Fitch pushes Malaysia’s credit rating outlook to negative

Fitch pushes Malaysia’s credit rating outlook to negative

The Malaysian Insider
July 31, 2013

Global ratings agency Fitch Ratings has revised Malaysia’s sovereign credit rating outlook from stable to negative as the possibility of addressing public finance weaknesses has deteriorated after Election 2013.

The news comes as the Malaysian ringgit slid to three-year lows against the US dollar and 15-year lows against the Singapore dollar, making imports more expensive while exports would be cheaper although exports have slipped.

But it affirmed the country’s long-term foreign and local currency issuer default ratings at A- and A, respectively.

“Malaysia’s public finances are its key rating weakness. Federal government debt rose to 53.3% of gross domestic product (GDP) at end-2012, up from 51.6 percent at end-2011 and 39.8 percent at end-2008.

“The general government budget deficit (Fitch basis) widened to 4.7 percent of GDP in 2012 from 3.8 percent in 2011, led by a 19 percent rise in spending on public wages in a pre-election year,” it said.

But Fitch believed that it would be difficult for Putrajaya to achieve its interim 3 percent federal government deficit target for 2015 without additional consolidation measures.

“Fitch sees risks even to the achievement of the agency’s 3.5 percent deficit projection, as this already factors in one percentage point of GDP of spending cuts.

“This leaves Malaysia’s public finances more exposed to any future negative shock,” it said.

It pointed out that Putrajaya’s contingent liabilities were on the rise and its debt guaranteed rose to 15.2 percent of GDP by end-2012 from 9.0 percent at end-2008, as state-owned enterprises (SoEs) participated in a government-led investment programme.

“Also, Malaysia’s fiscal revenue base is low at 24.7 percent of GDP, against an ‘A’ range median of 32.8 percent. Fitch has long emphasised two key budgetary vulnerabilities: reliance on petroleum-derived revenues and the high and rising weight of subsidies in expenditure. Fitch estimated that petroleum-derived revenues contributed 33.7 percent of federal revenues in 2012,” the ratings agency said.

“We believe the lack of progress on structural budgetary reform could be due to the general elections, resulting in the government delaying its reform. The situation was compounded by the Umno general election that has been set on October 5.

“Indeed, the government has since put on hold its subsidies rationalisation, after it last cut its fuel subsidies in December 2010. This was made worse by fiscal transfer in 2012 and 2013 to help ease people’s financial burden,” Fitch said.

It pointed although the subsidies were projected to fall, it remained sizeable and accounts for 18 percent of the revenue in 2013 (+21.3 percent in 2012), which was still uncomfortably high.

“Way back in the early 2000s, the subsidies only accounted for 2.9-7.8 percent of revenue in 2000-2004, compared with an average of 18.0 percent a year in 2008-12.

“We expect the government to resume its fiscal reform once the Umno election is over. This may help to convince Fitch that the government is committed to bring down its budget deficit through fiscal reform including rationalisation of subsidies and implementation of the goods & services tax (GST) to broaden the government’s tax base,” it said.

But it also affirmed the Short-Term Foreign Currency IDR at F2 and the Country Ceiling at A. Despite the weaknesses, the rating house also acknowledged the strengths in the composition of Malaysia’s debt and its funding base.

“Federal Government debt is overwhelmingly denominated in local currency (97 percent at end-2012) and has a smooth maturity profile.

“Sovereign funding conditions benefit from deep domestic capital markets and from the role of the broader public sector in funnelling savings to the Government,” it stated.

Fitch also said Malaysia’s credit fundamentals were weak by a range standards, as the average income level of US$10,400 (RM33,597) in 2012 was closer to the BBB range median of US$11,300 than the A median of US$18,600.

“Its overall level of development and standards of governance are also considered weak for its A- rating. Fitch’s Banking System Indicator of bbb suggests the standalone strength of Malaysian banks does not weigh on the credit profile.

However, Malaysia’s high level of private sector leverage is a risk from a credit perspective,” it said, pointing out it reached 118 percent of GDP at end-2012, above the ‘A’ median 94 percent.

Malaysia’s household debt also rose from a low of 60.4 percent in 2008 to 81.1 percent of GDP in 2012 and further to 82.9 percent in March 2013 but RHB Research said it was set to rise further given that household loans in the banking system continued to outpace the growth of GDP currently. – July 31, 2013.


Source: http://blog.limkitsiang.com/2013/07/31/fitch-pushes-malaysias-credit-rating-outlook-to-negative/

Those in whose name we fight and in whose name we betray

By Sakmongkol AK47 |JULY 20, 2013
LATEST UPDATE: JULY 20, 2013 08:43 AM

Tajudin Rahman, currently a deputy minister was never known for niceness. He has always come across as crude, arrogant and condescending. The nearest term that can best describe him as a person is hubristic. 

 That comes from the word hubris (pronounced hew-bris. It means extreme pride or arrogance and comes as a result of an overestimation of one’s own competence or capabilities. Especially when the person demonstrating these qualities is in power. Hubris is also associated with a person having a tunnel vision believing in only his rendition and explanation of things.

That is how Tajudin Rahman approached the Kuala Besut by election- in an arrogant and hubristic manner. DAP is not contesting in Kuala Besut and the core support group of the DAP- the Chinese is hardly present in Kuala Besut. Its almost 99% Malay. It’s a downtrodden extended village that has suffered or has been marginalized during uninterrupted Umno rule at the federal level. The conditions in which the majority Besut Malays find themselves in today is the result of Umno’s handiwork.

What else to work up the Malays? Say something about the political future of Malays, the Malay monarchy and Islam. Who else to blame other than DAP- partner to PR parties?

Tajudin has elected to fray DAP and because of its presence in PR. Maybe he is alarmed that DAP won 39 parliamentary seats and saw that ascendance as the rise of the Chinese specter. He is ignoring the fact that Chinese form about 23% of the population. Malaysian Indians constitute about 10% of the population and other Bumiputeras constitute the rest. The country is 61% Malay, 30% non-Malay and 9% non-Malay Bumiputeras. But Tajudin sees the DAP as the biggest threat as it is seen as having the gravitational pull for those who oppose Umno and BN.

He ignores the fact that DAP champions the cause of the poor, the marginalized, fights for a better government, better governance, fights against corruption and fights against race supremacists. Together with other PR partners, DAP fights for those in whose name Umno fights for and in whose name Umno betrays by doing our bit.

What does Umno do in the name of the Malays and what does Umno actually do for the Malays? In the name of the Malays, Umno secures political power in order to use that power entrusted to exploit the wealth of the country and distribute it largely among the elite. It’s the underlying feudal mentality at play here. 

Accumulate and concentrate political power and then redistribute the fruits of victory as part of their beneficence. Hence Umno sees nothing contradictory and hypocritical in practicing direct negotiations that have now morphed into selected or close tenders. The same elite is selected, and the tender closes out the non-compliant players.

DAP is pictured as that fiendish character out to suck out blood from Malays. So if DAP wins political power, it will abolish the Monarchy and install DAP Chairman Karpal Singh as Malaysia’s president. Then, Malays will be subjected to oppressive rules. Islam will be persecuted and so forth.

Tajuddin thinks he is speaking to an imbecilic audience. Tajudin’s crude story telling must be countered by an equally crude response. What is Tajudin’s real message? His message is how to preserve Malay political dominance. That’s already achieved. Malay MPs formed the majority in parliament unless of course Tajudin regards as Malays, only the Umno Malay MPs. As long as there are more Malay MPs in parliament, Malay political dominance is assured. What Tajudin fails to understand is not all Malays want to be Umno’s pliant tool serving the interest of the elite group in society.

Tajudin is telling his audience that all the Malays in Umno, PAS, PKR are all eunuchs and they will sit idly by when legitimate Malay interests are threatened. Or he thinks only the Umno types can defend legitimate Malay interests. The others aren’t Malay enough. Hence PAS is accused as compromising its value by associating with DAP. PKR, the other partner in PR is painted as a party with extreme liberal views. It’s a party supporting the rights of gays and lesbians and the perverted. PR is also accused as being a tool serving the interest of the DAP.

What is DAP interested in? DAP is interested in a better government, better governance, no corruption, no racism, fair dealing and all that are necessary to create a better and just society. We support what the Agong said in his speech. We dedicate ourselves to the upholding of the rule of law, accountability, good governance and integrity. As Muslims, we all support these objectives and getting these is our common mission.

DAP will gladly support the alleviation of poverty done in the right manner. For instance I find the giving out of BR1M objectionable not because I oppose the giving of cash to poor and needy, but the manner it was given. It’s not Umno’s or BN’s money- its money extracted from tax payers. The giving out should have been apolitical. Bank Negara proposed the distribution of cash directly into recipients’ accounts. The distributing banks were ready and willing to do it- but Umno leaders wanted the cash given through them.

Why? Because then, they will be able to tell the story that it’s out of Umno’s beneficence, that you the wretched of the earth, you the voiceless, you the downtrodden, get to enjoy this cash. So if you want more, keep us in power- we give you RM500, allow us to wallop the billions. We who fight in your name, deserves to be rewarded as how we see fit.

So Tajudin Rahman comes into town regurgitating the usual crap- that DAP is anti-Malay, anti-Malay Monarchy, anti-Islam or anti whatever the Malay wants. That is not true. Umno now survives on lies and misinformation.

I am telling readers from my own personal experience – I am a DAP member and got elected on a DAP ticket. My other colleagues and the leadership have never stopped me from speaking about Malay interests or about the hopes and despair of the Malays. Indeed I have and my DAP colleagues understood my position. Indeed as a Malay in DAP I can speak about the despair of the Malays freer that the Umno MPs can.

The DAP is a political realist. Even if all the Chinese combine and unite, they have only a 23% support base. That’s numerically impossible for a united Chinese party to take over the government. They can become a vocal opposition but not govern over the majority Malays.

The Malays constitute 61% of the population. All branches and levels of government are dominated by Malays. Even if Chinese take over as head of departments, almost 96% of the 1.4 million civil servants are Malays. What can the Chinese head of departments do, if the million strong Malay civil servants down their tools? The government will come to a standstill.

The DAP is not anti-Islam. The problems facing the Muslim ummah have nothing to do with the DAP. I hope Muslims don’t get offended. We can’t force others to get converted and we can’t use that as a reason to oppress them in direct and indirect ways. If we Muslims spend as much time looking after our own house instead of trying to Islamise others, we will be better off. Each year we spend millions in the name of Islam media-hyping about all things Islam- we have the ubiquitous dakwah programs in the media, we get excited at the sermons of hallelujah-ing clerics.

But if we Muslims stop to ponder- the biggest portion of sex offenders, sex miscreants, drug addicts, juvenile crimes is made up of Malay Muslims. What does this mean? It means the programs proselytizing Islam made-for-the- media does not work.

So do we blame the DAP for our own shortcomings? This is not a put down on my well-meaning friends in the government, but as a Malay and a Muslim I am asking all of us Malays and Muslims to look at our own house first. The DAP is not responsible for the bad things that is happening to the Malays and Muslims. – sakmongkol.blogspot.com, July 20, 2013.

The Arab spring – Has it failed?

The Economist
Jul 13th 2013 

ROUGHLY two-and-a-half years after the revolutions in the Arab world, not a single country is yet plainly on course to become a stable, peaceful democracy. The countries that were more hopeful—Tunisia, Libya and Yemen—have been struggling. A chaotic experiment with democracy in Egypt, the most populous of them, has landed an elected president behind bars. Syria is awash with the blood of civil war.

No wonder some have come to think the Arab spring is doomed. The Middle East, they argue, is not ready to change. One reason is that it does not have democratic institutions, so people power will decay into anarchy or provoke the reimposition of dictatorship. The other is that the region’s one cohesive force is Islam, which — it is argued — cannot accommodate democracy. The Middle East, they conclude, would be better off if the Arab spring had never happened at all.

That view is at best premature, at worst wrong. Democratic transitions are often violent and lengthy. The worst consequences of the Arab spring — in Libya initially, in Syria now — are dreadful. Yet as our special report argues, most Arabs do not want to turn the clock back.

Putting the cart before the camel

Those who say that the Arab spring has failed ignore the long winter before, and its impact on people’s lives. In 1960 Egypt and South Korea shared similar life-expectancy and GDP per head. Today they inhabit different worlds. Although many more Egyptians now live in cities and three-quarters of the population is literate, GDP per head is only a fifth of South Korea’s. Poverty and stunting from malnutrition are far too common. The Muslim Brotherhood’s brief and incompetent government did nothing to reverse this, but Egypt’s deeper problems were aggravated by the strongmen who preceded them. And many other Arab countries fared no better.

This matters, because, given the Arab spring’s uneven progress, many say the answer is authoritarian modernisation: an Augusto Pinochet, Lee Kuan Yew or Deng Xiaoping to keep order and make the economy grow. Unlike South-East Asians, the Arabs can boast no philosopher-king who has willingly nurtured democracy as his economy has flourished. Instead, the dictator’s brothers and the first lady’s cousins get all the best businesses. And the despots — always wary of stirring up the masses — have tended to duck the big challenges of reform, such as gradually removing the energy subsidies that in Egypt alone swallow 8% of GDP. Even now the oil-rich monarchies are trying to buy peace; but as an educated and disenfranchised youth sniffs freedom, the old way of doing things looks ever more impossible, unless, as in Syria, the ruler is prepared to shed vast amounts of blood to stay in charge. Some of the more go-ahead Arab monarchies, for example in Morocco, Jordan and Kuwait, are groping towards constitutional systems that give their subjects a bigger say.

Fine, some will reply, but Arab democracy merely leads to rule by the Islamists, who are no more capable of reform than the strongmen, and thanks to the intolerance of political Islam, deeply undemocratic. Muhammad Morsi, the Muslim Brother evicted earlier this month by the generals at the apparent behest of many millions of Egyptians in the street, was democratically elected, yet did his best to flout the norms of democracy during his short stint as president. Many secular Arabs and their friends in the West now argue that because Islamists tend to regard their rule as God-given, they will never accept that a proper democracy must include checks, including independent courts, a free press, devolved powers and a pluralistic constitution to protect minorities.

This too, though, is wrong. Outside the Arab world, Islamists — in Malaysia and Indonesia, say — have shown that they can learn the habit of democracy. In Turkey too, the protests against the autocratic but elected prime minister, Recep Tayyip Erdogan, have more in common with Brazil than the Arab spring. 

Turkey, for all its faults, is more democratic today than it was when the army lurked in the background.

The problem, then, is with Arab Islamists. That is hardly surprising. They have been schooled by decades of repression, which their movements survived only by being conspiratorial and organised. Their core supporters are a sizeable minority in most Arab countries. They cannot be ignored, and must instead be absorbed into the mainstream.

That is why Egypt’s coup is so tragic. Had the Muslim Brotherhood remained in power, they might have learned the tolerance and pragmatism needed for running a country. Instead, their suspicions about democratic politics have been confirmed. Now it is up to Tunisia, the first of the Arab countries to throw off the yoke of autocracy, to show that Arab Islamists can run countries decently. It might just do that: it is on its way to getting a constitution that could serve as the basis of a decent, inclusive democracy. If the rest of the Arab world moves in that direction, it will take many years to do so.

That would not be surprising, for political change is a long game. Hindsight tends to smooth over the messy bits of history. The transition from communism, for instance, looks easy in retrospect. Yet three years after the fall of the Berlin Wall, Europe was overrun by criminal mafias; extremist politicians were prominent in Poland, Slovakia and the Baltics; the Balkans were about to degenerate into war and there was fighting in Georgia. Even now, most people in the old Soviet bloc live under repressive regimes — yet few want to go back.

Don’t hold back the tide

The Arab spring was always better described as an awakening: the real revolution is not so much in the street as in the mind. The internet, social media, satellite television and the thirst for education — among Arab women as much as men — cannot co-exist with the deadening dictatorships of old. Egyptians, among others, are learning that democracy is neither just a question of elections nor the ability to bring millions of protesters onto the street. Getting there was always bound to be messy, even bloody. The journey may take decades. But it is still welcome.

http://www.economist.com/news/leaders/21581734-despite-chaos-blood-and-democratic-setbacks-long-process-do-not-give-up

 

Fight the Smear Campaign against the Oil Palm Industry

Koon Yew Yin

A few weeks ago the sky was covered with smoke from the burning of forests in Sumatra to clear land for agriculture. Many in Malaysia and Singapore were affected by the haze. Some observers in the west used it as an occasion to bad-mouth the oil palm oil further. In this article, I will try to share some facts of life in the oil palm industry so that Malaysians will not join the western world in their smear campaign.

Firstly, we must remember that the west had cut down their forests and trees centuries ago to develop their countries. Malaysia and Indonesia are both new comers in the development scene and have been felling our forests for only a few decades now. Of our tropical agricultural crops, oil palm is the most recent cash crop commodity.

Although there has been a rapid rate of exploitation, it still occupies a small proportion of our total land area. The oil palm industry in Malaysia accounts for 15.5 per cent of total land area and only 4.5 per cent of total land area of Indonesia. A large proportion of the oil palm plantations are also not newly felled forest but are old rubber plantations that have been converted to this more lucrative crop.

Many in the public know of my views which are critical of many developments in the country. However, praise needs to be given when it is deserved; and our home grown oil palm industry is one which deserves all our support. This support is important in view of the sustained criticism made against the oil palm industry by lobby groups that have their origin in the west.

Why We Should Support Our Oil Palm Industry

There are many good reasons to support our oil palm industry in Malaysia and Indonesia. These are some of the most important.

1. Firstly it is not only Felda settlers that are dependent on the crop for a livelihood. Malaysia’s annual US$25 billion (RM79.75 billion) palm oil exports support some two million jobs and livelihoods along the sprawling value chain. This means that one in every five working Malaysian is dependent for his or her livelihood on the crop. 

2. Plantations have borne the brunt of the bad publicity. However, the small farmers are also affected. More than 40 per cent of oil palm planters in Indonesia are smallholders whilst in Malaysia they contribute to 38 per cent of the country’s palm oil output.

3. Environmental activist groups such as World Wildlife Fund, Friends of the Earth and Greenpeace have launched many campaigns alleging that the expansion of oil palm plantations have destroyed forests, threatened endangered wildlife and robbed indigenous peoples of their land. Many of their arguments are not based on fact but are sensationalized from a small and atypical number of cases.

4. The anti-oil palm lobby in the west includes pro-soya bean and rape-seed groups who see oil palm as a major competitor and have recruited food lobbyists to play on fears of the health hazards of palm oil consumption. . Together with environmental activists, these well-funded groups have created trade barriers to the global oil palm trade under the pretext of environmental activism. 

5. In a fair contest amongst competing vegetable oils, palm oil will win hands down. The oil palm tree is the world’s most efficient oil crop because one can harvest five tonnes of oil per hectare. This is 10 times more productive than soya bean planted in the West, including United States and five times more productive than rapeseed, Europe’s main oil crop.

6. It is an undeniable fact that palm oil is the cheapest and most popular form of cooking oil for consumers, including many poor families in the west. Should trade barriers to benefit rapeseed farmers who are already heavily subsidised by the European Union (EU) government be successfully implemented, this will hurt consumers all over the world. 

7. Also should alternatives to oil palm be grown, more land would be needed to produce an equivalent volume of oil to replace palm oil, resulting in more deforestation and problems for Mother Earth.

8. Oil palm smallholdings and plantations meet the United Nation’s Framework Convention on Climate Change which defines a forest as an area of 0.5 to one hectare having more than 30 per cent canopy cover and having a potential height of two to five metres. To accuse the industry in Malaysia and Indonesia of contributing to global warming is sheer nonsense. In fact oil palm trees just as with other forest species, produce oxygen for us to breathe and act to counter coal and oil emissions which are the major cause of global warming. 

9. Finally, the western environmental activists’ campaign against oil palm plantation expansion, in the name of “saving rainforests”, is a violation of international norms and Malaysia’s and Indonesia’s sovereignty. 

Appeal to Malaysians
In a keynote address to over a thousand delegates at a conference organised by the Incorporated Society of Planters (ISP) in Sibu, Sarawak, recently, Datuk Amar Abdul Hamed Sepawi, Chairman of Sarawak Plantation Berhad warned, “We’re at a crossroads. It’s time for oil palm planters to adapt to the fast-changing world of ruthless vegetable oil politics if we want to stay relevant in this market”.

Conclusion:

I trust all Malaysians will circulate this article to all their contacts to fight against the smear campaign against our palm oil industry and eventually I hope consumers, all over the world, will not buy soyabean or rapeseed oil which is more expensive and not really superior to palm oil.

http://blog.limkitsiang.com/2013/07/16/fight-the-smear-campaign-against-the-oil-palm-industry/