Malaysians, you are owing more and more money

ARCHIVES 2010

By admin-s On May 19, 2010

It is no surprise that CIMB is mandated, not selected from tendering process, to raise fund. Najib must have great confidence in his brother.

By Lee Wee Tak

I picked up this nugget from the Star who picked up the news from Reuters:
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Friday May 14, 2010

Sovereign bond plan
Date, size and tenor of issue still not finalised

KUALA LUMPUR: Malaysia is pressing ahead with a sovereign bond issue despite recent unease in regional credit markets and has mandated CIMB Investnment Bank and HSBC to arrange the sale, sources said yesterday.

The issue, Malaysia’s first sovereign since 2002, would be of a “decent benchmark size” but was likely to be smaller than national oil firm Petronas‘ recent US$4.5bil bond, the source added

The source said the upcoming Malaysian issue was for benchmarking rather than fund-raising purposes as there was ample liquidity in the country.#

But Malaysia ran a budget deficit of 7.4% in 2009, its highest in more than two decades. It aims to reduce that to 5.6%.

The Government has traditionally relied on domestic bond issuances to fund its expenditure. ^

The Government sold RM88.5bil of bonds in the country last year, according to central bank data.
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# What does “benchmarking and not fund raising” mean? Why does Malaysia government want a benchmark for? Why do Malaysians have to pay bond interest to “benchmark” against something that we can’t feel, see or touch.

As far as I see it, in other words, a guy has enough money to handle his daily living expenses but for vanity reasons, he goes to the bank to see how willing the bank is to lend him money and as a result he pays unnecessary interest expense for that.

^ Borrow money for expenditure? Any reasonable finance manager would know medium or long term financing (which bonds are) is supposed to fund development expenditure which generate future revenue that hopefully exceed loan principal and interest payment.

Operating expenditure, meanwhile, should be funded by tax revenue because it is just mean for day to day functioning of civil service etc.

The decade long budget deficit mentioned clearly indicates that our tax revenue is not sufficient and given the terror financial management stories in Auditor General’s Annual Reports, countless scandals like PKFTZ, Matrade or even the “looks like vote buying, sounds like vote buying but it is not vote buying” stuff of legends in Hulu Selangor and thank goodness not in Sibu, the loans and debts committed on our behalf may not be necessary at all.

The article never mentioned the purpose and expected benefit of the bond issue and that piece of silence sounds like thunder to me.

I BRA HIM likes to talk about Malay rights and pride so I might want to suggest to him that there is no honour or pride and security in taking on debts and debts until keliling pinggan.

I for one, do not want my beloved country to go the way of PIGS (Portugal, Italy, Greece, Spain) with their host of economic problems including over-borrowing so perhaps I BRA HIM should advise Najib administration the perils of going towards that direction.

It is no surprise that CIMB is mandated, not selected from tendering process, to raise fund. Najib must have great confidence in his brother. The commission, professional fees, reimbursements billed for this sacred national service must be of respectable amount. Perhaps this is a good question to be tabled in the next Parlimentary session.