Overshadowed by the crowing RM60bn headlines surrounding the mini-budget announced last Tuesday is a measure imposing double levies on foreign workers. This applies to both new and existing foreign workers.
The intentions behind this move are good - to raise employment opportunities for Malaysians, but the timing is terrible. Implementing this could actually lead to even greater unemployment for Malaysians and fewer job opportunities as our businesses, including small-and-medium enterprises (SMEs) have become addicted to cheap labour.
The Barisan Nasional government has for too long now pandered to the business community's lobby for cheap labour and paid too little attention to productivity. Businesses kept asking for cheap labour, which the government obligingly delivered by freely granting work permits for lowly skilled Indonesians, Bangladeshis, Myanmese ...As many as 2,000 approvals PER DAY were granted at the peak, according to Sunday Star report (Mar 15)! The result: no incentive for Malaysian employers and employees to invest in productivity-enhancing measures and low incomes and low standards of living for working-class Malaysians.
The right time to move up the value-added curve is when times are good and companies have extra profits to invest. The worst time is now when businesses are struggling with collapsing revenues. It is a business fact - costs are stickier than revenues. Customers can stop buying your product overnight. But you can't turn around and reduce your capacity overnight. It also works in reverse - if sales go up 10%, your costs don't go up by 10% immediately. So in good times, profit grows quickly; but in bad times, profits can quickly turn into losses as revenues plunge faster than costs.
This double-levy initiative serves to increase business costs at a time when businesses are struggling. It could well tip barely-afloat enterprises into bankruptcy. And that would mean Malaysians would also be thrown out of work, along with the cheap foreign labour. Of course there would be far more cheap foreign workers affected than Malaysians, but this is akin to throwing the baby out along with the bath water. We need to keep whatever employment opportunities we have.
Here's a better idea. Khazanah, despite its miserable execution record, has been given RM10bn to spend under the latest stimulus package. Instead of giving it to Khazanah to fritter away on various projects of 'long-term' benefit (by which time we are all dead, as Keynes astutely observed), let's help small and medium enterprises (SMEs) support Malaysians by offering them a cash payment for each Malaysian employed instead.
It could work this way: For each Malaysian employed, who earns less than RM2,500/month, the government will pay RM1,000 of the wages. This will narrow the gap between the cheap foreign labour and Malaysians, encouraging SMEs to employ locals while still keeping their costs competitive. RM10bn will be enough to cover 420,000 Malaysians for 2 years! After that, the government can slowly reduce this support, say to RM800 per year, then RM500, then zero. This will give both employers and employees time to reinvest in productivity enhancements which result in higher wages AND higher profits.
Before anyone accuses me of plagiarism - let me say here that Singapore is implementing a similar move.
Wednesday, March 18, 2009
Friday, March 13, 2009
Public briefing on Selangor Water Takeover this Friday (tomorrow)
There will be a public briefing for Selangor residents on the proposed takeover of water concessionaires by the Selangor Government.
Do come and listen to the facts and figures, and show your support for the Selangor Government which is doing its best to stave off the Federal Government interference. The Federal Government is offering much more favourable terms which will lead to much higher water charges for Selangor consumers.
PUBLIC BRIEFING
Issue: Restructuring of Water Services Industry in Selangor
Date: 13 March 2009 (Friday)
Time: 8.30pm
Venue: Lecture Room, Civic Hall, MBPJ
PLEASE SPREAD THIS MESSAGE!
For further information, contact:
Erica Hew Li Huang
Special Assistant to MP for Petaling Jaya Utara (Tony Pua)
0162208867
Do come and listen to the facts and figures, and show your support for the Selangor Government which is doing its best to stave off the Federal Government interference. The Federal Government is offering much more favourable terms which will lead to much higher water charges for Selangor consumers.
PUBLIC BRIEFING
Issue: Restructuring of Water Services Industry in Selangor
Date: 13 March 2009 (Friday)
Time: 8.30pm
Venue: Lecture Room, Civic Hall, MBPJ
PLEASE SPREAD THIS MESSAGE!
For further information, contact:
Erica Hew Li Huang
Special Assistant to MP for Petaling Jaya Utara (Tony Pua)
0162208867
Wednesday, March 11, 2009
RM60bn stimulus – includes RM0.5bn for toll concessionaires!
Extract from Point 32 of the speech by Finance Minister YAB Dato' Sri Najib yesterday:
“The Government will also provide RM480 million to ensure that toll rates are not increased.”
Bear in mind this is just the additional amount of compensation to avert further increases in toll rates. The government is already compensating the concessionaires for past toll rate hikes which were not implemented. I estimate compensation to PLUS alone is RM700m per year. That will go up to RM1.5bn in 2011, if PLUS is not allowed to increase rates.
There is no need for this. The DAP has presented a concrete, viable proposal for a toll-free PLUS by 2016, at no additional cost to the government.
Hmm. Here's a thought. Khazanah has a RM10bn allocation, and a chequered execution record. I'd be very happy if it spent that RM10bn on buying out the rest of PLUS and making it toll-free even earlier!
“The Government will also provide RM480 million to ensure that toll rates are not increased.”
Bear in mind this is just the additional amount of compensation to avert further increases in toll rates. The government is already compensating the concessionaires for past toll rate hikes which were not implemented. I estimate compensation to PLUS alone is RM700m per year. That will go up to RM1.5bn in 2011, if PLUS is not allowed to increase rates.
There is no need for this. The DAP has presented a concrete, viable proposal for a toll-free PLUS by 2016, at no additional cost to the government.
Hmm. Here's a thought. Khazanah has a RM10bn allocation, and a chequered execution record. I'd be very happy if it spent that RM10bn on buying out the rest of PLUS and making it toll-free even earlier!
RM60bn? Not!
The newspapers today headline the RM60bn total 'package'.
It's not really that big. First of all, RM7bn of that RM60bn is due to “off-budget projects” and private finance initiatives (PFIs). “Off-budget” projects by definition are not undertaken by the government. What it did was corral certain projects done by GLCs (government-linked corporations), such as the RM2bn LCCT, into this package to help create the nice big headline number. Similarly, PFIs are led by the private sector. They are not new spending.
That leaves us with RM53bn. Still a fairly large number. But really, only a small fraction of that is likely to benefit the rakyat directly and immediately. Here's where the big money goes:
1)RM10bn to Khazanah to fund investments “over a two year period”. This is not going to help the rakyat today. Khazanah's record, by the way, is hardly exemplary. I challenge you to name 3 successes at Khazanah under its much-vaunted new leadership since 2004. Telekom continues to burn money overseas while providing Malaysians with sub-par services; Proton is still dependent on protectionist policies, consider the losses at Silterra; Malaysia Airports' LCCT is a disgrace …
2)RM25bn for guarantee funds, under which the government guarantees loans to encourage banks to lend. A good idea, which I had blogged on. But here is the rub. SME (small and medium-scale enterprises) get only RM5bn worth of guarantees. That's not even 4% of the total c. RM130bn loans outstanding. Bonds, ie debt issued by large corporations, get the largest chunk - RM15bn in total. And the balance RM5bn goes to loans for “Industry Restructuring”. Also, bear in mind this is not real spending – the government is liable only if the borrowers default.
Which takes us down to the real, direct government spend totalling RM18b (60-7-10-25=18). Bear in mind though – that's over two years. So it's only RM9bn per year. A drop in the ocean. But we're in trouble and we'll take whatever there is. Transparent and fast execution will help.
But the government did did not break down in detail how the monies will be spent. The record isn't comforting. As of to-date, just RM1bn of the RM7bn first stimulus package announced in Nov has been spent, according to our Finance Minister.
We are in a recession. Speed is of the essence. And so is maximising the effectiveness of government spending. How hard can it be for the BN government to put on a website the details of the various projects? For example, if it is a bridge project, please name the description of the bridge, the location, the person awarded to, the contract sum, the contract period and henceforth ...
Click here for more from Tony Pua and Jeff Ooi.
It's not really that big. First of all, RM7bn of that RM60bn is due to “off-budget projects” and private finance initiatives (PFIs). “Off-budget” projects by definition are not undertaken by the government. What it did was corral certain projects done by GLCs (government-linked corporations), such as the RM2bn LCCT, into this package to help create the nice big headline number. Similarly, PFIs are led by the private sector. They are not new spending.
That leaves us with RM53bn. Still a fairly large number. But really, only a small fraction of that is likely to benefit the rakyat directly and immediately. Here's where the big money goes:
1)RM10bn to Khazanah to fund investments “over a two year period”. This is not going to help the rakyat today. Khazanah's record, by the way, is hardly exemplary. I challenge you to name 3 successes at Khazanah under its much-vaunted new leadership since 2004. Telekom continues to burn money overseas while providing Malaysians with sub-par services; Proton is still dependent on protectionist policies, consider the losses at Silterra; Malaysia Airports' LCCT is a disgrace …
2)RM25bn for guarantee funds, under which the government guarantees loans to encourage banks to lend. A good idea, which I had blogged on. But here is the rub. SME (small and medium-scale enterprises) get only RM5bn worth of guarantees. That's not even 4% of the total c. RM130bn loans outstanding. Bonds, ie debt issued by large corporations, get the largest chunk - RM15bn in total. And the balance RM5bn goes to loans for “Industry Restructuring”. Also, bear in mind this is not real spending – the government is liable only if the borrowers default.
Which takes us down to the real, direct government spend totalling RM18b (60-7-10-25=18). Bear in mind though – that's over two years. So it's only RM9bn per year. A drop in the ocean. But we're in trouble and we'll take whatever there is. Transparent and fast execution will help.
But the government did did not break down in detail how the monies will be spent. The record isn't comforting. As of to-date, just RM1bn of the RM7bn first stimulus package announced in Nov has been spent, according to our Finance Minister.
We are in a recession. Speed is of the essence. And so is maximising the effectiveness of government spending. How hard can it be for the BN government to put on a website the details of the various projects? For example, if it is a bridge project, please name the description of the bridge, the location, the person awarded to, the contract sum, the contract period and henceforth ...
Click here for more from Tony Pua and Jeff Ooi.
Sunday, March 8, 2009
2nd stimulus package will be most effective in the rakyat's hands
Not even 10% of the RM7bn 1st stimulus package announced in November last year has been delivered. The Second Finance Minister confessed in Parliament that just RM568m, 8%, of the total had been spent as of February.
Even as we wonder how, where and when the balance of that first RM7bn will be spent, the BN is set to present in Parliament this Tuesday its 2nd stimulus package.
I expect the usual slew of various projects totalling billions and talk of improving government efficiency, with little to show after the media ink has dried on the subsequent approving comments by sycophants.
Given the slow pace and leakages in BN government implementation that we have grown accustomed to, there will be far quicker and greater impact if the funds are put directly into the rakyat’s hands instead. Here are two proposals from me:
1. Support payments to the poorest households. I suggest RM1,000 per month be paid to the 30% of EPF contributors with the lowest incomes. 30% of 5.4m active contributors = 1.6m workers * RM12,000 for one year = RM19.5bn. The multiplier effect from this will be substantial as these contributors will be spending primarily on local products and services, helping to support the domestic economy.
2. Banks have been cutting credit lines, exacerbating the downturn as even good businesses have to curtail activities due to the lack of financing. The government can help with a Special Risk-sharing Initiative (SRI) similar to that proposed by Singapore in its budget. Under this SRI, the government will share the risk of these loans should they turn sour. Banks will still be responsible for assessing credit and sourcing the customers, but if the government agrees to share 50% of the risk of these loans, banks will be more willing to grant credit. SMEs account for c. RM130bn of total loans. Total exposure would perhaps be RM16bn, assuming the government takes 25% of the total and in the unlikely event they all go sour. But in the meantime, this may just be the tonic to alleviate the credit crunch faced by Malaysian SMEs.
Financing the spending is where we run into difficulties, and which is why we have the headline number being bandied about now sharply reduced to just RM10bn, instead of the RM30bn or so being touted earlier. The profligate spending by the BN government during the years of plenty is haunting us now. Unlike, say, the governments of Singapore and Australia which ran budget surpluses during those years, which they are now using to mitigate the recession, the BN government has been incurring deficits and growing our national debt.
The prospect of larger deficits has prompted ratings agencies to cut their credit ratings for Malaysia, and is a part of the reason for the slide in our ringgit's value. So, as a first step, instead of just spending more money, we must look to at least 10% of savings from current government procurement. The 2008 government budget called for c. RM190bn of total spending. Save just 10%, for example from better procurement practices without using consultants and agents, and we would have RM19bn – enough for the EPF support payments!
Even as we wonder how, where and when the balance of that first RM7bn will be spent, the BN is set to present in Parliament this Tuesday its 2nd stimulus package.
I expect the usual slew of various projects totalling billions and talk of improving government efficiency, with little to show after the media ink has dried on the subsequent approving comments by sycophants.
Given the slow pace and leakages in BN government implementation that we have grown accustomed to, there will be far quicker and greater impact if the funds are put directly into the rakyat’s hands instead. Here are two proposals from me:
1. Support payments to the poorest households. I suggest RM1,000 per month be paid to the 30% of EPF contributors with the lowest incomes. 30% of 5.4m active contributors = 1.6m workers * RM12,000 for one year = RM19.5bn. The multiplier effect from this will be substantial as these contributors will be spending primarily on local products and services, helping to support the domestic economy.
2. Banks have been cutting credit lines, exacerbating the downturn as even good businesses have to curtail activities due to the lack of financing. The government can help with a Special Risk-sharing Initiative (SRI) similar to that proposed by Singapore in its budget. Under this SRI, the government will share the risk of these loans should they turn sour. Banks will still be responsible for assessing credit and sourcing the customers, but if the government agrees to share 50% of the risk of these loans, banks will be more willing to grant credit. SMEs account for c. RM130bn of total loans. Total exposure would perhaps be RM16bn, assuming the government takes 25% of the total and in the unlikely event they all go sour. But in the meantime, this may just be the tonic to alleviate the credit crunch faced by Malaysian SMEs.
Financing the spending is where we run into difficulties, and which is why we have the headline number being bandied about now sharply reduced to just RM10bn, instead of the RM30bn or so being touted earlier. The profligate spending by the BN government during the years of plenty is haunting us now. Unlike, say, the governments of Singapore and Australia which ran budget surpluses during those years, which they are now using to mitigate the recession, the BN government has been incurring deficits and growing our national debt.
The prospect of larger deficits has prompted ratings agencies to cut their credit ratings for Malaysia, and is a part of the reason for the slide in our ringgit's value. So, as a first step, instead of just spending more money, we must look to at least 10% of savings from current government procurement. The 2008 government budget called for c. RM190bn of total spending. Save just 10%, for example from better procurement practices without using consultants and agents, and we would have RM19bn – enough for the EPF support payments!
Wednesday, March 4, 2009
Defence Ministry steadily reducing open tenders
Tian Chua (PKR-Batu) asked in Parliament the total value of purchases or projects carried out by the Defence Ministry from 2006 until last year. In his written reply on 3 Mar, as reported by Bernama, current Defence Minister Datuk Seri Abdullah Badawi gave the following details:
1. 2006: RM6.7bn spent, of which 31% or RM2.1bn was via direct negotiations;
2. 2007: RM5.2bn spent, 33% or RM1.7bn via direct negotiations;
3. 2008: RM8.2bn spent, 54% or RM4.4bn was via direct negotiations.
Measured by number of contracts:
1. 2006: 52 (9%) of 609 acquisitions via direct negotiations;
2. 2007: 95 (19%) of 497 acquisitions; and
3. 2008: 100 (21%) of 477 acquisitions.
So, whichever way you look at it, the Defence Ministry has been handing out more and more negotiated contracts. Granted, some deals need to be negotiated due to national security issues. But do note – the Ministry has spent RM20bn in the last three years alone. I haven't heard of any significant new, sophisticated weaponry being acquired. But then again, I'm not a military expert. Anyone know any better? Also, an interesting follow-up question would be the amount of commissions and fees paid on these contracts.
Remember PM Abdullah only took over the Defence Ministry recently. These contracts were handed out under another minister. Let's hope past performance is not a guide to the future, in this case.
1. 2006: RM6.7bn spent, of which 31% or RM2.1bn was via direct negotiations;
2. 2007: RM5.2bn spent, 33% or RM1.7bn via direct negotiations;
3. 2008: RM8.2bn spent, 54% or RM4.4bn was via direct negotiations.
Measured by number of contracts:
1. 2006: 52 (9%) of 609 acquisitions via direct negotiations;
2. 2007: 95 (19%) of 497 acquisitions; and
3. 2008: 100 (21%) of 477 acquisitions.
So, whichever way you look at it, the Defence Ministry has been handing out more and more negotiated contracts. Granted, some deals need to be negotiated due to national security issues. But do note – the Ministry has spent RM20bn in the last three years alone. I haven't heard of any significant new, sophisticated weaponry being acquired. But then again, I'm not a military expert. Anyone know any better? Also, an interesting follow-up question would be the amount of commissions and fees paid on these contracts.
Remember PM Abdullah only took over the Defence Ministry recently. These contracts were handed out under another minister. Let's hope past performance is not a guide to the future, in this case.
Monday, March 2, 2009
Kudos to EPF operations
February is over. All listed companies have reported their results for last year ended 2008, including their dividend plans. EPF, custodian of our retirement money, is still maintaining an ominous silence. The Malaysian stock market fell by nearly 40% last year, as measured by the KLCI. It would be unfair to expect EPF to do well in those market conditions, but we have a right to know what is happening.
While EPF's investment division may be having a bad time, the operations department is delivering excellent service to contributors. I went over twice in the last week to execute a transaction. Both times I waited for less than 5 minutes; and both times the officers were polite and efficient. I also used the phone enquiry line – my call was quickly picked up, and the officer on the line answered my queries competently and politely.
Credit where credit is due: SYABAS, EPF! If only other government agencies would deign to learn from your experience. No need to go for expensive lawatan-sambil-belajar to exotic overseas locations. Malaysia Boleh!
While EPF's investment division may be having a bad time, the operations department is delivering excellent service to contributors. I went over twice in the last week to execute a transaction. Both times I waited for less than 5 minutes; and both times the officers were polite and efficient. I also used the phone enquiry line – my call was quickly picked up, and the officer on the line answered my queries competently and politely.
Credit where credit is due: SYABAS, EPF! If only other government agencies would deign to learn from your experience. No need to go for expensive lawatan-sambil-belajar to exotic overseas locations. Malaysia Boleh!
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