Thursday, 14 September 2017

SHOCKED AT AZMIN’S LIMITED COMPREHENSION ON INVESTMENT FLOWS IN MALAYSIA

Allow me to expose the falseness and hollowness of Azmin Ali’s press statement where he expressed shock at Prime Minister Najib’s announcement on the potential US$10 – 20 billion Boeing deal and US$3 – 4 billion EPF investments in US infrastructure during his visit to the White House yesterday.

Let’s do this paragraph by paragraph. Here goes:

“I am utterly shocked by the announcement by Prime Minister Najib Razak that Malaysia will be investing as much as US$24 billion (RM100 billion) into the United States.

I am honestly appalled by this opening para because Azmin seems to have no grasp on the difference between trade deal i.e. Malaysia Airlines signing a deal potentially worth up to US$20 billion to purchase 16 aircrafts from Boeing and investments i.e. EPF to invest up to US$4 billion in US infrastructure and Khazanah to increase investment in high tech companies in Silicon Valley.

When we purchase something from abroad, it counts as import. We buy or import something in return we get the products. Malaysia Airlines buying aircraft from Boeing is importation of goods by a Malaysian company from an American company.

Last year Malaysia imported goods worth RM55.65 billion (US$12 – 13 billion) from the US and this year (up until July), we have imported RM43.23 billion (US$10 billion) worth of goods. The United States is our country’s fourth largest source of import behind only China, Singapore and Japan.




Meanwhile the USA is also our 3rd largest destination of exports with export value worth RM80.2 billion in 2016 and RM45.5 billion year-to-date. Total trade of goods between both countries exceeded RM130 billion in value in 2016 and with the announcement of the deal with Boeing, we are on track to record higher trade activities this year.


It’s misleading for Azmin to lump US$20 billion Malaysia Airlines – Boeing deal with EPF US$4 billion potential investment and say Malaysia will be investing as much as US$24 billion (RM100 billion) in the US. Or else how did he arrive to the figure of US$24 billion investment?

“This investment is purportedly to “strengthen the US economy” at a time when our economy is crying out for greater investment, quite apart from the mystery as to why Malaysia needs to help out the world’s largest economy.

The US certainly can do without our help to strengthen its US$18.5 trillion economy. This is what we called the art of crafting a statement. I would say it was a smart statement in response to President Trump thanking Malaysia for all our existing investments in US financial markets.


If there’s one thing that I “admire” about Azmin is his ability to exaggerate everything. At a time when our economy is crying out for greater investment? For your information, investments have always been among important components of our economy.

Last year (2016) our gross capital fixed formation or simply fixed asset investments contributed to 25.7% of our RM1.23 trillion GDP. RM211 billion investments were made by private sector while the public sector or government invested RM105 billion bringing total investments to RM317 billion. It would take you less than 5 minutes to navigate the Department of Statistics or Bank Negara websites to find those investment figures.


“Malaysia is an emerging economy and we are doing our best to court investment from developed countries, not send our money away. Recently, we secured a RM1 billion investment from IKEA to build its Regional Distribution and Supply Chain Centre for Asia-Pacific in Pulau Indah. This creates value and generates jobs and economic multiplier effects back home.

Malaysia doesn’t just receive foreign investments, we also invest our money abroad. We have been investing thru direct and portfolio investments abroad every year, yes, every single year. Last year (2016) our net direct investment abroad (DIA) was RM33 billion, a year before that (2015) RM41 billion.


Malaysia has a huge international asset position which amounted to RM1.73 trillion last year (2016) or in other words cumulative outward investments made by Malaysian companies stood at RM1.73 trillion as of last year. It’s not something new or strange for Malaysian funds or companies to invest overseas. Where was Azmin when we invested more than RM50 billion abroad in 2014? Probably busy plotting to be the Menteri Besar.


Thanks to MIDA, a federal government agency tasked to oversee and drive investment into the manufacturing and services sectors in Malaysia, IKEA is willing to open a regional distribution and supply chain center in Pulau Indah, Selangor. Without the incentives offered by MIDA and the proximity of Pulau Indah to major entry and exit points of Malaysia like KLIA and Port Klang which were developed by the federal government many years ago, IKEA would not have invested in Pulau Indah. 


“It is also beyond belief that the Employees Provident Fund (EPF), according to Najib, is going to spend an additional US$3 billion to US$4 billion on infrastructure redevelopment in the United States. Is the PM telling us that helping the United States build infrastructure is more important than helping Sabah and Sarawak build roads and water pipes?

EPF is going to invest US$3 to 4 billion on infrastructure redevelopment in the USA, not spend. It’s an investment, not a spending. It seems that Azmin can’t distinguish between pension fund’s investment and government’s spending. The government cannot spend EPF money directly to build infrastructure.

Indirectly EPF money can be used for development purposes, where it has to subscribe government bonds i.e. Malaysian Government Securities (MGS) and equivalents. Government issues bonds on regular basis to finance its expenditure and EPF is one of its major subscribers.

Last year, EPF held RM181 billion worth of government bonds or 26% of total outstanding government bonds (RM685 billion). In return EPF received income in the form of bond coupons every year of which government bonds contributed RM7.7 billion to EPF’s gross investment income last year. This income then is returned to the EPF contributors thru annual dividends.




And the government has been spending on infrastructure projects in Sabah and Sarawak every year. I don’t want to spoon-feed Azmin everything. With the RM4 billion state cash reserves at his disposal, I’m quite sure he can afford to hire a researcher or two to read federal government’s annual budget and 11th Malaysian Plan documents.

“Money held by the EPF is money held in trust for the rakyat and cannot be used indiscriminately.

EPF has been investing abroad since many years ago and currently foreign investments made up close to 30% (RM212 billion) of its total investment assets of RM731 billion.



As a matter of fact, the diversification of investments made by EPF has helped maximize its return on investments (ROIs) and reduce the exposure to any one particular asset or risk. Last year, ROI for foreign investment was 9.73% compared to 6.18% for domestic assets. If EPF hadn’t invested in foreign assets, it would have recorded lower ROIs and subsequently announced lower dividend rates for contributors.

Had Azmin read EPF annual reports, he wouldn’t have released a shallow and baseless statement like this. 

“We understand that it is Najib’s choice that he meets with US President Donald Trump but leaders cannot mortgage the nation’s economic wellbeing for a photo opportunity.

I understand that it is Azmin’s obvious choice to mislead the public about economic and financial matters of our country because it’s in his and opposition’s best interest to keep hoodwinking the uninformed and the ignorants.

In line with his own theme Smart Selangor, Azmin should spend some time on reading and analyzing the data of investment flows in our country before making an ignorant statement like this which is not even remotely close to “smart”.

References:



3. Remarks by President Trump and Prime Minister Najib Abdul Razak of Malaysia Before Bilateral Meeting - The White House: https://www.whitehouse.gov/the-press-office/2017/09/12/remarks-president-trump-and-prime-minister-najib-abdul-razak-malaysia

4. Malaysia GDP by Component Expenditures - Bank Negara: http://www.bnm.gov.my/files/publication/msb/2017/7/xls/3.3.1.xls

5. Malaysia Direct Investment Abroad - Bank Negara: http://www.bnm.gov.my/files/publication/msb/2017/7/xls/3.6.9a.xls

6. Malaysia International Investment Position - Bank Negara: http://www.bnm.gov.my/files/publication/msb/2017/7/xls/3.6.18.xls


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