Venezuela : Hit by Oil Prices

Amid sky-high inflation, an absent president, snaking queues outside supermarkets, and plummeting oil prices, Henrique Capriles said this week that the time was ripe to try to force a change.
“We are in a state of emergency,” he said on Monday. “This is the time to mobilise in the streets.”
The call to protest was significant because Capriles, a state governor, disavowed last year’s violent protests demanding the resignation of Nicolás Maduro, Venezuela’s president. Instead, Capriles had advocated regime change through the ballot box.

But the situation on the ground has changed since then. Venezuela’s economy is estimated to have shrunk by 4% in 2014, with inflation hitting 64%. The price of oil, which accounts for more than 95% of Venezuela’s hard-currency income, continues to fall. According to the latest opinion poll, Maduro enjoys the support of just 22% of the population, and he has come under fire on social media and editorial pages for spending nearly two weeks outside the country – with his extended family in tow – while the crisis deepens.

Venezuelean mass protests - most dressed in white. Looks familiar?

Most worrying for Venezuelans are food shortages. Standing in line for hours to buy basic subsidised goods such as milk, soap and diapers has become an exhausting reality of everyday life, but tensions have grown since stocks are running lower than usual after the holidays and police began enforcing a policy that limits patrons to two shopping days a week at government-run supermarkets. In three states, authorities have banned overnight queues.

Capriles, who narrowly lost the presidency to Maduro in 2013, met with other opposition leaders throughout the week to define their protest strategy.

The Venezuelan opposition leader Enrique Capriles gives a press conference in Caracas on Wednesday.

But in the western city of San Cristóbal, the flashpoint of last year’s protests, a small group of students have already begun to set up roadblocks and burn tyres, according to Reuters. Flashes of protest at supermarkets in Caracas have landed a handful of people in jail.

“Venezuela is living in a state of perpetual crisis,” says Carlos Romero, a Caracas-based political analyst. “But it’s been a stable crisis,” he says, adding that despite rumours of a possible coup or an impending debt default, Maduro still holds the political reins.

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In December, Maduro confirmed that the country was in recession, but blamed an “economic war” orchestrated by political foes.
“The strategy that they are carrying out aims to disrupt civilians and cause extreme situations, that is the key part of their efforts to destabilise the country,” Maduro told reporters. “An economic coup is also under way in Venezuela,” he said.
The president, who succeeded the father of Venezuela’s socialist revolution, Hugo Chávez, two years ago, set off on 4 January on a whirlwind tour of China, Russia and several Opec nations to seek fresh money to shore up the Venezuelan economy and try to convince other oil producers to curtail production.


_______________ end of Article ________________

Oil Dependent Countries are badly hit with earnings shrunk significantly resulting in incompetent (also read as corrupt) government cutting necessary expenses such as food and utilities services.

The low oil price will continue to worsen the fiscal finance position for such nations. A case of poor risk management in failing to anticipate that oil prices can fall.

Lesson for all to learn to plan for the future. Don't wait for events to unfold and then to react too late and too little approach. Can it happen to Malaysia? Brunei? Nigeria? Its a rhetorical question.

Forensic Audit Interview with PWC on BFM

- Related to P7 AAA Candidates

Exam pressures are closing in. Nice to relax for a while. Heard a good practical interview with Director of Forensics Lead Alex Tan on approaches on survey related to Corporate Fraud. This is an international studies and as you have guessed right that Malaysia is ranked quite high on Fraud risks. As you can see many 'unresolved' scandals posted below. Note that the sources were taken from Government controlled press. Biased it would be in "protecting" its own leaders. But have a read and see if you can't help it but see glaring Corporate Governance failures, lack of accountability and opaque explanations.

To play the above mentioned interview, please go directly to link below:

PwC's 2014 Global Economic Crime Survey - The Malaysian Cut

Sit back and enjoy this interview of about 30 minutes. It touches on Forensic strategies, ethical approaches in conducting it and Report Assurance Findings (also known as Negative Assurances Report). All of which are related to P7 AAA exam preparations.

 Source:Shawan, 2014,

SHAZWAN MUSTAFA KAMALJanuary 13, 2014

SHAZWAN MUSTAFA KAMALJanuary 13, 2014

http://www.themalaymailonline.com/malaysia/article/is-pkfz-scandal-a-crime-without-culprits-pakatan-asks, January 13



Enjoy learning on case company Target (USA) Inc.

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Case Company: Target Markets (USA) 

Target hackers may have exploited backdoor in widely used server software

KrebsonSecurity digs in to point-of-sale malware infecting retailer's network.

Wikipedia

Update: About 24 hours after this report was published, BMC issued a statement that said in part: "BMC has confirmed that the password mentioned in the press is not a BMC-generated password. At this point, there is nothing to suggest that BMC BladeLogic or BMC Performance Assurance has a security flaw or was compromised as part of this attack."

Widely used management software running on Target's internal network may have given an important leg-up to attackers who compromised 40 million payment cards belonging to people who recently shopped at the retail giant by KrebsonSecurity.

Malware that infected Target's point-of-sale terminals used the account name "Best1_user" and the password "BackupU$r" to log in to a control server inside the Target network. The malware used the privileged insider access to temporarily stash payment card data siphoned out of the terminals used in checkout lines so it could then periodically be downloaded to a different service for permanent storage. In Wednesday's post, Krebs filled in some intriguing new details that suggest a poorly secured feature inside a widely used server management program may have played a role. Krebs explained:

That “Best1_user” account name seems an odd one for the attackers to have picked at random, but there is a better explanation: That username is the same one that gets installed with an IT management software suite called Performance Assurance for Microsoft Servers. This product, according to its maker — Houston, Texas based BMC Software — includes administrator-level user account called “Best1_user.”
This knowledge base article (PDF) published by BMC explains the Best1_user account is used by the software to do routine tasks. That article states that while the Best1_user account is essentially a “system” or “administrator” level account on the host machine, customers shouldn’t concern themselves with this account because “it is not a member of any group (not even the ‘users’ group) and therefore can’t be used to login to the system.”
“The only privilege that the account is granted is the ability to run as a batch job,” the document states, indicating that it could be used to run programs if invoked from a command prompt.

Krebs went on to quote a part of the BMC article that said:

Perform Technical Support does not have the password to this account and this password has not been released by Perform Development. Knowing the password to the account should not be important as you cannot log into the machine using this account. The password is known internally and used internally by the Perform agent to assume the identity of the “Best1_user” account.

Krebs asked BMC if "BackupU$r" is the password that controls access to the "Best1_user" account. Company representatives have yet to provide an answer.

Krebs also cited a report that Dell SecureWorks privately distributed to clients earlier this week. "The Best1_user account appears to be associated with the Performance Assurance component of BMC's Software's Patrol product," Dell SecureWorks researchers wrote. "According to BMC's documentation, this account is normally restricted, but the attackers may have usurped control to facilitate lateral movement within the network."

Krebs also repeated what Ars that there's a compelling case to be made that, just like the co-conspirators of now-convicted Albert Gonzalez, the people who hacked Target may have first penetrated the network by mounting a SQL injection attack on Target's website. Wednesday's report from Krebs has many more details, including a recent dump of more than 2 million compromised payment cards, all of them used at Target between November 27 and December 15.

The Hidden Costs - Big Mac, Facebook, Starbucks

A GREAT YEAR 2013, LOOKING FORWARD TO ANOTHER - 2014

Exciting times await in 2014. Kasturi School of Accountancy has witnessed record number of ACCA graduates in 2013. 

CONGRATULATIONS!  

We are always proud and privileged to share in your success. Thank you for working so mind boggling industriousness, steely determination, military-like discipline and eagle-like focus on Graduation goal. 

You certainly deserve the BEST that the future can offer. 

Relevant : P1, P7 and Socially Responsible Students

Examiner David Campbell's Article (extracts) on Social and Environment Costing 

"While accounting instruments already existed for reporting financial performance, there weren’t any for accounting for non-costable impacts, and it was this that gave rise to modern social and environmental accounting.

If, for example, a meat processor buys in beef and processes it for onward sale (eg as burgers), then the cost of the beef includes all of the identifiable costs incurred by the supply chain up to that point (plus profit margins, of course). So for beef, those costs will include elements of farming, land costs, logistical costs, abattoir costs, and so on. 

However, the farmer who produced the beef may have reared the cattle on land bought as a result of forest clearance. He may have paid a market price for the land upon which to graze his cattle, but the initial deforestation has implications that could not have been factored into the price he paid for the land. How, for example, could you attribute a cost to the loss of species habitat or the loss of greenhouse gas processing capacity? It is because of the difficulties in allocating the costs of these externalities that, environmental activists say, the price of that beef does not reflect the true – or full – cost, which should include the cost to the environment."

Exam Style questions: 

1) What is the Gray, Owen and Adams approach that is both acceptable to shareholders and society? Justify your answers in Starbucks context. [10]

2) Explain if firm should have an Environmental Audit. [8]

Enjoy the Videos on Hidden Costs or Externalities costs on iconic companies  by www.insurancequotes.org 

 

Best wishes on your coming results February 2014! Remember, complete the journey and not be discouraged by a few speed humps that slow down the graduation process. 

PS: I have updated the post links to ACCA's Technical articles as the accaglobal website has changed. 

Thank you for feedback. 

What are Substantive Analytical Procedures?

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Critically relevant to F8 and P7 Candidates

Tutorial Notes:

Explanation of analytical procedures

'Analytical procedures' means evaluation of the financial and other information, and the review of plausible relationships among both financial and non-financial data. For example, sales have a direct relationship with royalty expenses, provided royalty payments are based on the number of units sold. Therefore analytical procedures will include determining whether the sale for a period has a direct relationship with the royalty expenses incurred during the same period.

The analytical procedure also includes investigation of identified fluctuations and relationships that are inconsistent with other relevant information or deviate significantly from predicted amounts. For example if the relationship between sales and royalty expenses is not direct, then the auditor would investigate the reasons for the deviations because it indicates a possibility of a misstatement of either sales or royalty expenses in the financial statements.

Analytical procedures help in understanding an entity and its environment and its overall review at the end of the audit. They are also used as substantive procedures when their use can be more effective or efficient than tests of details, in reducing the risk of material misstatement at the assertion level to an acceptably low level.

How can Substantive Analytical Procedures by used?

The different types of analytical procedures available to the auditor are as follows:

Comparison with prior periods

Comparable information of the current year is compared with information relating to prior periods. This comparison helps to identify unusual changes or fluctuations in amounts. For example a comparison of revenue and gross profits of the current year with the amounts of the previous year will help determine the percentage of growth in sales and whether the gross profit margin was similar as in the previous year.

Another Example: 

The contagious virus H7N9 is spreading in China. What is the plausible relationship to the air travel industry? The expectation is FEWER travellers to China and rest of Asia. Thus, expect that the highly geared airline companies with high exposure to Asian markets to have significant lower passengers load and may pose a Going Concern risks. 

Pic 01: Bird Flu making Chinese nervous? Or Doctors on way to work?

Pic 02: Chip! Chip! Chip! Buy 1 Free 2.

Pic 03: Expect airline industry in Asia to experience big declines. A Going Concern issue?

Pic 04: Travelers thinking, "Where to go? Beijing? Sao Paolo? "

Comparison with anticipated resulted

Actual results are compared with anticipated results of the entity or budgets and/or forecasts. Unusual discrepancies identified by the comparisons indicate a possibility of misstatement in the area where the discrepancy is noticed. This would have to be investigated by further audit procedures. For example a comparison of sales will be made with budgeted sales and if major deviations are noticed, these would have to be investigated. In fact if the actual results show a significant fall as compared to the budgeted results, the auditor may have to investigate whether the going concern status of the entity is affected.

Comparison with industry information

Client information is compared with industry information either for the industry as a whole or by comparison with entities similar in size to the client. For example, receivable days of a client are compared with the receivable days of the industry.

End of Tutorial Notes

Next article, I will demonstrate how you apply them on Government Top Think Tank's PEMANDU's performance. 

American's Banks Failed Corporate Governance! (Part I)

-related to P1 and P3 of ACCA, and to a certain extend American taxpayers

American Capitol Hill interviewing Top 4 largest Banks’ CEO
On January 13, 2010, four bankers of the apocalypse strode into the Congressional hearing room and formed a crooked line. They raised their hands haltingly, looking at one another as if to see whether the other guys were going to do it, too. It was one of the more indecisive swearings-in you will ever see on Capitol Hill.




Pic 01: Super-millionaires CEO taking oath






Wall Street bankers took oaths at Wednesday's hearing, from left, Lloyd Blankfein of Goldman Sachs, Jamie Dimon of JPMorgan Chase, John Mack of Morgan Stanley, and Brian Moynihan of Bank of America.


Pic 02: CEOs who are also Chairmen in their firms







Four of the nation’s highest financial fliers took their places before the 10-member Financial Crisis Inquiry Commission charged with determining the causes of the nation’s financial debacle.

The bankers — Lloyd C. Blankfein of Goldman Sachs, Jamie Dimon of JPMorgan Chase, John J. Mack of Morgan Stanley and Brian T. Moynihan of Bank of America — joined a gallery of titans who have suffered through this ritual: tobacco executives, automakers and baseball’s steroid users, among others. Few Americans remember what they said, but the images endure as cultural mug shots.

These financial leaders with their colleagues of other failed banks collectively almost brought the financial sector to a standstill where banks froze and daren’t lend to another fearing that the borrowers may go bust like Bear Sterns, Fannie May, Freddie Mac and Merrill Lynch. Since the finance sector is internationally connected, it quickly brought an economic tsunami of chain reaction, the worst seen since World War II.

What is shocking is these CEOs justifications of “We didn’t know” and superficial apologies for the great risks they took which if turns out to be profitable, they take huge bonus and if losses incurred, then the stockholders suffer with the balance paid by taxpayers. Is a case of “Heads I win, Tails you lose” scenario. For the record, Goldman Sachs bonus will increase over 80% to a staggering US$9.1billion. These guys have quickly forgotten that Taxpayers bailed them out, giving them new breathe of life and went on blatantly congratulate themselves on profit recovery with huge bonus.

Here are some issues, and see if you can apply P1 (ACCA Professional Accountant) which advocates Anglo-Saxon Corporate Governance. Interesting to note that the financial tsunami was in USA and not United Kingdom. Bear in mind that ACCA adopts principle base governance of United Kingdom instead of USA Rules base governance.

1. Failed risk management. John Mack of Morgan Stanley said that the derivatives trader high income could be matched by a risk manager. This implies that risk manager too will profit if a derivative trade turns profitable. There is serious self-interests threat as the risk manager who is suppose to watch stockholders interests would go hand in hand with traders to bet big and win big.


Pic 03 : The sharp chairman, Philip Angelides.










2. Nonsense arbitrage. Lloyd Blankfein said that when they are uncomfortable with a trade position, they would go out and buy insurance on the downside risk. The chairman, Philip Angelides, sums it so well saying, “Silly! Its like you sell a car with faulty brakes to a customer and then quickly buy insurance on it (in case the customer sues you).”

3. Failed governance. Clearly institutional investors are partly blamed since they egged these fat cats to take excessive risks in exchange for short term gains.




Pic 04: Sach's office (USA), fast way make millions using fools' (i.e. stockholders and Taxpayers) money.









4. “Smart” bankers as a veil of greedy bankers. These men claimed and even boasted that they have top talents to develop sophisticated banking intrusments to suit the market. But in truth, its plain ridiculous like how can you extend a housing loan of 110% of the purchase price? Note that the housing prices has escalated to a bubble level ie ridiculous valuation? Though warned in the market that house prices were unrealistic, they claimed that they are caught unaware of the arupt 40% drop in sub-prime properties. I don’t know if they are stupid (highly unlikely case, Mack is a banker for 40 years!)or this is plain greed of self interest.


5. Over leveraging risk. The four banks collectively holds derivative exchange rate contracts worth US$266 trillion which is 20% of world currency derivative trade. If the contracts turn against them, this time financial meltdown we saw will be peanuts. It will be Financial Armegeddon! American currency will turn valueless since no American banks can honor their contract and there is no alternative currency to flee to. We could be thrown back to Stone Age.

6. Powerful lobbying. Blankfein openly and shamelessly lobbied on live television that despite the mess he and colleagues created, he pleaded, “Please do not regulate us!... Let us contribute to the economy!” Yes, that is right, they helped make 26 million Americans unemployed. Here politics are at play. Government makes craziest decision as they too are humans being arm twisted to bow to pressure from powerful lobbyists.

In my next article i will highlight the lessons we can from Krugman, Nobel Laureate and professor of economics at Princeton University on the current financial and economic recession.

MALAYSIA STOCK EXHANGE: BEAR MARKET RALLY

-related to P3, P5 and Uncles & Aunties in Malaysia whose favourite investment motto is "Buy High, Sell Low".

1. The Bursa Malaysia Stock Market has risen by 100 points past 2 weeks to 963 Composite Index. It usually is a precursor to future economic performance of 6 months. However, is it really a sign of recovery? I have my reservations. Its simply too early to cry out, "All's well."

2. But the current reality is all those who invested, say 4 months ago, would profit handsomely. Assuming they buy blue chip stocks. For instance, Topglove Berhad rose from RM3.50 to RM5.50 per share since December 30, 2008. An 57% rise.

3. As a general rule of thumb, the stock market looks to the future for its current performance. The past is well past. Still it tells us what kind of future it should bring. In this case, one should see in the past say the 2008, how much damaged the economic global recession has caused.

4. A simple logic, is if a patient is in out-patient treatment ward, one expects a speedy recovery.
Here, the USA economy is in the Intensive Care Unit, though I doubt the undertakers will have their day to see this giant economy dies.

5. 2nd quarter of 2009 may yet bring more upside for investors, but they should be mindful of the fact that when many countries (G-20 & G-7), all try to de-lever from the USA economic crisis. This is by no means an easy feat even if with all the coordinated governments stimulus package initiatives. For Malaysia's case, its hardly a stimulus: http://marcusong88.blogspot.com/2009/03/rm60-billion-stimulus-package-how-man.html .

6. History repeats itself. After the 1929 crash, the President Hoover's administration spied similarly hopeful signs in the U.S. economy. “Recovery is just around the corner”, is first attributed to economist, Irving Fisher (Noble Prize winner), but Team Hoover repeated this phrase and variations of it right up until he was crushed by the landslide election of FDR in 1932.

7. It is true the U.S. economy in 2009 has yet to see the massive reversals suffered during the Great Depression, but the root causes of each period — easy monetary policy and an over-reliance on debt — are the same.

Have a look at the Fortune 500 Annual List is out for 2008. It is Not Pretty:
▪ 2008 was the worst year in the history of the Fortune 500 for America’s largest companies;
▪ Profits fell from $645 billion in profits in 2007, to just $98.9 billion - an 84.7% decline;
▪ Eleven of the top 25 largest corporate losses in list history took place last year;
▪ Insurance giant AIG posted a $99.3 billion loss — the biggest corporate loss of all time. Dwarfs the Corporate Enron losses by a large margin;
▪ Thirty-eight companies disappeared from the list altogether;
▪ Newcomers to the Fortune 500 list: Polo Ralph Lauren, Visa and Mastercard;
▪ 17% working Americans — 25.6 million people — work for the nation’s largest companies;

Glimmer of good news on equality of the sexes:
▪ 15 women ran Fortune 500 companies in 2008 — an all-time high

Verdict
Economic recovery? Don't count on it until you see a real economic recovery turnaround. So, hold on to your purse strings.

"Caveat de Emptor" : Let the Buyer (investor) beware.

TOLL FREE HIGHWAYS!

-related to P3, some extend F7 & F9 and all Road users in Malaysia



From left to right:
Pic01 : Datuk Lin, MD of Gamuda Berhad which owns LDP, Kesas Highways;
Pic 02: Famous hanging bridge over Federal Highway, near to Motorola Factory
Pic 03: Next big idea? Toll road for pedestrian walk ways.

I. Global recession is here and scary. Everyone is concerned with their survival. Jobs are at stake. The government can do wonders in stimulating the economy by effectively making the Malaysian economy the best place to do business, at least in the South Asian region.

II. One way is to reduce the burdensome transportation costs. Already Malaysia has the second highest tax rates on cars in the world, after Singapore. But in Singapore, a car cost is equivalent to 2.5 years of average wage, whereas in the Boleh Land its 7 years! So that should makes us No.1 ranking, as in the most expensive car.

III. Below is the proposal of how to make our highways toll-free expecially beneficial to the ones where commuters use it daily! The BEST part of the proposal, there is no toll fee increase needed.

PROPOSED TOL FREE BUDGET

NOTE 1. Borrowings __________________________17.20 billion
NOTE 2. Interests at 2.5%_______________________ 3.01 billion

TOTAL NATIONALISATION COSTS______________20.21 billion

NOTE 3. Toll profits for 7 years to 2017 (no price hikes) __25.00 billion
NOTE 4.SURPLUS [Note 3 less Note 2]_____________ 4.79 billion

EXPAINATORY NOTES:
1. Nationalise all 5 highways (LDP, Shah Alam Highway, Cheras-Kajang Highway, Kuala Lumpur-Karak Highway and the Guthrie Corridor Expressway) purchasing shares not already owned by government. PLUS comes with the highest price, buying 32% shares. The current share price is at RM2.99. Government gives a mandatory offer at RM3.26 per share which is the highest price level past 1 year. That amounts to RM2.98billion. Government needs to undertake PLUS liabilitiesof RM8.72billion. PLUS nationalised bill works to RM11.7billion. All 5 highways nationalisation bill works out to approximately RM17.2billion.

2. Fund the nationalisation program with borrowings with Government bond at 2.5% interest rate. The interests payment then works out to RM430million per year. Over 7 years total interests liability is RM3.01 billion

3. If we continue pay toll, all 5 highways expected to generate profit of RM25billion over 7 years. This is assuming a modest traffic growth of 3% per year. By 2017, the amount can completely repay the Government debt and still has a surplus.

All road users, from thereon, get to use the highway for FREE due to the nationalisation program. We could spend on other more productive industries such as homes, durable goods, retails and food (BAK KUT TEH!) sectors

4. Take note that by year 2017, government still has surplus of RM4.79 billion! This is so even when there is NO increase in toll! This save taxpayers approximately 30% which translates to RM7.5billion over the 7 year period. In other words, the government is taking less money from rakyat's pocket. The amount which otherwise could be spent on productive industries.

IV. Other benefits are :
a) Substantially reduce the cost of doing business
b) Increase our standard of living. Noteworthy is in Shanghai, China of 10 million population has toll-free “Elevated” highways. Propels commercialism sector.
c) encourage more inter-state travels, giving an economic spillovers to poorer states like Perlis, Kelantan and Pahang.
d) The above proposal is far less burdensome compared to current system of double loss.Firstly road users face a toll hike prices every 3 years until 2030. Secondly government guarantees to pay the shortfalls in event Toll Operators didn't collect the minimum sum. In year 2007 and 2008, government [our money again] forked out RM2.85billion and RM2.82billion respectively. These subsidies have been ongoing for last 20 years!

V. The above is a broad extraction knowledge from F7, F9 and P3 of ACCA. A demonstration to you all ACCA students that knowledge is power! So study hard and your brains will be your most valuable asset. Employers and Business partners alike will like you.

Disclaimer: Due to lack of transparencies in accounts, I could not dwell deep and accurately calculate the figures. Hence they are 'roughly' right.

RM60 Billion “stimulus” package: How the man-on-the-street will NOT feel it!

- relevant to P1, P5 and all Malaysians

1. On the outset, the government should be commended for doing something about the global recession crisis. The announced package is RM60 billion. However, it’s worth a closer look to see if it really benefits the rakyat, you and I.

2. Lets get to the details of RM60 billion. RM10billion allocated for investment fund over 2 years. From track record, Government Investment House – Khazanah, will continue pour good money over poorly managed GLC (Government Linked Companies) like Telekoms, Proton and Maybank who continue to make us squint at the failures such as overseas (costly) investment, selling out-dated car technology to us and extending risky loans that spikes NPL [Non Performing Loans], respectively. In effect a bail out of under-performing civil servants managing these GLCs.

3. That leaves RM50 billion. RM5billion are for guaranteed loans to SMEs provided (i) banks approve such loans in which in current credit crisis, laon approvals are very stringent, and here is the good part (ii) only if the borrower defaults will the government pays. So the incentive is extend to poor credit status SME (I can’t help it but think of politician cronies) and then government will use taxpayers’s fund to repay the bank.

4. That leaves RM45Billion. Another RM15 billion will be extended to Large companies. Who? Well take your pick, MAS, PLUS, Sime Darby, all of which at best only offers mediocre performance.

5. That leaves RM30billion. Spent RM7 Billion on mega project in which government said will be the likes of LCCT (though was announced the project was cancelled) or something equivalent. Never mind that we already have 2 major airports in Selangor, One military airport in Sg Besi (Kuala Lumpur) and disuse airport in Subang. Lets build another white elephant project. Who benefits? Well, newspaper said that Sime Darby is the front runner. But they will “Fund” the project. This means that the RM7Billion does not come from the government although they are too happy to claim it so.

6. That leaves RM23 billion. Another RM 5 billion will be for industry restructuring. Well, to restructure what? No details here except the name suggest, bail out some industries that are in trouble. Who, you might say? TENAGA (Electricity) will fit the condition nicely for they as the sole seller of power could still incur loss of over RM1Billion. Now, that requires some ‘restructuring’.

7. That leaves RM18billion. RM3 Billion for tax incentives where retrenched workers could get the 1st RM10,000 tax exempt instead of normal RM6,000. Each retrenched worker will have tax savings of RM640 per year. Hardly to shout about and provided the retrenched worker able to find another job in this global recession where jobs are obviously scarce.

8. That leaves a paltry RM15billion. Now I am a bit exhausted here, so won’t go into details. Just give the benefit of doubt, that the balance RM15billion is spent to directly benefit the rakyat, which is over 2 years, to a population of 29 million Malaysians. That works out to RM517 over 2 years which is an average of RM21.55 per month. A stimulus effect? I bet your pocket money is bigger ‘stimulus’.

9. Is all of the above enough? To quote former economics advisor Tun Daim Zainuddin, “The (global recession) crisis is a ‘moving target’ and we have yet to see the worst of it. Therefore, I don’t think that this mini-Budget is the single cure for the crisis.”

10. To clinch Tun Daim concluding chilly statement, “Nobody really knows the extent of this crisis. For example, many analysts believe that the US economic contraction has still a long way to go and has not reached the bottom yet...”

11. In my humble opinion, I have propose a stimulus package that invest and emphasise developing Human Resource talents, Telecommunication infrastructures, mega projects like bullet trains linking to Singapore, attracting soft skills talents to set up research based universities and liberalising lame ducks industries (cars, banks, air travel) to nudge them to achieve world-class level of competition. For more details, please visit the article in http://marcusong88.blogspot.com/2009/02/my-letter-to-prime-minister.html

What does this mean for you?
If the Government continues to drag its feet of “too late and too little” effect, we will all bear the consequences.

There is a solution! You ‘invest’ in yourself! Education which Empowers you, truly! I suggest then, don’t wait for handouts from the government for destiny is in your OWN hands. Be Masters of your own [good] fate. Happy studying!

My Letter to the Prime Minister

ECONOMIC RECOVERY PLAN
(Applicable to ACCA Professional Level :P5 & P3 )

Dear Prime Minister,

I have read the progress of Malaysia with keen interests. After much research, I humbly propose the following as route to economic and very relatedly political recovery:

1. Asian economies are too export dependent for its economic growth. WIth USA & UK recessions, Taiwan had 43% fall in export in Dec 2008, Singapore -38%, China -18%, Korea over -50%, Malaysia also not spared with contraction of over -15%.

2. After a decade of overspending, US&UK consumers will need to rebuild savings mean that demand remain subdued. Asian economies cannot treat this as a cyclical recession anymore but a real permanent fall in demand.

3. Govt commendably have had stimulus package. The 'multiplier' effect on traditonal sector like construction is broad as it affects over 160 industries. Still, this is insufficient as consumers with low confidence likely to hold on spending.

4. Encourage consumers spending as economic recovery and growth by liberalising services sector by:
a)reduce subsidies on manufacturing, petrol, food ceiling prices as it tends to have over-investment in it at expense of services

b)liberalise banks sector to foreign competition as it will encourage lending and innovative financial products.E.g. Break oligopolies hold on Credit card lending at 18% interest pa that subdue spending.

c)homes and automobiles account for 65% of take home income. Open up automobile industry encourage more local contents by doing away with local tax duties. Govt pays lip service to this but needs to benchmark car affordability of 1 car equivalent to 9 month average income ie. 5000/month (combined family income)X 9 = 45,000. Pls note this price is current selling prices ex-duty based in Labuan,Langkawi. Toyota through Perodua has a strangle hold market share of more than 50%. Protected industry drives out other genuine investment. UMW todate ‘only’ spent RM4billion on car assembly plant for a total market demand of excess TIV 0.5million worth RM1.5 billion ringgit per year.

d) if essential goods, car and home, account for have a drop from 65% to 50% of total take home pay, this puts RM750 per month additional disposable income. Extrapolate that to average a million household equals to RM0.75 billion spending income per month. Note this is without government stimulus yet but the savings for government through subsidies removal.

e) consumers savings among highest in the world of average 32% of disposable income. Young savers plan for retirement due to poor social net like pension fund, health care, costly education. Invest and improve services sector ‘aggressively’. Set up independent committees to monitor progress, KPI, benchmark. Consumers will be less anxious of future if assured of proper health and retirement plans by government, improving confidence and spending.

f) hire and train doctors, professionals, head hunt overseas professors/researchers to improve health and education ‘soft’ –skill quality. Import doctors from India, professors from Singapore, France, Harvard Medical of USA. Offer KPI as controlling parenting style whilst giving autonomy to researched based universities. Resist temptation to construct more buildings. Competitive advantage is Human Resource talents, not cement blocks.
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Conclusion
Malaysia economy enjoyed diversified income of manufacturing and agriculture sectors that account for more than 70% of GDP. This will not work now as both dependent on exports earnings. Domestic demand is the key. Rapid services liberalisation is the key for recovery and economic growth for next 3 years.

Best wishes,

Marcus Ong (CA, MSc)
ACCA lecturer now in INTI College of Subang Branch

Useful Links:
Prime Minister YAB Datuk Seri Najib, 2009, Personal Blog, http://www.1malaysia.com.my/, Visited on 3rd February.