An uphill task

Published: Saturday January 11, 2014 MYT 12:00:00 AM 

Updated: Saturday January 11, 2014 MYT 8:30:41 AM

BY DATUK ALAN TONG

Having the wind knocked out of us without warning

I HEARD a complaint from someone about a marathon he took part in recently. He had been running the same marathon on flat roads for years until the organiser changed the recent one to include hilly roads without advising runners in advance.

“Running uphill nearly killed me! The organiser should announce it earlier instead of changing the route at the very last minute,” he grumbled after suffering from knee pain for days. The sudden change of route literally knocked the wind out of him, and that was his worst run ever in terms of time and stamina.

It is to be expected that terrain running requires more energy and will slow the pace of runners who are not prepared for it. In any game, it can be straining to all participants if rules are changed too drastically without a training and adjustment period.

This reminds me of a series of changes we have seen in our recent economic and property scene such as the government’s moves to reduce subsidies, impose higher electricity tariff, introduce the Goods and Services Tax (GST). These changes are viewed by many as challenging measures as they hike up the cost of living and doing business. Nevertheless, as shared by CIMB Group chief executive Datuk Seri Nazir Razak in his recent interview, these measures are some of the necessary moves to rein in the fiscal debt in the country as Malaysia cannot afford a sovereign credit rating downgrade that will lead to more severe outcomes affecting everyone such as increasing the cost of borrowing and reducing loan margins.

The Government needs to make this tough call to implement these painful but necessary measures in lieu of the current backdrop of huge subsidy bills and high government’s debt-to-gross domestic product (GDP) ratio of 53.6%. The question for us now is what can we learn from all these in terms of planning for the future?

Before we dwell further into the matter, similar examples and lessons may be picked up from the respective sectors. Let’s take a look at the property industry that has a domino effect on many industries.

A series of measures has been introduced in recent years with the aim to “cool off” the hike in house prices in our country. These included 70% loan policy for third property purchase, housing loan calculation based on net income, higher Real Property Gains Tax (RPGT), the abolition of the Developer Interest Bearing Scheme (DIBS), and the increase of foreigners’ purchase threshold from RM500,000 to RM1mil.

In addition to the above, there is a possibility that interest rate will be raised whenBank Negara reviews the Base Lending Rate (BLR) framework early this year. All these factors affect market sentiment and put all industry players in a dilemma when it comes to planning for the future. They, inadvertently, also dampen the supply of properties and when supply is lower than demand, prices of property will eventually increase in the near future.

As I have mentioned before, this has been consistently demonstrated in Singapore, Hong Kong and China. Usually within a year of newly-introduced cooling off measures, the house prices continued to rise. For 2014, many are predicting a cautious outlook. With the uncertainties of the world economy and the United States’ tapering its assets purchases on the global front, Malaysia will expect cost to continue increasing, leading to higher debt ratios and lower government spending.

Under the current circumstances, it seems that change is inevitable in our economy. It will hurt in the short run but it can be more painful in the long run if it is not addressed immediately.

However, we should take a more measured approach to avoid bringing the economy to a grinding halt with drastic changes. Just like the story I shared earlier in this article, it can be damaging to any player when there is an abrupt change of rules without enough time for adjustment.

As an organiser for a marathon or any game, it is important to consider the views of the participants before rules are set to provide a conducive environment for the run. If changes are needed, sufficient information and time should be given to the participants to adapt to the new rules.

The pace of implementing new rules is the key to ensure a smooth race. There must also be room for players to give feedback on the implementation to ensure continuous improvement. Helping the rakyat to complete the race, such as owning a house and pursuing a better quality of life, are all important goals for our government. The basis of doing so is to have a consistent approach in dealing with rules so as to not to knock the wind out of us.

FIABCI Asia-Pacific regional secretariat chairman Datuk Alan Tong has over 50 years of experience in property development. He is also the group chairman of Bukit Kiara Properties. For feedback, please email feedback@fiabci-asiapacific.com.