Wednesday, March 28th, 2018


Making the case for a minimum standard of living

BANK Negara Malaysia (BNM) believes that it is timely to aspire for all citizens to attain at least a minimum acceptable standard of living, under the living wage concept, as Malaysia moves closer to becoming a high-income nation.

Estimating the living wage includes taking into account variations in prices and living standards across location and household composition; deriving a representative basket of goods and services that reflect a minimum acceptable living standard, estimating the cost of the representative basket of goods and services and periodically updating the living wage estimates.

This standard approach is expected to work to ensure all segments of society reap the benefits and not be dislocated in the process of achieving a high-income nation status.

Using the living wage as a benchmark to assess the adequacy of current wages and social assistance, international experiences suggest that it has potential to inform, challenge and enhance policies towards the goal of achieving minimum acceptable living standard.

As such a significant amount of consideration is needed in calculating a representative living wage level.

Apart from allowing employees to afford a minimum acceptable standard of living, the living wage may also yield positive spillovers to the broader economy. These include reductions in employee turnover rates and improvements in employees’ morale and productivity.

The possibility of adverse outcomes from the implementation of the living wage underscores the importance of a corresponding increase in productivity and movement towards a high-skilled workforce.

The living wage can bring benefits to both employees and employers, with limited negative consequences on the economy, should it be representative and reasonable enough to guide employers towards paying fair wages to employees.

More effort needed to curb dependency on foreign workers

MALAYSIA'S efforts to rein in its dependence on foreign workers has resulted in the steady decline in the share of documented foreign workers to 12% of labour force in 2017, from 16.1% in 2013, but more needs to be done to build on the progress made.

The article “Low-skilled foreign workers’ distortions to the economy” by Bank Negara Malaysia said the end objective is to ensure that the future foreign worker management system in Malaysia is clearly articulated, firmly implemented, and more aligned to Malaysia’s economic objectives.

It raised five points that are worth pursuing. Firstly, it said there needs to be a clear stance on the role of low-skilled foreign workers in Malaysia’s economic narrative, as to where foreign workers are most needed and the manner in which they can be best engaged to support productivity growth and industrial upgrading.

Secondly, policy implementation and changes need to be gradual and clearly communicated to the industry to reduce the risks of policy reversals. Frequent policy reversals have complicated enforcement and increased business uncertainties.

“One example involved the several changes to the rules in foreign worker levy with regard to the party who should bear the cost. Since the introduction of the levy in 1992, Malaysia has changed its stance on the matter three times within the last 10 years.”

But it noted that the recent re-imposition of the levy on employers through the Employers Undertaking (effective Jan 1, 2018) is a step in the right direction.

Thirdly, existing demand-management tools such as quotas, dependency ceilings and levies, can be reformed to be more market-driven. Fourthly, there is room to ensure better treatment of foreign workers, be it improvements in working conditions or ensuring that foreign workers are paid as agreed.

Fifthly, these proposed reforms must be complemented with effective monitoring and enforcement on the group.

BNM: Household debt declines to 84.3% last year

KUALA LUMPUR: Malaysia's household debt-to-gross domestic product declined to 84.3% last year from 88.3% in 2016 driven by stronger performance of the domestic economy and improvement in underlying trends in debt accumulation by households.

Bank Negara Malaysia (BNM) said the growth of unsecured borrowings in the form of personal loans has been sharply lower, down to 2.5% last year from 25.2% in 2008, and the debt servicing ratios of most households remained within prudent levels.

It said the growth in household financial assets outpaced that of debt for the first time since 2012.

“The growth in household borrowings moderated for the seventh consecutive year and is now more in line with income growth,” BNM said in its Financial Stability and Payment Systems Report 2017 released today.

The central bank said the banking sector's profitability continued to improve, albeit the lower household income level, reflecting the slower growth in interest expenses and higher fee-based income from financing-related activities and stockbroking activities.

“Outstanding financing by banks grew 4.1% to RM1,584.4 billion in 2017, driven mainly by financing to households and small and medium enterprises (SMEs). In particular, growth in financing to SMEs remained healthy at 6%,” it said.

It said the Islamic finance industry also maintained healthy levels of profitability and capitalisation last year with Islamic financing grew by 9.4%, driven mainly by home and SME financing.

On insurance and takaful, the central bank said, the sector maintained positive growth underpinned by strong overall capitalisation but penetration rate for life insurance and family takaful remained low, increasing only marginally over the last four years.

“Unsurprisingly, penetration is lower in the Bottom 40% household segment with only 30.3% owning a life insurance or family takaful policy,” it said.

On cross-border development, BNM said, Malaysia's debt securities market continued its upward trajectory last year, growing 10.1% to RM1.3 trillion, or 97.6%, of gross domestic product (GDP).

“Bond yields, despite more volatile capital flows, remained relatively stable, owing to the active participation of domestic institutional investors,” it said.

It said following the series of measures introduced by the Financial Markets Committee since December 2016, onshore foreign exchange liquidity has improved considerably with average daily trading volume in the onshore foreign exchange market increased to US$9.9 billion, up by over 20% from 2016.

“The transaction volume of the ringgit non-deliverable forward market has contracted by 70% since November 2016,” it said.

It added that the more flexible hedging framework has also resulted in increased foreign exchange forward transactions by non-resident institutional investors.

Meanwhile, on payment and settlement systems, it said, the system remained resilient and operated without any major interruptions throughout the year.

“To mitigate cyber risk to key payment infrastructures, financial institutions have taken steps to comply with enhanced security controls, including those published by Society for Worldwide Interbank Financial Telecommunication to fortify the local operating environment,” it said.

It said as part of BNM's drive towards a cashless society, measures have been actively implemented to correct price distortions, enable a greater degree of competition, and establish market incentive structures to promote innovation and investments in payments infrastructure.

Going forward, BNM said, it would focus on initiatives to promote mobile payments to complement debit cards in displacing cash.

“An area of primary focus will be the operationalisation of the Interoperable Credit Transfer Framework (ICTF).

“By ensuring fair and open access to a shared payment infrastructure by banks and non-banks, the ICTF is envisioned to drive greater competition, spur the development of innovative payment services to cater to the needs of different customer segments, and foster greater financial inclusion,” it said. — Bernama

Astro Malaysia records growth despite widespread digitalisation

KUALA LUMPUR, March 28 — Despite the widespread digitalisation of media outlets in the market, Astro Malaysia Holdings Berhad recorded a 24 per cent year-over-year growth in Profit After Tax, Amortisation and Minority Interest(PATAMI) of RM771…

BNM: Banks have sufficient buffers to absorb potential direct exposure losses

KUALA LUMPUR: Bank Negara Malaysia (BNM) analyses indicated that banks have sufficient buffers to absorb potential cumulative losses of RM85 billion arising from the direct exposure and spillovers to related sectors.

BNM said roughly one-third of the losses could be attributed to residential mortgages.

“Taking into consideration banks' earnings buffers, the overall common equity tier-1 capital ratio is expected to decline by 3.2 percentage points, remaining well above the minimum regulatory requirement,” said the central bank.

Meanwhile, BNM planned to work with financial institutions this year to develop supporting mechanisms to prepare the sector's workforce for changes due to factors such as technological advancements, it said in its Financial Stability and Payment Systems 2017 released here today,

BNM said based on its findings, over 60% of commercial banks, insurers and takaful operators would benefit from having a more comprehensive approach towards workforce transition.

The central bank said it aimed to work with the institutions to conduct a holistic assessment of the dynamics of the financial sector workforce, including forecasting skill demand and supply, with the end objective of developing appropriate mechanisms to support the transition.

BNM said current trends in the financial sector workforce showed a trajectory towards becoming more technology-intensive and knowledge-driven.

However, it cautioned that the transition had the potential to be highly disruptive in a way that could undermine the broader benefits from a more productive and higher-skilled workforce.

This is unless institutional and industry arrangements were well positioned to not only manage, but also enable the transition by increasing the agility of the sector's workforce.

BNM noted that net hiring trends by the financial sector had been positive in recent years.

“At end-2017, 164,884 were employed by the financial sector, with Malaysians comprising a significant majority of the workforce (99.6%),” it said.

Over the past three years (2015-2017), 24,630 jobs were created, of which 90.6% constituted high-skilled positions.

BNM said lay-offs and discharges remained low, averaging only 7.5% of total separations in 2017, which indicated largely voluntary movements due to retirement, resignations and transfers.

“Looking ahead, the trend for job creation is expected to remain positive, with both banks and insurers/takaful operators expecting additional jobs to be created in 2018,” it added.

Another key development observed is the shift in composition of the workforce towards high-skilled workers in the last three years.

As at end-2017, high-skilled workers comprised 74.4% of banking sector employees (2015: 69.1%) and 83.4% of insurance/takaful sector employees (2015: 79.1%).

According to BNM, this significantly exceeded the national average for total employment in Malaysia, where only 27.2% of employed persons were within the high-skilled worker category.

Job vacancies remained at over 5,600 despite positive overall hiring trends by the financial sector last year.

Based on a survey conducted by BNM, a majority of these vacancies — over 3,500 positions — were high-skilled within the commercial banking sector as at end-September 2017.

Meanwhile, the broad reach of digital platforms and changes in consumer preferences have further accelerated changes in the delivery of financial services, replacing physical branch access with mobile- and Internet-based connectivity for performing financial transactions.

In 2017, banks onboarded over 5.3 million online and mobile banking customers, and notified BNM of 36 branch closures, broadly in line with declining transaction volumes at these bank branches.

“While these technological advancements have enabled financial institutions to be more agile and responsive to consumer preferences and a changing competitive landscape, they also herald an irreversible change in the future composition and skill sets of the financial sector workforce,” BNM said.

In preparing the financial sector workforce for the future, the central bank suggested the need to equip the workforce with new skill sets that were relevant and practical for the needs of the future.

It also said there was a need to support the transition of the workforce through re-training and outplacement assistance as job functions evolve and expand its innovative capacity to facilitate future growth, particularly through enhancing data capabilities and workforce diversity. — Bernama

Anbang’s ex-chairman Wu contests charges as trial opens in China

SHANGHAI, March 28 — The former chairman of Anbang Insurance Group Co Ltd, Wu Xiaohui, contested all charges against him in a high-profile trial that began in Shanghai today, part of Beijing’s crackdown on profligate investing by…

Tencent president sells US$55m worth of company shares

HONG KONG, March 28 — The president of Tencent Holdings, Asia’s most valuable listed company, has sold 1 million of his shares in the company at a premium of 5.4 per cent to today’s closing market price, according to a regulatory filing….

Tenaga Nasional signs PPA with KBJ Hecmy

KUALA LUMPUR, March 28 — Tenaga Nasional Bhd (TNB) has signed a large-scale solar (LSS) photovoltaic power purchase agreement (PPA) with special-purpose company, KBJ Hecmy Sdn Bhd. In a filing with Bursa Malaysia today, the utility firm said,…

Ringgit ends at 31-month fresh high

KUALA LUMPUR, March 28 — The ringgit extended yesterday’s gains to close at a fresh high in more than 31 months, the level last seen on August 4, 2015, as buying interests persisted following a sharp pullback in benchmark US 10-year Treasury…

BNM sees Malaysia 2018 inflation at 2% to 3%


KUALA LUMPUR (March 28): Bank Negara Malaysia (BNM) has projected Malaysia’s 2018 headline inflation to average between 2% and 3% after taking into account a higher base in 2017 and stronger ringgit. BNM said the country’s headline inflation is expected to moderate in 2018 from 3.7% in 2017. BNM said today in its 2017 annual report that while global energy and commodity prices are expected to rise in 2018, the country’s higher inflation base in 2017 will result in a smaller contribution to headline inflation. “In addition, a stronger ringgitRead More