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Friday, August 2, 2013

Menangani salah faham sistem cukai


Publication: BH
Date of publication: Aug 1, 2013
Section heading: Main Section
Page number: 032
Byline / Author: Oleh Abdussalam Shokhawi

Cukai adalah salah satu perkataan atau perkara yang cukup sensitif bagi sesebuah masyarakat di mana saja negara termasuk Malaysia. Perkataan cukai bermaksud suatu kadar caj yang dikenakan oleh kerajaan terhadap rakyat yang memiliki suatu hasil dalam negara. Cukai sering kali diibaratkan sebagai suatu bebanan dan tekanan yang dikenakan oleh pemerintah kepada rakyatnya.

Biarpun cukai mempunyai tahap sensitivitinya tersendiri dalam masyarakat, namun ia tidak pernah dihapuskan atau dimansuhkan oleh pemerintah sejak dahulu hingga sekarang. Rakyat kebanyakannya kekal taat kepada tatacara berkerajaan dengan memberikan sumbangan cukai mereka kepada pemerintah tanpa banyak soal bicara selagi ia munasabah serta diuruskan dengan teratur dan boleh mengelak masalah litigasi pada masa depan. Secara umumnya, penerimaan rakyat terhadap sistem cukai masih diragui walaupun mereka kelihatan patuh terhadap obligasinya.

Dalam sejarah ekonomi Islam, terdapat tiga jenis cukai yang dikenakan ke atas masyarakat bukan Islam, iaitu kharaj, jizyah dan usyur. Kharaj bermaksud cukai hasil tanah (pertanian) yang dikenakan ke atas orang bukan Islam. Jizyah pula ialah cukai yang dikenakan ke atas individu bukan Islam yang berlindung di negara Islam, manakala usyur ialah cukai perdagangan yang dikenakan kepada kapal milik bukan Islam yang berlabuh di negara Islam.

Ketiga-tiga jenis cukai terhadap masyarakat bukan Islam ini diseimbangkan dengan kewajipan berzakat terhadap masyarakat Muslim. Asas pengertian kharaj, jizyah, usyur dan zakat secara amnya adalah pembahagian sumber untuk pembinaan masyarakat dan negara yang seimbang iaitu mereka yang berkemampuan akan diwajibkan untuk menyumbang.

Namun begitu, zakat tertakluk penerimaannya kepada asnaf yang lapan, manakala cukai dimanfaatkan untuk memenuhi keperluan umum seperti pembinaan infrastruktur, urusan keselamatan dan pembayaran gaji kakitangan awam.

Cukai dan zakat dalam sistem ekonomi Malaysia

Hakikatnya, cukai di dalam sistem ekonomi Islam adalah suatu peraturan baharu yang wujud hasil ijmak atau persepakatan ulama Islam dan sebahagian daripada tradisi Islam atau urf. Imam As-Syatibi di dalam Kitab Al-'Itisam [2/86] ada menyebut mengenai pandangan mengambil cukai yang bermaksud: "Disyaratkan keharusan itu - di sisi mereka (ulama) - adalah pemerintah mestilah adil, dan perbelanjaan dari sudut pengambilan harta dan pemberian harta itu atas jalan yang dibenarkan syarak".

Dalam situasi di Malaysia pada hari ini, cukai telah menjadi elemen utama pendapatan negara untuk menampung segala keperluan ekonomi bagi 28 juta rakyatnya. Menurut Laporan Ekonomi 2012/2013 Kementerian Kewangan Malaysia (MoF), pada 2012 hasil cukai membentuk hampir 73.6 peratus atau RM152,493 billion daripada keseluruhan pendapatan negara yang berjumlah RM207,246 billion.

Sistem cukai di Malaysia pada dasarnya diwarisi daripada sistem yang diamalkan oleh penjajah sebelum kemerdekaan negara. Walau bagaimanapun, terdapat penambahbaikan yang signifikan terhadap sistem cukai warisan itu yang telah dilakukan oleh pihak Kerajaan sepanjang tempoh 55 tahun pasca kemerdekaan. Penambahbaikan yang dilakukan adalah bagi mendepani perubahan zaman, keperluan ekonomi dan situasi semasa di dalam dan luar negara.

Antara perubahan paling utama ialah kerajaan memberikan pengiktirafan kepada zakat bagi pembayar cukai Muslim sebagai rebat cukai yang diterima sebagai tolakan cukai. Ini secara tidak langsung menunjukkan bahawa teras utama pengagihan sumber (zakat) bagi umat Islam telah diasingkan daripada sistem cukai konvensional, tetapi masih diiktiraf sebagai satu komponen umum yang diperjelaskan melalui Akta Cukai Pendapatan 1967.

Melalui pengiktirafan ini, masyarakat Muslim di Malaysia diberikan pilihan yang jelas sama ada mahu menyumbang kepada tabung pendapatan negara secara umum atau menyumbang kepada perbendaharaan ummah atau kedua-duanya sekali. Dari aspek ini, dapat dilihat bahawa unsur keadilan seperti yang dipupuk oleh semangat falsafah ekonomi Islam diserapkan ke dalam sistem percukaian negara.

Ilmu mengenai cukai dan tanggungjawab rakyat

Di Malaysia, ilmu mengenai cukai hanya dapat dipelajari secara formal pada peringkat pengajian tinggi dan ia tertakluk kepada jenis aliran pengajian yang diduduki seseorang individu. Ini bermakna, tidak semua individu terdedah kepada pengajian mengenai cukai secara mendalam, malahan boleh dikatakan hampir kebanyakan individu tiada asas pemahaman yang betul mengenai cukai. Keadaan ini menjadikan cukai selalunya disalahertikan kerana kadar pendedahan atau pendidikan mengenai cukai kepada rakyat adalah tidak meluas serta tidak begitu dititikberatkan atau diberi perhatian secara serius.

Ironinya, sebilangan rakyat yang bertuah hanya akan dapat mempelajari ilmu asas mengenai cukai secara formal apabila peringkat umur mereka berada di antara 18 hingga 24 tahun, iaitu peringkat pengajian tinggi. Pada peringkat umur ini juga, sebahagian yang lain mungkin memasuki alam pekerjaan atau menceburkan diri dalam bidang perniagaan yang akan memberikan pulangan pendapatan sama ada dalam bentuk penggajian atau pendapatan daripada perniagaan atau kedua-duanya.

Situasi ini seterusnya mungkin akan melayakkan mereka untuk memberikan sumbangan cukai kepada kerajaan secara tiba-tiba sama ada disedari atau tidak disedari. Dengan pemahaman yang kurang mendalam menegani ilmu cukai akan menjadikan individu tersebut salah tafsir, tersentak, malahan boleh menimbulkan kemarahan atau protes terhadap kerajaan. Lebih malang lagi, setiap kelalaian akibat daripada kurangnya kefahaman tersebut juga perlu ditanggung oleh mereka dengan kos.

Jika diterjah dengan persoalan cukai secara rawak, kita akan dapati bahawa rakyat Malaysia yang langsung tidak menyedari hakikat yang sebenarnya mereka sedang dan telah melaksanakan tanggungjawab bercukai melalui perbelanjaan harian mereka, iaitu unsur cukai jualan 10 peratus dan cukai perkhidmatan 6 peratus sudah pun diserapkan di dalam harga setiap barangan atau perkhidmatan yang mereka gunakan.

Anggapan salah rakyat

Justeru, mereka ini selalu beranggapan bahawa mereka tidak pernah dikenakan cukai. Anggapan yang salah sebegini terbukti membawa kesan buruk kepada kerajaan apabila rakyat kelihatan sukar untuk menerima kehadiran sistem cukai baharu yang lebih telus iaitu Cukai Barang dan Perkhidmatan (GST).

Mengambil kira situasi sebegini, kerajaan seharusnya peka akan keperluan pendidikan mengenai cukai kerana ia sebahagian daripada asas pengajian kenegaraan yang perlu didedahkan seawal individu tersebut di bangku sekolah lagi. Cukai haruslah difahami dengan mendalam sebagai satu tanggungjawab setiap warga negara, bukannya sebagai suatu bebanan atau kezaliman daripada pemerintah kepada rakyat.

Hakikatnya, cukai bukanlah urusan profesional, tetapi urusan peribadi setiap individu di negara ini. Cukai adalah agihan nilai daripada rakyat kepada rakyat yang mana kerajaan hanyalah badan pentadbir dana cukai yang dilantik rakyat bagi setiap lima tahun. Persepsi umum yang positif mengenai cukai hanya dapat disuburkan melalui pendidikan awal yang berterusan kepada setiap warga negara.

Justeru, satu mekanisma pendidikan khusus mengenai tanggungjawab bercukai hendaklah diwujudkan segera bagi menangani salah tanggapan yang berlarutan mengenai cukai dalam kalangan rakyat terutama generasi muda yang agresif dan sensitif.

GST rangsang ekonomi, tingkat daya saing negara

Kerajaan sedang membuat persediaan rapi bagi melaksanakan pelan transformasi terhadap sistem percukaian negara. Dalam pelan itu, Cukai Barang dan Perkhidmatan atau GST akan diperkenalkan untuk menggantikan sistem cukai kepenggunaan sedia ada iaitu Cukai Jualan dan Cukai Perkhidmatan (SST).

GST adalah model cukai kepenggunaan yang dikenakan ke atas penggunaan domestik serta barangan dan perkhidmatan import yang dibekalkan di Malaysia. GST juga dikenali sebagai Cukai Nilai Tambah (VAT) kerana cukai ini dikenakan ke atas nilai ditambah bagi barangan dan perkhidmatan di setiap peringkat rantaian bekalan.

Dalam perniagaan, GST tidak menjadi sebahagian daripada kos kerana GST yang dibayar ke atas pembelian akan dituntut semula pada langkah seterusnya dalam rantaian bekalan. Dalam model ini, pengguna akhir akan menjadi pihak yang sebenarnya membayar GST kepada kerajaan.

Mekanisme GST

Menurut mekanisme GST seperti yang dinyatakan dalam Rang Undang-Undang GST 2009, terdapat tiga kategori kadar GST iaitu Kadar Standard (Standard Rated), Kadar Sifar (Zero Rated) dan Dikecualikan GST(Exempted). Menurut Rang Undang-Undang itu juga, Kadar Seragam yang dicadangkan oleh Kerajaan adalah empat peratus ke atas harga barang atau perkhidmatan yang ditakrifkan sebagai "Pembekalan".

Bagaimanapun, pembekalan barangan asas keperluan isi rumah seperti produk pertanian, bekalan ternakan, bahan asas masakan, dan lain-lain lagi, akan diletakkan dalam kategori Kadar Sifar. Manakala barang atau perkhidmatan awam pula seperti tanah dan kediaman, pengangkutan awam, pendidikan, perkhidmatan kesihatan, perkhidmatan kewangan serta caj lebuh raya akan diletakkan di dalam kategori Dikecualikan GST.

GST pada dasarnya dirumus untuk mengatasi kelemahan yang tidak boleh diatasi di dalam sistem SST seperti kesan cukai bertindih, cukai berganda dan cukai bertingkat, isu kebocoran dan ketirisan hasil akibat aktiviti pemindahan harga, penyeludupan dan sebagainya. Di samping itu, GST juga dirumus untuk meningkatkan pematuhan cukai melalui kaedah tadbir urus yang lebih mudah berikutan sistem pengurusannya adalah berasaskan kepada kaedah 'self policing'.

Sehingga 2009, GST sudah dilaksanakan di 146 negara dengan Perancis menjadi negara pertama melaksanakannya pada 1954. Dalam kalangan negara ASEAN, Indonesia adalah negara yang terawal melaksanakan GST iaitu pada 1984 dan diikuti negara lain kecuali Malaysia, Brunei dan Myanmar.

Hakikatnya, cadangan mengenai pelaksanaan cukai nilai tambah yang bersamaan dengan GST di Malaysia sudah diberitakan sejak Oktober 1988. Ia pertama kali disebut dalam Pembentangan Belanjawan 1989 oleh Menteri Kewangan ketika itu, Tun Daim Zainuddin.

Seterusnya, keperluan mewujudkan sistem cukai ini dinyatakan semula pada pembentangan Belanjawan 1993, 2005 dan 2010, masing-masing oleh Menteri Kewangan ketika itu.

Walaupun sudah sekian lama dirancang kerajaan, GST masih belum dilaksanakan di Malaysia. Rang Undang-Undang GST yang dibentangkan di Parlimen pada 2009 ditarik balik sebelum bacaan kali kedua kerana kebimbangan kerajaan mengenai penerimaan serta tahap pemahaman rakyat mengenai mekanisme GST.

Menteri Kewangan Kedua, Datuk Seri Ahmad Husni Hanadzlah, dalam satu kenyataannya kepada media pada Julai 2012, menyebut bahawa kerajaan ingin memastikan rakyat benar-benar memahami GST terlebih dahulu sebelum memutuskan untuk melaksanakannya.

Kepentingan GST kepada ekonomi negara

Kita sering kali mendengar rungutan dan keluh kesah rakyat serta komuniti perniagaan mengenai kadar cukai pendapatan individu dan cukai pendapatan syarikat di Malaysia yang tinggi berbanding negara jiran, Singapura. Perbandingan tersebut dibuat bagi menunjukkan seolah-olah kerajaan sedang menekan rakyat dengan mengenakan cukai yang tinggi dan menjadikan Malaysia kurang kompetatif dalam mengekalkan bakat untuk merangsang pertumbuhan ekonomi serta menarik pelabur asing berbanding Singapura. Untuk rekod, Singapura melaksanakan GST sejak 1994.

Sebenarnya, kadar cukai pendapatan individu dan cukai pendapatan syarikat di Malaysia boleh dirasionalisasikan secara berperingkat sekiranya rakyat memberikan sepenuh kepercayaan kepada kerajaan untuk melaksanakan GST, sama seperti dilakukan Singapura. GST berupaya menjana sumber hasil negara yang lebih kukuh dan stabil bagi menggantikan kebergantungan sumber hasil daripada kedua-dua cukai pendapatan individu dan syarikat.

GST pada hakikatnya adalah satu sistem percukaian yang lebih komprehensif, efektif, telus, efisien dan mesra perniagaan. GST mampu merangsang pertumbuhan ekonomi domestik serta meningkatkan daya saing negara kepada pelaburan global di samping kurang terdedah kepada risiko turun naik ekonomi atau kebergantungan kepada sumber minyak dan gas yang mempunyai jangka hayat yang terhad.

Kurangkan bebanan cukai rakyat

Rakyat perlu memahami bahawa, GST sememangnya dirumus untuk mengurangkan bebanan cukai terhadap rakyat pada masa sekarang yang disebabkan oleh kelemahan yang terdapat di dalam sistem cukai sedia ada. Objektif utama GST adalah untuk menyeimbangkan skop asas cukai kepada segenap golongan masyarakat mengikut paten penggunaan mereka. Secara prinsipnya, lebih banyak penggunaan, maka lebih banyak pembayaran. Sebaliknya, semakin efektif sesuatu pekerjaan, semakin banyak hasil yang dijana dan mereka patut menikmati cukai yang lebih rendah.

Jika situasi ekonomi Malaysia tanpa pelaksanaan GST masih berterusan, kerajaan dijangka akan menghadapi tempoh masa yang sukar dalam menguruskan ekonomi negara pada masa hadapan. Antara cabaran terbesar adalah untuk menangani isu perubahan persekitaran ekonomi global serta kebarangkalian penyusutan sumber domestik yang terhad seperti minyak dan gas. Kesan kepada kekangan sumber hasil pada masa hadapan akan mengganggu momentum pertumbuhan negara. Pihak yang akan menjadi mangsa keadaan adalah rakyat sendiri.

* Penulis ialah Ketua Jabatan dan Pengurus Projek GST di Salihin GST Services Sdn Bhd

GST atasi kelemahan sistem percukaian sedia ada



KUALA LUMPUR 1 Ogos - Cukai barangan dan perkhidmatan (GST) yang bakal dilaksanakan kerajaan bagi menggantikan cukai jualan dan perkhidmatan berupaya mengatasi kelemahan yang terdapat pada sistem percukaian sedia ada.

Timbalan Menteri Kewangan, Datuk Ahmad Maslan berkata, antara kelemahan yang dikenal pasti adalah cukai berganda yang menyebabkan pengguna terpaksa membayar harga lebih tinggi.

"Selain itu, amalan pemindahan harga turut memberi kesan kepada hasil kutipan kerajaan," katanya ketika menggulung perbahasan Rang Undang-Undang Perbekalan Tambahan (2012) 2013 dalam sidang Dewan Negara hari ini.

Tambah beliau, pelaksanaan GST merupakan usaha kerajaan untuk memastikan sistem percukaian negara lebih telus dan mesra peniaga.

Jelas Ahmad, kerajaan masih belum menetapkan tarikh pelaksanaan GST dan kajian tentang sistem percukaian tersebut sedang dijalankan bagi memastikan kepentingan dan kebajikan semua lapisan masyarakat diambil kira.


© Utusan Melayu (M) Bhd 

Concern over debt, spending


Published: Thursday August 1, 2013 MYT 12:00:00 AM 
Updated: Thursday August 1, 2013 MYT 7:12:50 AM
BY INTAN FARHANA ZAINUL INTANZAINUL@THESTAR.COM.MY




PETALING JAYA: Fitch Ratings, after cutting Malaysia’s credit rating outlook to “negative”, sending the stock market and the ringgit reeling, has said it is more likely to downgrade the country’s rating within the next two years on doubts over the Government’s ability to rein in its debt and spending.

The Government, in response to Bloomberg News, rebutted such concerns and said it was committed to fiscal responsibility, stressing that it would rationalise subsidies and broaden the tax base.

It said the economy was fundamentally healthy, with strong growth and foreign currency reserves.

Standard & Poor’s had last week, however, reaffirmed its credit rating on Malaysia and said it might raise sovereign credit ratings if stronger growth and the Government’s effort to reduce spending resulted in lower-than-expected deficits. “With lower deficits, a significant reduction in Government debt is possible,” it said.

It might lower its rating for Malaysia if the Government fails to deliver reform measures to reduce its fiscal deficits and increase the country’s growth prospects.

“These reforms may include implementing the Goods and Services Tax or GST, reducing subsidies, boosting private investments and diversifying the economy,” said S&P.

The downgrade in Malaysia’s rating outlook by Fitch on Tuesday took a toll on the capital markets, and sent the ringgit to a three-year low against the US dollar.

The FTSE Bursa Malaysia KL Composite Index closed 1.25% or 22.46 points lower at 1,772.62, and the ringgit fell to RM3.2425 against the greenback, its lowest since June 30, 2010.

The bond market, where foreign shareholding recently was at an all-time high, also saw yields climb dramatically. The yield for the 10-year tenure for Malaysian Government Securities rose seven basis points yesterday to 4.13%. The yield for the 10-year Government bond has climbed 77 basis points since April 30.

In a conference call yesterday afternoon, Fitch Ratings warned that a downgrade in Malaysia’s credit rating was “more likely than not” over the next 18 to 24 months. It highlighted Malaysia’s public finances as its key issue for the rating weakness.

Its head of Asia-Pacific sovereigns Andrew Colquhoun said over the phone that there was a concern over the Government’s commitment to fiscal consolidation after the May general election (GE).

“It is difficult to see the Government pressing forward with any fiscal reform steps or budget reforms,” he said, adding that the rating would reverse if any action was taken.

CIMB Research, in a note by its head of research Terence Wong and economics research head Lee Heng Guie, said Fitch’s revised outlook on the country was “bad news” for the stock market.

“While we believe there will be a knee-jerk selldown, the average lifespan for a rating outlook is about 18 to 24 months before a downgrade is enforced, giving Malaysia time to prevent that,” the report said.

They said the Fitch downgrade was a warning to Malaysia to improve its macroeconomic management, and was of the opinion that the Government had time to get its house in order.

“We believe the authorities will take the warning seriously and move to address any weaknesses,” they noted.

Both Wong and Lee, however, felt that any weakness in the stock market was an opportunity for investors to accumulate shares.

“The depreciation of the ringgit benefits exporters, such as plantation, rubber glove and semiconductor players, as well as those with foreign currency revenues,” they said.

Meanwhile, Areca Capital chief executive officer Danny Wong told StarBiz that foreign investors might use the downgrade as a reason to exit from Bursa Malaysia.

“There is a concern that the downgrading may affect foreigners to exit Malaysia in a big way. Hence, it created a ‘knee-jerk’ reaction to the market.

“However, I think the impact would be minimal on the equity market but the concern is on the bond market because of the 33% foreign ownership,” he said, adding that the outlook by Fitch was earlier than expected since the 2014 budget is set to be announced in two months’ time.

RAM Holdings Bhd chief economist Dr Yeah Kim Leng said the cut in the outlook by Fitch had rattled the market, but feels the country’s fundamentals such as gross domestic product (GDP) growth, high foreign reserves and current account surplus would soothe worries over any rating concerns.

“I believe the Government will pursue its target to reduce the budget deficit by 4% this year, or at least show a sign of reduction.

“However, Malaysia’s current account balance will narrow further by end-2013 due to a weakening in exports, although a deficit account is unlikely to happen,” he opined.

High debt levels have been a growing concern in recent years in Malaysia, as the Government debt-to-GDP ratio is among the highest in South-East Asia. At 53.5% as at the end of last year, it is higher than the 25% in Indonesia, 51% in the Philippines and 43% in Thailand, noted a report by Bloomberg.

The ratio for Malaysia is almost to the debt ceiling limit of 55%.

Fitch, it its notes accompanying its decision to downgrade Malaysia’s credit outlook, said the country’s budget deficit had widened to 4.7% of GDP in 2012 from 3.8% in 2011, led by a 19% rise in spending on public wages ahead of the May GE.

It believes that it will be difficult for the Government to achieve its 3% deficit target for 2015 without additional consolidation measures.

Thursday, August 1, 2013

Fitch ratings downgrade of Malaysia's outlook no surprise, analysts say


Published: Wednesday July 31, 2013 MYT 1:59:00 PM 
Updated: Wednesday July 31, 2013 MYT 2:01:05 PM

KUALA LUMPUR: As the market reacted anxiously to Fitch Ratings' move to downgrade Malaysia's sovereign credit rating outlook to Negative from Stable, analysts say the decision by the ratings agency came as "no surprise".

According to CIMB Equities Research, it had previously mentioned the risk of the Big 3 rating agencies - Moody's, S&P, Fitch - downgrading Malaysia's sovereign credit rating outlook if there was no clear indications from the government on fiscal reforms regarding subsidies, taxes and government spending after the election.

Unfortunately, there has indeed been none.

The research house pointed to the stasis in the implementation of the GST and the request put in earlier this month in Parliament by the government to add RM12bil to Budget 2013 via supplementary budget, as examples.

The Fitch downgrade on Tuesday, which still maintained the country's existing high investment-grade ratings of "A-" on long-term foreign debt and "A" on long-term local debt, appears to have already spooked the market, with BIMB Securities Research saying it may have triggered a flight of foreign funds out of the country on the very same day.

Before the announcement was made by Fitch on Tuesday, the FBM KLCI closed down 3.7% at 1,795.08 points on profit-taking, while government bond yields climb to their highest level since April 2011 and the ringgit weakened to a three-year low.

At midday on Wednesday, the Malaysia's blue chips came under selling pressure, with fund selling seen in Maybank and CIMB which was sparked by Fitch Rating's downgrade. The KLCI was down 17.88 points to 1,777.20 at midday.

BIMB Securities Research pointed to Malaysia's public finances as its key rating weakness.

Federal Government debt rose to 53.3% of GDP at the end-2012, up from 51.6% at end-2011 and 39.8% at end-2008. The general government budget deficit (Fitch basis) also widened to 4.7% of GDP in 2012 from 3.8% in 2011, led by a 19% rise in spending on public wages in a pre-election year.

Hong Leong Investment Bank Research said while the downgrade came earlier than expected, it was already negative on the fundamental aspect of emerging Asia. The research house said it was hopeful the Fitch downgrade would lead to a revisit of fundamentals in Malaysia.

"Due to high foreign shareholding (of more than 47% in Malaysian government securities and 25.2% in equities), we expect both fixed income and equity markets to experience heightened volatility.

"Nevertheless, we do not expect a crisis as BNM has enhanced banking surveillance; reserves are at all-time high, and government debt is mostly financed domestically," it said.

Meanwhile CIMB Research said the Standard & Poor's team - which had affirmed Malaysia's Stable outlook five days prior to the Fitch downgrade - is reportedly heading to Malaysia in September for ratings review exercise.

Stressing that the government was now under pressure to act, it said it expects Budget 2014 presentation on Oct 25 to provide clarity on fiscal policy issues and direction. 

Affin Investment Research pointed out that Fitch had warned that Malaysia's long-term foreign and local currency ratings could also be downgraded in the future, if Malaysia's fiscal performance continued to deteriorate and constrain its sovereign ratings.

"The risk of a downgrade in the country's credit ratings will make it expensive for Malaysia to borrow money from abroad. A lower rating will also dampen investment flow into Malaysia's equity and bond markets, with negative perceptions of the country's deteriorating credit quality," it said

However, it reiterated that Malaysia's economic fundamentals remained sound, with economic outlook improving, current account surpluses sustainable (albeit narrowing), and foreign exchange reserves steadily increasing."It is unlikely that other international rating agencies, such as S&P or Moody's, will downgrade Malaysia's sovereign rating outlook to negative in the near term. We believe the government is committed to a lower budget deficit of 4% of GDP in 2013 (4.5% of GDP in 2012), as well as sustaining government debt as well as contingent liabilities.

Fitch ratings downgrade of Malaysia's outlook no surprise, analysts say


Published: Wednesday July 31, 2013 MYT 1:59:00 PM 
Updated: Wednesday July 31, 2013 MYT 2:01:05 PM

KUALA LUMPUR: As the market reacted anxiously to Fitch Ratings' move to downgrade Malaysia's sovereign credit rating outlook to Negative from Stable, analysts say the decision by the ratings agency came as "no surprise".

According to CIMB Equities Research, it had previously mentioned the risk of the Big 3 rating agencies - Moody's, S&P, Fitch - downgrading Malaysia's sovereign credit rating outlook if there was no clear indications from the government on fiscal reforms regarding subsidies, taxes and government spending after the election.

Unfortunately, there has indeed been none.

The research house pointed to the stasis in the implementation of the GST and the request put in earlier this month in Parliament by the government to add RM12bil to Budget 2013 via supplementary budget, as examples.

The Fitch downgrade on Tuesday, which still maintained the country's existing high investment-grade ratings of "A-" on long-term foreign debt and "A" on long-term local debt, appears to have already spooked the market, with BIMB Securities Researchsaying it may have triggered a flight of foreign funds out of the country on the very same day.

Before the announcement was made by Fitch on Tuesday, the FBM KLCI closed down 3.7% at 1,795.08 points on profit-taking, while government bond yields climb to their highest level since April 2011 and the ringgit weakened to a three-year low.

At midday on Wednesday, the Malaysia's blue chips came under selling pressure, with fund selling seen in Maybank and CIMB which was sparked by Fitch Rating's downgrade. The KLCI was down 17.88 points to 1,777.20 at midday.

BIMB Securities Research pointed to Malaysia's public finances as its key rating weakness.

Federal Government debt rose to 53.3% of GDP at the end-2012, up from 51.6% at end-2011 and 39.8% at end-2008. The general government budget deficit (Fitch basis) also widened to 4.7% of GDP in 2012 from 3.8% in 2011, led by a 19% rise in spending on public wages in a pre-election year.

Hong Leong Investment Bank Research said while the downgrade came earlier than expected, it was already negative on the fundamental aspect of emerging Asia. The research house said it was hopeful the Fitch downgrade would lead to a revisit of fundamentals in Malaysia.

"Due to high foreign shareholding (of more than 47% in Malaysian government securities and 25.2% in equities), we expect both fixed income and equity markets to experience heightened volatility.

"Nevertheless, we do not expect a crisis as BNM has enhanced banking surveillance; reserves are at all-time high, and government debt is mostly financed domestically," it said.

Meanwhile CIMB Research said the Standard & Poor's team - which had affirmed Malaysia's Stable outlook five days prior to the Fitch downgrade - is reportedly heading to Malaysia in September for ratings review exercise.

Stressing that the government was now under pressure to act, it said it expects Budget 2014 presentation on Oct 25 to provide clarity on fiscal policy issues and direction. 

Affin Investment Research pointed out that Fitch had warned that Malaysia's long-term foreign and local currency ratings could also be downgraded in the future, if Malaysia's fiscal performance continued to deteriorate and constrain its sovereign ratings.

"The risk of a downgrade in the country's credit ratings will make it expensive for Malaysia to borrow money from abroad. A lower rating will also dampen investment flow into Malaysia's equity and bond markets, with negative perceptions of the country's deteriorating credit quality," it said

However, it reiterated that Malaysia's economic fundamentals remained sound, with economic outlook improving, current account surpluses sustainable (albeit narrowing), and foreign exchange reserves steadily increasing."It is unlikely that other international rating agencies, such as S&P or Moody's, will downgrade Malaysia's sovereign rating outlook to negative in the near term. We believe the government is committed to a lower budget deficit of 4% of GDP in 2013 (4.5% of GDP in 2012), as well as sustaining government debt as well as contingent liabilities.