SMEs face GST ‘burden’

The Malaysian Reserve | April 30, 2014

By K Vinotharan

KUALA LUMPUR: Small- and medium-scale enterprises (SMEs) will be the most affected by the introduction of the Goods and Services Tax (GST) from April next year due to lack of resources and funds to comply.

A survey of 1,000 companies undertaken by the National ICT Association (Pikom) found that SMEs will see significant impact on their revenue as they are the most in need to customise financial planning, tax filing and invoice billing to comply with GST collection.

Pikom chairman Cheah Kok Hoong said SMEs are now looking for financial support from government agencies and local vendors like banks and technology vendors to help ease the burden to make their organisations GST-ready.

“At this stage, many organisations have found themselves having only allocated a limited budget and possessed inadequate resources and knowledge to properly get themselves ready in facing the far-reaching operational and financial impact of a new tax system on their business,” he said in a statement.

He said in addition, they are also turning to ICT vendors to seek consultation to optimise the existing organisational infrastructures to comply with the new GST system.

The survey also saw that there is a large number of organisations in Malaysia that are still not ready for the implementation of the GST.

Over 70% of local organisations have indicated that their employees need more training to implement the GST system and further manage the impact to business operations.

The survey also shows that as of now, there are less than 25% of organisations that have sent their ICT employees to be properly trained to implement and leverage the new GST system.

Cheah said local ICT organisations are playing an important role to cushion the impact of local businesses trying to deal with the complexity of GST by leveraging on their expertise and track record of GST implementation in other countries.

Cheah said Pikom will host a series of seminars on GST in line with its efforts to educate organisations especially SMEs to gain in-depth insights on the new tax system.

Recently, the Malaysian Retail Chain Association (MRCA) had reported that only 10% of retailers in Malaysia are ready for the implementation of GST.

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‘Only 10%’ of MRCA retailers ready for GST

Wednesday, 09 April 2014 00:26 K Vinotharan 

Only 10% out of the 250 retailers under the Malaysian Retailers Chain Association (MRCA) are prepared to implement the upcoming Goods and Services Tax (GST) commencing April 1, 2015.

These retailers have engaged with tax consultants on the systems needed for the GST as well as counter measures on how to absorb an expected drop in sales while consumers digest the GST impact on prices.

The MRCA said based on a recent survey during its AGM, less than 10% of its members, mostly from the fashion industry, are prepared.

It said that in fact a majority of its members have yet to consider possibilities of the impact of the new tax that would replace the existing sales tax and sales and service tax.

“Retailers would take up to six months to prepare themselves towards the implementation of the GST. The MRCA is getting its members prepared through various seminars on GST,” said its outgoing president Datuk Nelson Kwok at a media briefing in Kuala Lumpur yesterday.

The reason why a majority of its members have not prepared themselves is due to the lack of awareness on GST and companies would rather wait till there is concrete proof that the GST will be implemented. Now that the Parliament had passed the bill for the GST implementation, these remaining companies will now move at a faster pace to prepare.

He said that the association is also conducting seminars not only on GST but to get its members to register themselves with the Customs in order for them to recover the cost imposed by their suppliers. He added that the MRCA will hold a seminar next week in Kuala Lumpur in which it expects 120 of its members to attend.

Kwok said the GST will certainly impact sales as consumers will be more thrifty in their spending. He said that some of the measures taken into consideration in facing a fall in sales post-GST would be to implement discounts for sales to help ease the burden of retailers.

Also present at the briefing was MRCA incoming executive secretary Shirley Tay who said MRCA have had past discussions with government officials on the impact of GST and the 6% rate is considered minimal, MRCA feels that retailers will not be able to see the full impact of the GST yet.

“We are currently seeking tax advice to see how we may best obtain any benefit from the soon to be implemented GST,” she said.

Commenting on the current situation of the retail industry in Malaysia, Kwok said that the industry is at a slow pace as retailers other than the food and beverage segment will only see a hike during festive seasons and school holidays.

“The industry is relatively slow after festive seasons and it would take up to three months for retailers to pick up the pace again,” he said.

MRCA’s incoming president Datuk Liaw Choon Liang, who is also the president of Focus Point Holdings Bhd, said the current focus of the association now is to provide more activities for its members in order to leverage on their brands and business models into franchise opportunities.

MRCA’s current members range from all sectors including fashion, food and beverage and services.

Demand for houses to go up in second half

The Malaysian Reserve | March 19, 2014

By John Gilbert

KUALA LUMPUR: Residential property demand is expected to increase in the second-half (2H) of this year as buyers try to beat the April 1, 2015 deadline, in anticipation of higher prices due to the implementation of the Goods and Services Tax (GST), said chartered surveyor and international property consultants CH Williams Talhar & Wong (WTW) MD Foo Gee Jen said.

Foo said the uncertainty of whether buyers will have to bear any rise in costs for new houses, could likely motivate them to buy or invest in properties before the GST is implemented.

He said the rush on property purchases will also balance the slower 1H of 2014 with stronger demand as many potential property buyers are currently in a “wait and see” situation.

“There are still ‘grey areas’ in the property sector which the government needs to look at, especially in material costs and related costs that should or should not be pushed on to the customers.

“However, it would be good for property buyers to make a decision within the first six months and this in tandem will also push up property prices and demand, which will benefit the developers,” Foo told reporters at a media briefing entitled Property Market Outlook 2014 in Kuala Lumpur yesterday.

He said the GST is not entirely zero-rated for residential properties as there is uncertainty on how the government will resolve the grey areas concerning residential projects.

A WTW survey showed the outlook for the property sector in Malaysia, particularly the residential and industrial sub-segments, is expected to remain robust in 2014 despite a minor setback due to the government’s cooling measures like the Real Property Gains Tax and Developer Interest Bearing Scheme.

The measures, which also involved tightening of loans by banks, will have some impact.

However, the demand and purchase of residential property is expected to remain robust despite these measures.

The WTW survey showed the industrial sector will continue to grow at a healthy pace, supported by both foreign and domestic investments.

“The only setback for the industrial sector is that it requires huge capital outlay and as it requires huge capital expenditure for development, it is an area developers must work hand-in-hand with the government as infrastructure projects are very expensive,” Foo said.

Adding that growth of industrial developments has been consistent between 10% and 15% annually, Foo said developers should look into areas such as Klang and Shah Alam, which offer good opportunities to develop industrial projects.

The WTW survey showed industrial premises moving up marginally in 2013 with selected industrial areas such as Shah Alam seeing rents appreciate strongly from RM1.20 to RM1.50 per sq ft (psf) in 2010 to RM1.30 to RM2.75 in 2013, while other areas such as

Taman Perindustrian KIP in Kuala Lumpur have seen industrial rents remain flat in 2013 at RM1.40 to RM1.70 psf compared with 2012.

Pandamaran Industrial Estate in Klang saw 3% to 4% growth annually from 2010 to 2013 — rising from 80 sen to RM1.10 psf in 2010 to 90 sen to RM1.20 psf in 2013.

On green buildings, Foo said the government must offer incentives for buildings that have green features and to encourage developers to build green buildings like in Singapore and Hong Kong.

Foo said property prices will not ease and will continue to go up and as such, buyers should look at secondary market as an alternative as there are still areas that offer good property buys.

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Housing market to taper off

The Malaysian Reserve | March 17, 2014

By Farah Adilla

KUALA LUMPUR: The residential property market is expected to taper off in the first-half of 2014 (1H14) following various cooling measures introduced by the government, stricter bank lending guidelines and new price thresholds for foreign ownership, according to a research report by KFH Research Ltd.

However, the research house said the market is expected to pick up before Goods and Services Tax (GST) kicks off in April 2015.

“We think that the segment of high-rise properties will face more severe impact while landed properties, which is driven by genuine occupational demand, will see limited impact.

“We gather that a lot of developers have deferred their new launches and revised down their internal sales target in 2014 in view of impending implementation of cooling measures.

“We also observed that many developers were in the final push for sales the last quarter of 2013 in view of impending implementation of new measures in 2014,” the report said.

Some measures introduced during the government’s Budget 2014 include the increase of Real Property Gains Tax (RPGT) to 30% for gains on properties disposed of within the holding period of up to three years. For disposals within the holding period of up to four and five years, the rates are decreased to 20% and 15% respectively.

The government also introduced a new minimum price for property that can be purchased by foreigners to RM1 million from RM500,000.

Meanwhile, CIMB Research said the impact of the new policy on the property market, which is going to be negative in the short-term, should be positive over the longer-term as it will help remove froth from some segments in the market.

“We believe that buying interest should progressively return in 1H14 as potential house buyers come to the realisation that property prices are unlikely to fall and that potential inflationary pressures from the implementation of the GST in April 2015 could push up property prices further.

“Strong sales by developers will, in turn, help to rerate property stocks,” CIMB Research said in a report published on Dec 10, last year.

KFH Research added that despite the slowdown in price growth and sales volume, it is unlikely to be for long as in the past.

“Typically, we will see some marginal weakness in two to three quarters following announcement of a hike in RPGT and subsequently sales will normalise,” KFH Research said. KFH Research said the key long-term driver for the sector, young population, is still intact.

“As long as the number of households is increasing, demand for younger families or couples seeking new homes is always there.

In the Klang Valley, strong demand is seen among young buyers for landed houses priced between RM600,000 and RM800,000 as well as high-rise properties priced around RM500,000.

“The run-up in property prices during recent years suggests that a forced shift of demand to more affordable housing or properties located in suburban and fringe areas will take place.

“In fact, some developers are switching their focus to affordable housing or fringe areas instead of launching high-end properties,” it added.

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16,000 restaurants will collect GST after April 2015, says Ahmad Maslan

Thursday, 20 March 2014 10:00 P Prem Kumar 

Nearly 16,000 restaurants will immediately collect the 6% Goods and Services Tax (GST) upon its implementation in April 2015, Deputy Finance Minister Datuk Ahmad Maslan said. In comparison, just 4,357 restaurants collect the Sales and Services Tax for the government.

“The reason for the increase is because the GST is applicable to businesses with annual sales of RM500,000 against the SST which sets the annual threshold at RM3 million,” he told reporters at Parliament yesterday.

He said more publicity campaigns will be carried out by the Treasury and Royal Malaysian Customs to ensure Malaysians have a better understanding of the GST.

While admitting the new tax will increase the cost of doing business in Malaysia, Ahmad said the government has introduced various me-thods to mitigate the cost incurred by businesses, especially by the small and medium enterprises (SMEs).

He said the GST will also cause a short-term hike in the consumer price index at 1.8%, however, this will still be below the unhealthy range.

“Even the apparels that we are wearing have taxes of 5% to 10%, taxed at manufacturing. After the GST, the tax at the manufacturer will be abolished and the 6% GST will come on board.

“Thus, it is wrong to conclude that prices of all items will increase after the GST.

That shows more understanding is needed, especially among the middle class citizens,” Ahmad added.

He said up to February this year, some 4,967 GST awareness and training programmes were held nationwide, attended by 271,288 participants.

He pointed out that based on a survey by the Customs, individuals earning below RM1,000 spend more than 33.4% from the income on food and 31.4% on housing, water, electric and fuel.

“Almost all the items in the 64.8% is exempted from the GST,” the deputy minister said.

Meanwhile, Ahmad said 55 companies — appointed by the Customs — are working on the GST software to be installed by all companies and businesses.

He said the roll out of such software has yet to be determined but emphasised that all businesses must install the software in order to file tax details and return claims.

The government will allocate RM150 million in subsidy for SMEs to install the software. The price of the software will be determined by the developers, he added.

“The subsidy will come in two phases, which is RM125 million for businesses which install the software this year and RM25 million next year.

“We are allocating RM98 million for the GST computerised system which have been developed by the Customs.

“The 55 companies will develop their respective software products based on the guidelines released by the Treasury.

The price will then be determined by them based on the market,” Ahmad said.

He also said another RM100 million will be allocated as grants by the Finance Ministry for GST implementation training programmes for businesses.

The GST is in line with the government’s commitment to reduce its budget deficit, with the view of achieving a balanced budget in 2020.

The GST will be introduced as a replacement tax, to take over the Sales Tax and Services Tax introduced in 1972 and 1975 respectively.

Malaysia’s 6% GST will be the lowest in Asean compared to Singapore (7%), Thailand (7%), Indonesia (10%), the Philippines (12%), Laos (10%), Vietnam (10%) and Cambodia (10%).

Healthcare players brainstorm GST issues

The Malaysian Reserve | March 4, 2014

By John Gilbert

KUALA LUMPUR: Manufacturers, importers and healthcare services providers raised clouding issues pertaining to the Goods and Services Tax (GST), touching on areas on supply of drugs to hospitals, medical insurance claims and related matters that are GST exempted in the healthcare sector.

The discussion was presented by Deloitte Touche Tohmatsu Tax Services Sdn Bhd executive director Tan Eng Yew who presented a series of slides explaining the GST mechanism in the healthcare sector.

“We see some concerns raised, for example, how would doctors bill their patients as consultancy services are not GST taxable while medication is taxable,” he told delegates at the dialogue entitled GST: Healthcare with Deloitte at the European Union-Malaysia Chamber of Commerce & Industry office in Kuala Lumpur yesterday.

The discussion also streamlined the definition of standard-rated items, zero-rated items and exempt items and during the sharing session, delegates shared views on how the GST affects their businesses and the healthcare sector as a whole.

“How badly you are affected by the GST is how well you pass on the tax to the consumer, and in some cases, we must be aware that such actions cannot be done if the price of drugs is controlled and regulated.

“However, the GST system, once it comes to full force, will evolve and change over time as many people will lobby on it,” Tan said during his presentation.

The dialogue also raised discussion points on the impact of the GST on pharmaceutical companies who are supplying to government and private hospitals, discounts and rebates, medical insurance claims and sponsorships, donations and related points within the healthcare sphere.

In November last year, Health Minister Dr S Subramaniam said healthcare costs will not be impacted by the GST as healthcare is GST-exempted.

He said the ministry is carrying out in-depth studies on the GST structure within the healthcare services and health products that are exempted from the GST for public consumption.

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Healthcare players brainstorm cloudy issues related to GST

Tuesday, 04 March 2014 10:00 

John Gilbert 

Manufacturers, importers and healthcare services providers raised clouding issues pertaining to the Goods and Services Tax (GST), touching on areas on supply of drugs to hospitals, medical insurance claims and related matters that are GST exempted in the healthcare sector.

The discussion was presented by Deloitte Touche Tohmatsu Tax Services Sdn Bhd ED Tan Eng Yew who presented a series of slides explaining the GST mechanism in the healthcare sector.

“We see some concerns raised, for example, how would doctors bill their patients as consultancy services are not GST taxable while medication is taxable,” he told delegates at the dialogue entitled GST: Healthcare with Deloitte at the European Union-Malaysia Chamber of Commerce & Industry office in Kuala Lumpur yesterday.

The discussion also streamlined the definition of standard rated items, zero rated items and exempt items and during the sharing session, delegates shared views on how the GST affects their businesses and the healthcare sector as a whole.

“How badly you are affected by the GST is how well you pass on the tax to the consumer, and in some cases, we must be aware that such actions cannot be done if the price of drugs is controlled and regulated.

“However, the GST system, once it comes to full force, will evolve and change over time as many people will lobby on it,” Tan said during his presentation.

The dialogue also raised discussion points on the impact of the GST on pharmaceutical companies who are supplying to government and private hospitals, discounts and rebates, medical insurance claims and sponsorships, donations and related points within the healthcare sphere.

In November last year, Health Minister Datuk Seri Dr S Subramaniam said healthcare costs will not be impacted by the GST as healthcare is GST-exempted.

He said the ministry is carrying out in-depth studies on the GST structure within the healthcare services and health products that are exempted from the GST for public consumption.

Business sentiment to improve

January 29, 2014

By Sathish Govind

KUALA LUMPUR: The deteriorating confidence in consumer sentiment and business conditions is only to be expected with rising prices and the anticipated further increase in prices, economists said.

They, however, add that consumer and business sentiment should improve, once the uncertainty in price increases in toll, water and petrol are made clearer and if the increases are not that drastic.

They were commenting on the Malaysian Institute of Economic Research (MIER) consumer sentiment quarterly report which showed that Consumer Sentiment Index (CSI) fell for the first time below the 100-point demarcation line in almost five years.

At 82.4 points, the MIER’s CSI for fourth-quarter of 2013 (4Q13) plunged a hefty 36.3 points from the same period last year and 26 points quarter-onquarter.

MIERS’ business conditions survey report also said that Business Condition Index (BCI) extending its declining trend, standing at 92 points in the final quarter, representing 6.6 points slide from the previous quarter.

RAM Holdings Bhd chief economist Dr Yeah Kim Leng said while the consumer sentiment is within expectations, nevertheless, the implementation of the Goods and Services Tax (GST) may propel greater consumer spending ahead of GST introduction in April 2015, which may result in inc reased consumers spending defying consumer sentiment.

Among the highlights of the consumer sentiment report include income expectation being the worst since 1Q09, declining employment opportunities, soaring inflation anxieties and growing concern of getting a job.

The highlights on the business conditions survey report said the sales performance deteriorated further, sluggish domestic orders and lower increase in export orders and a slight dip in investments.

CIMB Group Holdings Bhd chief economist Lee Heng Gui said the consumer spending growth is still robust this year at 6.5% compared to 7.5% last year.

Lee said with the consumer sentiment waning, it is only natural that business confidence also lags behind.

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Private hospitals gear up for GST

The Malaysian Reserve | January 22, 2014

By Farah Adilla

SHAH ALAM: The implementation of the 6% of Goods and Service Tax (GST) in 2015 will not have a huge impact on the private healthcare industry.

People will see only a minimum rise in cost for public healthcare and the fact that they pay the cost through their insurance, said Frost & Sullivan GIC Malaysia Sdn Bhd healthcare senior VP Rhenu Bhuller.

She said despite that, the country has to ensure a good quality of service because consumers will always have the option of using the public or private healthcare sector.

“Rather than a blanket GST, maybe we should look at areas where we want to move people away from public and into private because one of the impacts of GST could be that more people will decide to go to public healthcare rather than private.

“That impact will put more burden on public hospitals. That is what you want to avoid because the public sector is already overburdened,” she told reporters after her presentation at “Frost & Sullivan 2014 Asia Pacific Healthcare Outlook” in Shah Alam yesterday.

Meanwhile, Frost & Sullivan said one of the most pressing issues in Malaysia is access to healthcare. Healthcare service providers are largely concentrated in urban areas, creating large pockets of rural and remote populations who have to struggle to access healthcare services.

“Seeing this as a key opportunity, leading private healthcare providers are expanding into tier-two and tier-three cities.

At the same time, the situation creates opportunities for telehealth and remote patient monitoring companies as well as those working with the telecommunications service providers to penetrate these areas,” she said.

The evolution and establishment of polyclinics or clinics is both complementary to as well as a threat to private hospitals.

“This is changing the way hospitals look at their operations, structure, roles, activities as well as their key measurements. The traditional models are no longer relevant in today’s healthcare environment and healthcare service providers need to focus on areas where they have expertise and can create efficiency and value-based care,” said Bhuller.

“Healthcare service providers can move across the value chain through partnerships, collaborations or acquisitions to be able to provide end-to-end services, consisting of not only treatment, but financing, pharmacy lab services as well as follow-on home care that will enable them to ensure resources are used effectively and for maximum benefit.”

She said healthcare providers and industry players need to consider key trends and dynamics which are driving reform in healthcare systems across the Asia-Pacific healthcare industry, such as mobility and security of information, risk-sharing, rebalancing of public and private sector financing and delivery of care, use of data to drive decisions as well as patient engagement.

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Scramble is on to engage GST experts

Friday, 10 January 2014 10:00 Tanu Pandey 

With the Goods and Services Tax (GST) looming ahead next year, financial consultancy firms are wasting no time to reach out to engage experts to provide support in terms of technical and industry expertise.

The GST, which may have raised hackles in many quarters, promises more business for these firms who could build on their human capital to service swelling requests from clients to get "GST ready".

“There has been a significant increase/ surge in requests for proposals (RFP) from current clients and non-clients since the announcement of the GST implementation date in Budget 2014,” global tax, audit and consultancy firm Ernst & Young (EY) Advisory Services Sdn Bhd tax partner Bernard Yap told The Malaysian Reserve (TMR).

As GST will replace the existing indirect tax system and bring one common tax at the rate of 6% for all goods and services, companies in Malaysia are preparing themselves in reference to their internal processes.

“In view of the surge in demand for our services, we have also reached out to our global offices within the EY network to provide us with support in terms of technical and industry expertise, and these resources will be seconded to Malaysia for the necessary period of time,” Yap said.

EY currently has 20 professionals who have experience in managing GST projects.

“There is a very good market at the moment for those who have experience in implementing GST. We may be contacting our offices in other parts of the world to support us for GST,” ED of Deloitte’s tax practice K Sandra Segaran told TMR recently.

The GST has attracted criticism from manufacturers, public at large and the Opposition as the new tax system will raise prices.

However, the government is trying to allay fears by disseminating information about the benefits of implementing GST.

Apart from financial consultancy firms, the IT consultancy is also looking at increasing business from the implementation of GST by companies.

GST requires a good IT infrastructure and training as all sales need to be captured accurately and it needs to be done electronically.

While companies like GHL Systems Bhd — Malaysia’s largest e-payment firm by market share — are still not sure of their earning estimates post- GST, the share prices of GHL saw a surge on hopes that it will benefit from GST implementation.

“The government has still not come out with clear regulations on GST so it is not easy to estimate the earnings that the tax system will add for us. We have to wait till this year to get a clear picture,” GHL Group CEO Raj Lorenz told TMR.

Companies ‘should be GST prepared’

The Malaysian Reserve

| January 10, 2014

By P Prem Kumar

KUALA LUMPUR: Companies should conduct an in-depth analysis as well as carry out a self-assessment to determine whether they are ready for the Goods and Services Tax (GST), which will be effective on April 2015 at 6%.

CIMB Group Holdings Bhd regional tax head Sam Chay said preparations are crucial to avoid incurring heavy non-compliance costs, which include higher maximum penalties including imprisonment or fines.

Speaking at the recent CIMB 6th Annual Corporate Day, he said a company should do a mapping of the entire procurement and supply chain to identify claimable inputs, cashflow impact, employee benefits and price impact.

“It also needs to identify areas that would be impacted by GST and restructuring options and needs to go through the GST draft regulations and guidelines that are released by the Customs Department.

“It can highlight industry issues through industry associations and other appropriate forums as well as communicate with the department, and it needs to ensure that all its staff are well equipped with general GST knowledge by conducting training and developing training modules to achieve compliance with the procedures prescribed under the GST legislation,” he was quoted as saying in a flash note, issued by CIMB Research.

Chay also recommended local entities to ensure that the necessary processes and systems are all in place as timely registration is a must and trial runs must be conducted.

GST is a multi-stage and broad-based consumption tax, which replaces the Sales and

Service Tax (SST).

Chay said while the GST provides a stable source of revenue to support the government’s fiscal operation, it also helps to lower the cost of doing business through input tax recovery as it offers a fair pricing to consumers through greater transparency, fairness and equality-enhanced delivery systems.

He also said the winners of GST are taxable and zero-rated suppliers as they can claim back their input tax for GST, as well as GST and IT consultants, while the losers are exempt suppliers who cannot claim back all their input taxes as well as consumers.

“In theory, consumers should pay less if the 10% SST is abolished and replaced by a 6% GST, provided that businesses do not abuse the system – though there is strict enforcement to check unfair pricing as well as a deterrent provided by the Anti-Profiteering Act,” he added.

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IMF: M’sian inflation may touch 4% in 2015

The Malaysian Reserve

| December 17, 2013

The international financial institution says that the rise in inflation will be fuelled by the government subsidy cuts and the introduction of Goods and Services Tax.

by P Prem Kumar

PETALING JAYA: The Malaysian economy is moving toward a healthier track with a series of fiscal reforms and policies but at the expense of inflation touching close to 4% in 2015 due to a one-time adjustment of goods price hike.

The ongoing phased reduction of fuel subsidies and the introduction of the Goods and Services Tax (GST) in 2015 will contribute to a small rise in inflation, currently at 2.8%, to nearly 3% next year and 4% in 2015, according to International Monetary Fund (IMF) officials.

Alex Mourmouras, the IMF mission chief for Malaysia, said the inflation will, after 2015, reverse down to the initial inflation level.

He noted that Bank Negara Malaysia (BNM) has taken preemptive measures to deal with threats of price instability.

“Consumer spending will continue to be robust but will not be as strong as previous years. It is important for the public to understand how important is the fiscal reforms for the country in the long run,” said Mourmouras in a media briefing in Kuala Lumpur yesterday. Also present was Treasury secretary general Mohd Irwan Serigar Abdullah.

The IMF team is here for the IMF Article IV consultations, which usually take place once a year. IMF economists visit the member country to gather information and hold discussions with government and central bank officials, and often private investors and labour representatives, Members of Parliament, and civil society organisations, according to information on the IMF website.

Upon its return, the mission submits a report to the IMF’s executive board for discussion. The board’s views are subsequently summarised and transmitted to the country’s authorities, it added. The discussion on Malaysia will be held in February, said Mourmouras.

Mourmouras said Malaysia’s near-term growth prospects are favourable.

“Real GDP (gross domestic product) growth picked up in the third-quarter and is projected to reach about 4.5% by year-end, and with the growth momentum is likely to be sustained into 2014, underpinned by a pickup in private investment and stronger exports, which will more than offset mild headwinds from fiscal consolidation.

“The federal government is also on track to reach its fiscal deficit target of 4% of GDP in 2013. The 2014 federal deficit target of 3.5% is feasible if, as assumed in the mission’s baseline, growth in current spending is contained within a tight envelope,” he said.

Mourmouras said the mission welcomed the timely and comprehensive fiscal reform package comprising the establishment of a high-level fiscal policy committee, fuel and electricity subsidy rationalisation, and the planned introduction of GST in April 2015, which will help reduce the federal deficit to 3% by 2015 and to about zero by 2020.

“Inflationary expectations are well anchored. However, vigilance will be required in order to preempt second-round effects associated with increases in the minimum wage, subsidy cuts and GST introduction,” he added.

On Dec 2, the government announced that Tenaga Nasional Bhd will raise electricity tariff by about 15% from January 2014, which may trigger imminent inflationary pressure on the economy and hit manufacturers like glove producers and steel mill players. Bank Negara governor Zeti Akhtar Aziz had earlier this month said its early assessment estimated that the tariff hike would increase inflation by 0.4%.

“Given that the current inflation rate which is 2.8%, this could mean that inflation next year could touch over 3%,” she said, adding that the level would be temporary.

Mourmouras said the Malaysian financial system is wellplaced to withstand potential stresses, with strong capital and liquidity buffers, relatively low non-performing loans and improving asset quality over the past few years.

In that context, the mission welcomed steps taken by the authorities to strengthen financial supervision. Since November 2010, BNM has implemented a series of macroprudential policy measures aimed at slowing property price inflation and credit growth.

“The mission commends the authorities for implementing an extensive agenda of structural reforms to strengthen growth and make it more inclusive, as elaborated in a number of multiyear transformation programmes.

“Efforts to upgrade human capital, foster technological readiness, inject greater competition into product markets and transform the government are important ingredients in this regard. Of critical importance is the programme to improve educational attainment to meet the talent needs of the economy,” he said.

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Economist warns of subsidy-cut impact

The Malaysian Reserve

| December 13, 2013

By John Gilbert

KUALA LUMPUR: The government’s continuing policies in reducing subsidies on fuel, sugar and power may result in a weaker domestic demand for 2014, a Nomura Research economist said yesterday.

The economist said while the government’s measures are seen as positive, the consolidation and monetary tightening may slow private consumption but added that Malaysia’s high degree of openness will allow its external demand to pick up.

“Through these subsidy cuts, we are optimistic on the Malaysian government being serious and on the right track to continue the plan in cutting fiscal deficit moving forward.

“The move would present some drag on growth particularly on public spending and also on the effect on consumption and investments,” Nomura Singapore Ltd ED and economist for South-East Asia Euben Paracuelles said in a media briefing in Kuala Lumpur yesterday.

He said the focus will be on the momentum of the reform which is slowly building and forecast gross domestic product for Malaysia to rise 4.5% for 2014 from an expected 4.3% in 2013.

In recent news, Energy, Green Technology and Water Minister Dr Maximus Ongkili said the government expects to cut expenditure by RM2 billion annually from the reduction in subsidies for the power sector, a move that would save RM4 billion.

However, it would still have to pay about RM2 billion in other subsidies to help the lower income group.

Touching on the implementation of the Goods and Services Tax (GST) in April 2015, Paracuelles said the move will impose a fiscal drag on growth, particularly on public consumption.

“Because the GST is implemented in the early part of the year, the drag on growth is expected to be seen for three quarters, however, now is the right time for the prime minister to initiate the GST as well as other fiscal consolidation policies,” he said.

The research house sees 2014 as a year of continuation of proactive government policies aimed at lowering the fiscal deficit and keeping the external accounts in a comfortable surplus.

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‘Malaysia’s debt ratio will be under 60%’

The Malaysian Reserve

| December 9, 2013

The government is already taking steps to address the ballooning debt ratio, by cutting back on subsidies and introducing the Goods and Services Tax.

by P Vijian

PETALING JAYA: Malaysia’s debt ratio will be below 60% of gross domestic product (GDP) once the government starts initiating major budget- deficit reduction reforms such as the consumption tax to reducing subsidies this year, says a global accountant body.

The Institute of Chartered Accountants in England and Wales (ICAEW) economic adviser Douglas McWilliams said Prime Minister Najib Tun Razak had put in place the necessary policies to tackle the debt dilemma.

“The fast growth is helping taxation revenues and government’s budgetary consolidation, particularly on subsidies but also GST (Goods and Services Tax), which means Malaysia’s debt ratio will be below 60%,” McWilliams told the media after releasing ICAEW’s quarterly economic report in Kuala Lumpur last Friday.

Malaysia’s current national debt ratio stands at 53% to the GDP which has forced the government to adopt drastic measures such as cutting subsidies and introducing the “not-sofriendly” GST in 2015.

In the last four months, Najib tried to contain public expenditure by cutting ballooning subsidies, beginning with fuel and sugar. Power subsidies will go next month. This year’s total subsidies amounted to about RM33 billion.

McWilliams said the narrowing debt ratio augurs well for the economy and even when a reduction in the US Federal Reserves stimulus package happens the ringgit will not be affected.

“Had the debt ratio been getting close to 60%, then there would be much risk of a slide in the ringgit at the time when tapering was to happen. Confidence in the ringgit depends on keeping the debt ratio below 60%,” he added.

According to McWilliams, 2014 would be a “transition year” for the economy as it will undergo structural reforms to fix its fiscal woes.

“It (2014) will be transition year, consolidating government finances, increasing consumption taxes and widening the tax base. It is an important shift, it’s a pro-enterprise and pro-growth shift,” he said.

The professional body forecast Malaysia’s economic growth for 2014 would be 4.2% if China’s economy growth shrinks.

According to ICAEW’s quarterly report, high household and public debt levels will fuel concerns of unsustainable credit growth that would in turn hurt investments and household consumption.

“The implementation of a revamped general sales tax in 2015 would further hamper consumption growth. However, a stronger global economy should mitigate this somewhat. We forecast GDP will rise by 4.1% in 2015,” said the report.

This content is provided by FMT content provider The Malaysian Reserve

FMM: Production cost to double on tariff hike

The Malaysian Reserve

| November 29, 2013

Local manufacturers urge the government to increase tariff gradually so that the manufacturing industry could adjust accordingly.

by Farah Adilla & Sathish Govind

PETALING JAYA: The government’s announcement on the expected rise in electricity tariff will have an impact on manufacturers, resulting in a double-digit increase in production cost, according to the Federation of Malaysian Manufacturers (FMM) yesterday.

Its president ong Poh Kon said the recent FMM-Malaysian Institute of Economic Research (MIER) Business Conditions Survey indicated that local manufacturers expect the cost of production to increase on the back of the tariff hike.

These concerns come at a time when the government is on the verge of rationalising its subsidy and implementing the Goods and Services Tax (GST).

“Manufacturers are already expecting some form of energy price increase due to the subsidy rationalisation, so this will impact not only the gas users, but also the electricity costs,” Yong told reporters at the presentation of the survey findings in Kuala Lumpur yesterday.

Yong added that different industries will be impacted differently by the adjustments, depending on their electricity usage, but there is no doubt that the double-digit increase is quite significant.

“The government has been saying that they need to reduce the subsidy and also to fund the price of imported liquefied natural gas, as such we anticipate electricity tariffs to move up.

We do not know the actual amount of the increase yet, so we have to wait for the official announcement.

“We hope it (tariff hike) will move up gradually rather than be implemented at once. We are looking forward to greater details on how this is which alleged that FCB imports from Thailand were being imported into Malaysia at a much lower price than the price in the domestic market of the alleged country.

“The petitioner claims that this is causing material injury to the domestic industry in Malaysia,” MITI said, adding that the duties on FCB imports from Thailand will range from 13.96% to 63.1%.

MITI also said the final determination will be made based on the outcome of the verification visits to the foreign producers’ premises no later than 120 days from the date of the preliminary determination report.

The government has also imposed anti-dumping duties on imports of tinplate from China and South Korea.

On Feb 20, 2013, the government initiated an antidumping investigation based on a petition filed by Perusahaan Sadur Timah Malaysia Bhd (Perstima) on behalf of the domestic industry producing electrolytic tinplate (tinplate).

Perstima alleged that imports of tinplate originating in or exported from China and South Korea are being imported into Malaysia at a price much lower than the price in the domestic market of the alleged countries.

On April 10, Southern PC Steel Sdn Bhd filed a petition to MITI on behalf of the domestic industry producing stranded wire alleging that imports of stranded wire originating in or exported from China are also being imported into Malaysia at a price much lower than the alleged country’s domestic market.

MITI found that there is sufficient evidence to continue with further investigation on the importations of stranded wire, however, the government decided not to impose provisional anti-dumping duties on imports of stranded wire originating in or exported from the alleged country.

This content is provided by FMT content provider The Malaysian Reserve

FMM: Production cost to double on tariff hike

Friday, 29 November 2013 00:00 

Sathish Govind

SIGNIFICANT INCREASE IN COST: (From left) Yong, FMM VP Datuk Saw Choo Boon
and VP Datuk OK Lee at the presentation of the survey findings in Kuala Lumpur yesterday.
(Pic by Ismail Che Rus)

The government’s announcement on the expected rise in electricity tariff will have an impact on manufacturers, resulting in a double-digit increase in production cost, according to the Federation of Malaysian Manufacturers (FMM) yesterday.

Its president Tan Sri Yong Poh Kon said the recent FMM-Malaysian Institute of Economic Research (MIER) Business Conditions Survey indicated that local manufacturers expect the cost of production to increase on the back of the tariff hike.

These concerns come at a time when the government is on the verge of rationalising its subsidy and implementing the Goods and Services Tax (GST).

“Manufacturers are already expecting some form of energy price increase due to the subsidy rationalisation, so this will impact not only the gas users, but also the electricity costs,” Yong told reporters at the presentation of the survey findings in Kuala Lumpur yesterday.

Yong added that different industries will be impacted differently by the adjustments, depending on their electricity usage, but there is no doubt that the double-digit increase is quite significant.

“The government has been saying that they need to reduce the subsidy and also to fund the price of imported liquefied natural gas, as such we anticipate electricity tariffs to move up.

We do not know the actual amount of the increase yet, so we have to wait for the official announcement.

“We hope it (tariff hike) will move up gradually rather than be implemented at once. We are looking forward to greater details on how this is which alleged that FCB imports from Thailand were being imported into Malaysia at a much lower price than the price in the domestic market of the alleged country.

“The petitioner claims that this is causing material injury to the domestic industry in Malaysia,” MITI said, adding that the duties on FCB imports from Thailand will range from 13.96% to 63.1%.

MITI also said the final determination will be made based on the outcome of the verification visits to the foreign producers’ premises no later than 120 days from the date of the preliminary determination report.

The government has also imposed anti-dumping duties on imports of tinplate from China and South Korea.

On Feb 20, 2013, the government initiated an antidumping investigation based on a petition filed by Perusahaan Sadur Timah Malaysia Bhd (Perstima) on behalf of the domestic industry producing electrolytic tinplate (tinplate).

Perstima alleged that imports of tinplate originating in or exported from China and South Korea are being imported into Malaysia at a price much lower than the price in the domestic market of the alleged countries.

On April 10, Southern PC Steel Sdn Bhd filed a petition to MITI on behalf of the domestic industry producing stranded wire alleging that imports of stranded wire originating in or exported from China are also being imported into Malaysia at a price much lower than the alleged country's domestic market.

MITI found that there is sufficient evidence to continue with further investigation on the importations of stranded wire, however, the government decided not to impose provisional anti-dumping duties on imports of stranded wire originating in or exported from the alleged country.

Where polls and bolos rule over twerk

Tuesday, 26 November 2013 10:00 

Syed Nadzri Syed Harun

In Malaysia , the term is not “selfie” or “twerk” which should be Word Of The Year but, by far, the overused, extremely popular and pooped out “polls”.

“Polls” or “polling” may not be a new word but its place in the minds of the people in this country has been truly magical the past one year or so as elections of all kinds continue to dominate our lives everyday.

Even among the Internet generation here “selfie” and “twerk” which have just been picked as Words Of The Year by Oxford dictionaries do not have the same impact “polls” has had or is having. “Selfie” means using your handphone to take a picture of yourself while “twerk” is a gyrating, sexuallystimulating movement common in today’s dances.

I do not like its meaning but the sound of “twerk” which somehow gives out negative vibes is something else. Just by the way it sounds, I could very well use it freely on my enemies as much as they would use it on me. “You twerk!” But look at “polls”.

Various speculations about when the general election was going to be held started more than two years ago and it reached frenzied pitch from the start of this year. By the time the date was finally announced eight months ago, the whole country went into a delirium with the 13th General Election (GE13) which turned out to be a close affair.

The significance of the word did not end there of course because this year alone, Malaysians were fed with all kinds of things to do with polls and elections apart from GE13 — the elections in Umno, Gerakan, PAS, MIC, together with the controversy-filled DAP polls as well as the Kuala Besut and Sungai Besar by-elections.

And look at what’s coming in MCA and PKR? In fact, most of the elections mentioned above have been riddled with disputes and controversies that they remain the talking point for a great number of days this year.

The word “polls” itself seems to be bewitching in the Malaysian context as it has spawned many other words and phrases that have captured our imagination.

One is “indelible”, a word seldom heard before it was announced last year that indelible ink would be introduced in the country’s election process. It required voters to dip a finger in the ink as proof of having cast the ballot papers.

However, this method itself came in for a lot of dispute and this undoubtedly brought forth other words as spoof — illegible ink, incredible ink and edible ink among them.

This year’s GE initially also raised a new power in the political sphere using the word and concept of the “Third Force” which held a lot of promise but faded away miserably after GE13.

There are several other words which could come close to being classified as Word Of The Year.

“Transformation” another abused term is one, the politically- correct buzzword that got everyone uptight without knowing what it is supposed to mean.

Then there is “GST”, the Goods and Services Tax proposition that sparked the country into adrenalin drive. Like polls, “GST” has been in the air for many months now and, even before its real implementation in 2015, it is a matter of time before we feel its real impact.

There are three other words that came close to being the runner-up Word Of The Year in Malaysia.

One is “viral” — in the YouTube sense. This has caused so much of a claptrap lately that every little thing posted on YouTube or Faceboook is said to have gone viral.

I think it is a gross abuse of the term. It gives new meaning to the word which, as we knew it, is previously confined only to the medical or clinical aspects of things or sickness going “viral”.

The other word that has attracted so much attention to be in line for Word Of The Year in Malaysia is of course “racist”. Ironically, the less said about this term is better but it has to be pointed out that it is used as a launchpad for attacks from all corners.

Finally, the word or phrase that comes close to pushing polls off the pedestal is “bolos dan lolos”. The Malay expression points to a state of exposed and susceptible defence line.

It speaks volumes about firstly, the number of firearms and other contrabands that made their ways past our border guards. And secondly, the Malaysian football team which consistently crumbles under attack.

*****

Syed Nadzri is editor-in-chief of The Malay Mail. He can be reached at syednadzri@ redberry.com.my

GST net gain may be less, says tax expert

The Malaysian Reserve

| November 28, 2013

The collection will be affected by government's move to reduce income taxes and how it will respond to corporates which are seeking to expand the zero duty list.

by Tanu Pandey

PETALING JAYA: A tax expert said the Goods and Services Tax (GST) may not increase overall government revenues as much as expected because any collection will be affected by the lowering of the income tax and how the government react to lobbying from businesses to expand the zero duty list.

The GST, which is to come into force in April 2015, will replace the indirect taxes like Sales and Service Tax and impose a common tax at 6% on a host of items, even on many that have escaped any duty till now.

However, there will be many essential items like food which will be exempt from GST or be in the zero-rated list.

“There will be more lobbying to get items into the zero-rating. Also, it is quite strange that the prime minister or some other ministers said we are ready to listen if someone wants to get some goods in zero-rating. That may be politically correct but is a highly risky act if that happens,” Taxand Malaysia Sdn Bhd chairman Veerinderjeet Singh told The Malaysian Reserve yesterday.

Veerinderjeet was speaking to the newspaper on the sidelines of Malaysian Institute of Accountants Conference 2013 in Kuala Lumpur where he was also among the panel members and other delegates from the accounting profession who were attending the twoday conference. The conference ended yesterday.

GST is expected to contribute about RM6 billion in addition to the current earnings of RM16 billion to the exchequer from indirect taxes. “Net gain from GST will be less…At the end of the day it is not going to be a substantial increase,” he said.

In preparation for bringing about GST in the country, the government reduced corporate income tax rates to 24% in 2016 from current 25% and personal income tax rate reduced by 1% to 3% starting 2015.

Terming the income tax reduction as a “bold step” from the government, he said, “It is not necessary we could reduce it later. We need to see how GST works because it takes a few years for the issues, anomalies and perceptions to be cleared (on GST).”

In fact, about the opposition from the business community on GST, he pointed out that it happened as the government failed to educate and inform.

“The public relations policy of the government needs to be really looked at. That was why in the five years, since 2007 when the GST came into discussion, we have allowed a lot of misconceptions to grow in the minds of the people and now it is a challenge to try and erase those perceptions. We could have done it better,” he said.

Meanwhile, Veerinderjeet expected Malaysia’s corporate income tax rate and maximum personal income tax rate reduced to 20% by 2020 while GST will be raised to 10%.

This content is provided by FMT content provider The Malaysian Reserve

Higher power prices seen in 1Q of 2014

Friday, 08 November 2013 10:00 

P Vijian 

The government plans to cut fuel subsidies for power producers in the first-quarter (1Q) of 2014, in order to trim soaring subsidies for the energy sector which touched RM24.8 billion to date this year.

Electricity could rise as much as 19%, from 33.5 sen/kWh to 40 sen sen/kWh, if all the subsidies are removed, according to estimates.

Datuk Loo Took Gee, secretary general to the Ministry of Energy, Green Technology and Water, said the reduction in fuel subsidies for the power sector is essential to stabilise the economy.

She said the government consulted with stakeholders in the energy sector and a new power tariff rate would be announced next year.

“You can expect it in the 1Q of next year, so be prepared for it. We need to stabilise our economy and this is one way,” Loo told The Malaysian Reserve in Petaling Jaya yesterday.

Loo, who participated in the “Reforms in Peninsular Malaysia’s Electricity Sector” forum organised by the Institute of Strategic and International Studies in Kuala Lumpur yesterday, said fuel subsidies have to be reduced gradually, taking cognisance of the country’s fiscal condition.

Loo did not say how much more power producers will have to pay for fuel to generate electricity with the subsidy reduction but it is inevitable that Malaysians will pay higher for electricity.

“Everybody must use energy judiciously and prepare ourselves for an increase in energy cost because we have been receiving huge subsidies all these years,” she said.

Based on estimates, Malaysians may have to pay 40 sen/kWh, compared to current electricity price of 33.5 sen per kWh, when subsidies to power companies are cut.

The Cabinet last revised electricity price in June 2011, with a 2% increase in base tariff and prior to that power rates were reviewed in 2006.

The government had previously signalled that it will cut the natural gas subsidy for the power sector because of rising costs. The power sector buys gas at a subsidised price of RM13.70 per mmbtu, compared to market prices that are three times higher.

The subsidy rationalisation is also the first move towards market-based prices as well as a plan to introduce a fuel-cost pass through mechanism so that consumers pay higher or lower electricity prices according to the market.

Under this plan, which is already in place for petrol and diesel, the fuel cost would be reviewed every six months.

Subsidy removal for the sensitive energy sector is part of Prime Minister Datuk Seri Mohd Najib Razak’s fiscal consolidation agenda to trim worrying fiscal deficit and send a strong message to global rating agencies that Malaysia is firm on its budgetary reforms.

Malaysia’s fiscal deficit is at 4% of the gross domestic product (GDP) and national debt is expected to touch 54.8% of GDP or RM541.3 billion this year.

Najib reduced the fuel subsidy for petrol and diesel by 20 sen per litre in September. By reducing the subsidy, the exchequer will save about RM1.1 billion this year and RM3.3 billion annually.

This was followed by a 34- sen sugar subsidy cut in Budget 2014, announced on Oct 25, where Najib also introduced the Goods and Sales Tax (GST).

The GST, slated to begin on April 1, 2015, is expected to generate RM23.1 billion in the first nine months and RM32 billion in 2016.