☕️ The looming RM120 bil pension bill and new civil servants on contract service

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1. MARKET SUMMARY 📈

2. NUMBERS AT A GLANCE 🔢

According to the Department of Statistics Malaysia (DoSM), Malaysia's Consumer Price Index (CPI) recorded an inflation rate of 1.5% in December 2023. This has resulted in an annual inflation rate of 2.5% for the year 2023, as compared to 3.3% in the previous year. Dr Mohd Uzir Mahidin, the chief statistician, stated that the gradual increase in prices of restaurants and hotels (3.7%), various goods and services (2.7%), and food and non-alcoholic beverages (2.3%) was the primary reason behind the increase in the inflation rate.

On a separate note, Bank Negara Malaysia’s (BNM) Monetary Policy Committee (MPC) maintained the overnight policy rate (OPR) at 3%, stating that the monetary policy stance remains supportive of the economy and is consistent with the current assessment of the inflation and growth prospects.

USD1.9 trillion (RM8.99 tril) — the productivity cost of quiet quitting at US companies last year, according to Gallup. That is the price tag of workplace unhappiness. Many Americans feel disconnected from their employers after the pandemic, resulting in a staggering decline in engagement. Gallup's surveys show that engagement had been consistently increasing for ten years until it peaked in 2020. However, the pandemic has disrupted workplaces and reduced satisfaction, leading to more employees feeling unsure about expectations, which decreases engagement.

3. IN MALAYSIA 🇲🇾

Only contract hiring for civil servants, at least for now
The Madani Government may have to say goodbye to the civil servants’ safe deposit votes in the next election as Putrajaya decided to implement ONLY contract hiring for civil servants via the contract of service (COS) system while they are deciding on a more permanent solution soon. Public Service Department (PSD) director-general Wan Ahmad Dahlan Abdul Aziz said that the COS system will be effective from February 1 until a new law has been amended to allow for the creation of a new civil service recruitment method.

Commenting on the matter, Deputy PM Ahmad Zahid Hamidi said that this will just be a temporary measure and a future permanent solution to recruit civil servants will be developed to reduce the fiscal burden of the country. According to him, the Government will need to spend up to RM120 bil to cover pension payments by 2040 if the current hiring schemes are maintained. Zahid also added that the new salary schemes in public recruitment will be announced within this year.

Obviously, not all are happy with this new directive from the Government. Cuepacs president Dr Adnan Mat urged Putrajaya not to abolish the current pension scheme which is currently enjoyed by civil servants and could start trimming the expenses by stopping pensions being enjoyed by politicians and political appointees instead. UMNO Youth chief Dr Akmal Saleh also supported the notion brought by Dr Adnan that the abolishment of the pension scheme should first start with the people's representatives before it is implemented on civil servants.

So, what will happen if Putrajaya no longer practises the pension scheme? New intakes into the civil service will contribute to retirement schemes like the Employee Provident Fund (EPF) and the Social Security Organisation (Perkeso), like the rest of us. But is it really that bad for civil servants if they need to resort to EPF for their retirement savings? According to a back-of-the-envelope calculation done by a netizen on Facebook, based on the assumption that the civil servant’s tenure is at least 35-year, a 5% EPF dividend rate annually and an annual salary increase of RM225, a civil servant could have an EPF savings pool of RM1.36 mil when he or she reaches the age of 60. Perhaps it is not that bad for civil servants to have the same salary scheme akin to the rest of us.
Read: Can the civil service be downsized? (2019)

LCS is still not sailing anywhere
The Public Accounts Committee (PAC) chairperson Mas Ermieyati Samsudin said that the delays in the construction of the littoral combat ships (LCS) are worrying after the latest PAC progress report on the project was presented on Wednesday. However, in accordance with the Standing Order 85 of the Dewan Rakyat, the length of the delay in the LCS project could not be disclosed. Newly minted Defence Minister Mohamed Khaled Nordin is also unhappy with the delay in the project and welcomed the demand from PAC for all stakeholders of the project to take proactive measures in curbing the delays. If there’s quiet quitting for workers, there’s slow sinking for LCS.

After the wife, now Daim will be likely to be charged in court next week
The Malaysian Anti-Corruption Commission (MACC) chief commissioner Azam Baki told the media that former finance minister Daim Zainuddin will be charged in court next week after he was discharged from the hospital on Thursday. Daim will be facing a similar charge to his wife, Na’imah Abdul Khalid, for failing to abide by MACC’s notice to declare his assets.

On a separate matter, MACC released a statement on Wednesday that refuted Tun Dr Mahathir’s claim that MACC did not act on a former Bank Negara assistant governor’s allegations against Prime Minister Anwar Ibrahim years ago. MACC stated that its predecessor, the Anti-Corruption Agency (ACA) had opened six investigation papers on the matter in 1999 that led to nothing. In 1999, former Bank Negara assistant governor Abdul Murad Khalid made a statutory declaration (SD) claiming PM Anwar had around RM3 bil in 20 separate personal accounts. However, in 2012, Murad retracted the SD and said that ACA coerced him to sign the document.

Business

1. Tenaga Nasional Berhad (TNB) president and CEO Baharin Din said that TNB is forging partnerships with China’s state-owned power utilities to transform the Asean Power Grid (APG) via high-voltage direct current (HVDC) technology. China’s state-owned power utilised is highly experienced in developing complex HVDC projects in China and globally. HVDC technology offers the most efficient means of transmitting large amounts of power over long distances by using direct current for the transmission of electricity, in contrast to HVAC power systems which operate on alternating current.

2. The first phase of AT&S Austria Technologie & Systemtechnik’s RM8.5 bil investment in Malaysia has been officiated with the opening of its Malaysia campus at the Kulim Hi-Tech Park (KHTP). The new campus in Kulim will start delivering high-end Integrated Circuit (IC) Substrates for AMD's data centre processors by the end of the year.

About Holidays

1. No public holiday on Jan 31, 2024

   Communications Minister Fahmi Fadzil said that there will be no special public holiday in lieu of the installation of the new King on January 31. Johor’s Sultan, Sultan Ibrahim Almarhum Sultan Iskandar, will replace the outgoing Sultan Abdullah Ri'ayatuddin Al-Mustafa Billah Shah as the new King of Malaysia.

2. Would you consider floating holidays?
   Tuaran MP Wilfred Madius Tangau opined that Malaysia should adopt floating holidays to allow minorities in the country to celebrate their cultural and religious festivals just like other citizens from larger ethnic communities. A floating holiday is a paid day off from work that employees can take as a substitute for a public holiday, which could be used at the employee’s discretion. The concept of floating holidays is to ensure that employees who have different religious beliefs or traditions are not disadvantaged in relation to other co-workers.

4. AROUND THE WORLD 🌎

The business of football

• The CIES Football Observatory looked at buy/sell transactions of non-academy players signed and sold from 2014 to 2023 and it didn’t look good for globally prominent clubs. Losing the most is La Liga giant Barcelona at EUR631 mil and scoring the highest profit is French Ligue 1 side Lille at EUR386 mil. English Premier League clubs dominate the top 10 — for losses, with 6 clubs taking the spots and Chelsea taking the top spot amongst the English clubs. Read the full report here and the transacted players that brought in the profits and losses. With big names come big losses, more often than not.

• Spanish giant Real Madrid has overtaken Manchester City as the world’s highest revenue-generating club in the 2022/23 season according to Deloitte Football Money Lauge. Real recorded an increase of revenue of EUR118 mil, up 16% to EUR831 mil, driven by commercial revenue (e.g. retail performance, recovery of sponsorship income). Commercial revenue was the largest income stream at clubs for the first time since 2015/16, reducing reliance on broadcast revenue. The top 20 Money League clubs generated EUR10.5 bil in 2022/23, up 14% from EUR9.2 bil. Read the full report here.

  

  Credit: Deloitte

IVF giving a new lease of life to a rhino species, with final 2 left on the planet
Scientists have achieved the world’s first IVF rhino pregnancy, successfully transferring a lab-created rhino embryo into a surrogate mother. The northern white rhino is nearing extinction, with the 2 female animals left on the planet kept under tight security at the Ol Pejeta Conservancy in Kenya. The northern white rhinos were once found across central Africa, but illegal poaching fuelled by the demand for the rhino horn wiped out its wild population. 

This IVF project has been years in the making and it took 13 attempts to achieve the first viable IVF pregnancy. The surviving 2 northern white females are not fit to carry a pregnancy and its closest cousin, the southern white rhino has been used as a surrogate. IVF across a subspecies has never been tried before, but the team remains confident it will work. 
Learn: What is in vitro fertilisation (IVF)?

From the Land of Smiles

• Thailand’s Constitutional Court has found Pita Limjaroenrat, the popular politician who was blocked from becoming the prime minister, not guilty of violating election law and allowed him to be reinstated as a lawmaker. Earlier, he was found to break laws banning members of Parliament from owning shares in media companies. Pita inherited a stake in a TV station when his father died, which has not been broadcast since 2007. His Move Forward Party was a surprise winner in Thailand’s election last year and is a progressive party that plans to aim business monopolies and reform the draconian lese majeste law punishing anyone for insulting the monarchy. 

• JKN Global Group, the Thai media company owned by transgender media mogul Anne Jakapong Jakrajutatip, has sold half its stake in beauty pageant Miss Universe to a Mexican company for USD16 mil. The pageant, once owned by former US President Donald Trump, was acquired by JKN in 2022 for USD20 mil. JKN filed for bankruptcy last Nov with a “liquidity problem” after failing to repay bonds worth USD12 mil.

Shorts

1. Boeing 737 Max 9 cleared to return to the skies
   The US Federal Aviation Administration (FAA) has allowed the Max 9 to return to service 3 weeks after a door plug blew out midflight. However, the regulator halted all production of the 737 Max aircraft. The FAA is currently investigating Boeing’s production lines after the incident. 

2. Saudi Arabia to get first alcohol shop in 70 years
   The nation has allowed for the opening of a shop in Riyadh selling alcohol to non-Muslim expats, the first to open in more than 70 years. This is to counter the illicit trade of alcohol and customers will be limited to diplomatic staff. The prohibition has been in place since 1952 after one of King Abdulaziz’s sons drunkenly shot dead a British diplomat. This is amongst the initiatives of Crown Prince Mohammed bin Salman to liberalise the image of the country. Restrictions towards women have been loosened over the years too, including the lifting of a ban on their driving. 

3. Tesla’s competitive advantage — falling production costs + fat gross margins
   2023 saw electric vehicle makers aggressively discount their vehicles. If this remains the strategy to grab market share, Tesla, for the most part, has a lot more room to play this game as compared to its peers. For one, Tesla’s average production cost per car continues to drop to over USD36,000 in the final quarter of 2023, down from over USD39,000 year-on-year. Besides, its gross margins of 17.6% recorded in the fourth quarter is nearly double the industry’s average of 9%.
   View: Tesla Shareholder Deck — Q4 and FY2023 Update

Weekend Read: Capital Gains Tax: More than expected
If you are invested in the Malaysian and foreign markets, the capital gains tax one way or another will be biting you. Read up on this cover story by The Edge on the structure of this new tax. Not everyone is on the losing side — investors in real property company (RPC) shares will stand to benefit from a lower tax rate as compared to the real property gains tax (RPGT).

5. FOR YOUR EYES 📺

1. An epic and fun video of Bruno Mars’ time and concert in Japan. Could have been KL. Maybe Mars couldn’t be bothered to deal with green moon.

2. We hope our Hindu readers had a good celebration. Here’s an interesting infographic by the folks at Cilisos explaining this festival.