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.