Malaysia Plans to Borrow Money from Japan Amid 1 Trillion National Debt - What You Must Know

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1. Malaysia prime minister Tun Dr Mahathir has expressed his intention to borrow from Japan to lighten the financial stress on the Finance Minister. The move is expected to trim down the interest payable on current national debt.

2. It is normal for governments to borrow money to develop their countries. In most cases, the borrowing are deemed beneficial as long as the economic stimulation from the borrowed money overweights the cost of borrowing.

3. Compare Singapore and Malaysia, GDP of Singapore is at USD 297Bil while Malaysia stood at USD 296.4Bil, which was similar (latest data available, year 2016). Singapore debt estimated at USD 532Bil, while Malaysian new government claimed the national debt to be USD 272Bil. The charts below shows a clear comparison between the debts of Malaysia vs Singapore, and their GDP. If you have no economic background, GDP simple means how much value of goods and services the country people has produced for the year.

Figure 1

Figure 2

4. Refer to Figure 1, the GDP of Singapore was slightly more than Malaysia, despite having much smaller land, no resources, and smaller population. Something is very wrong but it's not today's focus. Now the new government is telling the people that Malaysia debt is in a very bad shape, citing that the debt is already at 80% of current GDP according to their estimates.

5. Comparing the current debt estimation against the 2016 reported GDP, Malaysia debt to loan ratio was 92%. What does this percentage mean? Do you think that once a nation's debt reach 100% of  GDP, it will go bankrupt? If you think it will, please look carefully again at Singapore's national debt to GDP ratio. It's at whopping 179%. Did Singapore go bankrupt? No, they are doing very well, even better than Malaysia in terms of average income per person.

6. How does this happen? I give you a simple example:
You have a food stall that sell RM 10,000 food a month.
From there, you make around RM 3,000 net profit a month.
You borrow RM 10,000, for 30 years from ABC bank to buy ingredients and machine.
Bank requires you to pay RM 60 a month for next 30 years until the debt and interest is cleared.
Does owing RM 10,000 to bank make you bankrupt? 

NO.

7. While it's good to keep the national debt low, a higher national debt or 100% national debt to GDP ratio does not guarantee national bankruptcy. IT IS NOT A DIRECT EQUATION.

8. Tun Dr Mahathir borrow from a low interest nation is a strategic move. From current debt portfolio, there are some debts with high interest up to 6.66% per annum. Japan policy rate is now at -0.1%. If Malaysia is able to secure a USD 5Bil(apprx RM 20Bil) loan from Japan at 1% interest rate to settle the high interest debt, that will save 5.66% interest for the amount, which could be apprx USD 283mil (RM 1.13B), ideally.

9. However, if Malaysia were to borrow from Japan, Japan will have the says on the allocation of the fund. We might not be able to offset the high interest loan with all moneys borrowed. In this case, with little interest written off from the debt, we are actually pilling up more debt. If we can only use USD 1Bil to settle the existing debt, that would add USD 4Bil to our existing debt portfolio.

10. Not all political moves should be viewed numerically. With this loan, we might see increased  trades and technical support from Japan. This is very beneficial to Malaysia in the long run. The money borrowed can be spent on infrastructures and fiscal loosening. The key objective here is not so much to reduce the debt of the country to 0, but more on increasing Malaysian's productivity and our spending power.

11. The main reason to postpone the RM55B HSR project shouldn't be the national debt level. This is misleading. With inflated project costing, be it at high or low national debt, the project need to be re-assessed.  The affordability of the expensive ticket is one thing, the time taken for the project to break even is another argument. Consider from the government financial perspective, the ticket fee vs construction cost break even period calculation model has underestimated the domino effect of economic impact it might bring.

12. Government gets tax income one way or another when there is a good or services created, whenever there is a value creation process. Don't underestimate the power of RM1 note. When the note is transacted for 4000 times in a year, it creates RM 4,000 GDP. Along the 350km railway, imagine property developers build and sell RM 300B worth of property in 10 years to come from the spillover effect of HSR, government would have generate hell lot of taxes from there (eg, company and staff income tax, import tax for materials, SST,  etc ). What about the tourist spending? Singaporean weekend visit to spend and have fun? New jobs created, new business opportunity, new technical and technological exchanges. Think independently, HSR is not a bad project at all. Re-tendering the project to involve more local, at lower cost, it will be a game changer for Malaysia.

13. Malaysian debt is not as scary as the political propagandist want you to believe. As long as we can increase our productivity, work harder, create more wealth and value, Malaysia will have no problem paying the debt and WILL NOT GO BANKRUPT. Even with RM 1 Trillion debt, with 32 million malaysian, each will bear only RM 31,250 of debt . Today if you buy a Toyota Vios with RM 25k D/payment, you already owed more than RM 31,250. So you get the concept?

14. The government should prepare a platform for domestic business to grow. Elevating the competitiveness and productivity of local businesses against international player is a must. Empowering the people with knowledge and technical competency is a must. Educating the people with the right value, culture and mindset is a must. Finding excuses to buy time for delaying manifesto, is a shame. Do what you must, and lead the rakyat by example, and create a high competitive nation. Happy New Malaysia, Happy New Merdeka.

15. If you love Malaysia, if you want Malaysia to be great again, if you want to have New Malaysia where people is the boss to their government, spread the awareness to more people. Knowledge and awareness is the key. If people are still easily manipulated by political lies, Malaysia will never change. Changes start from Rakyat. Share this out!

Tabung Harapan Malaysia - Why You Should Not Donate

Tabung Harapan Malaysia Is Not Required

1. The Pakatan Harapan government promised to abolish the GST in their PRU14 manifesto.

2. During the campaign period, they were asked how are they going to maintain a healthy fiscal budget without GST. They said that they can do it by retrieving the money wasted and embezzled by previous corrupted officer. Besides, they will also make sure the government run clean and lean, which will reduce wastage and spend money effectively.

3.  Since it has been foreseen and pre-planned, there is no need to form  Tabung Harapan Malaysia (THM). If the government know so surely they can solve the debt dilemma without needing to crowdfunding before the election, then it does not justify the forming of such fund.

Many Other Ways You Can Help Malaysia

4. Have you paid your PTPTN? As of November 2017, PTPTN has RM 6.8 billion due loan outstanding.This alone, is enough to pay off 4.2 billion debt of 1MDB. RM 2.8 billion are form people who has yet to pay a single sen. Brilliant, isn't it ? PTPTN is a federal fund. When you owe federal money, federal has to owe someone else money. So those who are yet to pay your PTPTN, know what to do? Instead of donating, pay your debt first!

5. Malaysian must stop freaking duit kopi culture. If you talk on the phone while driving and pulled over by officer, be a patriotic citizen and take the summon ticket. If you still owe your saman, pay it!

6. If your life is not that hard, do not be muka tembok and claim your BR1M. If you can spend on luxury item like Iphone, Starbucks, Travel... yes , I'm talking about you!

7. Hey tax-saving heroes. Well, you know I know. Many people are smart ass, damn savvy to "optimize" their tax, be it company or personal income tax. Seriously, it is not really that hard to do it. If you are patriotic, just .. pay your tax, and be honest to yourself. That's it. No elaboration.

8. Catch the fatty JL, Fatty Hippo, Shake out the Chicken, and all their cronies. Return people's money to people. PH government has just reduced the number of government officials and created so much unemployment. Give them some jobs, since many of them probably know insider info. 

9. PH government to run real transparent, effective governments and cut down wastage in years to come, that would reduce fiscal deficit.

More Fund, More Temptation 

10. While there are many other ways to solve the debt, forming a government crowdfunding is a shame for a nation, and a confident killer for FDI. PH government is telling investors "I cannot fix this mess as I boasted, I need minta derma from my own people".

11. To be neutral, whether PH government is all that clean, is yet to be proven. Will THM be another 1MDB? We do not have crystal ball. I do not say it will, but you cannot say it will not too.

THM Is Really Not Necessary After All 

12. If Rakyat can do the four points mentioned above, there would be easily over RM 10 billion, or even 20 billions of fund collected by the government (don't be surprise, normal people around us, owe government a lot of money too).

13. There is no shortcut in cleaning a 61 years mess. Donating to THM, and quick-fix the debt issue, is not healthy to the nation. The real revolution is not changing of government. Is the changing of the people's quality and mentality. PH government should not shortcut this revolution by asking for crowdfunding. They need to deliver what they promised. GST is to be abolished, not today but one day, when Malaysia is clean and efficient as a nation, not just the government. 

14. Malaysia is you, me, and him. Not Tun M and his government.

15. Happy New Malaysia.

You Need to Know This Before You Invest In Property

1. Property investment is a long term commitment.

Common Mistake

2. Not all property purchase are good investment. A good property investment make cash for you. You need to minus costs such as :

i) Bank Interests
ii) Maintenance Fees
iii) Quit Rent
iv) Assessment
v) Insurance
vi) Periodical repair
vii) Legal Fees
viii) Agent Fees
ix) Stamp Duties
x) RPGT
xii) Title Transfer Fees

3. Alright. Don't be scared by the long list. Gone are the days when you can flip and make a fortune in property market. People no longer buy a property based on speculated news. Some people call this property market slowdown, I call it re-positioning and consolidation/normalization.

4. If you own a business, it has to give you income from time to time. When the income increase over the year, your business increase in value. This is why shares with higher dividend fetch better price - the same reason why you look for FD with higher interest.

Rule of Thumb

5. If your rental return is lower than the interest you pay to the bank and your ongoing maintenance, it is not a good investment. You could be betting for nearby amenities upgrade, but unless your get insider news, chances is that your seller has factored that in. If you rely on insider news, it's nothing official until it's announced. Your risk is high especially on high leverage investment like buying a property.

6. Running Airbnb is a good idea, but pay close attention to the location you choose and the matrix of the surrounding development. Your neighborhood might not welcome such activities and it might depreciate your property value. Property are bricks and mortars but each community is different. You should view them differently.

7. Do not jump in buying a property just because it is cheap. If the property generally remain cheap even after many years of vacant possession, check out the developer background and the property management issues. If the developer has bad reputation for delivering poor workmanship, your property might not appreciate for years to come.

8. Do not rush in to buy a secondhand property below market value. Hang around and investigate the immediate neighbor and look out for possible nuisance. Do check with property management, make sure there is no serious outstanding issues with the property. Buy a good property at market price is better than buying a problematic property below market price.

9. Buy a property like a property tenant. How much are you willing to pay to rent there? How convenient is this property if you are working nearby? How much can you afford to rent here, if you are working nearby? Ask these killer questions. One day, you need to answer that to your tenant. If your property is not rented out, you are making a bad investment. Now imagine your cash flow is stuck.

10. The above law is exceptional when you have holding power and you are offered a rare property in an island where land is limited, and the economy is improving that you see airport undergoing expansion, roads becoming wider, and more businesses is setting up. Buy and wait patiently for at least 6 to 10 years, then you will be heavily rewarded. Best is when you can find a property like that with a high rental value.

Easy Way Out

11. Do you know nowadays you no longer need to find tenant, collecting rentals, monitor your housekeeping contractors? It's very tiring. Are you aware that you no longer need to worry that your property management ruin your investment? You can invest in a property managed by 5-star hotel chain. Imagine you can sit back and relax, and watch the cash flowing into your bank statement rather than paying mortgage from your pocket and make banks richer. Be an intelligent investor, not a bank feeder.

12. Use that rentals collected to invest in another property like this, and keep the dollar ball rolling.

13. Now you get the idea? If you don't, read from point No.1 again.

Langkawi is the New Property Investment Focus

The Legend is Back

1. Tun Dr Mahathir has won a glorious victory in PRU14 representing Langkawi Parliament.

2. In early 1980s, Langkawi island was an island of farmers and fishermen. in 1987, it was declared to be a duty free island. That was where the Langkawi saga started. Duty free shops started to mushroom and more and more people going to Langkawi. Tourism related businesses started to make a lot of money.

3. In 1991, the first Langkawi International Maritime Aerospace exhibition was held. According to the narration of the local, people had to sleep in airport, because there was simply not enough hotel back then. The once in two year event bring Langkawi under limelight, and it gain track of international attention since then. More and more international event such as La Tour De Langkawi, Supercar Exhibition, yacht exhibition  and triathlon events is held there. Today, the island is full of events all year long. You can check the event calendar here.

Behind the Limelight

4. Over the past 15 year with BN ruling without Tun M, Langkawi fades in the media facing the competition from its peers in Indonesia, Thailand, and Philipines. Even though the number of tourist grew from under 2 million to 3.6million, it's hardly reported in the news nor it was promoted well to the locals.

5. Langkawi faces the stagnation of tourist arrival growth since 2014 due to airport saturation of handling capacity. Currently it can handle 2.5 million arrival per year. The airport is under expansion and the first stage will complete September 2018. By 2020, the airport capacity will be doubled to 5.0 million a year. Kuah Jetty was saturated during peak season too. It's been expanded with new handling capacity of 7mil early this year.

The Next Saga In The Making

6. International luxury hotel chain, such as St. Regis, Ritz Carlton, Danna, Datai are in Langkawi today. St Regis spent RM 400 million to set up a complex with 85 hotel units. Averagely per hotel asset costs RM4.7million. Langkawi is poised to experience a high demand in high spending power tourist in the near future, when the new airport capacity is ready.

7. If you travel to Langkawi frequently, you can notice that there are more China tourist in recent years. The number of China flight is expected to increase. The South East Asia market is very big. Even with Phuket, Bali, Kosamui, Krabi in the competition, the market is still too big to be fully digested. The earth is rich enough to provide every one.

8. In Langkawi 2015-2030 masterplan, it's worth highlighting that the local authority still request for tender for hotel operator. The reason is simple - the hotel is still under supply, and will continue to be under supply. Currently, during peak seasons, even the rumah kampung are also fully occupied. The average occupancy rate for hotel has never go below 60% for the last 10 years.

The Land Rule Is Different Here

9. In Langkawi, you might see a lot of empty land, but you cannot simply develop on those land. Firstly, they need to protect their Geopark heritage. Langkawi has the oldest geopark in the country. The unique land formation is unique to the region. You can see, you cannot touch. More than 90% of the land available in market are Malay Reserve - only can be transacted among Malay Only. The non-Malay reserved land, are leasehold. Freehold land is as rare as gold.

10. To build a hotel, it takes at least 3 years. Imagine with new total tourist capacity of 12million (5mil from airport, 7 mil from Kuah Jetty), there are a lot of room to grow from current 3.6mil limited by airport and jetty saturation.Unfortunately, the land available for new hotel development is only so little, as a result of strict preservation regulation.

11. If you can find a freehold property in Langkawi, buy. Don't think,  because the freehold land is only so little in Langkawi. If you see any property in Pantai Cenang and Pantai Tengah, buy. Don't think, because in years to come, the new tourist capacity will pump hotel demand in the area like steroid. If you can find a property in the same area that can run as hotel and you have the money, don't just buy one. Because every single unit you don't buy, you are missing out a lot of potential income.

Key Takeaways

12. Some people might still think Langkawi as a forgotten island. Stop being a katak bawah tempurung, and start exploring. The sky might look the same as 10 years ago but the world has changed. Langkawi is not the same as 15 years ago; and it will not be the same for the 15 years to come. Do your homework. Visit the island, talk to the local authority. Check out the latest plans. You will change your mind. Happy investing!

You Can Invest Property This Way

1. Most property investors in Malaysia have a traditional concept about property investment.

2. Investing property to them means buy a house, find a tenant, and sell it later at higher price.

3. Many investors are not aware that there are many other types of property investments. In fact, the conventional buy to keep strategy may not be suitable for everyone. It is not for young investors with low holding power.

4. Today in Malaysia, the property market is going through a consolidation. Even in Kuala Lumpur, many property rental cannot cover the ongoing costs - loan interests, maintenance fee, assessment, quit rents, and contingency repair.

5. Not to mention getting tenants is getting harder today, due to increasing property supply. Tenants prefer newer property. They have many newer choices. Older property lost competitiveness to new property.

6. Some owners faces troubles selling their older property above 10 years; especially if the management office did not maintain the common area well. Be honest with yourselves, investing property is not like 10 years ago. People should give up the idea of flipping and making profit over night. At least for now and years to come.

7. Leaseback property is more suitable for current market scenario . The property is leased to a professional operator, to rent to a niche tenant in the area. For example, a hostel operator gets a special contract with college to rent the rooms to students. Hotel operator can rent your units to tourist at tourism hot spot.

8. This investment module will solve the problem mentioned in point 4 ,5 ,and 6.

9. Pick the right operator that add value to your property, so it can fetch a higher rental. A reputable operator will maintain the standard of your common area and facility to cope with their brand standard. If you have a 5-star operator, do expect your property to be 5-star under their management.

10. Property is all about location, location, location. If your property is bundled with hotel operation, pick a famous tourist destination where the tourist arrival is expected to rise. Basic supply-demand theory applies here. More tourist, better return. Pay attention to infrastructure upgrades such as road, airport, and jetty. These are pipelines to bring more tourists.

10. If your property do not generate higher cash flow, do not dream of selling it at higher price in future, even if the property has been touted as in prime development masterplan. If nobody is willing to pay a higher rent to stay there, nobody will pay a higher mortgage to stay here.

11. If you can rent the place with RM3,000/mth, who will pay mortgage of RM 4,000 a month and pay RM 1,000/mth maintenance fee to stay in the same place ? Participate in the future appreciation? If people are not willing to pay a higher rental, who would pay a higher mortgage?

12. If your property can generate higher rental in the future, you can sell it at higher price for sure. If you are willing to pay RM 600k for a RM 36k rental/year , when the rental increase to RM 48k/year, somebody will buy that at RM 800k. This is how property investment should work.

13. If your property rental increases, selling it at higher price is not a problem. If your property rental do not grow, you are trapped.

14. If you want to buy a property with rental yield and rental growth, send your message to this page.