Tuesday, February 03, 2015

RON95: Looking beyond cheaper teh tarik

By Abdul Wahid Omar
Minister in the Prime Minister's Department

As Malaysians enjoy lower RON95 petrol price of RM1.70 per litre effective 1 February, some may have missed credit rating agency Moody's announcement on 30 January 2015 that affirmed Malaysia's A3 rating & Positive outlook. 

An "A" rating is considered upper-medium grade & is subject to low credit risk. Positive outlook refers to a likely rating upgrade over the medium term (12-18 months). 

Here's my 1-2-3 take on Malaysia's rating:

1) There are 3 global rating agencies ; Moody's, Standard & Poor's and Fitch . Moody's and S&P are the 2 main agencies reatained by most global issuers. All three rating agencies have rated Malaysia at A3/A- but with different rating outlook. Moody's is Positive, S&P Stable and Fitch Negative. At A3/A-, Malaysia has the 2nd highest credit rating in ASEAN after Singapore (AAA), and one notch above Thailand (Baa1), two notches above Philippines (Baa2) and three notches above Indonesia (Baa3). Brunei is not rated. Other ASEAN countries are below Baa3 (minimum level considered to be investment grade). 

2) Moody's is generally positive on Malaysia due to the Govt's commitment to fiscal deficit reduction & reforms and Malaysia's fundamental credit strengths - notably macroeconomics stability, domestic capital market depth and favourable Govt debt structure. This provides resistance to a more adverse external economic environment, lower oil prices & global financial market volatility. Moody's acknowledged they have seen ongoing fiscal deficit reduction & actual implementation of significant reform. This includes, among others, the managed float system for petrol & diesel in Dec 2014 that effectively eliminated subsidies, reduced Govt reliance on oil revenues to 30% in 2014 and implementation of GST come 1 April 2015 which will broaden our revenue base. Meaning Malaysia has been doing the right things & potentially could have been upgraded if not for the recent sudden drop in global oil prices & market volatility. On economic fundamentals, Moody's expects Malaysia to continue to exhibit faster growth, lower inflation & a more robust external payments (current account in Balance of Payments) position than other A rated countries. Other strengths include favourable demographics, resurgence of private investment since ETP, macroenonomic stability anchored by credibility of BNM & Govt's favourable debt structure & depth of onshore capital markets. Only 3% of Govt debt is denominated in foreign currency. 

3) What are Moody's concerns? First is the high level of household debt which is mitigated by low unemployment & high level of household financial assets. Second is the external payments position but Moody's believes that Malaysia is likely to sustain a structural current account surplus & that foreign currency reserve adequacy will remain in line with other A rated countries. Third on clarity of off-budget financing entities to analyse contingent risks to Govt. 

Notwithstanding the concerns, the Posiitive outlook reflects confidence that fiscal consolidation will be sustained despite prolonged low commodity prices. What could move the rating up? Continued track record in fiscal deficit reduction and stability in the affordability & refinancing of Govt debt. What could move the rating down? Worsening of fiscal deficit or crystallisation of large contingent liabilities. 

What can Malaysian businesses/corporates do to help? 

Well, there are many things businesses/corporates can do to help the Country / economy. Top three; 

1) Help grow the economy. Optimise your expenditure. Please spend domestically if you can afford it. Invest domestically. 
2) Be generous to your employees. If you make more profit, share it with them. They can do a better job in stimulating private consumption out of the bonus paid. 
3) Be a responsible corporate citizen. Dont evade tax, dont bribe to get contracts, embrace inclusiveness & sustainability. 

Let us all do our respective parts to navigate through 2015 & beyond. 

Thank you & with best regards. 

AWO
3 Feb 2015

9 comments:

Anonymous said...

Macam ni punya Menteri baru ada kelas!

Rakyat1971

Anonymous said...

Thanks for the advice and reminder bro Wahid . Appreciate that .

But do you thing the Ultrakiasu DAPig bizmen who control the economy will heed your advice ... my foot .

Do you think these Ultrakiasu DAPig bizmen will be generous enough to lower the price of goods . .... my ass .

Do you think these Ultrakiasu DAPig bizmen willing to share their profit with all marhein ... dont be a joker .

A friend who works for a DAPig taiko bizmen told me this ... " ... orang cina niaga mesti bikin untung punya ... itu tipu ka atau bagi wang ka lain cilita ... " He works in the distribution of frozen food .

So bro Wahid , this is for your enlightment .

Aint no Charlie .
PN

Anonymous said...

Wahid,

Q: Can you please explain this:

http://www.malaysia-today.net/wahids-statistics-again/

http://www.institutrakyat.org/governments-household-income-figures-dont-add-up-br1m-overpaid/

http://malaysiansmustknowthetruth.blogspot.com/2014/09/rm5900-average-household-income-wahid.html

"Previously, the government boasted that BR1M had been given to those households earning less than RM3,000 per month, representing 5.2 million or 80% of all Malaysian households in 2012. Yesterday in Parliament, Minister in the Prime Minister’s Department Abdul Wahid Omar disclosed that the number of households earning less than RM3,000 per month only amount to 2 million, or 28.7% of all households. Did 3.2 million households suddenly clear the RM3,000 per month threshold?"

A: No, you can't.

Also, is your claimed RM5,900 the mean or median household income in Malaysia? Answer: Neither.

Easier question? Sure thing, sir.

Why is Datuk Rocky's tongue so firmly wedged up your rear passage?

Anonymous said...

Ala hantar whatsapp kat group je. Aku pun boleh.

charleskiwi said...

I am not an economist but one thing I am sure of is, if Malaysia stops paying their bills with inflated figures all the woes Malaysia is facing now. Plus the salary of all the lazy and corrupted civil servants it will immediately solve their headaches.

This is just like sweeping your rubbish underneath the carpet. Out of sight is NOT out of mind in this case. In fact very soon you have to face the truth, when you have to face austerity. Don't spare the rod and spoil the useless children, these children are beginning to think they are doing the ruling party a favour by staying on in the civil services.
In fact they are learning the bad habit of not motivating themselves. You are creating a generation of lazy citizens and try to do something about these 'parasites' now before a second generation of 'parasites' are created. It will surely be to late to try and save them !

charleskiwi said...

I know of few Chinese who go crazy over this teh tarik
in fact over anything that is not Chinese. All these are not because of their non support of this Malaysia drink. Just look at Genting Casino, the four digits, the turf clubs nd all the other haram activities.
They are legitimately not supported by the Malay muslims yet they still around and even prospering. You know why ? when they started the support of the Malays were never factored in. Therefore stop calling for the boycott of anything that is run by the Chinese.
The ultimate benefactors are the Malays, who are the majority benefactors in this country from the taxes the government will collect from the taxes it collects. So stop calling for the boycott of any of the Chinese run business !

Praxis said...

Rocky, my 1,2,3:-

1. Even when we are negotiating the darkest valleys, we seem to taking comfort in ratings by agencies and audit firms who are under investigation or who have been.
2. What naivete to attribute macroeconomic stability to current ingenuity or righteosness and human one at that.
3. Technocratic credentials only valid in the context of larger economic dynamics, which is driven by the iniquity in the Malay economy which comes out better in the writings of Chedet and the Scribe.

Fence Sitter Voter said...

The inability of state investment fund 1Malaysia Development Berhad (1MDB) to repay its debts may trigger a downgrade in Malaysia's sovereign ratings, dealing yet another blow to a country already hit by falling oil prices.

"Certainly, the risk is there for a downgrade," said Hak Bin Chua, Asean economist at Bank of America Merrill Lynch.

Ratings agency Moody's warned last week that a worsening in Malaysia's debt dynamics or the crystallization of large contingent liabilities could exert downward pressure on its current A3 rating.

Meanwhile, Fitch has an A- rating with a negative outlook on the country, which means a cut is likely within the next 12-18 months, according to a recent statement from the agency.

"Our sovereign credit team also has a negative outlook on the country. From an economics perspective, you can really see the cracks starting to show," said Su Sian Liam, Asean economist at HSBC.

The financial position of 1Malaysia Development Berhad has become a source of uncertainty. Fitch views 1MDB as a close contingent liability of the sovereign because of the nature of its operations and leadership, as well as explicit sovereign guarantees" the agency said.

Read more here:
http://www.cnbc.com/id/102391085#.

Careful now folks!!

Anonymous said...

This Wahid cartoon character again. He does not even know basic calculation.
Hey wahid just tell us where is the Billions that returned , if it actually returned, from Caymans is kept. In which bank??
Tak payah tulis canggih canggih.

And to PN , orang bodoh macam kau mungkin berniaga untuk rugi...bodoh bin bahlol .
TNB, Bernas , MSM,and all the other Crony monopolies ada turun harga depa tak?? hang pi pagi esok depan all these companies, carry sepanduk demanding them to lower their price.Boleh tak??
Orang dunggu macam kau buta pekak dan bisu...kesiaaaan....