Get Ready For Bad Time Ahead! – As Malaysia’s Economy & Corporate Debt Get Worse, Retrenchment Has Just Begun

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Oct 12 2020
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You know the time is really bad when new stalls spring up like mushrooms in your neighbourhood. The sight of stalls selling “nasi lemak”, fruits, homemade buns and cakes, cookies, and even face masks by the road side to earn some extra money could only mean one thing – people were struggling to make ends meet. And it could only get worse.


If you think the worst was over because a nationwide lockdown, declared on March 18, had been lifted, think again. Whether the lockdown – MCO (movement control order) – was a mistake is debatable. Exactly why was it justifiable for a lockdown in March when the daily cases spiked to 190 cases, but the same lockdown is not required now despite a spike of 691 new cases?


Either backdoor Prime Minister Muhyiddin had made a huge mistake seven months ago by sending the country’s economy to a screeching halt in favour of saving lives, or he is making a deadly mistake now by allowing infections and deaths to escalate in favour of saving the economy. But he can’t deny that his coups – “Sheraton Coup” and “Sabah Coup” – were responsible in both cases.

KLCC View - Night

While the inexperienced backdoor government could be forgiven for screwing up the economy by applying the wrong strategy – killing a fly with a sledgehammer – in containing the spread of Covid-19 back in March, the same power-hungry government certainly cannot be forgiven for launching its second coup to snatch power in Sabah, leading to the “Third Wave” of the pandemic now.


With the Coronavirus new infection cases skyrocket to 3-digit thanks to arrogant ministers and politicians who ignored health procedures, business and economy, which were already struggling to mount a meaningful growth, have gone from bad to worse. In fact, it’s not an exaggeration to suggest that Muhyiddin government is fast losing control as a new wave of clusters of Covid-19 spread like wildfire.


To make matters worse, the six months loan repayment moratorium on all bank loans for individuals and SMEs had expired on 30 September 2020. In essence, business owners and wage earners have to resume loan repayments this month (October). The moratorium had allowed millions of people and businesses to enjoy temporary relief for loans totalling RM66.6 billion (as of July 31).

Mega Merger - Bank Negara - Central Bank

Of the RM66.6 billion, business sector utilised RM23.3 billion, while the public used RM43.3 billion. A 3-month “targeted moratorium extension” for individuals who have lost their jobs and are yet to find new employment has since been announced. Those who were still employed, but had undergone pay cuts would have their monthly loan payments reduced in line with their new salaries – depending on type of loan.


Make no mistake. The moratorium was merely a temporary measure to allow a “delay” in loan payments from April 1, 2020, to September 30, 2020. The existing monthly interest charged for the loan amount will continue to add up (the decision to compound interest was later removed by all major banks after major complaints). Hence borrowers still have to pay, one way or another.


There have been calls for the government to extend the loan moratorium to everyone again until the year end. A delay bankruptcy proceedings against borrowers who failed to service their loans has also been proposed. The Federation of Malaysian Manufacturers (FMM) has even urged the government to consider extending the loan moratorium period for another six months to March 2021.

Finance Minister Tengku Zafrul and Prime Minister Muhyiddin Yassin

But the backdoor government argued that the banking sector was suffering from RM1.06 billion losses per month, or a whopping RM6.4 billion loss following the six-month loan moratorium period. That was as good as crippling bank’s capacities to give new loans worth up to RM79 billion. However, pulling the plug on borrowers to safeguard banks could have dangerous effects.


While the clueless and incompetent Finance Minister Tengku Zafrul has been telling all and sundry that Malaysia’s financial ecosystem remains resilient and economy activity is improving (what else could he say), the government’s optimistic view should be taken with a pinch of salt. The six months of honeymoon – loan moratorium relief – is over and the reality is brutal on the ground.


The real retrenchment has just begun. The latest big gun that has announced layoffs is AirAsia. The low-cost airline confirmed the retrenchment of 10% of their 24,000 employees last week. This is the company’s second round of job cuts where 2,400 employees were terminated. In early June, 250 of AirAsia’s staff were axed due to the Coronavirus pandemic.

Malaysia Airlines - Plane In The Sky

Another airline – Malaysia Airlines – could be shut down if its restructuring plan, which is in last leg of negotiation with its lessors, fails. The national airline, notorious for its financial problems for as long as one can remember due to incompetence and political interference, urgently requires a fresh cash injection from shareholder, state fund Khazanah Nasional Berhad (KNB), to keep it afloat over the next 18 months.


But airline isn’t the only sector that is cutting jobs by the thousands. Travel, leisure, retail, hospitality and even property sectors will start contributing to job losses at an industrial scale. Survey shows about 60% of Malaysian workers do not have the means to raise even RM1,000 for household expenses, if they were to suddenly lose their jobs due to the Covid-19 pandemic.


Thanks to power-hungry PM Muhyiddin, who won the state of Sabah, but in the process spread the virus from the Borneo state to nationwide, almost all major shopping malls – Suria KLCC, Mid Valley, The Garden, 1-Utama, Sunway Pyramid and Bangsar Shopping Centre – have seen more new cases of Covid-19. Banks, restaurants and a mosque at the Subang Jaya airport are among a long list of places infected.

Petronas Station - KLCC

Unlike 1997-98 Asian Financial Crisis, the backdoor government of Muhyiddin will find it hard to milk money from the national oil company Petronas to bail out large companies such as Malaysia Airlines. The reliance on Petronas to provide financial lifelines will be limited this time round simply because the company itself is in financial trouble.


Petronas, long known as the cash cow of Malaysia, has posted a quarterly net loss of RM21 billion for the period ending June 30 against a profit of RM14.7 billion in the same quarter last year. To add salt to injury, other large state-owned investment companies were plagued with massive debt themselves, further limiting the government’s ability to carry out rescues.


For example, Khazanah Holdings, the sovereign wealth fund of Malaysia whose strategic stakes included power utility Tenaga Nasional, telecommunications giant Telekom Malaysia, property group UEM Sunrise, telco operator Axiata Group and of course, national carrier Malaysia Airlines, had registered a net debt of RM57.6 billion as at the end of March this year.

Khazanah Nasional Berhad

Permodalan Nasional Bhd (PNB), one of the largest fund management companies set up in 1978 to realise the government’s New Economic Policy (NEP), a controversial racist and discrimination policy, too was not doing well. Despite having conglomerate Sime Darby and auto giant UMW under its stable, PNB posted a combined net debt of RM23.8 billion.


Lembaga Tabung Angkatan Tentera (LTAT) was once considered among the country’s best-managed pension funds, producing a stable annual dividend of 6% to 8% and backed by a strong balance sheet for years. But after an investigative audit last year (2019), the armed forces pension fund was actually having financial mismanagement and irregularities.


The new government of Pakatan Harapan discovered that LTAT had been overstating its assets, fabricating transactions and was paying more dividends than it earned. It was a humiliating scandal involving (former) CEO Lodin Wok Kamaruddin, whose close relationship with former Prime Minister Najib Razak saw him as the former chairman of 1MDB.


LTAT’s crown jewel, Boustead Group, controls four publicly listed companies – Affin Bank Bhd, Boustead Plantations Bhd, Boustead Heavy Industries Corp Bhd (BHIC) and Pharmaniaga Bhd. Yet, due to mismanagement, LTAT registered net debt of RM7.8 billion. Khazanah, PNB and EPF (Employee Provident Fund) are the biggest GLICs (government-linked investment company).


Clearly, most of the government-linked investment companies were in deep financial trouble themselves. Even casino tycoon Lim Kok Tay of the Genting Group, one of the richest men in Malaysia, has plunged into financial trouble due to Coronavirus. Billionaire Lim stunned investors last month when his cruise operator Genting Hong Kong announced that it would suspend all payments to creditors.


Formerly known as Star Cruises, Genting Hong Kong owed a total of US$3.4 billion as of July 31, creating a cash crunch that the company blamed on the Coronavirus pandemic. The industry has been badly crippled by lockdown measures and travel curbs across the globe. But financial troubles were not only confined in Hong Kong.

Genting Hong Kong - Star Cruises

Retrenchment back home saw some 3,000 jobs slashed at Genting Malaysia Berhad – represents about 15% of its 20,000 employees. Prior to the job cuts, the company had implemented company-wide pay cuts in April, the first of its kind since the company was formed in 1965, suggesting the level of serious economic storm brought by the Coronavirus.


Almost half of manufacturing companies said they are planning to cut costs by retrenching up to 30% of their workers by the end of this year. Even Petronas plans to cut salaries of its employees despite assurance there won’t be any retrenchment, at least for now. As a new wave of Covid-19 coincides with the end of loan moratorium, the situation can only get worse.


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The basics: What are the efforts so far to improve food and water security, reduce the expoitation of primary food producers and attract employees to this sector?

Does the “loan repayment moratorium issued by BNM, apply only to banks or tonly to banks or it includes financial institutions that finance the purchase of cars & bikes such as Toyota Capital M’sia Sdn Bhd?
Thank you, as we await your reply.

We as a Malaysian agreed with what has been decided by our goverment. The MCO should be enforced earlier by previous goverment but it didnt happen. I think ” Inexperience goverment” in your article referring to PH goverment. We are Malaysian must unite to empower our Malaysia’s economy. Stop pointing the fingure.

Can you explain why cases were only 1-digit during PH but exploded to 3-digit during PN government? And this 3-digit period happens TWICE under PH. Facts don’t lie so stop burying your head in the sand.

Had the MCO was not implemented back in March 18, our Health Services will collapsed and would not be able to cope…More people will die and the virus would be more widespread ! Look at countries like America and UK…they were delaying in Locking down and look at their number of cases in their countries ? And these are advanced and developed countries and they still ended up in Locking down eventually. Look at our surrounding SEA countries..places like Indonesia and Philipines…they are loosing their battle now…never mind about economy in these countries…I think to stay alive also a challenge in these countries !!! This is NOT a time to talk Politics and to capitalise for your own gain !! We should STAND TOGETHER TO FIGHT COVID and not play politics NOW !!!

Instead of MCO, would CMCO be more appropriate in March 18? If not, then today’s CMCO is a mistake and should be MCO instead. Otherwise how do you justify MCO in March and only CMCO today?

You do realize that today’s 3-digit cases and deaths started because of politics, don’t you?

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