Tuesday, October 16th, 2018


Relook policies aimed at reducing income disparity: Economists

PETALING JAYA: Economists flag income disparity as one of the issues that has to be relooked, ahead of the mid-term review of the 11th Malaysia Plan set to be tabled on Oct 18.

Malaysian Institute of Economic Research (MIER) executive director Prof Dr Zakariah Abdul Rashid said at a media briefing today that the policies related to income disparity between race, state and income group's should be scrutinised and if possible reviewed.

“This is a long-term plan, so it is essential to look at how it can strengthen the economic fundamentals to spur productivity. The allocation of resources is also an issue that has to be relooked given that the income disparity has widened between income groups, race and state,” he explained.

Socio-economic issues such as income disparity and cost of living has to be tackled to ensure that the economy is manageable in the long term.

Concurring with this, Sunway University Business School professor of economics Dr Yeah Kim Leng told SunBiz that unless inequality of income within individual communities is addressed, it will be difficult to bridge the gap on a national level.

However, he said it is timely to shift to needs-based economic policies to reduce disparity, to accelerate and promote an inclusive growth, maximising potential, fully utilise resources and unleash potential of communities.

Meanwhile, the executive director of the Socio-Economic Research Centre (SERC), Lee Heng Guie, said the mid-term review is expected to have programmes to mitigate cost of living burden and uplift the Bottom 40 (B40) group.

Areas such as human capital development, infrastructure and technology are also key in bridging disparity.

Lee opined that bridging income disparity is not only about reducing the number of taxes imposed but also through tangible and intangible initiatives such as education, investment in job creation and increasing income.

On expectations for the mid-term review, both Yeah and Lee noted that the government will come up with plans moving in the direction of the digital economy and the fourth industrial revolution.

Lee said while the policies on the original plan will be maintained while new dimensions will be added to it.

He also said it will be interesting to see if past targets such as reaching a high-income nation status by 2020 and economic growth projections of 5-6% per annum will be reset.

Yeah added that structural transformation to attain fiscal sustainability, reducing impediments to sustainable growth, private sector-led economic growth are areas to look out for in addition to social, environmental aspects and political maturity.

Leong Hup to make comeback to Bursa Malaysia, to issue up to 1.6b shares in IPO

PETALING JAYA: Poultry firm Leong Hup International Bhd is set to make a comeback on the Main Market of Bursa Malaysia Securities to raise funds for the repayment of bank borrowings, capital expenditure and working capital.

In a draft prospectus filed with the Securities Commission Malaysia, Leong Hup said the initial public offering (IPO) of up to 1.6 billion shares will consist of an offer for sale of up to one billion existing shares and a public issue of 600 million new shares.

Leong Hup is one of the largest fully integrated producers of poultry, eggs and livestock feeds in Southeast Asia. It operates in Malaysia, Singapore, Indonesia, Vietnam and the Philippines. It was taken private in April 2012 together with its feed miller, Emivest Bhd.

The group owns and operates five feed mills in Malaysia, five feed mills in Indonesia and three feed mills in Vietnam. As at June 30, 2018, its total annual production capacity was 3.12 million tonnes.

It also operates 237 farms and hatcheries spread across four countries (Malaysia, Indonesia, Vietnam and the Philippines) and six slaughtering plants spread across three countries (Malaysia, Indonesia and Singapore). Apart from that, it uses 618 contract farms to increase the capacity.

In 2017, Leong Hup's market share by annual production of livestock feeds was about 10.5% in Malaysia, 5.5% in Indonesia and 4.0% in Vietnam.

Leong Hup is planning to explore acquisitions of other poultry producers or feed mills and expand upstream production capacities in its newer markets of Vietnam and the Philippines in order to achieve greater scale and benefit.

It will continue to reduce reliance on contract farms in Malaysia by investing in increasing the capacity and efficiency of its own broiler farm operations.

Last year, Leong Hup recorded a net profit of RM192.57 million, a 5.5% increase from RM182.48 million in 2016. However, its net profit margin declined from 5.1% to 4.5%. For the first six months of 2018, its net profit stood at RM118.35 million.

Leong Hup is targeting a dividend payout ratio of 30% a year.

Credit Suisse Securities (Malaysia) Sdn Bhd and RHB Investment Bank Bhd are the joint global coordinators and joint bookrunners for the IPO.

US judge approves settlement between SEC, Tesla and Musk

NEW YORK, Oct 16 — A US judge today approved the settlement between the Securities and Exchange Commission, Tesla Inc and its Chief Executive Officer Elon Musk. Musk agreed to pay a US$20 million (RM82.9 million) fine and step aside as Tesla’s…

Bank proposals value Uber at US$120b in possible IPO: Report

BENGALURU: Uber Technologies Inc could be valued at US$120 billion (RM498 billion) when it finally goes public next year according to recent proposals made by US banks, The Wall Street Journal reported today, citing people familiar with the matter.

The ride-hailing company's most recent valuation was pegged at US$76 billion, following a US$500 million investment from Toyota Motor Corp in August.

Reuters reported in late September that Goldman Sachs and Morgan Stanley were in pole position to secure top roles in Uber IPO.

Goldman Sachs and Morgan Stanley last month delivered the valuation proposals to Uber, the WSJ report said.

Uber and smaller rival Lyft have been actively preparing to go public next year. While Lyft has hired IPO advisory firm Class V Group LLC, Uber is behind in its preparations.

Uber hired Nelson Chai as its chief financial officer in August, filling a long-standing vacancy and clearing the way for its much-anticipated IPO.

Uber declined to comment on the WSJ report. – Reuters

US stocks rally after strong earnings

NEW YORK, Oct 16 — Wall Street stocks jumped in early trading today following a batch of mostly good earnings that helped investors look past recent stock market weakness. About 20 minutes into trading, the Dow Jones Industrial Average was at…

Higher fiscal deficit of 3% next year forecast

KUALA LUMPUR: While this year’s fiscal deficit of gross domestic product (GDP) is expected to meet the 2.8% goal, a higher deficit of 3% could be seen next year despite efforts to cut expenditure along with the cancellation of major infrastructure projects.

Alliance Bank Malaysia Bhd chief economist Manokaran Mottain said for the upcoming Budget 2019, the government is likely to reduce the amount of allocation as part of operating expenditure cuts and streamlining of administrative processes. It is estimated that around RM8 billion to RM10 billion in operating expenditure could be saved annually.

He expects 2019 government’s revenue and total expenditure to register at about RM228 billion and RM273 billion respectively, resulting in 2019 fiscal deficit to increase to 3% of total GDP.

“With all these trimming down of expenses, you still can’t get off from registering a (larger) deficit of 3% (in 2019) and this is mind-boggling. The impact of all these project cancellation and expenditure trimming on the GDP is that the 2019 GDP will likely be slower at 4.5%,” Manokaran said at the Malaysian Economic Summit 2018 yesterday, which was organised by the Kingsley Advisory & Strategic Initiatives Institute, a new independent private sector think tank.

He estimated that total expenditure will be lower by RM10 billion for 2019, including lowering development expenditure to be in the range of RM40 billion from RM45.4 billion estimated for 2018, but noted that operating expenditure will be difficult to trim, estimating that on a conservative basis, the government can save some RM5 billion.

He said the government should not rush into correcting its debt issue and trim down development expenditure heavily, as development expenditure can contribute to future GDP.

Malaysian Rating Corp Bhd associate director of research and chief economist Nor Zahidi Alias concurred, saying that there should not be a drastic cut in development expenditure.

“We cannot put brakes on development expenditure drastically to the point that we suffer in terms of headline growth. We care about sovereign rating but not to the point where we squeeze the economy to the brink of recession.”

Nonetheless, he said anything that affects sovereign rating, especially for emerging markets like Malaysia, will have an implication on capital flows, currency and business sentiment.

“Austerity is not the solution. What’s more critical is the debt-to-GDP ratio. Cutting expenditure can be done in the first and second year, but going forward it’s more difficult to cut expenditure so I’d look for new sources of revenue,” said Zahidi.

Meanwhile, University of Nottingham Malaysia school of economics head Dr Teo Wing Leong is of the view that spending cuts should start from operating expenditure, followed by reducing wastage and increasing efficiency.

Asset disposals by government-linked companies can also be an option.

Malaysia, Japan in talks on Asian aircraft project

KUALA LUMPUR: Malaysia is in discussions with the Japanese government for an Asian aircraft project, which is still at the ideation stage, with Malaysia looking at possibly supplying components.

Entrepreneur Development Minister Datuk Seri Mohd Redzuan Yusof said the idea, envisioned to be like Airbus, for an Asian aircraft came from the Japanese government.

“They (Japanese government) invited us to consider participating in the Asian aircraft project in view that we have the base here in relation to what we do to support the global aircraft industry, namely CTRM (Composites Technology Research Malaysia Sdn Bhd) is supplying tier 2 (aerospace parts) to Airbus. That will become our base to open up more if the ideation from Japan do materialise in the near future,” he told a press conference at the Malaysian Economic Summit 2018 today.

He said it has not prepared the framework of its understanding between the various countries in Asia for the project, given that there is only an ideation coined.

Adding that it has yet to have the first meeting, he hopes the next engagement will be held in late November in Japan.

“I interacted with the Japanese counterpart. They coined the idea of having an Asian aircraft using the entrepreneurship kind of approach to develop this vendor (system), which is already in the industry, expand their capacity and capability, reaching certain level then combining our resources and technology to realise (this project).”

Meanwhile, he said the Ministry of Entrepreneur Development (MED) is reviewing all the policies and initiatives regarding the development of entrepreneurs and SMEs with the intent to make it more holistic, integrated and targeted.

Mohd Redzuan said it is the ministry’s mission to widen and coordinate entrepreneurial activities to be more targeted, inclusive, encompassing all segments of society including the B40s and M40s.

“MED will focus among others on providing proper training and facilitation for entrepreneurs based on industry needs such as business advisory, loans and funding to stimulate the interest of potential and new entrepreneurs to establish their own startups. At the same time, assistance will be extended to them to ensure growth and sustainability of their businesses,” he said.

He said it is the mandate of MED to provide support and facilitation to local entrepreneurs so that they may move forward and withstand the competition and challenges of the global market. – By Ee Ann Nee

Barakah Offshore obtains court order to stave off creditors

PETALING JAYA: Financially distressed Barakah Offshore Petroleum Bhd has been granted orders by the High Court of Malaya restraining all proceedings and actions brought against the group and its wholly owned subsidiary PBJV Group Sdn Bhd.

The order is valid for a period of 90 days, from Oct 12, 2018 to Jan 9, 2019, according to its filing with the stock exchange.

Barakah said the order was applied for as part of the group’s proactive measure to manage its debt levels. The order allows it to negotiate terms with its lenders and creditors without having the threat of any proceedings and actions.

It stressed that none of the group’s lenders have called for an event of default on any of its financing facilities prior to obtaining the order.

”The restraining order is not envisaged to have any material financial and operational impact to the Barakah group. Further development on the above matter will be announced to Bursa Malaysia Securities Bhd in due course.”

Last May, Barakah’s independent auditors Messrs Crowe Horwath raised concerns over its ability to continue as going concern due to the losses and borrowings ended Dec 31, 2017.

It incurred a net loss of RM216.75 million and negative cash flow of RM71.83 million as at end-December 2017, while fixed deposits stood at RM102.71 million.

Barakah shares were unchanged at 12.5 sen today before a suspension in the afternoon session.

Kerjaya Prospek wins deal to build Marriott hotel

PETALING JAYA: Kerjaya Prospek Bhd has bagged a contract to construct the new Courtyard by Marriott Kuala Lumpur South Hotel, located off Old Klang Road, Kuala Lumpur.

The hotel, sited on 5.2-acre freehold commercial land, is expected to be soft launched in the first quarter of 2019 and slated for completion by 2022.

Today, Kerjaya Prospek inked a memorandum of cooperation (MoC) to signify its collaboration with Marriott International in operating and managing the new 276-room hotel.

The hotel is part of Kerjaya Prospek’s RM1.1 billion proposed mixed development project which also includes three towers of serviced apartment.

With the signing of the MoC, Marriott International will be given a 10-year contract period to operate Courtyard by Marriott, while Kerjaya Prospek is tasked to design and construct the proposed mixed development project.

Aside from the 10-year contract period, Marriott International will also be providing technical consultation on the development, design, as well as develop marketing and branding strategies for the hotel.

Affin Bank to market PMB Investment’s six unit trust funds

KUALA LUMPUR: The implementation of the New Economic Policy (NEP) is still relevant and will continue to be strengthened through a more strategic policy to meet current needs, the Dewan Rakyat was told today.

Deputy Economic Affairs Minister Dr Mohd Radzi Md Jidin said there was still room for improvement in the NEP, especially in pursuing the interest of the bumiputra and other races, to ensure transparency and accountability in its implementation.

“The NEP, which ended in 1990, emphasised a two-pronged approach, which is the eradication of poverty regardless of race and restructuring of the society to bridge the economic gap among the people.

“Anyway, the spirit of the NEP continues under subsequent policies – the National Development Policy, the National Vision Policy and the New Economic Model – in efforts to achieve socioeconomic equitability and national unity goals.

“As a government that cares for the people, the wealth distribution must be done fairly according to the needs of the people,” he said when responding to ​​​a question from Awang Hashim (PAS-Pendang) during the question and answer session.

In the quest to re-examine key policies, bumiputra socioeconomic development will continue to be an important agenda without sidelining other races, he said, adding that the government would continue to develop bumiputra’s potential to increase their participation in the economy and achieve a more equitable wealth distribution.

The micro and macro plans to boost the economy will be highlighted by Prime Minister Tun Dr Mahathir Mohamad when he tables the Mid-Term Review of the 11th Malaysia Plan at 4pm tomorrow, Mohd Radzi said. – Bernama