. among export-oriented brand cient operation which enables that the trademark owner must trademarks are concerned. The Protocol’s structured owners, amongst them Microsoft, trademark holders to manage have either a pending application Malaysia External Trade De- designation process will un- Daimler, Sony, Nestle, Shiseido their brand portfolio through a and/or a registered trademark velopment Corporation (Matrade) doubtedly encourage more and many other well-known centralised system administered in Malaysia, known as the basic statistics show that in 2019, foreign trademark owners to brands to protect their multi-bil- by WIPO. mark. The owner, an individual or Malaysia’s exports amounted to designate Malaysia as one of lion-dollar trademarks. So, how do the country’s law a company, must either be dom- RM986.40 bil, and this value may their countries of interest, as it firms see the Madrid Protocol im- iciled or have a real and effective see a significant increase this now provides protection for their Convenient and cost- pacting businesses in Malaysia? establishment here. year following accession to the trademarks when introducing effective application In the case of Japan, a research As a quick review, to use the Protocol. their products and services in The Madrid Protocol is by far the paper says some IP practitioners Madrid Protocol, one begins with Local multinationals and Malaysia. most convenient and cost-effec- in that country that adopted a local trademark application (the SMEs that want to enhance their The statistics tell the story: tive solution for registering and the Madrid Protocol since 2000 Basic Application as filed at the competitiveness and protect The Intellectual Property Corpo- managing trademarks worldwide. reported that, through their Office of Origin - in Malaysia, their innovations internationally ration of Malaysia (MyIPO) says The most obvious advantage in experience, businesses can gen- it’s MyIPO). The owner requests can now obtain global trademark that as of Feb 11, 2020, 451 inter- using it is a simplified application erally save up to 50% of costs and MyIPO to submit the application protections more easily by filing national trademark applications process. time when they go through the to WIPO which submits it to all just one trademark request for as from abroad have designated Touted as a one-stop solution single channel Madrid Protocol as of the designated countries. many member countries as they Malaysia and 16 applications provider, the Protocol allows a compared to filing directly with Each countries’ trademark office want to, as the Madrid Protocol from Malaysian companies filed trademark owner to seek protec- individual countries. then reviews and processes the already covers over 80% of the trademark applications under tion of the trademark in several Prior to Dec 27, 2019, application according to its own world trade market. the Madrid Protocol since it was countries simultaneously by filing Malaysian trademark owners law and practices, such as for From the import aspect, the implemented in Malaysia on Dec one application at a single office, who wanted to protect their distinctiveness, descriptiveness, accession to the Madrid Protocol 27, 2019. in one language (English) and by trademarks in several countries morality or prior rights. could only do so by hiring a legal representative in each country What to expect they intend to protect the mark In summary, the Madrid Protocol in and by paying local registra- heralds a new beginning in the tion and application fees. All this way trademarks can be protected took up a considerable amount in Malaysia. Navigating the of time and money. Protocol for the local trademarks Although the cost-effective owner will require proper strate- nature of the Protocol is not in gic planning and it may not be the doubt, there were mixed opinions best solution for all trademarks. by practising firms in Japan back It is still early days for us in 2014. Some said the Protocol to gauge the full impact of the was only useful if 10 or more Madrid Protocol for Malaysia but countries were designated; some at least, the first step towards others, however, learned that the greater harmonisation for trade- Protocol is cheaper if three or mark rights protection has been fewer countries were designated. taken and this is indeed a step in The general consensus among the right direction. IP practitioners was that cost effectiveness is ideal when five Ramakrishna Damodharan is to 10 countries are designated. managing director of Adipven How much does it cost? Inter- (M) Sdn Bhd, an Asiawide in- ested parties can always prepare tellectual property consultancy The global reach of Malaysia’s products and services means that securing international trademark the cost estimates for obtaining and commercialisation firm protection has become a must protection for their trademarks headquartered in Kuala Lumpur March 2020 | FocusM columns 55

Question Time A temporary reprieve from rising car prices

by P Gunasegaram

OR now, prices of locally assembled cars are not going to rise as much as 20% or up to RM33,000 but this is only until the Fend of this year after which the new system of computing value of cars for the purpose of excise duty kicks in. There was initial confusion over whether the new method of computation will be imposed with consequential rises in the prices, especially of locally as- sembled cars, because of higher excise duties. In effect, this would have increased the gap in prices between locally assembled cars and the so-called national cars even further, increasing the competitive pricing of these cars and making more car buyers buy national brands such as Proton and . This is the last thing one wants when it comes to car prices which are among the highest in the world and are a considerable burden on all sectors of the Will there be a mad rush to buy locally assembled cars such as Hondas and Toyotas before the new system for computing car value kicks in? public in Malaysia as everyone aspires to buy cars to transport their families safely and com- rolled off the plant in 1985. that have to be included in the Association or MAA that the holding off for one year, the new fortably in the absence of a viable I used estimated sales of some price of cars, effectively raising finance ministry has confirmed method of calculation of OPV and affordable public transport 12 million vehicles between 1985 the so-called open market value there will be no increase in prices which would raise prices by as system. and 2016, of which some four of the car (OPV). until Dec 31, 2020. much as 20%. Buying a car is the largest million vehicles were Protons. I According to the automotive This will not be the end of the investment that families make, have estimated, conservatively, website paultan.org, the new matter of course. What happens Increasing duties through aside from the purchase of a that the average price per vehicle method widens the net consid- as we approach 2021? Will there dubious means house, and considerably drains was RM30,000 higher because of erably by including “any direct be a mad rush to buy locally Even this is unsatisfactory. Will the meagre resources of the protective barriers. Multiply this and indirect costs incurred or assembled cars such as Toyotas prices go up next year, will there public at large, all for the sake by 12 million vehicles for RM360 accounted in the manufacture and Hondas whose prices are be excessive demand for cars of protecting and cultivating bil. You may disagree with the and sale of the dutiable goods.” bound to go up, by as much as as the deadline comes up? How a highly inefficient industry exact figure but there can be This is “frightening,” because 20% according to MAA estimates? much will that distort the market which has neither the scale nor little doubt that the order of the Ministry of Finance/Customs This move may not even place? Remember the artificial the local expertise to make cars magnitude is in the hundreds of did not engage the auto industry raise much more revenue for the demand created in the second competitively. billions of ringgit. prior to the release of the gazette government because many locals half of 2018 when the government In other words, if the prices of widening the method of calculat- will buy the nationals cars – the foolishly gave an exemption from locally assembled cars increase, it Raising the open market ing OPV, the website said. Peroduas and Myvis – which will both the goods and services tax will mean even more protection value As Malaysians girded them- become relatively cheaper. The and the sales and service tax? through tariff barriers for the This new system of calculating selves in preparation for higher only reason these manufacturers Instead of rationalising the national cars which have already the value of a locally assembled prices, a clarification came via a make money is because of tariff car industry so that all duties been protected to the tune of over car for excise duty purposes statement from industry group, protection and clearly dubious are progressively reduced as RM300 bil since the first Proton broadens the category of things the Malaysian Automotive practices. the local car industry plugs into Take Proton for example. It is foreign car manufacturers and turning a profit solely because of improves efficiencies – Perodua one new model, the Proton X70, a with Daihatsu and Proton with model based entirely on the Geely Geely – the government is finding Boyue. ways to increase duties through The much-hailed Proton dubious means. recovery is a farce. The fact This would continue to give is until recently, not a single an unfair advantage to national X70 was locally assembled, let car manufacturers Perodua and Many locals alone manufactured, being fully Proton, result in higher and will buy the imported from China. higher prices of cars, promote nationals Meantime, Proton made an inefficient industry and result cars – the millions by simply importing in customers paying hundreds of Peroduas China cars and selling them billions of ringgit extra in future and Protons with tax advantages in Malaysia, for cars, money which could have – which will become a process which will continue. been used for more productive relatively Back to this farcical an- purposes. cheaper nouncement of excise duty after the new changes. Finance Minister Lim P Gunasegaram says protecting system of Guan Eng first says that the new industries always leads to higher computing duty structure has not been fixed prices and poorer quality the value yet. And then the MAA, not the of cars is finance ministry, announces the This article first appeared on implemented finance ministry’s clarification focusmalaysia.my 56 columns FocusM | March 2020 Regulate vaping rationally

• To effectively regulate vape and e-cigarette usage, there is a need to first resolve conflicting views on their health hazards • The approach to regulating the industry should be consumer-friendly in that it shouldn’t lead to making vaping products inaccessible in the marketplace • Malaysian-made e-liquids are global best sellers. As they have successfully penetrated the UK and many European markets, Malaysian brewers must have met stringent criteria in terms of pricing, volume of liquid and nicotine content for the flavoured juices • The vape industry can indirectly promote the gig economy by providing jobs while getting people to quit smoking

be consumer-friendly in that it shouldn’t lead to making vaping by products inaccessible in the Cheah Chor Sooi marketplace. “As it is, cigarettes are easily available at convenience stores,” emember the days he justifies. “This is in line with when e-hailing first our belief that e-cigarettes made inroads in should only be used by current Malaysia? There was smokers to kick their habit as significant resistance opposed to enticing a new gen- Rfrom taxi drivers who feared for eration of smokers.” their livelihoods. In this regard, the authorities Nevertheless consumer can highlight the age limit or even pressure was so overwhelming warn consumers on the health that the public transport au- hazards of vaping on the label of thority (beginning with the Land e-liquid bottles (similar to ciga- Public Transport Commission rette packs) or even to authorise and currently, the Land Public sales of devices and juices by Transport Agency) ultimately only outlets licensed by the MoH. made the bold move to regulate the e-hailing service industry Eradicating confusion instead of banning it outright. To effectively regulate e-cig- A similar logic should thus be arette usage, there is a need to The ultimate policy goal should be to ensure that smokers can easily transition to vaping, but not to make applied with regard to electronic first resolve conflicting views on it so accessible and appealing that non-smokers start vaping cigarette (e-cigarette) and vaping; the health hazards of vaping. a blanket ban simply won’t do It has to be pointed out that the trick as these products have the recently published question Control and Prevention stringent criteria in terms which boast top-notch quality become a global phenomenon. and answer on e-cigarettes by have reported 2,711 cases of pricing, volume of liquid and creativity are known to be In the US, concerns have the World Health Organisation with 60 deaths as of Jan 21 and nicotine content for the sold at RM20,000 to RM30,000 been raised that the move by its (WHO) has drawn flak from this year). flavoured juices, according to each, vegetable glycerin or VG, Food and Drug Administration the scientific and medical • There is clear evidence that MOVE founder Samsul Kamal. which is one of the four major (FDA) to remove e-cigarette community for providing “false, e-cigarettes help smokers With proper regulations in contents of e-liquids is based flavours from the regulated misleading or simplistic infor- quit. place, he is optimisic that the on palm oil which we have in market is counter-productive mation”. If Malaysia decides to vape industry can indirectly abundance here,” he adds. to public health. Just as alcohol “The WHO has a history regulate vaping, the “gold promote Malaysia’s gig economy All-in-all, demand for e-cig- prohibition provoked thousands of anti-vaping activism that standard” in terms of public from an employment standpoint arettes and vaping is expected to of alcohol-related poisonings is damaging the industry’s policy is the United Kingdom’s while saving lives (by getting grow exponentially all over the from bootleggers, banning e-cig- reputation,” commented Prof National Health Service (NHS) for people to quit smoking). world, including Malaysia. arette flavours may lead to more Peter Hajek, director of the it has received praises for having The global e-cigarette and people purchasing unregulated Tobacco Dependence Research tightly regulated e-cigarettes and Lots of SMEs involved vape market is expected to reach products from the black market. Unit at Queen Mary University vape for safety and quality. According to statistics by the US$47.11 bil by 2025, registering a ‘ of London. He further observed The NHS stance is sensible Malaysia E-Vaporisers and compound annual growth rate of Sensible regulations that: – while vaping is not com- Tobacco Alternative Association 24.9% from 2019 to 2025, accord- This should offer some food • There is no evidence that pletely risk free, it carries a (Mevta), there are more than ing to a new study by Grand View for thought for the Ministry of vaping is “highly addictive” small fraction of the risk of 5,000 small and medium en- Research Inc. Health (MoH) which is widely – less than 1% of non-smok- smoking cigarettes. Public terprises involved in the vaping “The growing awareness of expected to introduce laws on ers become regular vapers. Health England (PHE) says industry while the country’s consuming safe, smokeless, and the usage of vape and electronic • Vaping does not lead young e-cigarettes are 95% safer than e-cigarette market is valued at ashless tobacco is expected to cigarettes in 2020. people to smoke. tobacco though fewer than half between RM1.5 bil and RM2 bil a propel market growth,” the study Samsul Kamal Ariffin, • There is no evidence that of smokers are aware of this fact. year, and serves about 1.2 million notes. “The adoption of vaping president of the Malaysian vaping increases the risk e-cigarette users. devices is expected to increase, Organisation of Vape Entities of heart disease or that it Burgeoning industry “Amid the global economic particularly among individuals (MOVE), a non-profitable or- could have any effect at all Surprisingly, there is little uncertainties, it is music to willing to quit smoking or willing ganisation that strives to get the on bystanders’ health. publicity to the very fact that the ears that we have start-ups to smoke merely for recreation.” Malaysian vaping industry reg- • The US outbreak of lung Malaysian-made e-liquids are which can produce world-class The ultimate policy goal ulated, welcomes the regulating injuries is due to contam- global best sellers. Considering vaping products (devices and should be to ensure that smokers of the vaping industry but “not inants in illegal marijuana that they have successfully flavoured juices) from their can easily transition to vaping, to the extent of over-regulation”. cartridges and has nothing penetrated the UK and many own backyards,” Samsul Kamal but not to make it so accessible Speaking to the writer, he to do with nicotine vaping European markets, Malaysian enthuses. and appealing that non-smokers opines that the approach should (the US Centres for Disease brewers surely have to meet “While vape mods (devices) start vaping. March 2020 | FocusM columns 57

Lifting the Fog When everyone wants to be THE auto hub

by will be implemented through Automotive IoT, which will look at Mahathir as the prime minister. the automotive sector further, Xavier Kong seven roadmaps/blueprints, as the direction of the connectivity In what can only be defined as it again falls into the box of shared by then-prime minister revolution in the automotive political turmoil, many initiatives keeping the crutch on Proton Tun Dr Mahathir Mohamad at the industry. and programmes appear to have and Perodua, and here we see the verything is a com- launch. The four roadmaps and NAP 2020 will also feature a been put on hold pending the introduction of a third national petition. The most three blueprints will be rolled out new Malaysian vehicle project, decision of the King. car that requires investments supported person over the next 10 years, and are with claims that the prototype As if this was not enough, the from the private sector to even becomes the prime focused on the following. is ready and is just awaiting Malaysian market has also been have the prototype shown. minister, the most The roadmaps will focus investors. According to TA Se- identified as the worst-perform- That in itself is a telling Ecompetitive country becomes on Automotive and Mobility curities’ analyst Angeline Chin, ing market in the region, with sign, is it not? Why not show the the hub for a sector. But, see, the Value Chain, which aims to the new Malaysian vehicle project the political turmoil coming in prototype to the public, so that thing about a competition is that “assist the development of parts will also emphasise research while the country is still fighting the reception of the new project there can be only one winner, and components suppliers and development along with to recover from the 1Malaysia can be gauged? Why should the and everyone else will just have in Malaysia”; Automotive and the incorporation of the latest Development Bhd (1MDB) scandal private sector and the public pay to grin and bear it, while working Mobility Technology, which technologies in local industries which rocked the nation and its for the continued use of crutches harder to overthrow the winner. will chart the way forward on “in order to be competitive in economy, as well as the economic by local auto players? The same holds true for the related technology development both the domestic and global damper that came about due to For now, it honestly feels as country’s automotive industry. in the aspect of energy-efficient markets.” the outbreak of the Covid-19. though Malaysian auto policy is The recent launch of the National vehicles, next-generation Customised incentives will So, how will Malaysia’s meant to continue playing in this Automotive Policy (NAP) 2020 vehicles, smart mobility, Internet be further refined as well, with automotive industry stack up sandbox of their own, extracting again shows steps aimed at of Things (IoT) infrastructure and Malaysia Automotive Robotics to the competition, and will payment from other players that turning Malaysia into a regional IR4.0; Automotive and Mobility and Internet-of-Things Institute NAP 2020 be the kick it needs? want to come in, and letting only hub, this time for energy-effi- Talent, which outlines improved (MARii) chief executive officer select players enter the sandbox. cient vehicles. plans for the development of Datuk Madani Sahari noting that Tariff protection stays So much for Mahathir’s state- However, it is safe to say that a competitive workforce that the process will be made more Honestly, the gut feeling is no. ment that the AP policy is there Malaysia is not the only player is fit for industry demand at transparent, with criteria to be As it stands, local auto players to “protect the public from being in the game, as Indonesia and all levels; and the Automotive met. Proton and Perodua, established taken for a ride,” as well as how Thailand have been taking their Aftermarket, which will position However, missing from in 1983 and 1993 respectively, Malaysia is “a very open market.” own steps towards that elusive Malaysia as an automotive the policy are any changes to have enjoyed 37 and 27 years of The public should not have to pay “regional hub” status. Thailand remanufacturing hub in Asean, the excise duty as well as the tariff protection respectively. for the perceived success of the has its own aims to be a manu- while providing guidelines for Approved Permit (AP) system, Despite this, Proton needed a homegrown auto industry, or to facturing hub for electric vehicles optimising the quality of recy- along with any form of the end- further bailout by China-based prop them up for their pride. in the region, while Indonesia cling and reuse of components. of-life policy. auto player Geely Auto. How about adding an end- already has the title of the largest Analysts agree that NAP 2020 As much as competition is of-life policy, and removing automotive market in Southeast Strategies in robotic is a good policy that should help supposed to stir innovation and the tariff protection for fair Asia. technology in the long term, considering advancements, is it not high time competition among all the auto Still, competition can be a The blueprints, on the other the lack of details on the specific for the crutch that is the tariff players in Malaysia? Pretty sure good thing, as it drives innova- hand, will focus on Mobility as a action plans to date. However, protection be removed? That that would do more for the B40 tion and creativity in the eternal Service, which will outline core the short to medium term still way, it would be a clear indicator than the lack of the end-of-life race to one-up the other com- planning of transport services suffers from a lack of catalysts. as to whether or not Malaysia’s policy, while also creating jobs petitors. However, is Malaysia too and mobility solutions; Automo- It should also be pointed out homegrown auto players will be as the nation would become a ambitious at this time? tive Robotics, which will outline that, right after the launch of NAP able to stack up to the rest of the truly open market for the auto Let’s look at what Malaysia strategies in robotic technology 2020, there came an attempted region, and the rest of the world. industry. Would that not be the is bringing to the board. It has towards providing solutions for coup d’etat in the Malaysian As for NAP 2020, for all it is definition of a hub for the auto- been determined that NAP 2020 the manufacturing sector; and government, aiming to keep meant to stimulate and build up motive industry? Wake-up call for the Chinese SATIRE by Amie Ong

’M sure it was with shock and horror and will Jho Low be back? that you read about wolf pups being prepared for the table at this wildlife food centre in what is now the most When will the Chinese people realise netted almost 40,000 animals including rhinoceros (the horn for medicine) are off well-known city in China. this? That they shouldn’t eat civets, bats, squirrels, weasels and boars, suggests the table. INo thanks to this exotic meat slaughter- badgers, raccoons and the like? Can’t they that China’s appetite for wildlife and using Just a thought: When the coronavirus house in Wuhan, we have an international stick to pork, chicken, duck, beef and animal parts for medicinal purposes is scare dies down, will the exotic meat eaters epidemic in Covid-19 infections. mutton? likely to survive Covid-19. turn into vegetarians? The virus has infected about 83,000 How does it feel to be looked at with Traders legally selling donkey, dog, That will be good for mother earth as people and killed more than 2,800, the disdain by people from other countries? deer, crocodile and other meat told animal husbandry takes a heavy toll on the vast majority in China. The list of countries Granted that in a population estimated Reuters they plan to get back to business environment. infected has grown to 36. at 1.44 billion, the people’s tastes are bound as soon as the markets reopen. Another thought: As the virus spreads The fear is palpable as the contagion to be diverse. So there will always be that Perhaps the authorities there can put across China (five million people left is high. Countries and airlines have pulled group of people who will go for exotic an end to the wildlife markets, illicit or Wuhan before the lockdown, according back from China in a bid to stop the spread wildlife (sometimes as an aphrodisiac). otherwise? to its mayor), will it drive out a Malaysian of the disease in their own countries. A Reuters report said in the first two Growing up in a village myself, I have fugitive? Coming back to the Wuhan market, sci- weeks of February, China’s police raided seen the Chinese eating monkey brains, Will Jho Low, who is believed to be in entists suspect, but have not proven, that houses, restaurants and makeshift markets ant-eaters and monitor lizards. China, come back of his own accord to face the new coronavirus passed to humans across the country, arresting nearly 700 And we do have wildlife eateries in the music in connection with the 1MDB from bats via pangolins, a small ant-eating people for breaking the temporary ban on Malaysia too. An ex-colleague was always scandal? Is he still somewhere in Wuhan? mammal whose scales are highly prized catching, selling or eating wild animals. talking of his wildlife feasts at a restaurant (Low had been spotted in the city.) in traditional Chinese medicine. The Then on Feb 25, the top legislature in Semenyih, Selangor. And there’s one in Or is he partying out of harm’s (virus) pangolin was one of the 118 items of wildlife imposed a total ban on trade and con- Lenggong, where I’ve been invited way? that were slaughtered and delivered to sumption of wild animals, a move that to for nothing more exotic than frog legs. That’s probably the case – well customers from the market. aims to curb activities that scientists say Maybe we also need to draw a line on cocooned in comfort, luxury and safety In 2003, the SARS outbreak was traced may have caused the deadly coronavirus what can be eaten and what cannot because and not the least bit inclined to come back. to civets which were also prepared for the to jump from animals to humans. of the risks involved. And of course any Or perhaps there should be an airport pot. And the host country? China. The scale of the crackdown, which has endangered species like the turtle and watch for him. 58 columns FocusM | March 2020 Global economy still slowing, dangerously vulnerable

price bubbles and endangering financial stability. ‘Easy money’ from developed economies has also flowed to developing countries in search of better returns, making them more vulnerable, besides raising their indebtedness yet again. QE has also contributed to rising inequality. Meanwhile, major central banks have ex- hausted much of their means for lending at very low or even negative interest rates as they have very limited room to cut interest rates further.

No fiscal saviour Besides reducing overall revenue collection and marginal income tax rates, the longstanding trend from direct to indirect taxation has shifted tax incidence from incomes to consumption, largely at the expense of the middle class. Pursuing fiscal austerity under various guises, govern- ments have slashed social and infrastructure spending in favour The UN’s Global Green New Deal to stimulate economic recovery is going nowhere because the richest nations are ignoring it of public-private partnerships skewed in favour of influential corporate interests. Fiscal especially if their pronounce- To be sure, forecasting is delaying economic recovery by austerity also slowed economic ments are later denounced as extremely hazardous, and some- limiting aggregate demand and recovery and technology adoption self-fulfilling prophecies. times compared unfavourably to capacity utilisation. to the detriment of productivity But ‘talking up the economy’ astrology. Forecasters factor in growth. can have grave consequences, plausible developments, but com- Policy failure Such fiscal reforms have not by Jomo Kwarne Sundaram as with the 2008-2009 global pletely unpredictable ‘black swan’ Such fundamental weaknesses only exacerbated inequality but and Anis Chowdhury financial crisis (GFC). Then, the events, such as the novel corona- owe much to policy failures. also kept countries and house- IMF revised its forecast upward virus (Covid-19) pandemic, can Unlike the New Deal following holds in debt bondage. And as in July 2007, a month before the upset even the best of forecasts. the Great Depression of the governments have less fiscal N an annual ritual early US ‘sub-prime’ mortgage crisis Meanwhile, the World Bank 1930s, all too many contempo- space with rising debt, their in the year, most major morphed into the worst global warns of ballooning debt, both rary policymakers shy away from ability to respond to crises – fi- economic organisations downturn since the Great De- public and private. The UN and addressing core problems, such nancial, climate or pandemic – is have released forecasts for pression of the 1930s. the World Bank also note that as financial excesses, rising severely compromised. the global economy in 2020. Meanwhile, the OECD was the sharp productivity growth household debt, and exorbitant IIncredibly, almost as a reminder confident that any US ‘soft-land- slowdown since the GFC has executive salaries vis-à-vis Missed opportunity of where financial power resides ing’ would be offset by robust reduced long-term growth and stagnant - if not declining - real Had national policymakers, led in this day and age, the Inter- European economic perfor- poverty reduction prospects; wages that also contributed to by the G20 (the Group of 20, an national Monetary Fund (IMF) mance. Such forecasts fostered furthermore, a high level of the GFC. organisation of finance ministers released its forecasts at the World a false and ultimately dangerous inequality will also delay such Low (negative) interest rates, and central bank governors from Economic Forum’s 50th annual sense of invulnerability and com- progress. due to unconventional monetary 19 individual countries and the meeting in Davos. placency before the storm broke. Both the UN and the IMF note policy, especially ‘quantitative European Union, collectively rep- Although the IMF revised Policymakers ignored that high and rising inequality easing’ (QE), have not promoted resenting more than 80% of the its global economic growth warnings by the UN since 2005 also engenders greater social productive investments, and world’s gross domestic product), prognosis slightly downwards about fundamental weaknesses, and political polarisation, unrest allowed less-productive firms to embraced the UN recommenda- from its October 2019 forecast, including growing global im- and instability. Additionally, survive. Thus, QE failed to boost tion for a Global Green New Deal it still offers the most optimistic balances and the debt-financed the UN also warns of deepening productivity. to stimulate recovery, address prospect of 3.3% growth in 2020. US housing bubble. As is now political polarisation and growing ‘Easy money’ has been used the climate crisis and reverse The World Bank’s forecast of 2.5% well known, the collapse of the scepticism about multilateralism for share buybacks, mergers, ac- growing inequality, the global - identical to the United Nations US sub-prime mortgage market as significant downside risks. quisitions and inflated executive economy could have been put on (UN) estimate - is the lowest, with brought down world finance and, But none mention that the remuneration. Thus, as before a more inclusive and sustainable the Organisation for Economic eventually, the global economy. long-run effects of income the GFC, ‘fictitious capital’ is path. Cooperation and Development’s inequality on both consumption being systemically generated Such hopes remain even (OECD) at 2.9%. Hazards of forecasting and output can be quite large, once again, contributing to asset more elusive in an increas- The IMF justified its optimism Thankfully, it is customary to ingly fractured world where on improved market sentiments include some cautionary notes multilateralism itself has been following the phase one US-China with these annual forecasts, even discredited and deliberately trade deal and diminished fears when optimistic. For example, the undermined by ethno-populism’s of a ‘no-deal Brexit.’ Goldman IMF now warns of more downside relegitimisation of jingoism. Sachs describes these develop- risks, including geopolitical ments as ‘a break in the clouds,’ tensions, social unrest, trade Jomo Kwame Sundaram, a forecasting global growth at 3.4% tensions and developing econo- former economics professor, in 2020, while Morgan Stanley mies’ financial turmoil. was United Nations Assistant sees ‘calmer waters ahead,’ Both the UN and the IMF fear Secretary-General for Economic expecting 3.2% in 2020 and 3.5% that the climate crisis can trigger Development, and received in 2021. financial stress, further slowing the Wassily Leontief Prize for economic growth. To make Advancing the Frontiers of Perils of ‘talking up’ matters worse, ignoring funda- Economic Thought. Anis Chow- It is not unusual for these organ- mental weaknesses and focusing dhury is Adjunct Professor, isations to be optimistic: after all, excessively on ephemeral short- Western Sydney University and they do not want to be seen as term trends can be dangerously When the world economy stutters, the greatest impact is felt by the University of New South Wales naysayers, or prophets of doom, misleading. developing countries (Australia) March 2020 | FocusM markets 59

• As operators in the shadow economy do not register to Shadow economy – pay tax, this creates an unfair playing field for tax-paying businesses and Why does it matter? individuals

of taxpayers through the • A shadow economy exploring of best practices in of 21% of GDP identification and registra- restrains the tion process and in securing government’s authentication, including the use of biometrics and block- capability to fund chain technology. In 2019, national economic eligible Malaysian taxpayers development. The of 3.503 million only made up 22.39% of the total workforce government simply of 15.642 million. isn’t collecting d) Tax administration to enough revenue to undertake soft approaches meet a high level involving other govern- ment agencies, including of development local authorities, to track expenditure and and influence behaviour obligated operating of informal sectors to pay taxes. These include devising expenses an effective mechanism to Accelerating the growth of cashless payments can reduce shadow economy activities. Other measures share data, information and include limiting the amount of cash transactions, and increasing labour inspections in informal workplaces sources on the business operation of shadow agents in the economy. Tax admin- America it is between 25% and tax base, price and competition collection will translate into istration can collaborate by 60% and in Asia 13-50%. distortions in the market place, RM3.0 bil in additional revenue. with customers, suppliers Lee Heng Guie Among members of the the influx of lower quality goods To plug the tax leakages and trade bodies to trace Organisation for Economic that poses health hazard to through the shadow economy, the supply chains, involv- n most developing coun- Cooperation and Development consumers, rampant corrup- the government should reduce ing sub-contractors and tries, recouping “revenue (OECD), the average size of the tion and the degradation of the complexity of the tax system, traders producing goods foregone” from a large shadow economy in developed economic and social institutions, make the tax filing process and services for the formal shadow economy has been members is smaller at around which affect productivity and simpler and adopt a policy to sectors. a mammoth task for tax 13-15% of GDP though for some reduces economic growth. As incentivise formal payments for e) Set up a task force to Iadministrators as they face European countries, it can be as the informal sector does not business transactions through monitor the activities of the challenges to deploy the most high as 30%. register to pay tax, this creates banking channels, including sharing and gig economy. appropriate policy and admin- The International Monetary an unfair playing field for regis- electronic payments. It should While this sector can yield istrative responses to plug tax Fund (IMF), in a research tered tax-paying businesses and encourage wide use of e-pay- positive economic effects, leakage as well as manage the working paper published in individuals. ments, as e-transactions can it also risks expanding the revenue risks posed. January 2018, analysed the Malaysia has long reckoned prove useful in reducing the shadow economy as existing The shadow economy results of the shadow economy that the presence of a large informality of businesses. In and new activities may go includes all economic activities for 158 countries for the period tax gap estimated at 20% (the addition, ICT solutions, including unreported. Hence, the tax and production of goods and 1991 to 2015. It found the average difference between total taxes Big Data analytics and Artificial administration may have to services that are hidden from size of the shadow economy was owed and taxes paid on time) and Intelligence (AI), can be used explore the possible options tax authorities for monetary, 31.9%. Countries with the largest the shadow economy of 21% of to improve tax enforcement and solutions to facilitate regulatory, and institutional presence of the shadow economy GDP would restrain the govern- and plug tax evasion by shadow the growth of online inter- reasons. were Zimbabwe with 60.6% and ment’s budget operation to fund economy transactions. mediaries, sharing economy The monetary reasons Bolivia with 62.3% of GDP. The national economic development The government can consider and gig agents while fulfilling include avoiding paying taxes lowest ones are Austria with 8.9% given a relatively low revenue the following initiatives and their tax obligations. and all social security contri- and Switzerland with 7.2%. buoyancy, which had been strategies in strengthening tax f) Accelerate the growth of butions, regulatory reasons The Malaysian government trending lower from 2.1 in 2011 administration to tackle the cashless payments. Since the include avoiding governmental is looking into tapping income to 0.5 in 2017, indicating slower shadow economy: passive shadow economy is bureaucracy or the burden of tax revenue from the shadow tax revenue growth relative to a) Raise community awareness caused by cash payments, regulatory framework while economy as, according to economic growth. through education about it could be reduced either institutional reasons include Finance Minister Lim Guan Eng, the importance of taxation through actions promoting corruption law, the quality of the shadow economy accounts Make tax filing simpler policy in supporting so- electronic payments, or political institutions and weak for 21% of GDP and amounts to Although Malaysia’s nominal cio-economic development, through other measures rule of law. In short, businesses an estimated RM300.0 bil. Based GDP had increased by 7.3% per achieving social equity aimed at increasing the operating outside the tax system on the IMF policy paper, the annum in 2011-2018, tax revenue objectives and providing share of cash transactions and registered businesses shadow economy in the country collection paced slower at 6.0% essential public services being registered. However, conceal transactions; taxes are has been trending lower from an pa. Tax revenue to GDP ratio and infrastructure. The tax the promotion of elec- not paid and regulations are not estimated 37.5% of GDP in 1991 had declined progressively from agencies must engage the tronic payments would not strictly followed. to 31.1% in 2000, 30.2% in 2010 15.6% in 2012 to 12.0% in 2018 community to identify and influence the behaviour and 26.1% in 2015. The average and 11.8% in January-September reject shadow economy of the committed shadow Defies measurement ratio for the period 1991-2015 2019. Based on available data for operators through sus- economy participants, who It is difficult to measure the was 31.5%, which was higher regional comparison, Malaysia’s tained campaigns to raise would continue to use cash size of the shadow economy as than Singapore (11.9%), Australia tax-to-GDP ratio of 13.0% in 2017 awareness of the dangers payments in order to benefit those engaged in it try to remain (12.1%), China (14.7%), Hong Kong was lower than that of Vietnam of dealing with them as the from not reporting the trans- undetected. There is no single (14.7%), Vietnam (18.7%), India (19.0%), Chile (17.4%), Poland presence of these operators action. Therefore, this part infallible methodology for esti- (23.9%), Indonesia (24.1%) and (16.8%) and South Korea (15.4%). puts registered taxpayers at of the shadow economy has mating the size and development South Korea (25.7%). This issue of a shadow a disadvantage. to be addressed with other of this informal economy and the The presence of a large economy matters because years b) Reinforcing taxpayers’ fidu- measures such as limiting results of different approaches shadow economy deters the of budget deficits and a narrow ciary duty through education the amount of cash trans- can differ significantly. development of an inclusive tax base mean the government must be accompanied by actions, increasing labour According to a recent paper economic development as it is simply not collecting enough better governance of public inspections at building sites, published by Cristina Terra, deprives potential high tax revenue to meet a high level of finance and fiscal discipline. introducing more restrictive professor of economics at Essec revenue collection to finance and development expenditure and Taxpayers will fulfil the fidu- penalty sanctions for coun- Business School in France and implement development projects obligated operating expenses. ciary duty of paying taxes if terfeiting of excise products author of the book Principles of such as healthcare, education If the informal sectors of the they are convinced that the and smuggling. International Finance and Open and public transportation as well economy and unregistered in- tax money is being utilised Economy Macroeconomics, the as socio-economic communities. dividuals are captured in the tax for productive economic Lee Heng Guie is the executive shadow economy in developing The shadow economy’s net, they will boost tax revenue. development. director of Socio-Economic Research countries is estimated to account adverse economic and social With an estimated shadow c) Implement effective iden- Centre (SERC), an independent for about 36% of GDP, in South implications are an erosion of economy of RM300 bil, a 1% tax tification and registration research organisation 60 markets FocusM | March 2020

by Covid-19: How much Lee Heng Guie he onslaught of trade economic pain can tensions and sustained supply disruptions in the commodities sector as well as a continued Tdecline in public investment have Malaysia endure? weighed down Malaysia’s GDP growth in the fourth quarter of 2019, slowing markedly to 3.6% yoy from 4.4% in 3Q19, bringing the full-year growth to 4.3% in 2019 (4.7% in 2018). This misses the government’s target of 4.7% and also marks the slowest quarterly and annual growth since 3Q09 during the 2008-09 global financial crisis. The slower than expected 4Q GDP number raises concerns whether Malaysia’s economic and financial fundamentals are strong enough to withstand the headwinds from China’s highly contagious Covid-19 outbreak, at least in 1H20, in the hope that the outbreak will likely subside and stabilise in early 2Q. With increasing anxieties and wariness about the potential economic and business disrup- tions on the domestic economy, investors’ confidence and consumer sentiment, it raises questions about the government’s capacity for embracing and countering the fallout from the outbreak, especially when both the global and China’s economies are on slowing growth trajectory. Looking at Malaysia’s 4Q19 GDP numbers, private consump- chains and connectivity when Malaysia’s first quarter tion remained the primary growth compared with the SARS outbreak China’s significance to Malaysia (Jan-March) GDP growth of 2020 driver, still growing resiliently by in 2003. China has contributed would be the hardest-hit given the 8.0% yoy in 4Q, higher than 7.0% 15.8% of the world’s GDP in 2018 intensity of Covid-19 on China’s CHINA (% share of Malaysia) 2003 2018 yoy in 3Q19. Though private in- (2003: 4.3%) and 11.7% of total trade economy with its consequent vestment gained traction to 4.2% in (2003: 5.3%). Total trade (RM bil) 53.4 (7.5%) 314.5 (16.7%) impact on the domestic services 4Q (0.3% in 3Q), cautious investors’ China remains an important Total exports (RM bil) 25.8 (6.5%) 139.1 (13.9%) sector on the anticipated decline sentiments about the virus’ impact trade, economic and investment Total imports (RM bil) 27.6 (8.7%) 175.4 (19.9%) in Chinese tourist arrivals as well would slow private investment in partner of Malaysia. It was Ma- as the supply chain disruptions in 1H20. laysia’s largest trading partner Tourist arrivals from China (mil persons) 0.4 (4.0%) 2.9 (11.4%) manufacturing. A sustained higher Public investment declined by (17.2% of Malaysia’s total external Tourist receipts from China (RM bil) 0.9 (4.2%) 12.3 (14.6%) GDP growth is envisaged in 2H20 a smaller rate of 7.7% in 4Q from trade); largest exporter (14.2% of Gross direct investment from China (RM bil) 4.0 (2.8%) as the temporary disruptions from -14.1% in 3Q but a small turnaround total exports) and largest importer the Covid-19 outbreak recedes and is expected in 2020 as reflected by (20.7% of total imports) in 2019. FDI stock from China (RM bil) 17.0 (2.7%) stabilises in 2Q. the higher budgeted development China was ranked as the 10th Gross direct investment to China (RM bil) 1.7 (2.6%) Another spillover effect could expenditure as well as that of largest foreign investor in Malaysia. ODI stock to China (RM bil) 9.6 (2.0%) be in the form of periodic gyra- non-financial public enterprises At end-September 2019, China’s tions in financial markets. Equity on 5G infrastructure, solar energy FDI outstanding stock stood at SOURCES: STATISTICS DEPARTMENT, TOURISM MALAYSIA markets’ volatility across the and affordable housing. RM18.3 bil or 2.7% of Malaysia’s region has edged higher while the The external sector remains outstanding FDI. China’s share of of GDP. We are setting a target of -8.0% in 2Q), as well as transport ringgit has depreciated against the a drag on the economy as gross Malaysia’s tourism receipts more 3.48 million Chinese tourists in and storage (+2.3% in 1Q and -5.9% US dollar, which is not surprising exports declined by a larger 3.3% in than tripled to RM12.3 bil or 14.6% 2020. Non-China tourists would in 2Q). Chinese tourists dropped given the tendency to co-move 4Q compared to -1.9% in 3Q while of total receipts in 2018. Three refrain from travelling to this sharply from 2.9 million in 1Q03 to with the Chinese renminbi. It imports’ contraction also widened million Chinese made up 11.4% of region for fear of virus infection, 1.7 million in 2Q03 before rebound- must be cautioned that prolonged to -1.8% in 4Q from -0.2% in 3Q, total tourist arrivals in Malaysia at least in 1Q20 until the number ing to 2.5 million in 3Q03. volatility in equity markets could reflecting weakening imports in 2018. In Jan-Sept 2019, Chinese of infections subsides and the This time round, the drag from lead to broader risk aversion, of intermediate and capital tourist arrivals increased by 5.7% situation stabilises. the anticipated slowdown in the and could lead to a tightening of goods. This is in tandem with the to 2.4 million or 12.0% of total Reduced travel if prolonged, services sector on the domestic financial conditions. moderate industrial production tourist arrivals to rank as Malay- along with cautious Malaysian economy will be more pronounced The government’s stimulus and exports contraction as well sia’s third largest tourist arrivals. households’ sentiment, would given its share of GDP (56.7% in 2018 package, including financial as- as moderate private investment. have a severe effect on transpor- vs 50.5% in 2003) and moderate sistance, is designed to help ease The US-China trade tensions and How bad can it get? tation, including the airline, travel, growth in manufacturing, mining the economic pains for businesses cautious investors’ sentiment as Malaysia must be prepared to tourism and hospitality sectors. and agriculture as well as a gradual and industries affected by the well as the lack of policy clarity brace for an economic fallout The domestic services subsectors recovery in exports. The domestic Covid-19 outbreak. However, the and direction are also partly from the Covid-19 outbreak via such as wholesale, retail, hotel and economy is largely depending on speed of funds disbursement and responsible for the performance trade and services. It is certainly restaurants as well as transport private consumption (57.0% of implementation must be rapid and of exports and private investment. expecting a notable impact on its and communications will be GDP) amid still-sluggish private impactful to ensure the intended Seen in this light, the negative economy, business and consumer the main casualties. They have a investment and public spending. outcomes of cushioning the short- transmission effects from the confidence this year, especially as combined share of 22.3% of GDP. Overall, it is estimated that a 1% term impact. As well, the provision Covid-19 outbreak in China is the situation is expected to persist During the SARS outbreak lower economic growth for China of financial assistance and relief a test of Malaysia’s economic for some time. in 2003, Malaysia’s overall and a 1% decline in Malaysia’s funds to the affected sectors and endurance. The Covid-19 outbreak is a services sector had suffered two tourism receipts (which accounted companies by both the government Why does China matter to bane to Malaysia’s services and consecutive quarters of a sharp for 5.8% of GDP in 2018) could and banks must be effective. the world and to Malaysia in par- tourism-related sectors especially slowdown or contraction, with together potentially shave 0.5 to ticular? By the numbers, China’s as 2020 is Visit Malaysia Year pronounced declines in wholesale 1.0 percentage point off SERC’s Lee Heng Guie is executive director contribution to the world economy (VMY). The government targets and retail sub-sectors (+2.5% yoy (Socio-Economic Research Centre) of the Socio-Economic Research is much bigger now and deeply 30 million tourists and RM100 bil in 1Q03 and -2.4% in 2Q03), hotels baseline GDP growth estimate of Centre (SERC), an independent connected through global supply foreign exchange earnings or 6.2% and restaurants (+5.7% in 1Q and 4.5% for 2020 to 3.5%-4.0%. organisation March 2020 | FocusM enterprise 61 MYTHEO for investors to get started

• The digital investment universities and private entities to promote management service financial literacy aggressively. A platform invests in about 59 ETFs We use a lot of AI like MYTHEO makes it really affordable and also a lot of for everybody to invest and save for their on NYSE and Nasdaq input from a team future,” Tan notes. of professionals, There is an interesting story behind the • Around 70% of users on says Tan name of the product. Theo is the brother of Vincent Van Gogh who handled all the MYTHEO are millennials artist’s financial dealings so he could focus aged between 25 and 38 on his art and passion without a worry. “Our product is called MYTHEO. We want to be a Theo to young millennials and underserved investors so that they can continue to live their day-to-day life and leave the nitty gritty of investment to by us,” he adds. Chee Jo-Ey According to Tan, close to 70% of users on My Theo are millennials aged between t is reported that less than 5% of retail 25 and 38 and this could be due to its investors on the local bourse are mobility and an uncomplicated onboarding under the age of 35. Getting started process that takes only five minutes. in investment can be especially Tan paints a picture of how things go difficult for young millennials with on its platform. “For instance, if you would Ilimited funds. You need to have hundreds like to invest RM500 on our platform, we’ll of thousands of ringgit before any fund first profile you with just five questions manager would be willing to advise you and according to your profile, help you on your investment issues. invest your money into instruments called What’s more, Malaysians have long exchange traded funds (ETFs). They are like been known to have the tendency to hold unit trust funds but traded on the stock back on the investing front and would exchange.” much rather keep their stash in their An ETF is a collection of securities pockets. But digital innovation has changed – such as stock – that often tracks an the investment scene in recent years. underlying index, although they can invest There are now more investment tools that in any number of industry sectors or use require less entry costs such as the trendy by a cold black box but that’s not entirely Securities Commission Malaysia. various strategies. robo-advisor. true in our case. We use a lot of artificial Silverlake Group is a software organ- The platform’s funds are invested in intelligence (AI) too but there’s also a lot of isation focused on financial technology stocks on the New York Stock Exchange Can you entrust your money to a input coming from a team of profession- while Money Design is one of the pioneers (NYSE) and Nasdaq Stock Market. There robot? als,” Tan explains. of robo-advisory services in Japan “so we are three functional portfolios on the Many might think the term robo-advisor Digital investment management form this joint venture to provide robo-ad- platform which are growth, income and sounds futuristic but GAX MD Sdn Bhd incorporates technology in the creation visory services”, says Tan. inflation hedge. Growth stocks are for CEO and managing director Ronnie Tan of an algorithm along with the input of Money Design’s team comprises those looking for capital gains. The income Tai Ngee prefers to use the term digital professional fund managers to manage former employees of investment giants portfolio looks at bonds while the inflation investment management (DIM) services. a pool of asset classes or portfolios that like US-based Blackrock Inc, Japan-based hedge portfolio focuses on commodities GAX MD brings together the collabo- are designed according to factors like risk Nomura Holdings, Inc as well as academi- like gold and oil that can help balance rative effort and expertise of a tech firm appetite, income, investment horizons and cians from Kyoto University who all played investors’ assets in an economic downturn. and investment fund managers to give so forth. a part in building the algorithm. “If you’re a younger investor with a long birth to MYTHEO, a digital investment GAX MD is a joint venture formed in GAX MD conducted a lot of backtesting investment horizon, a higher percentage management service that handles the A to September 2018 by Silverlake Group and a that started back in 2006. would go into the growth portfolio. So, it Z of investing for its users. Japanese-based company by the name of Backtesting is the general method for really depends on your profile and each “To me, the word robo-advisor gives Money Design. seeing how well a strategy or model would investor has his or her own portfolio that the impression that everything is managed The fintech company is regulated by have done ex-post. It assesses the viability is created automatically,” Tan says. of a trading strategy by finding out how it would play out using historical data. One can start with RM100 “We simulated the Lehman Brothers Robo-advisory services often invest only in financial crisis in 2008 to see how MyTheo ETFs because they cover a wide spectrum would perform in that situation which is of asset classes and are more affordable. made available in our app. We also do MYTHEO invests in about 59 ETFs that projections of how your investments might are segregated into three functional port- turn out in the next 10 years. folios. These ETFs cover more than 10,000 “We have a group of experts that listed companies, among whom are global monitor for abrupt cases and make a companies across major countries like decision if it needs fine tuning. But we do the US, Japan, Hong Kong, and Australia not interfere with the algorithm every day to ensure diversification. because that would be timing the market. “To encourage people to try MYTHEO, MYTHEO is not for instant gratification we’re having a promotion currently but encourages long-term investment,” whereby investors can invest through our says Tan. product with only RM100,” says Tan. The good thing about the robo-advisor MYTHEO charges investors an annual is it is logic-based and operates without management fee of between 0.5% and 1% of any emotional attachment so it eliminates their assets under management (AUM). investor bias tendencies. The new tech- For those who want to have more of nology increases efficiency, allowing it to their own say, MYTHEO allows them to take analyse big data in an effective manner but control by offering two modes – omakase there’s a human element to it as well. whereby the platform prepares the invest- ment menu for investors and ala carte which Investor awareness takes into account investors’ input. a challenge For example, investors starting off with Digital asset management is still consid- RM1,000 can choose to allocate RM600 ered a new instrument so there needs to for MYTHEO to invest while the rest goes be more awareness and education. into the portfolio of the investors’ choice. Unlike a human, a robo-advisor operates without any emotion so it eliminates investor “We are working very closely with All portfolios will still be managed by the bias tendencies authorities and all relevant parties like platform. 62 income+ FocusM | March 2020 Credit card users need to be aware of charges on top of interest

to a financial education fund that might be administered by organi- sations like the Financial Planning by Association of Malaysia (FPAM) to Chee Jo-Ey educate the card-using public.” Koh says: “Ideally, we should veryone has a credit explore ways to reduce the unde- card horror story either sirable impact. To a bank, it is a from personal encoun- neat sum of revenue. But a bank ters or people we know would also say it commensurates who went overboard with the high unsecured default Ewith their spending. risk that it carries. Even the wisest of us all are “In fact, some card issuers not immune to credit troubles. send clear and timely reminders Extra charges such as the late of payment due dates via short payment charge can creep up on message service (sms). This is you if you’re not careful. good especially with so many No doubt credit cards can things including spam messages come in handy in the face of an which clamour for our attention. emergency but one small misstep Perhaps, banks should encourage (paying late by a day or two, or users to arrange for auto-debit paying only the minimum amount deductions or even award some when it falls due) can set you back bonus points if they pay on time.” financially. According to a 2019 report University of Malaya it is used as a convenience and the credit card-using public of the due date, a further charge of by Bank Negara Malaysia, credit department of finance and is never tapped into for the absolute importance of not merely a minimum of RM10 or 1% of cards are the most widely used banking faculty of business and extended ‘credit’ portion. Every making credit card payments on total outstanding balance as at payment card in Malaysia. An accountancy lecturer Dr Eric ringgit we spend on credit card time but rather to always aim to statement date, whichever is average of 349 million credit card Koh says: “We should enlighten interest in our lives reduces pay those charges early. higher, capped to a maximum of transactions were made annually people that credit card debt can the amount of money we can “Banks and credit card RM100, shall be debited to the over the past decade. easily multiply and cause much use to build wealth through the companies will not change their card account. To be a principal cardholder, harm. Such debts may well start compounding of our savings and ways; therefore, it is up to us, the “Credit card issuers make one only has to be at least 21 with the seemingly harmless late investments. little guys, to proactively choose money from those who pay years of age and have a minimum payments and quickly progress “This portion of the cash to manage our monthly cash between the minimum monthly income of RM24,000 per annum. through numerous roll-over management equation is truly a flow better so that we waste less payment and less than the Issuers offer credit cards to across several banks’ credit zero-sum game.” and less money over time paying total amount outstanding. The the public but education on the cards.” There are fees and charges credit card interest and late fees.” onerously high interest charges usage is lacking. As long as you “I ended up with credit card users need to be aware of before The late payment charge is are there for two reasons: to have a regular stream of income, problems twice in my life. But I getting a credit card. An issuer only applicable to retail transac- compensate the lenders for the you’re entitled to make an appli- was never in default and I always may impose a late payment tions and cash advances. The late proportion of credit card users cation for one. made sure, even back then, to charge for payments not received payment charge shall be the lower who end up being deadbeats “There seems to be lots of pay my minimum charges early. after the due date. of 1% of the outstanding balance who don’t pay their bills and to aggressive promotion of credit As I ever so slowly learnt from Devadason says: “While the or RM100. If an issuer intends accrue huge corporate profits,” cards. Some may even extend to my financial mistakes, I began ostensible reason credit card to set a minimum late payment says Devadason. people who can’t manage their to understand that some people issuers charge late payment charge, it shall not exceed RM10. “As such, there is a massive debts well. The issuers, together should never own a credit card; penalties is to educate users, the A check on Public Bank’s misalignment between the with the outsourced promotion for them using a debit card is ridiculously high level of those website shows that a finance economic interests of the card firms, should adopt a more much safer,” Manulife Investment charges flow directly from the charge of 15% per annum applies companies and those of its users. responsible promotional and Management (M) Bhd licensed fi- revenue line item of the business to card members with prompt It would be far more effective marketing approach. This isn’t nancial planner Rajen Devadason to the profit bottom line. Such payments for 12 consecutive for Bank Negara Malaysia to about selling simple one-off shares. charges can lead to rising debt months. exercise moral suasion to force items such as snacks. These may “For others, though, a credit levels. If one fails to make the these companies to contribute a well ruin a household,” Koh says. card can be useful, but only if “The solution lies in informing minimum payment by the fraction of their obscene profits Do we really need a credit card?

by Chee Jo-Ey After making our orders, the risk of getting into debt. payments for 12 consecutive A credit card can be useful, he proceeded to take out from I have seen friends swipe their months. but only if it is used for conven- n my line of work, I’ve had his pocket a tiny plastic bag cards any chance they get (even If you fail to make a minimum ience or during an emergency the opportunity to speak containing a couple of rolled-up for a cuppa at Starbucks). payment by the due date, a like a laptop breakdown or car with many financial gurus RM10 bills. He said something Credit cards are promoted further charge of a minimum of troubles. Rule numero uno is to varying from investment along the lines of “I set a budget everywhere in shopping malls RM10 or 1% of total outstanding make sure you educate yourself bankers to fintech players. for myself every day to keep track (ever wonder why?) but proper balance as at statement date, on the charges involved and how II consider this one of the biggest of my spending”. education on its usage is insuf- whichever is higher, capped to to always stay on top of things. perks of my job. In a growingly cashless ficient. a maximum of RM100, shall be It should not be regarded as Being a newbie, every word society where almost everyone Requirements to be a princi- debited to the card account. a licence to buy extravagantly was gold and insightful but it was owns a credit card with some pal cardholder is just a minimum Even a small misstep (paying first and pay later but more as a my encounter with a CEO of this swiping without much thought, age of 21 and a minimum income late by a day or two, or paying backup or tool when the unex- particular company that struck I was blown away by this breath of RM24,000 per annum. only the minimum amount when pected arises. me the most. of fresh air. There are fees and charges it falls due) can set you back If carrying cash is trouble- To give you a bit of back- When you spend with cash, users need to be aware of before financially. some, you may consider the ground, he owns a company you feel the pain with every getting a credit card. Did you Imagine having to pay late e-wallet or debit card which may based in Singapore that uses ringgit you use. The pain I feel know that an issuer may impose a payment charges for a cup of be safer alternatives for those board games to teach financial physically taking out cash notes late payment charge for payments Starbucks. who find keeping track of their literacy. We had arranged to from my wallet makes me think not received after the due date? I personally try not to get into spending difficult or feel that meet at an outlet of a coffeehouse twice about my spending. A check on Public Bank’s the habit of relying too heavily their spending can get out of hand chains so he could grab a bite to With a credit card, you just website shows that a finance on credit cards. I am, however, most of the time. Also, they might eat before travelling back to the swipe and go, which is very con- charge of 15% per annum applies not saying that we should shun want to avoid these plastic cards island-republic. venient indeed but also increases to card members with prompt plastic money altogether. altogether. March 2020 | FocusM income+ 63 E-wallets: Boon or bane?

• E-wallet players are still at the customer acquisition stage, with each trying to build his customer base. This means users have to use multiple e-wallets to be able to make transactions at every touchpoint

by Xavier Kong

ith the e-Tunai Rakyat programme in full swing, the interest in e-wallets has reached a new high in Malaysia, especially withW the promise of a free RM30 in credit for registered users. Still, there are those who remain wary of e-wallets, or believe it remains a fad that will pass. This article aims to answer that, by providing a general overview of what e-wallets are, their perks, their drawbacks, and a collected view of the major players in the country, along with some of their E-wallets promise better security, safety, individual perks, and drawbacks. hygiene and of course, convenience So, brass tacks. What is an e-wallet? Simply by dissecting the word, it tells you Ong says it is not what it is, an electronic wallet, which more only the safety of the “Switching from cash to e-wallet or or less functions just like the wallet in your money, but also data, cashless payment is a mindset shift. It at stake pocket (or bag, or drawer, or table, you get takes a little bit of time and education the idea). It can hold your cards and your before merchants are comfortable to cash, in a digital format, which can then switch over. But we believe this will happen be used to make transactions as needed. sooner rather than later,” said Boost chief executive officer Mohd Khairil Abdullah. What’s the good word? At the same time, there remain a First of all, the perks of using e-wallets. number of proponents of the idea that Coming out on top is, believe it or not, the e-wallets are unnecessary, considering the issue of safety and security. A particular fact Malaysia has a large number of pro- scenario was shared to FocusM by Ignatius viders for credit and debit card services. Ong, chief executive officer of TNG Digital, A common question is “why should I go the company behind the Touch N Go to e-wallets, when I already have my debit/ e-wallet. credit card?” Right now, with e-wallets still A roadside stall operator who works focused on user acquisition, it can be said alone, for example, has to worry about that they can provide more immediate depositing the cash he has on hand when rewards or cashbacks as compared to using he closes up, and it is not exactly the safest a banking card, and there is also something way to handle the cash. Any unfortunate to be said about being able to laugh at the occurrence, be it a robbery, or even a case surcharges imposed on transactions with of the money being lost accidentally, would Since an auto-reload feature is banking cards. result in the loss of the entire day’s revenue commonly available in e-wallets, they can and then some. be used in tandem with credit and debit The verdict? On the other hand, through the use of cards as a bridge, technically allowing the So are e-wallets a boon or bane? Ulti- an e-wallet, the operator would already use of the cards in places that don’t accept mately, it comes back to your decision, and have the money in his bank account, and card payment. This conveniently bypasses it remains to be seen whether it is just a fad have no need to worry about making it to a any surcharge that may be imposed for or if it is here to stay. cash deposit machine or a bank to deposit using a card to pay, as well. Personally, the use of e-wallets has his earnings for the day. really been a relief, as it is actually quite Should the unfortunate occur, what the Here come the drawbacks possible to forget your wallet and still be stall operator would lose would be his cell However, e-wallets are not without their able to go about your day normally through phone, but his money would already be drawbacks at the moment. Right now, it the use of an e-wallet. Yes, this is speaking safely ensconced digitally in his account, has been acknowledged that the sector is from personal experience. leaving only the need to get a replacement still in the customer acquisition stage, with With more and more merchants joining phone. each player trying to build his customer up with e-wallet vendors, the convenience From a user perspective, it is not just base. This means that each player is still factor is constantly increasing, and it is not the safety of the money, but also the data. working to draw users to his brand, leading just the big-name brands either. Smaller One perk of using an e-wallet is that there to users having to use multiple e-wallets vendors and businesses are taking to will never be a transaction that includes to be able to make transactions at every it as well, up to and including roadside your account or card numbers, which touchpoint. operators. means a lower chance of compromised At the same time, e-wallet players are Still, with e-wallets all chugging along data. still working to bring merchants on board, in the user acquisition stage, one can only In this day and age of coronavirus and this remains a work in progress, as wonder how many will survive the consoli- fears, an e-wallet can actually help to merchants would be looking at the user dation phase in the sector, not if, but when improve personal hygiene by removing numbers and amount of traffic signing up the sector reaches that point. the need to physically handle cash. This is with an e-wallet would bring, while users In any case, users might as well take due to the e-wallet handling transactions would look to see how many merchants advantage of the bevy of rewards, deals, through either scanning a QR/barcode on are partnered with a particular e-wallet, Mohd Khairil says it will take a bit of cashbacks, and other rewards using an your phone screen, or you scanning a QR leading very much to a chicken-and-egg time and education before merchants are e-wallet brings, and enjoy it for as long as code displayed at the shop. scenario. comfortable about using e-wallets they can. 64 | FocusM | March 2020

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