Rocky times ahead for China FDI in Malaysia

Li: ‘Malaysia must remember that by targeting Chinese investors in an unreasonable way, this will scare away not only FDI from China, but also from other countries.’ - credit: Malaysia Today

Great wall of controversy: Dr Mahathir’s criticism of Alliance Steel’s barricade for its RM6bil integrated steel complex has upset some Chinese investors.

A series of attacks on China-funded projects in Malaysia by the Prime Minister is causing anxiety not only to Chinese nationals but also locals.

INVESTMENTS and mega contracts linked to China will have to brace for rocky times ahead if Prime Minister Tun Dr Mahathir Mohamad continues unchecked with his incessant tirade against Chinese endeavours in Malaysia.

The golden era for Chinese investments, which possibly peaked during the rule of former prime minister Datuk Seri Najib Razak, seems to have come to an unceremonious end.

The future of foreign direct investment (FDI) from China is now seen as unpredictable – at least for the next 3-5 years – under the new government of Dr Mahathir, according to Datuk Keith Li, president of China Entrepreneurs Association in Malaysia.

Li: ‘Malaysia must remember that by targeting Chinese investors in an unreasonable way, this will scare away not only FDI from China, but also from other countries.’

“The series of comments made on Chinese investments by the PM have affected the confidence of Chinese investors. Those who originally wanted to come are adopting a wait-and-see attitude, while those already in are careful about their expansion plans,” says Li in an interview with Sunday Star.

The outspoken leader of Chinese firms notes that businessmen from the mainland are “worried”, although some comments of the Prime Minister were later “clarified” by other Cabinet Ministers or the PM’s Office.

“Malaysia must remember that by targeting Chinese investors in an unreasonable way, this will scare away not only FDI from China, but also from other countries as well,” adds Li.

Since his five-day official visit to China that ended on Aug 21, the 93-year-old Malaysian leader has caused anxiety to all by making shocking announcements.

While summing up his China trip on Aug 21, he declared he would cancel the RM55bil East Coast Rail Link (ECRL) and two gas pipelines being built by Chinese firms.

As the ECRL is of strategic importance to China’s Belt and Road Initiative – the policy which Dr Mahathir has repeatedly voiced his support for, Beijing would expect a renegotiation of the contract terms rather than an outright cancellation.

Dr Mahathir had reasoned that with national debt of over RM1 trillion, Malaysia could not afford these projects. In addition, these contracts are tainted with unfair terms and smacked of high corruption.


Although the Prime Minister said Chinese leaders understood Malaysia’s situation, reactions of Chinese nationals on social media were unforgiving with many suspecting Dr Mahathir “has other motives”.

Many see Dr Mahathir as attempting to raise Malaysia’s bargaining power in the negotiation for compensation for the cancelled projects. China, according to social media talk, is asking for RMB50bil as compensation.

On social media, there are also suggestions that Dr Mahathir is aiming at his predecessor as most China-linked projects were launched during the rule of Najib.

During the rule of Najib, Malaysia-China relations were intimate.

This has resulted in the influx of major construction and property companies from the mainland, followed by banks and industries.

But on May 9, Dr Mahathir’s Pakatan Harapan coalition toppled the Barisan Nasional government of Najib after the most bitterly fought general election in local history.

The second-time premier has put the blame on Najib for the massive 1MDB financial scandal, which Najib has denied, and mismanagement of the country’s finance.

And while the Chinese nationals are all riled up by the cancellation of ECRL, Dr Mahathir came up with an ill-advised statement.

Last week he ordered a wall surrounding Alliance Steel, which is investing US$1.4bil (RM6bil) for a massive steel complex, to be demolished. This was seen as unreasonably targeting a genuine FDI.

Although the foreign ministry later clarified that the leader had mistaken the wall to be built around the Malaysia-China Kuantan Industrial Park (MCKIP), the anger of Chinese nationals lingers on.

The industrial park is a G-to-G project to jointly promote bilateral investments. There is an even bigger sister industrial park in China that houses many Malaysian firms. All these were built during Najib’s reign.

Dr Mahathir’s statement has also caught the attention of China’s Global Times, the mouthpiece of the Communist Party of China.

In an editorial on Aug 28, the news portal warned: “Many words of Kuala Lumpur can spread to China via the Internet, causing different reactions. How the Chinese public sees China-Malaysia cooperation is by no means inconsequential to Malaysia’s interests.”

It noted “while Dr Mahathir advocates pursuing a policy of expanding friendly cooperation with China ... but when it comes to specific China-funded projects, his remarks gave rise to confusion. Like this time, it is startling to equate the controversy surrounding a factory wall with state sovereignty.”

Global Times added: “When such remarks are heard by Chinese people, the latter find it piercing. They will definitely make Chinese investors worry about Malaysian public opinion and whether such an atmosphere will affect investment in the country.”

In fact, it would be unwise for the government to disrupt MCKIP. Co-owned by Chinese, IJM Corporation and Pahang government, this industrial park has lured in Chinese FDI of over RM20bil.

It is an important economic driver in the East Coast and has aimed to create 19,000 jobs by 2020.

While the “wall” statement might be seen as a minor mistake, Dr Mahathir’s flawed announcement last Monday that foreigners would be barred from buying residential units in the US$100bil (RM410bil) Forest City stirred another uproar.

On Aug 27, Reuters quoted Dr Mahathir as saying: “That city that is going to be built cannot be sold to foreigners. Our objection is because it was built for foreigners, not built for Malaysians. Most Malaysians are unable to buy those flats.”

Currently being developed by Country Garden Holdings of China, this 20-year long project, built on reclaimed land in Johor Bahru, aims to house 700,000 people. As about 70% of the house buyers are Chinese, some locals fear this could turn into a China town.

Unlike Alliance Steel that has stayed silent, Country Garden fought back by seeking clarifications from the PM’s Office.

In a statement, the major Chinese developer said all its property transactions had complied with Malaysian laws.

Citing Section 433B of the National Land Code, it added a foreign citizen or a foreign company may acquire land in Malaysia subject to the prior approval of the State Authority.

In addition, it said Dr Mahathir’s comment did not correspond with the content of the meeting he had with Country Garden founder and chairman Yeung Kwok Keung on Aug 16.

During the meeting, Dr Mahathir said he welcomed foreign investments which could create job opportunities, promote technology transfer and innovations.

In fact, this forest city project – along with ECRL – were the main targets of attack by Dr Mahathir before the May 9 election.

Opposition to these projects had helped drive Dr Mahathir’s election campaign, during which he said was evidence of Najib selling Malaysia’s sovereignty to China.

These projects, together with major construction contracts won by Chinese and the inflow of industrial investments, place the total value of Chinese deals at more than RM600bil in Malaysia.

But few would expect Dr Mahathir to use his powerful position to resume his attacks on China-linked projects so soon after his so-called “fruitful visit” to Beijing.

During his official visit to Beijing, the Malaysian leader was accorded the highest honour by China, due mainly to respect for “China’s old friend” and strong Malaysia-China relations built since 1975.

Dr Mahathir was chauffeured in Hongqi L5 limousine, reserved for the most honourable leaders, and greeted in an official welcome ceremony by Premier Li Keqiang. He was also guest of honour at a banquet at Diaoyutai State Guesthouse hosted by President Xi Jinping.

But beneath these glamorous receptions, there were reservations exuded by the Chinese for this leader whose premiership is scheduled to end in two years.

There were no exciting business deals signed in Beijing. There was absence of high diplomatic rhetoric that “Malaysia-China ties have been elevated to another historic high”, oft-repeated during Najib’s past visits.

Many even notice that Premier Li and Dr Mahathir had a cool handshake after their short joint press conference in Beijing.

And although China promised to buy Malaysian palm oil, the statement was qualified with “price sensitivity”, which means it will not buy above market price.

In addition, there was no mention of “buying palm oil without upper limit”, which was promised to Najib last year.

If Dr Mahathir’s original intention was to target Forest City and its owners, his move has certainly backfired. The country will have to pay a price for his off-the-cuff statement.

The “new policy” will have serious ramifications as it would hit the value of the properties not only in Forest City but also in other China-linked and non-Chinese projects.

Country Garden’s Danga Bay project will also be hit. It now faces a more daunting task of selling the balance of about 2,000 units in Danga Bay, according to a Starbiz report.

Other Chinese developers like R&F Princess Cove and Greenland Group will be affected.

VPC Alliance Malaysia managing director James Wong told Starbiz there may be legal suits against the government.

“That may force Country Garden to scale down because it has invested a lot with its industrial building systems factory and an international school, among other investments. It will impact Country Garden and Malaysia’s property sector negatively,” Wong said.

“Foreign buyers and other foreign companies will shy away,” Wong added.

The change in government and the insensitive comments on China-funded projects have turned Malaysia into a high-risk investment destination for the Chinese, according to Li.

“We don’t know which China projects will be targeted next. Looking back, it’s a blessing in disguise that we were pushed out of the RM200bil Bandar Malaysia project. It is also lucky that Chinese money has not gone into the RM30bil Melaka Gateway project,” says Li, who owns a travel agency in Malaysia.

“In the immediate future, more tourists from China are likely to shy away from Malaysia.

“Malaysia may not hit the target of having three million visits from China this year,” Li adds.

Credit: Ho Wah Foon The Star

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Rocky times ahead for China FDI in Malaysia

Li: ‘Malaysia must remember that by targeting Chinese investors in an unreasonable way, this will scare away not only FDI from China, but also from other countries.’ - credit: Malaysia Today

Great wall of controversy: Dr Mahathir’s criticism of Alliance Steel’s barricade for its RM6bil integrated steel complex has upset some Chinese investors.

A series of attacks on China-funded projects in Malaysia by the Prime Minister is causing anxiety not only to Chinese nationals but also locals.

INVESTMENTS and mega contracts linked to China will have to brace for rocky times ahead if Prime Minister Tun Dr Mahathir Mohamad continues unchecked with his incessant tirade against Chinese endeavours in Malaysia.

The golden era for Chinese investments, which possibly peaked during the rule of former prime minister Datuk Seri Najib Razak, seems to have come to an unceremonious end.

The future of foreign direct investment (FDI) from China is now seen as unpredictable – at least for the next 3-5 years – under the new government of Dr Mahathir, according to Datuk Keith Li, president of China Entrepreneurs Association in Malaysia.

Li: ‘Malaysia must remember that by targeting Chinese investors in an unreasonable way, this will scare away not only FDI from China, but also from other countries.’

“The series of comments made on Chinese investments by the PM have affected the confidence of Chinese investors. Those who originally wanted to come are adopting a wait-and-see attitude, while those already in are careful about their expansion plans,” says Li in an interview with Sunday Star.

The outspoken leader of Chinese firms notes that businessmen from the mainland are “worried”, although some comments of the Prime Minister were later “clarified” by other Cabinet Ministers or the PM’s Office.

“Malaysia must remember that by targeting Chinese investors in an unreasonable way, this will scare away not only FDI from China, but also from other countries as well,” adds Li.

Since his five-day official visit to China that ended on Aug 21, the 93-year-old Malaysian leader has caused anxiety to all by making shocking announcements.

While summing up his China trip on Aug 21, he declared he would cancel the RM55bil East Coast Rail Link (ECRL) and two gas pipelines being built by Chinese firms.

As the ECRL is of strategic importance to China’s Belt and Road Initiative – the policy which Dr Mahathir has repeatedly voiced his support for, Beijing would expect a renegotiation of the contract terms rather than an outright cancellation.

Dr Mahathir had reasoned that with national debt of over RM1 trillion, Malaysia could not afford these projects. In addition, these contracts are tainted with unfair terms and smacked of high corruption.


Although the Prime Minister said Chinese leaders understood Malaysia’s situation, reactions of Chinese nationals on social media were unforgiving with many suspecting Dr Mahathir “has other motives”.

Many see Dr Mahathir as attempting to raise Malaysia’s bargaining power in the negotiation for compensation for the cancelled projects. China, according to social media talk, is asking for RMB50bil as compensation.

On social media, there are also suggestions that Dr Mahathir is aiming at his predecessor as most China-linked projects were launched during the rule of Najib.

During the rule of Najib, Malaysia-China relations were intimate.

This has resulted in the influx of major construction and property companies from the mainland, followed by banks and industries.

But on May 9, Dr Mahathir’s Pakatan Harapan coalition toppled the Barisan Nasional government of Najib after the most bitterly fought general election in local history.

The second-time premier has put the blame on Najib for the massive 1MDB financial scandal, which Najib has denied, and mismanagement of the country’s finance.

And while the Chinese nationals are all riled up by the cancellation of ECRL, Dr Mahathir came up with an ill-advised statement.

Last week he ordered a wall surrounding Alliance Steel, which is investing US$1.4bil (RM6bil) for a massive steel complex, to be demolished. This was seen as unreasonably targeting a genuine FDI.

Although the foreign ministry later clarified that the leader had mistaken the wall to be built around the Malaysia-China Kuantan Industrial Park (MCKIP), the anger of Chinese nationals lingers on.

The industrial park is a G-to-G project to jointly promote bilateral investments. There is an even bigger sister industrial park in China that houses many Malaysian firms. All these were built during Najib’s reign.

Dr Mahathir’s statement has also caught the attention of China’s Global Times, the mouthpiece of the Communist Party of China.

In an editorial on Aug 28, the news portal warned: “Many words of Kuala Lumpur can spread to China via the Internet, causing different reactions. How the Chinese public sees China-Malaysia cooperation is by no means inconsequential to Malaysia’s interests.”

It noted “while Dr Mahathir advocates pursuing a policy of expanding friendly cooperation with China ... but when it comes to specific China-funded projects, his remarks gave rise to confusion. Like this time, it is startling to equate the controversy surrounding a factory wall with state sovereignty.”

Global Times added: “When such remarks are heard by Chinese people, the latter find it piercing. They will definitely make Chinese investors worry about Malaysian public opinion and whether such an atmosphere will affect investment in the country.”

In fact, it would be unwise for the government to disrupt MCKIP. Co-owned by Chinese, IJM Corporation and Pahang government, this industrial park has lured in Chinese FDI of over RM20bil.

It is an important economic driver in the East Coast and has aimed to create 19,000 jobs by 2020.

While the “wall” statement might be seen as a minor mistake, Dr Mahathir’s flawed announcement last Monday that foreigners would be barred from buying residential units in the US$100bil (RM410bil) Forest City stirred another uproar.

On Aug 27, Reuters quoted Dr Mahathir as saying: “That city that is going to be built cannot be sold to foreigners. Our objection is because it was built for foreigners, not built for Malaysians. Most Malaysians are unable to buy those flats.”

Currently being developed by Country Garden Holdings of China, this 20-year long project, built on reclaimed land in Johor Bahru, aims to house 700,000 people. As about 70% of the house buyers are Chinese, some locals fear this could turn into a China town.

Unlike Alliance Steel that has stayed silent, Country Garden fought back by seeking clarifications from the PM’s Office.

In a statement, the major Chinese developer said all its property transactions had complied with Malaysian laws.

Citing Section 433B of the National Land Code, it added a foreign citizen or a foreign company may acquire land in Malaysia subject to the prior approval of the State Authority.

In addition, it said Dr Mahathir’s comment did not correspond with the content of the meeting he had with Country Garden founder and chairman Yeung Kwok Keung on Aug 16.

During the meeting, Dr Mahathir said he welcomed foreign investments which could create job opportunities, promote technology transfer and innovations.

In fact, this forest city project – along with ECRL – were the main targets of attack by Dr Mahathir before the May 9 election.

Opposition to these projects had helped drive Dr Mahathir’s election campaign, during which he said was evidence of Najib selling Malaysia’s sovereignty to China.

These projects, together with major construction contracts won by Chinese and the inflow of industrial investments, place the total value of Chinese deals at more than RM600bil in Malaysia.

But few would expect Dr Mahathir to use his powerful position to resume his attacks on China-linked projects so soon after his so-called “fruitful visit” to Beijing.

During his official visit to Beijing, the Malaysian leader was accorded the highest honour by China, due mainly to respect for “China’s old friend” and strong Malaysia-China relations built since 1975.

Dr Mahathir was chauffeured in Hongqi L5 limousine, reserved for the most honourable leaders, and greeted in an official welcome ceremony by Premier Li Keqiang. He was also guest of honour at a banquet at Diaoyutai State Guesthouse hosted by President Xi Jinping.

But beneath these glamorous receptions, there were reservations exuded by the Chinese for this leader whose premiership is scheduled to end in two years.

There were no exciting business deals signed in Beijing. There was absence of high diplomatic rhetoric that “Malaysia-China ties have been elevated to another historic high”, oft-repeated during Najib’s past visits.

Many even notice that Premier Li and Dr Mahathir had a cool handshake after their short joint press conference in Beijing.

And although China promised to buy Malaysian palm oil, the statement was qualified with “price sensitivity”, which means it will not buy above market price.

In addition, there was no mention of “buying palm oil without upper limit”, which was promised to Najib last year.

If Dr Mahathir’s original intention was to target Forest City and its owners, his move has certainly backfired. The country will have to pay a price for his off-the-cuff statement.

The “new policy” will have serious ramifications as it would hit the value of the properties not only in Forest City but also in other China-linked and non-Chinese projects.

Country Garden’s Danga Bay project will also be hit. It now faces a more daunting task of selling the balance of about 2,000 units in Danga Bay, according to a Starbiz report.

Other Chinese developers like R&F Princess Cove and Greenland Group will be affected.

VPC Alliance Malaysia managing director James Wong told Starbiz there may be legal suits against the government.

“That may force Country Garden to scale down because it has invested a lot with its industrial building systems factory and an international school, among other investments. It will impact Country Garden and Malaysia’s property sector negatively,” Wong said.

“Foreign buyers and other foreign companies will shy away,” Wong added.

The change in government and the insensitive comments on China-funded projects have turned Malaysia into a high-risk investment destination for the Chinese, according to Li.

“We don’t know which China projects will be targeted next. Looking back, it’s a blessing in disguise that we were pushed out of the RM200bil Bandar Malaysia project. It is also lucky that Chinese money has not gone into the RM30bil Melaka Gateway project,” says Li, who owns a travel agency in Malaysia.

“In the immediate future, more tourists from China are likely to shy away from Malaysia.

“Malaysia may not hit the target of having three million visits from China this year,” Li adds.

Credit: Ho Wah Foon The Star

Related posts:

The real Malay dilemma: race, religion & politics messed up!

Old politics: If the leadership keeps to the racialist, feudalist and religious-centric tactics and policies of the past, thinking this i...

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Foreigners Not Welcome as Malaysia Joins Property Clampdown

Malaysia Bans Foreigners From Project https://www.bloomberg.com/news/videos/2018-08-28/malaysia-bans-foreigners-from-project-video ..

ECRL and pipeline projects cancelled !

https://youtu.be/NyNXOirQ2F0 https://youtu.be/nyQIyNLQ4-o https://youtu.be/7zyP1xE9glo It added to the country's debts and ..

PM: Understand Malaysia’s fiscal woes

hhttps://youtu.be/Kb266n1yH8M https://youtu.be/aG6Sup8qo8g Wow! China's most impressive Guard of Honour for Tun Mahathier h...

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Malaysia's PM Dr Mahathir visits China to push forward bilateral ties and witness signing of 3 MoUs

https://youtu.be/8UpFfU_-G9w https://youtu.be/ugYWJQoUFpg https://youtu.be/ugYWJQoUFpg https://youtu.be/qvc0RQ_79qA https..

SST - for better or worse ?

What is Sales & Service Tax (SST) in Malaysia? - SST Malaysia

Today, the Sales and Service Tax (SST) makes a comeback on our tax radar screen to replace the three years and two months old Goods and Services Tax (GST), which was implemented on April 1, 2015.

The abolition of the GST and replaced with SST is an election promise of the Pakatan Harapan manifesto.

It has been claimed that the GST is a regressive broad-based consumption tax that has burdened the low- and middle-income households amid the rising cost of living. The multi-stage tax levied on supply chains also caused cascading cost and price effects on goods and services. That said, the Finance Minister has acknowledged that the GST is an efficient and transparent tax.

Following the implementation of the SST, the Government will come to terms that the budget spending will have to be rationalised and realigned with the lower revenue collection from the SST to keep the lower budget deficit target on track.

The expected revenue collection from SST is RM21bil compared to an average of RM42.7bil per year in 2016-17 from GST.

During the period 2010-2014, the revenue collection from the SST, averaging RM14.8bil per year (the largest amount collected on record was RM17.2bil in 2014), of which 64% was contributed by the sales tax rate of 10% while the balance 36% from the service tax of 6%.

Faced with the revenue shortfall, the Government expects cost-savings, plugging of leakages, weeding out of corruption as well as the containment of the costs of projects would help to balance the financing gap between revenue and spending.

The sales tax rate (0%, 10% and 5% as well as a specific rate for petroleum) and service tax of 6% is imposed on consumers who use certain prescribed services. The taxable threshold for SST is set at annual revenue of RM500,000, the same threshold as GST, with the exception for eateries and restaurants at RM1.5mil.

As SST is levied only at a single stage of the supply chain, that is at the manufacturers or importers level and NOT at wholesalers, retailers and final consumers, it has cut off the number of registered tax persons and establishments from 476,023 companies under GST as of 15 July to an estimated 100,405 under SST.

The smaller number of registered establishments means no more compliance cost to about 85% of traders.

The distributive traders (wholesalers and retailers) will be hassle-free from cash flow problems, as they are no longer required to submit GST output tax while waiting to claim back the GST input tax. During GST, many traders imputed refunds into their pricing because of the delay in GST refunds. This was partly blamed for the cascading cost pass-through and price increases onto consumers.

For SST, 38% of the goods and services in the Consumer Price Index (CPI) basket are taxable compared to 60% under the GST.

It is estimated that up to RM70bil will be freed up to allow consumers to spend more.

Expanded scope

The proposed service tax regime has a narrower base (43.5% of services is taxable) compared to the GST (64.8% of services is taxable).

Medical insurance for individuals, service charges from hotel, clubs and restaurants as well as household’s electricity usage between 300kWh and 600kWh are not taxable. However, the scope of the new SST has been expanded compared to the previous SST. Among them are gaming, domestic flights (excluding rural air services), IT services, insurance and takaful for individuals, more telecommunication services and preparation of food and beverage services as well as electricity supply (household usage above 600kWh).

For hospitality services, the proposed service tax lowered the registration threshold of general restaurants (not attached with hotel) from an annual revenue of RM3mil under old service tax regime to RM1.5mil, resulting in expanded coverage of more restaurants.

Private hospital services will be excluded under the new SST regime.

How does SST affect consumers?

Technically speaking, the revenue shortfall of RM23bil between SST and GST is a form of “income transfer” from the Government to households and businesses. This is equivalent to tax cuts to support consumer spending.

Will it lead to higher consumer prices?

The contentious issue is will the SST burden households more than that of the GST? It must be noted that the cost of living not only encompasses prices paid for goods and services but also housing, transportation, medical and other living expenses.

The degree of sales tax impact would depend on the cost and margin (mark-up) of businesses along the supply chain before reaching end-consumers.

The coverage and scope of tax imposed also matter.

As the price paid by consumers is embedded in the selling price, this gives rise to psychology effect that sales tax is somewhat better off than GST.

The good news to consumers is that 38% of the goods and services in the Consumer Price Index (CPI) basket are taxable compared to the 60% under the GST.

Technically speaking, monthly headline inflation, as measured by the Consumer Price Index, is likely to show a flat growth or even declines in the months ahead.

It must be noted that consumers should compare prices before GST versus the three-month tax holiday (June-August).

Generally, consumers perceived that prices should either come down or remained unchanged as the sales tax is levied on manufacturers.

On average, some items (electrical appliances and big ticket items such as cars) would be costlier when compared to GST and some may come down (new items exempted from SST).

Nevertheless, we caution that consumers may experience some price increases, as prices generally did not come as much following the removal of GST in June.

There are concerns that prices may still go up in September when the new SST kicks in as irresponsible traders may take advantage to increase prices further.

Household consumption, which got a big boost during the three-month tax holiday in June-August, could see some normalisation in spending.

The smooth implementation of the new SST, accompanied by strict enforcement of price checks and the curbing of profiteering, especially for essentials goods and services consumed by B40 income households, are crucial to keep the level of general prices stable.

Strong consumer activism with the support of The Federation of Malaysian Consumers Association and the Consumers Association Penang as well as the media must work together to help in price surveillance and protect consumers’ interest.

Credit to Lee Heng Guie - comment

Related post:

GST vs SST. Which is better?

 

SST - for better or worse ?

What is Sales & Service Tax (SST) in Malaysia? - SST Malaysia

Today, the Sales and Service Tax (SST) makes a comeback on our tax radar screen to replace the three years and two months old Goods and Services Tax (GST), which was implemented on April 1, 2015.

The abolition of the GST and replaced with SST is an election promise of the Pakatan Harapan manifesto.

It has been claimed that the GST is a regressive broad-based consumption tax that has burdened the low- and middle-income households amid the rising cost of living. The multi-stage tax levied on supply chains also caused cascading cost and price effects on goods and services. That said, the Finance Minister has acknowledged that the GST is an efficient and transparent tax.

Following the implementation of the SST, the Government will come to terms that the budget spending will have to be rationalised and realigned with the lower revenue collection from the SST to keep the lower budget deficit target on track.

The expected revenue collection from SST is RM21bil compared to an average of RM42.7bil per year in 2016-17 from GST.

During the period 2010-2014, the revenue collection from the SST, averaging RM14.8bil per year (the largest amount collected on record was RM17.2bil in 2014), of which 64% was contributed by the sales tax rate of 10% while the balance 36% from the service tax of 6%.

Faced with the revenue shortfall, the Government expects cost-savings, plugging of leakages, weeding out of corruption as well as the containment of the costs of projects would help to balance the financing gap between revenue and spending.

The sales tax rate (0%, 10% and 5% as well as a specific rate for petroleum) and service tax of 6% is imposed on consumers who use certain prescribed services. The taxable threshold for SST is set at annual revenue of RM500,000, the same threshold as GST, with the exception for eateries and restaurants at RM1.5mil.

As SST is levied only at a single stage of the supply chain, that is at the manufacturers or importers level and NOT at wholesalers, retailers and final consumers, it has cut off the number of registered tax persons and establishments from 476,023 companies under GST as of 15 July to an estimated 100,405 under SST.

The smaller number of registered establishments means no more compliance cost to about 85% of traders.

The distributive traders (wholesalers and retailers) will be hassle-free from cash flow problems, as they are no longer required to submit GST output tax while waiting to claim back the GST input tax. During GST, many traders imputed refunds into their pricing because of the delay in GST refunds. This was partly blamed for the cascading cost pass-through and price increases onto consumers.

For SST, 38% of the goods and services in the Consumer Price Index (CPI) basket are taxable compared to 60% under the GST.

It is estimated that up to RM70bil will be freed up to allow consumers to spend more.

Expanded scope

The proposed service tax regime has a narrower base (43.5% of services is taxable) compared to the GST (64.8% of services is taxable).

Medical insurance for individuals, service charges from hotel, clubs and restaurants as well as household’s electricity usage between 300kWh and 600kWh are not taxable. However, the scope of the new SST has been expanded compared to the previous SST. Among them are gaming, domestic flights (excluding rural air services), IT services, insurance and takaful for individuals, more telecommunication services and preparation of food and beverage services as well as electricity supply (household usage above 600kWh).

For hospitality services, the proposed service tax lowered the registration threshold of general restaurants (not attached with hotel) from an annual revenue of RM3mil under old service tax regime to RM1.5mil, resulting in expanded coverage of more restaurants.

Private hospital services will be excluded under the new SST regime.

How does SST affect consumers?

Technically speaking, the revenue shortfall of RM23bil between SST and GST is a form of “income transfer” from the Government to households and businesses. This is equivalent to tax cuts to support consumer spending.

Will it lead to higher consumer prices?

The contentious issue is will the SST burden households more than that of the GST? It must be noted that the cost of living not only encompasses prices paid for goods and services but also housing, transportation, medical and other living expenses.

The degree of sales tax impact would depend on the cost and margin (mark-up) of businesses along the supply chain before reaching end-consumers.

The coverage and scope of tax imposed also matter.

As the price paid by consumers is embedded in the selling price, this gives rise to psychology effect that sales tax is somewhat better off than GST.

The good news to consumers is that 38% of the goods and services in the Consumer Price Index (CPI) basket are taxable compared to the 60% under the GST.

Technically speaking, monthly headline inflation, as measured by the Consumer Price Index, is likely to show a flat growth or even declines in the months ahead.

It must be noted that consumers should compare prices before GST versus the three-month tax holiday (June-August).

Generally, consumers perceived that prices should either come down or remained unchanged as the sales tax is levied on manufacturers.

On average, some items (electrical appliances and big ticket items such as cars) would be costlier when compared to GST and some may come down (new items exempted from SST).

Nevertheless, we caution that consumers may experience some price increases, as prices generally did not come as much following the removal of GST in June.

There are concerns that prices may still go up in September when the new SST kicks in as irresponsible traders may take advantage to increase prices further.

Household consumption, which got a big boost during the three-month tax holiday in June-August, could see some normalisation in spending.

The smooth implementation of the new SST, accompanied by strict enforcement of price checks and the curbing of profiteering, especially for essentials goods and services consumed by B40 income households, are crucial to keep the level of general prices stable.

Strong consumer activism with the support of The Federation of Malaysian Consumers Association and the Consumers Association Penang as well as the media must work together to help in price surveillance and protect consumers’ interest.

Credit to Lee Heng Guie - comment

Related post:

GST vs SST. Which is better?

 

New Malaysia should push for meritocracy

The Meritocracy Paradox

Pakatan Harapan’s unexpected win in the recent 14th General Elections sent a signal that it is time for the country to move towards focusing on being more performance oriented and making decisions on the basis of meritocracy for the long-term good of its citizens.

Interview with Tan Sri G.Gnanalingam

Westports Holdings Bhd’s chairman Tan Sri G. Gnanalingam says this is the basis of how the company has been operating all this and notes that it is paying off today.

“Westports has always prided itself on being a performance-oriented organisation, being innovative and treating our employees as family members,” he says.

Gnanalingam, who has been the face of Westports for more than 20 years, says this idea can be extended to how the country can be governed as well.


He says that in the company, everyone is treated equally irrespective of race or gender and this has worked tremendously well.

He notes that this also comes with some form of a safety net for those who can’t perform as well as their counterparts.

“The system should be such that we reward success but provide some safety needs for the unfortunate few who didn’t make it, but the safety net is not so big that it promotes complacency.

“There will always be some members of the community who do not do as well as others. This is where we need to lend a hand to support them, regardless of race or gender,” Gnanalingam adds.

This is important because innovation is best built on meritocracy and is a needed ingredient for the country to excel in the new economy of the Internet.

“Innovation is needed as the world prog­resses forward; we cannot move backward. Today, we have a computer in our pocket called the smartphone, which does all kinds of things.

“Malaysia needs to forge ahead as the future is increasingly influenced by information technology, artificial intelligence and Industry 4.0,” Gnanalingam says.

“As for the new Malaysia, I believe that transparency, good governance and people first should be values that are celebrated,” he adds.

Gnanalingam, who is the founder of Westports, also tells of the company’s humble roots, noting that it has grown by leaps and bounds and is now listed on Bursa Malaysia.

“The year 1994 was when we started building Westports. In fact, we were the first private company to build a port after the British left in 1957.

“Prior to the birth of Westports, Port Klang was a port that had less than one million container volume. Malaysia transshipped everything from Penang, Kuantan, Johor and even East Malaysia to Singapore,” he says.

He also highlighted that while the company is primarily a family-owned firm and is now helmed by his son Datuk Ruben Emir Gnanalingam, who is Westports’ group managing director, the family still takes heed of the advice of professional managers.

“Leading Westports is a bit like managing a football team. In order to win, we must assemble the best players, train very hard, formulate specific strategies and out-do our opponents. And we must continuously improve our skills and knowledge of the game. There will always be room for innovation and a better way to do things,” Gnanalingam says.

Westports has grown steadily since its inception in the year 1994.

Today, the company is a RM12.8bil company in market capitalisation on the Bursa Malaysia Main Board.

Recalling the the company’s early days, Gnanalingam says Westports had to focus on what was important: its productivity.

“I always tell our people to focus on raising productivity, being innovative and being cost-effective. Westports is ranked among the top five in the world in terms of productivity.

“Westports has also risen from 27th place to 12th place in the world port traffic league rankings.

“Once Westports was born, we focused on producing the best service for our customers, the shipping lines. To do that, we improved our productivity.

“Our crane operators are well trained. Their performance is world class as they are able to do 35 or more containermoves per hour,” he says.

The company’s terminal tractor operators and stowage clerks have also been upskilled to create a fast turnaround time for the cargo from the container yard to the vessel and vice versa.

While the going seems smooth now, Gnanalingam notes that it was not always smooth sailing for Westports, as it had to go through several financial crises and political uncertainty on the global front, where it threatened or slowed down shipping demand.

However, hHe notes that it has grown its market share steadily and incrementally over the past 20 years.

Today, he notes that Westports captures 16% of the container volume moving through the Straits of Malacca and supports 38% of all container volume in Malaysia.

“And today, we are proud to be one of only three mega-transhipment hubs in the entire Asean region,” he says.

Costs to ship and out of Malaysia have also fallen tremendously and Gnanalingam notes that both exporters and importers pay some 90% lower in freight charges today.

“Before 2005, it cost about US$800 (RM3,280) to freight a container from Port Klang to Busan in Korea. Today, the cost is about US$35 (RM143) only.

“To cite another example, before 2005, it cost about US$500 (RM2,050) to freight a container from Port Klang to Kaoshiung in China. Today, the cost is about US$110 (RM450), which is almost 80% lower,” he says.

Credit to : Daniel Khoo The Star

Related:

The real Malay dilemma: race, religion & politics messed up!

Old politics: If the leadership keeps to the racialist, feudalist and religious-centric tactics and policies of the past, thinking this i...

MERITOCRACY is about more than just academic grades

 

Lee Kuan Yew's meritocracy: a key reason for S'pore's separation from Ma'sia, his quotable quotes.. 

 

A question of talent in Malaysia 

 

World Bank says: NEP, brain drain holding back Malaysia

 

Arrest decline in productivity and competitiveness in Malaysia 

 

Malaysia sacrifices talent to keep one race on top, said Lee Kuan Yew of Singapore

New Malaysia should push for meritocracy

The Meritocracy Paradox

Pakatan Harapan’s unexpected win in the recent 14th General Elections sent a signal that it is time for the country to move towards focusing on being more performance oriented and making decisions on the basis of meritocracy for the long-term good of its citizens.

Interview with Tan Sri G.Gnanalingam

Westports Holdings Bhd’s chairman Tan Sri G. Gnanalingam says this is the basis of how the company has been operating all this and notes that it is paying off today.

“Westports has always prided itself on being a performance-oriented organisation, being innovative and treating our employees as family members,” he says.

Gnanalingam, who has been the face of Westports for more than 20 years, says this idea can be extended to how the country can be governed as well.


He says that in the company, everyone is treated equally irrespective of race or gender and this has worked tremendously well.

He notes that this also comes with some form of a safety net for those who can’t perform as well as their counterparts.

“The system should be such that we reward success but provide some safety needs for the unfortunate few who didn’t make it, but the safety net is not so big that it promotes complacency.

“There will always be some members of the community who do not do as well as others. This is where we need to lend a hand to support them, regardless of race or gender,” Gnanalingam adds.

This is important because innovation is best built on meritocracy and is a needed ingredient for the country to excel in the new economy of the Internet.

“Innovation is needed as the world prog­resses forward; we cannot move backward. Today, we have a computer in our pocket called the smartphone, which does all kinds of things.

“Malaysia needs to forge ahead as the future is increasingly influenced by information technology, artificial intelligence and Industry 4.0,” Gnanalingam says.

“As for the new Malaysia, I believe that transparency, good governance and people first should be values that are celebrated,” he adds.

Gnanalingam, who is the founder of Westports, also tells of the company’s humble roots, noting that it has grown by leaps and bounds and is now listed on Bursa Malaysia.

“The year 1994 was when we started building Westports. In fact, we were the first private company to build a port after the British left in 1957.

“Prior to the birth of Westports, Port Klang was a port that had less than one million container volume. Malaysia transshipped everything from Penang, Kuantan, Johor and even East Malaysia to Singapore,” he says.

He also highlighted that while the company is primarily a family-owned firm and is now helmed by his son Datuk Ruben Emir Gnanalingam, who is Westports’ group managing director, the family still takes heed of the advice of professional managers.

“Leading Westports is a bit like managing a football team. In order to win, we must assemble the best players, train very hard, formulate specific strategies and out-do our opponents. And we must continuously improve our skills and knowledge of the game. There will always be room for innovation and a better way to do things,” Gnanalingam says.

Westports has grown steadily since its inception in the year 1994.

Today, the company is a RM12.8bil company in market capitalisation on the Bursa Malaysia Main Board.

Recalling the the company’s early days, Gnanalingam says Westports had to focus on what was important: its productivity.

“I always tell our people to focus on raising productivity, being innovative and being cost-effective. Westports is ranked among the top five in the world in terms of productivity.

“Westports has also risen from 27th place to 12th place in the world port traffic league rankings.

“Once Westports was born, we focused on producing the best service for our customers, the shipping lines. To do that, we improved our productivity.

“Our crane operators are well trained. Their performance is world class as they are able to do 35 or more containermoves per hour,” he says.

The company’s terminal tractor operators and stowage clerks have also been upskilled to create a fast turnaround time for the cargo from the container yard to the vessel and vice versa.

While the going seems smooth now, Gnanalingam notes that it was not always smooth sailing for Westports, as it had to go through several financial crises and political uncertainty on the global front, where it threatened or slowed down shipping demand.

However, hHe notes that it has grown its market share steadily and incrementally over the past 20 years.

Today, he notes that Westports captures 16% of the container volume moving through the Straits of Malacca and supports 38% of all container volume in Malaysia.

“And today, we are proud to be one of only three mega-transhipment hubs in the entire Asean region,” he says.

Costs to ship and out of Malaysia have also fallen tremendously and Gnanalingam notes that both exporters and importers pay some 90% lower in freight charges today.

“Before 2005, it cost about US$800 (RM3,280) to freight a container from Port Klang to Busan in Korea. Today, the cost is about US$35 (RM143) only.

“To cite another example, before 2005, it cost about US$500 (RM2,050) to freight a container from Port Klang to Kaoshiung in China. Today, the cost is about US$110 (RM450), which is almost 80% lower,” he says.

Credit to : Daniel Khoo The Star

Related:

The real Malay dilemma: race, religion & politics messed up!

Old politics: If the leadership keeps to the racialist, feudalist and religious-centric tactics and policies of the past, thinking this i...

MERITOCRACY is about more than just academic grades

 

Lee Kuan Yew's meritocracy: a key reason for S'pore's separation from Ma'sia, his quotable quotes.. 

 

A question of talent in Malaysia 

 

World Bank says: NEP, brain drain holding back Malaysia

 

Arrest decline in productivity and competitiveness in Malaysia 

 

Malaysia sacrifices talent to keep one race on top, said Lee Kuan Yew of Singapore

Letters to CIA, Spies and the millions - Malaysian External Investigation Organisation (MEIO)' under probe

Bundles of money: Azam (second from left) and his officers showing the seized money during the press conference in Putrajaya.

https://youtu.be/89gTYnelAmA
> https://youtu.be/q4bT80wh29Y
https://youtu.be/7xVhzykRBbQ
https://youtu.be/BhdL4ocvsoM
https://youtu.be/u7Gc5Dossrs


PUTRAJAYA: The Malaysian Anti-Corruption Commission (MACC) is widening its investigation into the alleged misappropriation of US$12mil (RM49.3mil) worth of government funds involving a little-known spy agency.

It has already made nine arrests as it looks into unravelling the web of intrigue involving Datuk Hasanah Abdul Hamid, the former director-general of the Malaysian External Investigation Organisation (MEIO).

The anti-graft investigators are probing if the senior intelligence officers had “help” to bring in US$12mil – believed to be from a Middle East source – into the country.

The cash was believed to have been brought in via air, possibly through Kuala Lumpur Inter­national Airport.

Highly placed sources in the anti-graft body said this angle needed to be looked into as it would be difficult to carry such a staggering amount of money undetected.

Malaysian laws require those bringing in US$10,000 and above into the country to have it declared at the point of entry.

“Obviously, there was a breach of security because the cash was brought in without raising alarms of the authorities at the airport.

“We want to investigate if those who brought in the money had some assistance so that they need not declare it,” a source told The Star.

Following the remand of officers from the MEIO as well as its former chief Datuk Hasanah Abdul Hamid, investigators found out that the money was brought into the country three months ago in May.

“The timing suggests that the cash was for the general election. But the other question is why the officers had their hands on the money,” said the same source.

Investigators are also not discounting the possibility that the funds could be from 1Ma­­lay­sia Development Bhd (1MDB).

“We will have to probe deeper before coming to a conclusion,” the source added.

Malaysian Anti-Corruption Commission deputy chief commissioner (operations) Datuk Seri Azam Baki said there was a possibility that the money was brought into the country through the airport.

“Whatever the entry point is, we would like to know how it passed through security. Obviously that would be one angle of investigation,” he said.

Azam said his officers could still manage the investigation but if the need arises, it would seek assistance from other authorities.

Hasanah and seven other former MEIO officers were arrested earlier this week, and a ninth arrest was made on Wednesday night involving a 47-year-old businessman.

The businessman, who has a “Datuk” title and is also a permanent resident of Britain, was ­arrested in Kota Baru at 11pm on Wednesday.

The MACC has so far recovered US$6.3mil (RM25.9mil) of the US$12mil that was brought into the country about three months ago, as well as RM900,000 in ringgit.

The bulk of the US currency, about US$4.07mil (RM16.7mil), was seized from the businessman.

“We have raided several locations, including a rented condominium in Cyberjaya and the Prime Minister’s Department, where we seized the cash along with other valuable items including a luxury watch.

“Our swoop on the suspects began on Monday and we are not ruling out the possibility of making more arrests in the future,” Azam told a press conference at the MACC headquarters earlier yesterday.

The MACC has already called ­several witnesses, including three foreigners, and at least 20 more witnesses will be tracked down and called to assist with the investigation, he said.

MEIO was listed as the “research division” of the Prime Minister’s Department under the previous Barisan Nasional administration.

“Initial investigations revealed that the funds were brought into the country about three months ago,” said Azam.

“We are investigating whether this was before or after the last ­general election (on May 9).

“We are also investigating the source of the funds and which country the money came from.”

And despite its widening scope, the MACC is hoping to wrap up its investigation within two months as long as it does not involve a complicated money trail or require any foreign assistance, he added.

Hasanah was arrested at the MACC headquarters at 4.15pm on Tuesday after she arrived to give a statement to the anti-graft body.

She had previously courted controversy after writing a letter to the US Central Intelligence Agency (CIA) director Gina Haspel, appealing to the United States to support former premier Datuk Seri Najib Tun Razak’s administration.

She and the seven officers are also being investigated under Section 23 of the MACC Act 2009 for abuse of power.

Related

RM26mil in US currency seized in spy agency graft probe

How Malaysia became a big part of ‘Crazy Rich Asians’

Letters to CIA, Spies and the millions - Malaysian External Investigation Organisation (MEIO)' under probe

Bundles of money: Azam (second from left) and his officers showing the seized money during the press conference in Putrajaya.

https://youtu.be/89gTYnelAmA
> https://youtu.be/q4bT80wh29Y
https://youtu.be/7xVhzykRBbQ
https://youtu.be/BhdL4ocvsoM
https://youtu.be/u7Gc5Dossrs


PUTRAJAYA: The Malaysian Anti-Corruption Commission (MACC) is widening its investigation into the alleged misappropriation of US$12mil (RM49.3mil) worth of government funds involving a little-known spy agency.

It has already made nine arrests as it looks into unravelling the web of intrigue involving Datuk Hasanah Abdul Hamid, the former director-general of the Malaysian External Investigation Organisation (MEIO).

The anti-graft investigators are probing if the senior intelligence officers had “help” to bring in US$12mil – believed to be from a Middle East source – into the country.

The cash was believed to have been brought in via air, possibly through Kuala Lumpur Inter­national Airport.

Highly placed sources in the anti-graft body said this angle needed to be looked into as it would be difficult to carry such a staggering amount of money undetected.

Malaysian laws require those bringing in US$10,000 and above into the country to have it declared at the point of entry.

“Obviously, there was a breach of security because the cash was brought in without raising alarms of the authorities at the airport.

“We want to investigate if those who brought in the money had some assistance so that they need not declare it,” a source told The Star.

Following the remand of officers from the MEIO as well as its former chief Datuk Hasanah Abdul Hamid, investigators found out that the money was brought into the country three months ago in May.

“The timing suggests that the cash was for the general election. But the other question is why the officers had their hands on the money,” said the same source.

Investigators are also not discounting the possibility that the funds could be from 1Ma­­lay­sia Development Bhd (1MDB).

“We will have to probe deeper before coming to a conclusion,” the source added.

Malaysian Anti-Corruption Commission deputy chief commissioner (operations) Datuk Seri Azam Baki said there was a possibility that the money was brought into the country through the airport.

“Whatever the entry point is, we would like to know how it passed through security. Obviously that would be one angle of investigation,” he said.

Azam said his officers could still manage the investigation but if the need arises, it would seek assistance from other authorities.

Hasanah and seven other former MEIO officers were arrested earlier this week, and a ninth arrest was made on Wednesday night involving a 47-year-old businessman.

The businessman, who has a “Datuk” title and is also a permanent resident of Britain, was ­arrested in Kota Baru at 11pm on Wednesday.

The MACC has so far recovered US$6.3mil (RM25.9mil) of the US$12mil that was brought into the country about three months ago, as well as RM900,000 in ringgit.

The bulk of the US currency, about US$4.07mil (RM16.7mil), was seized from the businessman.

“We have raided several locations, including a rented condominium in Cyberjaya and the Prime Minister’s Department, where we seized the cash along with other valuable items including a luxury watch.

“Our swoop on the suspects began on Monday and we are not ruling out the possibility of making more arrests in the future,” Azam told a press conference at the MACC headquarters earlier yesterday.

The MACC has already called ­several witnesses, including three foreigners, and at least 20 more witnesses will be tracked down and called to assist with the investigation, he said.

MEIO was listed as the “research division” of the Prime Minister’s Department under the previous Barisan Nasional administration.

“Initial investigations revealed that the funds were brought into the country about three months ago,” said Azam.

“We are investigating whether this was before or after the last ­general election (on May 9).

“We are also investigating the source of the funds and which country the money came from.”

And despite its widening scope, the MACC is hoping to wrap up its investigation within two months as long as it does not involve a complicated money trail or require any foreign assistance, he added.

Hasanah was arrested at the MACC headquarters at 4.15pm on Tuesday after she arrived to give a statement to the anti-graft body.

She had previously courted controversy after writing a letter to the US Central Intelligence Agency (CIA) director Gina Haspel, appealing to the United States to support former premier Datuk Seri Najib Tun Razak’s administration.

She and the seven officers are also being investigated under Section 23 of the MACC Act 2009 for abuse of power.

Related

RM26mil in US currency seized in spy agency graft probe

How Malaysia became a big part of ‘Crazy Rich Asians’