Tuesday, November 29, 2016

Berjaya Group launches Four Seasons Hotel & Residences Kyoto with great fanfare

By Sharen Kaur from Kyoto, Japan

KYOTO: Berjaya Group has officially launched the Four Seasons Hotel & Residences Kyoto, here and expects earnings to be immediate.

Founder Tan Sri Vincent Tan, who dubbed the Four Seasons Kyoto a trophy asset, anticipates the property to be in the black in fiscal year 2017, led by sales of the residences.


Four Seasons Kyoto has a total of 123 hotel rooms and 57 units of serviced residences. Since the launch in June this year, more than half of the serviced residences have been sold for between US$5,000 and US$6,000 per sq ft, said Tan.

"For the remaining units, we plan to raise the selling price and we already have Japanese investors waiting to buy. We are quite confident to sell everything by early next year.

"The project was funded by RHB Bank of Malaysia, Mizuho Bank, Shinsei Bank and Tokyo Star Bank, and we expect the payback period to be quick because of the total sales achieved so far," said Tan, after the opening yesterday.

Johor Ruler Sultan Ibrahim Sultan Iskandar and Mayor of Kyoto City Daisaku Kadokawa were the guests of honour officiating the event.

Also present were Tunku Tun Aminah Maimunah Iskandariah Sultan Ibrahim, Puan Sri Esther Tan, Tan Sri Danny Tan, Puan Sri Ivy Tan, Low Siew Beng (Vincent Tan's mother), Ambassador of Japan in Malaysia Makio Miyagawa, Ambassador of Malaysia in Japan Datuk Ahmad Izlan Idris, Governor of Kyoto Prefectural Office Keiji Yamada, founder and chairman of Four Seasons Hotels and Resorts Isadore Sharp, and Berjaya Corp Bhd chairman and chief executive officer Datuk Seri Robin Tan.

Four Seasons Kyoto was built by Kyoto Higashiyama Hospitality Assets TMK, a subsidiary of Berjaya Kyoto Development (S) Pte Ltd (BKyoto), which in turn, is a 50:50 joint venture company between Berjaya Corp and Berjaya Land Bhd.

BKyoto invested a total of US$380 million, inclusive of land cost, to develop Four Seasons Kyoto - the Berjaya group's signature and flagship development in Japan.



This development represents Berjaya’s third major project in North Asia after the Integrated Resort Development in Jeju, South Korea and the Great Mall of China Project in Beijing, China.

Four Seasons Kyoto general manager Alex Porteous said the average room rate (ARR) for the property is about US$1,000 and that it would be raised next year.

He also expects the average hotel occupancy to be in the region of 65 per cent in the first year of operation.

"There will be an incremental increase in AAR year-on-year. Kyoto is a big market, so there is a huge pie for us. Our advantage is that we are one of two high-end five-star accommodations in Kyoto," said Porteous.

Meanwhile, Four Seasons founder Isadore Sharp said the Four Seasons Kyoto is the 101st property under the group and he is confident that it will be one of the world's best.


Thursday, October 6, 2016

Higher GDV target for Encorp Bhd's Malacca project

By Sharen Kaur
Published in NST, October 6, 2016

KUALA LUMPUR: ENCORP Bhd has revised upwards the gross development value (GDV) target for its integrated township project in Bukit Katil, Malacca, by 30 per cent to about RM4.1 billion.
 
  Chairman Tan Sri Mohd Isa Abdul Samad told Business Times that he was confident the market value would pick up next year, given the strong key economic indicators.
 
  Encorp, which posted a net profit of RM8.8 million for the six months ended June 30, had earlier this year cut the GDV forecast for the project to RM3.2 billion because of unfavourable market conditions.
 
  Although it has now raised the GDV back to more than RM4 billion, it is still below the initial target of RM4.9 billion announced in June last year.
 
  This was when Encorp inked a memorandum of understanding (MoU) with its major shareholder - the Federal Land Development Authority (Felda) - to develop the latter's 259.3ha of leasehold land for the Bukit Katil project.
 
  "When we first estimated the GDV to be RM4.9 billion, we didn't expect the market to slow down. We see the market improving and it will get better. Right now, I can say the target is about RM4 billion.
 
  "Hopefully by the time we launch Phase 1 of the project, the market will improve further," said Isa.
 
  He said the Bukit Katil project would be developed in several phases and each would be rolled out over 10 years based on market demand.
 
  The project, of which location a nine-minute drive from the Ayer Keroh toll plaza and about 18 minutes from Bandar Hilir, would offer a mixture of residential and commercial properties on a 80:20 ratio.
 
  Encorp, via its wholly-owned subsidiary Encorp Bukit Katil Sdn Bhd, aims to launch Phase 1 in the third quarter of next year.
 
  It acquired the development rights from Felda, which holds a 70.97 per cent stake in the company via investment arm Felda Investment Corp Sdn Bhd in a deal that valued the land at RM380 million, or RM13.61 per sq ft.
 
  The amount adds up to RM583.6 million, considering that it is to be paid over 13 years and at a discount rate of about nine per cent.
 
  Last Wednesday, Encorp told Bursa Malaysia that the proposed acceptance of development rights from Felda by Encorp Bukit Katil, in relation to the development of the land parcel, had been completed.
 
  Encorp shares closed five sen higher at 74 sen yesterday.


Friday, September 2, 2016

Sg Segget River restoration project a game-changer for JB

By Sharen Kaur
Published in NST, September 1, 2016

KUALA LUMPUR: The Sungai Segget rejuvenation project, which is part of the RM20 billion plan to transform Johor Baru's old city into a world-class metropolis, is a game-changer.
 
  Iskandar Regional Development Authority (Irda) chief executive officer Datuk Ismail Ibrahim said the project would transform the river and the adjacent Jalan Wong Ah Fook into a vibrant area.
 
  He told the New Straits Times that it would also make Johor Baru a sustainable city by providing economic activities, lifestyle and amenities that were in line with the Johor Baru City Council, Irda and Iskandar Malaysia's vision.
 
  The estimated cost to rejuvenate the 1.3km-long and 25m-wide river is RM240 million.
 
  The project is similar to the Cheonggyecheon river restoration in Seoul, South Korea, which underwent a 386 billion won (RM1.38 billion) facelift in 2003.
 
  An elevated highway over the polluted Cheonggyecheon river was demolished and replaced with a 5.76km restored stream with parallel roadways, improving the area's environment and beauty.
 
  The restoration process had provided huge boosts to local biodiversity and catalysed the city's economic development.
 
  Ismail said the works at Sungai Segget, which was once a busy trading port, was vital for the city's future.
 
  The project started more than a year ago and consists of two packages. Package 1 involves the development of the Sungai Segget Integrated Water Treatment Plant while Package 2 is to develop a mitigation and sewerage system.
 
  Ismail said the final stage of the project would be carried out under Package 3. Package 3 involves the beautification of Sungai Segget and upgrading of Jalan Wong Ah Fook.
 
  "Once completed, Sungai Segget and Jalan Wong Ah Fook will turn into the new green lung in Johor Baru city centre," he said.
 
  Ismail said to ensure that Sungai Segget was well maintained, a Special Purpose Vehicle (SPV) would be set up.
 
  "This SPV is required for the maintenance of facilities to ensure that the river system meets the objective of being clean and flood-free.
 
  "The SPV may involve the state government and Irda. Nonetheless, it is still in its initial stage. Once everything is ready, an announcement on this will be made," he said.

'MRT Line 3 may cost RM50b'

By Sharen Kaur
Published in NST, August 15

KUALA LUMPUR: THE mass rapid transit (MRT) Line 3, which will loop around the city, may cost at least RM50 billion as a large portion would be underground, say sources.
 
  They said the MRT Line 3 might cover a distance of between 45km and 48km, or longer depending on the final alignment.
 
  "We know that more than 50 per cent of Line 3 will be built underground because it is in the city centre. It could involve 35km of underground tunnelling and that would cost RM35 billion.
 
  "Underground portions are more expensive than at-grade transit lines or elevated guideways. For every 1km of the MRT Line that is built underground with stations and all, the cost is about RM1 billion," sources told Business Times.
 
  The other parts of Line 3 will be either at-grade or have elevated guideways and the cost per kilometre for the latter could be between RM300 million and RM400 million.
 
  "We also need to include the train sets to serve the line. So roughly we are looking at about RM50 billion in construction cost for Line 3," said the source, adding that the new line was expected to have between 25 and 28 stations.
 
  The MRT project, the country's largest infrastructure development, comprises three lines that will serve as the backbone of the integrated public transport network for the Klang Valley.
 
  They first two are the Sungai Buloh-Kajang (SBK) Line 1 and Sungai Buloh-Serdang-Putrajaya (SSP) Line 2.
 
  The underground portion of the SBK Line cost RM8.3 billion for 9.5km, while the SSP underground line cost RM15.47 billion for 13.5km.
 
  Overall, the construction cost for the SBK Line is RM23 billion while for the SSP Line, it is expected to be RM30 billion.
 
  The source said Line 3, also known as the Circle Line, was in the final planning and evaluation stage.
 
  Line 3 is expected to cover the hotspots surrounding Ampang Jaya, Kuala Lumpur City Centre, Jalan Bukit Bintang, Tun Razak Exchange, Bandar Malaysia, KL Ecocity, Pusat Bandar Damansara, Mont Kiara and Sentul.
 
  On Friday, Mass Rapid Transit Corp Sdn Bhd (MRT Corp) chief executive officer Datuk Seri Shahril Mokhtar said the company expected to submit the study on Line 3 to the government by year-end.
 
  "We started the feasibility study early this year and we will present it to the Land Public Transport Commission (by year-end)," he said after the signing of a memorandum of understanding between Credit Guarantee Corporation Malaysia Bhd and MRT Corp.

Maglev trains for JB region by 2019

By sharen kaur
Published in NST on Sept 1, 2016

KUALA LUMPUR: A PRIVATE company is proposing to build a mass rapid transit (MRT) system in Johor using magnetic levitation, or Maglev technology.
 
  Johor ruler Sultan Ibrahim Sultan Iskandar told the New Straits Times in an interview recently that a company was studying the possibility of setting up the Maglev MRT project.
 
  The sultan said the project, which was not related to the Kuala Lumpur-Singapore high-speed rail (HSR) system, would link Johor Baru, Pasir Gudang, Kempas, Iskandar Puteri and other areas around the state capital.
 
  He said the company was also looking at the proposal to extend the services to Singapore in view of the daily congestion on the Causeway.
 
  The Maglev trains in Johor would be a breakthrough for the country.
 
  Currently, the Federal Government is constructing two MRT lines in the Klang Valley - Sungai Buloh-Kajang (SBK Line) and Sungai Buloh-Serdang-Putrajaya (SSP Line) - using standard-gauge trains.  
 
  The difference between Maglev and standard-gauge train is that a Maglev train does not have wheels - it uses a strong electromagnetic force to lift and propel it forward.
 
  Unlike standard-gauge trains, there is no friction between the wheels and tracks in Maglev trains, therefore, reducing wear and tear.
 
  While Maglev trains are more expensive, their characteristics and infrastructure requirements make them easier for expansion of service when passenger demand grows, without having to build huge trains and stations. This allows savings on cost of implementation and land acquisition.
 
  Meanwhile, sources close to the Johor company said the proposed Maglev line in Johor was expected to use low-speed trains due to the short length of the proposed tracks, which was slightly more than 100km.  
 
  The sources said the MRT project would link Johor Baru city centre to Kulai, Ulu Tiram, Pasir Gudang and Iskandar Puteri, and the company had obtained the exclusive right to do a feasibility study.
 
  "The exclusive right was given by the Johor State Economic Planning Unit (UPAC) a few months ago after a presentation by the company."
 
  The sources said the company would be embarking on the study soon, which it expected to complete in six months. The study report would be submitted within the first-half of next year.
 
  It is understood that the company planned to finish building the Maglev MRT line in 2019. No estimates were given in terms of construction cost but a project of that scale could easily exceed RM40 billion.
 
  In comparison, the construction cost for the Klang Valley SBK Line, which is 51km long, is RM23 billion while the SSP Line, which is 52.2km in length, is RM32 billion.
 
  The Maglev MRT project will greatly benefit Johor as the state population is expected to increase with infrastructure development and housing projects.
 
  Sources said the line would integrate with the HSR project in Iskandar Puteri, and also the Keretapi Tanah Melayu Bhd train services at JB Sentral.


Wednesday, August 10, 2016

MRT extends CEO Shahril's contract for two more years

By Sharen Kaur
Published NST Online, August 10, 2016

KUALA LUMPUR: Datuk Seri Shahril Mokhtar's contract as chief executive officer (CEO) of Mass Rapid Transit Corp Sdn Bhd (MRT Corp) has been extended by two years effective January 1, 2017.

Shahril, who holds a Master of Management from the University of Malaya, was appointed CEO of MRT Corp effective January 1, 2015 to oversee the country’s biggest infrastructure project.

MRT Corp CEO Datuk Seri Shahril Mokhtar's contract has been extended for another two years, effective Jan 1, 2017
MRT Corp, a wholly owned subsidiary of Minister of Finance Inc Malaysia, is the developer and owner of the Klang Valley Mass Rapid Transit (KVMRT) project.

The project involves the construction of a rail-based public transport network comprising three lines - Sungai Buloh-Kajang (SBK) Line; Sungai Buloh-Serdang-Putrajaya Line; and Circle Line.

Shahril, who currently sits on the Board of Prasarana Negara Bhd and MyHSR (High Speed Rail) Corp Sdn Bhd, both wholly-owned units of the MOF Inc, has played a key role in helping to develop the country's transport industry.

Before being appointed as CEO of MRT Corp, he was group managing director of Prasarana, a position which he held since 2010.

Prior to that, he was chief operating officer of Suruhanjaya Pengangkutan Awam Darat (SPAD).

Before joining SPAD, Shahril was attached to RapidKL as its general manager of corporate planning.

While serving in that position, he was seconded as an Adviser to the Economic Planning Unit in the Prime Minister’s Department where he was involved in drafting the Land Public Transport Commission Act 2010 and the Land Public Transport Act 2010.

Shahril was also involved in the laboratory for urban public transport improvement which was held as part of the Government Transformation Plan.

Among the other positions he has held were general manager of Corporate Services in Penerbangan Malaysia Bhd, manager at PricewaterhouseCoopers Malaysia and British American Tobacco (M) Bhd, and senior executive in the Maybank Group.

Tough times for real estate sector

By Sharen Kaur
Published in NST, August 10, 2016

KUALA LUMPUR: Certain real estate segments, including high-end condominiums, in key areas in Malaysia may not be in the pink of health now and in the near future, according to Knight Frank Malaysia.

The global property consultant, however, said there would be growth despite the cloudy outlook for all market sectors amid weakening in the domestic economy and global uncertainties.




The country’s economic growth would continue to be driven by significant increase in construction activities, in particular infrastructure projects, according to Frank Knight Malaysia’s half-year real estate report released yesterday.

The report looks at market performance across the property mix of residential, office and retail, and highlights the trends and outlook in four key markets in Malaysia — Kuala Lumpur, Penang, Johor Baru and Kota Kinabalu.

“The slew of infrastructure-related projects in the country will inevitably shift the focus of future developments,” said Frank Knight Malaysia managing director Sarkunan Subramaniam.

He expects more activities along the various transportation routes as a higher segment of the population embraces public transport.

With Phase 1 of the Mass Rapid Transit Sungai Buloh-Kajang Line slated to be operational by year-end, urbanites in Klang Valley would experience improved mobility, he said.

“Penang is benefiting from the RM337 million Bayan Lepas Expressway that was opened to traffic in early April. Sabah is also set to benefit long term from big infrastructure projects, such as the Pan-Borneo Highway and Bus Rapid Transport system.”

On the recent signing of the memorandum of understanding (MoU) between Malaysia and Singapore for the high-speed rail (HSR) project, Subramaniam said it was a step closer to bringing the “game-changer” to reality.

The MoU was signed on July 19 in Putrajaya. The 350km HSR project, targeted for commercial operations in 2026, would reduce travel time between here and Singapore to 90 minutes.

The report also highlighted that the high-end condominium market here remained lacklustre as potential buyers and investors continued to adopt a “wait-and-see” approach.

The report said multinational corporations from marine and offshore sectors were enticed to relocate here in view of attractive currency and competitive rental rates.

It added that consumers continued to hold back on spending, as evident from weaker retail sales data in the Klang Valley in the first quarter of this year (-4.4 per cent) against the 1.3 per cent growth in the fourth quarter of last year.

However, there are still opportunities in the Klang Valley retail market, particularly in upcoming under-served but well-populated areas.

The report said Iskandar Malaysia in Johor was still attractive to investors with cumulative investments so far standing at RM202 billion.

Wednesday, August 3, 2016

2 MRT jobs to be awarded in Sept

By Sharen Kaur
sharen@mediaprima.com.my

Published in NST, August 3 2016



KUALA LUMPUR: Mass Rapid Transit Corp Sdn Bhd (MRT Corp) will award two packages worth about RM1.5 billion for the MRT Sungai Buloh-Serdang-Putrajaya (SSP) Line next month.

Chief executive officer Datuk Seri Shahril Mokhtar said the packages were for automotive fare collection worth more than RM100 million and track work valued at around RM1.3 billion.

Both packages would be awarded by September 30, he told Business Times at MRT Corp’s Hari Raya open house, here, yesterday.


Shahril (right) presenting a mock cheque to Yayasan Chow Kit programme coordinator Mohd Noorjamil Mohd Issak at the company's Hari Raya open house in Kuala Lumpur

“We will also award two viaduct packages, worth RM600 million to RM700 million each, between October and December.”

Next year, several other packages worth more than RM3 billion would be awarded, added Shahril.

They include four or five viaduct packages and at least 10 station packages.

“In April, we will open up 11 packages, worth between RM60 million and RM70 million each, to build multi-storey carparks. After that will come the smaller packages for signages and others.” Shahril said.

 MRT Corp had so far awarded packages worth a total of RM24 billion for the 52.2km SSP line, adding that he was happy with the progress. The packages previously awarded included eight advanced work packages, four viaduct work packages, two designated contractor/supplier packages, three system work packages, a depot work package and an underground work package.

The RM15.47 billion underground work package was awarded to MMC Gamuda KVMRT (T) Sdn Bhd to build 11 underground stations covering 13.5km of tracks.

Shahril said with the new awards between this month and December next year, the company would have dished out packages close to RM31 billion.

“The progress has been excellent. We are going to do the ground-breaking for Putrajaya Sentral on August 26, meaning starting physical works.

“We have awarded viaduct packages to Sunway Construction Sdn Bhd, IJM Construction Sdn Bhd, Ahmad Zaki Sdn Bhd and Malaysian Resources Corp Bhd (MRCB), and they are going to start working at the end of this month.”

Sunway Construction will build three stations from Damansara Damai to Sri Damansara at a cost of RM1.4 billion and Ahmad Zaki will construct four stations from Kepong Sentral to Jinjang for RM1.44 billion.

IJM Construction will build four stations from Sri Delima to Jalan Ipoh for RM1.47 billion and MRCB will construct two stations from Cyberjaya to Putrajaya for RM648 million.

MRT (SSP) Line project may cost up to RM40b, says MRT Corp

By Sharen Kaur
sharen@mediaprima.com.my

Published in NST, August 3, 2016



KUALA LUMPUR: Mass Rapid Transit Corp Sdn Bhd (MRT Corp) said the total cost for the MRT Sungai Buloh-Serdang-Putrajaya (SSP) Line could be anywhere between RM35 billion and RM40 billion.
  “We have not finalised the actual cost for the SSP Line but for construction alone, we have budgeted RM32 billion,” MRT Corp chief executive officer Datuk Seri Shahril Mokhtar told Business Times.
  “With the project delivery partner and all, we expect the total cost to be between RM35 billion and RM40 billion,” he said.
  The 52.2km SSP Line will serve a corridor with a population of around two million in Damansara Damai, Jalan Ipoh, Kampung Baru, Kuala Lumpur City Centre, Tun Razak Exchange, Kuchai Lama, Seri Kembangan and Cyberjaya.


  Phase 1 of the SSP Line will run from Kwasa Damansara to Kampung Batu, and comprise 12 stations.
  It is targeted for completion by July 2021. Phase 2 is expected to be completed in the second quarter of 2022.
  It will have 11 underground stations and 26 elevated stations.
  The MRT project is the country’s largest infrastructure development and backbone of the city’s public transport network.
  It started with the MRT Sungai Buloh-Kajang (SBK) Line, where the construction cost for the 51km network is RM23 billion.
  Shahril said construction of the SBK Line was on schedule and within the targeted cost.
  “Progress is now at 86 per cent. We have a few months before Phase 1 of the SBK Line between Sungai Buloh station and Semantan station is operational by the end of the year.”
  The mechanical and electrical system works are undergoing testing while trial runs for the trains will begin in October.
  He said Phase 2 of the SBK Line, which covered the underground and southern elevated sections, was also progressing well and would be ready for operations in July next year.

Tuesday, August 2, 2016

KL-Singapore high speed rail alignment almost finalised

By Sharen Kaur
sharen@mediaprima.com.my

Published in NST, July 25, 2016


KUALA LUMPUR: THE 350km alignment for the Kuala Lumpur-Singapore High-Speed Rail (HSR) project is more or less finalised, said sources.
 
  According to government sources, four design criteria - geology, land, topology and geometry - were used as input to determine the alignment.
 
  "Looking at the alignment today, a lot of work has gone into it. We don't want the project cost to run up because of land acquisition, relocation of houses, transmission towers, electrical supply and communication systems.
 
  "Areas were selected to avoid the relocation of such things, and also to minimise tunnelling work. There will be some tunnelling work here, in particular around Bandar Malaysia as the area surrounding this new city is congested.
 
  "There will be more tunnelling involved for Singapore up to the point of Jurong East and this is going to cost them a lot," said sources.
 
  One of the key benefits of the HSR is that the travel time between Kuala Lumpur and Singapore will be reduced to 90 minutes.
 
  The HSR will have eight stops, a terminus each in Bandar Malaysia and Jurong East, and six transit stations in Putrajaya, Seremban in Negri Sembilan, Ayer Keroh in Malacca and Muar, Batu Pahat and Iskandar Puteri in Johor.
 
  Business Times had reported that the HSR project is expected to cost around RM60 billion.
 
  This is provided the link between Iskandar Puteri and Singapore on the Straits of Johor is via an overhead bridge.  Constructing a sea tunnel will increase the cost by four times.
 
  At least 335km of the HSR system will run in Malaysia and 15km in Singapore.
 
  The terminus in Bandar Malaysia and Jurong East, as well as the transit stations, will be designed to integrate with local public transport systems.
 
  At Bandar Malaysia, the terminus will be linked to four lines - the Express Rail Link (ERL), Keretapi Tanah Melayu (KTM), Mass Rapid Transit (MRT) Sungai Buloh-Serdang-Putrajaya Line 2 and the Ampang Light Rail Transit (LRT).
 
  The MRT Line 2 will have an interchange at Chan Sow Lin LRT Station (Ampang Line) and Sungai Besi LRT Station (Ampang Line-Sri Petaling Branch).
 
  Based on MyHSR Corp Sdn Bhd's website, the HSR is required to cater to mobility and market demand today and in the future between the two countries.
 
  At present, the demand on the Causeway exceeds capacity by 33 per cent, resulting in acute traffic congestion.
 
  Traffic would continue to grow at a rate comparable to the gross domestic product growth of Malaysia and Singapore, at an average three per cent to five per cent, the company said.
 
  Over the longer term, growth rates are expected to taper off, in line with expectations for a maturing market, with an average growth of 3.2 per cent per year from 2011 to 2060, with a market of 251 million passenger trips by 2060.

"HSR (high speed rail) will make money within concession period'

By Sharen Kaur
sharen@mediaprima.com.my

Published in NST, July 30, 2016


KUALA LUMPUR: Train-operating companies for the High-Speed Rail (HSR) connecting Singapore and here will make money within the concession period.
 
  Malaysian developer and asset owner MyHSR Corp Sdn Bhd chief executive officer Mohd Nur Ismal Kamal told the New Straits Times that operators were expected to make money from day one of the concession.
 
  Concession starts when the HSR is completed and ready for operation in 2026. Two train-operating companies will be appointed.
 
  One will operate the cross-border services between here and Singapore, while another will run domestic services within Malaysia.
 
  The HSR will have eight stops, a terminus each in Bandar Malaysia and Jurong East, and six transit stations in Putrajaya, Seremban in Negri Sembilan, Ayer Keroh in Malacca, and Muar, Batu Pahat and Iskandar Puteri in Johor.
 
  Nur Ismal said the concession period would be between seven and 10 years.
 
  He said operators would have to bid for the concession via an international open tender.
 
  "It can be any private party, whether from Malaysia or other countries. They must have a good track record and the ability to perform."
 
  A report from Nanyang Technological University said HSR projects typically struggled for years before turning a profit.
 
  For example, the Eurotunnel linking the United Kingdom and France was profitable only after 26 years.
 
  With operating deficits common among most HSR operators globally, the Kuala Lumpur-Singapore HSR might not be an exception, the report said.
 
  But, Nur Ismal said Malaysia planned to use a business model similar to that in the UK, which demonstrated the ability of HSR systems to run profitably.
 
  In the UK, operators would lease trains from Rail Rolling Stock Companies and they would pay Network Rail for the rights to use the track.
 
  There are several ways to operate an HSR system. One is to separate the infrastructure that combines civil and railway assets versus the operator as another layer, or have everything integrated.
 
  For the Kuala Lumpur-Singapore HSR, there is a separation between the infrastructure, rail operating assets and operator.
 
  "In the model that we have adopted, the operators do not have to invest in civil infrastructure, rail operating assets and operations. MyHSR will build the civil infrastructure, and AssetCo will build the railway operating assets, which include the track, signalling, communication, power and rolling stock.
 
  "The operators will use trains from AssetCo. They do not have to invest in anything other than human capital, and maybe, small infrastructure to support their operations. These are all minimal hard-asset investments."
 
  Nur Ismal also pointed out that operators would not have legacy assets and liabilities that would eat into their margins.
 
   All they had to do was focus on running operations as efficiently as possible and attract as much ridership as possible, he said.
 
   He said if operators did not perform during the concession period or performed below expectations, then they would be replaced.
 
  "We will know how they perform. We can see the number of people taking flights and how many still drive (from here to Singapore and vice versa). If operators fail to migrate these people, then we know they are not performing, and we will go out to the market and re-tender."


  /ends

Land deal freeze along HSR route

By Sharen Kaur
sharen@mediaprima.com.my

Published in NST, August 2, 2016


KUALA LUMPUR: MYHSR Corp Sdn Bhd will lay out plans for the authorities to freeze all land transactions along the Kuala Lumpur-Singapore high-speed rail (HSR) corridor.
  The HSR, which will link Bandar Malaysia, here, to Jurong East in Singapore, has a total length of 350km and will require a lot of land.
  However, MyHSR Corp chief executive officer Mohd Nur Ismal Kamal said the construction of the HSR would involve minimal displacement of families and businesses.
  About 335km of the alignment will be built in Malaysia and the rest in Singapore.



  The alignment would be the longest in Johor, about 150km to 160km, Nur told Business Times.
  “Because the alignment is the longest in Johor, there will be more land acquisitions there.”
  There will be three transit stations in Johor, namely Muar, Batu Pahat and Iskandar Puteri.
  Nur said a budget had been estimated for land acquisitions and compensation but he declined to reveal the amount. He said there would be two stages of land acquisition.
  The first will be to freeze transactions for a corridor that is 500m wide.
  “This is where we will file with the local authorities or the state governments to freeze transactions of land identified for HSR use.
  “This will enable us to do soil investigation, survey the land and determine the final alignment within that 500m corridor.
  “Once that is determined, we will take the next step to acquire the land. But we will acquire a narrower corridor of about 50m. So, much of the land will be released.”
  Nur said the 50m-wide corridor would be used for the alignment (which includes building two tracks and reserving space in-between the tracks), the railway reserve and to protect the whole railway against intrusions.
  He said bigger plots would be acquired to build stations, depots and maintenance facilities.
  “As for tunnelling and other works, if we don’t buy the land, we will have to come up with an agreement with the landowner where we can co-exist.
  This is something similar to what MRT Corp has done for the mass rapid transit project.”

Land deal freeze along HSR route

By Sharen Kaur
sharen@mediaprima.com.my

Published in NST, August 2, 2016


KUALA LUMPUR: MYHSR Corp Sdn Bhd will lay out plans for the authorities to freeze all land transactions along the Kuala Lumpur-Singapore high-speed rail (HSR) corridor.
  The HSR, which will link Bandar Malaysia, here, to Jurong East in Singapore, has a total length of 350km and will require a lot of land.
  However, MyHSR Corp chief executive officer Mohd Nur Ismal Kamal said the construction of the HSR would involve minimal displacement of families and businesses.
  About 335km of the alignment will be built in Malaysia and the rest in Singapore.



  The alignment would be the longest in Johor, about 150km to 160km, Nur told Business Times.
  “Because the alignment is the longest in Johor, there will be more land acquisitions there.”
  There will be three transit stations in Johor, namely Muar, Batu Pahat and Iskandar Puteri.
  Nur said a budget had been estimated for land acquisitions and compensation but he declined to reveal the amount. He said there would be two stages of land acquisition.
  The first will be to freeze transactions for a corridor that is 500m wide.
  “This is where we will file with the local authorities or the state governments to freeze transactions of land identified for HSR use.
  “This will enable us to do soil investigation, survey the land and determine the final alignment within that 500m corridor.
  “Once that is determined, we will take the next step to acquire the land. But we will acquire a narrower corridor of about 50m. So, much of the land will be released.”
  Nur said the 50m-wide corridor would be used for the alignment (which includes building two tracks and reserving space in-between the tracks), the railway reserve and to protect the whole railway against intrusions.
  He said bigger plots would be acquired to build stations, depots and maintenance facilities.
  “As for tunnelling and other works, if we don’t buy the land, we will have to come up with an agreement with the landowner where we can co-exist.
  This is something similar to what MRT Corp has done for the mass rapid transit project.”

Saturday, July 16, 2016

1MDB to be a run-off company

By Sharen Kaur
Published in NST, July 16, 2016

KUALA LUMPUR: 1Malaysia Development Bhd (1MDB) will be a run-off company following the transfer of all its assets to the Minister of Finance Inc (MOF Inc).

Second Finance Minister Datuk Johari Abdul Ghani said 1MDB would not be sealed off immediately after the asset sale.



“We will sell the assets and run off the company as it has debts to repay. We will slowly retire the debt with the plans we have, which is selling and developing the land in Bandar Malaysia and Tun Razak Exchange (TRX),” he said.

So far, 1MDB has transferred the ownership of Bandar Malaysia Sdn Bhd and TRX City Sdn Bhd to MOF Inc. 1MDB also owns land in Air Itam in Penang, and Pulau Indah in Klang.

For the land at Westports in Klang, Johari said MOF Inc was in the process of getting a buyer.

For the 104.52ha in Air Itam, it intends to work closely with a suitable developer for a mega project. Johari said for assets like Bandar Malaysia and TRX, the plan was to team up with the private sector to develop the land.

“We have signed agreements with Iskandar Waterfront Holdings Bhd and China Railway Engineering Corp for Bandar Malaysia and can expect the gross development value (GDV) to reach RM50 billion to RM60 billion.”

He said 1MDB was a company that started with a very noble idea. According to Johari, the idea was basically to use 1MDB to leverage its ability to borrow money and do something that an ordinary company could not do — to develop huge assets like Bandar Malaysia and TRX, and at the same time, consolidate the energy sector.

“Unfortunately, along the way, things went wrong. I am quite pleased to see that the government is willing to come out openly to allow the Public Accounts Committee to do a report and allow people like myself to study that report,” he added.

Johari said three conclusions were made following the report. They included a wrong business model for 1MDB, weak management and lack of corporate governance.

Efficient tax system to boost revenue

By Sharen Kaur
Published in NST, July 16, 2016

The second part of the New Straits Times exclusive interview with Second Finance Minister Datuk Johari Abdul Ghani.

Question: What is your take on the Goods and Services Tax (GST)? Answer: Many people say we, the government, are taking the money from the rakyat through GST. GST is a system that replaces the Sales and Services Tax (SST). GST is an efficient tax system that has been used by more than 170 countries in the world. It is a very efficient system that can reduce our “black economy”.



Q: What do you mean by “black economy”?
A: “Black economy” is untraceable and non-taxable business transactions. That is where a big chunk of the GST revenue now comes from. If people say we collect additional tax from the rakyat, the answer is “no”. You must analyse the figures. The imported goods in this country are a lot. For most of these goods the government is supposed to collect SST, but it was not reported to us. Unfortunately, I can’t share with you the details. We really collect a lot from the import of goods as companies have to declare. If they don’t declare they will not be able to claim their input tax.

Q: Do you see revenue increasing from GST?
A: We expect revenue to increase as we are able to efficiently manage our tax system. It would not be at the expense of the rakyat as a majority of the additional revenue that the government collects is from the untraceable, that includes non-taxable business transactions in the past. When we implemented GST, companies that imported goods started to declare their taxes. They can’t avoid paying GST as the system will also allow them to claim input tax. If they don’t pay, it’s just a matter of time (before) we trace them. The tax collection from the import of goods has increased by more than 150 per cent because in the past many businesses did not pay their SST. Now, they have no choice but to pay the GST.

Q: Are small business owners paying GST?
A: Local companies, especially the ones that are not registered like family-owned businesses, backyard operators and sole proprietors, are exempted from paying GST if their annual sales turnover is less than RM500,000. For those doing millions of ringgit of business, they have to pay tax. Before this they pay 10 per cent SST, now under GST they pay six per cent.

Q: Why have prices of goods increased after the GST?
A: Businesses used to make more profits because some of them didn’t pay SST... but now they have to pay GST. And because of that they don’t want to reduce their profit. They want to still maintain their profit margin. That’s why you see a sudden increase in the prices of goods because some of them take the easy way out by adding GST on top their current selling price. By right, they should reduce the SST elements in the product and then only add the GST on it.

Q: Is the lower-income group affected by the GST?
A: For the government, when we implemented the GST, we knew there would be a spike because suddenly businesses would start to realise that if they pay GST, their profit margin would reduce. So what they do is they increase the prices of goods. Previously they were not paying the SST to the government. That is why the government decided to give the low-income earners the BR1M (1Malaysia People’s Aid) of RM1,000.

Take an example of those who earn RM2,000. If you ask them how they spend, they will list buying rice, sugar, oil, and flour, and paying for transport and education. When you look at the list, those items are already tax-exempted.

But, of course, there would be items that they have to spend on that come with GST. If they spend 25 per cent of their income on GST goods, the tax works out to about RM50. If you times that with 12 months, it is RM600. But the government is giving them RM1,000. So at the end of the day, the lower-income group will benefit and that is what we want, which is to lift some of their financial burden.

But, of course, those with salary of RM10,000, RM15,000 or RM20,000, they will have no choice but to pay GST if they spend beyond the above items. The system is very effective because it will put all businesses on the same level playing field. In the long term it will be good for the country. For the traders, at the end of the day, they have to compete among themselves without anyone having advantage for not paying taxes.

We need healthy competition. If you are not competitive it’s just a matter of time before customers will not buy from you. This disparity in prices will adjust naturally over time. I’ll give you an example. When Celcom was a single mobile phone operator, it charged 20 sen per SMS (short message service). Now, you see the price has reduced by more than 70 per cent, as there are other players competing to offer the best deal. Today, you only have to pay three sen for sending a SMS. You now have more options to choose from to get the best deal. You have Maxis, Digi, U-Mobile, Yes and other small operators. Yes, I like competition because if you want to be a developed country you cannot run away from engaging or participating in competition.

Q: What is the estimate of our “black economy”?
A: Our “black economy”, some people tell me, is about 30 per cent of the GDP (gross domestic product). Some say it’s about 20 or 10 per cent. But I don’t like to say something without providing the evidence. As we go through this, you will be able to see it as it will slowly translate into our GDP, tax collection and competitiveness in the industries. It is important for us to reduce the black economy. If you have a company that operates in Malaysia under the “black economy”, that means it doesn’t pay GST and corporate tax. It only operates and sells goods without declaring its records. When genuine investors come and invest in the same industry, they invest in a factory, build their capacity and pay the GST and corporate tax, but they cannot fight the market because there is no level playing field. In business you must provide a level playing field. When there is a level playing field, that is where the competition comes. But if one is paying and the other is not, how are you creating a level playing field? I think this is where the role of the government is, which is trying to make sure that we try to reduce as much as possible the black economy and create level playing field for businesses to compete healthily. When you get the right system, you will get more and more serious players coming here to do business.

Q: What are the revenue-raising initiatives for 2016 and onwards? Where do you see the potential for growth?
A: Malaysia is an open economy. The next two years are not going to be easy for the global economy. There are a lot of challenges ahead of us. We must emphasise on our export activities and services industries. Our economy is very diversified. The services industry accounts for 54 per cent of our GDP, manufacturing (23 per cent), plantation (eight per cent), mining (nine per cent), (and) construction (four per cent). Our financial system is resilient and banking sector is well- institutionalised. We must also look at the tourism industry. These are the areas we can promote in order to basically defend our economy from the external factors. The more diversified our economy, the better for us to defend our economy from external challenges.

Q: What can we expect from the 2017 Budget? Will there be any goodies in store for the rakyat? Any surprises?
A: It’s a bit too early for me to share about the budget because right now we are in the process of engaging with a lot of stakeholders. We have a focus group meeting with different stakeholders. I think, all together there are about 20 focus groups — the cost of living, housing, financial sector and many more sectors. Once we get this feedback from the focus group, we consolidate and then compare with our estimate of government revenue. When it comes to budget, you have to look at government revenue and how much we can spend. However, what I need to stress is that, the action that we want to do or the strategy that we are going to adopt in the budget will always be in line with our 11th Malaysia Plan (11MP). Because 11MP is actually the five-year plan that we have presented to Parliament and the budget is basically a yearly executing plan that we need to take to achieve that long-term plan. So that would be the centre stage of our budget preparation.

Q: So, revenue is the key thing?
A: That is the key thing. You see today we are spending RM50 billion on development expenditure. We are spending on education, health, defence, building schools, roads and all the infrastructure for that RM50 billion. But this RM50 billion, if you want to spend, it’s just like how you want to buy a car or a house, you must look at how much is your income. If your income is RM5,000 you can’t buy a bungalow, a BMW or a Mercedes, right? This is where you need to manage. You need to look at where is your source of income and then analyse what are your commitments. If you have 10 projects that you want to do, then you have to prioritise which one you want to do first. We want to do all but because of the constraint in our resources, then we have to decide which one is the priority. We always want to see something that can give impact to the rakyat and stimulate the economy. These are the key things that we are looking at. That is the part I’m looking at in terms of our budget. And I’m sure our PM (Prime Minister Datuk Seri Najib Razak) also will have something in his mind for the rakyat. But, whatever it is, we must make sure that we keep the social security net intact so that every people can live and stay in Malaysia and they can progress together with the country.

Q: How do you foresee the oil price performance in the second half of this year?
A: The oil price is currently at US$48 to US$50 per barrel and I’m only comfortable if it is between US$55 and US$60 per barrel in the second half of this year. During the recalibrated budget early this year, it was US$30-US$35 per barrel. When we prepared our budget last time it was US$48 per barrel. So now we are US$50 per barrel. Whatever the price level now, you will see the impact in the next six months. Q: What would you like to see, going forward? A: Assuming that we are comfortable with US$55 and US$60 per barrel, we must have a policy in the government, where the moment oil price shoots up to US$70, US$80, US$90 or US$100, we must continue spending our money based on the US$55 or US$60 per barrel level. Anything more, we must take that extra amount and keep it in our reserve. We must create a reserve under whatever circumstances. You must keep that spending up to that US$50 per barrel level. So, assuming our oil price goes back to US$80, US$90, US$100, anything extra from the US$55 or US$60, we keep it at the side. We build a reserve fund for the country. We want to be a country like Saudi Arabia. When they face huge deficit due to drop in oil prices, they tap their foreign reserve, which is currently at about US$600 billion to US$700 billion. Some of the countries like Kuwait and Qatar, if I’m not mistaken, they, too, have a huge reserve amounting to US$300 billion or US$400 billion from oil revenue reserve that they keep. So we need to start building that.

Q: Is the government’s Bumiputera Agenda being met? As chairman of UDA previously, what were the key challenges you saw and have they been resolved today?
A: We want to help Bumiputeras that really can grow. We do not want Bumiputeras whom we help for 10 to 20 years but (still) don’t grow. They don’t build the capacity. They engage with activity that simply use a sub mentality. That, I think, we need to put in check. We need a genuine Bumiputeras that can fight out there, not only to get government business but (also) to get business out there and become a regional player. We signed the TPP (Trans-Pacific Partnership) agreement and we are going to finalise RCEP (Regional Comprehensive Economic Partnership). We have signed a lot of trade agreements with other countries.

Moving forward, we want to continue to help the Bumiputeras but we want to make sure that the Bumiputeras can also reciprocate in terms of embracing the competition culture. Be prepared to be competitive and able to build capacity. We must allow Bumiputeras to compete among themselves based on merit. The one that can build more capacity, capabilities and talents, they will get more. We want Bumiputeras who can excel and perform better among themselves to get what they deserve.

For those who have capacity of only 10 per cent, they will get only 10 per cent. They cannot get 50 per cent. In the past we don’t check this. If you give the Bumiputeras that have 10 per cent of the capacity 20 per cent, it ends up that the balance 10 per cent goes somewhere else through the sub system. If they have 20 per cent and you give them 50 per cent, then the 30 per cent goes somewhere else. There is another group of Bumiputeras who have capacity of 70 per cent, but they only get 30 per cent. So they have ample capacity but not given a chance to utilise their capacity. That’s how we want to look at it, going forward. The final analysis is that all Bumiputeras must prepare to be competitive and compete out there and not relying on the government to help them forever.

Q: It is not the number but the quality, right?
A: Yes. It is important to have quality. I give you an example. You have one person like Syed Mokhtar (Tan Sri Syed Mokhtar AlBukhary). Because he is so successful, he employs 140,000 people and then those industries that work within the companies that he owns employ another 200,000 people. So, Syed Mokhtar employs directly 140,000 people and indirectly 200,000 people. Syed Mokhtar has also appointed 28 Bumiputera CEOs (chief executive officer). So I’m sure everyone will be very happy to see that at the end of the day we have a company that can genuinely really contribute to the economy and GDP growth of the country. We can also have more SMEs (small and medium enterprises).

Q: Moving forward, what are the plans for Bumiputera SMEs?
A: Our forecast in the next five years under 11MP is that by 2020, we want to try to increase the SME contribution to the GDP from 36.5 per cent to 41 per cent. There are also SMEs owned by Bumiputeras. We have to make sure that we choose the right Bumiputeras to help and grow them. I want to see that one day, without the Bumiputera privilege, they can survive on their own.

Q: There is one concern that has been raised — that government-linked companies (GLCs) stand to crowd out the Bumiputeras. Is that a valid concern?
A: Not really. This is a statement without real evidence. I give you an example. TNB (Tenaga Nasional Bhd) doesn’t compete with Bumiputeras. In fact, they allocate for those companies to participate in their Bumiputera vendor programme. Likewise, you look at PLUS Expressway. They don’t compete with Bumiputeras. You look at PR1MA (1Malaysia People’s Housing Programme), SPNB (Syarikat Perumahan Negara Bhd) and UDA Holdings, they don’t compete with another Bumiputera company. They are there for strategic reasons. They go into strategic areas and locations that they feel the Bumiputera are not capable of playing that part.

Sometimes, you also have to be fair to some of these GLCs. They have to go into some of these industries simply because they don’t have credible Bumiputeras that can fully support them. So, therefore, they build their own and they still accommodate Bumiputeras. If there are any clear-cut case where they compete I am willing to intervene.

Rent-to-own concept to help low-income group buy houses

By A Jalil Hamid and Sharen Kaur
Published in NST, July 16, 2016

KUALA LUMPUR: The Finance Ministry is recommending the rent-to-own concept to help first-time home buyers with low income to own a property.

Second Finance Minister Datuk Johari Ghani said the concept could be a very effective way for those with low income and who do not have enough cash for a down payment to buy a house.

“I am looking at this category, where people earning RM2,500 and below should be able to afford monthly rental of up to RM800 as an installment for a house without paying any down payment.

“When their income level rises, they can make a decision to buy the property. For example, when their salary increases to RM6,000 a month, they can pay RM2,000 as installment. Every time their salary is raised they pay more. If they decide to buy the house, then the installment would be different.
“Even though they have rented the property for 10 to 15 years, when they decide to buy they only have to pay the balance sum for the remaining balance at the price to be determined at later years,” he said in an interview.

Johari hoped the federal and state governments as well as other authorities would allocate land to build houses for the group.

“Everyone has to play their role, including state governments. They must make sure they reserve certain percentage of the land they own for this purpose. The rest can be used for commercial development or residential projects targeting middle- or high-income earners,” he said.

Johari said a certain percentage of land must be gazetted and allocated for the lower-income group.

“Once the land is allocated for this purpose, the government will come in and build the houses. We don’t have to talk about the value of the land because we do this for social agenda. I hope all the parties will play a role to make this a reality,” he added.

GST helps combat 'untraceable' activities

By A Jalil Hamid and Sharen Kaur
Published in NST, July 16, 2016


PUTRAJAYA: The Goods and Services Tax (GST) will help combat previously untraceable economic activities and give more revenue to the government to be used for infrastructure projects that can benefit the rakyat.

Second Finance Minister Datuk Johari Abdul Ghani said the six per cent GST implemented from April 1 last year was an efficient tax system that could reduce the country’s “black economy”.



‘Black economy’ refers to untraceable and non-taxable legitimate business transactions. That is where now a big chunk of the GST revenue comes from,” he said in an exclusive interview recently.

The 52-year-old chartered accountant by training and a former corporate figure said it was not true to say that the government’s additional collection from GST was at the expense of the rakyat.

“If people say that we collect additional tax from the rakyat, the answer is ‘no’. You must analyse the figures.

The imported goods in this country are a lot. For most of these goods, the government is supposed to collect SST (Sales and Services Tax), but it was not reported to us (in the past),” Johari said.

He said the tax collection for the import of goods had increased by more than 150 per cent because in the past many businesses did not pay their SST.

Now, they have no choice but to pay the GST. “When we implemented GST, firms that imported goods started to declare their taxes.

They can’t avoid paying GST because the system will also allow them to claim input tax. If they don’t pay, it’s just a matter of time before we trace them,” he said.

Under the GST, only traders with proper sales and purchase records are eligible to get their input claim.

This will create a level playing field for all firms and industries, which will also spur healthy competition, he said.

“Previously with the SST, it was difficult to check on them, but now, with the GST system, there is cross- checking among the manufacturers, suppliers, wholesalers, distributors and retailers.

So, chances for them to avoid paying the GST is difficult. At every level, we can cross-check. “In the long term, it will be good for the country.

For the traders, at the end of the day, they have to compete among themselves without anyone having advantage for not paying tax.

We need healthy competition. If you are not competitive... customers will not buy from you. This disparity in prices will adjust naturally over time,” said Johari, who assumed office on June 28.

He said the GST and Malaysia’s well-diversified economy would help strengthen the country against external factors that could affect its growth trajectory. “I know the next two years are not going to be easy.

But I think that if we can be very focused on some of these industries, and with our currency now at RM4 to US$1, I’m sure we can attract a lot of customers that can buy our products, encourage our export and tourism, and boost our value-added services industry as well as manufacturing.” Johari also said Malaysia today was spending more than RM50 billion on education, health, defence and security.

Johari stresses adherence to principles of good corporate governance

By Sharen Kaur
Published in NST, July 15

NEWLY minted Second Finance Minister Datuk Johari Abdul Ghani is resolute in ensuring that the business and affairs of all companies under Minister of Finance Inc (MOF Inc) are in strict adherence to the principles of good corporate governance.

The principles include integrity, transparency, accountability and responsible business conduct.



“Corporate across the board, not just MOF Inc companies, have to be mindful of the three important elements that make a business successful. “They are having a sustainable business model, and good management and corporate governance. Without either one, a business will fail. Once you have the three elements, profit will come naturally,” said Johari, adding that he enjoyed working with people who were committed and focused on their work.

Johari, having been in office for only 19 days, has already tasked a team with reviewing all companies under MOF Inc to ensure that they remain focused on their respective fields.

Born in Kampung Pandan, Kuala Lumpur, in 1964, Johari obtained a diploma in Accounting from Institut Teknologi Mara in Shah Alam in 1985 and furthered his studies in the United Kingdom.

The fellow-certified chartered accountant started his career as an auditor with Peat Marwick & Co (now known as KPMG).

He has held directorship positions in local public-listed companies, including as chairman of UDA Holdings and group managing director of CI Holdings Bhd (from November 2002 to July last year).

He has more than 23 years of cumulative experience in the corporate scene, having also served as group managing director of KFC Holdings Malaysia Bhd and QSR Brands Bhd.

Johari, 52, had been vocal about the government providing affordable homes for the middle- and low-income groups in Kuala Lumpur when he was a backbencher.

He said despite his busy schedule, he made time for golf as it was one of his favourite sports.

  /ends

'No denying external factors are beyond us'

By A Jalil Hamid and Sharen Kaur
Published in NST, July 15, 2016


The following are excerpts from the New Straits Times’ exclusive interview with Second Finance Minister Datuk Johari Abdul Ghani.

Q: What are the macroeconomics of the country? Where are we now in terms of revenue and GDP (gross domestic product) growth?
A: Basically, when we look at our macroeconomics, let’s look back at the last two years. In 2014, our GDP growth was about six per cent and last year, it was about five per cent. For this year, at the time we prepared the budget, we forecast four to 4.5 per cent. If you look at today, as far as the global economy is concerned, I think Malaysia is facing a lot of external issues that are beyond its control.
First, look at the last 1½ years. We have lost RM30 billion in revenue from the oil industry. This is a result of the drop in oil prices, from US$115 (RM452) per barrel to US$30 per barrel. Certainly, it would affect the government’s ability to spend money. We have to cut expenditure in many ministries to make sure that we maintain our fiscal deficit.

Our fiscal deficit last year was 3.2 per cent and for this year, we are targeting 3.1 per cent. A lot of people ask me, why are we so concerned about fiscal deficit? It is important for us to manage fiscal deficit because if we don’t, it will affect our sovereign rating. Today, we are A-, but assuming our rating drops to triple B, then our interest cost will be higher. When interest cost is higher, the cost of doing business is higher.


Ultimately, the people will suffer because if we look at our household debt, we are among the highest in the world. We are close to 89 per cent to GDP. What is household debt? Housing loan, car loan, credit card loan, personal loan, investment loan. So, if the interest increases, all these people will be affected because they will have to pay more interest.

Second, we are also facing issues in terms of the global economy. The IMF (International Monetary Fund) and World Bank have forecast a drop in global growth for this year. In particular, if you look at China, it is one of the important markets, the second-largest economy in the world after the United States. China is very important to us because it contributes approximately 15 per cent of our trade in the world. So, if anything happens to China, we will also get affected.

For example, China’s growth used to be at seven to eight per cent, and suddenly, it is now down to six per cent — and even that is uncertain. This has also created uncertainty in terms of the external factor, as far as the global market is concerned, because China is not only dealing with us. It does a lot of trade with a lot of Asian countries and also the world. And, these Asian countries also trade with us. If they are affected economically, it will also affect us.

We used to see the ringgit against the US dollar at 3.20 or 3.30, and suddenly, it shot up to 4.47 against the US dollar. Certainly, a lot of companies in Malaysia, especially the ones involved in manufacturing that rely on imported goods as part of their raw materials, suddenly have to pay 30 to 40 per cent extra. This has also caused a lot of issues in the economy.

The other issue that recently cropped up was Brexit in Europe. Out of the 28 countries (in the European Union), the United Kingdom represents about 10 per cent of our trade. If it has issues about uncertainty in Europe, certainly, that will affect our 10 per cent trade. You know how world economies work — they don’t like uncertainty. With uncertainty, a lot of people start to hold back on their investments. These are all the issues that we face at the moment.

A lot of people ask me, how are you going to address this? There are only a few things that we can address internally and domestically. External factors are beyond us. We cannot deny this. A lot of people are trying to convince the people, telling them that we are okay, and whatever happened to China or Brexit, we have no problem. But, the reality is that it will affect us. Because we are an open economy, anything that happens in the world will affect us.

Domestically, what we are looking at is, how do we manage our debt? Today, our debt is 54.5 per cent of our GDP. Is that high, low or reasonable? We have to compare ourselves with other countries. If you look at Japan, I think its debt to GDP is almost exceeding 200 per cent. The US is about 120 per cent of GDP. Singapore is 89 per cent of GDP.

Even though they are high, their ability to service their debts is good. It doesn’t mean that if we are at 54.5 per cent, we are good.

The issue here, I think, is that we must continue to put in check our debt situation so that we are always in a position to match our ability to pay.

Q: How is Malaysia doing now?
A: At the moment, I think Malaysia is doing okay. We have never defaulted on our loan. Any loan that we take, we invest back into our economy. We build our infrastructure, highways, airports and ports. Right now, we are aggressively expanding our public transport, such as the MRT (mass rapid transit) and LRT (light rail transit).

Next week, our prime minister will sign an MoU (memorandum of understanding) with the Singapore government to launch the high-speed rail project. These are the loans that we have taken to finance our infrastructure. We also borrow money to get our sewerage and water systems, and to consolidate all that.

But, we need to put a check on this. We have seen a lot of countries, like Greece, for example, where, because they did not manage their debts properly, they are affected. This is something we really need to look at.

Q: Inflation-wise?
A: Inflation-wise, we are also doing okay. We are still at about two to three per cent. We need inflation, but we must manage it. If we don’t have inflation, it’s not good for the country. We need a manageable inflation, but it is just that last year, there was a spike in our inflation because we implemented the GST (Goods and Services Tax). But, I think it is manageable.

Q: What is your view on 1MDB (1Malaysia Development Bhd)?
A: 1MDB is a company that started with a very noble idea, basically, to use the company to leverage against our ability to borrow money, and to do something that an ordinary company cannot do, which is to develop a huge asset like Bandar Malaysia and the Tun Razak Exchange, and to try to consolidate the energy sector. But unfortunately, along the way, things went wrong. I am quite pleased to see that the government was willing to come out openly, to allow the Public Accounts Committee (PAC) to do a report and allow people like me to study the report.

Q: What conclusion did you make on the report?
A: There are three points. First, the business model for 1MDB was wrong. The business model was not sustainable because you are borrowing money and, at the same time, you have to service the interest and principal, but you don’t have the revenue or a positive cash flow from the business to basically help you pay that commitment. Most of the projects are long-term in nature, while the interest and principal payment is short-term in nature. So, the business model was wrong and not sustainable.

Second, based on what PAC outlined in the report, they (1MDB) had weak management. If there had been good and efficient management, I don’t think 1MDB would reach this level.

Lastly, we are looking at the corporate governance part of it. This was also lacking in 1MDB. At the end of the day, for any company, for that matter — I am not only saying 1MDB, but any company, be it a listed or non-listed company — if they don’t have either one of these three factors — a sustainable business model, and good management and corporate governance — they will also go. If they have good management and corporate governance, but not a sustainable business model, they will also go. So, this is very important.

Q: What’s next for 1MDB?
A: As far as 1MDB is concerned, we want to run off the company.

Q: What do you mean by “run off”?
A: That means we will take out all assets from 1MDB and team up with the private sector to develop Bandar Malaysia and TRX. For example, recently, we signed agreements with Iskandar Waterfront Holdings Bhd and China Railway Engineering Corp. We can expect the GDV (gross development value) to go as high as RM50 billion to RM60 billion.

Yes, we do have the expertise, but global companies are in this line of business and can pull investors to Bandar Malaysia and TRX. This is the reason we decided to give them the incentive.

Q: How will TRX be developed?
A: For TRX, we will take the asset out from 1MDB. We have applied two strategies for TRX. First, we sell our land and let builders develop it. Second, we form joint ventures, like what we did with Land Lease from Australia. Here is where we give our land and they give us their expertise. They will bring in the capital, and we build. We will start focusing on how we want to intensify our work with Land Lease. Mulia Group is developing on their own, where they buy our land and build.

Q: What happens to 1MDB’s debts?
A: 1MDB will eventually be run off and, hopefully, all those assets that we take, we can maximise their value. And, when the time comes to pay their debts, we can use this value that we have created and pay off their debts. To what extent will we be able to cover all their debts? Only time will tell. We need to go through this process first.

Q: What will happen to the other parcels of land owned by 1MDB?
A: In Westport, we have decided to sell the land. In Penang, we have about 260 acres there. We have invited the RFP (request for proposal). We have shortlisted the candidates and we are going to work with them where they will develop the land.

Our criteria is that, whoever that we partner with must be able to manage and work closely with the Penang government. That is the reality and we have to accept that fact because the Penang government is not part of Barisan Nasional. So, whoever wants to partner with us must be able to work with the state government and fulfil its requirements.

Q: What is your aim for government-linked companies?
A: I want to start looking into all MOF Inc (Minister of Finance Inc) companies. We need to reanalyse all the 45 companies that we have and segmentise them by sectors. These are companies involved in property, plantation, financial services, manufacturing and so many other industries.

We need to reanalyse and group them so that we can look, in detail, whether there are duplications in terms of their roles. We will then split the companies into three categories.

Q: What are those categories?
A: The first category is, companies that make money and consistently declare dividends to the government. We want to look at how we can enhance them and help them grow further.

The second category is, companies that continuously lose money, increase their debts and don’t give benefits to the government. We will reanalyse them. If we can put them back on track, then we put them on track. Otherwise, we will close them.

The third category is, companies that we need to keep even though they are losing money. For example, a company that is involved in infrastructure development, like MRT Corp and Prasarana. These are companies that have a heavy burden in interest payment, and revenue is not enough to pay. The government has to subsidise them because it is the government’s job to provide good infrastructure for the people.
Other companies include those involved in sewerage and water. These are companies that we have to look into and refine their operations so that there is no wastage and there is good management. Even though we subsidise them, these companies are able to deliver very efficient services to the people, and the people receive the benefits.

Q: Are there many companies in the second category?
A: Well, I think there are, but the losses are not that big for some of them. They are manageable, but I think, at the same time, I also have to consider how many employees the companies employ. There are also some that provide financing in innovation and innovative industries. These kinds of companies are very difficult to close, even if they are not making much money.

For example, companies that provide venture capital are hard to close. Venture capital is not like a commercial bank or other financial institutions. Assuming we finance 100 companies under venture capital and 10 per cent are successful, and the 10 per cent create employment for 1,000 to 2,000 people; that is what we want. That’s what venture capital is all about.

Q: Are there possibilities of mergers and acquisitions?
A: Yes, especially among the good companies and smaller firms that make RM10 million to RM20 million in net profit a year. If we can merge them and make them regional players or list them and they become another Khazanah Nasional Bhd outfit, we want to do it.

Q: Will there be government guarantees involved for their expansion?
A: If they can bring in value, yes. Look at Khazanah. It is so successful. The government helped Khazanah with only about RM20 billion in government guarantee. But, with that RM20 billion, it has created more than RM150 billion in assets over the years. So, there is nothing wrong in giving a guarantee. Khazanah has the right business model, and that is why it has been able to give value to the government by creating RM150 billion worth of assets and employment.

Look at what Khazanah has today. It has CIMB, Tenaga, Telekom, Celcom, Axiata, MAS and many more. Some of the group’s companies have become regional champions, including CIMB and Axiata. Not to mention there are good domestic companies, like Plus Expressway under UEM Group Bhd.

Q: Of the 45 companies, are you considering selling some?
A: It is too early to tell, but I have engaged with a team to reanalyse this. We will shortlist a few companies, and look at how we want to manage them and how we want to KPI (key performance indicator) them. They cannot do whatever they want just because they are 100 per cent owned by the government. We want to put a KPI on all directors, chief executive officers and the management.

'Managing fiscal deficit key as it will impact the people'

By A Jalil Hamid and Sharen Kaur
Published in NST, July 15, 2016

Managing the country’s fiscal deficit is crucial because it will ultimately impact the people, said Second Finance Minister Datuk Johari Abdul Ghani.

“It is important for us to manage fiscal deficit because if we don’t, it will affect our sovereign rating. Today, we are A-, but assuming our rating drops to triple B, then our interest cost will be higher. When interest cost is higher, the cost of doing business is higher. Ultimately, the people will suffer because if we look at our household debt, we are among the highest in the world. We are close to 89 per cent to GDP (gross domestic product).”

Household debt includes housing, car, credit card, personal and investment loans.

“So, if the interest increases, all these people will be affected because they will have to pay more interest,” said Johari.


In an exclusive interview with the New Straits Times, the newly minted minister describes how Malaysia’s economy has been affected by external issues beyond its control, including the drop in oil prices, slowing global economy and uncertainty over China’s economic rebalancing.

Amid such global uncertainties, the government’s focus is on addressing internal and domestic economic issues, including fiscal deficit and debt.

Johari said Malaysia’s debt was at 54.5 per cent of GDP, compared with more than 200 per cent in Japan, 120 per cent in the United States and 89 per cent in Singapore.

“It doesn’t mean that if we are at 54.5 per cent, we are good. The issue here is that we must continue to put in check our debt situation so that we are always in a position to match our ability to pay.”

Johari, 52, said Malaysia was still in a good position because it had never defaulted on any loan. He added that debts taken on were utilised to invest in the economy.

“We build our infrastructure, highways, airports and ports. Right now, we are aggressively expanding our public transport, such as the MRT (mass rapid transit) and LRT (light rail transit). We also borrow money to get our sewerage and water systems, and to consolidate all that. But, we need to put a check on this. We have seen a lot of countries, like Greece, for example, where, because they did not manage their debts properly, they are affected. This is something we really need to look at.”