Enough with the comics, give full list of GST-free items, says Rafidah

BY ANISAH SHUKRY

Published: 31 March 2015 7:00 AM

The article was first published on The Malaysian Insider.

Putrajaya must change its current approach of educating the public on the goods and services tax (GST) by publishing immediately a list of tax-exempted items in every newspaper in the country, former minister Tan Sri Rafidah Aziz said.

The outspoken former international trade and industry minister said a clear list would help consumers to be better prepared for the new tax which takes effect tomorrow.

She said Putrajaya’s reliance on the use of cartoons, billboards and technical jargon such as "zero-rated" for the past year to explain GST has left Malaysian consumers, including herself, more confused over the new tax system.

"I personally think that right now, we should have a complete list of the categories that are exempted, so the public will know which (items) won’t be taxed.

"It should be made available in all the newspapers, in all languages, and it should not be technical,” Rafidah told The Malaysian Insider.

"Our problem is that the explanation so far has not been clear. The government has been using different sources or different approaches, and most of them have been very technical.

"For instance, who understands what ‘zero-rated’ means? Why can’t they just use the phrase ‘tak kena GST’ or ‘no GST’. That’s much simpler and easier to remember.”

She said it was also important that Putrajaya first cleared the air over which items would not be taxed, so that consumers would not rush to stores and hoard goods unnecessarily in anticipation of the GST.

Rafidah said the newspaper pull-out would also help consumers identify traders who raise prices on items that were not affected by the GST.

"Let’s say on April 1, I read the newspaper and I see that soap will not be taxed. Then I go to the supermarket and see they are charging me 6% for it. Thanks to the pull-out, I know they are cheating me and I can report this.

"Forget about the various codes, the technical jargon and whatnot. All that is irrelevant,” said Rafidah.

She added that Putrajaya could pay for the newspaper pull-out as the cost involved would be far less than erecting large billboards across the country.

"Some time ago, there was a billboard near my house that said education would be exempted from GST. It even had a cartoon drawing on it. I thought, what does that mean? Are university fees or tuition fees exempted from GST? What about books or computers or school-related tools?

"Instead of spending money on all those billboards, by this time you could’ve gotten a complete publication on all the items that are not taxed,” said Rafidah.

She added that a separate exercise should be done for traders so that they could calculate how the GST would affect them, and urged the government to hold meetings with associations.

"Right now, there appears to be no coordinated effort. That’s the only problem. I have no quarrels with the tax itself. It is a good move to rationalise taxes. But people are not familiar with it; some are taking advantage of it, and that causes confusion and hoarding.” she added.

The GST jingle sung by customs officers which was mocked online by Malaysians. – The Malaysian Insider pic, March 31, 2015.One of Putrajaya's efforts to educate the public on GST through a music video recently received heavy criticism from Malaysians after went viral on the internet.

The video, purportedly created by the Customs Department, hailed the virtues of implementing GST, but was panned by critics as "sad", "cheesy" and "reminiscent of the 1970s".

In the meantime, to ease the transition period, the Domestic Trade, Cooperatives and Consumerism Ministry has set up a round-the-clock operations room to monitor prices after the GST kicks off.

Located at Precinct 2 in Putrajaya, the operations room would also take complaints and reports from the public on GST matters.

A daunting year for Malaysia and Indonesia

By Afiq Isa / The Edge Malaysia   | February 3, 2015 : 2:00 PM

IT is a testing time for Malaysia and Indonesia, two of Southeast Asia’s economic powerhouses. Amid a worsening outlook for the world economy, a half-decade of prosperity slowed down last year for the two countries, which are particularly exposed to volatile commodity prices and the flight of foreign funds accustomed to high yields.

However, at a media briefing on the sidelines of Credit Suisse’s 4th annual macro conference and 6th annual Asean conference earlier this month, its heads of research from Malaysia and Indonesia were sanguine about the prospects for the two neighbours and optimistic that important changes could be instituted.

Jahanzeb Naseer, Credit Suisse’s head of research for Indonesia, noted that the republic will be grappling with a multitude of institutional and political reforms and Malaysia with economic and fiscal reforms.

He said President Joko Widodo, or Jokowi as he is popularly known, has proved his reformist credentials by making and implementing tough decisions.

“For example, Jokowi chose to cut fuel subsidies even when crude oil prices were at US$80 per barrel and he changed the board of (state-owned oil company) Pertamina, which not many had expected. That’s a sign of his commitment to executing reforms. Over the past 15 years, none of the previous governments touched this because it was a very difficult thing to do.”

To encourage growth, Jokowi is redirecting the close to US$30 billion (RM108 billion) in savings from the fuel subsidy cut to infrastructure development. New land reforms are expected to be announced.

“After US$30 billion in savings following the fuel subsidy cut, spending it to boost infrastructure will be challenging as Jokowi now needs to cope with land reforms and ensure ease of investment,” observed Jahanzeb.

According to him, new land reforms are expected to be announced by the end of this month, which would smooth the way for land acquisitions that are dedicated to infrastructure projects, such as highways.

“However, this will be Jokowi’s next big challenge as he now has to deal with various departments and stakeholders to make it happen. This is more difficult than a single policy decision.”

It is worth noting that last Tuesday, the Indonesian Parliament voted unanimously to reinstate direct elections that were scrapped last October. This means direct elections will be held for mayors, regents and governors.

Malaysia faces a different set of challenges, said Credit Suisse’s head of equity research Tan Ting Min, including dealing with the reality of low oil prices and the economic ramifications for the country going forward.

“Malaysia was the worst-performing market in Asean last year partly due to the weak crude oil prices and ringgit, which continued to decline at the start of 2015. But every cloud has a silver lining: the second half of this year should be better for the equity market as all the negative elements would have been factored in,” she pointed out.

Tan highlighted the implementation of the Goods and Services Tax (GST) as a key theme this year. She said she sees a spike in consumption just before April and a slump thereafter before gradually normalising.

“It would take about 6 to 12 months for domestic consumption to normalise after factoring in GST. There will also be problems when it comes to the tax’s implementation and it may take up to a year to sort everything out. Even the highly efficient Singaporeans had problems [with their implementation] for a year.”

Both heads of research agreed that Indonesia and Malaysia’s exposure to “hot money” or foreign capital outflow remains a looming problem.

Jahanzeb pointed out that foreign holding of Indonesia’s sovereign debt is at an all-time high.

“The risk of hot money outflow is on the bond side instead of equities, similar to what Malaysia is currently facing. If people worry about a scenario where the interest rate [for the US dollar] is headed upwards, the outflow from bonds will put more pressure on the local currency, which in turn will negatively affect the current account balance,” he said.

The external pressures notwithstanding, Credit Suisse remains optimistic about Indonesia’s growth prospects but not so much about Malaysia’s. In a Jan 20 note, Tan explains that the group’s 2015 gross domestic product (GDP) forecast of 4.8% for Malaysia is below consensus expectations.

Last Tuesday, Prime Minister Datuk Seri Najib Razak announced revisions to Budget 2015 and lowered the country’s GDP growth target to between 4.5% and 5.5% this year from between 5% and 6%.

Economic growth in Indonesia, on the other hand, could surprise on the upside.

“I think the expectation of 5% GDP growth right now is probably underestimated. The investment needed for infrastructure over the next five years is US$300 billion. Instead of a 43% year-on-year increase in infrastructure expenditure, we may be looking at a 200% increase, thanks to the reduced fuel subsidies,” Jahanzeb said.

Indonesia will remain a top investment destination in the region if reforms are speedily executed, he added.

Both experts concur that corporate earnings growth in Indonesia will outpace Malaysia’s this year due to the respective economic factors.

While Tan said earnings growth for Malaysia will be underwhelming at below 8%, Jahanzeb believes that the focus on infrastructure growth and the corresponding investment inflow will result in around 12% to 13% earnings growth for Indonesia.

“With the upcoming GST and expected weak economic and earnings numbers, I think the first half of the year will be quite tricky for Malaysia,” Tan concluded.

High income not enough to become developed nation

[Note: The article was first published on The Malaysian Insider.]

Simply becoming a high-income nation is no basis for Malaysia to be considered a developed country by 2020, says Tun Dr Mahathir Mohamed.

The former prime minister said that equally important is research and development, as well as the skills that are available in the country, Bernama reported today.

Speaking at a seminar in Cyberjaya today, he said, "Malaysia may not be a developed country by 2020, if its only emphasis is on becoming a high-income nation but it still lags in research and development".

"Malaysia's income is almost reaching that of a developed country but the people's experience and skills are still very much like those of a developing country.

"At the moment... I am afraid. I am not very hopeful that by 2020, Malaysia will be a developed country," Bernama quoted Dr Mahathir as saying.

Giving the example of Brunei, he noted that while it was a high income nation, it was not developed, adding that high income and low productivity would only make the cost of living higher.

"The mindset of Malaysians on research and development (R&D) must be tuned. Malaysians still lack understanding on the importance of R&D and always question the return on investment of R&D."

According to Bernama, Dr Mahathir said that Malaysia was the only developing country which had its own automative industry and developing countries were learning from Malaysia.

Emphasising its importance, the Proton chairman added that the automative industry has the potential to be a catalyst in providing Malaysians skills, knowledge and ability in engineering.

However, he lamented that Proton's share of the car market in Malaysia stood at only 18%. – October 29, 2014.