Category: News

World Bank Cuts Malaysia 2018 Economic Growth Aim On External Risks

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© Nikkei Markets

KUALA LUMPUR (Dec 18) — The World Bank Tuesday trimmed its 2018 economic growth forecast for Malaysia to 4.7% from 4.9% citing external headwinds arising from the U.S.-China trade tension and volatile commodity prices.

The multilateral agency, which forecasts the economy to expand at the same pace next year in its Malaysia Economic Monitor report, expects private consumption to drive growth through 2019, while exports growth rate is expected to stay modest at 3.0% next year compared with an estimated 2.8% in 2018.

“We revised down (the economic growth forecast) due to two developments: lower government spending and investments,” World Bank’s Malaysia Economist Shakira Teh Sharifyddin said at a news conference.

Since sweeping to power in a shock May 9 election, the new Alliance of Hope coalition 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.

Gross fixed capital formation – a proxy for investment – is expected to expand “modestly” with lower-than-expected public spending dampening growth prospects, the World Bank said in East Asia and Pacific Economic Update report. It projects gross fixed capital growth to decelerate sharply to 2.1% this year from 6.2% in 2017.

The World Bank is the latest to downgrade its economic growth projections for the trade-dependent Southeast Asian nation. In September, the Asian Development Bank lowered its Malaysian economic growth forecast to 5.0% for this year and 4.8% in 2019 citing risks of sluggish exports growth and subdued domestic investment.

The recent downgrades mark a sharp turnaround from April when the World Bank had raised its forecast for Malaysia’s economic growth to 5.4% this year from a previous projection of 5.0% but had cautioned risks from shifts in external demand and financial market conditions.

Malaysia’s economic growth rate has decelerated for four straight quarters and expanded 4.4% in July-to-September. The central bank has said it is confident that the economy will likely grow 4.8% this year.

“With Malaysia’s economy tightly integrated with the global economy through financial and trade linkages, increased uncertainty in the external environment poses downside risks in the near term future,” the multilateral agency said. The country’s heavy reliance on oil-related revenue also pose challenge to the fiscal space in cases of price or supply shocks, it added.

The crude exporting Southeast Asian country counts hefty dividend from state-run oil explorer Petroliam Nasional, or Petronas to boost its non-tax revenue that is crucial for meeting budget deficit targets.

Still, the World Bank is “encouraged to see the Malaysian government taking measures to both preserve growth, restore fiscal buffers, and improve governance,” said Mara Warwick, World Bank’s Country Director for Brunei, Malaysia, Philippines and Thailand. “Such reforms will pay dividends over time, with efforts to improve not just the quantity of economic growth, but also of the quality of economic growth.”

The government has scrapped an unpopular but remunerative goods-and-services tax that netted some $10 billion in revenue last year and re-introduced a single-tier sales and services tax. It also plans to tax foreign service providers and adopt a more targeted fuel subsidy scheme to fix its strained finances. Still a narrower revenue base and dependence on fickle oil-related income could limit its flexibility to make fiscal adjustments against future macroeconomic shocks, the World Bank said.

– By Gan Pei Ling
– Edited By Abhrajit Gangopadhyay

Malaysia Hiap Teck Joint Venture To Be Profitable If Current Steel Price Holds-Official

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© Nikkei Markets

KUALA LUMPUR (Dec 17) — Malaysian steelmaker Hiap Teck Ventures expects its joint venture company Eastern Steel to be profitable if the price of steel slabs remains at the current level of $450/ton, its group executive director said Monday.

“We are operating at our full capacity of 700,000 tons per annum and have incurred positive cash flow,” Foo Kok Siew told reporters after its annual shareholders’ meeting in Selangor.

Hiap Teck Ventures was in the red from 2015 to 2017 after operations at the Eastern Steel were stalled. “Our downstream operations (trading and manufacturing) have always been profitable,” Foo added.

Eastern Steel’s furnace in Kemaman, Terengganu ceased production after steel slabs price dropped to $250/ton in 2015, thanks to the influx of cheap imports from China. It resumed production in July this year after the Chinese production capacities fell.

Foo said 60% of Eastern Steel’s production is exported to the neighboring countries mostly to the Philippines, Indonesia, Thailand and Taiwan.

– By Gan Pei Ling
– Edited by Sayantika Bhowal

Malaysia Tabung Haji To Offload Under-Performing Assets Worth MYR19.90 Bln-CEO

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© Nikkei Markets

KUALA LUMPUR (Dec 11) — Malaysia’s state-run Muslim pilgrimage fund board, Lembaga Tabung Haji, will transfer under-performing assets worth 19.90 billion ringgit ($4.76 billion) to a state-run special purpose vehicle as a part of its broader restructuring plan, its managing director and chief executive said Tuesday.

“We’re transferring the assets to an SPV, owned by the Ministry of Finance before Dec. 31,” Zukri Samat said at a news conference.

The underperforming assets include equity investments that have lost more than 20% in value and properties with a yield of less than 2%.

In exchange, the Ministry of Finance-owned SPV will issue Islamic bonds, or sukuks worth 10 billion ringgit and Islamic redeemable convertible preference share worth 9.90 billion ringgit to Tabung Haji.

“The sukuk will be subscribed by Tabung Haji. We cannot go to the market to sell the sukuk. We’re proposing a seven-year sukuk so that the SPV has time to (turn around) the (underperforming) assets,” said Zukri.

The Islamic redeemable convertible shares won’t have maturity timeframe and yield no dividend.

Tabung Haji would also be placed under Bank Negara’s supervision from Jan.1, 2019, Zukri added.

With this recovery plan, the fund hopes it would be able to improve its balance sheet for the financial year 2018. 

It has been in the limelight for allegedly issuing dividends to its depositors since 2014 even as its liabilities exceeded the value of its assets as of the financial year 2017, the Islamic affairs minister informed the parliament Monday. 

– By Gan Pei Ling
– Edited by Sayantika Bhowal

Malaysia Probing Top Glove After Firm Admits To Breaching Overtime Cap-Minister

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© Nikkei Markets

KUALA LUMPUR (Dec 10) — Malaysia’s federal labour department is probing Top Glove Corp for violations of some labour laws after it found the company breached the legal working hour limit, the human resources minister said Monday.

Some of the workers of the world’s largest rubber glove maker clocked more than 104 hours of overtime per month, Kulasegaran told reporters after visiting the company’s plant in Selangor.

“They (Top Glove) have themselves admitted. It’s an offense under the law,” he said.

Suggestions from an independent committee on foreign workers to improve working conditions will be submitted to the cabinet this month, he added.

Labour Department Director General Mohd Jeffrey Joakim said his department is still interviewing workers to verify other complaints of labour abuses reported by The Guardian and Thomson Reuters Foundation recently.

Top Glove’s Chairman Lim Wee Chai said the company is committed to ensure the welfare of its work force and is cooperating with official investigation.

– By Gan Pei Ling
– Edited By Abhrajit Gangopadhyay

Malaysia Petronas May Build 32-KM Gas Pipeline To Connect Terengganu Industrial Park-CEO

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 © Nikkei Markets

KUALA LUMPUR (Dec 06) — Malaysia’s national oil and gas company Petroliam Nasional or Petronas may build a 32-kilometer gas pipeline connecting a new industrial park in the Terengganu state, Group Chief Executive Wan Zulkiflee Wan Ariffin said Thursday. 

The company will conduct a feasibility study to assess demand for gas and power at the new industrial park, he said at a pact signing event with the investment arm of the Terengganu state. 

“Apart from gas supply, the study also involves technical assessment of the feasibility to build a 32 km gas transmission and distribution pipeline from Santong to the industrial park,” Wan Zulkiflee said. 

Terengganu’s Chief Minister Ahmad Samsuri Mokhtar expects to attract 13 billion ringgit worth of investments to the industrial park – Terengganu Silica Valley – to create 7,200 jobs. 

– By Gan Pei Ling
– Edited By Abhrajit Gangopadhyay

Malaysia To Announce In 1Q Regulatory Framework For Peer-To-Peer Home Financing-SC Chairman

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© Nikkei Markets

KUALA LUMPUR (Nov 28) — The Securities Commission of Malaysia will announce in the first quarter of next year the regulatory framework for peer-to-peer home financing, its chairman said Wednesday.

“We’ve completed the first draft for the FundMyHome peer-to-peer, equity crowd financing platform,” Syed Zaid Albar told reporters. “We’ll engage with all the stakeholders.”  

Earlier this month, while announcing the federal budget for 2019, the finance minister said private sector would be allowed to engage in peer-to-peer lending scheme, governed by the capital markets regulator, to help home buyers purchase properties through crowd funding mechanism. 

– By Pei Ling Gan
– Edited By Abhrajit Gangopadhyay