RM500 Billion In Debt – Is The Malaysian Government Bankrupt?



Bankrupt“We are going bankrupt in five years time”

“The government has no more money and we have RM500 billion of debt”

“Mismanagement and Corruption has made us poorer”

These are the routine statements you may have heard regarding the state of the Malaysian government finances.  But do they hold any water?

A while back, in Book 3 of the 259 Trillion Vs 5 Trillion Series, my co-author and I have presented the calculations of the US Government assets and compared them to the so called “mountain of debts” and found out that the opposite was the truth, that the US has far more asset than debt.  People with their own agenda use half-baked statistics to propel “unsuspecting” citizens to become angry and extremely emotional toward their own governments, masking their true intention, which is mostly for power grabs.  As such, with such roaring emotional outburst of various camps on small issues, I will try to dispel a few myths on the Government of Malaysia.  One should view things with brains and facts and not on sensationalized half-truths and emotion.

I have dispelled the myth on the increasing price of Roti Canai in my first Malay book, complete with historical prices and charts.  The conclusions was clear, relative to Malaysians income level, the price of roti canai has dropped significantly.  We can’t blame the government for everything, including the price of ordinary goods.

One such myth is the impending bankruptcy of the Malaysian Government.  One condition of being a bankrupt, is by having more debt than asset.

The following is an extract of the statement from the Government’s Accountant which, to a great extent, compounded the public’s perception that the government is doing very poorly financially.

“The Federal Government assets disclosed in the Statement of Memorandum Accounts only include Recoverable Loans RM95,493 million and Investments RM27,194 million, whereas the liabilities comprised Public Debt RM501,617 million and Other Liabilities RM276 million”. [Extract from 2012 Federal Government Financial Statements report].

The statement clearly implies that the government is withholding assets worth a mere 95+27 = 122 billion ringgit while the debt is now in excess of 500 billion.  But is it really true that the government’s debts exceed its assets, or in other words, bankrupt?

RM500 billion Debt

In the government’s consolidated and unified balance sheet statement, it was reported that the government was only holding a sum of RM27 billion in investments in select companies including that of Kumpulan Wang Amanah Pencen (KWAP) as of the year 2012.  Unfortunately it does not seem to mention the real market value of these assets, which is of many times greater.

Or take for instance that in the same report, it was mentioned that the government’s holding of Petronas is only worth 99.99 million ringgit.  Everyone knows that Petronas is worth a lot more than this.  Fortune500 as well as Petronas itself, reported that it is worth as much as RM521 billion as of Sep 2013 with an amazing 123 billion in an essentially all cash assets!

The investments made into Khazanah Nasional Berhad, a well known investing arm of the government, is worth only RM 5 billion according to the government’s report, but Khazanah itself puts the figure of all of its investments well in excess of RM134 billion, a really significant sum.  The government is simply aggregating the original money it invested into these companies; however the actual marketable value of these investments today is far larger.

To add to its burden, the government also listed the entire, I repeat, the ENTIRE amount of money in the EPF, as its financial obligation by way of government guarantees.  That is worth about RM480 billion at the end of 2012!  Now, this is a colossal amount to guarantee, but the government explicitly guarantees the entire savings of Malaysia’s future retirees.  Not just the EPF will take care of your retirement money, on top of that, the government itself guarantees it.  This is very similar to the banking system, where the bank guarantees all deposits, and the PIDM insure the majority of the deposits in the system while the government, although not being explicit, would guarantee the entire system as well.  [Note: as evident in 2009, the government then had publicly provided an express written guarantee to all deposits in Malaysian banks for a period of several years, without any limitation on the deposited amount]

The total statutory financial guarantees extended by the government is RM690 billion of which, as already stated earlier, 480 billion is due to the guarantees to EPF.  Bet that you have not heard that in the year 2011, the total financial guarantees of the government was in excess of 771 billion ringgit, thus recording a significant drop of about 80 billion in the year 2012.

RM500 billion Debt

Nobody has a clear figure just how much the total assets owned by Malaysia Federal Government, but the total debt of the government (and the deficit) is published widely.  Currently the government owes as much as 500,000,000,000 ringgit (that’s 500 billion ringgit to be exact).  It takes a while to dig the relevant data and study them, so here it is for your consumption.

The reason why the government published a widely lower asset value compared to the “current” value is largely unknown.  When compared to other governments, they also declared far lower asset value than they actually holding.  This accounting anomaly is probably a legacy of old accounting standard which the government follows diligently.  Few corporations do the same to their balance sheet.  Even the Federal Reserve would publish its substantial gold holding at a mere USD35/oz which is the official gold price set by the Nixon administration in 1970’s, instead of the current market price of 1,250 dollars per ounce.  The difference in numbers is huge, it means that the US Gov is under-declaring its gold assets by a trillion dollars or more! Despite every incentive to revalue the holding value for spending purposes and credit worthiness purposes, the government has maintained its position.  Similarly in Malaysia, the government is also under declaring its assets value, even if by re-declaring the value it would have gained a significant political mileage.  Yet the government is often accused of manipulating and cooking the books, however I found no such evidence.  It is of little wonder that the Accountant General and those who actually read and study the balance sheet of the government routinely dismissed the critics of the government who would jump in no time (every year in fact) on their same misleading figures and harp about the impeding bankruptcy.

 

What does the government owns?

The government owns a significant chunk of the economic wealth, locally and abroad.  Take a look at its investment arm, Khazanah below, you don’t have to see each individual company, just observe the scale and breadth of the investments in many major companies, whether listed in the stock market or not.  Tenaga Nasional, the electricity producer and distributor, Pos Malaysia, CIMB Group, the toll operator and owner, PLUS, and many more such as ASTRO, UEM, Parkson, Axiata and Telekom are all essentially owned by the government.

RM500 billion Debt

The total investments are worth in excess of 134 billion ringgit as recently reported by Khazanah.  The major GLCs are said to be having annual revenue exceeding 400 billion a year, far outpacing the revenue of the government itself.

The government also owns the following:

KWAP, Petronas, PNB, Tabung Haji, EPF, Bank Rakyat, Bank Simpanan and a dearth of other companies and institutions.  For the full list, click here.  Yes, National Feedlot Corporation or NFC is also listed inside.  Well, not all of the investments make money as it turns out.

Now for the full total:

RM500 billion Debt

There are too many zeroes in the total, so in billion, that’s 1,157 billion ringgit, or 1.157 trillion ringgit! This is indeed, much larger than the entire debt of the federal government of 500 billion.  A trillion is a number with 1 followed by 12 zeroes in it.  Therefore the Malaysian Government is actually far from being bankrupt and has tremendous resources at its disposal.

The table above took into account as much as possible (but surely not perfect) the portion of assets co-owned by others such as retirees’ monies in the EPF.  Despite having a fund size of 480+ billion ringgit, it is estimated that 105 billion ringgit is the true money of the government, which it can manipulate by changing the payouts to the retirees and from any yet to be declared profits.  We can also argue that 100% of the 480 billion is government controlled and owned, however this may not be reflective of the financial standing of the government.  Similarly, within Tabung Haji for example, the government has a portion totaling 48 billion ringgit, despite the institution having a combined total customer deposit and government controlled money of 90 billion.

The government also owns plenty of real estates, billions of ringgit in fact.  Due to time limitation, we can only guesstimate the total.  The 2012 report of the financial standing of the government also mentioned that the government is holding some 29 billion ringgit in pure cash in banks and other places.

Therefore, the frequent talks of the impending bankruptcy of the government were just mere talks, without supporting facts.  Now that you know the real facts, you should not be easily swayed by those who want to scare everyone for their own gain.

rm500-billion-debt-5

With more than a trillion ringgit in real assets, the government’s wealth is no doubt, owned by the public, that is, you and the rest of the populace.  This mean that each person in Malaysia owns as much as RM38,500 in economic wealth, held in trust by the government.

In terms of pure, cold hard cash, just how much the government is holding, or able to obtain within a short notice?  Based on the following estimate:

RM500 billion Debt

That’s a lot of cash, which the government can muster in the time of need.  This amount is so large, it is more than 9 months of government expenses.  How many of you, saved this much money for expenses, just in case? If 100 ringgit bills are stacked up on top of each other, it will reach a high of 932 km (space is only 300 km above the earth) or if laid next to each other, the bills would go around the earth four times.

The calculations also did not include the International Reserve of Bank Negara for reasons stated in Book 3 of the series.  The official amount is in excess of RM400 billion, which is again, a really massive number.  The external debt of the federal government? It is less than RM30 billion.  Therefore there is almost zero chance the government would or could be bankrupt anytime soon.  Bank Negara Malaysia is also capable of mustering unlimited amount of ringgit bearing papers if there is ever a need to access cash quickly by the government.  When I say unlimited, it is really is unlimited, it can be multiples of many billions or even trillions.

So the begging question now, if the government is so rich and have a trillion ringgit worth of assets, then just how large and how rich Malaysians combined personal wealth really is especially that they are the true ultimate owner of the government itself?

Sharif Rahman is the co-author of 259 Trillion Vs 5 Trillion book series as well as several other books including one in the Malay language. He can be contacted at his email at [email protected]


Leave a Comment

  • hanizam 5th February, 2014, 2:57 pm

    jadi selama yang dicanangkan oleh Pakatan Rakyat, kerajaan akan jadi macam Negara Grees tak betullah…

    dari ape yang saya baca artikel ni, ternyata ada fakta bagus yang patut diwar-warkan tapi fakta yang kurang enak yang dicanang bagi menimbulkan perasaan negetif dan marah rakyat pada kerajaan..

    tapi kenapa takda artikel begini diketengahkan untuk menidakkan ape yang Rafizi ceramah…

    sekadar pandangan…

    Reply
    • Sharif Rahman 5th February, 2014, 3:37 pm

      Bill Gates, the richest man in the world, has provided an interesting explanation to this:

      “By almost any measure, the world is better
      than it has ever been. People are living longer,
      healthier lives. Extreme poverty rates have been
      cut in half in the past 25 years. Child mortality is
      plunging. Many nations that were aid recipients
      are now self-sufficient (Malaysia is one of it).
      You might think that such striking progress
      would be widely celebrated, and that people
      would rush to figure out what is working so well
      and do more of it. But they’re not, at least not
      in proportion to the progress. In fact, I’m struck
      by how few people think the world is improving,
      and by how many actually think the opposite—
      that it is getting worse.
      I believe this is partly because many people are
      in the grip of several myths—mistaken ideas
      that defy the facts. The most damaging myths
      are that the poor will remain poor, that efforts
      to help them are wasted, and that saving lives
      will only make things worse.
      I understand why people might hold these
      negative views. This is what they see in the
      news. Bad news happens in dramatic events
      that are easy for reporters to cover: Famine
      suddenly strikes a country, or a dictator takes
      over someplace. Good news—at least the kind
      of good news that I have in mind—happens
      in slow motion. Countries are getting richer,
      but it’s hard to capture that on video. Health is
      improving, but there’s no press conference for
      children who did not die of malaria.
      The belief that the world is getting worse, that
      we can’t solve extreme poverty and disease,
      isn’t just mistaken. It is harmful. It can stall
      progress. It makes efforts to solve these
      problems seem pointless. It blinds us to the
      opportunity we have to create a world where
      almost everyone has a chance to prosper.
      If people think the best times are in the past,
      they can get pessimistic and long for a return
      to the good old days. If they think the best times
      are in the future, they see things differently.”

      Source : Bill and Melinda Gates Foundation Letter

      This means that media like “sensational news” and one that is fast action. Those that are slow moving..and mundane…are omitted. So what is left would be a bunch of negative and hot news..

      Reply
      • Sham Seoul 6th February, 2014, 4:30 pm

        “This means that media like “sensational news” and one that is fast action. Those that are slow moving..and mundane…are omitted. So what is left would be a bunch of negative and hot news..”

        Should have put above statement in the main article, pure gold 🙂

        p/s- Malaysian Government ought to pay you for clearing the fact from fiction, an eye-opener. Totally changed my view!!! Feel a lot better, thankful and looking forward to Malaysia future improvement. Thanks~

        Reply
        • Sharif Rahman 7th February, 2014, 4:15 pm

          Good suggestion, i should have, but i want to make the article as short as possible …
          unfortunately nobody pay me for this…the gov? The fact is..i am the one who is paying them big money year in and year out.
          My intention is so that people realized that all their hardwork all these years has not gone to waste, proper presentation of data is critical.
          Malaysia is doing better by the day, we have no bridge to Penang just 30 yrs ago, now we have not one, but two. True that some policies are out of whack, so it is our job to correct them and push our leaders (whether gov or opposition) to do the right thing. Keep your spirit up and don’t stress out, relaxx…

          Reply
          • Sham Seoul 10th February, 2014, 5:04 pm

            1.Kudos for replying to every comment in this entry!
            2. I believe it is everyone/Malaysian responsibility to improve their take-home pay/monthly gross income. Our grandparents were farmers, our parents are government servants/self-employed and we shall be Business Owner and Investors. Inevitably our GDP will increase.
            3. Sharing these insights & “revelation” about wealth thru this blog definitely increase Malaysian financial-literary rate exponentially, Robert Kiyosaki a.k.a Rich Dad would be proud 🙂
            4. Regardless of our religions, political-belief/orientation…I am sure no countries been improved due to some hot-talks in cafe/mamak. For God-sake, man have landed on the moon and we are still just “developing-country”.
            5. I have a dream/vision that one day Malaysia will be self-sufficient and instead of busy/distracted with internal political issues, we will focus on helping other nations to improve themselves. “Bro” Sharif Rahman, ♪♫kalau aku PM♪♫…definitely will hire you as Minister of Finance 🙂
            6. So let’s us all take Action Now….starting with taking control of our income & expenses.

  • razibar 5th February, 2014, 9:39 pm

    Interesting article. I’m confused now…. If the government is not poor and has trillion in its coffers, then how come the minister in the PM dept (ex Maybank CEO) said that the govn has to raise toll rates or it will go bankrupt. It’s all in the news and not created by the opposition. Even BN ministers mentioned this word “bankrupt” to justify the toll increase and other subsidy cuts.
    Now after pressures from the public, the govn decided to defer the toll increase for 2014. so it seems that people at high places just say whatever they want to justify whatever decision they’re making…

    Reply
    • 1mdb.com 5th February, 2014, 11:50 pm

      You have to remember that the government is in deficit for several years now. If no action taken to reduce expenditures/subsidies and increase revenue, there will be a lot of trouble & may lead to bankrupt.

      Reply
    • Sharif Rahman 7th February, 2014, 4:03 pm

      The gov have about 250 billion in liquid assets, including stored in its companies. The other 850 billion, are mostly in illiquid assets, such as buildings, etc. Similarly, you may have little cash or no cash at the end of the month, however you do own two cars and a house. You could be broke, but you are not a bankrupt yet.
      In my view, the gov spread its assets evenly, i think many of us do not (people are too concentrated on illiquid assets which they cannot use at the time of need).
      As for politicians statements, you should take it with a pinch of salt. I demonstrated the actual standing of the government finances. You know politicians, they like to be dramatic..otherwise nobody would read their news.

      Reply
  • hanizam 6th February, 2014, 10:18 am

    dalam keadaan sekarang, kadangkala langkah-langkah yang kerajaan buat seperti mengurangkan subsidi telah menyebabkan golongan berpendapatan rendah menerima kesan yang nyata kenaikan harga terutama barang keperluan harian.

    kerajaan juga perlu membuat penjimatan dalam perbelanjaan yang tidak perlu dan mengurangkan juga elaun tertentu sebagai menunjukkan kepada rakyat kerajaan juga bersimpati dengan ape yang berlaku.

    saya tidak nampak dalam keadaan sekarang, kalau bertukar pun kerajaan, tiada jaminan harga barang dan lain-lain akan naik juga seperti yang diwar-warkan oleh pembangkang..pada saya, memang mudah berceramah dari melaksanakan ape yang patut dibuat..

    contoh bila PR kata nak buat pendidikan percuma, sehingga sekarang, sebenarnya PR boleh buat pendidikan percuma dalam negeri yang ditadbir PR..seperti sekolah agama rakyat kendalian Jabatan Agama masing-masing..tengok sahaja yuran sekolah agama, purata seorang pelajar rm150.00..kalau 4 orang yang bersekolah?

    seperti juga dengan UNISEL, sampai sekarang kerajaan dulu masih dipersalahkan dengan ape yang berlaku, sedangkan dah 2 penggal, takanlah tak boleh buat perubahan yang lagi bagus jika kerajaan dahulu mentadbir teruk..rizab kerajaan negeri dicanang dalam ceramah banyak..berbillion katanya, tapi ape guna duit banyak, disimpan lama-lama kalau tak digunakan untuk sesuatau yang berfaedah kepada rakyat?? berikan pendidikan percuma seperti yang diwar-warkan…

    jadi kalau betul PR nak laksanakan, boleh buat dulu di bawah pentadbiran mereka…sebab tu saya katakana, memang senang berceramah sambil tokok tambah fakta bagi menaikkan kemarahan rakyat pada kerajaan..bukan senang nak laksanakan seperti mana senangnya kita bercakap.

    sekadar pandangan…maaf admin, dah termasuk bab politik sikit…

    Reply
    • Sharif Rahman 7th February, 2014, 4:10 pm

      Memang betul pemerhatian anda. Ganti kerajaan bukanlah guarantee bahawa tidak akan ada kenaikan harga. Banyak negara telah bertukar kerajaan mereka kerana kenaikan harga barangan, tetapi harga barangan tetap naik juga.
      Berkenaan dengan wang, it is either you have it, or you don’t. So ganti kerajaan apa pun, jika duitnya tiada, sama sahaja. Untuk menjana lebih wang (lebih kekayaan), semua orang perlu bekerja keras dan rajin belajar, bukannya meminta-minta kiri dan kanan. Itu sahaja caranya. Jika harga kangkung itu semakin mahal, jangan bising-bising, tanam sahaja sendiri dan jual, boleh buat lebih banyak wang.

      Reply
      • hanizam 8th February, 2014, 1:22 pm

        Sekadar pandangan org tak sekolah tinggi je en Sharif..belajai setakat SPM je..hu..hu.

        saya suka laman blog ni, banyak info yg berguna dan berfaedah pasal ekonomi dan sebagainya..walaupun artikel dan komen2 dari rakan2 pembaca lain ditulis dlm bahasa inggeris, tu bukan penghalang pada saya nak tau ape pendapat dan mungkin sedikit ilmu dari rakan2 yg lebih profesional..mujurlah ada google translate..

        Saya bersetuju sangat2 usaha dan rajin adalah salah satu penyelesaian yg paling ideal utk meningkatkan pendapatan masing2..pendek kata dimana ada kemahuan, disitu ada jalan..

        Satu lg, berbelanja biarlah ikut kemampuan masing2, ukur baju dibadan sendiri..besar periuk, besarlah juga keraknya..

        Reply
        • Sharif Rahman 8th February, 2014, 7:15 pm

          Saya tabik anda kerana tetap belajar, biarpun sudah tamat sekolah dan telah bekerja. Inilah yang perlu dilakukan oleh semua orang. Sejarah telah menunjukkan betapa ramai orang yang tak pandai sangat, tetapi mereka jujur dan bekerja kuat, menjadi kaya raya, malah lebih kaya daripada orang lain. Check out QL Resources, the chairman is worth a billion ringgit, he is darjah enam if i am not mistaken.

          Reply
  • Aladdin 6th February, 2014, 10:24 am

    How can you say EPF is government money? it is people’s money. So if government touch the money there then this means government is sticking its hand into people’s pocket, just like Cyprus that is almost bankrupt.

    Reply
    • Sharif Rahman 7th February, 2014, 4:06 pm

      Aladdin, don’t worry, all of government monies are actually your money. You entrusted the government to spend it the best way it could, and for the benefits of no one else but you (and your fellow citizens).

      If you ask the gov to give you back all of your money, and your fellow citizens also agrees, you will get it all back. However your fellow citizens may think otherwise.

      A good analogy is to think this way:
      You are a parent for your children. You manage all of their finances, including their money in the bank. There are times when you will have to use their money for their own good, such as buying books etc. So in theory, the government can use your EPF money for your own good. However this has not happen since our gov is still flushed with enough cash. Although your children may complain, what you are doing is for their own good anyway. And you may choose to replace their money when you receive your bonus etc. So when they grow up, you will still give them their money. Hope this helps.

      Reply
      • nerdyfred 7th February, 2014, 6:01 pm

        Well, i would agreed with you if the parent is wise in wealth management but in truth fact is NOT. Coupled with mis-manage of funds (KLIA 2, missing guns, tourism fb website, lembu, PKFZ, etc – the list go on n on) Plus, u cant be computing EPF money is the govt money in the accounts.

        Reply
        • Sharif Rahman 8th February, 2014, 7:16 pm

          nerdyfred,
          You are smart! What you are saying is true. But then, it is never a secret, everyone has been saying all along, gov is not the most efficient out there. So why do Malaysians ask their gov to control this and that, some even ask gov to go and tanam kangkung to bring the price down. Gov is not the most efficient, yet we want gov to do it. So the end result would be, everything would be more expensive. We should tanam the kangkung ourselves.
          Even with many mismanagements as you mentioned, Malaysia’s gov still have good financial status. No doubt about that based on the numbers.
          No, i did not include EPF as the money of the government (check the numbers above). If I include it, the gov would have several hundred billions more, perhaps around 1.45 trillion ringgit. But keep in mind that a large portion of EPF money does belong to the gov. Why this is so you might ask, the reason is because it is not investors’ money.

          Reply
  • oceanbiru 7th February, 2014, 10:48 am

    If Malaysia ihas that much cash-able assets as the author wishes to paint it and that it is not driving off the cliff at 150km/hr why is our ringgit legless against other currency?
    Yeah, everyone says the current dip is due to the outflow of fund.
    If so, then it is not necessary to dependent on foreign saline-drip to keep our ringgit up
    Incidentally, during my last visit to Singapore I was able to have a cup of kopi-o for only $0.80.
    How much was yours this morning?
    Dollar for dollar …… the ringgit and we still keep the mantra of “It’s ok …they sky aint dark yet, it’s only 7.30pm”
    Good luck to us.

    Reply
    • Sharif Rahman 7th February, 2014, 3:58 pm

      Oceanbiru, currency is simply relative. 1 USD is 100 Yen, but that does not mean Japan is 100 times worse, or anything. Now if we base our observation solely on trends, we will see that currencies move in all directions, all the time. For your information Japanese Yen was 77 just one year ago, now it is 100+. So does this mean Japan has become poorer in the space of one year only?

      You will need to understand how one ringgit, is being printed and gets into the market. Who demanded it and why? For this part, you should go to 259 Trillion Vs 5 Trillion website to understand more.

      The more Malaysians transferred their money into Singapore, the worse our ringgit will become. Just how many did exactly that? You mentioned you just went to Singapore, perhaps you also have a lot of money over there?

      Yes, it is solely because of money going up, returning to the US for example (and Singapore). This is the biggest reason why ringgit’s value drops, however it is only a small drop, it is hardly felt by anyone in Malaysia. No we do not need saline drip to keep our ringgit up. I can assure you, there is no such things. Since you make your claim, why don’t you publish to us, just how the gov is “saline-drip” our ringgit at the moment. How is the process since you claimed you are aware of it.

      Kopi-o in Malaysia differs widely, so is in Singapore. In my kampung, it is only 30 sen. The bigger places, only 50 cents, that is in ringgit. In KL, it is usually one ringgit. Still, it is ‘relatively’ cheaper than in Singapore (in absolute sense).

      And before i conclude, do you know that we can revalue our currency, just like that, overnight? What exchange rate do you want, it can be achieved. One to one with SGD? This can be done by Malaysia, overnight. And do you know that so many countries did exactly that?

      Don’t go around and gong around with your doom and gloom scenario, especially if you do not understand what currency is and how it come to being (no, it is not printed out of thin air!).

      Reply
      • Sharif Rahman 7th February, 2014, 5:04 pm

        Additional info:
        Monetary Authority of Singapore mentioned that the largest foreign buyer of Singapore properties are Malaysians, displacing China. Malaysians represent about 30% of foreign buyers of SG properties. As you all already aware, SG properties are way more expensive than in Malaysia, each would costs the buyer millions of ringgit. So overall, billions of Ringgit will need to be dumped and converted in SG, surely will put a big pressure on the Ringgit.

        Reply
      • oceanbiru 7th February, 2014, 8:44 pm

        Ooops,you want to debate on the strength of currency and the status of a nation?
        I am no economist nor author but just a simple person who watches the market.
        Maybe you can have an open debate with the author of this world class financial publication who has the same opinion as most of us the doom-ist and gloom-ist.
        “Why the dollar stays steady as America declines” or inversely within the broad loose interpretative vein of “Why the ringgit decline as Malaysia declines”
        Once again, good luck to all of us. 🙂

        http://www.cnbc.com/id/101396524

        Reply
        • Sharif Rahman 8th February, 2014, 7:18 pm

          oceanbiru, typically i presents data. Anyone could use it for their own info. But always remember, do your own research. When someone says this zzz company is good, you should do your own research first before buying. Similarly, when someone says the USA is in decline, you should do your own research before you believe them and worse, you tell everyone else as if you have done your research.

          People has been saying about America’s declined since the 80’s. And the latest, since 2008, and yet, America is still the richest country in the world.
          America is not yet in a decline. They still lead in techs, military, research and just about everything else. This is from my own research.

          The link you gave on the cnbc failed to mentioned why as the usa economy go down severely in a recession, the USD did not follow suit. My co author and I wrote in our book series, from our own research, that one of the reason is that fully 70% of all USD is not being used by Americans in America, but by other people, worldwide. The demand for dollar is strong. Venezuela, zimbabwe, you name it. All prefers to use the USD.

          Debate with world class financial institutions? Recently i debunked the misleading data by GFI, who says 1 trillion went out from Malaysia by crooks. You will become doom and gloom if you do not do your own research. Check their numbers. Why don’t you start by checking my numbers so that you will be happy?

          You said good luck to all of us, don’t simply bet your future on luck. We all can do something. Improve your country one step at a time. Luck has not much to do with it.

          I suggest that you read about currency devaluation, and then revaluation for your info.

          Reply
          • fsyong 16th February, 2014, 3:40 pm

            Your statement regarding MAS authorities are equally same like others without any research. How do we factor in Malaysian Singapore PR buying Sg property funded with income from SGD? Is there any dump of ringgits? At the same time I believe MYR should strengthen due to inflow of money from singapore i.e from people working in sg transferring $$ home or buying properties and etcs. Even the property development and fdi in Iskandar development (excluding tourist spending between countries). I prefer somewhere with higher purchasing power…

          • Sharif Rahman 17th February, 2014, 9:52 am

            Dear fsyong, there is considerable difficulties for us to verify whether Malaysians working in Singapore, would pay their house purchases in SGD obtained right from Singapore itself. We will have to check house purchases data, for those mostly done in cash, as many Malaysians may not work in Singapore for 20 to 25 years continuously. Some may only work up to five years only, yet they have to pay for the house for up to 25 yrs, using their future incomes from whatever country that would be. Barring any numbers and assumptions aside, just why do Malaysians buy expensive houses in tiny Singapore? Wouldn’t Malaysians prefer to buy houses right here in Malaysia, getting better deals anyway?
            You believe that the Ringgit should strengthen when people working in Singapore transfer their money home. But do you know there are several hundred thousand Malaysians currently working in Singapore, and this has been the case for decades. They have transferred money back into Malaysia, for tens of billions, every year. They have dumped their SGD into Ringgit, yet the fact shows that the value of Ringgit, has fallen down instead when compared to SGD all these years. Therefore your argument could not hold water, simply because there are other factors at play, especially that currencies are merely relative to each other. Going higher in value may never be a cause for celebration at all. In order to answer this question, a lot of research is required. As for purchasing power, even if the Ringgit loses 2% of its value, everyone may end up having more should they be able to get 5% more ringgit in their hands, so they will still come out as the winner. The absolute exchange rate may mean nothing unless it is compared to all of the related factors in determining ‘purchasing power’. Finally, the other ‘unseen’ factor is that if too much ringgit is bought by these Malaysians PR and there isn’t corresponding adjustment on the monetary side, the value of Ringgit as you rightly points out to, may go up, but, because all of the wealth was generated in Singapore and not in Malaysia, when the money is converted and spent in Malaysia, the end result would be higher inflation. Could this be a reason why the prices of goods are getting more expensive? You may want to study how the Gulf countries handle very large inflow of money into their economies from selling tons of oil, one of the persistent problem is high inflation.

  • razibar 7th February, 2014, 5:56 pm

    Dear Author

    Despite your stand that the country is in good financial health. i still feel something is not right. something smeeling fishy somewhere. As you might be aware, Petronas has been the main source of revenue for the government all these years. if the government financial health is that good as you mentioned, then why does Petronas chariman has to go public to beg the gov that it could no longer continue to pay 30% of its profit to the govn as dividen as if the govn is desperate for money to stay afloat.

    Reply
    • Sharif Rahman 8th February, 2014, 7:20 pm

      Razibar,
      Your smell on the fishiness is correct. Actually, i smell it too. However as it is right now, the country is still ok. Petronas has wasted and is wasting tons of money, money losing investments and those that requires new capital, in the billions. Petronas even went to Venezuela, the last place anyone would want to go. This is a country that implemented price control and currency controls, and now they have no hope. The devalued their currency 8 times in 15 yrs, each devaluation they lost 50% of their currency’s value.
      Now that i am thinking about it, isn’t Petronas created by a law in Malaysia to manage Malaysia’s hydrocarbon resources? So why petronas wasting its time managing other countries’ resources? It seems they have exceeded their original mandate. Does anyone in Malaysia question this?
      Smart people who smell all kinds of fishy things, must take action and help the country back on a good path.

      Reply
  • Moh 9th February, 2014, 12:28 am

    Saya perlu berterima kasih kepada authors Simple, short (not really) tetapi benar benar bermanfaat. Terima kasih 1) memberi info berkenaan kewangan negara. 2) maklumat berkenaan currency Valuation/devaluation (from the debate?) 3) Interesting explanation from bill gates.

    Explanation berkenaan perkara di atas setakat ini the best that I ever had.

    TQ

    Reply
  • mike 9th February, 2014, 7:27 am

    Sharif, from your comment, you seem to say that price & currency control is not good for a nation. What is your comment about subsidies & price control on certain items in Malaysia. Should the government remove it altogether?

    I really hate when the time when the government have to cut some subsidies. Not to hate the government but to businesses. They seem to increase the price arbitrarily. Example, sugar price increase by 50 sen per kg, kopi-o price also increase 50 sen per cup. The worse part when petrol price increase, everything increase including plain water at unjustified quantum. They really take the advantage to gain more.

    Reply
    • Sharif Rahman 10th February, 2014, 9:00 am

      I have pondered this question a lot. Thank you for posting it.
      I have done many simulation on it, and every time, the answer is, subsidy is bad for the economy.
      Therefore Malaysian Gov should remove subsidies where it is appropriate, and step out of business. Instead, the gov should assist those who are in need, directly via several agencies it already have. Not everybody need petrol subsidy, for example a visitor from Singapore.

      In order to proof the point in a simple way, if it is true that the government can control prices, then why don’t the gov reduce the price of petrol to say 20 cents only? And if it is good for everyone, why not even down to 1 cent? Or maybe free? The answer would be pretty obvious.

      Gov providing subsidies is an illusion because the gov simply takes money from someone, to give it to someone else. This is called redistribution of income. However this redistribution should be done in a good way.

      So the answer is the gov should remove it altogether as the absolutely the best way. Even if you are not a taxpayer, you will still stand to benefit from this. When the gov do kedai runcit, it will crowd out other competitors in the area. Well, nobody can beat the government. So there will be less competition, and of course, higher prices in the end. Did you notice that despite price controls, every year, the price of everything seems to be going up anyway? Isn’t the control is merely and ‘illusion’?

      An interesting case in point is Telekom Malaysia. They showed a graph back in the late 90s to show that by the year 2006 or 2010 like that, the sewa telefon for the fixed line would reach RM100+. Now look at it, not just the price dropped to very low levels, actually it dropped to zero! The reason is simple, competition after the market is ‘freed’ from monopoly. Same with the airline sector, when AirAsia was created. Now not just it is a lot cheaper, Malaysia has one of the best airline in the world.

      Regarding businesses increasing their prices. This is a perennial ‘issue’ because it is natural for businesses to want to increase their prices. Every possible way, they will try to increase it. In fact, we complaint a lot about it, but even if WE ourselves do businesses, we will behave the same way anyway. In fact this is also evident from salaried people without businesses, they would want to increase their salary at every opportunity. This is entirely normal however. So what will keep businesses from increasing their prices? The answer is obvious, their competitors. If you want to increase the rent of your house, and another landlord decided to keep his, you will lose because the renter will move. Similarly with the prices of kopi-o, teh tarik etc. But one thing that i clearly notice is that, prices tend to go up very fast, but they will come down slowly. Competition works in a slow motion, it takes weeks or months for it to come back down, despite that it can go up in a day. But with enough competition, it will go back down to the minimal (cost + margin (profit)).
      In a reverse fashion, in many instances, do you notice that a company’s stock price would go up slowly, but would go down quickly? But still in the end, the stock would go back to where the fundamentals are, so similarly with our increasing prices, it will go back to the fundamentals.

      Consumers have 1001 one ways to fight price increases (the arbitrary ones). Just don’t buy the kopi-o, or just go to the next shop. You will find a cheaper one. If the price is fixed, that is a monopoly by a cartel. Try to avoid as much as you can. Now if you actually exercise your power, you will see that the businesses would respond, by lowering their prices to match. This happens all the time. On the flip side, as i said earlier, if you really think the price is too high and they are making obscene amount of profit, then why don’t you do your own business and make ‘obscene’ amount of money, yourself? Whether you want to help reduce the price by setting lower prices than those businesses you hate or not, you will stand to profit from it. Why you’d become rich? It is because you brought in cheaper (and better) kopi-o to the market and your customers benefit from it. New wealth would be created.

      Reply
  • ray 11th February, 2014, 10:11 am

    Hi

    In your article you stated” Bank Negara Malaysia is also capable of mustering unlimited amount of ringgit bearing papers if there is ever a need to access cash quickly by the government. When I say unlimited, it is really is unlimited, it can be multiples of many billions or even trillions.”

    Wouldn’t this devalue the currency? This is the printing money to pay for bills scenario right? After a few such printing sessions of trillions of dollars wouldn’t the ringgit be worth less than daun pisang?

    Reply
    • Sharif Rahman 11th February, 2014, 4:18 pm

      Ray, you are absolutely right. In such a situation, the government may already have too much borrowings that it could not repay its debt by using tax money, while its assets, is much lower than its overall debt. In this instance, the gov could simply print away by asking the central bank to issue it ringgit in exchange for treasury papers (gov bonds, IOU etc.) This process can go on without limit, but it will devalue the currency if there is no asset backing it (debt is more than asset).

      In Malaysia’s government case, i.e. current scenario, the government can simply issue such bond papers to the central bank (EPF is also another source), and asks the central bank to issue it fresh ringgit. Global investors would immediately calculate whether the government is over its debt limit or not, in this case, having more debt than assets. So in our case, the gov still has plenty or room to borrow. Next investors will look at the repayment ability of the government. If it is still ok, such issuance of bonds to the central bank would not necessarily cause dilution on the value of the ringgit, especially when the transmission of money via the banking system is taken into account. This happened in the USA, where the central bank bought gov papers and issued new dollars into the system, yet the value of the dollar remained steady (this is QE). This part is highlighted in an article on QE at our 259trillionvs5trillion.com website. It explained why such massive money printing by the gov did not devalue the US dollar.

      Now, as a closure, why would the government want to print away massively? The answer is simple, with debts dominated in ringgit, the gov can simply print it and pay any debt it owes, regardless on the value of the currency. So at the end of the process, the gov will owe nothing (zero) and has paid its debt off. An independent central bank is absolutely crucial to a country. In the US, the Federal Reserve is independent from the government, while in Malaysia, if i am not mistaken, there is a clause in the BNM ruling that it may act as directed or for the interest of the government. This clause may one day affect the citizen when the bankrupt scenario occurs and the gov direct the bank to you know what. Therefore the choice of the central bank governor, is absolutely critical to the wellbeing of a nation like Malaysia.

      To derive a correlation, several years ago, Argentina’s government wanted to use the central bank’s international reserve to pay off its debt obligation. The central bank governor refused to allow it (it is not gov money anyway). The president sacked the central bank chief, however parliament brought the issue to court, and the court ruled that the president cannot sack a central bank governor. So he was reinstated. But then he eventually resigned from his post. So after that, Argentina used several billion dollars from the reserves, and eventually, the number grew. And now several years later, Argentina’s Peso currency has crashed. If you want to know more about international reserves, this is explained in the Book 3 of the series.

      The story reveals that as long as the central bank is independent, no harm will come to the currency. The government can whack its finances all it want, it can spend and borrow all it want, eventually it will reach a limit (can’t borrow anymore) and the gov will go bankrupt. Argentina went into a default (bankrupt) in 2001, as they have done several times before. Yet life will go on for the citizen, and the currency’s value will be reasonably maintained (via interest rate manipulation). However, the whole country will ended up poor generally because the gov has squandered their savings. This is happening in Japan as we speak. When a government enters into bankruptcy, it can simply choose not to pay its bonds etc, to the ire of bondholders. The gov can choose to suspend payment, or simply disavow the debt altogether. This trick will result in bondholders boycott, but then, they typically boycott in the region of 5 to 10 yrs period. The gov would benefit due to the elimination of its entire debt. When the gov receives a bail out, say internationally from the IMF etc. this debt obligation may remained as it is. This will put further strain on the gov and may never be able to exit from debt for eternity. Luckily that in many instances, the IMF assisted by asking bondholders to reduce the gov debt by up to 90%, leaving only 10% behind. The gov will get money from the IMF for making the reduced debt repayments. Again, the gov would emerge as a ‘winner’. This happened in Greece recently. To draw the parallel to the event, Greece, a nation with a population less than half that of Malaysia, has a total debt exceeding RM 1,200 billion, has no capacity to pay its debt, ever. So the bonds were reduced and the EU bailed them out.

      By understanding all these intricate relationship of gov, the banking system and international finance etc., one can predict years ahead what would happen to a country. For now, Malaysia is still safe.

      Another conclusion that we can derived is this, why should anyone with money, become a bond buyer, because in every situation above, bond buyers would lose, and lose.

      Reply
  • Budak buat thesis REITs 12th February, 2014, 6:52 pm

    Assalamu’alaikum Tuan,

    Saya rasa “most people who do engaged writing” dalam blog ini semua orang yang ada duit dan hidup mewah. Sebab tuh boleh dan mampu ada jalur-lebar dan “give comment bla bl bla bla”.

    Yang pasti, kami yg duduk di flat burung 5 tingkat tanpa lif harga Rm35,000 semakin terasa dengan bahang “Najib-isms’ monetary policy”. Nak makan RM10 pun semua orang berjimat jimat.

    Makin ramai anak anak tak bersekolah dah terpaksa bekerja…. dan makin ramia ayah ayah juga dibuang kerja dan menganngur.

    Saya “merasakan”…. jika SGD bertambah mahal…. akan berlaku “REVOLUSI RAKYAT”. Jom laaa jengah orang orang miskin 90% of Malaysians population…

    🙁

    Kami Orang Miskin yang masih belajar tulis thesis

    ..

    Reply
    • Sharif Rahman 13th February, 2014, 8:41 am

      Itu cuma perasaan anda sahaja bahawa semua orang di sini adalah kaya dan hidup mewah. Saya sendiri pun tidur di atas lantai selama sepuluh tahun sewaktu saya mula bekerja, saya rasa ramai lagi org yang sebegini. Pendek kata, semua org di sini mungkin miskin dahulunya, tetapi sekarang ok lah. Oleh itu, saudara perlu bertanya dan belajar, bagaimanakah boleh meningkatkan taraf hidup sendiri.

      Di dalam buku ketiga 259 Trillion Vs 5 Trillion series, ada ditulis bagaimanakah caranya, dan mengapakah seseorang itu tidak dapat menaikkan taraf hidup sendiri. Ianya cukup jelas, saya harap saudara baca dan hayati.

      Anda tulis najib-ism’s monetary policy, menunjukkan anda seorang yang agak terpelajar. Najib policy is to give lots of free aid, so those who earn less than RM4k (which is 90% or more of the population) would receive aids. Tak ada pun menyiksa golongan rendah, malah antara kenaikan inflasi dan kos sara hidup adalah kerana implementation of minimum wage. Semua orang mahu, tapi tak pernah memikirkan akan akibatnya. Duit bukannya percuma, tidak turun daripada langit. Tiada sesiapapun berhak mendapat lebih daripada sepatutnya, jika mereka tidak tahu or tidak layak. So akhirnya, naiklah gaji banyak mana pun, akhirnya harga barang naik juga, so jadi “kosong, kosong” kembali.

      Revolusi rakyat yang ok tak apalah, jangan hancurkan sana dan sini sudah, kerana semuanya perlu dibayar. Revolusi main suka-suka kerana dengki yang orang lain lebih banyak wang, tidak akan membawa Malaysia ke mana-mana, apabila dirampas hak orang2 kaya tersebut, akhirnya negara menjadi miskin, dan apa yang akan terjadi? Ini telah berlaku puluhan kali di dalam sejarah dunia. Rampas bagaimana pun, sendiri juga yang akan merana kelak.

      Mulai hari ini, anda jangan salahkan orang lain di atas masalah anda. Anda tangkis semuanya dengan cara yang baik. Anda perlu bermula dengan bertanya kepada mereka yang telah berjaya, bagaimanakah mereka melakukannya. Kemudian anda perlu bertindak. hidup anda, di tangan anda, bukannya di tangan Najib dll.

      BTW 90% Malaysia population ini tidaklah dikategorikan sebagai miskin. Hanya beberapa peratus sahaja yang diketahui memang miskin.

      Pernahkah anda mendengar atau membaca, “simptom orang miskin mendapat wang judi loteri yang banyak”. Ianya satu kajian thesis yang menarik, anda perlu membacanya.

      Reply
      • Elbert Sikuil 15th July, 2014, 1:41 pm

        Salute you Sharif Rahman, Good. I like what you wrote

        Reply
        • Sharif Rahman 23rd July, 2014, 9:13 am

          Due to the upcoming long holiday, I will publish an interesting article on the Wealth of Malaysia and Singapore. Who is richer, and getting richer, faster? This is a contentious issue, and many people think that Singaporeans are far richer than Malaysians. And they thought the ringgit is always on the losing side, against the sing dollars. Well, want to find out the real data?

          Reply
  • malaysian 16th February, 2014, 11:45 am

    Hi Sharif ,
    satu article yg bagus , tapi pada pandangan saya , kerajaan tidak boleh guna duit kepunyaan tabung haji , BSN , bank rakyat dan sebagainya sesuka hati , penyimpan dan other debtor kena didahulukan .
    satu hal lagi – kerajaan boleh print RM sesuka hati , jadi ikut teori ,harta kerajan boleh tambah billion-billion lagi , tapi yg penting apa “nilai” RM yg di print itu ? satu bangunan yg dimiliki oleh kerajaan berharga RM 1B tapi tiada org nak beli , RM1 bilion hanya jadi book value RM 1B sahaja . kerana terlalu banyak RM diprint , RM sudah rusuk harganya dan kebanyakkan makanan / barang kegunanan hajian malaysia diimport , ini menyebabkan barang harga nak dan kos hidup rakyat jadi tinggi , yg teruknya , gaji tetap dibayar dengan RM….
    Pada masa sebelum perang dunia kedua , Jerman pun sangat kaya ada bertrillion-trillion Mark harta , tapi Mark jerman yg over print itu langsung tidak berharga .

    Reply
  • Sharif Rahman 17th February, 2014, 10:06 am

    Di dalam pengiraan saya, memang para penyimpan TH etc itu didahulukan. Anda perhatikan data tersebut. Sebagai contoh, pendeposit TH telah mendeposit wang sebanyak RM42 billion, tetapi TH memiliki wang melebihi 90 billion. Jika perlu diberi balik, kerajaan akan mendapat 48 billion lah. Inilah nombor yang digunakan, bukannya keseluruhan 90 billion tersebut. Maknyanya, ianya most likely adalah wang kerajaan dan boleh digunakan kerajaan jika perlu.
    Memang jika ringgit di overprint, nilainya akan menurun. Untuk mengelakkan ini, BNM mengikut satu prosedur yg amat mudah (disebut di dalam Siri 259 Trillion Vs 5 Trillion).
    Jerman telah mengalami kehancuran ekonomi akibat peperangan, itulah masalah mereka. Mereka melaluinya sebanyak dua kali, bukan sekali. Tetapi hari ini mereka tetap menjadi antara negara terkaya. So jika kita belajar daripada sejarah, biarpun hancur ekonomi, ianya boleh dibetulkan kembali dan kembali menjadi negara yang ulung. Oleh itu jangan kita khuatir akan keupayaan kita sendiri. Yang penting ialah kita berusaha keras dan belajar dengan rajinnya.

    Reply
  • kampunginvestor 18th February, 2014, 8:42 am

    Good also if one day Malaysia bankrupt. Not trying to be cruel BUT to awaken most Malaysians that are still sleeping!

    Just my 2 cents!

    Reply
    • Blur 22nd February, 2014, 12:54 pm

      Kampunginvestor
      We dont need ur 2 cent idiotic advice here! It is you that has been sleeping all this while with mouth wide open waiting to be spoonfeed..Talk with facts please.

      Reply
  • Sharif Rahman 18th February, 2014, 5:00 pm

    Well, that is a drastic solution! To awaken them, that is why i do research. Capitalism has a way, which is rewarding to those who are deserving. However when the government intervenes too much into the economy, those who are not deserving, got too much money and free time, so they would never need to wake up. They will be the perennial cry babies.

    Sometimes, a financial crisis is needed to awaken people, the most drastic is devaluation and the subsequent bankruptcy. However in some cases, this may not work as expected, because Argentina has gone through multiple crises and bankruptcies, yet they still “do it”.

    The everlasting answer would always be better “education” and “hard work” a point that i am trying hard to make.

    Reply
    • Blur 22nd February, 2014, 1:08 pm

      Dear Sharif
      Your analysis is well appreciated and that’s what we need. Judging from most of the comments above, looks like these people are just “kedai kopi” talker. Nothing other than perception. Do agree with you that hardwok is the keyword to survive.

      Reply
  • Passerby 22nd April, 2014, 12:01 pm

    Hi,

    You only investigated the assets? You think you are so clever with these analysis? These research are so shallow and inconclusive. Have you ever thought why the government wants to under-declare the assets? it’s possible underlying motives?

    If you are a researcher, you should know better.
    You are just a lousy researcher, who is biased to only trying to prove people wrong and bullshit out whatever you can. As a researcher your research objective should cover all aspects, so that you could not missed out other possibility. You claimed as though you were correct. You think you are better than the government people? You are just like them. Claiming things without evidence of the whole picture. You investigate their assets. Then what about their debts?

    More importantly HAVE YOU INVESTIGATED WHETHER THE GOVERNMENT UNDER-DECLARE THE DEBTS?

    NOTE TO EVERYONE : *don’t believe everything you see on the internet.

    Reply
  • Sharif Rahman 25th April, 2014, 3:50 pm

    Dear Passerby,

    Thank you for your “frank” comment, however you also ‘passed’ judgment without any proof. Not one. That’s too bad. It is true that people reading here in the Internet need to be cautious; with people who create confusion and statement without backing them up. You asked me where is the calculation on the debt side, but the onus is on you to show credible evidence. Didn’t you even read the article properly and analyzed it? That is a shame because I did state that regarding the debt level, it is a topic widely discussed and many papers or articles have been written on it. What was lacking is the asset side. Thus the focus of the article. Nevertheless, the level of debt of the federal government was indeed, stated in the article.

    Regarding under declaring debt, again, the burden of proof is on your shoulder. Why don’t you answer it for us, instead of asking others to answer for you? Even if i give you the answer, you wouldn’t like the answer anyway because of your very negative perception. Interestingly, i found evidence that there is a government who is underdeclaring its assets (not debt), by a wide margin (in the tune of trillions). We shall wait for you to pass us that information that you claimed.

    The article is a research on the assets of the government of Malaysia. Why should i busy myself with the debt of the government? Do you know how many articles regarding debt of the government out there? Frankly speaking, those articles were the unbalance ones, declaring bankruptcy etc. but without showing the asset side. Some articles declaring bankruptcy since more than 10 yrs ago.

    Of course I am correct on the research. You wrote a lengthy comment, but you did not furnish any evidence. Again, not a single one. I quote what you wrote:

    “Claiming things without evidence of the whole picture”.
    It is obvious you are making claims without looking at the whole picture.

    In conclusion, the Internet is widely used by people like you who talk “courageously” but when challenged, would not do anything because of laziness and sometimes, just sheer stupidity. Further, people like you love to say bad things about others, because you hide behind the anonymous internet. Why don’t you use your own name and be proud of it?

    Reply
  • nizam 23rd July, 2014, 12:43 pm

    the discussion seem to lead to the point where we actually can paid off the debt by selling our sovereignty.

    Reply
    • Sharif Rahman 24th July, 2014, 9:18 am

      Do you know how nationalization works? No country will ever sell their sovereignty because of debt. Argentina went bankrupt not once, but several times, still they own their country, and everything inside, if they wish. So don’t worry so much about it. This is the thing I want to point out.
      The end of the article mentioned about how wealthy Malaysians could be, the answer will be in the upcoming article mentioned above.

      Reply