Author: Pei Ling

Malaysia To Soon Present Cabinet Note On B10, B7 Biodiesel Programs-Minister Kok

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© Nikkei Markets

KUALA LUMPU (Nov 08) — Malaysia plans to soon present a cabinet note that proposes implementation of B10 and B7 biodiesel programs, the minister for primary industries said Thursday. 

“I’ll present a cabinet paper on the implementation of biodiesel B10 for the transport sector and B7 for the industrial sector soon,” Teresa Kok said at a news conference in Purtrajaya. 

The comments follow last week’s budget announcement that proposed implementation of the B10 and B7 biodiesel programs from the next year. 

The biodiesel program, which aims to blend 10% of palm-based methyl ester with 90% traditional petroleum diesel for sale at retail pumps nationwide, was initially designed in 2013 in-part to cut the Southeast Asian country’s swelling palm oil inventory that weighed on prices of the commodity.

However, the program was deferred multiple times due to concerns over potential damage to vehicle’s engine that may prompt manufacturers to dishonor their warranty pledges. A steep decline crude oil prices in 2014-15 also dimmed appeal of the mixed-fuel program.

Meanwhile, Malaysia and Indonesia, the world’s two top producers of palm oil, will jointly combat anti-pam oil campaigns, Kok said.

Kok said Malaysia and Indonesia reject the EU’s Renewable Energy Directive II, which discriminate against palm oil, and the countries will jointly seek new markets for the commodity that is used in everything from ice creams to lipsticks. 

E.U. lawmakers have approved draft measures to reform the local power market that seek to lower energy consumption to meet broader climate goals. The plan includes a ban on the use of palm oil in motor fuels from 2021.

The EU move comes despite heavy protests from Malaysia and Indonesia which together account for more than 80% of global palm oil output.

“We’re very unhappy with EU. We’re doing our very best. We feel that our efforts are not being appreciated,” Kok added. 

– By Gan Pei Ling
– Edited By Abhrajit Gangopadhyay

Malaysia To Save 1.26 Billion Ringgit From Cancelling 4 Power Projects-Minister Yeo

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KUALA LUMPUR (Oct 25) — Malaysia will potentially save 1.26 billion ringgit ($302.2 million) following cancellation of four power projects, the minister of energy, green technology, science, climate change and environment said Thursday.

The projects – a 700MW gas plant in Kapar by Malakoff Corp and Tenaga Nasional, 1,400 MW gas plant in Paka, Terengganu by Aman Majestic Sdn Bhd and Tenaga Nasional, a 300 MW gas plant in Palm Oil Industrial Cluster, Sandakan by Sabah Development Energy Sdn Bhd and SM Hydro Energy Sdn Bhd and a 400 MW solar power quota to Erda Power Holdings – were cancelled “due to the lopsided terms in favour of the project developers,” Yeo Bee Yin said in parliament.

Future power projects will be awarded through open tendering instead of direct negotiation, Yeo said.

Malaysia’s electricity reserve margin remains at the 32% optimal level and the cancelled projects will not result in any negative financial or legal implication to the government, she said.

The government had earlier said it was considering cancelling up to eight power projects to help boost competitiveness and keep a lid on power generation cost.

– By Gan Pei Ling
– Edited By Abhrajit Gangopadhyay

Malaysia To Encourage Investments, Build Plants In Rural Areas Via MIDA

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KUALA LUMPUR (Oct 19) — Malaysia’s federal government will encourage investments and establish factories in rural areas through state-run Malaysian Investment Development Authority to help erase poverty and shrink rural-urban divide, the deputy trade minister said Friday.

The government’s targeted subsidies, welfare schemes and entrepreneurship programs will help alleviate poverty, Ong Kian Ming said at a conference.

“The idea here is to empower people in rural areas to take advantage of online, cross-border markets,” he said.

He said MIDA will continue to work on incentivizing foreign and domestic direct investments to set up factories and operations in less developed areas.

“We can work with state governments to build niche clusters based on local resources and advantages,” he said. “This is part of the strategy to narrow the urban-rural divide.”

The government welcomes high-tech and clean investments to create jobs, he added.

“We want to stress that investments should be high tech and pollution free, provide small and medium enterprises opportunities to work with them and create jobs for locals,” Ong said.

– By Pei Ling Gan
– Edited By Abhrajit Gangopadhyay

Malaysia Paid $50.3 Million In Interest On 1MDB Energy Langat Bonds-Minister Lim

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KUALA LUMPUR (Oct 18) — Malaysia Thursday paid $50.3 million in interest on bonds issued by 1MDB Energy Langat and the government will service all debt obligations of the now-defunct state investment agency, Finance Minister Lim Guan Eng said. 

“Malaysia will not be in default. We’ll make the payments so that it doesn’t affect our (credit) ratings,” Lim told reporters in parliament. 

The government will pay $52.413 million on Nov 11 as interest payments on 1MDB debt and 143.75 million ringgit for sukuk on Nov. 29, he added.  

The Alliance of Hope coalition government that swept to power in May’s shock election outcome has said it will fulfil debt obligations of 1MDB despite such hefty payments weighing on government finances. 

– By Gan Pei Ling
– Edited By Abhrajit Gangopadhyay

Malaysia Considering Cutting Toll Rates, Discount During Off-Peak Hours-Minister Baru

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KUALA LUMPUR (Oct 18) — Malaysia will not scrap road tolls until fiscal health improves even as the government considers cutting the rates or offer 30% discount during off-peak hours, the federal works minister said Thursday.

“We’re still in discussions with concessionaires for alternatives: to lower toll rates, offer a flat rate, offer off-peak 30% discount or freeze the rate for two to three years,” Baru Bian said in parliament. “We will not abolish toll until the fiscal position is healthy again. This is our policy.”

He was responding to a lawmakers’ query on whether the government will fulfil its pre-election promise to abolish tolls.

– By Gan Pei Ling
– Edited By Abhrajit Gangopadhyay

Malaysia Cuts Development Spending, Growth Aim Through 2020 In Economic Roadmap

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KUALA LUMPUR (Oct 18) — Malaysia will cut development expenditure by 15% under a revised five-year plan and won’t meet a previous aim of balancing the budget by 2020 even as the government steps up fiscal consolidation efforts amid slower economic growth.

The government now plans to spend up to 220 billion ringgit, or about $53 billion, under the so-called 11th Malaysia Plan that ends in 2020, according to the Ministry of Economic Affairs’ report.

The economy is expected to expand 4.5%-5.5% between 2016 and 2020, lower than the 5.0%-6.0% growth target when the plan was unveiled in 2015.

Average public investment will contract 0.6% through 2020 although the government pledged to maintain ‘high-impact’ projects to boost economic growth, the report said. Robust domestic demand and resilient exports will continue to power growth in the third-largest Southeast Asian economy.

“Swift implementation of these difficult and crucial reforms is likely to have short-term impact on growth but the trade-off is necessary to maintain the economy on a sustainable growth path,” the report said.

Since sweeping to power in a shock May 9 election outcome, the new government has scrapped several costly infrastructure projects and put others on review as Prime Minister Mahathir Mohamad seeks to mend Malaysia’s finances amid mounting government debt.

The government has scrapped the unpopular goods-and-services tax that netted some $10 billion in revenue last year and re-introduced a single-tier sales and services tax. By 2020, fiscal deficit will remain at 3.0% of gross domestic product instead of a balanced budget as previously projected, the report said.

“The government is confident its fiscal position could recover at the end of 2020 with improvement in governance and increased revenue,” Mahathir told lawmakers in a nearly-two hour speech highlighting the mid-term review of the 11th Malaysia Plan.

Among others, the 93-year-old premier said the government will improve its procurement processes that will include enforcing open tendering to bring in more transparency.

The government will also review implementation of ‘unsustainable’ projects and scrap projects with “low priority,” Mahathir said. A special task force will be established to review roles of sprawling state-run agencies and government-owned companies, he added.

Economists said the revised targets are achievable although execution remains a key concern even as the government is backed by popular expectations for political and economic reforms.

“The plan is good, but the execution is equally critical,” Lee Heng Guie, executive director of think-tank Socio-Economic Research Center. “You can give a very good macro policy management, but without supported by good institutional reform, we may not see the desired result.”

To plug the fiscal gap, the government said it will undertake a “comprehensive review” of investment policies including incentives and lift indirect taxes and other non-tax revenue.

Still, Malaysia expects to achieve high-income status by 2024 when annual per capita income reaches $12,056, longer than the 2020 initial target set by the previous administration.

“The government will balance economic growth objectives and fiscal consolidation initiatives to ensure continuous and inclusive development without impairing growth prospects,” Minister of Economic Affairs Azmin Ali said in the report.

– By Jason Ng and Gan Pei Ling
– Edited By Abhrajit Gangopadhyay