Bakun Dam - Malaysia or Sarawak?

- Putrajaya agrees to sell the multi-billion RM Bakun Hydroelectric Dam

- No power transmission to peninsular as a result which could span 670km and costing RM9bn

- Cabinet has agreed on the Sarawak's government's proposal

Multi-billion question: At what price?

- Official overall cost of project is RM7.3bn (not yet factor in cost overruns, compensation for delays & interest)

- Speculate price tag RM8bn, but, Sarawak was expecting a mere RM6bn only

Why such a BUYing impulse?

Sarawak said the state needs the electricity generated to power up its SCORE corridor, which still do not has concrete investment yet. However, Kuching deny there will NO power glut by stressing the demand is there to meet soon.

Romer First, Now Summers....Gone

The two chief economic advisors to Obama will not be around in 2011. Summers announced today that he is returning to his secured, tenured professorship at Harvard (which he cannot do if he lingers in Obamaland past January the 1st). Romer has already returned to her protected sanctuary at Berkeley. Neither of these two need worry about the plight of the millions of unemployed Americans. Romer and Summers have safe jobs. They work for the government, i.e. they are professors.

Now, all eyes turn to what kind of Keynesian will replace Romer and Summers. It is unlikely that Obama will change stripes. He likes big government and despises the private sector, so that if he goes after a corporate type, you can be sure that the "new corporate type" will be someone whose sympathies rest with big government, higher taxes, and more regulation.

Only a new Congress can reverse the disastrous course of this presidency. Shifting the deck chairs won't help as long as the Captain Queeg is in command.

6 Key Takeaways from ETP open day

Key Takeaway from Economic Transformation Programme (ETP):

 

  

 

Transforming Klang River to River of Life ?

 

Funding ?

 

Throughout the presentation, this sentence keeps on repeating to remind us... So did here...

 

Source: www.pemandu.gov.my

The Unemployed Over 50 -- Never Work Again?

Why can't the 50 and over population find jobs? The New York Times has a lengthy article today spelling out the cold hard facts...no one wants to hire anyone over 50 years of age. Why? The article gives no reasons and laments the problem.

The answer is obvious.

If you are an employer and you hire someone over 50 years of age, that person can sue you for age discrimination if you every decide to let them go. In fact, a large number of such folks do sue for age discrimination when laid off. They are part of the protected class along with minorities, women, etc. Who wants to hire people who can sue you if you lay them off later? The answer: no one.

Over 50s will not get hired until the absurd "age discrimination" laws are repealed or until over 50s gain the right to waive their rights to sue. As things stand now, only a fool would hire someone over 50 years of age.

You might say: well isn't that illegal...to not hire someone because they are over 50 years of age. The answer is yes. But illegal immigration is also illegal.

Understanding REITs

What is a Real Estate Investment Trust (REIT)?

A REIT is a collective investment scheme that invests primarily in income-producing real estate assets such as shopping centers, offices, warehouses and hotels. To qualify as a REIT, a fund must have most of its assets and income tied to real estate investment and must distribute at least 90% of its total income to unit holders annually. In Malaysia, REITs are exempted from corporate tax if it distributes at least 90% of its total income.

Who is unit holders?

Every investor (like us) who invest into REITs are called unit holders, and entitled to receive income distributions (dividend).

Why invest in REITs?

REITs typically provide high income distribution (currently, 6-10% annually) plus the potential capital appreciation. Comparing 3-4% fixed deposit rate, REITs dividend yield is definitely better.

How to invest in REITs?

One can buy units in any REIT, which is listed on Bursa Malaysia, just like normal stocks trading.

Differences between REITs and Unit Trust?

Direct vs Indirect investment. Almost the same.

How often REITs makes an income distribution?

It depends on respective REITs, usually semi-annually or quarterly.

What is the Tax treatment of unit holders?

Withholding tax will be deducted for distributions made to the following categories:

Risks involved in Malaysia REIT...

- Low liquidity

- Unfavorable interest rate environment

- Deflation and Devaluation of assets

Finance Malaysia's view:

Generally, REIT is suitable for everyone (young, experienced, rich, resourceful, professional...) because it is an hassle-free exposure to real estate investment. Finance Malaysia hopes that more players will join the REIT bandwagon in Malaysia, such as IGB (Mid Valley City), IOI Corp, and even AEON's Jaya Jusco.

Coming next...

- More on M-REIT

- 5 rules of thumb on MREIT investing

Why Great Eastern chose KATM as its partner?

Referring to previous article "Issuance of New Family Takaful Licenses" on 1st September 2010, many people are skeptical about Great Eastern's (GE) partner -- Koperasi Angkatan Tentera Malaysia (KATM). Given the other 3 new consortium which partner with banks, I am not surprise by those reactions.

To recap, the 4 new family takaful licenses:

1. AIA with Alliance Bank
2. Ambank with Friends Provident Fund (UK)
3. ING with Public Bank and Public Islamic Bank
4. GE with KATM

KATM, the country's Armed Forces multi-purpose cooperative, is however, no stranger to the insurance industry and it is a substantial shareholder of PacificMas with 16.4% stake. Meanwhile, Pacific Insurance Bhd is a wholly-owed subsidiary of PacificMas. (See picture below to see the GE-KTAM relationship)

Why with KATM?

KATM has 140,000 members which could be a huge market for GE to tap into. Another reason is that GE has to look into it's agents rice-bowl as well, if GE was to tied up with a local bank. Instead, GE dive into the 'blue ocean' where KATM is an untapped market of their existing agents. Other than that, this kind of partnership is well-isolated from political view, as KATM is not a company and it was not linked with government either.

Going forward...

Business Times had reported almost a year ago that Great Eastern had roped in former Prudential BSN Takaful Bhd chief executive officer Mohamad Salihuddin Ahmad to head its Islamic insurance operations.

Great Eastern would have a clear head-start compared to the other new takaful operators come next year and its reputation itself would give its an extra mileage.

Great Eastern is the largest insurance group in Singapore and Malaysia, with assets of S$48.5 billion (RM112 billion) as at February 10 2010 and 3.8 million policyholders in both countries.

On 30th August 2010, PacificMas saying it plans to sell its entire stake in Pacific Insurance Bhd to Fairfax Asia Ltd (Canadian company) subject to Bank Negara Malaysia's approval.

That We Know

Larry Summers, the main economic advisor, said on CNBC this morning that "a failure of regulation caused an economic crisis.....that we know" He could not be more wrong. A housing bubble induced by favorable tax treatment of housing combined with Fannie Mae and Freddie caused the economic crisis. Regulation actually made matters worse. The previous Basel accords encouraged banks to substitute riskier assets for safe assets (the new ones are likely to do the same).

Government regulation has never prevented a crisis and never will. Most economic crises are government induced. The government needs to get out of the way.

If Summers doesn't understand what caused the financial collapse of 2008, then it's no surprise that his policy recommendations to Obama have been as misguided as they have been. Summers should head back to academia, where he can continue to pretend that his policies work. People in the real world know better. "That we know."