Najib: Middle-income group vital to economic growth

Prime Minister Datuk Seri Najib Tun Razak took to his blog on Monday to explain the important role the middle-income group, or M40, plays in national development. He also explained the efforts included in Budget 2016 to help the M40 face trying financial times. 

Below is his statement in full:

I tabled the Budget 2016 some three weeks ago. It was one of the more difficult budgets for the Ministry of Finance and I had to come up with – considering the constraints that we have with reduced receipts from oil and gas sources as well as the demands that the country had in view that the Budget is the first under the 11th Malaysian Plan.

But we were fortunate. Although the income from GST did not quite make up the shortfall, it was sufficient for us to have a well-rounded budget for all.

The 11th Malaysia Plan was designed to take us to what we aspire to achieve by the year 2020. The annual budget between now and then must be able to bring us closer and ever closer to realising our high-income advanced economy status.

As you may already know, no country can reach progressive growth, economically and socially, without the full participation of the middle class. The size and strength of the middle class is the quintessential measurement of a country’s economic strength. The middle class’ social and cultural habits and value system can essentially determine the course of a country’s history.

In any capital market enterprise economy, as is Malaysia, the middle class is the driver of the economy. The middle 40 percent of our household income group or M40, is extremely important to the nation’s well-being. The M40 is central to our consumption spending and private investments. The M40 also serves as a critical pool for talent, investment and entrepreneurship.

Last year, in Budget 2015, the Government reduced the individual tax rates between 1.0% to 3.0% and to help the lower-income, we raised the lowest taxable bracket to a minimum of RM4,000. Those earning below this threshold need not pay any income tax.

Building from the measures introduced in the previous year, the Budget 2016 introduced additional measures to further alleviate the financial challenges faced by the M40:

• Tax relief for each child below 18 years of age is increased from RM1,000 to RM2,000 from year of assessment 2016;

• Tax relief for individual taxpayer whose spouse has no income is increased from RM3,000 to RM4,000;

• Tax relief up to RM5,000 per year for medical treatment and care of parents who are ill;

• Tax relief for children who provide for their parents is given total tax relief of RM1,500 for the mother and RM1,500 for the father;

• Tax relief from RM6,000 to RM8,000 for each child above the age of 18 years who is studying at local or foreign institutions of higher learning; and

• Tax relief from RM6,000 to RM8,000 for disabled child above the age of 18 years who is studying at local or foreign institutions of higher learning

In addition to this, the Government has also been emphasizing home ownership for all Malaysians for both the B40 or M40 groups.

In the recently tabled Budget 2016, the Government has reiterated its plan with regards to home ownership. As an example, the Budget 2016 has allocated RM 200 million for the First House Deposit Financing Scheme under the Ministry of Urban Wellbeing, Housing and Local Government (KPKT) to assist first-time buyers of affordable houses to pay the deposit.

I have also announced another significant policy decision which is the increase of minimum wage throughout the country. This is an important step as it will not only help increase the income of those who are struggling to break into the middle class bracket, but it would also cause employers to raise wages through “spillover effects” throughout the wage spectrum.

In addressing the issues of M40, the private sector also plays an important role in ensuring Malaysians are paid fairly. Currently in Malaysia, wages as a percentage to GDP stands at 34% in 2014, and this is considerably lower than the levels of developed nations, which we aspire to become. As such, I call for employers to be more inclusive in the sharing of the economic pie and company success so as to achieve the target of having our employees’ compensation of at least 40% to GDP by the year 2020. With this, employees can expect a more equitable salary from their companies so long as that they do not compromise on productivity.

With the theme “Prospering the Rakyat”, Budget 2016 presents an inclusive budget that addresses the realities of today’s economic conditions. It is important for the Government to ensure that the M40 will maximise its full potential in realising their aspirations that they too are being provided with the financial cushion in order to increase their purchasing power and the option to save for their retirement.

The strategies outlined in Budget 2016, would encourage upward social mobility, while at the same time, encouraging family values that are true to our Asian roots.

To have a strong and growing economy, we need a strong and growing M40.

Paris Attack

Blaming fundamentalist Muslims for acts of extremism and terrorism is wrong, says Tan Sri Rafidah Aziz.

The former cabinet minister in a Facebook post on Monday said that while news reports tend to equate acts of terrorism with fundamentalist Muslims, the world must recognise that fundamentalists of any religion follow the tenets of their faith and that no religion encourages extremism and terrorism.

"These are the Muslim towards which fingers will be always pointed because fundamentalist Muslims are perceived to be those who perpetrate heinous crimes in the name of Allah and in the cause of Islam.

"It is time that people get it right! First, the vast majority of Muslims in the world are fundamentalist Muslims, because we believe in core fundamental principles and teachings of Islam, which teach and exhort upon us to be moderate in everything we do," said Rafidah.

She said that in every religion there is always a minority which deviates and interprets the faith according to their own personal understanding.

"There are those who become extremists, with the extremely divisive 'us and you' attitude.

"Such views and interpretation can and sadly does lead to behaviours and acts of terrorism, where they are out on a rampage to destroy others who are different from them," she said.

Rafidah added that it is time to separate extremism and terrorism from the fundamentalist majority.

"The fundamentalists believe in harmonious coexistence with everyone else and do not condone self styled extremism.

"We reject what the terrorists are doing. I am a Muslim who adheres to the fundamentals of my religion, thus I am a fundamentalist Muslim, so the world must get that right," she said.

On Friday, at least 129 people were killed in a series of suicide bombings and shootings across Paris.

What are the Reasons to Vaccinate My Baby?

 “I want what is best for my kids, and protect them from diseases.”

Isn’t it ironic, how we can strongly agree on the above statement, and also somehow it is the very statement that drives us apart when it comes to vaccination?

Most modern parents have never seen the devastating effects that diseases like polio, measles, or whooping cough (pertussis) can have on a family or community.

It’s easy to think of them as diseases that only existed in the past when the bitter truth is, they still exist.

The growing number of people who are anti-vaccination in Malaysia, coupled by the large number of migrant workers from India, Pakistan, the Philippines and Indonesia exposes those who cannot be vaccinated among us to unnecessary risk.

As a medical doctor with a public health background, I have an obvious bias towards vaccination.

“My baby is healthy, why should I vaccinate?”

Many don’t realise that vaccination is not about treatment. It’s about prevention.

Malaysian babies are without polio, measles and whooping cough today thanks to a high vaccination rate among Malaysians. These immune Malaysians confer “protection” to those who are not vaccinated by breaking the chain of infection, and preventing the nasty viruses from reaching them.

They form sort of a shield, if you will.

And this can only happen when the vaccination rates are above a certain level of the population.

But taking into consideration the migration of workers from neighbouring countries especially Indonesia, the Philippines, India, and Pakistan where immunisation rates are low, coupled by the anti-vaccination movement in Malaysia, it is safe to believe the decline in that threshold.

This puts those who are not vaccinated in danger of contracting these diseases, which I will illustrate next.

“This is my decision, not yours.”

Let us take the MMR vaccine as an example.

If the American CDC number of 99 per cent efficacy for MMR is accurate, and assuming we vaccinate 100 per cent of the population, then we would see:

* 1 per cent of those vaccinated still susceptible to measles, and,

* Another 1-2 per cent (rough figure) or so susceptible from contraindications to vaccinations i.e. those with allergies, or severe immunodeficiency i.e. from haematological disorders, on chemotherapies, or long-term immunosuppressive therapies, patients with AIDS, and,

* Another 7-8 per cent or so of the entire population susceptible because they are too young to have received their full dose of vaccination.

This means about 10 per cent of the population is at risk when an outbreak occurs, assuming of course that those who can be vaccinated are vaccinated.

The number is higher if those who can be vaccinated, refused.

Do MMR vaccines cause autism?

No.

But proponents of anti-vaccination often cite Andrew Wakefield to justify a causal link between vaccines and autism.

While his original paper did not prove causality, his statement linking the vaccines and autism caused panic, and inspired a number of other studies to confirm or disprove his conclusion. The scientific community found significant ethical problems with Wakefield’s study, but also realised that his research data was not reproducible.

Reproducibility is an important criteria in any study where similar results should be able to be replicated by anyone using the same research methods and procedures.

Needless to say that his study, and therefore findings were dismissed.

Some argued that just because we do not have evidence linking autism and vaccinations, nor government-reported correlation between the two, it doesn’t mean that vaccines do not cause autism.

Alright, but by the same thinking neither can anyone prove that it does.

The conspiracy theorist will say this is done to protect the pharmaceutical industries, but again, for the sake of this article, let us keep the discussion to facts. Unless you have evidence to suggest conspiracy, let us move on.

Is vaccination absolutely safe?

Nothing is absolutely safe. Flying, driving, crossing the streets.

There’s risk involved in everything we do hence the term relative safety. So the question we need to ask is, are vaccines relatively safe?

Absolutely yes.

Again, referring to the statistics from the American CDC, and again using MMR vaccines as an example, we are looking at 1 in a million getting a life threatening allergic reaction, and another 1 in a million to develop a serious neurological disorder, and another one in a million will get deafness from the MMR vaccine.

To put it in perspective, it is safer than driving a car in this country.

Malaysian Institute of Road Safety Research (MIROS) said there were 462,423 road accidents and 6,917 road deaths on our roads in 2012. If our population was 29.3 million then, the road accident rate in Malaysia was 15,782 for every million population and road death was 236 for every million population.

Which means that the vaccines are 15,782 times safer than driving in Malaysia.

Naza Kia Malaysia aims to sell 2,000 Rio Sedan cars

Naza Kia Malaysia, the official distributor of Kia vehicles in Malaysia, targets to sell 2,000 units of the Kia Rio Sedan next year after it was unveiled to the public at the Mines International Exhibition and Convention Centre.

The company is keen to compete in the B-segment market that’s dominated by the Toyota Vios and Honda City and is confident the compact-sedan will succeed after announcing it was accepting bookings with the car expected to arrive in January, 2016.

The cost of the compact sedan is estimated at RM73,000 (on-the-road with GST and insurance) and will come with a five-year warranty with unlimited mileage in order to attract the young and trendy who seek a vehicle to suit their lifestyle.

“With over 2,000,000 vehicles sold since its global introduction, we expect the Rio Sedan to contribute significantly to Naza Kia Malaysia’s sales performance in 2016,” said Naza Corp Holdings group chief operating officer (automotive group) Datuk Samson Anand George.

The sedan will feature a bevy of safety features that include six-airbags in addition to the generous 389-litre boot and a 1.4-litre engine that’s managed by a four-speed automatic gearbox.

It will also feature daytime running lights, keyless entry and bluetooth connectivity for the tech-savvy, while being offered in five colour choices of Clear White, Bright Silver, Deep Blue and Signal Red.

“With the sophisticated styling and its sleek urban character, I am sure the Rio Sedan will be able to penetrate into the growing potential of the B-segment market,” said Samson.

HIGHLIGHTS - Malaysia's 2016 Budget

Oct 23 Prime Minister Najib Razak announced Malaysia's 2016 budget on Friday, highlighting how the government plans to narrow its budget deficit, address rising cost of living. The government also released an economic report.

Following are highlights of Najib's ongoing speech to parliament

BUDGET ALLOCATION

- 2016 budget allocates total 267.2 billion ringgit ($63.32 billion), an increase from a revised allocation of 260.7 billion for 2015. The initial allocation for 2015 was 273.9 billion.

- For 2016, federal government revenue collection is projected at 225.7 billion ringgit, up 3.2 billion ringgit from 2015

TAXES

- Income tax increased from 25 percent to 26 percent for people earning between 600,000 ringgit and 1 million ringgit. Increased to 28 percent for those earning above 1 million ringgit. Some tax relief measures to help middle income wage earners.

- Goods and services tax to increase government revenue by 39 billion ringgit, versus 27 billion ringgit in the first eight months of 2015. Some basic goods to be zero-rated, including over-the-counter drugs, baby milk, nuts based food, noodles.

EXPENDITURE

- 41.3 billion ringgit allocated to improve education

- Defence Ministry allocated 17.1 billion ringgit

- Allocation of 30.1 billion for development projects, 5.2 billion for security, social development gets 13.1 billion

- Government allocates 1.2 bln ringgit to the tourism industry

- Majlis Amanah Rakyat, an agency to facilitate the development of ethnic Malays and other indigenous Malaysians, allocated 3.7 billion ringgit

SUBSIDIES AND HANDOUTS

- Spending allocation for Bantuan Rakyat 1Malaysia (BR1M), a programme providing cash assistance for low income households, will be raised to 5.9 billion ringgit in 2016, up from an estimated 4.9 billion in 2015.

DEVELOPMENT

- Affordable housing projects allocated 1.6 billion ringgit, to be spent building 175,000 houses

- 900 million ringgit allocated to resolve Kuala Lumpur traffic congestion

- Telecommunications infrastructure allocated 1.2 billion ringgit

- 1.4 billion ringgit earmarked for development of rural roads nationwide. An-Borneo highway to be toll free.

- Government to improve improve infrastructure in rural areas, including building houses and water supply

- 5.3 billion ringgit allocated to modernize agricultural sector

- 515 million ringgit allocated to improve electricity supply in Sabah state

OIL PROJECT

- Pengerang oil project to receive 18 bln ringgit in 2016

MINIMUM WAGE

- Increased from 900 ringgit per month to 1,000 ringgit in peninsular Malaysia

MACROECONOMIC HIGHLIGHTS

- Current account surplus in 2016 to be down more than half to 11.3 billion ringgit ($2.63 billion) from 23.4 billion ringgit this year and 47.3 billion ringgit in 2014

- Economic growth forecasts at 4.0-5.0 percent for 2016, compared with 4.5-5.0 percent this year

- Fiscal deficit for 2016 reduced to 3.1 percent of gross domestic product, down from 3.2 percent in 2015 and 3.4 percent last year

- Exports forecast to rebound 1.4 percent in 2016 after a 0.7 percent fall this year

- Inflation seen at 2.0-3.0 percent in 2016, against 2.0-2.5 percent this year

- Government debt limit to remain at 55 percent of GDP in 2016, forecasting a ratio of 54.0 percent this year and slightly up from 52.7 percent in 2014

- Oil and gas related revenues seen at 14.1 percent of total revenue in 2016, down from 19.7 percent in 2015

- Goods and Services Tax (GST) expected to raise 39 billion next year, against 27 billion ringgit collected in the first eight months of 2015

- Subsidy allocations seen falling slightly to 26.1 billion ringgit from 26.2 billion ringgit this year

($1 = 4.2200 ringgit) (Reporting by Kuala Lumpur Bureau; Editing by Simon Cameron-Moore)

AirAsia X risk reward not attractive

Low-cost medium-haul carrier AirAsia X’s (AAX) 3Q15 operating statistics were uninspiring and showcase that management still has much to do in its effort to turnaround the group, says Maybank Investment Bank Research.

It said on Monday that passenger traffic shrank by 13.6% on-year due to capacity cuts and a drop in seat load factor to 75.1% (-5.5 percentage points on-year). 
“This is a stark contrast against the industry whereby many airlines enjoyed record high load factors and strong traffic growth,” it said.

Maybank Research pointed out the 3Q15 results to be released on Nov 25 would not inspire much confidence in the stock and may exacerbate concerns over management’s ability to turn the group around. 

“Nevertheless, we believe that many of the initiatives undertaken are fitting, and will probably begin to yield benefits in 4Q15,” it said.

The research house said the third quarter is seasonally a low period and AAX has produced losses before, even during the good times. 

However, Maybank Research expects some noteworthy improvement on a year-on-year and quarter-on-quarter basis due to the benefit of lower fuel price and management’s capacity cuts on the weak routes. 

“We forecast a core net loss of RM62.6mil, which is a 66% improvement on-year. This would lift 9M15 core net loss to RM233.5mil (-43% on-year), which is in line with our full year loss estimate of RM204.5mil.

“Generally we are negative on the stock as we think the risk-reward is not attractive.  However, the stock is trading at just 0.86 times price-to-book value (P/BV) which suggests limited downside.  Maintain Hod, with an unchanged target price of 21 sen based on 1.0 times FY16 P/BV,” it said.

Ringgit slumps to 16-year low, money changers warned against hoarding foreign currencies

Money changers should not hoard foreign currencies as this could pose risks in a volatile market, the Malaysian Association of Money Services Businesses (MAMSB) warned as the ringgit hits its lowest in 16 years.

MAMSB president Ramasamy Veeran said it was never a practice to stockpile and withhold foreign currencies in order to make a profit from the weak ringgit.

"It is not a standard practice or a norm… Further, there are risks associated in stockpiling foreign currencies in a volatile local and global market," he told The Malaysian Insider recently.

"The risk would be exchange rate risk whereby if there are adverse changes in currency exchange rates, the money changer could suffer a loss if they are stockpiling foreign currencies."

Ramasamy's comments come as the ringgit slid to a 16-year low on July 6, falling to 3.8092 to the US dollar.

It was last at this level from 1998 to 2005 during which it was pegged to the US dollar at 3.8 following the Asian financial crisis which was blamed on currency speculators.

This time, the ringgit's slide comes amid low crude oil prices, as well as damning allegations against Prime Minister Datuk Seri Najib Razak and his brainchild, state investment firm 1Malaysia Development Berhad (1MDB).

Najib is alleged to have received billions of ringgit from entities linked to 1MDB in his personal bank accounts.

Ramasamy said MAMSB has yet to receive any complaints about money changers withholding foreign currencies but warned such actions could impact on various sectors of the economy.

"Stockpiling and withholding of foreign currencies can create an artificial shortage of foreign currency which can impact areas, such as tourism."

Under its governing rules, MAMSB can act against money changers found to be hoarding foreign currencies in order to make profits due to the ringgit's slump, Ramasamy said.

"Our members have been advised to ensure that all customers are handled in fair and transparent manner.

“If any complaints are received on this matter, necessary action will be taken in accordance to our governing rules," he said, adding that the public could lodge complaints at the association's website (www.mamsb.org.my) or with Bank Negara Malaysia.

The ringgit is Asia’s worst-performing this year and has not been helped by ongoing allegations against Najib, 1MDB, resulting in political uncertainty.

1MDB's debts of RM42 billion, incurred in six years of operations, have also raised concerns over Malaysia's credit rating, although the central bank has said that the state investor's problems alone did not pose a systemic risk to the country's economy.

Fitch Ratings recently revised its outlook for Malaysia to stable from negative previously.

Controversies surrounding 1MDB are not yet over, as the fund is currently being investigated by a special government task force for alleged financial wrongdoing, and its books are being inspected by the national auditors for review by a parliamentary bi-partisan committee on public accounts. – July 22, 2015.