On Your Own

The writer is an entrepreneur who hopes to share his experience and insights with readers who want to take that giant leap into business but are not sure if they should.

10/2018 – My wishlist to Economic Affairs Minister

Dear Datuk Seri Azmin Ali,

A belated greeting of Selamat Hari Raya Aidilfitri to you and your family. I hope you have rested well over the weekend. And congratulations to you on your appointment as Economic Affairs Minister.

Pending the announcement by Prime Minister Tun Dr Mahathir Mohamad on the rest of the ministries, we are uncertain as to the specific functions and scope of your ministry. From press reports, we understand your responsibilities may include the Economic Planning Unit (EPU), Petronas, government-linked investment companies (GLICs) and government-linked companies (GLCs). Effectively, the Economic Affairs Minister will be managing the wealth of the country.

According to an article in The Star dated June 6 by Edmund Terence Gomez, the professor of political economy at Universiti Malaya, in 2017 there were seven GLICs controlling majority stakes in 70 GLCs and additional investments of between 5-37% in another 140 listed companies, effectively controlling more than 60% of Bursa Malaysia’s market capitalisation. As the GLICs are controlled by the Finance Minister, the Government is now the biggest business corporation in Malaysia.

Petronas, wholly owned by the Government of Malaysia since 1974, is vested with the entire oil and gas resources in Malaysia. For 44 years, Petronas has been a major source of revenue to the Government in funding development projects and covering government operating expenditures.

Perhaps you may want to study the Norwegian oil fund, which is The Government Pension Fund Global, established in 1990. Funded by the surplus revenue of the petroleum sector, in May 2018, it has over US$1 trillion in assets, including 1.3% of global stocks and shares, making it the world’s largest sovereign wealth fund. It is now worth US$195,000 per Norwegian citizen (population 5.2 million).

The Norwegian oil fund is managed by a professional team at Norges Bank Investment Management, part of the Norwegian central bank on behalf of the Finance Minister.

Of the assets, 65% were equities and the rest were property (not more than 5%) and fixed income instruments. The fund is an active investor via company governance even though they are not involved in direct management of the investee companies.

Most of their investments do not exceed 20% of the investee market cap.

In Malaysia, this Norwegian oil fund will be known as a GLIC. So technically speaking, because they do not have controlling stakes in their investee companies, they have no GLCs in their portfolio of investments.

They do not have to assign nor appoint any CEO from their management team to any of these companies and they have the flexibility to sell their investments if they deemed their investment is at risk or having a poor return on investment going forward.

A local example will be our EPF selling all their shares in Felda Global Ventures Bhd last year despite realising an investment loss of RM203mil.

According to our learned professor Edmund, there are seven GLICs in Malaysia which comprise five savings and investment-based institutions, namely Permodlan Nasional Bhd (PNB), Lembaga Tabung Angkatan Tentera (LTAT), Lembaga Tabung Haji (LTH), Retirement Fund Inc (KWAP) and the Employees Provident Fund (EPF).

The other GLICs are Khazanah, which is the only sovereign wealth fund, and Minister of Finance Inc, which also incorporates many other companies like 1MDB, etc, as it wishes since MoF Inc is under the purview of the Finance Minister.

PNB

PNB was established in 1978 as one of the instruments of the New Economic Policy (NEP) to re-engineer the economic imbalance in Malaysian society. NEP’s main objective was to achieve a 30% share of the economic pie for the bumiputra community.

PNB has been highly successful in managing multiple units trusts with more than 13 million accounts. It is now the second largest fund manager after EPF with assets under management (AUM) of about RM 276bil. PNB controls about 10% of Bursa Saham market cap.

Since its inception, PNB has rewarded its unit holders with more than RM157bil in dividends and bonus.

PNB has been the most effective institution in the redistribution of wealth to the mass bumiputra community whereas previous policies of building successful bumiputra businessmen has resulted in immense wealth accumulated in the hands of a few.

LTAT

LTAT was established in 1972 with the aim to provide retirement and other benefits to the members of the Armed Forces via a compulsory savings scheme. Members of the Armed Forces, numbering around 200,000, contribute 10% of their salary with the Government contributing 15%.

With an AUM of around RM10bil, it is the smallest savings and pension fund amongst the five GLICs.

LTH

LTH was set up in 1963 and act as the Malaysian Pilgrim Management and Fund Board. The main function of Tabung Haji is to administer and manage Malaysian Muslims to go for the Haj. The fund invests in syariah-compliant vehicles with an AUM of RM73bil contributed by nine million depositors.

KWAP

Kumpulan Wang Persaraan (KWAP) or the Retirement Fund Inc was established in 2007, replacing the Pensions Trust Fund (1991) to assist the Federal Government in funding its pension liability. Funds are raised from contributing employers comprising of statutory bodies, local authorities and agencies to an amount of 17.5% of the basic salary of the employee/ civil servant.

KWAP has an AUM of RM125bil with an average return of 6.5%.

EPF

The EPF is a federal statutory body set up in 1991 to manage the compulsory savings and retirement plan for private sector workers in Malaysia. Its predecessor Employees Provident Fund Board was set up in 1951. With a net contribution inflow of RM2bil-RM3bil a month, EPF has become a behemoth savings fund now managing an AUM of RM814bil, with an average return of 5.5 to 6.5%.

The five savings and pension funds now have an approximate total of RM1.3 trillion assets under management.

Khazanah

Khazanah Bhd, incorporated in 1993 as a public limited company, is owned by the Minister of Finance Incorporated (MoF Inc). Khazanah was entrusted to hold and manage the commercial assets of the Government and thus acts as the strategic investment fund of the Government of Malaysia.

With a shareholders fund of RM40bil, Khazanah manages a mark to market AUM of RM157bil.

To finance its investment, Khazanah issues bonds and sukuk which are guaranteed by MoF Inc. As it is able to pay off its debts, the current Finance Minister does not consider Khazanah debts as an off-balance sheet liability of the Government.

Khazanah’s bumiputra empowerment agenda includes initiatives like Teraju, which develops bumiputra entrepreneurs and provides scholarships for the brightest students to study in top universities all over the world.

If compared to Singapore’s two sovereign funds, Temasek (1974), with an AUM of approximately RM800bil, is similar to Khazanah whereas the Government of Singapore Investment Corp (GIC,1981) is similar to EPF as it manages Central Provident Fund (CPF) funds of approximately RM900bil (out of a total AUM of RM 1.2 trillion).

As all of these GLICs are under the purview of the Finance Minister and the Prime Minister’s Office, it will be interesting to see how the Economic Affairs Ministry can play a meaningful role in managing the wealth of the nation. Perhaps we can classify the GLICs into two categories.

The first category should prioritise on the savings funds that look after the welfare of the bumiputras in accordance with the PH manifesto declaration. The Finance Ministry can park PNB, LTAT, LTH and KWSP under the good care of the Economic Affairs Ministry. One must note that these funds do not generate any returns for the Government.

These funds, if well managed, will be effective in redistributing wealth to the mass bumiputra community.

EPF being a savings and pension fund for the private sector should remain under the purview of MoF. Khazanah, which is owned by MoF Inc, is expected to generate returns for its shareholders and thus should remain under the purview of MoF. In addition, Khazanah’s liabilities/borrowings are considered as off balance sheet liabilities of the Government.

To reform these GLICs, both the Finance Minister and the Economic Affairs Minister must work in tandem to ensure that transparent investment policies are set with proper governance structure in place. Perhaps our two senior ministers would like to consider the following reforms.

  • No political appointees to the board or management of the GLICs.
  • Hire the best talent to manage the GLICs.
  • Current reforms on changing the CEOs of GLICs and GLCs should be based on talent and skills of the individual and not on their previous political affiliations.
  • Talented and professional managers like Datuk Shahril Ridza Ridzuan (Oxford/Cambridge) of EPF and Datuk Abdul Rahman (Cambridge) of PNB should be retained as they are our brightest talents with high integrity.
  • GLICs should not be directly involved in the management of the investee companies.
  • Main focus should be on portfolio and risk management, not in supplying half baked and inexperienced CEOs to manage the GLCs. Let the board of directors do their job of finding the right candidate with relevant experience to lead the company.
  • Reduce the number of GLCs especially in non strategic industries by divesting to not more than 20% shareholding of the investee company. Some of the non strategic industries are property development, construction, plantations (Felda the exception), airlines, etc.

From an investment perspective, it does not make sense for PNB to own the biggest property development company in Malaysia with the biggest landbank when there is a massive oversupply of all kinds of properties in a cyclical industry.

If Bank Negara made a ruling that no individual or corporation should own more than 20% of any banks, should it apply to GLICs as well? In the age of budget airlines and free skies, there is no need for a national airline as Khazanah has discovered at great costs.

With the world automotive industry moving towards electric and self driving cars, I wonder what Tun Mahathir has envisaged when he mused about having another national car project?

Malaysia, with its high debts, can ill afford wasteful projects that do not deliver economic benefits to the country.

It is highly recommended that Datuk Seri Amin Ali assemble the best minds to helm the Economic Planning Unit (EPU) to chart a new economic course for this country. This will prevent haphazard and ill advised development projects by individual ministries and wayward finance Ministers.

Just imagine if the High Speed Rail project had been properly evaluated by the EPU with regards to its economic viability. Let’s assume that it brings major economic benefits, Azmin will then consult with saudara Guan Eng whether MoF can afford to pay for it.

Again assuming that MoF can find the money, then the Transport Minister will be tasked with the responsibility of negotiating with his Singapore counterpart and when both sides are in agreement, our Transport Minister will conduct open and transparent tender and then tasked to implement the project. If we had followed this protocol, we will not be in the mess that we are experiencing now.1

Managing Petronas is a no brainer. Just appoint Tan Sri Mohd Hassan Marican as the chairman of Petronas if he is willing to forego his lucrative employment contract with Temasek. Appeal to his sense of national service and it might just work.

Just like Guan Eng, you might discover that managing national assets and national budgets are a major step up when compared with managing a state like Selangor or Penang. Have no fear. The trick in excellent management is to appoint the smartest people in town to work for you. That might just be your toughest assignment in managing the economic affairs of the nation.

Published: https://www.thestar.com.my/business/business-news/2018/06/19/my-wishlist-to-economic-affairs-minister/

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9/2018 – Not possible to revamp public sector in 100 days

In just a matter of three weeks, the new Pakatan Harapan government has made many major decisions at breathtaking speed which has left many citizens breathless in amazement.

While many decisions might look like populist strategies by a new government in its haste to fulfil its election manifesto, management students like me can draw parallels as to how to manage a large corporation embroiled in financial difficulties.

At the end of the first 100 days, we would be able to assess whether this new management team has got its overall strategies pointing in the right direction or this nation is left with a trail of disconnected strategies hastily conceived by a motley crew of novice political management trainees.

Corporate managers and SME owners have much to learn from this historical case study as it unfolds.

Fact. The government is the biggest corporation and the biggest employer in this country.

With revenues in the hundreds of billions and expenses always more than its revenue, its biggest management headache is always about balancing its budgets. The government can manage continuous deficit budgets because it controls its own bank which is allowed to print money whenever there is a cash flow deficit.

However there is a limit to borrowings to finance deficits as the government like a corporation has to be able to service its debts. Prudent financial management of the national balance sheet dictates that borrowings should not be more than 55% of GDP of this nation.

One of the major reasons on failures of large corporations and SMEs alike is over-borrowing. Short-term borrowings to finance long-term projects. Financing loss-making diversification activities from borrowings instead of profits from core business. The key consideration to additional borrowings must be based on the organisation’s ability to have sustainable forward cash flow to pay for its expenses and to service its debt repayment. Any capable chief financial officer (CFO) would be able to advise you on this basic accounting concept.

SME owners who also act as the CFO of their own companies are advised to adopt a prudent financial policy on borrowings. It will get even more messy if you include your personal borrowings with your company borrowings if the cash flow from your company is your only source to service both debts. There are so many instances of SME owners with a profitable business getting into cash flow problems when they over-invest into properties etc.

Fact. Rescue operations requires emergency life saving affirmative actions.

Once a patient is wheeled into an emergency ward, the medical officer has to immediately assess the overall health of the patient, diagnose the problems and implement corrective medical actions. Our good doctor, Tun Dr Mahathir Mohamad has recommended surgery, amputations where necessary, prescribed sour medicines and gave oxygen to the patient. Once the condition of the patient is stabilised, he will be wheeled into the ICU or general ward depending on how he respond to emergency treatments.

Many corporate recovery managers are actually financial doctors and they will be able to identify with Dr Mahathir in this case. It is also common practice that new CEOs/CFOs who have been brought into financially distressed corporations will resort to “kitchen sinking” – announcing all the bad news at one go, blaming all the covered up problems on the previous management. If the previous management team is found to have mismanaged with financial irregularities, they can be charged in court. If found to be poor managers, they will be labelled as stupid and incompetent.

For SME owners, you will have no such problem. If you mismanaged your company, nobody will help you and nobody will call you names. You will be declared a bankrupt and you will quietly slide into oblivion. No room for mistakes and no time for self pity. You are on your own.

Fact. Small companies, small problems. Big corporations, massive problems.

Just imagine you have been hired as part of the new management team to manage a corporation called Malaysia. Staff strength 1.6 million employees, 25 department heads, 25 different businesses, some revenue driven, mostly cost centres. Staff morale is low as job uncertainty weighs on their mind. Loyalty to old management team still high but prospects of side income not the same as before. Difficult to change old habits and lackadaisical attitudes. What should you do?

One department has 550,000 teachers on its payroll. With a student population of about five million, these teachers will have to adapt to smaller teaching classes and new teaching methods.

It will be more difficult to improve the teaching of English to students if the teachers themselves do not speak much English. Should the fake facts in history books be replaced with true facts and teaching of religion be restricted to respective religious schools? As the department head of education, what should you do?

Another department has a staff strength of 100,000 officers to uphold the rule of law. Some heads act above the law, some act like the law but more perplexing is that different laws apply to different persons. Cutting off rotten heads might stop the rut but only when no one is above the law, rules become rules then only the law will again be true and fair. In all fairness, what can you do?

So many departments, so many problems. Some problems are big and difficult, some are teething and irritating. So many staff, some are bad, many are good. As they say, one rotten apple spoils the whole basket. How do we sieve out the good from the bad?

It would be much easier to solve the financial problems than the people problems. Ask any CEOs, CFOs and human resource directors. Numbers can be crunched and analysed. To change attitudes and cultural habits, it will need a massive transformation of mind sets across the whole organisation. Definitely not achievable within a 100 days.

As Lao Tzu said, “A journey of a thousand miles begins with a single step.” Let us all walk together in this journey for a better and more prosperous Malaysia.

Published: https://www.thestar.com.my/business/business-news/2018/06/02/not-possible-to-revamp-public-sector-in-100-days/

8/2018 – My wish list to the entrepreneurs

Saturday, 26 May 2018

Dear entrepreneurs

This past general election must have surprised you with such an unexpected twist that you are unprepared for the rapid changes in government policies. If you want to forecast the next steps to be taken by the Pakatan Harapan government, I suggest you read up their election manifesto.

Surprisingly, this motley crew of politicians are able to work together, counter check one another and following the manifesto that they have promised to the last word. Even Tun Dr Mahathir Mohamad has to retract some of his earlier decisions in the spirit of the manifesto.

However don’t raise your hopes too high for these are early days.

Saudara Anthony Loke has changed the meaning of the YB acronym from Yang Berhormat to Yang Berkhidmat. No decorum please. Now everybody can get a driving licence. If you pass. Saudara Maszlee Malik will be reforming our education system with new refreshing ideas so hopefully it will be well received by the professors, lecturers and the teachers. Implementation will be his toughest task though not impossible.

Entrepreneurs who believe that honorific titles will get you respect in the government departments will be in for a surprise with these motley crew of saudara ministers. Save your money and reinvest in growing your company capabilities instead.

Entrepreneurs who have been getting negotiated contracts from the previous government should revisit your one sided contracts and understand the rules of the law when the government comes a calling to renegotiate with you. Be prepared for a haircut.

Entrepreneurs who have openly supported Barisan Nasional in the previous elections should not worry too much as this Pakatan government believes in freedom of speech, freedom of rights and freedom to choose and vote. However general public sentiments are against you so it might be advisable to keep quiet for now rather than making a bad situation worse.

Entrepreneurs who controls public listed companies should refrain from being openly involved in politics. You have a responsibility towards the other stakeholders in your company. Your personal choice in supporting the government of the day or the next government should not jeopardise the fortunes of your listed company.

Just as politicians should not be involved in business, businessmen should not be involved directly in politics. The recent dramatic saga of Tan Sri Stanley Thai and Tan Sri Tony Fernandes have been well documented, discussed and gone viral. It will eventually be a good case study for topics on leadership governance and managing government bullies. As said by Tan Sri Rafidah Aziz, let’s bury these past cases and move on for we have much to look forward to.

Hopefully this new government will not set the Inland Revenue Department onto the businessman who has not supported them in the last election.

While it seems unlikely, there is no indication of any changes in the IRD by the Finance Minister, probably because they have the 1MDB debacle to unravel on an urgent basis.

Saudara LGE, the entrepreneurs are urging you to reform the IRD to be more compassionate, less arrogant and more fair. Please do not set them KPI’s on excess tax collection as the officers will start believing in creative accounting of their own imagination. Dr Mahathir has asked the IRD to pay back the excess tax created and collected from many individuals and corporations. It will be interesting to see what the IRD will do with his instructions.

Bumiputra entrepreneurs should not worry too much as to the loss of business opportunities with the government. The Pakatan government has pledged to maintain certain rights for bumiputra business community. The only difference will be no more negotiated contracts, all on open tender and please make sure you perform or your performance bonds will be taken by the government.

Many associations like the taxi associations are approaching Dr Mahathir and the new ministers for clearer policies or additional regulations to be applied to the digital competitors.

No matter what new regulations there is, this can only be short-term breathing space for the taxi operators.

Only a complete overhaul in attitude and business model can help the taxi players survive in the long run. The consumers decide their future, not the government.

For entrepreneurs who are involved in the import, distribution and retail of China made consumer products, apparels, electronic products and accessories, I strongly suggest you guys have a quick discussion with our Economic Affairs Minister and Human Resources Minister. With the rolling out of the Digital Free Trade Zone, Alibaba will be flooding China-made products into Malaysia. Are you guys prepared for the onslaught?

I recommend a quick national survey to be done by the Human Resources Ministry on how many people will be affected or displaced by this digital e-commerce disruption. The ministry should plan a re-training programme for these displaced workers and work on re-routing these workers to other industries.

Dr Mahathir has said that this Pakatan government will be business friendly. I hope the civil service especially the IRD will transform itself to be business friendly too. Entrepreneurs who enjoy a lower cost of doing business due to government efficiency should pass the cost savings to their customers.

This Pakatan government has promised to lower the cost of living for all Malaysians in their manifesto. No unintelligent remarks yet from their ministers. So far so good.

Published: https://www.thestar.com.my/business/business-news/2018/05/26/my-wish-list-to-the-entrepreneurs/

7/2018 – My wishlist to Dr Mahathir and Guan Eng

Dear Dr Mahathir

It is difficult to congratulate you for your self appointment as the next Education Minister. Not especially with Tun Dr Siti Hasmah Mohd Ali being unhappy that you have broken your promise not to take up an additional portfolio as you already have the heavy job of a Prime Minister. You have hardly slept the past week and the nation is worried about your health.

So with it with great relief that you have decided to pass the baton to Dr Maszlee Malik before the starting line. Neverthless, many are pleased that you have thought about it as the future of this country rests upon your wise decision and a firm hand.

As you have combined the two education ministries into one, you can now chart a seamless education for a child from standard one to university. Re your online software lessons, it will open up content possibilities different from the dreary textbooks. Digital technology will enable scaling in terms of different subjects, multiple age groups and in different languages. It will open up the young minds.

However please ban political themes in primary and secondary schools. Reintroduce Rukunegara and moral teachings. Mastering science, maths and English will enhance personal intellect.

Religious indoctrination should be put aside while teachers and lecturers should stay religion neutral. All academic disciplines in universities should be recalibrated to produce graduates with the right skills to be hungry and job ready.

I do have one wish. Please set up a Council of Eminent Historians. Yes they say History is written by Victors but this was because in those days, it was difficult to archive manuscripts. But our history is young, we have computers and gigabytes of storage memory. And the Council should review all the history books in schools and replace the fake facts with true facts

The future belongs to those who learn from the past and live brilliantly.

Those who cannot learn from history are doomed to repeat it. Hopefully our recent bad chapter in history will never be repeated.

What’s done is done. Right actions in the future are the best apologies for bad actions in the past.

Anyway Tun, you will always be remembered in our history as the PM who came in from the past to save our future. And may God bless you with many more healthy years.

Dear Lim Guan Eng

Congratulations for being appointed as the Finance Minister-designate. According to Datuk Seri Anwar Ibrahim in his homecoming speech on Wednesday, as a past Finance Minister, he found the job to be difficult and complex.

Maybe that is why you were picked for the job. When the country is having a major cash flow problem, it is time to pick a prudent Malaysian accountant to helm the Ministry.

That Tun Dr Mahathir Mohamad picked you for this post, he must have had tremendous confidence in your ability and your integrity. You yourself have had meetings with the Ministry officials in the last few days and discovered that the problems in the Ministry especially the 1MDB debts are deeper and wider than expected.

But financial debt is not your only problem. In an article by Digital News Asia just two days ago, the former secretary-general Tan Sri Serigar Irwan was described as the pillar of the startup ecosystem in Malaysia. Besides being the Board Chairman of Malaysian Global Innovation and Creativity Centre (MaGIC), his contribution, support and commitment towards the startup ecosystem has not been matched by any senior civil servant.

Well this is all admirable as Malaysia moves into the digital technology space, one wonder why MaGIC (MoF Incorporated) is under the purview of Finance Ministry and not under the Science, Technology & Innovation Ministry? It is akin to Maybank CEO appointing his chief financial officer to be in charge of its Innovation Lab when a chief innovation officer has already been employed.

Similarly Malaysia Digital Economy Corporation (MDEC) another MoF incorporated company is under the purview of your Finance Ministry.

You will be pleased to know that MDEC was formerly known as Multimedia Development Corporation launched by your new boss Dr Mahathir back in 1996 under the purview of Science and Technology Ministry which was transferred to Communications and Multimedia Ministry and finally landed under Finance Ministry. Lucky you.

Should you decide to keep this two MoF incorporated companies under the purview of your Ministry, may I suggest you hire an additional secretary-general who is technologically qualified to oversee these two important subsidiaries.

I would strongly advise that your first secretary-general to be a highly qualified accountant to help you solve the massive financial problems and ensure that he is not distracted by all these digital jumbo mumbo from performing his task at hand.

When you next walk into your new office, perhaps you would like to verify an article by The Edge dated Jan 8th 2018 that another MoF company may have acquired a 51% stake in Mulia Property Development Sdn Bhd (for an undisclosed amount) which is developing The Exchange 106 skyscraper at the Tun Razak Exchange. You might need another assistant who is well versed in property development which I believe you will not find it difficult to find among our civil service team.

It would be advisable that you also check with your boss the financial commitments of all the big infrastructure projects that are under the purview of the PMO office like ECRL, Bandar Malaysia, TRX etc. All which leads to a great opportunity to cut costs at other Ministries since they are left with hardly any major projects to manage.

As recommended by your DAP colleague Liew Chin Tong, Malaysia does not need so many Ministries since PMO and the MOF have taken over so many functions on their behalf. In view of the budget constraint, you can merge some of the mini Ministries, either into a 2 in 1 or even 3 in 1 thus reducing redundancy.

If your Pakatan Harapan government can reduce the financial deficits despite zero rating GST, I am sure Harvard Business School will write one its best Management, Finance and Leadership case studies for its world class students.

Talking about GST, you caught the market by surprise by zero rating GST from June 1. While it is an admirable action taken in view of the coming Hari Raya celebrations, most of the SMEs are confused and feeling a bit lost. It will be good if you can bring back Datuk Ahmad Maslan to explain to us how zero rating the GST will bring down retail prices.

I have advised my trading companies to reduce the recommended selling price by 6% for ALL products or as close as possible due to the rounding up of the odd cents which means a savings of 5.8% to 5.99% reduction from the selling price.

However, some of our products will be charged a sales tax of 10% when you implement the 10% sales and service tax. At that time, I will advise my trading companies to raise the recommended selling prices on the affected products accordingly. Kindly advise your still unnamed Trade Minister colleague to restrain his officers from threatening us with profiteering as we are just following the government’s flip-flop policies.

I have a humble wish to make. With our neighbouring Asean countries forging ahead with investments in startup ecosystem and national digital initiatives, Malaysia must not fall behind in this race to the future. It would be advisable for this government to continue funding a sizable annual budget towards supporting an innovative and vibrant digital economy.

A well-run ecosystem will produce many digital entrepreneurs. What is required is to institute good governance, transparent policies and open tenders.

I would however like to extend my appreciation for your ‘nampak banyak teruk tetapi mesti buat jugak’ attitude. You will survive. Lucky us.

Published: https://www.thestar.com.my/business/business-news/2018/05/19/my-wishlist-to-dr-mahathir-and-guan-eng

6/2018 – My wishlist to the new government

An efficient and business friendly civil service will help the SME community greatly.

—-

Major force: SMEs now number around 500,000 and despite the presence of huge conglomerates, SMEs still provide the most employment opportunities and keep the economic engine running.

Major force: SMEs now number around 500,000 and despite the presence of huge conglomerates, SMEs still provide the most employment opportunities and keep the economic engine running.

Dear Tun Dr Mahathir Mohamad,

Congratulations on your appointment as the 7th Prime Minister of Malaysia.

It has been 15 years since you have retired and your return has raised the hopes of the nation. I had my doubts with regards to your age and health but you have proven to everyone that your mind is still sharp, your retorts still laced with acidic humour and your eyes still having the mischievous twinkle. Vintage Dr M as I have known since my student days in Universiti Malaya. Welcome back.

Since you are about to appoint members of your coalition government to the Cabinet, I would like to share a few grievances facing the entrepreneur community in Malaysia. Hopefully you will have a better perspective of the state of affairs currently faced by entrepreneurs so that your new team of ministers can formulate new strategies, correct dysfunctional current policies and create a new mentality among the huge civil service that you will inherit.

Malaysia under your management for 22 years grew at a robust pace on the back of innovative and hardworking SMEs’ (small and medium enterprises) involvement in manufacturing, agri business, trading and exports. For your information, SMEs now number around 500,000 entities and despite the presence of huge conglomerates, SMEs still provide the most employment opportunities and keeps the economic engine running. You will be pleased to know that SMEs and its employees are the main supporters of Pakatan Harapan.

I would like to suggest some ideas for your new ministers to consider.

No new slogans please: It just confuses the civil service and the public in general. Bring back “Bersih, cekap dan amanah.” It has worked well before, it will work well again. As Tan Sri Rafidah Aziz has said recently, the civil service exists to serve the community and not to lord over the community. An efficient and business friendly civil service will help the SME community greatly.

Efficiency saves time, time is money: Lower costs increase competitiveness. Competitive companies make profits and increase tax collection for the government. Your ministers should focus on controlling the government agencies that increase business costs unnecessarily. Ultimately, lower costs of doing business will result in lower selling prices thus lowering the cost of living for the people.

Eliminating goods and services tax (GST): As an economist, a consumption tax like GST or value-added tax is a sustainable tax collection model for any nation but it must be accompanied by lower personal and corporate income taxes. Pakatan Harapan’s plan to eliminate GST and reinstating the sales and services tax (SST) might reduce the cost of some products that does not incur sales tax at source. But still the net RM20bil loss in government revenue (GST less SST) means a RM20bil expenditure savings for the people. For that, all the SMEs will support your no-GST programme.

Like all businesses, the government needs to balance its books. I believe you can easily find RM10bil savings from your Prime Minister’s Office expenditure alone. Reducing the number of ministries and cabinet size might save you another few billion. In business when we are not able to increase revenue, we have to cut costs. When revenue decreases, we cut more costs. May I humbly suggest you get a sharp CPA (certified public accountant) assistant to help you review how to achieve savings from the expenditures of the various ministries to make up for the loss of GST revenue.

Another major factor in the increase of costs of living was imported inflation due to the weakening of the ringgit (RM3 to RM4.5 per US dollar). From experience, you have had major battles before with currency devaluations and its effects on our economy. I am confident that you will be able to create a stable exchange rate regime that can sustain a decent cost of living vis-a-vis the prevalent income of your citizens. Businesses will be able to plan better in a stable currency environment.

Rule of law: No businesses can survive without the rule of law being applied in a fair and just manner. It is even more unfair when different rules of law applies to different people. Your plan to restore the independence of the judiciary will create market confidence for new investors and citizens alike.

Similarly, your plan to restore the independence of various national institutions brings hope that a check-and-control system for political excesses can be implemented.

Reducing government involvement in business: The government’s role is to help the private sector, especially the SMEs, in growing the economy so that corporate tax revenues grow in tandem. Instead we have so many federal and state enterprises competing in all sectors of the economy. This creates an uneven playing field as the business opportunities dwindle and monopolies are created. Worst still, politicians and civil servants are involved in running such businesses and being inexperienced managers, state enterprises are inefficient and wasteful. There should be a clear separation of roles – politicians and civil servants administering the government and social projects – and leave the businesses to the private sector.

Anti-fake laws: Your decision to rescind this monstrous law augurs well for freedom of speech and expression. An independent judiciary will be able to solve any defamation suits. What will be of interest to the nation will be how your new administration will manage the publication licences of all the Barisan-owned media companies of newspapers and TV stations. You should not worry too much as they are all traditional media assets. Maybe it is time you allow apolitical independent online and offline media companies to exist and grow.

You will be pleased to know that viewership and readership of traditional media have been sliding at an alarming rate. So has their advertising revenue. Most of the lost advertising revenue has gone to social media companies like Google and Facebook, which incidentally are not taxed on their Malaysian revenue. To make matters worse, local advertisers have to pay additional withholding tax to the Inland Revenue Board since the advertising fees are paid online to overseas account. Perhaps you should direct our Inland Revenue to start collecting tax from such companies instead of harassing our local businesses.

Minimum wage of RM1,500: As most business employers will tell you, salary commensurates with productivity. If you go to a McDonald’s outlet in London, for example, a service staff there gets paid twice our salary on a dollar to dollar basis but their staffing efficiency is one to three. What needs to be done is to inculcate our young on the need to work hard and work fast instead of relying on handouts mentality. That said, it is difficult to find staff who is willing to work on minimum wage in the city thus the reliance on foreign workers.

For SMEs, the staffing problem is more acute. Despite the availability of unemployed local graduates in the hundreds of thousands, it is difficult to find Malay or Chinese graduates who can speak and write passable English. In this increasing Internet-driven economy, basic English proficiency is a prerequisite to employment. Your Education Minister will have a tough job reversing 20 years of misdirected education syllabus which does not meet current needs. Supply not able to meet specific demand. Suggest short-term solutions to bridge the gaps.

Hiring the best people to the cabinet: Please select capable and bright talents to be ministers. When GST was implemented, the ex-deputy minister of domestic trade said that GST will not increase the prices of products. After insulting our intelligence, his officers from the ministry compelled our retail chain stores (customers) not to increase the selling price of products in the store for one year. So the retail stores in return forced the suppliers to absorb the 6% GST. As our imported products were void of sales tax, we had to bear the full GST cost ourselves. At that time, ringgit started its devaluation trend so it was a double-whammy hit on importers. Feeling insulted and bullied was an understatement.

In view of the transition to the new digital economy, I would suggest that Tun bring in as many capable and untainted young talents into your various ministries, if possible. Guide them well and we will have a pool of talented leaders who embodies your “Bersih, cekap dan amanah” mantra to take Malaysia into the next millennium.

Talking of young leaders, I would like to make a personal request that you keep Rafizi Ramli out of jail and bring him into your Cabinet. Nurture him and keep him out of harms. This boy from Terengganu has much to learn and much, much more to give to this country.

My last request is for you to appoint Datuk Ambiga Sreenevasan to be the chairman of the Election Commission. She has been complaining non-stop for the last few years, so it will be good if she is allowed to clean up the electoral rolls, tighten up the laws, revamp the machinery and processes so that the whole nation do not have to stay up so late just to get the election results come GE15.

Last but not least, we wish you good health and good governance. Please listen to your doctor’s advice when she tells you to rest and eat well. You are blessed with a lovely and caring spouse. Not every Prime Minister is as lucky as you are.

Keep well sir.

Published: https://www.thestar.com.my/business/business-news/2018/05/12/my-wishlist-to-the-new-government/#EXvAGlTjf0XhqkBj.99

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