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

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.

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

Summarise from Bank Negara Malaysia Press Statement release on 30 Dec 2008

Monetary and Financial Developments November 2008 Highlights of the Press Release

1) Commercial Bank lowered the fixed deposit (FD) rates for tenures between 1 and 12 months were within the range of 3.02% to 3.53% and the base lending rates (BLR) in response to the reduction in the Overnight Policy Rate (OPR). The average lending rate (ALR) decreased to 5.98% in November (6.01% in October).

2) On gross terms, however, financing raised by the private sector was slightly lower at RM53.1 billion. Total loans outstanding expanded at an annual growth rate of 10.7% as at end-November.

3) During the period 1 November to 26 December 2008, the ringgit appreciated by 2.4% against the US dollar. The ringgit, along with most regional currencies, had earlier depreciated in November due to portfolio outflows caused by the global de-leveraging process and heightened risk aversion amid the global financial turmoil.

4) The ringgit appreciated against the pound sterling (13.6%), but depreciated against the euro (-6.3%) and the Japanese yen (-6.1%). Against regional currencies, the ringgit depreciated against the Philippine peso (-0.5%) and Singapore dollar (-0.2%), but appreciated against other regional currencies in the range of 2.2% to 3.6%.

5) Investor trimmed their long position in US dollar following the reduction in the Fed Funds rate to 0% - 0.25% on 17 December 2008.

6) Inflation 5.7% in November 2008.

7) Broad money, or M3, expanded at a faster annual rate of 12.5% in November or increased by RM8.8 billion,reflecting the higher provision of credit to the private sector and expansionary Government operations.

8) Net non-performing loans (NPLs) of the banking system at 2.4% of total net loans.

9) Banking system capitalisation remained strong with a risk-weighted capital ratio (RWCR) of 12.5%.

10) The international reserves of Bank Negara Malaysia amounted to RM336.4 billion (equivalent to USD97.7 billion) as at 28 November 2008. As at 15 December 2008, the international reserves amounted to RM330.4 billion (equivalent to USD96 billion). The reserves position is sufficient to finance 7.8months of retained imports and is 3.4 times the short-term external debt.

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Comment :

Lower FD will affect the return for the deposit holders; for those retire and rely on interest rate they may receive lower income but need to bear the higher expenditure for their daily life. The inflation is at 5.7% base on BNM information. In reality it might be higher, depend on the person spending or expenses.

As November financing by private sector still at a stable level, with the global recession, do the Malaysia bank still will continue provide loan at double digit growth? Loans outstanding expanded at an annual growth rate of 10.7% as at end-November.

Although MYR appreciate 2.4% against USD, but if we compare with Dec 07, MYR actually depreciate around -5% against US. MYR depreciate roughly -23.2% against Japenese Yen from Dec 07. And compare with our neighbor country Singapore’s SGD we depreciate around -4.9% from Dec 07.

Inflation may come down, but the other issue is do we have the purchasing power? The rural area people is highly rely on plantation, nowadays Crude Palm Oil (CPO) and rubber commodity price coming down a lot, to maintain their daily expenses also a problem.

On November Broad money, or M3 still at the stage of expand, but BNM Malaysia also mention that foreign outflows continued to exert a contractionary impact on M3 and for the Nov 08 net foreign assets outflows around 12.1 billion from Oct 08 22.7 billion.

Malaysia international reserves also decrease starting from this few months, as this may indicate more outflows money. Do these mean the foreign investors’ lack of confidence to us? Why they would like to outflow the money? Where do they put the money?

2009 Malaysia Growth may hit 8-years Low

According Morgan Stanley recent report, Malaysia trade surplus will condense, as slowing in demand and lower commodity price.

Mr. Deyi Tan Morgan Stanley economist predicted that South East Asian nation may grow 0.5% in 2009, while Malaysia goverment still expect our nation growth rate will at the rate of 3.5%. The economist also forecast that the trade surplus may narrow to 17.1% in 2009 from 20.6% 2008. Whose figure should the people rely on? We are the net export country, and the demand for export will decrease and the price of our commodity come down.

Malaysia growth model of trade is depend on commodity resource and fiscal pump-priming. With the currenct stituation, demand for export slow down, palm oil & crude oil price come down more than 50%, it is tough for us to maintain the trade balance.

On 11th Jan 2007 according to AFX news, Malaysia's second finance minister Nor Mohamed Yakcop remain confident that Malaysia economic growth will achieve around 6-6.5% in 2008 despite higher crude oil price at the point of time. He also mentioned that revenue from the state-run oil comapny Petronas will be better for with the higher oil price, but where is the money Petronas spend when the time Petronas enjoy higher oil price?

As Malaysia growth may be slow down, when the good time do the government keep the money? If yes, will the government spend it?




Reference :
1) http://www.btimes.com.my/Current_News/BTIMES/articles/20081219105257/Article/index_html
2) http://www.forbes.com/markets/feeds/afx/2007/11/01/afx4287510.html

How my view toward Malaysia 2009 economy

How do we overcome the 2009 economy recession? As starting from US crash for sub-prime mortgage loan, the economy of US not seem not be a the positive move. But more and more bad news coming from US. For the collapse of Lehman Brother, Dow Jones Industries Average drop to the ten years low (i do not sure whether more than that), plenty of companies that need the US government to bail out.

US is one of the main export country for many countries, such as Japan, China, Germany, Euro countries, & etc. When the demand of US reduce, this country will first hit, as their export come down. All the countries can not stay alone, as we need to trade with other countries to boost our economy.

This issue is that, how will this recession affect us? Initially the Malaysia government mention that, we will not hit hard by the US economy recession, how far is true? Our export to US is around 15%, Singapore around 14%, China & Japan around 9%. As this countries also the major export for US. From the point of view, we can know whether we will be affect by US.

On 24 Nov 08, Malaysia Monetary Policy Committee (MPC) announce that Overnight Policy Rate (OPR) reduce to 3.25%. When there is rate cut, is mean that our economy been slow down and encourage for investment. Will this rate cut help us much on that?

Let me talk about the interest cut, are Malaysia follow the world trend to cut the interest rate? As we know, since the increase the petrol price in Malaysia, inflation been go up a lot, if we still cut the interest rate, will this affect those who retire and rely on interest as their income? Or the motive is to cut the interest rate is to reduce the borrowers cost of borrowing?

When the good time, those who borrows can enjoy the low interest rate, as Malaysia not increase the interest year few years ago although our economy go up from year to year. When there is recession, then the BNM MPC will cut the interest rate. From this it seem not so fair to those save money in the bank, they do not enjoy high interest while the good time, but need to accept lower interest in the bad time. Or the other way, the government seem encourage borrowing, will this a good scenario to Malaysia?

Can Malaysia have a sustain growth from 2008 to 2009?

1. Growth for domestic demand, private consumption, foreign direct investment(FDI)?
2. Are all the key sector industries growth going positive? Such as communication, transport, finance & etc.
3. Manufacturing industries register a steady growth? As electronics & electrical (E&E) one of the main contributors to Malaysia export.
   
4. Agriculture sector have the potential to grow further?
   
5. How about the construction sector?

As for the domestic demand and private consumption, let take the sales of vehicle as the benchmark, most of the car dealers mention that Q2 sales figure drop and forecast will further decline in the coming quarter.

For International Reserves of BNM as at 31 Dec 2007 is Rm335.7bil (equivalent to USD101.3bil at that time), as for 29 Aug 2008 is RM400.2bil (equivalent to USD 122.6bil at that time), as at 14 Nov 2008 is Rm343.8bil (equivalent to USD99.7bil). This show a down trend for Malaysia international reserve, will this boost the FDI, let us justify ourself but previous do not prove the future trend.

As for the key sector such as finance, are our banking growth still at the up trend? Recently I read a news, a of the foreign bank in Malaysia mention that they are seeing a "steady" loan growth in both Islamic and conventional financing, but she also mention that "in the event of economy slow down, then the loan growth will be slow down." The other issue we need to look into is the Non performance loan (NPL), if the recession keep on eventually the NPL will go up, will the NPL grow up will the banking sectors drag down?

Let look at the anchor banking shares price:

1. Maybank 02/01/2008 closing price around RM9.02, now around Rm5.00
2. Commerx 02/01/2008 closing price around Rm 10.70, now around 5.80
3. PBBank 02/01/2008 closing price around Rm 10.30, now around RM8.40

From this we can see how well the bank growth, you may not agree with me, the share price of the bank may different with the performance of the bank. Haha... But I think the market is the most sensitive to know what is the value of the bank now.

Local transport industry transport fees been increase due to last few month diesel price increase drastically, although they may have the fleet card system to buyer cheaper diesel. Today diesel price decrease, but the transport industry player refuse to cut price, they give excuse of spare part and wear & tear part price not been reduce. The others reason is, they diesel price they enjoy also not reduce, as they have the fleet-card system. The bus express companies even request for price hike. From this, I am confidence this will contribute to the inflation.

In the theory of economy, if the transport go up normally it indicate a positive sign, as the factory make the goods eventually it need to distribute out to the end consumers. But in Malaysia, can we see this sign?

Let me talk about marine transits, for global transport the cheapest definitely go to marine transit. As my knowledge to marine, I will look into Baltic Dry Index this is the measure of bulk-shipping rate. The BDI had been to a year high around $11,000 drop to below $800 now, drop of more than 90%. A news that I read before, the shipping companies that carry high liabilities will be in the hard time.

For the manufacturing industry such as E&E maybe slow down as the global demand for electronics reduce. With this it will indirectly decrease the export, as I mention E&E one of the main contributor to Malaysia export.

Agriculture sector in Malaysia in fact should be very good as the CPO price hit the all time high of around RM3,600. But recently around Rm1,600, this show a decline near to 55%. When they is good time, government impose wind-fall tax. But a couple of months when the government impose the tax, CPO crash to around RM1,400. From this we can know that, the government initially also believe that the CPO price may be sustainable.

When the CPO price is high, so the crude oil(CL) are high. In fact that time is the best time for Malaysia, we own a lot of palm oil plantation and we are the net export for CL. But at that time do Malaysia really appreciate that? If we keep money that time, I think we will be more comfortable at this point of time.

Construction and properties face the global liquidity crunch and falling in assets price, although the material price of construction decrease from the all the time high. Will the 2009 bring more development to Malaysia?

As conclusion, my opine toward Malaysia 2009 economy with a negative outlook. But who those who like investment when there is a tough time, there is the opportunity. I sincere hope that all Malaysian overcome this tough time together to make Malaysia a prosperity country.





References:
1. http://www.state.gov/r/pa/ei/bgn/2777.htm#econ
2. http://en.wikipedia.org/wiki/Baltic_Dry_Index