Issuu on Google+


Page |1

Could Bilateral Ties Between China-Malaysia Maintain After MH370 Tragedy? By: Ezan Ismail

with bilateral trade worth US$88 million for the first six months of 2012, while the total trade for 2011 was at US$90 million and $106 billion in 2013. In fact, Malaysia is China’s third largest trading partner in Asia, behind only Japan and South Korea. The country is a Reminiscing about a tragic airplane crash shocked everyone as China and Malaysia celebrating the 40th anniversary of formal ties

popular destination for Chinese tourists, although it’s likely the disappearance of Flight 370 will put a damper on the tourism trade.

in 2014, great opportunities await. Now, however, those “great opportunities” have been overshadowed by an unforeseen crisis: the disappearance on Malaysia Airlines Flight 370, along with 239 passengers and crew (including over 150 Chinese passengers). Malaysia and China have had a special relationship for years, ever since 1974, when Malaysia became the first of the ASEAN countries

to

establish diplomatic ties with

China.

Malaysia is also China’s largest trading partner among ASEAN,

Somehow, in the article, the author Jonathan Gan of theedgemalaysia.com claimed that the bilateral ties between these two countries are expected to continue over the medium to long term, according to a report by the IHS, a global information company.


Page |2

On top of that, in a report of April 3, IHS

some negative impact on the Malaysia tourism

Global Insight chief said that, the long-term

economy with China being the one of the

Sino-Malaysian economic ties should continue

largest tourism market for Malaysia. Refer to

to strengthen, with deepening links in trade,

Figure 1.

investment and tourism flows. The bilateral ties between Malaysia Although it been said the relationship will not

and China should be continuing as these two

affected by the aircraft’s disappearance, the

countries are depending on each other. Both

chief also highlighted that there had been

involved in export and import as well as the

increasing report of large drops in tourism

tourism industry too. It can be said that if both

booking to Malaysia from mainland China.

countries stop the bonding it will be huge shift

Additionally, he also said that this could have

of economical for Malaysia.

Figure 1: Top 10 Tourist Arrivals by Country by Nationality in Malaysia in 2012 and 2013 Source: Tourist Malaysia Corporate website


Page |3

Malaysia’s Travel and Tourism Industry: Blooming or Failing? By: Wan Syalia Amira binti Mior Shafawi

to

further enhance the tourist

industry is one of the

increase too along with the

experience in the country

biggest contributors

increase

revenue

through the promotion of

economic

collection. In 2013, tourist

cultural, sporting, culinary,

sectors. It is an area where

arrivals grew by 2.7% from

and other exciting major

the country hopes to keep

the previous year of 25

events,”

increasing year by year since

million

Nazri.

it is profiting and giving

people.

T to

ravel

and tourism

Malaysia’s

this

country expected

in

to

25.7

million

recognition to Malaysia.

added

Mohamed

At one point of this year, the The Tourism and Culture

government

Ministry was seen attending

expected a sudden backfire

Travel and Tourism Council

Malaysian

Association

of

of hope for the growth in

(WTTC),

and

Tour

Travel

Agents

tourism sector due to the

for

(MATTA) Fair held at Putra

devastating

Malaysia will be giving a

World

an

Malaysia Airlines’ MH370

positive turn out by 6.3 per

event eagerly looked forward

plane that went missing on

cent

by

and

March 8th of this year. People

According

tourism

to

the

the

World

travel

industry

increment.

This

&

Trade

tourism

Centre,

industry

Malaysia

incident

of

expectation is made based on

consumers

further

from China, who were the

the

helps the growth of tourism

ones mostly affected by this

industry year after year.

incident, have raised their

final

outlook

at

Malaysia’s performance for

which

of

the year 2013, where it

opinions of not wanting to

brought massive revenue of

‘To know Malaysia is to love

visit Malaysia and even vow

RM65.44 billion, out taking

Malaysia’

on boycotting the export

the

Malaysia 2014 motto, where

prediction

of

RM65

is

Tourism

products from Malaysia.

billion pars that was set.

Malaysia will continue to

Tourism

Culture

highlight on the uniqueness

Nonetheless,

Ministry, Mohamed Nazri

in diversity this wonderful

Nazri assured the response to

Abdul Aziz said that the

country has to offer. This

the MATTA Fair event that

number of tourists visiting

year also Malaysia “…would

was held for three days was

and

Mohamed


Page |4

still

promising

and

year too.

state to its huge base readers that will focus on the state’s

overwhelming. The hope for a

continuous

for

The other two were runners

eco-tourism attractions. The

Malaysian tourism is still

up for Best Airport (World)

signage event took place less

shimmering brightly.

for

Lumpur

than a month ago. Perak too

International Airport (KLIA)

launched a limited edition

while Langkawi Island was

Tourism Malaysia Perak’s

voted by a popular travel

awarded

travel booklet.

magazine, Lonely Planet as

Honeymoon

one of the top 10 must visit

Runners Up.

Recently,

growth

Malaysia

was

Kuala

The

Best

Destination In the end, Malaysia’s future

global destination in 2014.

for its travel and tourism The states in Malaysia too

industry seems to stand tall

In addition, in New Delhi,

are vigorously putting their

despite

the

India was held a Travel +

effort in promoting their

taking

place.

Leisure India’s Best Awards

unique features to attract

according

to

and Malaysia were awarded

tourists worldwide. As an

President

and

Chief

with three awards. One of

example, Perak has signed a

Executive

Officer

(CEO)

them was The Best Green

Memorandum

David

Destination

Understanding (MoU) with a

requires further actions to

where Malaysia has won it

popular

travel

ensure the industry remained

consecutively in the previous

magazine to promote the

positive in the future because

(World)

2013

German

of

tragic

event

Just

Scowsill,

like

WTTC’s

Malaysia

the outlook of this sector in the coming 10 years is looking very good.

It is in a way, showing us a positive pattern for tourism industry in achieving the goal of 10th Malaysian Plan that focuses tourism as one of

the

economic

12

national

areas

key

(NKEAs)

that have the potential to Figure 1 : Langkawi took home The Best Honeymoon Runners Up award recentl y

generate

high

returns.


Page |5


Page |6

KLIA2 vs AirAsia: Is KLIA2 safe? By: Lai Li Bai Chuan

Proposed design of KLIA2

About KLIA2 Capacity to accommodate 45 million passengers per year

Estimated total cost RM3.6 - 3.9 Billion

257,000 m2 total area

4Km runway with a 2.2Km separation from Runway 2

32,000 m2 allocated for retail space and shops

124 pax / m2 passenger comfort (capacity / floor space)

6,000 car park lots

Scheduled to open on 2 May 2014

Source : www.klia2.info

Kuala Lumpur International Airport 2 (KLIA2) is

In 2010, Malaysia Prime Minister, Datuk Sri Najib

one

class

Tun Razak announced the low cost terminal

infrastructure to support growth and enhance

project, which will be known as KLIA2, will mark

of

projects

to

establish

world

th

productivity in the 10 Malaysia Plan. Malaysia

the growth of the nation and leadership in aviation

Airports Holdings Bhd (MAHB) has stated that

in the region and the world. Prime Minister also

KLIA2 will start the operation on the 2nd of May

stated that KLIA2 is designed with consideration

2014 and it will replace the current Low Cost

of the requirements from AirAsia as AirAsia is

Carrier Terminal, LCCT. All the departments and

known for the effort to stimulate low cost travel.

agencies in LCCT will be transferred and shifted

The new terminal will also boost tourism and

to KLIA2 by 9th of May as LCCT will be closed

increase the job opportunity.

on the same date, 9th of May.


Page |7

In February 2014, The Star reported that KLIA2

stated that MAHB had complied with almost

has failed in the fitness test and there were cracks

everything that was requested by AirAsia for it to

at KLIA2’s tarmac which had been patched up.

operate from the new low-cost carrier terminal,

About two-third of the main terminal building at

KLIA2. He also said that the transfer to KLIA2

KLIA2 had not gain permission from relevant

has been agreed by all the parties which include

authorities, such as Indah Water Konsortium Sdn

Department of Immigration, Royal Malaysian

Bhd, Sepang Municipal Council and Fire and

Customs, police and health authorities. He also

Rescue Department found that 65% of the main

said that MAHB has run the Operational

terminal did not comply with the fire and safety

Readiness and Airport Transfer (ORAT), which is

standards, there were cracks in sewerage pipe and

a trial to simulate functionality and operational

parts of the road and drainage were not fit for use.

aspects since early February and Datuk Azmi said

KLIA2 should not be operated until the safety

that “we are very satisfied”. Datuk Azmi also said

issues are settled.

that KLIA2 is more secured than current LCCT as Source : The Star, 27th February 2014 “All patched up: old pictures of cracks at KLIA2 tarmac allegedly circulated online”

it will implement a commonly used passenger processing system by Sita, which is the world’s leading service provider of integrated IT business solutions.

Furthermore, Datuk Azmi said that the cracks that were found on the runway were normal and not Tan Sri Tony Fernandes, the boss of AirAsia, stated that AirAsia wants to delay to move to KLIA2 due to the safety and security of the terminal. “The main point is we wanted a low cost terminal and safe and secure terminal. All we want was a terminal which would make it cheap for consumers and on time. MAHB have failed on both,” Tan Sri Tony Fernandes said. AirAsia will

structural cracks. A normal engineering process was sufficient to settle the problem. Moreover, Malindo Air had undertaken a landing trial at KLIA2 in October 2013 to prove that the runway is in good condition and KLIA2 is able to accommodate a load of up to 100 tonnes, which is more that the weight of a Superjumbo A380, the world’s biggest commercial aircraft.

move, but they need to be ensured that people can afford the terminal which was supposed to be low cost. AirAsia is asking for delay so that KLIA2 is fully checked and KLIA2’s terminal building has not received the Certificate of Completion and Compliance (CCC).

Datuk Azmi also gave guarantee that the safety of the runway, apron, taxiway, and others, has all been certified by the Department of Civil Aviation (DCA). The DCA has the right authority to certify the runway, not the airline and the current LCCT also has cracks which are dangerous for the

The senior general manager of Malaysia Airports

aircraft, so they need to be transferred to KLIA2

Holdings Bhd (MAHB), Datuk Azmi Murad,

and closed the LCCT. The general director of


Page |8

DCA, Datuk Azharuddin Abd Rahman said

AirAsia, Datuk Kamarudin Meranun, he stated

MAHB had done test through an independent

that AirAsia will move to KLIA2, but he did not

company to ensure the strength of the runway and

say when. However, the Prime Minister, Datuk Sri

it meets with DCA’s requirements.

Najib Tun Razak, he said AirAsia must move to KLIA2 as schedule on May 9th.

“There

are

many

concern,

especially

on

functionality, safety and security of KLIA2, which

AirAsia will only move to KLIA2 after all the

are paramount to staff working efficiently, and for

issues on the safety and security are resolved.

our passengers to have a seamless travel

KLIA2 is built to be the International Airport Hub

experience,” said the CEO of AirAsia, Aireen

that allows seamless connectivity for local and

Omar. She also mentioned that they are ready to

international low cost carrier and has the potential

move to KLIA2 but they must move under the

to be a global aviation hub just like Dubai and

right circumstances, where all the issues are

AirAsia will contribute to make that a reality,

addressed. As AirAsia is expected to utilize 80%

directly moving the nation’s aviation industry as a

of KLIA2, AirAsia need to make sure that their

whole. But before AirAsia is able to uplift KLIA2

concern is being solved and taken care of and to

to be the global aviation hub, MAHB need to

ensure that KLIA2 is safe and secure for the

ensure the issues that AirAsia are concerned about

airline, employees and mainly the customers.

are being taken care of so that there will be no

AirAsia’s argument is that there are still safety and

problem that will occurs in the future and KLIA2

security issues that need to be address before they

will be able to function well and efficiently in long

can move, and they are also concerned about the

term.

potential rise in the airport charges and passenger service charges. This potential rise in charges will

On the latest news reported by The Star on 15th

eventually raise the overall cost of travelling and

April 2014, a team of officials from International

burden the travelers who want to travel in low cost.

Civil Aviation Organisation (ICAO) had evaluated

Thus with the concern that these charges may

the safety of KLIA2 to ensure the safety of public

increase, it is hard for AirAsia, a provider for low

when it starts to operate on the 2nd May. After the

cost travel, to provide their customers affordable

inspection done by ICAO, AirAsia decided to

and low cost travelling.

move to KLIA2 by May 9th. AirAsia appreciated

Aireen also said that they are trying their best to

that Prime Minister and government made a

resolve all pending issues with MAHB so they

decision to enlist the expertise of the ICAO to

could relocate to KLIA2. AirAsia has to ensure

further evaluate KLIA2 to determine the long term

that the airport is fully functional without any

safety of the new airport. This reflects the

possible problems or interruptions as they

government’s priority in the safety issue and

expected to have a huge size of operation this year,

assuring the public that KLIA2 is safe. This

carrying at least 24 million passengers via Kuala

indicates that KLIA2 is safe for the public.

Lumpur. According to the executive chairman of


Page |9

Interests on car loans have increased - Will it affect the buyers? By: Mohd Zarif Syafiz

B

ased on the news reported in The

years loan interest rate is 5%. If we compared

Edge Malaysia on 1st of April 2014,

national car and non-national cars, the interest

the interest rate on hire purchase

rate for national cars is higher than that for

loans have increased starting two weeks ago

non-national cars.

by about 40 basis points for both national and non-national cars, according to bankers. The

For recondition imported car loan interest rate

increase was an “order” by Bank Negara

is 5% for 5 years, 5.1% for 6 years and 5.2%

Malaysia (BNM) partly over concerns those

for 7 years. These used imported cars are

non-performing loans (NPL) for motors

usually high-end cars like Mercedes, BMW,

vehicles were on the rise. Bank Negara

and MPVs skills, such as Toyota Estima,

Malaysia has denied on the directive to banks

Alphard and Velfire.

to increase the interest rate on the hirepurchase financing for cars.

Malaysian Automotive Association president Datuk Aishah Ahmad said the gradual

Loans for the purchase of national cars that

increase in interest rates by local banks since

used to fetch rates of around 2.7% would now

the middle of last month, was not significant.

incur rates of around 3.1%, while for non-

“An increase of between 0.3% and 0.4% in

national cars, rates that have stayed at about

hire purchase rates is quite acceptable to the

2.4% for around two years have now gone up

industry,” she said.

to about 2.8%. Federation of Motor and Credit Companies According to an article from myroadtax.com,

Association of Malaysia president Datuk Tony

car loan interest rates for national cars such as

Khor confirmed that hire purchase interest

Proton and Perodua have gone up to 5.25%

rates had increased between 0.4% and 0.7%.

for 5-years loan, 5.5% for 6-years loan and

“The increase is less than 1%, so it’s quite

5.75% for 7-years loan. For non-national cars,

minimal,” he said, adding that the rates

such as Toyota, Honda, Nissan, Mazda, KIA

currently ranged between 2.7% and 3.1% from

and others, the 5-years loan interest rate is

2.1% and 2.4% previously. Buyers also still

4.8%, 6-years loan interest rate is 4.9% and 7-

can get a new vehicle at previous interest rate.


P a g e | 10

Besides, hire purchase interest rates in

rate has increased. The interest rate will

Malaysia were the second lowest in Asean

definitely affect the buyers but the impact

after Singapore.

towards the buyers is different among the individual based on their financial capabilities.

Bank Negara Malaysia said it was the individual banks that determined the interest

“If he is earning a good salary, the interest rate

rate based on the borrowers’ credit standing,

would be low. But if his income is poor, he

market

competitive

would be required to put down a higher down

considerations. Moreover, a local car dealer

payment and the interest rate would remain

stated that the rate is dependent on the

the same. It’s on a case-to-case basis”, said

individual’s credit rating, thus the buyers still

one of the local car dealers.

funding

rates

and

can get a new vehicle even though the interest

Figure 1: Letter of ruling


P a g e | 11

Figure 2: CIMB Hire Purchase Financing Rate


P a g e | 14

Can Malaysia’s economic growth reach 5%? By: Najri Aiman

Figure 1: Forecasted GDP growth rate for Malaysia in 2014 to 2016 Source: www.worldbank.org

According to the World Bank, the Gross

The Allianz Group chief economist, Micheal

Domestic Product (GDP) in 2012 was

Heise,

US$305.0billion, with the GDP growth rate of

economy is expected to expand by 5% this

5.6%. The World Bank estimated that in 2014,

year as last year’s second-half upward

the GDP growth rate will be 4.8%.

momentum is likely to be sustained. During a

also

stated

that

the

Malaysia’s

media briefing on ‘The global economic On February 2014, during a press briefing on

outlook, emerging markets and Malaysia’ on

Citibank Bhd investment chant for 2014, the

March 2014, he said that they expect stable

chief executive officer, Sanjeev Nanavati, said

growth for Malaysia which would benefit

that Citibank Bhd is projecting Malaysia’s

from the improvement in exports, especially

GDP to be around 5% this year and US dollar

to the European countries following their

to continue to strengthen against the local

economic recoveries. He also stated that the

currency. Moreover, he also stated that the

commodity prices would help the economy,

country’s economic growth would be driven

with the oil palm and others commodities to

by exports with less reliance on domestic

trade higher due to the Ukraine crisis. With

demand. He also expected that the US

the improvement from the exports, it will then

economic growth to be stronger this year

trigger strong investments moving into the

which would result in higher Malaysian

country.

exports.


P a g e | 15

Moreover, Bank Negara Malaysia expects the

the improvement in the global economic

economy in 2014 to grow at a steady rate,

environment, the services and manufacturing

supported by the services and manufacturing

sectors will be the key drivers to the overall

sectors. From the BNM Annual Report 2013,

growth.

it is projected that a conservative economic growth of 4.5% to 5.5% for 2014 compared

If the export is going to improve as what has

with

Government’s

been expected, there is rises in the commodity

projection of 5% to 5.5%. Bank Negara

prices and investments will be attracted due to

expects the manufacturing sector to grow at

the export, then Malaysia may have higher

6.2% in 2014 compared with 5.9% in 2013,

chance in attaining 5% or even higher than 5%

and the services sector to expand by 3.5%

of GDP growth rate in 2014.

the

earlier

Federal

compared to 3.4% in 2013. Benefiting from

Figure 2: 10th Malaysia Plan targeted GDP growth rate of 6% per annum in 2011 to 2015


P a g e | 16

Remittances by Foreign Workers in Malaysia Increases By: Ezan Ismail

A remittance is a transfer of money by a

These flows act as an antidote to poverty and

foreign worker to an individual in his or her

promote prosperity.

home country. Money sent home by migrants competes with international aid as some of the

Remittances remain a key source of external

largest

resource flows for developing countries, far

financial

inflows

to

developing

countries.

exceeding official development assistance and more stable than private debt and portfolio

Importance of Remittance

equity flows.

As well as helping boost consumption in the

Current issue

receiving country, payments can also help boost investment, funding new business and

Remittances by legal foreign workers in

other projects. Through the multiplier effect (one person’s spending becomes another’s income), they can lead to an even greater boost to economic growth.

This is now changing, partly due to the technological advances reducing the barriers

Malaysia doubled from RM10 billion in 2009

to entry and providing cheaper, more efficient,

to almost RM20 billion last year (US$3.12

methods to make money transfer. Mobile

billion and US$6.24 billion respectively).

phone companies have spotted the opportunity

There are other factors that could have

to provide services beyond simply making

contributed towards the increase in the

calls. This is revolutionizing the way banking

remittance figure. The quantum remitted

and other services are carried out and could be

would increase if there are more foreigners

an example where new technology actually

sending home money and if more money is

‘trickles up’ from developing to developed

being sent out. The increase in the number of

nations.

avenues used to send home money can hardly be a factor.


P a g e | 17

Official figures show that as of 2013 1 there

as such there would have been a substantial

were 3.2 million foreign workers of which 1.9

amount in remittance.

million were legal workers and an estimated 1.3 million were illegal. If the amount

Potential security concerns.

remitted by illegal foreign workers can be ascertained, then there is likely to be more

Malaysia’s workforce breakdown, current

than RM20 billion remitted.

total Malaysian workforce is at 12.7 million. Of this 16% are made up of legal foreign

There are also the remittances sent by those

workers at ~ 2 million. Forecasted total

who enter Malaysia legally or illegally as

workforce in 2020 is 16 million in total with 4

foreign workers and then leave their jobs and

million legal foreign workers, Malaysia needs

start small businesses. These are people who

foreign labour to fill in gaps but risk lowering

have been in the country for a few years and

market wage rates for Malaysians, social

know their way around and also know where

illnesses, and large outflow of funds in

and how to get merchandise to trade. There

remittances?

are many great businessmen among them and The recent internationally coordinated effort to stifle possible sources of money laundering and/or terrorist financing has increased the cost of sending remittances directly increasing costs to the companies facilitating the sending and indirectly to the person remitting.

As in some corridors a sizable amount of remittances is sent through informal channels (family connections, traveling friends, local money lenders, etc.).

According

to

countries do

the

not

World

Bank,

some

report remittances

data.

Moreover, when data is available, the methodologies 1

We are sorry for the incorrect information on our first batch of Special Edition Volume 13

used

by

countries

for

remittance data compilation are not publicly available.


P a g e | 19

Keeping Up with the Debts By: Wan Syalia Amira binti Mior Shafawi

ousehold expenses

growth in 2012 to 11.7% in

much concern

are one of the

2013, which is quite a big

to. Instead, Malaysia should

biggest

change. This tells us that we

view the indebtedness as

for Malaysian consumers.

are

high accessibility in finance

This is because it involves

going in the right way.

H

concerns

somewhat

continue

area. He added by saying

the everyday lives of the

that

the

growth

of

should

be

individuals themselves. A

Back in 2010, Bank Negara

indebtedness

person could not continue

Malaysia has made an effort

relevant if the household

living if the cost of living

to cool off lending activities

income

keeps getting higher and

by introducing incremental

relatively.

higher up to the point it

measures for the purpose to

makes life like a living hell.

limit excessive indebtedness

Sander

in a household. This has

thoughts that probably Bank

As cost of living increases,

proven a result in reducing

Negara

households tend to opt to

vulnerability

lower

concerned on this issue to a

take up credit loaning. Thus,

income

and

greater extent by making

this maintains the country’s

prevented

high household debt rate. By

households in Malaysia from

household debt and apply

the

becoming over-leveraged.

various measures to make

end

household

of

2013, debts

the

of

households

average

of

effort

is

also

growing

expressed

Malaysia

to

restrict

his

is

in

sure banks do not agree on

Malaysians keep growing to

However, Dr Federico Gil

giving credit debts towards

86.8%. However, the rate of

Sander, who is the World

individuals

its debt growth from year to

Bank’s Senior Economist for

capability of paying back

year is showing impressive

Malaysia, said that this is

their loans to the banks.

decrement

not an issue to be given

from

13.5%

with

no


P a g e | 20

A few examples of these

mentioned

implementations

by

household assets are high at

Zeti

Bank Negara Malaysia are

the percentage of 321.6%

further explained that it is

such

the

compared to 86.8% of the

due to the reason that “…the

maximum tenure of loans

nation’s household debts. He

relativity young labour force

from 45 years to 35 years,

claimed that Malaysia is

and more affluent population

shortening

definitely is improving, even

setting in urban centres.”

as

done

shortening

personal

loan

small,

Negara governor Tan Sri Dr. Akhtar

Aziz.

She

if

years

demand

changes over the last four

In

requirements for key credit

years, and slowly reaching

Bernama has made an article

providers to take attention of

to the government’s goal to

calling out to Malaysians to

debt service ratios in their

get debt level of the nation

start saving more to better

clients’ credit assessment,

to

overcome the difficulties of

and lowering the pace of

percentage below 60%.

the

a

country’s

tenure from 25 years to 10 only,

in

the

safe

slightest

zone

of

expansion in lending by the non-bank

financial

institutions.

Minister

in

this

issue,

rising cost of living. They proposed a number of

However, we will not be

initiatives that could be used.

able to see any slowing

They are such :

down of credit in the level of

Manage money 

Prime

household indebtedness in

and

the near future as Malaysia

finances of oneself in

Management

is expected to sport this

helping one to live

and Delivery Unit CEO,

growth for the next few

within one’s means

Datuk

years, according to Bank

and this pattern will

Minister’s Performance

Seri

the

rising of

Office

Idris

Jala

A skill of managing


P a g e | 21

remain as a habit

leverage positions than those

until the future.

in

the

other

income

standards. 

Savings culture 

To start back with

On the other hand, Bank

the culture of saving

Negara also has the policy

a portion of money

priority

for uses at times of

prices in the country were

emergency.

reflective

to

ensure

of

asset

economic

fundamentals. Any changes 

Keep 10%-20% of one’s

of it could make a big

salary

change

on

stabilizing

financial

and

economic

Financial

planners

advise individuals to try

and

keep

aspects.

a

portion of their salary

Tan Seri Dr. Zeti Akhtar

from as low as 10%

Aziz

as

for

importance of asset prices

anything emergency

for Malaysian economy. She

just like the saying,

quoted,

“save for a rainy day.”

movements

security

explained

on

“Asset

the

price

have

an

important

effect

on

Bernama stated that most of

household

spending.

For

us do our savings the wrong

example, a reversal of asset

way, which is to save only

price gains in recent years is

with

likely to

what

is

left

after

reduce

wealth,

spending it.

which may cause households

Bank Negara will continue

to

to observe carefully in the

spending.

scale

back

on

their

process of lending to lowerincome households, as they

“Thus, policy would need to

are more at risk to have

focus on the sustainability of

income shocks due to higher

asset

prices

and

the

spillovers to the economy.”


P a g e | 23

Benefits of GST in Malaysia

By: Lai Li Bai Chuan

Goods and services tax (GST) is also known as

of GST is that it is self-policing features, which

value

multi-stage

allow the businesses to claim their input tax credit

consumption tax on goods and services. It is a

by automatic deduction in their accounting system.

broad based consumption tax that covers all sectors

With this feature, it eases the administrative

of the economy; all good and services made in

procedures and the government’s delivery system

Malaysia including imports except goods and

will be further enhanced. GST will be implemented

services that are categorized under zero rate supply

to replace the current consumption tax in Malaysia

and exempt supply orders. The basic fundamental

is the sales and services tax (SST).

added

tax

(VAT)

is

a

Figure 1: How Sales Tax Works

Figure 2: How Services Tax Works

Source: Official website of Malaysia Goods and Services Tax (GST)

GST does bring benefits to consumers, businesses

public facilities to further improve the

and government in various aspects. The benefits

standard of living of the society.

are:

2. Lower cost of doing business

1. Improved standard of living

Some businesses pay multiple taxes and higher

The revenue from the GST would be used to

level of tax-on-tax with the current system thus

development

social

with GST, businesses can benefit from the

infrastructure such as healthcare facilities and

recovering input tax, which reduce the cost of

institutions, education infrastructures and also

doing business.

purpose

for

the


P a g e | 24

3. Nation-building

GST eliminates double taxation under SST.

GST is better and more efficient in revenue

Consumers will pay fairer prices for most

collection for the government. There will be

goods and services compared to SST.

more funds that are able to be channeled into

10. Greater transparency

the nation’s building projects for progress

Consumers will benefit from GST as they will

towards achieving a high income nation.

know exactly whether the

4. Fairness and equality

manufacturing,

There is news that reported low-income groups may not able to withstand the shock from the GST,

5. Enhance delivery system GST will be administrated in a fully computerized environment which will speed up the delivery, especially for refund claims. This makes the delivery faster, more efficient

especially with the rising of inflation due largely to subsidy rollbacks and a likely economic recession by 2016.

In respond to the news, the Deputy

Finance Minister, Datuk Ahmad Maslan said that goods and services for the low-income group

and reliable.

would mostly be exempted from the GST when it

6. Increase global competitiveness GST is not being imposed on the Malaysian exported goods and services, but GST incurred on the inputs can be recovered along the supplies chain. This will strengthen our export industry and help the country progress

comes into effect in April 2015. Government also provided several packages to ease the burden of low and middle-income group. The basic needs are zero-rated for domestic users, while for mass public transport, education, health, tolls, residential property and financial services are exempted from

even further.

GST.

7. Enhance compliance current

they pay for.

wholesaling,

retailing or service sectors.

The

they

consume are subject to tax and the amount

GST taxed fairly among all the businesses involved;

goods

SST

has

many

inherent

Another

issue

that

has

risen

from

the

weaknesses which makes the administration

implementation of GST in 2015 is the increment in

difficult. GST system has in-built mechanism

the salary. On January 2014, The Star reported that

to make the tax administration self-policing

KPMG Malaysia is urging both public and private

and therefore will enhance compliance.

sectors to gradually increase the salaries of their

8. Reduce red tape

employees. The Managing Partner, Johan Idris,

With the current SST, businesses must apply

suggested that a 6% increase in employees’

for approval to get tax-free materials and also

salaries per annum will help to tide over the high

for special exemption for capital goods, while

cost of living in Malaysia. This will help to

with GST, this system abolished as businesses

consumers not to worry about their cost of living.

can offset the GST on inputs in their returns. 9. Fair pricing to consumers

Datuk Kamariah Hussain, the Finance Ministry’s GST implementation office tax advisor, stated that


P a g e | 25

GST is a fair, efficient and transparent taxation

being implemented, but gradually, it will bring

system that depended largely on the consumers’

benefits to the people and government. GST is to

habits. Furthermore, the consumers will know what

replace the current sales and services tax and it is

type of taxes that they are paying for and how

not a new tax, thus the people does not need to

much. It might be difficult at first when GST is

worry so much.

Figure 3: How GST works on zero rated supply Source: Official website of Malaysia Goods and Services Tax (GST)

Figure 4: How GST works on exempted supply Source: Official website of Malaysia Goods and Services Tax (GST)


P a g e | 26

Second Penang Bridge will Boosts Property Market By: Mohd Zarif Syafiz

Figure 1: Sultan Abdul Halim Muadzam Shah Bridge

T

he Penang Second

Abdul

Halim

Muadzam

Bridge,

Sultan

Shah, will acts as a catalyst

Malaysia’s

Abdul

Halim

for more economic activities

Minister, Tun Dr Mahathir

Muadzam Shah Bridge, is

not only in Penang, but also

Mohammad and followed

also a dual carriageway toll

in the northern region. He

through by Tun Abdullah

bridge connects Batu Maung

also said the launch of

Ahmad Badawi who decided

on the Penang Island and

Second Penang Bridge was

that it should be located in

Seberang Prai on mainland

another testament of the

the southern part of the

Peninsular Malaysia. It was

Federal

government's

island to stimulate economic

opened on February 2014,

unwavering will to deliver

growth in the northern states

with total length of the

on its promises.

will

bridge is 24km. The main

proposed

in

as

1995

fourth

the

by Prime

Northern

Economic Corridor," said

contractor for this bridge is

Built at a cost of RM4.5

Datuk

China Harbour Engineering

billion, Northerners could

estimated

Co Ltd.

now look forward to shifting

vehicles using the bridge

their economic focus from

will increase by 68% by

Datuk Seri Najib Tun Razak

agriculture to industry. "In

2020.

said, he believed that the

many

launching of the Second

Penang

Penang Bridge that was

important

named

Malaysia. The idea was first

Jambatan

Sultan

ways

the

Bridge

Seri

Najib.

The

number

of

Second is

an

The Second Penang Bridge

milestone

for

will

greatly

benefit

the

property market and narrow


P a g e | 27

the

development

gap

people who wish to purchase

logistics and other business

and

homes on the mainland as

opportunities will boost the

mainland due to easy access,

the island is too congested

state's

says the Real Estate and

with few affordable houses.

demand for housing. It is a

Housing

Developer's

Demands for houses will

positive

(REDHA)

increase on the mainland.

Penang as whole. In the

Penang. It will generate

The property market on the

longer

positive spin-offs for the

mainland is likely to see a 10

would help stimulate the

local

per cent growth per annum

state's economy amid more

especially with more players

amid

economic

job opportunities from the

looking for land on the

outlook, rising interest for

new industrial corridor on

mainland.

houses on the mainland as

the mainland especially in

well

Batu Kawan.

between

the

island

Association

property

market

positive

as

home-price

Besides, this new bridge

appreciation.

could be the solution for

Furthermore, new factories,

economy,

creating

sentiment

term,

the

for

bridge

Figure 2: Supply of residential units by type in Penang (top) and current and future demand of residential properties in Penang (below). Source: “Penang: Past, Present and Future�, The Star, 20 April 2014


P a g e | 29

What are the forecasts done by HSBC?

By: Najri Aiman

1) Gross Domestic Product (GDP) 2) Inflation Rate The HSBC Asean Economist, Lim Su Sian, said that the Malaysia’s Gross Domestic

Lim Su Sian also forecast that the inflation rate

Product (GDP) is expected to grow 5.2% this

to grow to 2.4% on average this year, with an

year, 2014, as the export cycle has started to

upward risk to this number. “If we continue to

improve amid external recovery despite some

see a fuel price hike, it is quite likely that

domestic headwinds. She expects the GDP for

inflation will stay above 3% for most of the

2013 to record 4.6% growth driven mostly by

year,” she said. With the inflation expected to

domestic factors such as a rise in household

remain high, HSBC expects to see Bank

income. HSBC Global Research is maintaining

Negara Malaysia come in with a rate hike in

its GDP growth rate forecast for 2014 and 2015

the middle of this year.

at 5.2% and 5% respectively. 3) Budget Deficit “Most of the pick-up will come from the external side. Given moderate improvements in

Furthermore, the HSBC Global Research said

the global backdrop, exports should gain some

that the hike in subsidised fuel prices last

momentum and to a degree will be offset by

September, together with the further fiscal

slower domestic activity as some of the

consolidation this year, should result in

headwinds start to set in,” Lim Su Sian told a

narrowing the Malaysia’s budget deficit to 3.5%

media briefing on the Economic Outlook 2014.

of GDP from 3.9% registered in 2013. The government remains committed to fiscal

She also stated that among the headwinds that

consolidation as sugar, fuel and electricity

could offset growth in the local economy are

subsidies are cuts over the past few months and

interest

plan to restructure the revenue base through a 6%

rate

hikes

and

government’s

commitment to its fiscal consolidation policy.

goods and services tax in April 2015.

HSBC also said that the recovery cycle in Malaysia’s exports would be underpinned by

To conclude, HSBC’s forecast on the GDP

higher

remains the same which is at 5%. The forecasts

shipments

for

both

products and commodities.

manufactured

are also tally with the forecasts done by others


P a g e | 30

economists that stated that the Malaysia

go beyond what it is expected to ensure of a

exports will improve and bring in more

good economy.

investments to Malaysia. The increase of cost of living and decrease of purchasing power will definitely increase the inflation rate which is

estimated

to

have

an

upward

risk.

Government also need to make sure that the budget deficit and debt accumulation will not


P a g e | 31

References 1. Could Bilateral Ties Between China-Malaysia Maintain After MH370 Tragedy? Sources: -

http://www.theedgemalaysia.com/business-news/283605-malaysian-and-china-bilateral-ties-to-continue-despite-mh370says-ihs-global-insight-report-.html Tourist Malaysia website

2. Malaysia’s Travel and Tourism Industry: Blooming or Falling? Sources:0 -

http://www.nst.com.my/business/latest/travel-tourism-industry-to-grow-6-8pc-1.521431 http://www.nst.com.my/streets/northern/perak-aims-for-rm1-5b-tourist-dollars-1.523649 http://www.thestar.com.my/Travel/Malaysia/2014/04/14/Triple-win-for-Malaysias-travel-sector/ http://www.freemalaysiatoday.com/category/business/2014/03/18/more-revenue-from-tourism/ http://www.thestar.com.my/story.aspx/?file=%2f2010%2f6%2f10%2fnation%2f20100610094152

3. KLIA2 vs AirAsia: Is KLIA2 Safe? Sources: -

http://www.thestar.com.my/Business/Business-News/2014/04/02/AirAsia-will-stay-put-in-LCCT-wont-budge/ http://www.thestar.com.my/News/Nation/2014/03/06/Hisham-Consultant-appointed-to-evaluate-safety-of-KLIA2/ http://www.thestar.com.my/News/Nation/2014/04/02/airasia-ask-Najib-intervene-KLIA2/ http://www.thestar.com.my/News/Nation/2014/02/27/KLIA2-tarmac-cracks-patched-up-Officials-Old-pictures-beingcirculated-online/ http://www.thestar.com.my/News/Nation/2014/04/05/Najib-Airasia-move-May-9/ http://www.thestar.com.my/Business/Business-News/2014/04/15/AirAsia-Group-says-will-move-into-KLIA2-by-May-9/ Malaysia KLIA2 Info website

4. Interest on Car Loans has Increased- Will It Affect the Buyers? Sources: -

http://www.theedgemalaysia.com/business-news/282841-highlight-interest-on-car-loans-has-increased-quietly.html http://www.theedgemalaysia.com/in-the-edge-financial-daily-today/283103-no-directive-to-increase-rates-on-car-loansfd.html http://www.theedgemalaysia.com/business-news/283020-bank-negara-denies-qdirectiveq-to-hike-rates-for-carfinancing.html myroadtax.com CIMB Malaysia website

5. Can Malaysia’s Economic Growth Reach 5%? Sources: -

http://www.nst.com.my/business/latest/economist-5pc-economic-growth-for-malaysia-1.509365 http://www.theedgemalaysia.com/features/284022-malaysias-gdp-to-grow-49-says-world-bank.html http://www.thestar.com.my/Business/Business-News/2014/02/27/Malaysias-growth-likely-to-be-driven-by-exports/ http://www.theedgemalaysia.com/business-news/282927-adb-forecasts-malaysia-gdp-to-grow-51-this-year-and-5-in2015.html http://data.worldbank.org/country/malaysia http://www.nst.com.my/latest/malaysia-s-gdp-to-grow-5-4-pct-in-2014-rhb-research-1.522886


P a g e | 32

6. Remittances by Foreign Workers in Malaysia Increases Sources: -

http://www.establishmentpost.com/remittances-foreign-workers-malaysia-increases/

7. Keeping Up with the Debts Sources: -

http://www.thestar.com.my/Business/Business-News/2014/03/18/Household-debts-seen-rising-This-is-despite-measuresby-Bank-Negara-to-cool-lending-in-this-segment/ http://www.thesundaily.my/news/997930 http://www.thestar.com.my/business/business-news/2014/03/20/rising-household-debt-it-hits-new-record-of-868-of-gdpon-loans-for-properties-and-motor-vehicles/ http://www.bernama.com.my/bernama/v7/ge/newsperspectives.php?id=1029519

8. Benefits of GST in Malaysia Sources: -

http://www.theedgemalaysia.com/business-news/283323-low-income-groups-may-not-be-able-to-withstand-shocks-fromgst.html http://www.thestar.com.my/Business/Business-News/2014/01/07/EMPLOYEES-SALARIES-MUST-BE-INCREASEDFOLLOWING-GST-IMPLEMENTATION-NEXT-YEAR/ http://www.thestar.com.my/News/Nation/2014/03/20/GST-exemptions-on-many-items-for-lowincome-group/ http://www.nst.com.my/opinion/columnist/gst-better-than-existing-taxes-1.371033 http://gst.customs.gov.my/

9. Second Penang Bridge will Boosts Property Market Sources: -

http://www.theedgemalaysia.com/business-news/283596-rehda-second-penang-bridge-to-boost-mainland-propertymarket.html http://www.theedgemalaysia.com/business-news/278754-najib-second-penang-bridge-will-spur-economic-growth.html http://www.theedgemalaysia.com/in-the-edge-financial-daily-today/278592-new-bridge-turns-eyes-on-seberang-peraiproperties.html

10.What are the forecasts done by HSBC? Sources: -

http://www.theedgemalaysia.com/in-the-edge-financial-daily-today/283592-hsbc-sees-budget-deficit-narrowing-to-35this-year.html http://www.thestar.com.my/Business/Business-News/2014/01/24/HSBC-GDP-growth-at-52-Improvement-in-export-cycleseen-despite-domestic-headwinds/ http://www.nst.com.my/business/latest/hsbc-maintains-malaysia-s-gdp-forecast-1.547353



Zoom In