National debts: the big shadow behind

Najib reported a decline in hutang negara/national debts.

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http://thestar.com.my/news/story.asp?file=/2010/6/9/parliament/6429068&sec=parliament

National debt is down

THE national debt has dropped from RM236.18bil in 2008 to RM233.92bil last year, Datuk Seri Najib Tun Razak said.
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Great, wonderful.

So I went to the Finance Ministry to confirm the good news

http://www.treasury.gov.my/pdf/ekonomi/le/1011/jp4_9.pdf

Yes, the numbers reported in the Star is right down there alright.

Ok, there is a 5% drop from RM233,136 million to RM221,741million. This represents Malaysia’s borrowings from foreign source, I believe. The reduction is mainly due to huge repayments made in 2009 i.e. RM42,545 million, as compared to RM20,019 million in 2008 (possibly due to windfall petroleum revenue), as well as strengthening RM against USD, which will mean we owe less in RM terms when we borrow in US$.

However, when I look at the other side, “Hutang Dalam Negeri Kerajaan Persekutuan” (HDNKP), the domestic debt is much larger than the foreign source debts and it is on increasing trend.

http://www.treasury.gov.my/pdf/ekonomi/le/1011/jp4_8.pdf



How come when we had a windfall with raising petroleum revenue in 2009, HDNKP/domestic borrowings increased by 22%? No handbags can cost that much money! The increasing trend shows no sign of decreasing. By June 2010, another 6% is added onto the already hugely increased 2009 base.

Disturbingly, when I look at per capita basis, while we added 5.5% of the total population over the years from 2006 till June 2010, the national debt per capita increased by 40%! (see the 2 graphs below)

On average Malaysians population grew by 1.3% over these years, while total national debt (domestic + foreign) and total national debt per person increased on average 10.2% and 8.8% respectively.

Bear in mind that the increase in population are mostly babies hence non-tax payers so in Rich Dad Poor Dad 1Malaysia Rakyat Diutamakan version, a new born in your family in 2010 means an additional RM21,250 debt for your household, up from RM15,150in 2006.

No amount of love making can reverse this trend.



How does our earning capability fare against our debts accumulation appetite? Well, between 2006 to June 2010, our gross domestic product grew at an average of 6.6% while the total debts grew at an average of 10.2%. Total debts to GDP have increased recklessly from 64% to 73%.




We are borrowing faster than we are producing income (& babies). No educated, intelligent, prudent and responsible adult would put oneself and the family members through such reckless financial (mis)management but we are talking about a more than 50 years old administration who keep saying that only they can bring development.

And who does the Fed borrow from? From the breakdown, Sijil Pelaburan, Institusi Bank, Syarikat Insurance and KWSP represent between 63% to 73% of total HDNKP for the years 2006 till 2010.

Sijil Pelaburan? No wonder there is so much Wawasan, 1Malaysia and what not unit trusts being issued. The amount of sijils sitting as HDNKP has ballooned from RM19,600 million in 2006 to RM74,500 million (3.8 times) within the space of 3.5 years. I wonder how these sijil can service their dividends and interests? By borrowing more and more? I hope there is no gargantuan pyramid around.

http://en.wikipedia.org/wiki/Permodalan_Nasional_Berhad

Amanah Saham Malaysia (ASM)Amanah Saham Malaysia (ASM) was launched on 20 April 2000 with a fund size of two billion units which was fully subscribed in 21 days. On July 18, 2007, PNB is offering 500 million new units.

Amanah Saham Didik (ASD)Amanah Saham Didik (ASD) is the fourth unit trust schemes was launched on 20 April 2001.

Amanah Saham Gemilang (ASG)Amanah Saham Gemilang (ASG) was launched in 2003

Amanah Saham 1Malaysia (AS1M)Amanah Saham 1Malaysia was launched on 31 July 2009 by sixth Malaysian Prime Minister, Najib Tun Razak.

http://1-million-dollar-blog.com/comparison-between-amanah-saham-nasional-berhad-funds/



Institusi Bank? Asians have always been called high saving citizens by economist but there is always a way to get their money spent. I wonder if the much discussed leakages do contribute to the low deposit rates available to financially responsible people and retirees.

Syarikat Insurans? We pay premiums to pool our resources to share risk. God help us if it is used for white elephants, bail outs, letters of support and write offs.

KWSP? I suppose together with Petronas, these 2 are the favoured piggy banks. Notice KWSP accounts are never made known to public like Institusi-Institusi Bank and JPA scholarship awardees (deserved or otherwise).

And if you think that is the full extent of all of our debts, stay tune for next week.