Malaysians, you are owing more and more money

I picked up this nugget from the Star who picked up the news from Reuters:

Friday May 14, 2010

Sovereign bond plan
Date, size and tenor of issue still not finalised

KUALA LUMPUR: Malaysia is pressing ahead with a sovereign bond issue despite recent unease in regional credit markets and has mandated CIMB Investnment Bank and HSBC to arrange the sale, sources said yesterday.

The issue, Malaysia's first sovereign since 2002, would be of a “decent benchmark size” but was likely to be smaller than national oil firm Petronas' recent US$4.5bil bond, the source added

The source said the upcoming Malaysian issue was for benchmarking rather than fund-raising purposes as there was ample liquidity in the country.#

But Malaysia ran a budget deficit of 7.4% in 2009, its highest in more than two decades. It aims to reduce that to 5.6%.

The Government has traditionally relied on domestic bond issuances to fund its expenditure. ^

The Government sold RM88.5bil of bonds in the country last year, according to central bank data.

# What does "benchmarking and not fund raising" mean? Why does Malaysia government want a benchmark for? Why do Malaysians have to pay bond interest to "benchmark" against something that we can't feel, see or touch.

As far as I see it, in other words, a guy has enough money to handle his daily living expenses but for vanity reasons, he goes to the bank to see how willing the bank is to lend him money and as a result he pays unnecessary interest expense for that.

^ Borrow money for expenditure? Any reasonable finance manager would know medium or long term financing (which bonds are) is supposed to fund development expenditure which generate future revenue that hopefully exceed loan principal and interest payment.

Operating expenditure, meanwhile, should be funded by tax revenue because it is just mean for day to day functioning of civil service etc.

The decade long budget deficit mentioned clearly indicates that our tax revenue is not sufficient and given the terror financial management stories in Auditor General's Annual Reports, countless scandals like PKFTZ, Matrade or even the "looks like vote buying, sounds like vote buying but it is not vote buying" stuff of legends in Hulu Selangor and thank goodness not in Sibu, the loans and debts committed on our behalf may not be necessary at all.

The article never mentioned the purpose and expected benefit of the bond issue and that piece of silence sounds like thunder to me.

I BRA HIM likes to talk about Malay rights and pride so I might want to suggest to him that there is no honour or pride and security in taking on debts and debts until keliling pinggan.

I for one, do not want my beloved country to go the way of PIGS (Portugal, Italy, Greece, Spain) with their host of economic problems including over-borrowing so perhaps I BRA HIM should advise Najib administration the perils of going towards that direction.

It is no surprise that CIMB is mandated, not selected from tendering process, to raise fund. Najib must have great confidence in his brother. The commission, professional fees, reimbursements billed for this sacred national service must be of respectable amount. Perhaps this is a good question to be tabled in the next Parlimentary session.

Dato' Sri Nazir Razak
Non-Independent Executive Director/Group Chief Executive

Dato’ Sri Nazir Razak, a Malaysian, aged 42, was appointed a Non-Independent Non-Executive Director on 27 January 2006. He is presently the Group Managing Director/Chief Executive Officer of BCHB and CIMB Group and is also a Director and Deputy Chairman of CIMB Investment Bank, CIMB Bank and CIMB Islamic

Dato’ Sri Nazir is a member of the National Economic Council, the Employees Provident Fund’s Investment Panel, the Securities Commission’s Capital Market Advisory Council, Bursa Malaysia’s Securities Market Consultative Panel, the MasterCard Asia/Pacific Regional Advisory Board and the Asia Business Council. He holds directorships in Multimedia Development Corporation and Malaysian Electronic Payment System (1997) Sdn Bhd. He is an Executive Committee member of the Malaysia International Islamic Financial Centre. He is also a trustee of both the Rahah Foundation and the Pride Foundation.

Take a look at this link * where it shows Malaysia's external debts. The graph post 1995 looks like a 20 year old man on viagra but yet we are still stuck in this middle income trap that NEM is talking about. So where is the payback from all these debts?

* the magic number I see at the link is USD66.2 billion end of 2008 and at exchange rate of US1 = RM3.22 it is like, gosh, RM213,164,000,000. Divided by 27 million Malaysians, that is RM7,894.96 per person. If you have a non-working wife and 2 kids, congratulations, you owe the world RM31,579.85.

According to Anil Netto's post here , the external debt had increased to RM265 billion and the per person share became RM9,814.81 and the poor example above saw his debt increased to RM39,259.26. Remember foreign exchange goes up and down beyond our control.

The principal of opportunity cost dictates you must give up something for another thing so god knows what Malaysians are robbed off.

In Australia, tertiary education is free yet many Malaysian parents have to save the equivalent sum of a house to see through their children's tertiary education. The best students are not rewarded with scholarship (whereas free public education may have the equivalent financial impact of a scholarship) but slapped with anxiety and humiliation in the annual scholarship hijack.

Hell, let's not even talk about middle income, we have loads of Malaysians, especially in Sabah and Sarawak that have no proper water and electricity supplies, decent transport routes, health care and what not......

I wonder if the following are signs that Malaysia is heading the way of the PIGS

1) postponed introduction of GST when the condition is not proper and the people are not willing

2) proposed and retracted huge increase of traffic penalties

3) annual issue of PNB unit trust to non-bumis whereas during the Mahathir era there was only once; that Wawasan 2020

4) the idea of getting swift, one-off cash inflow from selling of toll concession

5) the service tax on credit cards

6) reduction of subsidy on petrol, yet no visible payback from improved public transport (except for some female only gerabaks?)

I have lost a bit of interest in the trial and Saiful's ass as I am more worried about my own now.

Sigh, compared to the Pakatan administration in Penang which saved money, turned a deficit into surplus and gave out despite Shahrizat's misgiving, RM100 to warga usia emas.....

And they say Barisan Nasional have the edge over Pakatan in terms of experience in running a country. Hell with so much natural resource, even my granny can run Malaysia.


  1. let malaysia fail for once the hard way, maybe just maybe the people may wake up

  2. yes let malaysia go to default and only all these jokers can feel it and wake up!!!

  3. Great article, I have been thinking about the issue and you have coined it succinctly. Our Government under BN have been indulging itself in deficit spending spree for the past 20 years. The abuse of public fund is too blatant for any sane citizen to overlook.

  4. You have painted the scenario very clearly. You are right; I am looking after my ass too.

    Before reading this I was reading the article by Dr. Chan on Sime Darby. There is no difference in the way they manage a government and a conglomorate. Sime is lucky this time around because the merger helped to soften the impact as revenue from a larger oil palm acreage helped.

    Truly this is a blesed country otherwise we would have followed Greece.

  5. Ayo. I paid tax and my Kampung in Kudat still has muddy gravel roads..

  6. Bro,

    Think you may be a little confused about the word "mandate".

    What the Star article means by "mandating CIMB and HSBC" to arrange the sale is that CIMB and HSBC were given the mandate i.e. responsibility to handle the issuance. These mandates are given after a selection process.

    Let me quote example from an external source to provide some context..

    BTT Merchant Bank Limited was recently successful in its bid against two major international banks to arrange financing for the St. Maarten Harbour Holding Company.

    “We were proud to have been awarded the mandate to raise this funding, ahead of other international financial institutions, by providing excellent pricing, long tenor and a fixed rate for 15 years,” said Nigel Ferguson, RBTT Merchant Bank Regional Manager


  7. Anom 1 & 2
    - I see your point and I shrudder to think we go this way. Had a chat with an accountant today, he said it is no big deal if a country goes broke compared to you personally go bankcrupt. The precedent I can think of is in 1997, TDM refused IMF assistance and was saved by palm oil, petroleum and excessive borrowings....

    thanks for your compliment. this is an itch I need to scratch and glad you find it relevant

    anom 3
    - sorry I dun know much about Slime Darby but perhaps you have given me a lead to explore further

    Kay- time for change, are my Borneo brothers ready?

    amon 4/bro,
    thanks for pointing it out
    I refer to Longman dictionary:

    1) having the authority to decide after being elected into office

    2) an official instruction given to someone/some organisation to carry out certain task

    3) power given to 1 country to run another

    4) inform formally e.g. the measures were mandated by IMF

    5) to give someone the right or power to do something

    so it can go either way but has anyone heard of an open invitation for all banks to bid for the job?

    perhaps a parlimentary question can be drafted:

    "Tuan XXX minta Menteri Kewangan menyatakan adakah CIMB dan HSBC dilantik terus ataupun dipilih menerusi proses tender terbuka untuk menjadi pengelola usaha pentadbiran Barisan Nasional menerbitkan bon dan berapakha jumlah bayaran upah serta perbelanjaan kepada kedua-dua bank ini?"

  8. thank you for brings these up to light,i am sure people like myself who really not know how these govt. runs or markets have the sense of knowing what really goes around.

  9. It is no big deal if a country goes bankrupt compare to a person? Of course if u are looking at the alternative for the people in that country to flee and become citizen of others national. When a country is broke, it will have no more fund to develop the country. And I personally do not think the lucky lady will stay with us forever and keep smiling...

  10. Being bankrupt is a big deal of course.
    1)Govt will have to raise taxes because it has no money
    2)Public healthcare, law enforcement will fail because of the lack of funds
    3)Law enforcement of course, will be like a mafia
    4)Migration will happen
    5)However the migrants depending on their skill levels and demand for their skills will be subject to a huge salary discount because of the lousy perception on their country.
    6)Racial riots will happen, with one race blaming another for the misfortune. Perkasa wins.
    7)Economic activities will stop. The GDP drops like hell.
    8)Currency value drops, inflation spikes through the room. The Govt will print more money but this will worsen the situation.
    9)The Govt can't pay its public sector employees and bribery will increase amongst Govt employees.
    10)The Govt raises interest rates to fight hyper inflation. A housing crisis happens.
    10)People loose jobs; and home loans will not be repaid.

    Long list here- enuff said.

  11. we malaysians must whack umno/bn out and that is not an option come GE13.there are simply too many leakages in the economy and no thanx to umno's corruption-infested lawmakers and their political subsidiaries.our economy is having huge structural-defects of mismanagements.unless and until we successfully addressed this cronic issue,place whatever monetary or fiscal the long run it will never work!

  12. Good idea to post Q in parliament. But it's pretty understandable why GOM would want to go with CIMB. CIMB is the No.1 bond market player in both Malaysia and ASEAN. Long before Najib became PM.

    Oh, and in the investment banking world, parties who want to issue bonds only reveal their intention within a small circle, so as to not distort final pricing. Applies to both Gov and corporates.

  13. yep, just gotta find the right MP.....sigh

    whack UMNO BN? the middle class who emphasize on justice and proper running of the country might think so but for those ignorant, poor and duped hillbillies....the challenge is either to change them or to get the younger enlighten ones to outnumber them in the rural areas