The Terengganu Investment Authority (TIA) was well-covered by the weekend press, including the Star and the Edge Weekly. “Well-covered” in the sense of plenty of news pages being devoted to this RM11bn fund, which, by the way, is equivalent to ladening RM11,000 of debt on every single one of the 1million Terengganu folk!
Not surprisingly, hard, penetrating questions were rare. Like, “How exactly will the average Terengganu citizen benefit from all this?”
Based on the reported comments by CEO Sharol Azral Ibrahim Halmi and executive director of business development Casey Tan, TIA will be yet another launch pad for huge construction mega-projects that will benefit a few cronies, a few hundred Class-F contractors (want to bet they’ll mainly be UMNO-related?) and a few thousand, mainly foreign, construction workers.
Consider just two examples:
1) CEO Sharol said TIA is “taking a masterplan approach to build a resort with private villas and other amenities as well as retirement homes”. TIA will invest US$1.8bn and expects a foreign investor to match this sum. That works out to nearly RM13bn, which coincidentally is about the same sum reportedly frittered away in the Port Klang Free Zone debacle;
2) An even worse idea comes from Tang: “It will be a tourism play. The land will be acquired from the state and sold at a higher price to the master developer.” Hello? Land-flipping was a major issue at PKFZ. Influential private parties acquired land cheaply from the state and subsequently resold it at far higher prices. What the private party gains, the state loses – why can’t the state sell it at the higher price in the first place, and use the proceeds to fund state development. Why is TIA, a sovereign fund which aspires to best-practices, even considering this approach?
Coming full circle to my original question, after the land is bought and sold, after the spanking new buildings are constructed … how will the average Terengganu resident be better off?
More to come …
Wednesday, May 27, 2009
Tuesday, May 19, 2009
Terengganu’s ‘Sovereign Wealth Fund’ is anything but
“The country’s first state-established sovereign wealth fund, Terengganu Investment Authority (TIA), with an initial fund of RM11bil, has identified several high-impact investment projects in the tourism, energy and agriculture sectors in the state and around the country,” reports the Star today, Tuesday May 19.
Unfortunately, as with most financial-related topics associated with the Barisan Nasional (BN) government, there are far more questions than answers. Here are just three big ones, to start off with:
1) First, funding. TIA will reportedly raise RM5bn in bonds backed by a federal government guarantee. PM Najib reportedly said “There’s no money involved” (The Edge Daily, May 19). Hello? Has he been keeping up to-date on the multi-billion ringgit Klang Port scandal which involved dubiously granted government guarantees?
The bigger question though, is why TIA needs a government guarantee in the first place. TIA will also reportedly have RM6bn ‘raised through the assignment to TIA of some of the future oil royalties due to the state.” RM6bn is already a huge some of money to start off with. Why the rush to add RM5bn of federal government-guaranteed debt on top of that?
2) Second, objectives. TIA chief executive officer and former executive partner at Accenture, Shahrol Halmi said, “The key objectives of TIA’s investment strategy are … ensure the development of long-term sustainable economic and social programmes for the state.”
Elsewhere in the world, the whole point of sovereign wealth funds (SWFs) is to invest windfall gains from high resource prices wisely, OUTSIDE the home country. SWFs came about because resource-rich countries found that their own economies were too small to effectively deploy all the income coming in from their trade surpluses. Rather than have too much money chasing to few goods, leading to unproductive investments and domestic property price inflation, countries such as Norway chose to set up SWFs in order to effectively invest the money overseas for a rainy day.
Over here, TIA is proposing to invest within Terengganu. Yes, a major political issue is the people of oil-rich Terengganu do not appear to have reaped any benefits from record-high oil prices. But, that’s an issue with the BN federal and state government delivery mechanism. How does TIA fit in with the local government? In fact, the presence of TIA could actually deter investment by private investors, as it could be perceived that TIA will be given undue advantages. SWFs should have no business in their home countries!
3) Third, accountability. Media reports say TIA will have a “triple-tier check and balance system comprising the board of directors, a board of advisers and a senior management team.” I say a system is only as good as its people. Note that the board of advisers will include the Prime Minister or the Finance Minister, in his stead. Far better if politicians stay out completely and leave it to professionals.
Also, the best accountability is via public disclosure. Dare we hope that TIA will adopt best practices as per the Government Pension Fund of Norway? (Contrary to its name, this fund is entirely funded by surplus wealth from Norwegian petroleum income – no government guarantees! – and is professionally managed). I invite you to check their website. Information including ALL the shares held by the fund are available for quick and easy download!
I have other issues, including the so-called “experienced personnel” involved in running the fund. Right now, the list is very narrow and, by accident or design, seems to consist primarily of one ethnic group only. I know for a fact, having worked for MNCs, that financial services talent encompasses the entire globe from Caucasians to sub-continent Indians to mainland Chinese. If TIA truly intends to be world-class, its hiring policies need to be world-class too.
Unfortunately, as with most financial-related topics associated with the Barisan Nasional (BN) government, there are far more questions than answers. Here are just three big ones, to start off with:
1) First, funding. TIA will reportedly raise RM5bn in bonds backed by a federal government guarantee. PM Najib reportedly said “There’s no money involved” (The Edge Daily, May 19). Hello? Has he been keeping up to-date on the multi-billion ringgit Klang Port scandal which involved dubiously granted government guarantees?
The bigger question though, is why TIA needs a government guarantee in the first place. TIA will also reportedly have RM6bn ‘raised through the assignment to TIA of some of the future oil royalties due to the state.” RM6bn is already a huge some of money to start off with. Why the rush to add RM5bn of federal government-guaranteed debt on top of that?
2) Second, objectives. TIA chief executive officer and former executive partner at Accenture, Shahrol Halmi said, “The key objectives of TIA’s investment strategy are … ensure the development of long-term sustainable economic and social programmes for the state.”
Elsewhere in the world, the whole point of sovereign wealth funds (SWFs) is to invest windfall gains from high resource prices wisely, OUTSIDE the home country. SWFs came about because resource-rich countries found that their own economies were too small to effectively deploy all the income coming in from their trade surpluses. Rather than have too much money chasing to few goods, leading to unproductive investments and domestic property price inflation, countries such as Norway chose to set up SWFs in order to effectively invest the money overseas for a rainy day.
Over here, TIA is proposing to invest within Terengganu. Yes, a major political issue is the people of oil-rich Terengganu do not appear to have reaped any benefits from record-high oil prices. But, that’s an issue with the BN federal and state government delivery mechanism. How does TIA fit in with the local government? In fact, the presence of TIA could actually deter investment by private investors, as it could be perceived that TIA will be given undue advantages. SWFs should have no business in their home countries!
3) Third, accountability. Media reports say TIA will have a “triple-tier check and balance system comprising the board of directors, a board of advisers and a senior management team.” I say a system is only as good as its people. Note that the board of advisers will include the Prime Minister or the Finance Minister, in his stead. Far better if politicians stay out completely and leave it to professionals.
Also, the best accountability is via public disclosure. Dare we hope that TIA will adopt best practices as per the Government Pension Fund of Norway? (Contrary to its name, this fund is entirely funded by surplus wealth from Norwegian petroleum income – no government guarantees! – and is professionally managed). I invite you to check their website. Information including ALL the shares held by the fund are available for quick and easy download!
I have other issues, including the so-called “experienced personnel” involved in running the fund. Right now, the list is very narrow and, by accident or design, seems to consist primarily of one ethnic group only. I know for a fact, having worked for MNCs, that financial services talent encompasses the entire globe from Caucasians to sub-continent Indians to mainland Chinese. If TIA truly intends to be world-class, its hiring policies need to be world-class too.
Tuesday, May 12, 2009
What about respect for the rakyat?
Perak Regent Raja Dr Nazrin Shah had to wait five hours to deliver his opening address to the Perak State Assembly due to the shenanigans last Thursday. As he was taking his seat, menteri besar, as reaffirmed by the High Court yesterday, Datuk Seri Mohd Nizar Jamaluddin requested to raise an objection on the forceful and illegal means employed by the Barisan Nasional to remove speaker V. Sivakumar.
The New Straits Times reported the Raja Muda then asked Nizar and the DAP’s Datuk Ngeh Koo Ham to approach him. The Raja Muda told the duo: “I don’t want to get involved in this. I just want to give my speech, so respect my speech, when I am giving it. You understand that? If you want to work with me in future, you have to respect my speech. Understand?
“So go and tell that." (to the Pakatan Rakyat state assemblymen)
The Raja Muda can demand respect due to his position as a constitutional monarch. Who will accord respect for the rakyat’s wishes? Only a minority of Perak folk voted for the Barisan Nasional. The majority of the people of Perak do not want a Barisan Nasional state government.
How have we come to the situation where the minority is allowed to rule over the majority? What does this say for the future of Malaysia? We took a huge step away from democracy last week. I fear we are on the path to kleptocracy. Dare I see a glimmer of hope following yesterday's court decision?
The New Straits Times reported the Raja Muda then asked Nizar and the DAP’s Datuk Ngeh Koo Ham to approach him. The Raja Muda told the duo: “I don’t want to get involved in this. I just want to give my speech, so respect my speech, when I am giving it. You understand that? If you want to work with me in future, you have to respect my speech. Understand?
“So go and tell that." (to the Pakatan Rakyat state assemblymen)
The Raja Muda can demand respect due to his position as a constitutional monarch. Who will accord respect for the rakyat’s wishes? Only a minority of Perak folk voted for the Barisan Nasional. The majority of the people of Perak do not want a Barisan Nasional state government.
How have we come to the situation where the minority is allowed to rule over the majority? What does this say for the future of Malaysia? We took a huge step away from democracy last week. I fear we are on the path to kleptocracy. Dare I see a glimmer of hope following yesterday's court decision?
Wednesday, May 6, 2009
On ex-PMs becoming “advisors” …
Tun Abdullah Badawi is now advisor to Malaysia Airlines. The Malaysian Insider says “The Najib administration has manoeuvered around a potentially delicate situation … keeping Tun Dr Mahathir Mohamad as Petronas advisor.”
Apparently there is a “tradition” for a recently retired prime minister to be given the prestigious advisor position in the national oil company. This can’t be a long “tradition”. Petronas was formed only in the 1970s after our first prime minister Tunku Abdul Rahman had retired. Our second prime minister Tun Abdul Razak passed away in office. Tun Hussein Onn was the first such ex-PM “advisor”. And Tun M is the second.
I wonder why this “tradition” developed. The scope and terms of reference of these “advisors” has never been officially disclosed. It is less of an issue in the case of unlisted Petronas. But Malaysia Airlines is a public-listed company, with directors elected by shareholders. Where does Tun Abdullah sit in the overall scheme of corporate governance?
It would be wonderful if Tun Abdullah declines this ‘honour’ and nips this dubious “tradition” in the bud. Cushy GLC (government-linked corporate) positions should not become part of the expected retirement package for ex-PMs.
It would be far more meaningful if ex-PMs apply their influence to champion projects that benefit the ordinary rakyat. For instance, I am thinking of the Tun Hussein Onn Eye Hospital, a wonderful hospital that provides affordable specialist eye-care. Jeff Ooi was a very satisfied patient; and so was I.
Apparently there is a “tradition” for a recently retired prime minister to be given the prestigious advisor position in the national oil company. This can’t be a long “tradition”. Petronas was formed only in the 1970s after our first prime minister Tunku Abdul Rahman had retired. Our second prime minister Tun Abdul Razak passed away in office. Tun Hussein Onn was the first such ex-PM “advisor”. And Tun M is the second.
I wonder why this “tradition” developed. The scope and terms of reference of these “advisors” has never been officially disclosed. It is less of an issue in the case of unlisted Petronas. But Malaysia Airlines is a public-listed company, with directors elected by shareholders. Where does Tun Abdullah sit in the overall scheme of corporate governance?
It would be wonderful if Tun Abdullah declines this ‘honour’ and nips this dubious “tradition” in the bud. Cushy GLC (government-linked corporate) positions should not become part of the expected retirement package for ex-PMs.
It would be far more meaningful if ex-PMs apply their influence to champion projects that benefit the ordinary rakyat. For instance, I am thinking of the Tun Hussein Onn Eye Hospital, a wonderful hospital that provides affordable specialist eye-care. Jeff Ooi was a very satisfied patient; and so was I.
Wednesday, April 29, 2009
Malaysians are poor – based on our tax records
Only 1 million or so Malaysians pay tax. That’s 10% of the working population. Take a look around you. 9 out of 10 adults you see don’t pay tax. That’s a phenomenally narrow tax base. 1 million Malaysians are paying for the government services for all 24 million of us; 26 million if you include the (legal) foreigners.
Or perhaps it’s more accurate to say 1 million Malaysians are paying for the “work” done by our government, which includes trips to Disneyland, Mount Everest and other exotic locations.
Hafiz Noor’s musings on income tax got me thinking.
Firstly, are the vast majority of Malaysians that poor, that 9 million working Malaysians don’t pay tax?
Secondly, if the core issues are not addressed, more and more Malaysians will do their utmost to avoid tax. Because, we don’t seem to be getting our money’s worth.
One function of taxation is to raise revenue to fund social services such as roads, schools, hospitals and security. Yet, in Malaysia, we 1) pay tolls, 2) are forced to send our children for private education, 3) go to private hospitals when we are very ill and 4) engage private security to patrol our home neighbourhoods because of the rising crime rates. Another function is redistribution, that is to take from the rich to help the poor. No right thinking human should be against that. But how much of that do we see going on in Malaysia? We see billions of ringgit being squandered on follies and some scandal or other; and on the other hand there are so many obvious examples of poverty.
So, where did all our tax money go? This lack of accountability fuels the sense of injustice by the taxpayer and increasing efforts to avoid or downright evade tax. Why pay tax when “the government is going to waste it anyway”?
Which brings me to the broader, third issue. There are about 12 million eligible voters. The fact tbat only a fraction of these voters pay taxes is fertile ground for populist politicians offering voters short-term goodies at the expense of longer term economic disaster.
Voters will be tempted to vote for whoever offers cheap petrol/electricity/[insert whatever you want here] because they don’t have to cover the cost. The only way the costs can be covered would be to raise taxes. Our taxes, once you factor in the indirect taxes, are already among the highest in the world. Raise them further and the brain drain will get worse. We will face economic ruin when our best and brightest are all gone.
How can we get around this? One – break the addiction to cheap foreign labour so that Malaysians can move up the value chain and earn enough income to pay taxes. Two - accountability by the government – so we know where our tax money is going and feel we have a stake in its spending. Dare we hope for the report on the Port Klang Free Zone problems to be made public; and just as importantly, the people responsible held accountable and penalized?
Or perhaps it’s more accurate to say 1 million Malaysians are paying for the “work” done by our government, which includes trips to Disneyland, Mount Everest and other exotic locations.
Hafiz Noor’s musings on income tax got me thinking.
Firstly, are the vast majority of Malaysians that poor, that 9 million working Malaysians don’t pay tax?
Secondly, if the core issues are not addressed, more and more Malaysians will do their utmost to avoid tax. Because, we don’t seem to be getting our money’s worth.
One function of taxation is to raise revenue to fund social services such as roads, schools, hospitals and security. Yet, in Malaysia, we 1) pay tolls, 2) are forced to send our children for private education, 3) go to private hospitals when we are very ill and 4) engage private security to patrol our home neighbourhoods because of the rising crime rates. Another function is redistribution, that is to take from the rich to help the poor. No right thinking human should be against that. But how much of that do we see going on in Malaysia? We see billions of ringgit being squandered on follies and some scandal or other; and on the other hand there are so many obvious examples of poverty.
So, where did all our tax money go? This lack of accountability fuels the sense of injustice by the taxpayer and increasing efforts to avoid or downright evade tax. Why pay tax when “the government is going to waste it anyway”?
Which brings me to the broader, third issue. There are about 12 million eligible voters. The fact tbat only a fraction of these voters pay taxes is fertile ground for populist politicians offering voters short-term goodies at the expense of longer term economic disaster.
Voters will be tempted to vote for whoever offers cheap petrol/electricity/[insert whatever you want here] because they don’t have to cover the cost. The only way the costs can be covered would be to raise taxes. Our taxes, once you factor in the indirect taxes, are already among the highest in the world. Raise them further and the brain drain will get worse. We will face economic ruin when our best and brightest are all gone.
How can we get around this? One – break the addiction to cheap foreign labour so that Malaysians can move up the value chain and earn enough income to pay taxes. Two - accountability by the government – so we know where our tax money is going and feel we have a stake in its spending. Dare we hope for the report on the Port Klang Free Zone problems to be made public; and just as importantly, the people responsible held accountable and penalized?
Saturday, April 25, 2009
Is the next bull run here? (2)
The US equity market is still going great guns. So, is the bear market over? Last week, I pointed to a fundamental research piece offering one view.
This week, I came across another interesting piece. This one is from the technical research perspective.
For the uninitiated, here’s one technical mantra:
In a bull market, advances accompanied by increasing volume or declines on diminishing volume are taken to be bullish. Conversely, in a bear market, declines are accompanied by increasing volume and advances show diminishing volume. Volume should always be studied as a trend (relative to what has preceded) – Richard Russel, The Dow Theory Today.
Check out Hussman Funds for the full article.
This week, I came across another interesting piece. This one is from the technical research perspective.
For the uninitiated, here’s one technical mantra:
In a bull market, advances accompanied by increasing volume or declines on diminishing volume are taken to be bullish. Conversely, in a bear market, declines are accompanied by increasing volume and advances show diminishing volume. Volume should always be studied as a trend (relative to what has preceded) – Richard Russel, The Dow Theory Today.
Check out Hussman Funds for the full article.
Tuesday, April 21, 2009
Where are the good Malaysian employers?
The best employers in Malaysia are foreign, based on a study by human resource consultancy Hewitt Associates in conjunction with The Edge, The Edge Financial Daily and Asian Strategy and Leadership Institute (ASLI).
2. American Express (M) Sdn Bhd
3. Four Seasons Resort Langkawi, Malaysia
4. Federal Express Services (M) Sdn Bhd
5. Agilent Technologies
6. SP Setia Berhad
7. Hilton Kuala Lumpur
8. Intel Technology Sdn Bhd
9. Golden Arches Restaurants Sdn Bhd 10.
Telekom Malaysia Bhd
Only two home-grown firms made it to the Top 10 – property developer SP Setia at No 6 and Telekom Malaysia at No 10.
That's a sad indictment of 53 years of Barisan Nasional (BN) rule. BN economic policy is characterised by secure monopolies, oligopolies or various protections for industries ranging from autos to banks, gambling, telecoms and satellite tv.
All this protection resulted in some very rich businessmen emerging – enough to support the largest Ferrari showroom outside Italy. That's right – the RM20m showroom was officially opened on 31 March in a glittering ceremony graced by royalty.
So, we can been proud that our richest can now compete with the best in the world. On the other end of the scale though, our workers are forced to compete against the most lowly-skilled in a race to the bottom for the lowest wages and worst working conditions.
The BN government often defends protectionist measures as necessary to defend the rakyat's interests. The survey results suggest otherwise. Opening more industries to foreign competition could lead to better working conditions and remuneration for the ordinary worker.
For the record, the top 10 employers are:
1. The Ritz-Carlton, Kuala Lumpur2. American Express (M) Sdn Bhd
3. Four Seasons Resort Langkawi, Malaysia
4. Federal Express Services (M) Sdn Bhd
5. Agilent Technologies
6. SP Setia Berhad
7. Hilton Kuala Lumpur
8. Intel Technology Sdn Bhd
9. Golden Arches Restaurants Sdn Bhd 10.
Telekom Malaysia Bhd
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