Rahman Dahlan’s dismissive attitude towards Malaysian’s inability to afford even daily groceries shows his blatant disregard for the issues of the average Malaysian.

Earlier this week, Mydin owner Datuk Ameer Ali Mydin had said that though the Goverment’s published GDP figures showed strong growth, consumers seemed to be spending less and less on grocery shopping. He suggested that Malaysians just did not seem to have the same amount of money to spend as before, even though the economy has been growing.

Mydin’s comments quickly drew responses from members of the Government, including Minister in the Prime Minister’s Department Dato’ Seri Abdul Rahman Dahlan who was quick to defend the Government’s economic measures. He said that hypermarket sales only made up 8% of total retail sales, which had seen overall growth both in terms of volume and value. He further added that Malaysians did indeed have more money to spend as highlighted by increases in domestic tourist expenditures as well as tourist spending abroad.

Dato’ Seri Rahman Dahlan’s dismissive attitude towards Mydin’s claim shows just how out of touch the BN Government is from the daily struggles faced by average Malaysians. If even low-priced hypermarkets like Mydin are facing weakened consumer demand, where does the Minister expect Malaysians to be buying their everyday groceries? Does he think Malaysians are going abroad to do their groceries?

Last November, 5 Giant hypermarkets were shuttered by owners GCH Retail (Malaysia).The 2017 Malaysia Retail Industry Report, also noted that consumers were less likely to spend money in the past year owing to the increasing cost of living. The same report noted that hypermarket sales in general had shrunk 3.1% in the first 3 quarters of 2017.

Accordingly, Malaysian consumers were found to be more frugal and judicious with their spending opting to make smaller purchases at different stores to make the most out of the various discount and offers provided by different stores.

All the above information is consistent with the Government’s own statistics. Inflation last year was the highest we’ve seen in years, averaging 3.7%. In particular, food and non-alcoholic beverages saw an increase of 4% over the past year. Regardless of whether someone is shopping in a hypermarket or a pasar tani, these price increases are present everywhere.

The Government should not be flaunting the spending statistics of Malaysians who can afford to travel abroad as proof that all Malaysians are better. Worse, they should not be dismissing the very real and loud complains of average Malaysians who struggle to even afford their daily groceries.

If the BN Government has no sympathy or empathy for the ordinary men on the street, it is time for them to get the boot.  Malaysians deserves a government that looks out for the interest of all Malaysians and does not dismiss the real issues being faced everyday.

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Mark Twain’s quote, “there are lies, damned lies and statistics” best describes Information and Communications Minister Dato’ Seri Salleh Keruak boasting of Malaysia having the lowest poverty rates in Southeast Asia

Writing on his blog on Wednesday, 28 December, Dato’ Seri Salleh Keruak boasted that the Malaysian economy was in fact very doing very well because our GDP per capita, according to the CIA World Factbook stood at US$27,2000, which was much better than those of neighbouring Thailand, Indonesia, the Philippines, Vietnam, Myanmar and Laos.

More importantly, he claimed that our poverty rate was the “lowest in South East Asia” at 3.8%. He further added that he was grateful because our poverty rates are “drastically lower” than the poorest countries namely Syria, Madagascar and Zimbabwe with poverty rates above 70%.

Have we really gone so low today that we now need to compare ourselves with the poorest countries in the world today to make ourselves feel good for the new year?  What has happened to the times when we pride ourselves to be among the Asian Tigers, being quoted in the same breath as South Korea, Taiwan and sometimes even Singapore and Hong Kong?

What’s more, the Information and Communications Minister can’t even gets his fact right, intentionally or otherwise.  It appears that he has conveniently erased both Singapore and Brunei, with substantially higher GDPs per capita at USD77,500 and USD87,800 respectively off the map of Southeast Asia.

And even when he did get his “facts” right when compared to Vietnam, Indonesia, Thailand, Laos, the Philippines and Myanmar, he also conveniently forgets to convey the fact that our neighbours have been enjoying significantly higher growth rates in the recent years.

Curiously however, Dato’ Seri Salleh Keruak chose to quote the CIA Handbook statistics, instead of the more authoritative World Bank.  If Salleh Keruak were to believe the CIA Handbook statistics, Malaysia should already immediately declare itself a “developed nation”, ahead of the Vision 2020 target.  Does the Minister actually believes that the average monthly income of Malaysians today is in excess of RM9,000?

A check with the World Bank Report – which is consistent with Malaysia’s own Department of Statistics, our GDP per capita is only US$9,500, barely a-third of the Minister’s boast!  So why did the Minister decide to quote an unbelievable source and not that of our own Department of Statistics or the World Bank?

Instead of trying to glorify Malaysia’s superiority to countries like war-torn Syria and Zimbabwe, or even the Southeast Asian backwaters of Laos and Cambodia, Dato’ Seri Salleh Keruak should instead explain why Malaysia has fallen so far behind countries like South Korea and Taiwan?

In 1966, 10 years after achieving independence, Malaysia’s GDP per capita was triple that of South Korea?  The latter overtook us in 1990 and today, based on World Bank figures, South Korea has a GDP per capita of US$27,500 (2016) which is more than triple that of Malaysia today.

Why have we lost competitiveness to our Asian Tiger peers in the 1980s and are now threading water above countries which are rapidly catching up like Vietnam and Indonesia?  This is the real question which Dato’ Seri Sallleh Keruak and the BN administration must answer, and not continuing to pull the wool over the rakyat’s eyes.

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Dato’ Seri Rahman Dahlan should answer why inflated ECRL contract was a direct negotiation with a China company, and not whether it was foreign or locally owned.

Yesterday, Minister in the Prime Minister’s Department Datuk Seri Abdul Rahman Dahlan once again tried to deflect questions and criticisms of the RM55 billion ECRL project by painting it as “a domestic investment with foreign funding”.

This was in response to the statement issued by former Finance Minister, Tun Daim Zainuddin  who responded to questions from the media last weekend on whether the country should be worried over foreign investments from China.

“How much investment did they bring in? Like Forest City? Does the train project (ECRL) bring in money?,” he asked

“If it is a loan, that means we have to pay (it) back. If you have to pay (it) back, does that mean it is an investment? If you were an investor, what would you say? Its not (an investment). It’s a loan,” Tun Daim explained.

Dato’ Seri Rahman Dahlan then retorted in his statement, “Would Daim and Bersatu be happier if foreigners own and operate the ECRL instead?”

The Minister who is in-charge of the Economic Planning Unit (EPU) is trying to be disingeneuous in his response.

While the fact of the matter is that ECRL is indeed an infrastructure project which funded with foreign debt, the Prime Minister Dato’ Seri Najib Razak himself, together with many other Cabinet Ministers have often used the project as a successful example of Malaysia’s ability to attract sizeable investments from China.

For example, earlier in January this year, Dato’ Seri Najib Razak defended “investments” from China, stating that “This is unfair, because investments from China benefits the nation including us in Pahang, not only large investments like ECRL but the price of palm oil also go up, to simultaneously profit smallholders and settlers,” he said said this at ‘An Evening With the Chinese Community In Pekan’ programme.[1]

Hence Tun Daim is merely trying to correct the ‘managed’ perception that these large infrastructure projects are not ‘investments’ from China, but are effectively huge debts which have to be repaid by Malaysians in the future.

The question isn’t where former Prime Minister, Tun Dr Mahathir Mohammad or Tun Daim or any Malaysian for that matter, “be happier if foreigners own and operate the ECRL instead”.

Instead, Malaysians would “be happier” if the ECRL project was tendered openly and competitively so that our tax-payers will receive best value for our ringgit.  Why was a infrastructure project of this magnitude awarded directly without any competitive tender?  Hence, it begs the question - who will really profit from this contract?

It has already been exposed that the Government’s own appointed engineering consultants, HSS Integrated (HSSI) has estimated in December 2015 the project's value was RM29 billion (RM53.2 million per km), whereas China-owned China Communications Construction Company (CCCC) was awarded the contract at RM55 billion (RM91.7 million per km).

We have demanded for the HSSI to be publicly disclosed and Transport Minister, Dato’ Seri Liow Tiong Lai has promised in Parliament in November 2016 to “publish” the feasibility study when it is “finalised”[2].  However, the HSSI report remains a secret document with the BN Government.

The question which remains unanswered to date – if ECRL were to cost RM30 billion or less, why was CCCC awarded the contract via direct negotiation for RM55 billion, even if there so-called favourable financing terms?  Where would the excess RM25 billion go to?  Would it be used to pay-off some of 1MDB’s debts as speculated so as to cover up the Najib administration’s largest international financial scandal?

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The biggest culprits to the supply-demand imbalances in the property market in Malaysia are none other than Government-linked Companies

The Cabinet has imposed a “temporary ban” approvals for shopping complexes, offices, serviced apartments and luxury condominiums priced over RM1 million effective November 1.

The freeze came after Bank Negara’s report on the substantial supply and demand imbalance within the country’s property market. Bank Negara stated that the oversupply of properties in the country has been persistent over the past few years. Bank Negara themselves had raised the issue in their 2015 annual report.

In the Klang Valley, the report found that office vacancy rates had increased from 20.9% in Q1 2015 to 23.6% in Q1 2017. The situation is only set to get worse as there is an incoming supply of 38 million square feet of office space.

However, what Bank Negara and the Cabinet did not say was that among the biggest culprits causing the supply-demand imbalances in the property market are the Government-linked Companies (GLCs) and Government-linked Investment Companies (GLICs).

A report by The Star on April 6 this year highlighted the increasing involvement of GLICs in the property both directly and indirectly. EPF has been directly involved developing the new Kwasa Damansara township, which has a massive size of 2,300 acres and RM50 billion in gross development value (GDV).

Pemodalan Nasional Bhd (PNB) on the other hand, is developing the 118-storey Menara Warisan project next to the historic Stadium Merdeka. It will offer 4.3 million square feet of residential, hotel and commercial space.

PNB is also the single biggest shareholder of S P Setia, one of the largest, if not the largest property developer in Malaysia.  S P Setia is renown for some of the biggest luxury developments in the Klang Valley, including a 25-acres KL Eco-City, Setia Sky Seputeh and many others.

In addition, EPF and PNB jointly owns 63% of Sime Darby Bhd, whose property arm is another one of the largest property developers in the country.  The company has only recently launched its RM8 billion GDV AYLA Kuala Lumpur project which covers an area of 360 acres.

There is also the Bukit Bintang City Centre (BBCC) which sprawls over 19.4 acres with a GDV of RM8.7 billion. The project is spearheaded by UDA, a wholly-owned subsidiary of the Ministry of Finance.

No listing of high-end property projects in Kuala Lumpur will be complete without also mentioning the 76-acres RM20 billion GDV KL Metropolis project.  While on paper, it is developed by a private company, Naza TTDI, the project is in effect a controversial land-for-building deal with the Ministry of International Trade and Industry (MITI).

Elsewhere, Khazanah-owned UEM Sunrise also specialises in the high-end residential market in prestige locations such as Mont Kiara. In Johor, which was highlighted as having the largest share or 27% of all unsold properties in the country, UEM Land is developing 14 new projects which are all listed as high-end developments.

All of the above do not yet include the two mega-property developments linked to the scandalised 1Malaysia Development Bhd (1MDB) – the 70-acre Tun Razak Exchange (TRX) and the 486-acre Bandar Malaysia.

The issue here is two-fold. First, it is clear that GLCs contribute overwhelmingly to the glut which is threatening our property space in the country today.  No policy prescription without recognising and reviewing the role of the government, GLCs and GLICs has played in our “imbalanced” property development sector will be effective or successful.

The second more important economic question is, will the Government also be granting ‘ban’ exemptions to all these GLCs’ projects as it has done for TRX and Bandar Malaysia?  What then, will be the implication for the private sector in Malaysia?  Should they all just pack they bags and take their money to other countries to invest?

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Is the high-end property ‘freeze’ a case of a hare-brained attempt to hose down a fire which has already burnt to ashes, or worse, cause a flood and further add to the woes?

On 17 November, Bank Negara Malaysia (BNM) produced a report highlighting the mismatch in supply and demand of property developments in Malaysia.

The BNM Governor, Tan Sri Muhammad Ibrahim pointed out that the supply-demand imbalances in the property market has increased since 2015, pointing to the decade-high of unsold residential properties. There were 130,690 unsold units at the end of March this year, with 83% priced at above RM250,000.

The knee-jerk reaction to the alarming report was the announcement two days later by Second Finance Minister, Datuk Johari Abdul Ghani that the government had issued a directive temporarily stopping developments of shopping malls, commercial complexes and condominiums valued about RM1 million from November 1.

One can tell that it was a hare-brained policy attempt because the day after, the Works Minister, Datuk Fadillah Yusof said that the directive was not a blanket freeze and that approvals would be evaluated on a case by case basis.

Datuk Johari then added, on November 21, that the freeze would only affect projects that had not been approved and the length of the freeze would depend on a continued assessment of the situation.

The question is, how did the Government allow the situation to develop to such a state of gross mismatch in the first place?

Actually, the issue of imbalances in the property market was already highlighted by BNM in its 2015 annual report. And the oversupply in the housing market has since then almost doubled between 2015 and 2017.  In fact, Bank Negara’s figures for the property supply and demand come from the National Property Information Centre (NAPIC) located under the Ministry of Finance (MoF).

As the BNM Governor opined, “we have raised these issues for more than a year. Exposure of financial sector within this area is within a comfortable level. But if we're not careful, the oversupply could have a negative impact on the economy.”

Hence the question now is, given the fact that the milk is already spilled, will the seemingly drastic knee-jerk ban on luxury condominiums, shopping malls and commercial complexes solve the problem or trigger even more problems?

Investors, both domestic and foreign, will tell you that what they fear and hate more than bad policies are inconsistent, uncertain and ad-hoc policy-making.  The latter results in constant unanticipated changes and frequent policy U-turns which makes it impossible for business to plan their investments and measure their expected returns.

In this case, there are so many unanswered questions based on the Cabinet's hasty policy decision.

Has MoF asked the real estate sector – why is it that despite the excess supply of “luxury condominium”, developers continue to build them at that price?  Are Malaysian developers really that stupid to invest in projects which cannot sell?

Has MoF conducted a study to determine if a ban on the “luxury” sector will reallocate investments into the “affordable” property sector?  If it doesn’t, will the ban merely stop property and construction activities and consequently trigger an economic slowdown and lower employment opportunities?

One of the biggest questions that needs to be asked is, what is considered a “luxury” project?  The Bank Negara report used RM250,000 as the benchmark.  However, the Government’s own affordable housing agency PR1MA have properties priced between RM100,000 and RM400,000, although prices tend to be skewed more to the higher-end.  On the other hand, the latest MoF ban appears to apply to only properties priced above RM1 million.  Hence, are we prescribing medication to the wrong patient?

Worst, the blanket ban does not take into account of regional factors and imbalances.  The BNM Governor clearly stated that Johor is poised to have the highest number of unsold residential properties and potentially the largest excess supply of retail space. Hence is a nationwide ban of any kind the right prescription or will it instead cause economic distortions in other states and regions?

We call upon the Minister of Finance to provide not only clarity to the hare-brained “temporary ban” decision but also to justify how such a ban will actually solve the “supply-demand imbalances” in our property sector.  He should also take in cognizance of the fact that BNM’s 6-policy prescription to resolving the problem did not involve an outright ban on types of development.  Otherwise, the unintended consequences of such a crude policy prescription would worsen the effects on our already fragile economy.

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Najib’s toll freebie meant to entice Harapan supporters will only going to cost BN voters more

In Friday’s 2018 Budget speech, one of the big “goodies” that the Prime Minister announced was the abolishment of 4 tolls at Sg Rasau, Batu Tiga, Bukit Kayu Hitam and on the Eastern Dispersal Link (EDL).

On the surface, it looks like the Najib administration is hard pressed to replicate the Pakatan Harapan Alternative Budget which promised abolishing all highway tolls over time.

However, before Malaysians decides to rejoice, the first question that arises is how the government intends to compensate the existing toll concessionaires for their loss of revenue.

The Second Finance Minister, Datuk Johari Abdul Ghani very quickly burst the balloons by admitting that the government is looking at increasing the concession period for other tolls belonging to concessionaires as compensation.

This simply means that Malaysians will end paying toll fares for longer periods.

More specifically however, the tolls abolished were located in Selangor, a state which Dato’ Seri Najib Razak is only too eager to regain; and in Kedah as well as Johor, where BN is at the risk of losing with the twin threats of Tun Dr Mahathir Mohamad and Tan Sri Muhyiddin Yassin.

The 3 tolls at Sg Rasau, Batu Tiga and Bukit Kayu Hitam are owned by PLUS Malaysia Bhd. As a result, compensation for abolishing just three tolls will see the extension of its concession on any other highway under its management including the North-South Expressway, Seremban-Port Dickson Highway, Butterworth-Kulim Expressway, Malaysia-Singapore Second Link.

Very simply, the burden of the political move by Dato’ Seri Najib Razak to “free” the tolls in Selangor, Kedah and Johor will be “shared” by BN supporters in other parts of the country.  It appears to make a lot more sense to demonstrate support Pakatan Harapan because then, the BN government will actually show more love for you.

That however, isn’t the whole story.

The EDL is currently owned by MRCB, who just so happens is desperately looking to sell the loss-making highway.  MRCB also doesn’t own any other highway assets.

Hence the only way for the EDL toll to be abolished is for the Federal Government to fork out multi-billion ringgit compensation for MRCB.  Therefore, Dato’ Seri Najib Razak must come clean as to how much tax-payers must fork out to pay for the EDL and how the compensation is calculated.

The rakyat’s biggest fear is the Najib administration bailing out highway concessionaires, further proving that BN’s intrinsic economic policy is to “privatise profits and socialize losses”.

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Despite 2 years after the implementation of the Goods and Services Tax, Budget 2018 projects increasing reliance on income taxes

Dato’ Seri Najib Razak proudly announced that the projected budget deficit for 2018 will be 2.8% compared to 3.0% expected for 2017.

However, this target is to be achieved not via more prudent spending but significantly higher government revenue collection.  As previously expressed by the Prime Minister, his administration has been “saved” by the implementation of the Goods & Services Tax (GST).

The GST is expected to contribute RM41.5 billion to the treasury coffers in 2017, and further increase to RM43.8 billion in 2018.  This compares against income from Sales and Services Tax (SST) last collected from Malaysians in 2014 which amounted to RM17.1 billion.

However, despite the massive increase in Government revenues resulting from the GST, there was no reprieve for individual and corporate income tax payers.  In fact, it has become increasingly painful for Malaysian income tax payers.

For individuals, income tax contributions increased by 4.7% from 2015 to 2016.  However, for this year (2017), individual income tax contributions will increase by a massive 9.2% to RM30.1 billion.  For 2018, individual income tax collection for the Government will increase by another 7.1% to RM32.2 billion. This is inspite of the proposed 2% decrease in income tax rates for taxable income up to RM70,000 per annum.

For corporate tax payers, the increase in burden isn’t any less. While corporate taxes dropped by 0.1% from 2015 to 2016, it is expected to increase by 6.6% to RM67.8 billion this year.  Next year, the increase is even more, at a projected 6.9% to RM72.5 billion.

The above increases in individual and corporate income taxes are disproportionately higher than the 4-5% economic growth rates for Malaysia.

The above lends credence to the widespread discontent against the Inland Revenue Board (LHDN) for their heavy-handed tactics in squeezing substantially higher tax contributions from individuals and businesses. Some have even termed LHDN’s tactics as “tax terrorism” by demanding, with hardly any room for negotiation, backdated taxes of up to 10 years.

The above Budget proved that the Najib administration has not seriously implemented policies to impose prudence in spending.  Instead, it is relying almost entirely on increasing taxes to balance its books instead of cutting wastage, eliminating corruption and reducing the cost of government.

As a whole, this is reflected in the significant increase in the Federal Government operating expenditure which is expected to increase by RM14.4 billion 6.5% to RM234.3 billion in 2018.  In contrast, the increase in only by RM9.7 billion or 4.6% in 2017; while in 2016, the operating expenditure actually reduced by 3.1%.

In addition, the operating expenditure as a proportion to total expenditure continued its increase to 83.6%, the highest in Malaysian budget history.

Dato’ Seri Najib Razak’s 2018 budget speech, like the year before, was littered with political sniping and peppered with a litany of election year goodies.  It contained no meaningful reforms in economic policies and institutions to end corruption and wastage.

The 2018 Budget only served to prove the widespread fears that as long as there are no such serious reforms in place, ordinary Malaysians will be forced to bear increasing higher tax contributions – whether it is via the GST, individual or corporate income taxes.

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Dato’ Seri Najib Razak is clutching at straws arguing that the ringgit has performed well this year when it has barely recovered a fraction of its losses since 2013

Dato’ Seri Najib Razak wants Malaysians to believe that “the ringgit had performed better than the currencies of many other large commodity exporter countries, and forecasters had predicted that it will regain its strength”.

Is the Prime Minister trying to convince us that the 5.9% appreciation of the ringgit from RM4.49 to the dollar on 1 January 2017 to RM4.24 today is an achievement worthy of a standing ovation from Malaysians?

Does he need reminding that when he became the Prime Minister on 9 April 2009, the exchange rate was RM3.58 to the dollar or 18% higher than what it is today?  As a matter of fact, since the 2013 general election, the ringgit has tanked significantly on an annual basis.

In 2014, the ringgit slumped 6.3% from 3.281 on 1 January to 3.502 a dollar on 31 December.

The Prime Minister had then told us in January 2015 that the Ringgit will bounce back from the then five-year low versus the US dollar as “Malaysia's financial market is sufficiently robust”.  Believe it or not, the Ringgit was then trading at 3.50 to the Dollar, which now seemed like a parallel universe away.

Instead, in 2015, the ringgit collapsed 18.5% to 4.303 a dollar on 31 December.

Even then, despite continued re-assurance from the Government and Bank Negara that our currency was undervalued and unjustifiably depreciated for those 2 years, the ringgit tanked a further 9.6% in 2016.

If we had all trusted Dato’ Seri Najib Razak and invested based on his financial advice, some of us would be bordering on suicidal tendencies today.

The thing is, if every other currency had declined at the same rate against the Dollar, it wouldn’t have felt so bad.  What is particularly galling is that the Ringgit performance is the worst among all the major regional currencies over the past few years.  We have weakened significantly against the Hong Kong and Singapore dollar, the Thai baht, the Indonesian rupiah, the Chinese yuan and many more.  Hence the Prime Minister’s call for a celebration for a marginal improvement in the exchange rates this year is a serious case of clutching at straws.

It appears that everyone knows the real cause of the ringgit’s terrible performance except our clueless or pretend-to-be-clueless Prime Minister and his merry men. The fundamental cause is because of the complete collapse in confidence in our currency and economy ever since we have been outed as a major global kleptocracy and the failure of the Malaysian authorities and Government to take any action against those responsible.

The direct consequence of a badly depreciated ringgit is not only significantly higher travel cost overseas, it is the much higher cost of imports which translates into the highest inflation rates Malaysia is facing since the last global financial subprime crisis.

We cannot let Najib’s focus on the Ringgit’s short-term improvements distract us from the bigger picture. In order for the Ringgit to recover to RM3 to the dollar, the only way will be to rid the country of a kleptocratic administration and implement clean, transparent and competitive economic policies to bring back the confidence of local and foreign investors in Malaysia.

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The single biggest economic challenge which Dato’ Seri Najib Razak must address in the 2018 Budget is rising inflation

We will expect Dato’ Seri Najib Razak to wax lyrical about the higher that expected economic growth as reflected in the recent GDP figures. Bank Negara Malaysia (BNM) said given the strong growth in the first half of 2017 at 5.7%, the economy is expected to expand by more than 4.8% in 2017.

The question must be asked, if Malaysia’s economy is doing so well, why is it that ordinary Malaysians on the streets are feeling so pained?

The answer is obvious.  While the BN leaders sing praises of themselves over their supposed achievements, Malaysia’s inflation rate – which reflects the cost of living in the country, has been hitting record levels unseen since the global financial subprime crisis a decade ago.

Malaysia recorded an inflation of 4.3% year-on-year in September, the highest since March, mainly due to the rise in transportation costs and prices of food and non-alcoholic beverages.

According to the latest the consumer price index (CPI) released by the Statistics Department on Friday, transportation segment increased 15.8% on costlier fuel while the food and non-alcoholic drinks group rose 4.6%.

To put the above figures in context – despite GST’s implementation in April 2015 which resulted in a spike in inflation, the CPI had only increased to 2.1%.  In 2016, the inflation rate continued remained persistent at 2.1%.

Back then, the BN Ministers argued that the rising inflation was only a temporary “one-off”, and assured that the inflation rate will decline after a year or so after the implementation of the GST.  However, the CPI not only remained stubborn, it has accelerated to 4% year to date in 2017 demonstrating how wrong the BN administration have been.

In fact, Malaysia is currently suffering from negative real interest rates.  A survey of the local banks would show that they are only paying up to interests of 3.05% for 1-month fixed deposits.  If one keeps cash in a current or savings account as most Malaysians do, the gap would be even bigger.

This means our hard-earned savings kept in the banks are worth less tomorrow than they are worth today.

Hence not only Malaysians have gotten markedly poorer globally as a result of the massive depreciation of the ringgit over the past 4 years, our wealth is shrinking even in local ringgit terms.

Hence, the single biggest economic threat which must be addressed in the 2018 Budget to be announced on Friday this week is Malaysia’s inflation rate.  If Dato’ Seri Najib Razak decides to gloss over the issue by pulling the wool over the people’s eyes in an election year, the consequences for the people will be dire as Malaysians will be faced with even higher cost of living expenses in an environment of stagnant wages and rising unemployment, especially among youths.

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Why is Dato’ Seri Najib Razak making up the plans for Bandar Malaysia as he goes along?

Over the past 2 weeks, the Prime Minister and the Ministry of Finance have been making a whole series of announcements, varying them along the way.

First, the Ministry of Finance surprised the markets with the sudden temination of the sale of 60% interest in Bandar Malaysia to the consortium led by Iskandar Waterfront Holdings (IWH) for RM7.41 billion.  According to MoF, IWH and it’s partner, China Rail Engineering Corporation (CREC) failed to fulfil their financial obligations under the agreement despite more than 10 extensions granted.

However, despite the purported breach of contract by the IWH consortium which should have led to an event of default requiring the forfeit of the 10% deposit paid, the MoF decided to refund the RM741 million deposit paid in full.

Then the markets were fed “rumours” from official sources that the agreement was terminated as the Prime Minister, Dato’ Seri Najib Razak was expected to sign an agree with China’s Dalian Wanda, owned by China’s richest man, Wang Jianlin for Bandar Malaysia.  The expected agreement was purportedly worth more than US$8 billion.

However, during the Beijing meet between Dato’ Seri Najib and Wang on 13th May, the latter offered nothing other than polite, diplomatic and measured praise for Malaysia.  The Prime Minister had to return home empty-handed, not even with a perfunctory, non-committal Memorandum of Understanding (MoU) as is typically signed during such high-profile events.

Suddenly with the embarrassing failure by the Prime Minister to secure any deal with Wanda, The Star reported on 15th May that according to a government source in Beijing, “Chinese Prime Minister Li Keqiang told Najib that China hopes the deal on Bandar Malaysia stays unchanged. Najib may have to take the Chinese wishes into consideration.”

It was further reported that Najib said then that the formula for equity stakes in Bandar Malaysia would be changed and that foreign participants would not be just Dalian Wanda Group alone.  “We will take into account the position of CREC and other groups that are interested, including Wanda,” he said.

However, yesterday, back in Malaysia, the Prime Minister appeared to have changed his tune again. He said, contrary to some erroneous reports, the termination of the previous agreement with IWH CREC Sdn Bhd is final, and will not be reinstated.

"The selection process for the master developer will involve very strict criteria, including a proven track record, speed of delivery, content creation, and the financial capability to deliver a project of this scale. The highest possible value will be sought to ensure the best deal for the taxpayer is obtained," he added.

It appears very clear that the Bandar Malaysia development lacked any direction, and Dato’ Seri Najib Razak is making up plans has he goes along.  And as policies got varied by the day, the market reaction can only be best encapsulated by the wild gyrations of the Iskandar Waterfront City Bhd over the past two weeks.

Such ad-hoc policy making pronouncements are completely detrimental to the MoF’s objective of snaring a new investor for the project.  Instead, potential buyers will only be frightened off by the policy flip-flops which can take place in Malaysia, providing them with little confidence and certainty over their investment in the country.

We call upon the Ministry of Finance to deliberate in-depth the developments over the past 2 weeks carefully before making any more vacuous decision announcements.  Dato’ Seri Najib Razak must not forget the fact that the original sale to the IWH consortium was finalised only after a 6-month global hunt for investors by C H Williams, Talhar & Wong, the 1MDB-appointed real estate brokers, in 2015.

The offer by IWH consortium, despite their apparent inability to fulfil their financial obligations was the then highest offer on the table.  Instead of making empty promises of selling Bandar Malaysia at substantially higher prices which may in turn cripple the viability of the proposed economically beneficial projects, the MoF must study in-depth the types of development in Bandar Malaysia which will generate the most economic multiplier effects for the country, with an emphasis of supporting competent local developers and businesses.

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Is our national interest now subjected to foreign terms and conditions?

Last week, I had asked the Finance Minister to justify the award of the RM55 billion East Coast Rail Link project to China Communications and Construction Company (CCCC) and why Malaysian companies were not given the opportunity to tender for the project.

In the Finance Ministry’s reply, it said "to qualify for this financing offered by China Exim Bank, the project had to be executed by CCCC".

The Minister said that the Export Import Bank of China (China Exim Bank) offered a soft loan to Malaysia for the project at low interest rates.  He added that the loan, for a period of 20 years, also allows for a grace period of seven years where the government does not need to repay the principal.

In addition, "the government has, in principle, agreed at least 30 percent of the infrastructure work will involve local companies and contractors".

If studied carefully, the reply carried very sinister undertones.

Malaysia now appears so desperate for foreign financing for its so-called national interest projects that it is willing to subject itself to terms and conditions of foreign powers.

Just because somebody is willing to lend you the money at seemingly favourable terms does not mean that you should accept the condition to select the product that will cost nearly double the estimated price.

This is no different from unscrupulous retailers to duped Malaysian shoppers into “zero-interest” financing schemes on products costing significantly higher than if you have paid for it in cash.  Any financial consultant will educate you that the real cost of financing is already built into the jacked-up price of the product.

Worse, the real cost of funds for the project is now opaque because we do not know the real cost of the project as it was awarded without any open and competitive tender.  We do know however, that the Government’s own appointed consultants, HSS Integrated has estimated that the cost of the 600km railway project will cost less than RM30 billion.

Therefore, to pay for the project at RM55 billion just because China Exim Bank offered an “attractive financing package” is absolutely scandalous!

Worse, only 30% of the project will involve local companies and contractors, despite an abundance of experience and expertise which are already widely available in Malaysia.  We have now got many companies who have built double tracking railway projects, dug award-winning tunnels systems and constructed the MRT.  And yet, the Government is awarding a standard rail link project at substantially higher cost to a foreign company with minimal local participation.

The irony is, the Finance Ministry has advised or even instructed our Government-Link Companies to halt their investments abroad and repartriate its foreign funds from overseas to check the drastic decline of the ringgit.  Bank Negara even put in harsh measures to force private companies to convert their foreign currency receipts into ringgit.  However, the Government clearly doesn’t practise what it preaches because the overwhelming bulk of the inflated RM55 billion cost will be paid to China despite available local options.

There can be no better example of the English saying, “penny wise but pound foolish”.  What boggles the mind is, the Finance Ministry doesn’t comprise of idiots – they should know that we are paying well above what is a fair price for the project.  What is the ‘real’ reason why the project has been awarded to CCCC – is the real ‘quid pro quo’ the fact that CCCC will help launder part of the astronomical profits to pay off 1MDB debts as widely speculated?

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Malaysians are massively dissappointed that the Government has sided to protect the profits of oil and gas companies, at the expense of the man-on-the-street

Malaysians are hugely disappointed that the Government has made a complete U-turn on the previously announced proposal for fuel retailers to compete freely at prices below a government-set ceiling price.

"After joint discussions with oil companies, we have agreed to announce the weekly price of petrol and diesel every Wednesday and the price (for the first week under the new system) will be effective March 30," the Minister of Domestic Trade, Cooperatives and Consumerism (KPDNKK) said in a live announcement on RTM1.

Datuk Hamzah Zainuddin said any companies that wished to sell below the weekly ceiling price must seek approval from his ministry.  "Petrol dealers that wish to hold promotions and provide discounts on the set price can do so by first seeking approval from KPDNKK.

"All oil companies and petrol dealers are reminded to abide by the new pricing. Stern action will be taken against dealers that sell petrol or diesel at prices other than what is set by the government," he said.

This announcement reversed the earlier announcement by the Second Finance Minister, Dato’ Seri Johari Abdul Ghani and Datuk Hamzah himself.

Bernama has reported on 16 March that the Second Finance Minister, Dato’ Seri Johari Abdul Ghani has said that “although the ceiling price was determined by the government, it was up to the oil companies to sell the petrol and diesel below it”.

This was further to the announcement made by the Minister of Domestic Trade, Cooperatives and Consumerism, Datuk Hamzah Zainuddin on 4 March.

The first sign of a U-turn was when I received a parliamentary reply from the Minister of Finance earlier this week who said that “with regards to the proposal to fix ceiling prices for petroleum products, it is still in the study and evaluation stage which will directly involve several relevant agencies such as the Ministry of Finance and the Minstry of Domestic Trade, Cooperatives and Consumerism”.

The sequence of events clearly showed that the Government came under pressure from the oil companies who protested against the policy which allowed them to compete freely.

Although the Minister will claim that on paper, those companies who were interested to sell at a lower price or hold promotions will still be able to do so after obtaining “approval” from KPDNKK, this process will be cumbersome and any applications will be subjected to protests from other oil companies.

Why should these oil companies remain ‘protected’ by the Government when petrol and diesel are no longer subsidised by the tax-payers?  What makes these oil and gas companies so special that the deserve special protection compared to other goods and services?

I had previously issued a statement in support of the ‘free competition below ceiling price’ policy because the ultimate beneficiaries of the policy will be the man-on-the-street who are burdened with high fuel prices and that of other essential goods and services.  Competition will allow more efficient petrol companies to offer lower prices to consumers.

The biggest winners to the Government’s policy now are Petronas, Shell, BHP, Petron and Caltex – as they effectively form a cartel to control petrol prices via a Government’s fixed price.

Such a policy will contradict the spirit and intent of the Competition Act which forbids price-fixing and monopolistic practices in nearly all of the other industries.  Even trade associations such as the Coffee Shop Association have been told that “fixing” coffee or tea prices – which have been their practice for decades – is now illegal under the Act.

We call upon the Government to prioritise the interest of the rakyat who are burdened with increasing prices of essential goods and services, and not that of big corporates like oil and gas companies.

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Don't “thank” the Domestic Trade Minister for raising sugar prices by “only 11 sen” - facts proved that the BN Government has allowed Malaysia’s sugar duopoly to make super-profits over the past 2 years

Two days ago, Domestic Trade, Cooperatives and Consumerism Minister Datuk Seri Hamzah Zainuddin said Malaysians should be thankful for the minimal hike in sugar price.  He said the hike, at only 3.8%, was minor compared with what was proposed.

This followed the ministry’s recent announcement that the new price of coarse granulated white sugar from March 1 onwards was RM2.95 per kg, up from the previous RM2.84.

“In fact, when we did the calculation, the millers had been asking us to increase the price to RM3.20, which is a jump of 40 sen. But from our calculation, we took the average and set it at the minimum of 11 sen,” he told reporters at the Dewan Rakyat.

“Malaysians should thank me instead of being angry with me,” Hamzah said.

An arrogant statement like that by the Minister is an open invitation for a fact-check.  In keeping with the current fad of “fact-checks” as epitomised by Malaysia Communications and Multimedia Commission’s (MCMC) “Sebenarnya” portal, I dug up the historical prices of global raw sugar prices, Malaysia government’s “Long-Term Contracts” (LTC) for raw sugar supply, our historical subsidies for processed white sugar and the Manufacturer’s white sugar price (before subsidy). (Please refer to table attached.)

Prior to 2015, Malaysia’s two sole sugar manufacturers purchased raw sugar via Malaysia government’s LTC for imported raw sugar supply.  For 2009-2011, the fixed raw sugar price was US$17.50 per 100lbs, while for 2012-2014, the price per 100lbs was US$26.00.

The LTC raw sugar purchasing system was subsequently abolished and manufacturers purchased import their raw sugar supply directly based on global market raw sugar prices.

I have also calculated the Manufacturer’s white sugar price, which is the sum of retail white sugar price plus any subsidy paid by the Government.  This will be the price that the two manufacturers receive per kilogram of sugar sold.

Very simply, I put the manufacturer’s raw sugar purchasing price and the processed sugar selling price historical trends from 2010 to date together in a single chart as shown in Chart A below.

The Chart itself speaks a thousand words.

Between January 2012 to December 2014, the manufacturer’s raw sugar supply price was US$26 per 100lbs.  They could sell processed sugar at RM2.84/kg and had no problems making a profit.

The question that needs to be asked is, today, the global market raw sugar price is approximately US$18.16 per 100lbs, why is it that the BN government see it fit to further increase the retail sugar price to RM2.95/kg?

Even after accounting for the differences in exchange rate over the period of time, the price of sugar should have been reduced, and not increased!

Chart A:

Worse, if you look at the raw sugar supply price in 2015, it dipped for the manufacturers immediately from US$26 in December 2014 to US$15.06 in January 2015, and further to a low of only US$10.67 in August 2015, why did the Government allow the manufacturers to continue making astronomical profits at RM2.84/kg?

Why hadn’t the Government reduced the price of sugar drastically in 2015 when the raw sugar supply price hit rock bottom?  As a comparison, even when the manufacturers bought raw sugar for US$17.50 prior between 2009 and 2011, the manufacturer’s sugar price was only between RM2.05 and RM2.50.

The data proved beyond doubt that there is absolutely no need for Malaysians to “thank” the Domestic Trade Minister as demanded by Dato’ Seri Hamzah Zainuddin.  Instead, Malaysians should perhaps be cursing and swearing at the Minister and the BN Government for stupidly (or perhaps intentionally) allowing the two Malaysian sugar manufacturers for profiteering via a Government-imposed selling price at the expense of ordinary suffering Malaysians.

We call upon the Government to not only withdraw the recent price hike of 11 sen for the retail price of sugar, but instead further lower the ceiling price from RM2.84/kg to reflect the substantially lower global price of raw sugar over the past 2 years.  This should be done immediately without any compensation or subsidies paid to the manufacturers.

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Move to allow petrol companies and kiosks to compete will benefit consumers and is long overdue

Bernama reported last week that the Second Finance Minister, Dato’ Seri Johari Abdul Ghani said the government is studying the option of setting a ceiling price for petrol in view of the escalating cost of fuel.

He added that "It is up to the government to set a ceiling which is deemed fair for all. When the government has decided on the ceiling price, whether they (O&G industry players) want to sell the oil at lower prices for promotional purposes, we leave it to them.”

We fully welcome the above move as it is long overdue. Malaysians do not understand why petrol companies in Malaysia are not allowed to sell petrol prices at lower prices when they could see how kiosks in Thailand or Singapore can compete and lower pump prices.

When I asked the above question in Parliament several times, the only response I had once in 2009 from the then Deputy Minister of Domestic Trade and Industry, Datuk Tan Lian Hoe was that allowing petrol stations to compete with different prices “would confuse consumers”.  It appears that Malaysians consumers are much more easily confused compared to our overseas counterparts.

We can understand if the Government sets a maximum price these companies can sell petrol so that Malaysians will not be unfairly over-charged.  But we don't see the logic of not allowing the companies to compete and transfer their cost efficiencies to us via lower fuel prices. This is especially since the Government has already abolished fuel subsidy more than a year ago.

The only reason we could think of was that the Government is merely trying to protect the weaker players at the expense of the consumers.

As publicly discussed over the past weeks over the fuel price hikes, the petrol price is calculated based on the average monthly price of refined fuel as measured by Means of Platt Singapore (MOPS). However, petrol companies don't purchase their fuel at these “average” prices. They will all try, with varying degrees of success to acquire their supply of petrol at the lowest possible price during the month or even the year.

In addition, some petrol companies are obviously more efficient than others and have lower operating and investment costs.

Therefore, why shouldn't these companies who purchase their stock at cheaper prices and are more cost-efficient be allowed to pass on some of their savings to long-suffering Malaysians?

Hence we call upon Dato' Seri Johari Abdul Ghani to free up the competition as soon as possible and not wait until petrol prices go up further in the coming months.

In fact, under the new regime, the competition between petrol companies and kiosks must be regulated under the Competition Act by the Competition Commission of Malaysia. This is to ensure that there will be a level playing field and the petrol companies and kiosks will not collude to fix prices at the expense of ordinary consumers.

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No clarity, more obfuscation: BN Strategic Communications Team's lengthy answer on how the Government arrived at a painful 20 sen hike for February petrol prices

I had issued a statement yesterday demanding that Dato’ Seri Najib Razak explain exactly how the Government arrived at a painful 20 sen increase for petrol prices.

RON95 and RON97 prices went up by 20 sen to RM2.30 (9.5%) and RM2.60 (8.3%) respectively while diesel cost went up by 10 sen to RM2.15 (4.9%).

This follows from the already big hike Malaysians have experienced since January where all types of fuel already increased in price by 20 sen.

Malaysians deserve a straightforward answer from the Government because they cannot fathom why the prices of fuel was upped significantly even though global crude oil prices have declined over the past month. What’s more, the beleaguered Ringgit actually recovered marginally which should ease the price pressures further.

Instead of receiving any response from any responsible Minister, much less the Finance and Prime Minister, we got a reply from the “BN Strategic Communications Team”. We don't know who they are, or even know what is their capacity to respond on behalf of the Government.

Regardless, taking their response at face value, they failed to provide any clarity on how the Government arrived at the painful 20 sen quantum of hike. If they could write such a lengthy essay to rebut my simple question, why couldn't they just attach the spreadsheet to justify the increase?

It explained that the pump prices was calculated from the average refined oil prices as measured by the “Singapore Means of Platts” (MOPS), which is already a widely acknowledged fact.

However, all that was further relevant from the statement was a paragraph which said, “a check on the MOPS would show that the average price of motor gasoline 95 unleaded for January had stabilised in a range of US$69 to US$70 per barrel and was materially higher than the average price in December 2016 where the price had steadily increased from US$62 at the beginning of the month to US$68 by December’s end.”

If the BN Strategic Communications Team is so confident of the numbers, why did they try to obfuscate the statistics with a fuzzy range of numbers, instead of just providing the specifics to justify the 20 sen hike?

I did the BN Strategic Communications Team a favour by doing the calculation on their behalf.

The average MOPS95 price for December 2016 is US$66.553 per barrel or US$0.4186 per liter. That works out to RM1.8753 per liter at the then exchange rate of US$1:RM4.48.

MOPS95 averaged slightly higher at US$68.820 per barrel or US$0.4328 per liter in January.  In turn, it translates to RM1.9130 per liter (US$1:RM4.42).

Hence based on the exact explanation provided by the BN Strategic Communications Team, the difference in price is only 3.8 sen more for January.

If so, why did the Government increase by so much more at 20 sen?

Therefore, my question raised yesterday remains unanswered, and Dato’ Seri Najib Razak, as both the Finance and Prime Minister, must explain why the price of petrol has increased so significantly despite the above.

The Ministry of Finance must disclose if the Government is actually imposing hidden taxes on the consumers to cover up for Government budget shortfalls.

Once again, we call for the full disclosure of the data, formula and exact details on how the fuel price hikes are calculated so that Malaysians know exactly why they have been forced to suffer as a result of the Government’s policies.

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Dato’ Seri Najib Razak must explain why the price of petrol increased so drastically despite international crude oil prices having fallen slightly in January

Malaysians of all races returning from the Chinese New Year holidays received a shock when Dato’ Seri Najib Razak presented them with a big “ang pow”, a big hike in fuel prices.  RON95 and RON97 prices went up by 20 sen to RM2.30 (9.5%) and RM2.60 (8.3%) respectively while diesel cost went up by 10 sen to RM2.15 (4.9%).

This follows from the already big hike Malaysians have experienced since January where all types of fuel already increased in price by 20 sen.

While it was painful, Malaysians could perhaps have understood when fuel prices went up for January.  It was as a result of an increase in global crude oil prices for the month of December.  Brent crude prices went up from US$51.48 to US$56.73 in December 2016.

However, Malaysians cannot understand why the prices were increased for February when the Brent crude price actually declined slightly in January to approximately US$55.86.

Even when we try to second guess that perhaps it’s due to the ringgit depreciation, it also doesn’t add up.

In December 2016, the ringgit depreciated from RM4.38 to RM4.48 for every US Dollar.  However, for January 2017, the ringgit is currently trading at approximately RM4.42 to the dollar, which means it has strengthened marginally for the month.

Therefore, the increase in fuel prices cannot be as a result of any increase in crude oil prices or further depreciation of the ringgit.

Hence Dato’ Seri Najib Razak, as both the Finance and Prime Minister, must explain why the price of petrol has increased so significantly despite the above.

The Ministry of Finance must disclose if the Government is actually imposing hidden taxes on the consumers to cover up for Government budget shortfalls?

Barely a week ago, Dato’ Seri Najib Razak said he did not want a situation where ministries use excuses, like “not enough budget” to not implement people-oriented projects.  “Not receiving money or not enough budget should not be an excuse for any operating ministries to not start a project or programme,” he added.

If the above the reason for the hefty hike in fuel prices so that the people are forced to pay for the so-called “people-oriented projects”, so that the Najib-BN administration can claim credit?

We call for the full disclosure of the data, formula and exact details on how the fuel price hikes are calculated so that Malaysians know exactly why they have been forced to suffer as a result of the Government’s policies.

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While blinkered Treasury-General Tan Sri Irwan Serigar continues to praise the Emperor’s new clothes, little hope of seeing meaningful changes to Malaysia’s drifting economy

The dreadful performance of the Malaysian ringgit and a listless economy under-performing its potential are not merely depressing news but have caused Malaysians plenty of pain.

And yet, the most senior civil servant in the Ministry of Finance, arguably a most powerful one, the Treasury-General insisted that all is well, and what is wrong is only “a matter of perception”.

"I go to restaurants and supermarkets, who are there? People are buying and travelling.  Some group of people are making noise as though the whole country is in trouble,” Tan Sri Irwan Serigar quipped at a press conference yesterday.

We are stunned that the Treasury-General thinks that just because there are people in restaurants and people are still visiting the supermarkets for the daily needs, everything’s fine and dandy with the economy.

Does he expect all Malaysians to be jobless and living in the streets begging for food before he would recognise that the economy is in trouble?

According to him, the plummeting of the ringgit was a short-term phenomenon that would recover in the middle-term following the measures taken by Bank Negara Malaysia (BNM).

However, isn’t that exactly what the Ministers and BNM have been telling Malaysians annually over the past 4 years as the ringgit lost more than 40% of its value against the dollar?  How can it still be a short-term problem when we are consistently the worst performer among the major regional currencies for each of the past few years?

Worse, the latest Nikkei Malaysia Purchasing Manager’s Index (PMI) clearly cited that our manufacturing production has been shrinking for 21 consecutive months, with no signs of improvement.

The PMI is derived from indicators for new orders, output, employment, suppliers’ delivery times and stocks of purchases.

How can Tan Sri Irwan continue to insist that all is well when our manufacturing performance is so pathetic despite the fact that our substantially depreciated currency should have made our goods so much cheaper and competitive?

The biggest shocker from the press conference however, is the fact that he believed that all the negative perception arising from the problems with the economy will be righted and vanished immediately once the media publish his “all is well and good” assurance.

He told the media to contribute to the ringgit appreciation through positive reports about the currency and economy.  "Hopefully, when you publish today's briefing, the ringgit will be strengthened," said Tan Sri Irwan.

How we Malaysians can renew our hopes on the economy when we have such a hopeless Treasury-General is beyond me.

Tan Sri Irwan Serigar’s refusal to address and resolve the issues surrounding the tens of billions of ringgit which have been siphoned from the Ministry of Finance subsidiaries, 1MDB and SRC International, which made Malaysia an infamous kleptocratic capital of the world is one thing.  After all, he is not the first person you would accuse of “cari makan”.

However, his woeful attempt to wave away our economic misery with his magic wand without recognising the problems we face and without offering any concrete measures to remedy the situation proved beyond doubt that the Najib administration is completely bankrupt of ideas.

In order to have any chance of reviving our currency and economy, the Najib administration must be replaced and there is no better time than the impending general election.

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2017 – Relief and recovery for the Ringgit, or more pain and punishment?

While 1MDB and the Prime Minister Dato’ Seri Najib Razak’s kleptocratic scandals were unquestionably the most talked about topic for 2016, it is the Ringgit’s relentless depreciation which would have caused the most pain for ordinary Malaysians.

Over Christmas, I managed to take my family for a week’s holiday in Chiang Mai – our first since I was banned from overseas travel for allegedly taking part in “activities detrimental to parliamentary democracy” in July 2015.

One would have assumed that travelling to the “backwaters” like rural Thailand would have been easy on the pocket.  Well, in the past, trips to Thailand did make me feel “richer”.  When you walked the colourful and rambunctious street markets, you needed to exercise maximum self-restraint to prevent oneself from having to purchase additional luggage space from AirAsia because everything was “cheaper”. 

Not anymore. Now, the Baht-Ringgit exchange rate will automatically keep you disciplined.

As late as August 2014, the currencies were trading at 10 Baht to the Ringgit. Today, it’s 8 to 1. And to rub salt on the wound, the Ringgit ain’t particularly welcomed by our neighbours. 

Needless to say, if a trip to Thailand could make you feel kinda poor, a journey south to Singapore would make you feel like a destitute.  Think about it, a budget Hotel 81 room in the fringe of the city would cost you just about S$100, or RM310 per night.

Ringgit déjà vu?

So, will we get to see some desperately yearned for relief and recovery of the Ringgit this year?

Most pundits are telling us that the Ringgit is undervalued and will recover by the second half of this year.  PublicInvest Research said the Ringgit will recover to average between 4.10 and 4.15 for 2015 against the US Dollar, which is currently trading at 4.48.

Dato’ Seri Najib Razak would similarly like you to believe that the ringgit will recover.

“With the recent changes and developments, we are confident the ringgit will recover.  It is due to speculation by outsiders and the uncertainties in the United States that the ringgit dropped, and not because the ringgit is weak,” he said in December when the Ringgit traded at 4.42 to the Dollar.

But didn’t they all say the same thing last year?  Or for that matter, the year before?

The Prime Minister told us way back in January 2015 that the Ringgit will bounce back from the then five-year low versus the US dollar as “Malaysia's financial market is sufficiently robust”.  Believe it or not, the Ringgit was then trading at 3.60 to the Dollar, which now seemed like a parallel universe away.

If we had all trusted our Ministers and invested based on his financial advice, some of us would be bordering suicidal tendencies today.  2016 was the Ringgit’s 4th consecutive year of decline against the US Dollar.

The thing is, if everyone else had declined at the same rate against the Dollar, it wouldn’t have felt so bad.  What is particularly galling is that the Ringgit performance is the worst among all the major regional currencies.

In 2015, the excuse given was straightforward – the Ringgit suffered more because we were an oil-exporting nation.  As the price of global crude collapsed from US$102.10 in January 2014 to US$60.70 (Dec 2014) to US$36.57 (Dec 2015), it is almost understandable that the Ringgit would be disproportionately pummelled. 

The pundits had predicted that the Ringgit would recover with the recovery of oil prices last year.  They were indeed spot on in their prediction of higher oil prices with the Brent crude trading at US$55 a barrel by December 2016.  Unfortunately, despite the oil price reversal, the Ringgit value worsened significantly.

How was that even possible?

No more an export powerhouse

Back in November 2015, the then Bank Negara Governor, Tan Sri Zeti Aziz told an international audience that the Ringgit was “significantly undervalued” as our “export growth remains fairly strong”.

Except it wasn’t.

Conventional economic theory tells us that as our currency gets depreciated, our goods become cheaper and consequently the demand for them increases.  A robust increase of the export of our goods and services would in turn increase the demand for our currency and hence provide a strong platform for the recovery of our ringgit and economy.

Well, the Ringgit was massacred in 2015 when it depreciated by nearly 20%.  On paper, that makes our exports dirt cheap in 2016.  And given that we have always prided ourselves as an export-oriented economy, our goods should definitely be flying off the shelves as they became extremely competitive.

But the Government’s own statistics tell us that our exports barely eked out a gain.  The 2016/2017 Economic Report published in October 2016 tells us that our Gross Exports for January to August 2016 grew by only 1.1%, compared to 1.6% in 2015.

More specifically, the electrical and electronics exports, the pride of our manufacturing industry, grew by only 2.2%, a substantial decline from 7.4% in 2015.  While 2.2% might have been just about acceptable under normal economic circumstances, the number is pathetic given the depreciation the Ringgit suffered.

Worse news followed since the above report, when the Department of Statistics disclosed last month that our exports declined 3.0% and 8.6% for the months of September and October respectively.

Separately, the latest Nikkei Malaysia Manufacturing Purchasing Managers' Index, or PMI which measures manufacturing activities shows that the sector “in contraction territory for 21 consecutive months”.

The headline PMI posted for December was 47.1 signalling continued deterioration.  A score above 50.0 signals improvement in manufacturing conditions, and Malaysia has not reached a score of 50.0 since early 2015.

Living and La-La Land

There is no question that our economy is suffering from something chronic which needs immediate treatment.  Alarm bells should have been blaring deafeningly in Putrajaya but all we get is Ministers with their heads in the sand. 

Prime Minister Najib Razak welcomed 2017 by boasting that Malaysia has achieved a growth rate the Western world can only “dream of”.

“Our estimated growth rate of 4.3 to 4.5 percent for this year is one that developed countries in Europe and North America can only dream of.  Malaysians should be proud of the growth we are achieving.”

A statement from the Barisan Nasional strategic communications team earlier in December also boasted that “Malaysia’s economic growth is less volatile and more robust than Singapore’s as a result of the Najib administration’s shift towards the domestic economy.”

Of course the fact that developed countries have a different growth trajectory compared to developing ones was irrelevant.  What was more important to the ruling leadership was the continued thumping of the chest to praise and glorify the Emperor in the eyes of seemingly gullible Malaysians, even if the Emperor is really naked.

So what’s really happening?

A loss of confidence

The anticipated explosive growth in exports and manufacturing activity as a result of persistent depreciation of the Ringgit never materialised. Either no one wants to buy more Malaysian products even though they are significantly cheaper or more plausibly, businesses and investors are not investing in additional production capacity in Malaysia.

They are at best adopting the “wait and see” strategy or at worst, have decided in investing their money in other countries.  There could be many reasons for this, including perhaps a increasingly limited supply of skilled and quality labour, a weakening education system or the bureaucratic and corruption cost of doing business. 

However, anecdotal evidence would tell you that one of the key factors is the fact that they have lost confidence in the country.  A country led by a Prime Minister who has been indicted as one of the worlds biggest kleptocrat would and could never inspire confidence in genuine investors.

The complete failure of the institutional authorities to take enforcement actions against blatant and brazen corruption has destroyed whatever that’s left of Malaysia’s long-standing reputation as a country they could do business in.

Bank Negara saves the day?

Bank Negara Malaysia is now forced to implement increasingly desperate measures to stem to tide against the Ringgit.  They now include the restricting the off-shore trade of the Ringgit via non-deliverable forward contracts, and more controversially, the move to compel exporters to convert 75% of their proceeds into Ringgit.

The Central Bank is claiming success for its policies, stating that the measures are starting to bear fruit, following lower volatility in the ringgit.  Sure, such short term measures will provide immediate support for the Ringgit as it mops up whatever excess liquidity existing today. 

However, as explained earlier, Malaysia being an “export-oriented country” is heavily dependent on continued investments in our export sectors, manufacturing or otherwise.  If the use of your future export proceeds are restricted and the hidden cost of doing business in Malaysia increases, then who would want to invest in new or additional production capacity in the country?

Current exporters would not have a choice in the repatriation of export proceeds as demanded the authorities.  But they and future investors – both local or foreign – have a choice in where they choose to invest in the future.  With alternative competing investment destinations aplenty today, such short-term Bank Negara measures will only further dampen the medium and longer term demand for the Ringgit, jeopardising any eventual recovery.

A new normal

We used to pride ourselves as an export and manufacturing powerhouse.  We are used to being described as an “economically resilient” country, even if it was somewhat a function of striking oil lottery, especially during the decade of high oil prices.

Unfortunately, the hard statistics are becoming hard to refute.

I would be foolish to give a specific prediction of how the Ringgit will perform over the next 3, 6 or 12 months even as it hit 4.50 to the Dollar yesterday, a new record low since the Asian Financial Crisis.  However, it would be more than fair to say that the downside risks significantly outweigh the upside prospects given the reasons explained above.

For Malaysians, perhaps its time to accept the new normal.  We have lost more than 40% of our wealth in US Dollar terms over the past 3 years. The lost of wealth will be reflected in higher prices of goods and services – including the higher price of petrol as oil is traded internationally in Dollars.

Although it is not impossible, this new normal will be extremely difficult to reverse.  In fact, it more than likely to get worse given the utter inability by the Najib administration to rectify the failures of the economy.

I would be foolish to give a specific prediction of how the Ringgit will perform over the next 3, 6 or 12 months.  However, it would be more than fair to say that the downside risks significantly outweigh the upside prospects given the reasons explained above.

The only way Malaysians can hope for “the good old days” to return is to see a change of regime.  The new regime needs to cleanse the country of its kleptocratic reputation and wipe out the scourge of grand corruption from the Government.  It needs a new, intelligent economic team which isn’t encumbered by sacred cows decreed by those who are desperate to stay in power at all costs.  It really isn’t rocket science.

Then perhaps, we will see a meaningful, significant and sustained recovery of the Ringgit, and our wealth over the longer term.

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The Second Finance Minister should stop crying wolf and start addressing the ultimate cause of the loss of confidence in the Malaysian economy

Two days ago, the Second Finance Minister, Datuk Johari Abdul Ghani told Malaysians there is no need to panic about the weakening ringgit, stating that the nation has in place an ecosystem that encourages investment and an open economy.

“Don’t panic, we shouldn’t panic,” Johari said.  The ringgit, which has weakened along with other emerging market currencies against the US dollar, has all the strength to bounce back, he added.

"We have the ecosystem to make it right, ensure political stability is intact and (continuously) apply the right policies to facilitate investors," he said when asked on the ringgit's decline to 4.4805 per US dollar.

The Second Finance Minister’s attempt to assure the Malaysian public has zero credibility and if that’s his only answer to the depreciated ringgit, then 2017 will only see further pains for our currency and economy.

Perhaps, Datuk Johari has forgotten that this is the first year we have hit bottom. In fact, even I myself was a little surprised to discover that his is not the second, but the third consecutive year where the ringgit has become the worst performing currency in Asia.

In 2014, the ringgit slumped 6.3% from 3.281 on 1 January to 3.502 a dollar on 31 December.

Last year in 2015, the ringgit collapsed 18.5% in 2015 from 3.505 on 1 January to 4.303 a dollar on 31 December.

Despite repeated assurances from the Government and Bank Negara that our currency was undervalued and unjustifiably depreciated for the past 2 years, the ringgit tanked a further 9.6% this year.

As the saying goes, once is an accident, twice a coincidence and three times a pattern.  Hence the Second Finance Minister sounds exactly like the boy who has cried wolf too many times.  No Malaysian with any sense left believes or is assured by what he is saying.  In fact, his open call “not to panic” is likely to have had the opposite effect as it showed that the Government is completely clueless and incapable of stemming the disastrous decline of the ringgit.

Worse, even the oft-repeated excuse that the ringgit’s ignominy as Asia’s worst performing major currency was a result of the drastic decline in global crude oil prices is no longer tenable.  Malaysia is a major oil producer in Asia (excluding the Middle East).

The Brent Crude price per barrel has indeed declined from US$102.10 in January 2014 to US$60.70 (Dec 2014) to US$36.57 (Dec 2015).  However, for the month of December 2016, the Brent Crude has been trading 50% higher at around US$55 per barrel compared to a year earlier.

If the global oil price drop had been the reason why we were the worst performing currency in 2014 and 2015, there is certainly no reason why we should remain the worst performing currency in 2016 with the substantially higher oil prices.

It appears that everyone knows the real cause of the ringgit’s terrible performance except our clueless or pretend-to-be-clueless Ministers. The fundamental cause is because of the complete collapse in confidence in our currency and economy ever since we have been outed as a major global kleptocracy and the failure of the Malaysian authorities and Government to take any action against those responsible.

In a country where the Prime Minister, Dato’ Seri Najib Razak who has been referred to as the Malaysian Official One by the US Department of Justice as having misappropriated US$731 million into his personal bank account in Malaysia can get away scot-free while all attempts to bring him to justice, including cartoonists, are met with oppression and intimidation by the police, there can be little surprise that Malaysia has lost the confidence of both local and foreign businesses and investors.

Unless and until there exist Ministers and a Government in Malaysia who is willing to call a spade a spade, and is willing to take concrete actions to redeem ourselves from the kleptocratic bottom, Malaysia’s economy will only continue to struggle to stay afloat and its currency continuing to significantly under-perform relative to its peers.

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Minister in Prime Minister’s Department, Dato’ Seri Abdul Rahman Dahlan tried to pull a fast one by comparing the exorbitant cost of the East Coast Rail Link with complex High Speed Rail in Europe

Three days ago, Dato’ Seri Abdul Rahman Dahlan, the Minister in-charge of Economic Planning Unit (EPU) responsible for the East Coast Rail Link (ECRL) tried to deflect the allegations that the cost of ECRL was the most expensive in the world.

Unlike his fellow Cabinet Minister, Datuk Seri Liow Tiong Lai who denied that the ECRL was to cost RM55 billion or approximately RM91.7 million per kilometer, the EPU Minister pretty much confirmed the cost of the project.  Instead he argued that it was not the most expensive in the world.

Dato’ Seri Rahman Dahlan gave the examples of a 57km rail project in Switzerland costing US$11.9 billion (RM50bn) or US$209 million (RM860 mil) per km to build; a 177km rail line in Madrid-Valladolid, Spain, costing US$5.48 billion (RM22.46bn) or about US$30 million (RM123 mil) a km; and a 48km rail project in Barcelona costing about US$8.12 billion (RM33.3bn) or US$170 million (RM697 mil) per km.

It is disastrous for Malaysia that the EPU Minister actually cited these projects as comparison to our own proposed ECRL.

Dato’ Seri Rahman Dahlan perhaps didn’t realise that the 57km Swiss Golthard rail project costing a whopping RM50 billion actually involved the building of the world’s longest tunnel as deep as 2.3km below the surface!  The neighbouring 56km Brenner rail project which is currently under construction costing just a shade less than Golthard, will be the second longest tunnel in the world when it’s completed in 2025.

Is the Minister telling us that the 600km ECRL link from Port Klang to Kota Bahru via Kuantan will be, if not completely, substantially underground to compare with the Swiss rail lines underneath the Alps?

Similarly, the Barcelona line costing US$8.12 billion has a length of 47.8 km, of which 43.71 km is underground and 4.9 km is on viaducts.

At the same time, the 177km Madrid-Valladoid line was only the first phase of the two-phase Madrid-Leon 342km rail line costing a total of US$6.34 billion.  That actually works out to only US$18.54 million (RM76 mil) per kilometer which is cheaper than the ECRL’s RM91.7 million per kilometer!

Most of all, all of the examples cited by Dato’ Seri Rahman Dahlan are not only tunnel-intensive, they are all High Speed Rail (HSR) projects which, as we know cost significantly more than conventional rail projects like ECRL.  These European HSRs travels up to a top speed of 300km per hour compared to the ECRL project proposed at 170km per hour.

Hence what the ignorant Dato’ Seri Rahman Dahlan attempted to do, intentionally or otherwise, is to try to sell Malaysians a ATP turboprop at the price of a Boeing 747.  Unfortunately for him, Malaysians are not that stupid.

The EPU Minister shouldn’t have to go around to world to try justifying the exorbitant cost of the ECRL project.  After all, this isn’t our first and only rail project.  He should very well know that the 329km Ipoh-Padang Besar and 179km Gemas-Johor Bahru double-tracking link cost RM44.0 million and RM39.8 million per kilometre respectively.  Amazingly, these projects such as the Ipoh-Padang Besar and Rawang-Ipoh links were all completed by local engineering and construction companies!

We challenge Dato’ Seri Rahman Dahlan to show proof that a conventional railway project would cost anything more than the above or that there are no local companies with the necessary expertise who are able to complete the ECRL project for far less than the RM55 billion awarded to China Communications Construction Company.


Rafizi Ramli
MP Pandan

Tony Pua
MP Petaling Jaya Utara

Dr Hatta Ramli
MP Kuala Krai

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