Janji Ditepati and national debt

A quick look at the Ministry of Finance (MoF) annual statistics shows the following:
·         From 2007 to 2011, the GDP increased on average, 6.4% a year and between the years, our GDP increased by 28.2%
·         During the same time, external borrowings increased  on average 8.2% a year and between the years, our external debts increased by 37.2%
·         During the same time, Hutang Dalam Negeri Persekutuan increased on average 15.2% a year and between the years, our HDNP increased by 77.22%!
In short, as much as Najib praised Malaysians for being hardworking; his administration works much harder at incurring debts. Tell me who should be bersyukur?

The last 2 quarterly reports for 2011 from MoF repeat the same thinghigh portion of operating expenses: 79.5% for Q3 2011 and 74.1% for Q4 2011. (this high ratio means opex eating away development expenditure for the nation)
Opex comprise chiefly of
·         fuel subsidy (result of Mahathir’s Proton first policy, exposing Malaysians to uncontrollable oil price trend, tormenting traffic jam and substandard public transport system) and;
·         civil servants remuneration where an overstuffed civil service keep getting increment and bonuses without corresponding improvement in performance, testament of the success rate of BN’s 50 years old education system in producing a viable work force.

Ministry of Finance quarterly report, Q3 2011:-

Ministry of Finance quarterly report for Q4 2011:-

And moving into 2012, the formidable subsidy and payments to civil servants kept the tax payers’ burden high. Although termed nicely as aid to the people, the RM500 aid, the school vouchers and book vouchers are just actually more debts pile on the rakyat, ostensibly to create “feel good” before Najib unveils his trade secret – the exact GE date. Technically, does this constitute vote buying?

MoF's quarterly report for Q1 2012:-

It is nothing unusual  about dishing out money recklessly in a GE year. It is a trade mark financial disease and ill discipline.

In every GE year existing expenditure ceiling is smashed; the normal expenditure level is kept at a new summitt and keep increasing, pushing national debts ever higher (see MoF graph below).
The last number in the above analysis, 11.9%, basically means from 2003 till 2011, total operating expenses increase11.9% on average basis. Yet in election years of 2004 and 2008, opex increased tremendously by 21.4% and 24.7% against their preceding years. This means concentration of sweeteners.
In 2011, financial indiscipline is measured by a 22.3% increase against an already high opex level in 2010. Trust the numbers in 2012 will make even greater sickening reading.


Part I only talk about the “official” debts.  In Malaysia, a host of public services and goods are
provided by GLCs but called "private sector" - like Telekom, Tenaga, Padi Beras Nasional, MyEG etc.

Since their debts are paid by the public, it is also considered national debt. I previously blogged about the concept and numbers here:

Back in 2010, Najib administration promised the following the pile more and more debts on the rakyat:
According to Singapore's Today, Dow Jones reported that 21 more government bonds auctions (really it means rakyat debts committed by temporary administrators on their behalf without getting rakyat's consent), 1/3 more than this year, to raise money to spend on 131 "key projects" (which should include the much objected Menara Warisan Merdeka).

In other words, the Najib administration promised Malaysia will borrow more and have to pay more. Now why does a high income nation needs higher borrowing? Shouldn’t a high income country aim to be more self-sufficient, reduce borrowings and strive to become a net creditor (i.e. lender to others)?
This is a janji that is not only delivered, but surpassed my imagination.

In 2011, corporate bond issuances in the Malaysian capital market totalled RM70 billion.  In the first half of 2012, total corporate bond issuances reached RM66 billion, including PLUS Berhad’s issuances earlier this year of a RM30 billion sukuk – the single largest corporate sukuk in the world.  Given this trend, the SC expects to see two consecutive years of record level issuances which augurs well for the Malaysian bond market.
In short, by middle of 2012, we tax payers have to bear as much loan as the explosion for the entire year  of 2011. God help us with the remainer of 2012!


What is this "single greatest sukuk in the world" about?
In January 2012, Projek Lebuhraya Usahasama Berhad (PLUS Berhad) successfully issued RM30.6 billion Sukuk pursuant to its Islamic medium term notes programme comprising both governments guaranteed (GG) and non-government guaranteed AAA-rated (AAA) issuances of varying tenors, sizes and yields to maturity.

The Sukuk was issued by PLUS Berhad, which is a wholly owned subsidiary of Plus Malaysia Sdn. Bhd. (Plus Malaysia). Plus Malaysia is a jointly-owned special purpose company of UEM Group Berhad and the Employees Provident Fund (EPF), which was set up to acquire the Malaysian business and undertakings including the assets and liabilities of PLUS Expressways Berhad, the largest provider of expressway operation services in Malaysia, under a privatisation exercise (Proposed Privatisation). Following the completion of the Proposed Privatisation, PLUS Berhad shall acquire all the assets, liabilities, business, undertakings and rights of the respective highway concession companies from PLUS Malaysia (including Penang Bridge Sdn. Bhd.) via the issuance of the GG Sukuk and AAA Sukuk Musharakah

In other words, the above looks like the below.  

After Pakatan Rakyat proposed that the rakyat could be saved from the oppressive toll concessions by way of federal administration taking over PLUS EXPRESSWAY BERHAD, BN administration half copied the idea, got UEM and EPF to take over PLUS EXPRESSWAY BERHAD and in the process, borrowed a hell lot of money by becoming the champion sukuk borrower of the world.

We all know that PLUS EXPRESSWAY got no cashflow or profit issue- it either collect cash when users come to its gates or even pay in advance via Touch n Go and Smart Tag. The roughly RM800million profit guarantee “compensation” a year make this company extremely cash rich and profitable, paying dividends of RM800 million a year. So it make no sense for the greatest Islamic loan in the world to be incurred and become a monkey that hangs on every Malaysians’ back.

Happy paying toll, guys!


If I were to ask you to lend me money and I only service your interest payment only, what say you?
Don't be so sure kiddo! Read on.......


Wednesday June 13, 2012
MAS' RM2.5bil sukuk well-received
Enough takers for MAS bonds, it will unveil new business plan next week
PETALING JAYA: Malaysia Airlines (MAS) has found enough takers for its RM2.5bil 10-year perpetual junior sukuk* of which the first tranche of RM1bil bonds had been fully-subscribed by Kumpulan Wang Persaraan (Diperbadankan) (KWAP).
*perpetual sukuk, so-called because it does not come with set maturity….

That aside, Jauhari told reporters yesterday that “we are grateful to KWAP for being the first subscriber of the RM1bil perpetual sukuk, and we have also obtained firm commitments for the remaining RM1.5bil issue... our entire sukuk programme is fully subscribed.”
Jauhari declined (why decline? revealing reputable supporters should be a great way to baost your company's image!)  to name the takers for the remaining RM1.5bil issue but sources said it would not be surprising if institutions such as Lembaga Tabung Haji, Permodalan Nasional Bhd and the Employees Provident Fund become takers of the Islamic papers.
For the sukuks, MAS is offering a long-term funding rate of 6.9% for the RM2.5bil bonds which some say is not cheap, although it is comparable to Thai Airways International's 7.0% for its own issue.
The RM2.5bil sukuk is also part of the extensive RM9bil financing plan MAS had announced last month. (a bit puzzling now, how come MAS needs RM9 billion and yet MAS relinquish their claims against a certain Tajuddin Ramli?) The other parts of the financing plan includes the Government via a special purpose vehicle issuing RM5.3bil bonds to fund the purchase of six A380 and two A330 aircraft, and MAS obtaining a RM1.2bil commercial loan to pay for its wide body aircraft purchases for 2012. The entire RM9bil fund raising exercise has to be secured this year in order for MAS to pay for its 23 aircraft purchases for this year and also working capital.
Asked when the RM5.3bil bonds would be issued, Jauhari said “plans are being finalised and it should be before the year is out.”
Reading the above, Malaysians, via KWAP, LTH, PNB and EPF will have to absorb another RM9billion to back up the sick cousin of the successful and profitable Singapore Airlines.

Perhaps there is a punch line somewhere….”my name is bond, jibbo bond”


  1. http://www.malaysia-today.net/mtcolumns/from-around-the-blogs/51061-janji-ditepati-and-national-debt-

    written by semagode, August 12, 2012 15:06:10

    They have even got EPF and Pertonas to borrow. Believe it or else!
    written by devious17, August 12, 2012 12:31:13

    In short, the rakyat is farked and so is the country in the hands of umno/bn.

    Thank God I have taken 'evasive' measures.
    written by Gilagila, August 12, 2012 11:37:43

    Going at this rate, many legitimate Malaysians will wish that they haven't been born!
    written by telur dua, August 12, 2012 00:14:27

    You got it wrong.

    When the PeeM says high income economy what he means is people will have to pay more for everything resulting in a high income for the cronies who have their fingers in almost every sector of the economy.
    written by Jimmy Lim, August 11, 2012 20:54:07

    Malaysia is heading for bankrupcy. Under BN, all rakyats money are siphoned and leaked to Umno cronies. UMNO only spend, spend n spend. Throw BN out and vote in PR for financial prudence

  2. Mr Lee...... A question or two from a layman, if I may,

    i read recently that Malaysia has a total outstanding corporate debt of 941 billion ringgit. Also, recently it was reported that S&P had warned the GOM that excessive spending of public funds on stuff like a second round of BR1M might result in a credit downgrade.

    What happens then in the event of a credit downgrade?
    Will the interest rate payable go up a notch?
    Or does it affect only new issues?
    And would a downgrade affect the corporate papers as well?

    I remember when the US suffered a downgrade last August. The dow lost 500 points. Could this happen here?

    Sorry sir, too many. I realise you dont own a crystal ball, but your educated guess would be great. Thanks

  3. Also, can such a downgrade happen after this next budget, which, I'll bet my bottom dollar, will be another deficit budget.


  4. Thanks for the question, Colin

    I can only give me my guess...if Malaysia get down graded, the interest rate should go up and we might get difficult to get more loans. we probably have the pledge very expensive assets, like a oil field off shore sarawak as collateral..or even some panic fellows ask for re-negotiation for shorter and bigger repayment?

    A credit downgrade can result in stock index dropping off, which means more EPF maybe considered to pop up the index...

    You don't have to bet, I am pretty sure it will be a deficit budget

    Lee Wee Tak

  5. Awesome stuff, thank you and keep coming with these, will be back again.