Times They Are A Changin: Change Or Sink Like A Stone

Hantu Laut

Read Outsyed The Box "PM Confirms Malaysia Will Go Bankrupt Under Him !!"

As they say "The road to hell is paved with good intentions" 

Good intention is meaningless unless followed through.

I am not a trained economist, a bloody accountant, or a wiz-kid of some kind, but my business sense, which I hardly use nowadays had grown sharper over the years for not being overused.

I am not against the GST as I do believe it is high time such effective tax mechanism be introduced in this country to compensate for the leakages through cheating and tax manipulation. However, such exercise would be futile and of no use if the government continued with its extravagant and corrupt ways. 

Show me a wise government that foolishly spent RM7.2 billion in consulting fees, has 1.4 million civil servants, almost half doing next to nothing and spending over 80% of its recurring budget for operating expenditure leaving less than 20% for development expenditure. 

No where in the world you can find such caring government.....where there is 1 civil servant for every 20 people.

In the 2014 Budget of RM264.2 billion, a sum of RM217.7 goes to operating expenditure and RM46 billion for development expenditure, a meagre sum by comparison. Malaysians have been had, we give our money to people who had no money sense.

This government is spending beyond its means, good money chasing bad money, indiscriminate and unconscionable spending that's going to bankrupt the country.

Najib's 1MDB is full of big talking men in dark suits that's going to screw the country big time   They proudly say that many of their bonds are not backed by government guarantees, but these bunch of shitheads forget that 1MDB is wholly owned by the Malaysian government and if 1MDB goes down the Malaysian government goes down with it and Malaysia's credit rating goes down the sewer and no one would want to touch Malaysia with a ten-foot pole.

GST: Najib, Do It Now ! Ask Malaysians What They Can Do For The Country

Hantu Laut

We are left far behind because of decades of government pampering a lazy and subsidy-minded population. 

Many Malaysians believe government subsidies as of entitlement rather than of charity. Unless we do it now, implement the GST, Malaysia will forever be caught in the middle income trap.

In order to maintain its competitiveness, in order to sustain long-term growth and increasing employment and getting the country to higher income level, the government must change its tax structure and its reliance from direct taxes to indirect taxes. 

Direct taxes and some indirect taxes are deemed uncompetitive as such taxes are being subjected to abuses. Cheating and evasion of income, sale and excise taxes are common among businesses in the country, resulting in massive loss of revenues. GST is the most efficient and effective way to collect taxes. Other than GST the government must also reduce all subsidies, gradually to zero level. 

The right thing to do is to increase income, not reduce the cost of goods through subsidies to please an already unproductive population. 

Malaysians compared to countries like Singapore, Hong Kong, Taiwan, South Korea and China have poorer per unit output in productivity. Higher productivity signifies a healthy and expanding economy, which have helped those countries progressed economically by leaps and bounds, leaving Malaysia behind in a stagnated middle income pool.

A slow Malaysia was fault of the government, who have been trying to please a population into keeping them in office in perpetuity. The BN government should know by now all those years of cradle coddling has backfired on them and they are likely to lose the next GE if nothing bewitching is done to appease a disconcerted and angry population.

Some critics consider GST to be a regressive tax, as the poor pay more, as percentage of their income, than the rich. It has its pros and cons, but in the longer term it will benefit the population as a whole. 

I have travelled to many much poorer countries, which have introduced GST or VAT long before Malaysia mooted the idea, which shows how out of sync we are with the rest of the world. 

To date 146 countries, including poor countries like Cambodia, Pakistan, Vietnam, Nepal, Bangladesh, Laos, India and many more, have added GST to their tax structure.

Are we worse off than these poor countries, some with per capita income of less than US$1,000.

The opposition's campaign against GST being unsuitable here on the premise that there are still plenty poor people in the country doesn't hold water. It boils down to war of nerves to demonise and further weaken a limping ship that may not make it to port.

There is no abject poverty in Malaysia compared to the many countries I have visited over the years where many families could not afford three decent meals a day and many are hapless victims of circumstances and not of their choosing. 

Malaysians have wide ranging choices and Malaysia was ready for GST a decade ago but a myopic government have failed to see its silver lining, preferring to giving subsidies instead of increasing income and standard of living of the people through higher productivity.

Najib should not heed the oppositions berating him against implementing the GST, he should introduce it in the 2014 Budget. The tax should be broad-based and should not be too high or too low. I think a starting rate between 4 to 7% will not burden the people. There will be some exemptions like export of goods, international services and other items deemed essentials and should be zero-rated, but it must still be broad-based, otherwise, it will defeat the whole purpose and objective of the GST.

As John F .Kennedy said in his inaugural speech when elected as President of the United States "My fellow Americans:ask not what your country can do for you - ask what you can do for your country"


Malaysians suck!

(The people's opposition to the GST is mainly the government fault as nothing has been done to explain to the common people the mechanic and the long term benefits of the GST. The government machinery is still fast asleep)

Budget 2011, Will Crony Capitalism Be Alive And Kicking ?

Hantu Laut

While I yearn for a better Malaysia where the gap between the rich and poor would narrow down to a civilised level I just could not comprehend the logic of a 100-storey tower that could help us jump start an economic miracle to becoming a high income nation.

We need to grow an average 8-10 percent annually for the next 10 years to ever come near that dream.

Can we?

Which economic formula is the Prime Minister using? Adam Smith's "invisible hand", John Keynes principal of government intervention or Milton Friedman's free market economy and government non-intervention,, or all pleated into one.

All three are acceptable economic principles that have been used over the century in varying degree.

However, the global financial crisis in 2007 has brought the resurgence of Keynesian economics.

Though, government intervention advocated mostly legislative in nature, fiscal and monetary measures are needed to mitigate adverse effect of economic recessions.In severe cases where the private sector had become incapacitated such scenario occasioned the use of government funds to save the economy.The Western economies are still reeling from the effect of the private sector's bad financial governance.

The 2007 global financial crisis that led the US and other Western economies to bail out failed financial institutions by taking up equity and management of these companies was one such occasion.It helped to decelerate economic meltdown and brought speedy recovery to the economy.

The building of mega structures for prestige rather than economic considerations will not excite the economy as much as if the money is spent on increasing industrial outputs.

Putrajaya is the ultimate white elephant and we don't need anymore of such monument to strain our financial resources.Too often, we have mega-failure projects like the PKFZ and Bakun Dam which punch big holes in government finances and disgrace to the nation.

Ours is a nation that survived on our trading capabilities and have to reckon with countries like Thailand,Vietnam,Indonesia and big player China in the world markets.These are sectors that needed to be boosted. China would eventually become a big economic threat to smaller nations in this region.

Letting the private sector to take the lead is well and good as long as the government stop crony capitalism which has been the practice all these times.It leads to inefficiency and cost ineffectiveness to the system.

Letting those who knows the business best do the job is the only way to bring competitiveness to the industry.In the past almost all government projects,special licences,approved permits had to go through UMNO linked middlemen who sat on their arses and do only Ali Baba business to collect huge windfall from the project.

The government should wake up to reality and be bold enough to correct mistakes of the past.

Malaysia has probably one of the worse practices of trade monopoly in a free market economy. These are given to either GLCs or cronies.The breaking up of these monopolies should be given priority to liberalise the market so prices can find its own level.

Bigger chunk of our annual budget goes to recurring expenditure, literally, to take care of the grossly over-staffed and inefficient civil service.We have over 1 million civil servants to take care of 26 million Malaysians while the UK had only around 500,000 against a population of 61 million.

It's a reflection of bad policy of the government of creating jobs just to give employment to the majority bumiputras. When the oil wells run dry this country will be bankrupted by none other than the civil service.It's about time the government starts trimming the civil service down to less shameful level.

In Budget 2011, Sabah and Sarawak would probably be the biggest losers getting only a meagre RM10 billion in projects or just 8 percent of total value of projects mentioned in the budget.Despite Sabah and Sarawak contributions to the total government revenue the two states stayed neglected and may lose its premium as fixed deposit states.

Why is it that most development should be in Kuala Lumpur, which is already a burgeoning city with highly developed infrastructures and a dysfunctional traffic system that clog the city roads and streets despite billion of ringgits spent? More mega buildings and construction of the mass transit would be a major nightmare for the city dwellers.

More money should be channelled to Sabah and Sarawak for infrastructure development.The two states with land masses over three times more than that of Peninsula Malaysia still remained backward because of neglect and inequitable distribution of development expenditure.

Obviously, the government is only interested in monumental and cosmetic economic reforms which is not going to help up the value chain and make Malaysia high income nation in the near future.

I don't see it as an exciting budget but more likely acts in furtherance of existing crony capitalism.

Najib needs to do more.He took over a weak administration and party members who are used to the spoils system.

Will Najib Have The Right Formula ?

Hantu Laut

The Finance Minister and Prime Minister-in-waiting Najib Tun Razak is to announce the 2nd stimulus package later to day.In my earlier posting under "Economic Malaise:Will The Government 'Broke The Buck' " I mentioned that anything less than RM30 billion would be insufficient to inject new lease of life into the economy. The stimulus has come a little late but not too late to rescue the economy provided the government dispense the package only in critical sectors of the economy, not projects manufactured to put money in selected pockets.

If the government have not sat on its laurel and took positive actions to put in place a contingency plan on the first sign of a downturn and at about the same time when I wrote my article "Badawi's State Of Euphoria" which appeared in Asia Sentinel in January 2008, it wouldn't be so topsy-turvy today.

The stimulus need not be in cash injection alone but can come in the form of cash, incentives,tax rebate and tax reduction.

Malaysia is the third most export-dependent country in this region after Singapore and Hong Kong. Special attention should be given to this sector to maintain high level of export receipts by providing various incentives and assistance.Special incentives should be given to Malaysian products using high level of local materials and added incentive if this value added products are exported overseas.

Manufactured products and services are the biggest contributors to the GDP, naturally these should be the areas the government should provide the highest priority

Some of the things, among many others, the government need to do immediately for the rest of 2009.

1. Provide incentives in the form corporate tax reduction for all manufacturing companies and bigger tax reduction for companies that export at least 50% of their products overseas.

2.Give bigger tax reduction for companies in selected sectors such as plantations and construction that employ 70% or more Malaysian labour.

3.Remove all export cess or duties on primary products exported overseas.

4.Suspend EPF contributions from all employers and give option to employees to contribute or not.

5.Require banks to suspend loan repayment for principal amount only for companies affected by the downturn and for Bank Negara to impose at least 6 months, as rule of thumb, before such account goes under NPL (non-performing loan).

6.Provide export credit scheme for selected countries and cheaper pre-shipment financing for exporters.

7.Allow those who lost their jobs to draw half of their last drawn salary from their EPF savings for a maximum of 6 months.

8.Remove personal income tax for the year 2009 for those who earned less than RM36,000 per annum.

9.Stop recruitment of all foreign workers and repatriate those that have been retrenched.Require companies to give names and particulars of all foreign workers retrenched to the Immigration Department to ensure they have left the country.

10.Consider re-pegging of the ringgit to RM3.80 to US$1.00 to arrest the volatility and maintain stability of the currency.

Under the current economic conditions the ringgit will not be stable and the government do not have the money to continuously prop it up. With the global recession there wouldn't be many FDI (foreign direct investment) coming to Malaysia or repatriation of capital and profits, therefore, a pegged currency will do little harm to the nation's reputation.

The government must face the grim outlook of the possibility that the nation will face a serious negative growth this year, which we have not seen for many decades and it must not be foolhardy to think otherwise.

What kind of stimulus package Najib will deliver later today will decide whether he has what it takes to lead this country until the next general elections or a revolt within his own party to throw him out before his time is up, just like what they did to Abdullah Badawi.

Will Najib have the right formula to rescue the nation from economic disaster ?

Let's wait and see what's in the package.

Economic Malaise: Will The Government 'Broke The Buck' ?

Hantu Laut

Reported in The Strait Times

MARCH 4 – The Malaysian ringgit could breach the psychological 3.80 to the greenback mark in the not too distant future, nudged by a deepening global recession and resultant flight to quality, plus a widening budget deficit.

Previously, few would have entertained the notion of the local unit tumbling back to 3.80 – the level at which it was fixed in 1998 during the Asian financial crisis before the peg was dismantled in 2005 – but it appears a distinct possibility now.

On the back of weakening exports and a growing budget shortfall, the ringgit climbed to within a 3.62/63 band a month ago.

Yesterday, it opened at 3.727/731 from Monday's close of 3.726/730. Full story here...

Read the one below:

Reduced corporate profits or losses would mean less income taxes going into government coffers, which among other things, would affect the government budget.New sources of funding would have to be found to finance the budget.Unless there is sudden upswing to the current gloomy global conditions the general economy will face serious contraction in the next few months which would affect the value of the ringgit.The ringgit may be traded at 3.80 to 4.00 range by 1st Quarter 2009 if no viable solution is found to stimulate growth. Read the full story here...

Read this one:

KUALA LUMPUR: The property market in Kuala Lumpur could depreciate as much as 10% to 15% going forward, while the prices of high-end condominiums in the Kuala Lumpur City Centre (KLCC) area may fall up to 30% in the next two to three months, said property consultant Rahim & Co. Full story here...

Now read this one:

Presently, there is notable forced sale and marginal decline in the prices of medium and lower scale properties in cities like Kuala Lumpur and Johor Baru.If the economic crisis deepen the next few months and continues into the middle of 2009 the prices of properties for all sectors would take a tumble.Upscale properties would fall between 20 t0 40% mainly in big urban areas.Full story here...

The Straits Times was right only few had the notion how bad things can get when the domino hits us. I was one of the crazy prophets of doom that have had all my forecasts and predictions hitting bulls eye.

Is the government still living in a state of denial?

They are going to announce the second stimulus package on 10 March 2009.Will have to wait and see what kind of package they have in store to rescue the economy.

Anything less than RM30 billion (inclusive the RM7 billion) may not do a good job. The problem is the government do not have the money and would not get enough money from its normal sources of revenue to finance its main budget, let alone finance the stimulus package.Its budget deficit is expected to grow to unhealthy level if the stimulus package could not revive the economy by the 2nd half of 2009. The longer the delay to implement the stimulus package the longer the sickness would stay.The country may be looking at unpleasant negative growth.

Unpleasant, as it may be, the government needs to borrow to finance the budget and the stimulus package. It has a number of options that it can take for its deficit financing.

1.Issuance of Treasury Bonds for domestic and international markets.....unlikely. Response from the international financial community may not be strong enough, which can downgrade the credit rating of the nation.

2.Foreign borrowing in foreign currency..... unlikely.Can become very expensive in the long run.

3.Liquidation of government assets..... not efficient in a downturn and possible diminution in value of assets.

4.Borrow from pension funds and government-controlled trust funds......very likely.The most efficient, cheapest, easiest and quickest way to raise the funds. Most likely candidates would be EPF and savings in ASN and ASB.

When the government announces the stimulus package it would be imperative and responsible on the part of the Prime Minister to tell Malaysians where the money is coming from.

Should the government decides to use money from EPF, the Board of EPF should not agree to a term loan between EPF and the government but demand for the issuance of medium term bonds with reasonable rate of interest.A term loan can be renegotiated and the terms and conditions can be varied from time to time by the lender (EPF) which is controlled by the government but government bonds must be paid in full upon maturity.

EPF funds were already badly managed giving poor return for many years and investments in low-yield government bonds or low interest loans are going to worsen the earnings of the fund.

Is Pak Lah Overspending Our Money ?

Hantu Laut


The 2009 Budget saw a total allocation of RM207.9 billion. A sum of RM154.2 for operating expenditure and RM53.7 for development expenditure.Although it is normal for budget to increase as the economy grow with higher GDP, excessively high increase in expenditure reflects imprudent fiscal policy.

In 2004, Mahathir's last budget before he stepped down, the operating expenditure was RM80.5 billion and development expenditure of RM31.9 billion.Since handing over to Pak Lah there was a whopping increase of 92% of operating expenditure over period of 5 years, an annualised increase of 18.4%.In comparison the increase in development expenditure was only 68.3% for the same period.

The excessively high increase in the operating expenditure is a worrying sign that there are still high inefficiency,indiscriminate spending, corruption and grossly overstaffed civil service.

In 2006 Malaysia had 1.1 million civil servants, the highest in the region.It would not be wrong to guess that this figure would have increased even more by now.

The total manpower in the civil service shown here doesn't include those employed under government linked companies(GLC) and those employed by states government departments.

We have the highest number of civil servants per population as compared with other countries in the region.

The government have not made any effort to cut down on unnecessary employment and expenditure.All talks but nothing concrete had been done on the ground to bring about the desired reforms.Efficiency and financial probity is still lacking in this homogeneous and overstocked civil service.

Go to any government department and see for yourself how busy our civil servants are and if you need to see any senior officers or chief of department, more often than not, you are told they are either very busy or have gone out for meetings.Ironically, some of those meetings are held on golf courses.

It is also appalling to note the lack of officious determination to correct the ignominious act of cronyism and nepotism in awarding contracts.Many projects had fallen by the waysides or rooted in problems due to this method of giving out contracts.

A perfect example of Murphy's law,where "if anything can go wrong,it will" and not only once but repetitively, is the sad state of affair of the Parliament house, where the roof which has a perpetual leaky bladder has the habit of pissing down on the 'yang berhormats' every now and then.

The total lack of accountability is appalling.There is no semblance of shame from those that have benefited from this most shameful fiasco and no one have been hauled up to take full responsibility.

The cost of refurbishment have been astronomical with initial allocation of RM41.8 million in 2001.Three years later, after completion, the costs had double.In April 2005 parliamentary proceedings were brought to a halt when leak in the roof disrupted power and communications system in the august House.A month later the PWD informed the House Standing Committee the total cost had ballooned to RM99 million.To add salt to the wound and a disgrace to the government another round of leaks occurred in May 2007. Then in May this year water dripped from the air-conditioning vent after a downpour.

Whether we should be amused or angry with what follows after the last episode is food for thought.

Works Minister Datuk Mohd Zin Mohamed said he would present a Cabinet paper to Minister in the Prime Minister’s Department Datuk Seri Nazri Abdul Aziz for a total rehabilitation of Parliament’s mechanical and electrical systems.

He said it was not a leak but water seepage caused by back flow from the rainwater down-pipe. “As far as the roof slab is concerned, there is no leakage,” he said.

Even more laughable is Public Works Department deputy director-general N. Selvanayagam who said the 45-year-old rainwater down-pipe could not cope with the downpour as its bore was smaller than its original size due to sedimentation.

You mean they didn't change the 45-year old rainwater down pipe and renew the mechanical and electrical systems.Where have the RM99 million gone to? Would a brand new Parliament house cost more than that ?It seems the RM99 million was not spent to refurbish the building but to buy a host of problems and send someone laughing all the way to the bank.

The Parliament house is just one of the many financial blunders that have made mockery of the government.

In Sabah,a couple of years ago a federal project for RM200 million to build the GOF(General Operation Forces) headquarters was abandoned before it even got started.It was given to an UMNO man rumoured to be a legalised illegal immigrant from the southern Philippines.The project collapsed but the man have collected enough money to buy 2 new Ferrari and a few more wives.One of the Ferrari was rumoured to be given to Siti Nurhaliza for her hand in marriage but the pretty lass was smart enough to reject the offer.

There are many other equally distasteful stories that would take too many pages to bring out of the twilight zones.

I think I'll save it for another day.