ValueCap Not For Bailouts?

Finance and Deputy Prime Minister Datuk Seri Najib Razak continued to insist that the RM5 billion injection of public funds into the Valuecap Sdn Bhd investment fund will not be used to either bail out the politically connected of any government-linked companies (GLCs) as reported in the media today.

His denial has come to calm public fears and unhappiness over the move to direct the Employees Provident Fund (EPF) to lend the RM5 billion to Valuecap.

However, his assurances lacks conviction for he has still begs many many questions.

1. With so many credible foreign and local investment and fund managers with extensive experience in the local markets, why is it that the Government is not direct funds to these institutions to “value invest”? Why is it that the Government is directing these funds to a little known company, ValueCap, with uncertain, opaque and questionable track record to invest such a large sum of money?
   
   
2. The fact that the original bond amounting to RM5.1 billion which will expire in March 2009 has been further extended beyond the terms of the agreement raises the question as why a company which has not been able to repay such an amount, be extended an additional RM5 billion? ValueCap is set to become one of the rare fund management company in the world which invests with nearly 100% of its investment capital sourced from loans and not from investors.
   
   
3. After initial protests by the public on EPF's loan to ValueCap which is subjected to extensive risks, the Government took the most irresponsible step of becoming the guarantor to the loan. What that essentially means is that should ValueCap fail to repay the EPF, the tax payers will then bear the burden of the loan. 
   

This measure will also create a moral hazard situation whereby the fund managers will likely adopt a high risk investment strategy since there is no “downside” to the investment for the Government will bail them out in the event of failure.

In fact, the repeated attempts to provide verbal reassurance on EPF's RM5 billion injection by the Finance Minister clearly demonstrate continued public opposition to the measure since it was first announced more than a month ago.

Hence, Datuk Seri Najib should do what a responsible Finance Minster should do, that is to reverse the RM5 billion injection decision, and instead place appropriate pressure on the EPF investment board to improve the performance of its investment returns.

Crime is all Perception

That's what the Royal Malaysian Police and the Government would like you to think. Clearly, it seems if since the Police can't fight crime effectively, the next best thing to do is to fight perception.

The Royal Malaysian Police and the Deputy Prime Minister have over the past few days, gone on an offensive to blame the high crime rates in Malaysia on “perception”.

The Star reported on 30th November that the Deputy Inspector-General of Police (IGP), Tan Sri Ismail Omar said the latest statistics showed the crime index to be 772 cases per 100,000 residents and compared it favourably against Singapore which according to him “recorded 704.7 cases, Hong Kong (1,166), Japan (1,569) and Australia (4,470)”.

On 1st December, the IGP himself, Tan Sri Musa Hassan was reported in the New Straits Times saying that “our crime rate is still low compared with many other countries although the global trend shows an increase... Singapore's crime rate is 740.7 cases for every 100,000 population, Hong Kong's is 1,166, Japan's is 1,569, Australia's is 4,470 and Rome's is 8,341.”

As reported in the Malaysian Insider, “Malaysia is still a very safe country, but the problem is public perception. We are trying our level best to give a correct picture,” Federal Criminal Investigation Department director Datuk Mohd Bakri Zinin told The Straits Times.

And as reported in the media today, our Deputy Prime Minister, Datuk Seri Najib Abdul Razak said that "our perception of crime must change" because “based on the statistics given by the police, it indicates that the crime rate in Malaysia is lower than Japan and Hong Kong.”

The above appears to be a concerted effort by the Government to downplay the significance of 2% increase in the crime index as of October this year compared to last year, as well as to blame the public concerons over high crime rates in Malaysia as a matter of misplaced “perception”.

Howvever, the Royal Malaysian Police has failed to provide the full picture in the statistics provided and instead have given a misleading perception that Malaysia is much safer than Japan, which is renown as one of the safest countries in the world.

Based on statistics provided by the Statistics Bureau of Japan, in 2007, the crime rate per 100,000 is 1,493.6. However, approximately 75% of this number is classified as “larceny” or theft (e.g., shoplifting etc.)

Similarly in 2005, the crime rate per 100,000 is 1,775.7. However, larceny made up 76% of all cases, while violent crimes which includes homicide, arson, rape, bodily injury etc., made up 3.8% or 66.6 cases per 100,000. Homicide and rape cases form 1.09 and 1.62 cases per 100,000 population respectively. In contrast, for 2007, violent crimes recorded 180.1 cases per 100,000 while homicide and rape cases in Malaysia form 2.12 and 11.47 cases per 100,000 population respectively.

The biggest contrast is for robbery cases in Japan which records only 4.69 cases per 100,000 while it's a staggering 88.76 cases for Malaysia. Similarly, criminal intimidation in Japan records only 1.92 cases per 100,000 while in Malaysia it's 21.31 cases. Hence, the Government's attempts to paint a picture that Malaysia is much safer than Japan is clearly misleading at best. In fact, from the statistics of violent crimes above, Malaysia is a much more dangerous place when compared to Japan.

To further illustrate how the comparisons with the countries highlighted is misleading is that the Malaysian index includes on violent and property crimes, but excludes white collar and moral crimes. For the Japanese index, “intellectual offences” (e.g., fraud, embezzlement, counterfeit etc.) and moral offences makes up 20% of the total crime rate in 2005.

Similarly in Singapore, the Singapore Police Force announced a crime rate of 715 per 100,000 in 2007 where commercial and miscellaneous crimes constitute 21.8% of the index. Hence the claim that Malaysia is nearly as safe as Singapore is clearly unfounded.

In addition, separate crimes ranking table compiled by NationMaster, Malaysia is ranked 34th in terms of the number of murders per capita, which is higher compared to Australia (43), Italy (47), Hong Kong (59) and Japan (60). In terms of rapes per capita, we are ranked 38th, but still ahead of Italy (46), Japan (54) and Hong Kong (55).

Therefore, while Malaysia is clearly not the worst country in the world in terms of crime, the fact that the crime index has risen by more than 45% since 2003, while violent crimes have increased by more than 85% demonstrates clearly the dire circumstances we are in.

The people of Malaysia no longer feel secure and safe walking the streets. Hence the Government's attempts to change the “perception of crime” in Malaysia by citing statistics which are most misleading is most irresponsible. Instead of continuously blaming public perception as the key reason why crime is seen as serious in this country, the Government and the Royal Malaysian Police should instead focus its efforts in fighting crime and improving its credibility with tangible steps, such as implementing the full recommendations of the Royal Police Commission report which included the restructuring of the police force such that 30% of the police force is transferred from administrative to crime-fighting functions as well as to set up the all-important Independent Police Complaints and Misconduct Commission.

Najib: Liberate the Minds of Students

Here's what The Star reported this morning:

There should be an intellectual renaissance to open up and liberate the minds of students, and this should start in the universities, said Datuk Seri Najib Tun Razak.

“Our education system must chan ge. Our children are just not curious enough. They must be curious about the world. They must ask questions,” the Deputy Prime Minister said.

This should really be posted on my Education blog, but I wasn't even going to discuss the merits of the statement, but just to put it up to show the sheer "audacity" of the Prime Minister-in-waiting, so this blog might be more appropriate.

Can you believe that he probably read his speech with a straight face without flinching at all?

Our EPF Savings In Jeopardy

The Finance Minister, Datuk Seri Najib Tun Razak announced two days ago that the Government will inject RM5 billion into ValueCap Sdn Bhd to invest in “undervalued companies”, presumed to be those listed on Bursa Malaysia. This was part of the initial slew of high-level measures announced by the Finance Minister, who at the same time confirmed that there will be no cut in the budgeted expenditure for 2009, currently debated in Parliament.

He then further announced yesterday that the source of the RM5 billion additional investment will not be from the Government's budget but instead be sourced from Employee Provident Fund (EPF)!

To me, directing EPF to fund RM5 billion ValueCap investment to shore up Bursa Malaysia is an abuse of Government's authority and puts to risk hard-earned savings of millions of its contributors. This clearly is an example of Barisan Nasional's bad governance and damages the credibility of Datuk Seri Najib as our new Finance Minister.

This RM5 billion off-budget measure raises several very worrying questions and concerns:

1. 1.What measures have been put in place to ensure that the RM5 billion will be utilised in a fair and transparent manner and not be used instead to bail out Government-linked or crony companies whose stock prices have plummeted during the current financial crisis? Will ValueCap for example, be investing a substantial amount into Malayan Banking Berhad who has been hit badly, to a large extent due to its purchase of Bank International Indonesia at exhorbitant prices?
   
   
2. Secondly and more critically, how will supporting the prices of stocks listed on Bursa Malaysia actually change the fundamentals, including but not limited to the efficiency and productivity, of our economy and its companies? 
   
   
3. Most importantly, while agencies such as the EPF are under the purview of the Finance Minister, he has no basis to direct the EPF to make particular investment decisions. EPF investments is led by an investment panel, headed by Y.Bhg. Tan Sri Samsudin b. Osman and they should be given the leeway to decide what they regard as the best investment approach to protect and grow the hard-earned savings of ordinary Malaysians.
   

As a trustee of members' savings, the EPF must discharge our responsibility with sincerity, honesty and trustworthiness at all times. The investment panel's key objective should be looking at making investments at best prices to maximise returns, instead of investing for the purposes of supporting the stock market which will inevitably put at risk the EPF contributors' interest.

The 2nd Finance Minister's attempt to reassure the public that ValueCap will make money for EPF isn't reassuring at all, as it fails to consider the very real possibly that ValueCap can at the same time lose money for the people!  Why must EPF be forced to invest via ValueCap when it has its own investment panel?

And since our financial institutions have been declared to be sound and financially stable, and hence not susceptible to the current global financial crisis, the Government should let the market dictate its stock prices, while the Government focuses its spending areas which will generate high economic multipliers for the economy.

Where's The Credibility?

On 20 January 2009, Prime Minister in-waiting said:

Barisan Nasional (BN) leaders should break out of their comfort zones and reorientate their approach to be constantly in tune with the people's aspiration, Datuk Seri Najib Tun Razak said today.

Calling on BN leaders to raise to the occasion, the deputy prime minister also urged them to rearrange their strategies and resolve to make changes not only to themselves but also to the party for the sake of the people and country.

Can you believe him?

(I'm biased of course, as I was charged in court for lighting up candles in public without permit within 3 days of him making the statement)

Now we have the new Chairman of Election Commission, telling us with a straight face that the nomination date, is set more than a month away on 29 March has "nothing to do with the UMNO General Assembly" that is scheduled to be held from 24 to 28 March.

He was quick to deny the scheduled dates were made to accommodate the Umno party polls in late March, saying the law required the by-elections to be held within 60 days of the seats being vacant, which falls on April 11.

"The date was chosen for the convenience and comfort of all parties and not with any political considerations," said Abdul Aziz, who assumed the post six weeks ago.

He said the situation in Perak was still tense after a government switch and the time-frame for the Bukit Gantang by-election would allow all parties to "cool off", adding he was hopeful there would be a high voter turnout despite polling day being a Tuesday.

Yeah, right. He's an UMNO stooge, no question about it.

Oh, and BN reform? My foot.