Malaysia Government Come Out More Loan Scheme

Recently I read the press statement from Bank Negara Malaysia(BNM) website, BNM announced the establishment of a RM2 billion SME Assistance Guarantee Scheme (SAGS).

According to BNM the objective is to ensure that viable SMEs adversely impacted by the current economic slowdown continue to have access to adequate financing.

Eligible SMEs can obtain financing of up to RM500,000 per SME under this Scheme for tenures of up to 5 years. The Credit Guarantee Corporation Berhad (CGC) will provide an 80% guarantee cover for financing approved under this Scheme. The guarantee cover will be provided free of charge and the cost of the guarantee will be fully borne by Bank Negara Malaysia. Financing obtained under this Scheme is for new financing only and must be used for business purposes, such as working capital, project financing and capital expenditure.

This scheme can be accessed at any commercial and Islamic bank, SME Bank, Agrobank, Bank Rakyat, EXIM Bank and Bank Simpanan Nasional. Participating financial institutions will determine the lending or financing rate to be charged and applications are subject to the normal credit approval process of the participating financial institutions. Applications for this Scheme will be open from 3rd February 2009 till 31st December 2009 or when the financing limit of RM2 billion has been fully utilised.

For further details, SMEs can approach the participating financial institutions or contact BNMTELELINK at 1-300-88-5465 or visit the BNM website at www.bnm.gov.my.

Yesterday, I make a call to BNMTELELINK, the officer told me that I need to enquiry this product directly through the participating financial institutions.

Today I make a phone call to Public Bank to know how this scheme work, but the officer told me that they still yet to receive any information from the head office. I have a short chat with the officer and she told me that previously there is also a scheme SME Assistance Facility which commemcing on 1st Aug 2008 and maximum financing of RM1.5 million per SME. And this SAGS scheme is the subsequent scheme that introduce by BNM.

For the SME Assistance Facility, Credit Guarantee Corporation (CGC) will provide 80% guarantee cover on principal and normal interest and risk on the remaining 20% will be borne by the participating financial institutions. And the interest rate is only at 4%p.a.

The documents need to apply for the loan as follow:
1. If for the Senderian Berhad company the audited account for the past 3years, and for the sole proprietor unaudited account for the past 3 years.

2. Bank current account statement for the past 6months.

3. Form 9, 24 & 44 for Senderian Berhad. For the sole proprietor business registration.

4. For the Senderian Berhad the directors personal income tax "Borang B" for the past 2 years.

5. Memorandum & article for the Senderian Berhad.


As this kind of scheme that been gurantee by the CGC, the banks should be more aggressive to provide the loan to assist the SMEs who face the difficult time.

How well can the SMEs utilise the loans that provide by the banks? Can the SMEs and the bank over come this global recession.

Normally SMEs borrowing is for working capital, and the profit should be greater than the cost., in order for the SMEs have the ability to repay the loan. And at this global recession time, most of the stock and assest value come down, if the SMEs purchase the stock and assets last 2years the chances for its stock or assets value come down is high.

For example, if a company purchase a factory which cost him RM500,000 and it pay the deposit of RM 100,000 and the remaining finance it for 25years and at the interest rate of 6%p.a.. and monthly installment at 2577. After repayment for a year the remaining outstanding loan still around RM 392,879. And now it face the difficult time and have the tight cash-flow for the repayment. Moreover the market price of the factory may come down, if we make assumption it come down 10%, the current value of the factory may only at RM 450,000. If it would like to sell it, it may need to find another place to continue the business. If it sell it at market price of RM450,000 after deduct the loan, the company only get around RM 57,121 this excluded any cost of selling the factory. So for this example, if the corporation foresee the business still have the bright future and he just need to over come the recession then the company can make ton of money while the economy boom, the shareholders may consider either to pump-in his own money to the company or borrow more money for the purpose of working capital.

So it real life, if you are the shareholders of the company, would you like to sell the factory and get the money or would you continue to support the company either in term of injecting the capital or support it take loan ?

And if the corporation would like to take loan, which bank dare to borrow it? By the loan schemen provide, this may boost the borrowing. But how effective & efficiency can the banks provide the loan, this is one of the key component?

Time is value for money!


Reference:
1. www.bnm.gov.my

When forgiving and forgetting is not an option

Last Sunday I read an article of Paul Krugman who won Nobel Memorial in Economic Sciences, the sole awardee for 2008. That some of the points of him I would like to share with you. Below is the thoughts that I get after read that article. I feel impress with some of the points, as it maybe useful in Malaysia political as well.

1. US President Barack Obama was asked whether he would seek an investigation of possible crimes by the Bush administration. His responed "I don't believe that anybody is above the law"... "we need to look forward as opposed to looking backwards"

2. In Mr. Paul Krugman article he said that, the fact is that the Bush administration's abuses extended from environmental policy to voting right, and most of the abuses involved using the power of government to reward political friends and punish political enemies.

3. In his article he also mentioned that abuse involve the US Justice department, there's strong evidence that officials used their positions, to undermine the protection in minority voting right and persecute Democratic politician (that time opposition political party of Bush administration).

4. The war of Iraq, Bush administration handed billion of dollars in no-bid contracts to political connected companies, companies that then failed to deliver.

5. Any government official who tried to enforce the accountability of the awarded contracts, will find his or her career derailed.

6. Moreover, while the Bush administration government agencies experienced major scandals over the past eight years. In most cases, the scandals that were not properly investigated. You may read more at wikipedia US Political Scandals.

7. Does anyone seriously doubt that the Bush administration deliberately misled the nation into invading Iraq? Why, then shouldn't we have an official inquiry into the abuse during the Bush years?


8. "Pursuing the truth would be divisive, that it would exacerbate partisanship." As we normally will said that, "over is over, let it be, we need to move forward". But if the partisanship is so terrible, shouldn't there be some penalty for the Bush admintration's politicisation of every aspect of government?

9. We are told we don't have to dwell on past abuses because we won't repaet them. But the issue is that, first do we break the law at that moment? If yes, should we be punish? Or due to we are somebody, we are exempted from any prosecution.

10. For US during the Ronald Reagan (40th President of the US) years, the Iran-Contra conspirators violate the Constitution in the name of national security. But the President George H.W. Bush in the final day of presidency pardoned all the malefactors who involve in the Iran-Contra.

11. In short would the US President Barack Obama let Bush administrator sleeping scandals lie?

12. From the article above, what lesson can the Malaysia politicians learned? Let we all judge ourself.




Source:
1. New Sunday Times 18th Jan 2009 Page 21
2. http://en.wikipedia.org/

Happy Chinese New Year & Gong Xi Fa Cai

Dear All My Friends,

Happy Chinese New Year.

Wish You Good Health & Prosperity in The Year of Ox.

祝你春节快乐

OTL

As Global Recession, Are The Pump-priming The Only Way?

1. We are facing the global recession, Malaysia export will be negative. As global commodity price decrease & electronic product demand reduce, which is one of the main export of Malaysia.

2. When global demand reduce, the manufacturer will produce less products, capacity of the factory will reduce, this may increase the risk of factory to retrenchment the workers.

3. Manufacturer less production, profit of the factory will be reduce, if the company listed at the Bursa Malaysia, share price may come down due to adverse of profit.

4. When retrenchment then the unemployment rate of the national will increase.

5. When high unemployment, it will increase the social welfare problems.

6. In order to prevent economy recession, government should take further government spending to improve the overall economy.

7. Government spending more, businessmen have more business to do, this will lower the unemployment, company profit will be more stable this will overall improve the economy.

8. But by pump-priming nation's budget deficit will expand and the country credit rating adverse.

9. With the lower credit rating of the nation, if the country have foreign loan, the cost of borrowing will go high.

10. As we all focus on driving the economy, the nation's budget deficit should not be overlook. And the government spending should use it wisely as that can benefits all the nation.

For The First Time Malaysia Toll Concessionaire Agreements Made Public

Works Ministry for the first time allow the public to view the toll concessionaire agreements.

The toll concession agreements can now be viewed at the library of the Works Ministry but photocopies of the documents are not allowed, it needed the Order of the DYMM Yang di-Pertuan Agung under Section 3 of the Fees Act (1951) to be tabled in the Dewan Rakyat and gazetted.

Those who wished to view the concessionaire agreements can fill up the form then only allow to access the agreement for two hours and only five people are allowed at any one time, if they wish to have more time to view the agreements they need to fill up the new form and wait for their turn again.

I am happy to see that, now the Works Ministry start to take public suggestion regarding to the toll concession. In The Star Jan 8th, Works Minister Datuk Mohd Zin Mohamed has invited all parties who have studied the toll concession agreement to give him a memorandum with their queries or suggestion. Moreover, there is not time frame to submit the memorandum and is his duty as minister to respond.

According to New Straits Times news, Chief Minister Lim Guan Eng said the government should not use traffic volume and bank loan guarantees if government would like to privatise the second Penang Bridge. Commenting on the agreement for the existing bridge (Penang bridge) with Mekar Idaman Sdn Bhd, he said it was a lopsided agreement, which benefited the company, if the government refuses to approve an increment in toll rates, it has to compensate Mekar Idaman for the loss based on estimated traffic flow on the bridge.

MCA Youth will set up a special unit to study the toll concessionaire agreements which made public on 5th Jan 2009. What I surprise is that, the toll concessionaire agreements normally will discuss in the cabinet meeting, and MCA have several ministers in cabinet, they should well understand the issue before this concessionaire agreement made public.

As Malaysia citizen, that a great idea the the government review all the toll concessionaire agreements, but do our government act the best benefits for rakyat to sign the agreement the toll concessionaire agreement? Of course government also have to fair enough to the toll concessionaire company, but if there is lopsided then is not fair to either side.

Works Minister Datuk Mohd Zin Mohamed said all future toll concession agreements signed between the Government and highway operators will be made public.

But what we concern is the agreement will be fair enough?

Malaysia SME Facing Difficulty to Get Bank Loans

Recently, SME complaint that they have difficulty to obtain bank facilities, these make them hard to survive due to short of cash flows. Malaysia government’s previously mentioned that bank have sufficient liquidity and have the ability to provide loan.

SME complaints that their existing loan been reduced, overdraft facilities reduced, loan been call-back, reduce their trade loan facilities and etc.

Bank are cautious and take longer processing time when provide any loan to SME. Moreover, banks are focusing on their loan recovery department to give more pressure to the borrowers who delay their repayment obligation, in anticipation “problem” loan percentage have the high possibility to go up.

For SME side, they comment that banks are over-reacting to the global recession. Banks are not following to what Malaysia central bank advice, that not over-cautious when lending is concerned.

In other ways, if you are the bank what will you react? They have to responsible to the stake holders, which include the depositors, shareholders, government, staffs and etc. If bank predict that future economy will worsen, they may have to squeeze their lending, in order to protect their own benefits.

If you are wise businessman or entrepreneur, we should not complaint the bank but we have to find our own way to survive in this market. Market is cruel; if you can not sustain in this market you will be kick-out.

When that is bad time, as a businessman we should bear along with our stakeholders, try to re-plan all our strategy and over come this global recession.

US Tax Cut & Fiscal Spending to Boost Economy, Will Malaysia Follow Suit?

US President-Elect Barack Obama economic stimulus package including hundred billion of dollars worth of tax relief to individual and corporate, according to the transition official.

The tax relief will make up around 40% of the stimulus package and worth as much as USD 775billion.

The plan would attempt to boost consumer demand, a tax break worth USD 500 for individual and USD 1000 for couple.

For Business, US allowing companies to get refunds for taxes paid in any or all of the past five years by deducting losses they’ve incurred now; those losses can currently only be carried back two years.

US President-elect said “We need an American Recovery and Reinvestment Plan that not only creates jobs in the short-term but spurs economic growth and competitiveness in the long-term,” and “And this plan must be designed in a new way—we can’t just fall into the old Washington habit of throwing money at the problem. We must make strategic investments that will serve as a down payment on our long-term economic future. We must demand vigorous oversight and strict accountability for achieving results. And we must restore fiscal responsibility and make the tough choices so that as the economy recovers, the deficit starts to come down. That is how we will achieve the number one goal of my plan—which is to create three million new jobs, more than eighty percent of them in the private sector.”

How will Malaysia over come the global recession, will Malaysia government take the same move as US for the Recovery and Reinvestment plan. Will our government able to come out a solution that spur the economic growth and competitiveness in the long-term? Do our government can make a strategic investment that benefits our long-term economy?

Can the Malaysian political use US politic as benchmark that come together to seek solutions that benefit not the interests of any party, or the agenda of any political group, but the success of all Malaysian? Or Malaysia political use the "Dewan Rakyat" as the place for them to "mouth battle" and past their time, I am not said that they didn't do their duty, but let us watch the live telecast to justify ourself.

We Malaysia face the 1997 economic crisis before, we should be more knowledgeable to handle the economy crisis.

So how will the Malaysia political both Barisan Nasional and Pakatan Rakyat come out a better solution to make all Malaysian have a better lifestyle in the future.

Reference :

1. CHANGE.GOV -American Recovery and Reinvestment Saturday, January 3, 2009 06:00am EST / Posted by Dave Rochelson

2. BLOOMBERG.COM - Obama Said to Push for Tax Cuts in Stimulus Plan By Brian Faler and Ryan J. Donmoyer