Posted tagged ‘1MDB’

With proper management Malaysia does not need GST

April 8, 2015

The much-despised and repressive consumption tax GST is finally here to drain our pockets further. Despite the appeal from many quarters to postpone it, the government went on and implemented the GST collection as per schedule. After deliberating for 23 years, the Ministry of Finance(MOF) has finally implemented GST at 6% at every stage of the supply chain. In 2014, the MOF had scrapped subsidies for fuel, electricity and sugar. Then, in 2015, the GST was implemented to increase revenue so that the high fiscal deficit incurred continuously for the past 16 years would be narrowed and to reduce the high public debt to gross domestic product or face the risk of lowering sovereign ratings by rating agencies.

Unlike Malaysia, Singapore and many other countries introduced the GST as part of a larger tax restructuring exercise to shift their reliance on direct taxes to indirect taxes. Singapore’s GST was introduced on April 1 1994 at 3%. It was increased to 4% on January 1 2003, then to 5% on January 1 2004 and finally to its current rate of 7% on July 1 2007. In Singapore, the threshold was set at an annual turnover of S$1 million (RM2.6 million) while the threshold in Malaysia is RM500,000, to be GST-compliant.

The lower threshold for GST compliance in Malaysia means an increase in the number of businesses collecting the GST. The option to increase the GST rate is left to the minister of finance. There are suspicions whether traders are raising prices arbitrarily and taking advantage of the initial uncertain period. It will take a while before clarity and confidence set in. Consumers across the board feel the pinch when they eat out or when they make purchases. The working class are unhappy and are complaining of price increases.

The Malaysian corporate tax will be reduced from 25% to 24% and from 20% to 19% for medium- sized enterprises from 2016. In comparison, Thailand has brought down its corporate tax rate to 20% while Vietnam is also scaling back to a 20% corporate tax rate from 25% by 2016. Singapore’s corporate tax has been fixed at 17% since 2010.

The successful implementation of Malaysia’s GST depends on neutral, fair and corruption-free enforcement. The GST is expected to bring in 24 billion in revenue, replacing the current 13 billion from SST from which RM3.8 billion is for exempted goods and RM4.9 billion is to be paid as BRIM, leaving behind about RM700 million in the government’s coffers. More GST revenue is expected to flow from next year onwards.

In many countries, people do not grumble about or grudge contributing to the GST because of the efficient usage of GST collections to subsidise medical care, senior citizen care, efficient government delivery systems and affordable high-quality education systems for their citizens. Malaysia too has to rise up to its people’s expectation for more social safety nets and better delivery systems.

The annual Auditor-General’s report on government usage of public funds shows no improvement all these years. Public funds are simply wasted and squandered. The prime minister’s 1Malaysia initiative to transform the government delivery system has come to naught. How then will people pay the GST without any reservation? Given the recent 1MDB fiasco and the history of imprudent and unaccountable spending by the government which has landed it with high debts, the public is sceptical about how the GST revenue will be spent.

The indiscriminate undertaking of loans by GLCs with government guarantees does not instil confidence in the government. Recently, the social media exposed another MOF GLC Pembinaan PFI debacle, with RM47 billion in loans apart from the RM42 billion 1MDB loan. High house prices and car prices, poor public transport, high cost of living coupled with low and stagnant wages have made Malaysians poorer and more indebted. On top of that, we have to pay the GST.

That’s why the opposition maintains that with proper management of our public funds, Malaysia doesn’t need the GST. Can the government improve public transport, reduce house prices, improve medical care and reduce prices to justify the implementation of the GST? Malaysians are getting impatient and want improvement without excuses straight away. The GST can be a double-edged sword for the government.

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1Malaysia initiatives finally drowned in debts

March 21, 2015

The 1Malaysia slogan was supposed to be the game changer for PM Datuk Seri Najib when he took office in 2009. Datuk Najib tun Razak came out with 1Malaysia slogan to win back the non-Malays who have deserted UMNO/BN after the 2008 general election when for the first time BN lost their 2/3 majority and 5 states fell to PR. The slogan was launched with much pomp and pride to turn around the electoral fortunes of BN. 1Malaysia campaigns and slogans launched emphasizing the ethnic harmony, unity and improve delivery to the government agencies and civil servants and Umno politicians. Huge funds were injected into the 1Malaysia campaign and transformation initiatives. Public debt which stood at 38% of GDP in 2009 jumped to almost 55% around 2014. But the national unity, public delivery and corruption levels never improved for the better.

From the beginning Umno hardline leaders nurtured and groomed by Mahathir rejected and did not support the 1Malaysian theme of PM Najib. The 1Malaysia intiatives, the transformation programs and people first and performance now initiatives, did not receive the needed support from civil servants and Umno hardliners. Mahathir himself reported saying that he “still doesn’t understand (masih tidak faham)” the concept. Perkasa went to town against PM for introducing the 1Malaysia campaign to unite the country. Datuk Seri Najib was helplessly watching the opposition with Umno, Mahathir, Perkasa and Isma and remained silent without confronting them. 1Malaysia slogan was spoken about and mentioned in all government sponsored programs but its objectives were never achieved. National unity, improvement in deliver system and corruption level never improved and the whole initiative was a failure.

Datuk Seri Najib armed with the 1Malaysia slogan and transformation initiatives programs behind him went into the 13th election in 2013 hoping to wind more non-Malay votes and retain the Malay votes. The non-Malay support did not come back to BN and for the first time BN lost the popular votes. Even though Pakatan secured 52% popular votes but could only win 89 parliament seats out of 222(40%). It’s Obvious that BN won due to gerrymandering and unfair delineation of electoral boundaries. After 2013 elections Datuk Seri Najib dumped 1Malaysia and made moves to win back Malay votes and strengthen his position in Umno. All his efforts failed and to top it Malaysians witness the MH370 disappearance, drop in oil prices and now the 1MDB.

Even though 1Malaysia initiatives did not bring the much needed national unity and harmony, but 1MDB sovereign fund turned out to be swelling pool that might drag down even the BN government. The complex money trails round the globe and the complex wheeling and dealing is simply complicated for even professionals. It’s amazing that a MOF linked company will billions of dollars being handled by personals not in the management using dubious companies and the MOF, PMO, BNM and Security Commission as just watching it happen. Within 5 years since its inception the sovereign fund accumulated 42 billion in debts and still counting.

Assets pasted their expiry dates were purchased with excessive prices and prime lands allotted at nominal prices hoping for high gains on valuations. Excessive loans with high interest rates taken to finance the purchase of overpriced assets finally exposed the unsustainable business model of 1MDB. Billions of dollars transferred out with no questions from BNM to dubious accounts in Cayman Island managed by unknown fund managers from Hong Kong makes 1MDB a thriller story. Malaysians may forget all the other 1Malaysia initiatives but 1MDB will be remembered and quoted as how funds should not be managed. It is sad that a noble initiative turned out to be colossal mistake.

1Malaysia slogan drowned in debts

March 17, 2015

The 1Malaysia slogan was supposed to be the game changer for PM Datuk Seri Najib when he took office in 2009. PM Najib tun Razak came out with 1Malaysia slogan to win back the non-Malays who have deserted UMNO/BN after the 2008 general election when for the first time BN lost their 2/3 majority and 5 states fell to PR. The slogan was launched with much pomp and pride to turn around the electoral fortunes of BN. 1Malaysia campaigns and slogans launched emphasizing the ethnic harmony, unity and improve delivery to the government agencies and civil servants and Umno politicians. Huge funds were injected into the 1Malaysia campaign and transformation initiatives. Public debt which stood at 38% of GDP in 2009 jumped to almost 55% around 2014. But the national unity, public delivery and corruption levels never improved for the better.

From the beginning Umno hardline leaders nurtured and groomed by Mahathir rejected and did not support the 1Malaysian theme of PM Najib. The 1Malaysia, the transformation programs and people first and performance now initiatives, did not receive the needed support from civil servants and Umno hardliners. Mahathir himself reported saying that he “still doesn’t understand (masih tidak faham)” the concept. Perkasa went to town against PM for introducing the 1Malaysia campaign to unite the country. Datuk Seri Najib was helplessly watching the opposition with Umno, Mahathir, Perkasa and Isma and remained silent without confronting them. Non-Malays knew 1Malaysia is a failure and Datuk Seri Najib cannot pull through the campaign to achieve its targeted goals.

Datuk Seri Najib armed with the 1Malaysia slogan and transformation initiatives programs behind him went into the 13th election in 2013 hoping to wind more non-Malay votes and keep the Malay votes. The non-Malay support did not come back to BN and for the first time BN lost the popular votes. Even though Pakatan secured 52% popular votes but could only win 89 parliament seats out of 222(40%). It’s Obvious that BN won due to gerrymandering and unfair delineation of electoral boundaries. After 2013 elections Datuk Seri Najib dumped 1Malaysia and made moves to win back Malay votes and strengthen his position in Umno. All his efforts failed and to top it Malaysians witness the MH370 disappearance, drop in oil prices and now the 1MDB.

Even though 1Malaysia initiatives did not bring the much needed national unity and harmony, but 1MDB sovereign fund turned out to be swelling pool that might drag down even the BN government. The complex money trails round the globe and the complex wheeling and dealing is simply complicated for even professionals. It’s amazing that a MOF linked company will billions of dollars being handled by personals not in the management using dubious companies and the MOF, PMO, BNM and Security Commission as just watching it happen. Within 5 years since its inception the sovereign fund accumulated 42 billion in debts and still counting.

Assets pasted their expiry dates were purchased with excessive prices and prime lands allotted at nominal prices hoping for high gains on valuations. Excessive loans with high interest rates taken to finance the purchase of overpriced assets finally exposed the unsustainable business model of 1MDB. Billions of dollars transferred out with no questions from BNM to dubious accounts in Cayman Island managed by unknown fund managers from Hong Kong makes 1MDB a thriller story. Malaysians may forget all the other 1Malaysia initiatives but 1MDB will be remembered and quoted on how funds should not be managed. It is sad that a noble initiative turned out to be colossal mistake.

PM should resign to make way for independent inquiry

March 17, 2015

Auditor general and inspector general have announced that their departments will audit and investigate the transactions of 1MDB for any mismanagement and questionable deals. For any credible and independent inquiry the suspected parties must make way and allow free hand in inquiry and return once the inquiry clears them of any wrong doings. How will auditor general and his department investigate if the prime minister himself is subject to inquiry? It will be partial and defeat the whole purpose of investigation. Therefore to come out with credible and impartial inquiry the prime minister must step aside and allow a full inquiry.

Besides, Umno itself is in full support of the prime minister without knowing the details and without any inquiry. All these impediments will hinder a proper and independent inquiry. US$1 billion was disbursed by 1MDB to buy 40% stake in 1MDB Petrosaudi Ltd which had assets worth only US$100 million and later converted US$700 million as loan repayment to Petrosaudi. This transaction looks dubious and doesn’t make any sense. Yet the 1MDB directors and advisors and MOF officials did not raise any red flag to stop the payment and verify the transaction. MOF and PMO officials were silent about these fictitious and purported transactions using tax payer’s money.  The Prime Minister cum finance minister stand exposed for being also the chairman of 1MDB. Therefore the prime minister must lead the way in setting an example for others to follow.

160 Umno division leaders out of 191 divisions have given the prime minister their support. The minister of agriculture Ismail Sabri who spoke for other division leaders said that they cannot compromise misappropriation and abuse of power but 1MDB is free from these abuses. Another division leader says that 1MDB has more asset than debts and the company will show more profits later. But DPM Tan Sri  Muhyiddin had come out with his own statement on 1MDB, saying there would be no public bailout of the company and that its directors must explain some of the company’s business deals which had not profited the government.

1MDB has paid out US$1billion to a company that did not even have company profile to sign any joint venture agreement and yet Umno leaders can say there is no misappropriation and abuse of power. Why was 1MDB set up for in the first place? Is it to uplift the economic interest of Bumiputras?   Auditor general and IGP may not have a free hand to conduct a credible inquiry. PM must resign to enable the auditor general and inspector general to investigate.

A young boy called Jho Teck Low the superstar was able to lead 1MDB into debt amounting to RM42 billion without any accountability or public disclosure within 5 shorts years. It’s incredible that MOF, 1MDB and PMO allowed it to happen. This kid has broken many laws that warrant an inquiry.

Yet Umno cannot see the seriousness of the matter and going about as though nothing has happened. Whistle blower site Sarawak report and the edge have revelation the detailed dealing and close knit connection of Jho teck low and the ruling government leaders. There are enough evidences to investigate.  All the AG and IGP need is to side aside the impediments and the political will to conduct and independent inquiry.

1MDB should be rated before cabinet approve cash injection

March 7, 2015

Prime Minister Datuk Seri Najib Tun Razak being chairman of 1MDB advisory board is under tremendous pressure to explain the many twists and turns of its large borrowings and opaque transactions. Joint ventures with susceptible company Saudipetrol with mysterious shuffling and revaluation of assets purchased at dip discounts from the government. Within 5 years of operation it racked up 42 billion in loans with little profit to show. 1MDB is a serious contingent liability for the Malaysian government at a difficult economic time. Public debt is already at the upper limit 55% of GDP threshold.

There is seems to be mysterious wheeling and dealing at every major transaction right from the inception of the fund. 1MDB must have stretched the limit of defining fair values in its balance sheets. No wonder auditors Ernst and Young were replaced by KPMG and later Deloitte in the last 5 years. 1MDB has been ably restructuring its dubious transactions for even the big 4 auditors to detect the effect of accounting entries. 1MDB is an accounting quagmire for any auditor.

This sovereign development fund has accumulated high interest debts that are backed by dubious and unverifiable assets. The silence and complicity by the various government agencies in the reckless borrowing of 1MDB is speaks volumes of government transparencies and accountability. There is so much of concealment and non-disclosure by senior officers, directors, advisers and auditors in its investment and valuation.

Billions of dollars guaranteed by Malaysian government is managed and transacted by the Prime Minister’s associate and family friend the party-loving billionaire tycoon, Jho Teck Low. The name Jho Teck low does not appear anyway in the management but his footprints are all over 1MDB. While Malaysian budget was revised due to shortfall in oil revenue, billions of borrowed funds guaranteed by Malaysian government were injected into 1MDB funds.

Despite all the above developments the Cabinet doesn’t seem to press the panic button and feels all dealings and transactions are above board. At the same time it has deferred the approval of RM3 billion cash injection. The cabinet should ensure 1MDB be rated before approving the cash injection. If 1MDB has done nothing wrong as claimed by the PM’s backers why was the fund not rated by rating agencies which would be required before investing public fund. Government should only invest if the sovereign fund is above the investment grade. Therefore to dismiss all the bad publicity and negative reporting Cabinet need a third party professional opinion before deciding on the cash injection. An independent rating agency would dispel all aspersions.