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Malaysia 2008 Budget Rumbling



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Sep 09 2007
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As usual, after Malaysia Prime Minister Abdullah finished his 2008’s Budget speech last Friday (after heavy coughs in between), you can bet your last penny all the cabinet members will praise how great the budget was. All the ministers never fail to amuze me and perhaps everyone on the street, as they (ministers) seem to sing the same old praise song repeatitively on annual basis. So, was the budget this time really benefits the people who voted the current government? Let’s see:

Corporate Businesses

Malaysia 2008 Budget Corporate BusinessCorporate tax reduced to 25% in 2009 – obviously this reduction is good for local businessman as they’ll pay less tax, though not necessary will translate to better productivity by passing the same quantum of benefits to its employees. If the intention is to maintain or wrest foreign investors into the country, this might not work too well, considering neighbouring countries such as Singapore has a lower tax bracket.

Besides lower tax and other incentives, foreign investors are putting other factors such as red-tapes, efficiency, transparency, good-governance, fair-policies and to a certain degree crime rates into consideration as well. I still don’t see why foreign investors will be super-interested in local REIT sector with the racial policy of minimum 30% Bumiputra ownership requirement.

Housing

Malaysia 2008 Budget Housing50% stamp duty exemption for house purchase not more than RM250,000 per unit – a good move though I can bet most people (buyers & developers) will ask why not abolish it 100%. Besides, house buyers still need to fork out huge amount of dollars for legal fees, not to mention the bulk of the cost in owning the house will actually goes into serving bank interest of which the rate is not low either.

Of course, you might argue that the kind-hearted government now allows you to make monthly withdrawals from the balance in Account 2 to reduce housing loans. Does this new measure serve any purpose since the existing policy allows EPF contributors to withdraw “all money” (or balance of the loan whichever lower) from Account 2 once a year to reduce housing loans? The quantum of monthly withdrawal allowed is not known (though I still wonder till today why it wasn’t presented) but unless you can withdraw maximum amount required to pay “monthly installment”, it won’t help much, would it?

Lower Education

Malaysia 2008 Budget Lower EducationAs for tax exemption for primary and secondary Chinese and Tamil schools, these schools should not be taxed at all in the first place. Not only the government didn’t chip in a single cent while these schools were busy begging for donations from public and depends heavily on charitable bodies (mostly Chinese and Indian businessmen and associations) in order to run the schools, the government also “steals the IP (intellectual property)” from these schools – to borrow a statement from former premier Mahathir who recently claimed that developed countries should pay for stealing so-called talents and thus IP from developing countries which spent huge amount of money and time in providing the education for its own citizens.

Text Book Loan Scheme will be provided to all students – irrespective of their families’ income. And annual fee for primary and secondary schools will be abolished. But shouldn’t the government provide “free” education if it’s serious about developing human capital? Furthermore reducing RM4.50 annual fee for primary school and RM9.00 annual fees for secondary school is nothing to shout about.

Note that with the new goodies, the lower education is not free yet, it’s just “almost free” – you still have other miscellaneous fees which might eats up into the poor’s pocket. Remember the case of how a student who was so poor that his mother has to cut the pencil into two so that it can be shared with other brother and sister, only to be teased by the teacher that the student ate the pencil because he was hungry resulting in the student commited suicide?

Higher Education

Tax relief of up to RM5,000 on education fees to all post graduate studies might be one of the most attractive goodies for working people who desire to climb the corporate ladder which might require you to have a Master degree nowadays. Again, with the average course fees ranging from RM20,000 to RM40,000, depending on which university that offer it, the 5K might looks like chicken feed.

Malaysia 2008 Budget Higher EducationPSD sponsored students in loca universities to be doubled from current 5,000 to 10,000 annually should be lauded. But instead of pushing for quantity, the government should admit there’s serious problem with the quality of the graduates generated from the mill nowadays with thousands of them not being able to find employment. Either they’re “not employable” or the government did a lousy job in administering the country that “unemployement” hits record high – please pick your choice.

The cheers could be heard both locally and thousands of miles away when the premier announced the increament of COLA (cost of living allowance) between 23% to 84% and almost 100% for students in local and overseas universities respectively. How many non-Bumiputras actually benefits from
such move? Not that they’re eager to come back to serve the country after their studies. Heard of how these students studied for years but yet to graduate, even got married and have kids mind you, simply because they purposely fail their papers in order for them to “continue their studies” (forever), while staying at the comforts of the rented home enjoying the allowance for years?

Youth and Sports

Everyone was surprised with the individual tax relief of up to RM300 a year be given on the purchases of sports and exercise equipment. Great step in encouraging healthy citizens. I would be still interested to know the scope of equipments that I can buy to claim the relief, does golf set or slimming sets count?

Aren’t it pathetic to allocate almost RM1 Billion to implement so called sports programmes, including RM677 million for training of 110,000 youths under the National Service Training Programme only to have multiple deaths reported due to unknown and suspicious reasons? You might start asking yourself whether you’re actually sending your son or daughter to die in the camp, not to mention the multiple corruptions or misuse of the funds. The business of providing equipments under such program is simply too lucrative.

And talk about Youth and Sports Ministry, you should read today’s news on how the consultants for the Youth and Sports Ministry had reached an estimated price tag of RM399.67million for the equipment for the IKBN (National Youth Skills Institutes) project which later ballooned to RM767.98 million after two appeals by the ministry for additional allocations. And guess where the extra money ballooned went to. Consider this:
Malaysia Sports Ministry Corrupt

  • Technical books (market price = RM417 per set) was billed for RM10,700 per set
  • A set of 3 plastic vases (market price = RM5.20) was billed for RM42.80
  • A 2-ton car-jack (market price = RM50) was billed for RM5,741
  • A set of average screw-drivers (market price = RM40) was billed for RM224.94
  • A 3.1 megapixel digital camera was billed for RM8,254

Internet Trading

Minimum broking charges per transaction will be fixed at RM40 from RM12 previously and clearing fees be reduced to 0.03% from existing 0.04% with a maximum fee of RM1,000 were proposed. I won’t mind paying if the broker’s remisiers or dealers can add value by providing me with quality advice. But to pay minimum RM40 per transaction for the no-brainer advice such as “buy this stock because it’s going to fly soon but don’t ask me why” is simply outrages.

Internet TradingAs comparison, I’m paying USD1 dollar (RM3.50) per contract trading U.S. options via internet trading, though some other broker houses charge slightly more than that. That’s the cheapest brokerage fees I can get with super-fast speed in trades execution. To add salt into wound, I can sometimes get cheaper rate (less than USD1 per contract) during promotion period. So, Malaysia’s internet stock trading still has a long way to go dude.

Where the credit is due it should be awarded. So FinanceTwitter think the stock investors would appreciate that the government has stopped robbing investors of the dividends paid by companies. The removal of dividend tax will give better investment returns to shareholders. Hence, high dividend-yield stocks will stands to gain with new interest from investors.

Conclusion – I believe citizens are still hoping that the huge allocation for Education Ministry (RM30 billion), Public Transportation (RM12 billion), Public Safety (RM6 billion) and others will not go to waste (or corruption or misuse) as most of the money came from hard-earned taxpayers’ money (42.5%).

# Note: FinanceTwitter has started yet another poll on what you think of the Malaysia 2008 Budget revealed last Friday. Have fun voting (located on right side navigation bar of this blog, just scroll down)

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Comments

While I do take your point about JPA scholars who break the bond, and do not return to serve the people who paid for their education – the SCUMBAGS! – I have to disagree with this remark:

How many non-Bumiputras actually benefits from such move?

In my field, we do have a respectable number of non-Bumiputera scholars, but race aside, we being Bangsa Malaysia and all that, I do honestly feel just because JPA may be flawed in awarding scholarships is no reason to leave the students who HAVE gotten these scholarships to starve. ‘cos I for one, am more than happy, more than willing to come back & serve, and I am more than grateful that that can happen because my education, and my SURVIVAL in the 1 pound x 7 ringgit land is being funded by the people whom I am coming back to serve for 10 years.

I guess the point of this long-winded comment is just to clarify that not all scholars are Bumi, not all scholars run away, and the increment makes a world of difference to those who make full use of their education. Cheers.

Btw, I really liked the way you photoshopped that Y&S Ministry picture 😉

thanx sheena for your comment … i believe you were able to read between the lines who are those people that i referred to, so you’ve no reason to be concern as you’re not the target here …

of course the government should be lauded for increasing the COLA, not that they increased it because they care for people such as you but others you-know-who …

the point here is hundreds of millions, if not billions, of dollars have been wasted if you measure it from the dollars-spent-against returns perspective …

of course there’re people who really are “students” and not parasites, bumiputra or non-bumiputra, but if you measure the numbers, it’s ahem …

cheers …

The corporate tax is pretty much useless for smaller SMEs. That’s only a measly 1 percent drop, and then it’s only in 2009, more than 1 year away.

Which, in the Malaysian time frame, might not ever happen ie, it can be taken away or, the old classic Malaysian standby, “postponed until further notice”. It’s reasonable to expect it might happen, as with the APEC and AFTA postponements and many other legislation.

“But to pay minimum RM40 per transaction for the no-brainer advice such as “buy this stock because it’s going to fly soon but don’t ask me why” is simply outrages.”

I think the remisiers are not there to give advice. Check the job functions of the remisiers-pretty sure about that.

The $40 replcaces the $12 mininimal day-trade brokerage

hello anonymous … a good remisier would be able to advice me if a particular stock is a crap … he/she also should be able to tell me what’s the meaning of P/E ratio or EPS of a particular stock … if not, i should be allowed to trade directly through the BFE system bypassing the remisiers and pay only the broker house for whatever processing fees …

if he can only take order and punch some keys to get the commissions, then i’m sorry but his/her day is over as with globalization, remisiers need to add-value in order to survive …

i’ve been dealing with some good remisiers so i know the gap between a good and a lousy one …

you won’t want to deal with a remisier who do not know what the heck is P/E ratio or EPS, do you?

cheers …

you won’t want to deal with a remisier who do not know what the heck is P/E ratio or EPS, do you?

Compulsorily for all to attend CPE courses for points to renew their licenses (they don’t know what the heck is PE, EPS!)Still, you should check his job functions.

Cheers.

i think what is even worse is remisiers who know a bit about what P/E ratio and/or EPS is but feel like they know everything there is to know. A little bit of knowledge is a dangerous thing they say. Besides, you know remisiers survive on commission, people who buy on fundamentals are mid-long term investors. If remisiers were to rely on that kind of business, die lah friend. Unfortunately the system in Malaysia is such that it’s a matter of survival for remisiers to rely mostly on speculators/gamblers (a conflick of interest, i would say but one that is encourages by Bursa, maybe you should ask why). Hence, rarely is there a need to go into fundamentals UNLESS the remisier has intent to venture into the investing zone (as some do, i can attest. I guess that is why you have analyst to handle a lot of the numbers. AS for globalisation, it will come but Malaysia will take a while. To compare the US brokerage industry and Malaysia’s is like comparing apples and oranges, considering the maturity of the market players.

the side-problem with malaysis stock-broking business is there’re simply too many remisiers, against the number of active clients who can bring stable income to the remisiers, not to mentioned low quality remisiers floating around …

whether it’s comparing apples and oranges, globalization doesn’t recognize such and will put everyone on same platform, regardless you’re ready or not …

you might whine that malaysia is not ready but the external factors are pushing it onto the country’s shore … of course you can remain static if you wish to, and in the process get left out …

cheers …

stocktube,
“not to mentioned low quality remisiers floating around”

Not educated, they are simply picked up from chow kit, cannot even understand PE & EPS. Ha Ha

Still, must check what is their job functions first, then only you can tell if it is an apple or an orange. Can’t call an apple an orange vice versa, can you?

hi,
do you mind sharing in your blog about the broker you currently use? perhaps a comparison of those broker that you know ? i’m interested in looking out of malaysia

friend, maybe you have had bad experience b4 (got screwed by a remisier’s “advice” maybe) but no reason to peg everything into a general statement and complaining. Anyway, what is the difference between an analyst and a remisier? Perhaps you care to explain the difference of their job fuctions. And in all fairness, can you tell me which profession does not have “low quality” personnel, only high quality people? Don’t think you can. And talking about factual situation is not whining, it is talking about facts, and since you are a writer it would be nice if you could appreciate the difference. Whining is like complaining about remisiers not going beyond their job scope. Like i said, in malaysia, changes take a while longer, even globalised changes. Now, instead of brokerage fee going down, it go up somemore, so tell me what is going on since this does not follow the globalised trend. This situation does not neccesarily reflect my preferred position, so please do not assume i choose to remain static. Of course, “in the long term”, things will have to flow towards a certain course, but then again “in the long term”, we will all be dead anyway.

hello anonymous … i hope you’re making a good living now with the new brokerage fees (if you’re one of the remisiers) … also i hope to see you around after the full-blown globalization which slowly but surely taking place … that’s all i can say …

you’re saying the price of a hot-dog should cost the same in U.K. and Italy, since they’re within E.U. and already part of the globalization, no?

i do not depend on remisier for my trades, though sometimes i’ve to go through them (merely for small position execution) via internet trading platform …

cheers …

stocktube
if he can only take order and punch some keys to get the commissions, then i’m sorry but his/her day is over as with globalization, remisiers need to add-value in order to survive ..

Like learning about PE and EPS and then the remisiers don’t have to worry about globalisation?

stocktube
hello anonymous … i hope you’re making a good living now with the new brokerage fees (if you’re one of the remisiers) … also i hope to see you around after the full-blown globalization which slowly but surely taking place … that’s all i can say ..

I can see you are really concern about remisiers learning about EPS and PE in order to stay afloat. Do you have any other more suggestions for the remisiers to face this full-blown globalisation?

knowing what the heck are eps and p/e ratio are just some examples dude and if you can’t read between the lines and see the whole purpose of the content, then i’m sorry that i made you chasing your own tail …

cheers remisier …

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