A new jurisdiction

In my current role, I am given the opportunity to participate in formulating the strategy for our function globally.  Our strategy is to be in line the overall strategy of the company; and we call it “the collective agenda”.  Essentially, it aligns the focus of the whole department.

One item within our collective agenda for 2011 is geography focus.  Apart from the usual suspects, 1 particular country caught my attention.  This jurisdiction is certainly not in the same league as Hong Kong, Singapore, China, India, Dubai but is now considered as a “geography in focus”.

It is the first time this country made it on the list.  As far as I know, Malaysia has never made it on the list before.

Since the beginning of the year, I have travelled there once and foresee more business travels to this said jurisdiction.  I have had numerous meetings with business personnel about big plans for this jurisdiction and will be having another one next week to talk about more exciting plans there.

Last week, I dialled into the HR call centre of my company to clarify some queries and I can choose to continue in English, Cantonese, Mandarin and was very surprised to actually hear that I can continue in the language of this jurisdiction in focus.

The global head of the function I am in was here in Singapore yesterday for a business visit.  Today, he is in this new jurisdiction in focus.  No, he didn’t visit Malaysia.

The country that I am talking about is…

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Indonesia.

The reason why I decided to break out from my blog hiatus to talk about this is because I just came out from a hot debate with someone saying that current Malaysian govt is doing a good job as Malaysia’s economy is only behind Singapore in this region. 

One can choose to ignore the fact that Indonesia has already surpassed Malaysia in foreign direct investment and continue to derive a false sense of superiority based on the notion that your maids and construction workers are from Indonesia. 

But the reality is this… Indonesia’s economy is moving at a speed much quicker than Malaysia and while huge capital is flowing out of Malaysia, it’s flowing the opposite direction in Indonesia. 

Of course, many Malaysians are not impacted by this phenomenon.  Will they be ever impacted? Is this a really bad thing to Malaysia?  As some quarters have mentioned, will Malaysians end up being maids and construction workers in Indonesia? The honest answer is that I don’t know.  My attempt to answer those questions may be rather bias.

One thing for sure… the statement of Malaysia’s economy being only behind Singapore in this region is incorrect.  Besides Indonesia, Philippines is also gaining substantial ground on the economic platform.  The Malaysian media may say otherwise but from where I work… right here on this seat... reality paints a very different picture.  

1 year go... When Kilkenny became 'kill Kenny' (recommended)

2 years ago… High what?... It felt like shite... A new trend with the couples

3 years ago… Some general modern slavery comparison

Some discoveries after 3 months in Singapore

Hello world… ! This is arguably the longest break I have taken from blogging. Work being the main reason, with laziness being the combination when time permits.

As for work, many have asked whether I am struggling with my Mandarin. Well, in the team that I work in… there is a Japanese, a Korean, an Indian, an American, an Australian, a Pakistani, a Mexican coming on board soon, 3 Malaysians including myself; and 3 Singaporeans… do you think I will be struggling with my Mandarin?

Anyway –

My working life in Singapore has almost reached 3 months. And indeed, it has been a revolutionary experience for me.

When I was in Malaysia, I was already quite senior in the function that I was in. Back then, I was already able to see issues and happenings in the corporation and the industry that I was in from a nationwide perspective. And since it is a prominent industry, I was also able to see things happening within the government agencies and get to know things that will never appear in the news.

And because I could see all these and was involved in a lot of the major in-country transactions, it did gave me a sense of achievement and as time goes by, the feeling of I-can-conquer-the-world began to creep in.

Metaphorically speaking, I was swimming very well in the Malaysian rivers and possibly, straits of Malacca. These were my territories. I knew I would be thrown into something deeper when I come to Singapore. I thought it would be the South China Sea.

I was wrong, I was thrown right smack in the middle of the Pacific Ocean.

It’s like how you once felt strong and mighty after graduation, ready to take on the world only to find out that you knew nothing about the modern slavery world. Multiply that by about 50, and that’s more or less about my current feeling.

From a country function, I now have to look after the business stream that I am assigned to… globally. I realised that what I used to look after in Malaysia was just so tiny.

And when I was in Malaysia, I used to make some noises to head office about the issues that I had and how attention must be paid or else, something might just blow up. Back then, I was often left perplexed as issues escalated by me seemed to have landed on deaf ears.

Don’t they care? If something blows up, it’s going to cost the corporation a lot of money. Why no one seemed to care?… I wondered…

Now I know why…

Again… metaphorically speaking…

If Malaysian operation is on fire, and help is sought from head office, the first thing people in the head office (i.e. where I am now) are supposed to do, it to ask whether countries like China, India, Singapore, Hong Kong, UK, Middle East whether there’s any fire there. If there’s fire in these jurisdictions, we’ll put it out. If not, we will check whether there’s any potential fire hazard in these countries first, to protect the operations here. If there’s no such hazard, we will put mitigating steps to ensure such fire does not happen.

And all these will take place while Malaysia operation is on fire.

Priority is to protect major operations first before coming to Malaysia’s rescue. China, India, Hong Kong, UK, etc. are where all the big bucks are. And by the time those major operations are well reviewed, Malaysian operation already put out the fire themselves (i.e. what I used to do).

And during meetings or discussions, I have tried to bring Malaysia into the picture, things that need to be looked at. But I have since learned that I should look at the “bigger picture”.

And this is not just in the corporation that I am in. Some friends of mine who are in high positions in their respective multi-national corporations also experienced the same thing. And lately, I can tell you that Indonesia is coming into prominence. There have been instructions that Indonesia is to be “guarded”.

In effect, it does give a broad idea of where Malaysia stood in the eyes of multi-nationals, and I am experiencing it… first hand.

You might say that I keep bashing Malaysia because I am out of the country, etc, etc… Well, you can say anything, but this is reality.



1 year ago… Who rang the doorbell?… I was spotted

2 years ago… 10 vs 1… The game

3 years ago… Keyword splendour… One night on the wrong stand

The price that really kills

We have all heard about how prices have increased over the years. I know this chicken rice shop I frequent which used to charge MYR2.60 a plate when I first started working now charges MYR5.50. That’s a 112% increase.

When I started working, my starting pay was MYR1,800 (USD560) a month and currently, I understand that the starting pay for that same position in that same company is MYR2,600. That is a 44% increase.

We can go into the topic of how increase in income doesn’t match inflation rate because the economy sucks and that is why we are all screwed. But that is not quite the notion today, though close.

Generally, the Malaysian public as a whole has brilliantly (or stupidly depending on how you see it) accepted and adapted the slow increase in salary. Some are fortunate to have parents as ATMs, while some just max out the credit cards and perpetually be in debt. The rest typically carry the if-the-good-is-good-the-price-doesn’t-matter mentality.

Essentially, chicken rice for MYR5.50 or teh-tarik for MYR2.50 or char-kuey-teow for MYR6.50 or nasi-lemak for MYR7.50 is still not that bad though even-though those prices have already inflated 75% - 100% in the last 5 years or so. It is not the end of the world.

However… the story is very different when prices of this particular thing inflate at a frightening rate – the prices of properties.

I bought my first property 6 years ago. It’s not exactly the best in town but with the same amount of money, there is no way I can buy that kind of property in KL anymore.

Paying for a plate of chicken rice which has increased from MYR2.60 to MYR5.50, despite it being a 112% increase, is a totally different story compared to paying for a property which has increased from say, MYR350,000 to MYR500,000; which represents only 43% increase. Mind you, such is the range of property prices in KL.

With the current trend of property companies seemingly putting up projects only for the rich, i.e. everything seems to be MYR600k and above, the general working population in KL will only end up with huge amount of debt when they decide to buy a property.

And everything is connected. A huge mortgage will then put pressure on the working population a.k.a. modern slaves to “work hard”. The need to “work hard” will put us at the mercy of the companies we work in. The situation becomes competitive amongst modern slaves. Willingness to “work hard” to service our commitment will result in us keeping quiet when pay is low or bonus is cut because there will be another modern slave who will be willing to “work harder”.

Ultimately, salary will continue to remain stagnant or rise slowly.

And that… is what ultimate kills us all.

That’s what I call a high-income economy

There was this department secretary in the division that I worked in when I was seconded to London 2 years ago. She was the person who booked my service apartment, arranged my transport from the airport, arranged my workstation in the office, books meeting rooms when there is a need for one, arranged my farewell lunch, things like that.

She was the department secretary… apparently the lowest paid person in the division.

During that period, her birthday happened on one of the weekend. Being a nice and all, I went to wish her a very Happy Birthday and asked her how she celebrated her birthday. Her reply was…

“Oh, I flew to Vegas over the weekend for my birthday”

How many department secretaries in Malaysia can fly to say… Singapore over the weekend for a holiday?

There was this guy whom I worked with when I was there. We are of the same grade in the organisation, i.e. same ranking based on internal hierarchy.

When I was there… he bought himself an Audit R8.

In the last 2 years, we have rose in rank and file. As of to-date, I think we are of the same internal grade, or maybe I am even 1 grade higher than him.

News came to me 2 days ago that he is going to upgrade to a Ferrari. No, I can't afford a R8, probably only the wheels.

Now, that’s what I call a high-income economy. And this is NOT an April Fool Joke.

Don’t be depressed cause at that time, I was made to feel like shite too. Enjoy the weekend!


1 year ago… Will you call?

2 years ago… The prank that went wrong… A toilet encounter

What's USD15,000?

Maybe I am ignorant, but I have yet to understand what exactly is the newly announced National Economic Model (NEM). From the brief summary, I can only see a lot of promises and pledges.

Remember the 11 goodies dished out after the initial 100th day?

Measures to be announced to curb correction = 1 goodie.

The NEM seems to carry the same tone, with its major selling point…

Aim to increase per capita income to USD15,000 within 10 years = NEM! Yay!

Anyway, let’s think a bit. What’s USD15,000? Based on current rate, its circa RM50,000. That would be RM4,166 a month. After tax and other deductions, left with maybe RM3,500? What’s RM3,500 a month?

Oh wait! It’s to be achieved within 10 years. Assuming, this timeline doesn’t suffer a from the Malaysian-time syndrome and is actually achieved in 10 years time. What’s RM3,500 a month in 10 years time? How much do you think a nasi-lemak, char-kuey-teow and bak-kut-teh will cost by then?

But then again, maybe in 10 years time, USD1 = RM10 and hence, USD15,000 = RM150,000!

Or maybe, we can buy more submarines that can't dive, or buy more planes that keep crashing, or sponsoring a few more F1 team, or keep driving away foreign investors, then maybe it’ll make USD1 = RM20 and hence, USD15,000 = RM300,000! It may be part of the plan, you’ll never know…

Having said that, a lot of us are probably earning above the per-capita income level we don’t really care.


2 years ago… More valuable than gold

Crazy money

I am sure we have all heard about how investment bankers or hedge fund managers or forex traders making huge amount of money. There were also plenty of media coverage on bonuses and payouts at the peak of the so called “financial crisis” about a year ago.

But they are all just hearsay, and what we read of the media. As far as I am concern, I know they money involve is huge, but just don’t know how huge.

My first monthly salary was RM1,800 (USD520 – aren’t we cheap labour?). My first bonus was when my salary was RM2,100. A 2 months bonus brought me RM4,200. After all relevant deductions, it was only RM3,000+. Not exactly a lot but damn… was I happy when I got it then. It was hell lot of money. I am sure some of you know what I mean.

For a few years running, bonuses for me and my peers were all 4 figures. Hence, when we heard about people getting 5 figure bonuses, our jaws will drop.

My current role brings me with close proximity of the “money industry”, and I had a very good catch up session with a friend who is a player within the “money industry”. And I found out…

RM0.5m bonus payment is a norm. There are people who consistently get 7 figure bonuses.

There was a smart soul who managed to get into one of the biggest “money company” in the world and his monthly salary alone is already hitting 6 figures. Yes, 6 figure salary a month!! And… when he joined this super “money company”, he was given a joining “gift”… a 6-figure “gift in USD. Can you imagine what this smart soul will be getting as bonus?

I also personally know of an investment banker whose lifestyle went through no changes at all during the so called financial crisis. The flying around and the spending continued to flow. I wouldn’t be surprise if his bonus is also something within the region of 7 figures. The media said these people were very affected by the financial crisis. I think otherwise.

Don’t be misled. I am not earning what these people are earning. Not even close. But to actually know of people who are getting these mega bucks, it really throws me off my chair.

It’s really… crazy money.

P/S: What is “money industry / money company”? You have to figure that out yourself, I can't be telling you everything, right?


1 year ago… This thing called MTM

2 years ago… Cards laugh

3 years ago… 2nd chance with Mom: Between hard work and success… The week that’s been

It’s not about image

I am sure many will agree that our country tends to hit the limelight for the wrong reason. From burning of churches to statements by Australian MPs to bad coverage in recognised international media to purchase of non-dive-able submarine… certainly, this is not going to give our country a good image, no?

I observed one thing… the immediate reaction of people to this “bad image” is that, we will lose out on foreign investments. We-can-kiss-investors-goodbye… No-one-will-want-to-do-business-here… direct-foreign-investments-will-hit-another-low… such are the usual rhetoric.

Is it true? Will investors shy away from a country because the country has got a bad image?

No entirely accurate…

I am not saying that I am a high flying corporate figure with tonnes of business experience and information. But, being in an industry with a significant international dominance has given the opportunity to see that the decision for corporations to invest in a particular country depends on 2 major reasons…

Money… and… potential opportunity to make money…

The business world does not give a damn whether the country is burning churches or severed cow head is being dragged along the road or whether someone died because he was thrown out of a building. Honestly, they don’t give a shit about it.

All they care is whether there is avenue to make money. They will only be driven away if there is an interruption in their profit making mechanism. Really, it’s just as simple as that.

So next time, if you see some major international newspaper doing a coverage about so and so are being forced to admit so and so screwing his asshole or so and so asked “Can I fuck you today” or some submarines unable to dive thus putting the nation to massive embarrassment and you think this will affect foreign direct investments… thinking again…

What then, are the things that will severely damage the profit making mechanism and stop all these so called modern-colonial-power known as “investors” from coming here?

Well, why don’t you do some thinking? I cant be telling you everything all the time right?


1 year ago… 10 days at a glance

GST - Explaining input-tax with sex, blowjobs and handjobs

This summary is not available. Please click here to view the post.

More money gone

I heard about this shite a while ago, the kind of privilege info that I can get my hands to in my industry. But I thought blogging about it would not be a wise move as it is after all, P&C typed of information. But now that it is out in the open, I guess we can all talk about it.

Did you guys read the big news last Friday? More were elaborated today. I am referring to sub-prime ala middle-east flavour.

Dubai World, the flagship investment arm of Dubai with stakes in Nakheel, the company responsible for the construction of the palm-tree-like artificial residential islands (Palm Islands), is unable to pay off its debt worth USD60b.

Worse, it appears that Dubai seems to be saying I-am-sorry-thank-you-bye-bye, metaphorically speaking.

So, USD60,000,000,000 gone. Well, technically, not gone. Just that it has gone from pocket A to pocket B and pocket A is going to cry, get drunk and dump down buildings while pocket B will enjoy all the bliss.

Anyone who has got active thinking juice should ponder on a few things… If Dubai, said to be a damn-f*cking rich place can’t pay USD60b, what does that tell you? Do you think they are really rich? Everyone is saying that the economy has recovered and this, which has been kept under the carpet for a while creeps out, what does that tell you? Don’t you think there are a lot more shite hidden behind the multitude of good news reported in the press?

Of course, this will not affect the taste of your nasi-lemak, bak-kut-teh and char-kuey-teow so you can choose not to bother about it.


1 year ago… Generation condemnation

2 years ago… Yes, we do believe

Do you know you work for the bank?

I think many of us are aware that banks make profit by charging you interest on your borrowings. Those lacking self-control on credit card spending will know exactly what I mean. But do you know how exactly does it work?

Banking operations are highly complex. There are many way a bank can make profit but for today, let us just focus on loans. And as always, let me put it in a very simple manner…

Let’s say there is this bank, called Z-Bank. In this bank, 100 depositors place fixed deposit of $50,000 each, totalling $5m. If Z-Bank just keeps the money, they will have to pay the customers interest which is a cost. Naturally, Z-Bank will take this $5m and lend to others to make profit.

Let’s say the entire $5m is then lent to John to buy a house and John said he will repay the loan in 30 years, which is a common tenure for a home loan. Let’s say John begins to pay mortgages from the first year and the amount paid by him on the first year was $300,000.

For those who have no idea about home loan; the answer is yes, the total amount that you need to repay to the bank after the entire tenure is very likely to be almost double (or more) of the original amount borrowed by you, depending on the interest rate. In this case, John will need to repay $9m in 30 years to Z-Bank. That’s life…

Now, under recognised accounting principle, Z-Bank will need to segregate the $300,000 into principal and interest. Principal refers to the original $5m lent out to John and interest refers to Z-Bank’s income. The exact splitting mechanism is complicated, but I am not exaggerating when I say that the interest portion recognised as income in the $300,000 paid by John could be as high as $250,000, thanks to accounting principle.

From this “income” of $250,000, let’s say Z-Bank pay interest to the 100 depositors and other costs amounting to $150,000. This means there is a profit of $100,000! From this $100,000, the bankers will declare that they make huge profit and pay bonuses.

But wait, let us take a step back…

A total of $5,000,000 was lent out. Only $300,000 was collected. Z-Bank has not even recover 10% of the money lent out, how can it declare that it has made a profit and started paying huge salary and bonuses?

Well my friend, the banks have been doing this for years. And if you seriously think accountants are square, think again! Mind you, if John goes bankrupt and fails to pay the balance $4.7m, it is the govt who guarantees the deposits that will have to pay the money back to the depositors, not those who have taken profits.

Have you ever heard of the saying… “We all work for the bank”? It simply means…

You work and with your salary, you pay your car and home loan, giving profits to the bank. After your spending, you place the balance in the bank as savings, giving more “principal” for the bank to make more profits. And if a bank goes bankrupt, the govt will save the bank by giving bail-out money; using that portion of your salary called… tax.

P/S: Some of you will probably comment… “Zewt, does that mean we shouldn’t place our money in the bank anymore?” My answer will be… This post is to enlighten you on some knowledge of life, not telling you what and what not to do.

1 year ago… 5 things I failed to fathom… A change in dominant language

That 10 + 5 that you pay

I realised a lot of people are actually quite confused about that additional “++” that you pay when you eat at a restaurant. The general understanding is that they are “govt tax”. But do you really know what exactly it is that you are paying for? Allow me to enlighten you.

The “++” is made up of 2 components.

The first component is “service charge”, usually at 10%. This is NOT a tax. In fact, there is actually no law to say that you must pay this amount. This additional 10% is what the restaurants charge you for the service you receive, namely; taking of your order, laying the towel on your lap, replenishing your water, recommending dishes to you, making you stand on the chair as the birthday song is sung to you, etc.

One should ask, does the additional 10% that you pay match the service that you receive? How many times have we been served by foreign waiters who have no idea of the dishes being served? Some can hardly pronounce the dishes in the menu.

There was once I was at this quite up-class restaurant and we asked the waiter whether this particular dish has got cheese, she just stared blankly at us. When we repeated our questions, her reply was … “I from Myanmar”. This is quite an up-class restaurant which charged us 10% of the bill for such service.

In effect, this 10% is to cover the restaurants’ labour cost in employing waiters to serve you. But you and I know that these labour costs have already been factored into the price of the dishes. Top that up with the I-from-Myanmar type of service, this 10% can be quite a rip-off. But then again, we are rich Malaysians who make a lot of money and since it’s for food, we just pay without asking.

The second component is “service tax”, at 5%. This IS tax. You are legally obligated to pay this under the Service Tax Act, 1975. And here is something you should know…

Previously, restaurants located outside hotels with an annual turnover (i.e. revenue, not profit) of RM300,000 are required to be licensed and collect this 5% service tax from their customers. Effective 1 July 2008, the threshold of RM300,000 was increased to RM3m. [Source: Service Tax (Amendments) Regulations 2008 – PU(A) 216/2008]

This effectively means for restaurants located outside hotel, only those with an annual turnover of RM3m should be charging service tax. So what if you happened to eat at a restaurant which you don’t think is making RM3m in turnover per annum and you are made to pay this 5% service tax?

Well, chances are this restaurant was licensed under the old rule (i.e. RM300,000 threshold) and lazy to go to the Customs and revoke its service tax licence. Since the people paying the additional 5% are you and me, these business people just couldn’t be bothered.

But all if not lost as you can put in a complain at the Customs if you seriously think a particular restaurant not making RM3m a year is charging 5% service tax. One thing though, don’t judge a restaurant by its set up. There are some very old looking coffee shops making millions every year.

And remember, you can only make a complaint if it’s service tax and not service charge. I hope you all have an idea on what’s the difference by now.

That little bit of humanity

An anonymous person commented in Disparities Insanities Inhumanities saying that scenarios mentioned there-in can only be eliminated if we revive communism. He (assumed he) spoke like a true intellect; filled with knowledge that communism can kill the evil capitalism. However, he lacks wisdom.

An intellect will say “revive communism”, a wise man will say “amplify socialism”. I am not asking all of us to be Robin Hood and rob the rich and give to the poor. Rather, I would prefer to have the rich to voluntarily do something for the poor.

In the movie “Home” which was screened last Friday, it was mentioned that 2% of the world population possess 50% of the world’s wealth. If you ignore human rights and seize all the wealth from these rich 2% and make the 2% to be on par with the rest of the 98% world population, then it’s communism. No, I am not asking for that.

Socialism is asking the 2% to relinquish 20% of their wealth to help the rest of the 98%. Simple maths will tell you that 20% of the 2% who possess 50% of the world’s wealth is equal to 10% of the world’s wealth. Can you imagine what 10% of the world’s wealth can do to the world?

Unfortunately, for someone who has $100m to give away $20m is akin to a crime. Instead, someone with $100m wants his wealth to increase to $120m and this someone doesn’t care the additional $20m is going to come from those who hardly have $20k. That’s capitalism

A very good example of socialism was also mentioned in the movie “Home”. It was a point which fascinated me. It’s truly an epitome of socialism.

The movie mentioned about a man who established a bank in Bangladesh which will ONLY lend to the poor, changing the lives of many people in Bangladesh. I did some research and found out that this institution is known as Grameen Bank.

Based on Wikipedia, this bank does not require a guarantee or collateral. There is no signed contract and repayment is purely based on trust. Have you ever heard of such “bank”? Remember those times you get a call from the bank when you miss your credit card payment deadline by just 1 day?
I find it heart warming to know that in the midst of a cruel capitalist world, there is a bank which is doing things totally against the orthodox. Certainly, there are quarters criticising this bank claiming that it has put the poor into debts. But I think this bank has redefine the meaning of “debts”. And I see it as giving the poor a venue to obtain a source for survival. I see it as a bank fulfilling its true purpose… providing funding to those who are truly in need.

It’s about not about complaining about disparity. It’s not about despising insanity. It’s about giving birth that tad bit of humanity.


2 years ago… Zewt mystery in century entry

Why UK companies will not do business in Malaysia in the future

Let’s put it plain and simple…

UK corporate tax rate = 28%
Malaysia corporate tax rate = 25%
A UK-subsidiary in Malaysia will pay tax on its profits at 25%. Thereafter, when the profits are being repatriated to UK in the form of dividend, the UK holding company will have to pay an additional 3% of tax (28% - 25%) on the gross dividend.

Put simply, a $100 profit means $25 tax paid in Malaysia and $3 paid in UK. Hence, in totality, profit of a UK corporation should only suffer a maximum of 28% tax. Of course, the exact mechanism is slightly more complicated but this is the gist of it. That is how it works, or how it will work until end of June 2009.

The UK govt has just announced that dividends received by a UK company from its subsidiary around the world (i.e. foreign dividends) will be fully tax exempt effective 1 July 2009. Put simply, a UK company will not need to top up the 3% tax if it receives dividend from Malaysia.

What has that got to do with less investments coming into Malaysia? Doesn’t seems to bother us right?... WRONG!

Although a UK company no longer needs to top up the 3% of tax on dividend received from Malaysia, the profit will still suffer 25% Malaysian corporate tax. This is bad because the UK company can choose to set up its business in countries like Singapore (“SG”) and Hong Kong (“HK”).

The tax rate in SG and HK is 18% and 16.5% respectively. A UK company will need to top up 10% and 11.5% of tax previously in respect of dividend coming in from those countries. With the new rule, that is not the case anymore. In effect, the profit of a UK Group will suffer 25% if they do business in Malaysia but will only suffer 18% and 16.5% of tax if they do business in SG or HK. That is tax savings of 7% / 8.5% if they can somehow move their profits from Malaysia to SG / HK.

“Zewt, not all business can be done in SG / HK. Maybe some businesses have to be done in Malaysia?”

A very good question indeed if the above occurs to you. Well, with the wonders of globalisation, a lot of things can be done to facilitate profits being made solely in SG and/or HK. In fact, I can tell you that motion has already started by some big UK corporations to ensure that profits are booked in HK.

8.5% of tax savings (if profits are booked in HK) is A LOT of money. Top that up with the pleasure of having to deal with govt agencies in SG/HK vs. Malaysia; I would not bet against UK corporations moving their operations elsewhere.

Well, think about it. If you are a boss of a UK company, what would you do?


2 years go… Why is the rum gone?

Why the value

The reason why diamonds are expensive is because it is rare. Not everyone has it. That is why diamonds have significantly high value. But if one day; diamonds started to drop freely from our ass-holes; how much would you pay for diamonds then? Since we all have ass-holes (you have one right?), diamonds might just be worthless if such day is to come.

That is the general definition of value. The more there is of a particular thing, the less valuable it gets.

Perhaps this is why a few people mailed me asking how come the US$ is still so valuable (comparatively speaking) despite the fact that the US govt (the one led by your favourite Obama) keeps printing it? Since currency is no longer backed by gold, the value of US$ should be like shite, right?

Well, did you notice that the price of crude oil is always quoted at US$ per barrel? When multinational corporations declare their results to the world, did you notice that they always declare in US$? When transfer price of a footballer is disclosed to the world, did you notice that it is always quoted at US$?

Ya’ see, the US is quite smart from the very beginning. They made the world agree that US$ will be made as the international trading currency. Can you imagine all the imports and exports in the world are being done in US$?

This simply means that there will always be a demand for US$? The US$ can be dropping freely from the US govt’s ass-holes (I am referring to printing by the way), but the value of it will always remain. There are other factors but demand is the main force keeping the US$ going.

What do you think will happen if US$ is removed as the international trading currency? With its national debt currently standing as US11 trillion and US$ continue to fall freely from a very big ass-holes, the value of it may be US$1 = RM0.50? Could even be less!

No one has the balls to suggest this for a very long time. Everyone is afraid of US military power. You don’t want to suddenly being told that Osama is hiding in your country based on some super reliable intelligence and hence, your country should be bombed to pieces. So, no one has the ball.

Well, someone finally appears to have balls. It’s the Cina; those from China. The Cina, backed by Russia, Brazil and India; made a call to break the US$’s dominance in the world trading arena. This is big! Of course, it may take years but it is big. If it happens, US will probably go bankrupt and a lot of Cina from Malaysia will really go… “Actually, I is Chinese”.

But then again, do you think your beloved Obama will let this happen? The last great recession, famously known as The Great Depression started World War 2. What if this recession is bigger than The Great Depression?

Aiyah… nothing will happen wan lah. Life here still good mah… I can still go shopping and swipe my credit card and storm the latest iPhone craze. Forget about the world lah, let us just continue with our happy life here…


1 year ago… Cards laugh

2 years go… The week that’s been… Chef of the day… A quick threesome

This thing called MTM

Do you still remember how I once blogged that all the money in the world didn’t suddenly disappear; it’s just that money was never there the first place? Today; let me tell you one mechanism on how you are made to think that money is there. It’s not real, but you will be made to believe that it is real.

This mechanism is called Mark-to-Market, or better known as MTM. Let me give you an example on how it works.

Let’s say a company called “A-Co”, together with a lot of people all owned the same car, a 5-year-old proton wira. And let’s say this proton was bought at RM50,000 but is now worth RM20,000 if sold to another person or traded-in for another car. That means, A-co had a MTM loss of RM30,000. In simple accounting term, A-co will record in their accounts as a loss (perhaps in the form of depreciation) of RM30,000. Understand? Simple isn’t it?

If suddenly, one psycho guy came up and announced that he adores 5-year-old proton wira and is willing to pay RM500,000 for one, and is willing to buy as many as possible. What happen now? It means A-co now have a MTM gain of RM450,000.

Under accounting rules, assets are to be disclosed at fair-value, loosely translated as market-value. It means A-Co does not need to sell the car. As long as the car belongs to A-Co and that psycho guy exist, A-Co can now recognise a gain of RM450,000 in the accounts.

What does it means? Assuming no other items, it means you will see in A-Co’s financial accounts that there is a profit of RM450,000. An ordinary man on the street with no corporate knowledge will see the accounts and go… “Wow, just one car and can make so much profit!”

But is the profit (money) real? Can you go to A-Co and ask them to show you RM450,000 in cash? Heck, A-Co will not even be able to show you RM1 in cash. All they have is a car, and a psycho man story.

But you know the beauty of the story? People in A-Co can claim they work very hard and
demand for high bonus. And so they go to the bank and tell the bank they have such big profit and draw out a huge overdraft for bonus. By the way, when I said people in A-Co means the senior management. Those at the bottom will be told that A-Co’s target was RM1,000,000 and since there was only RM450,000 profit; A-Co did not meet the target so no bonus.

Earlier this week, the US govt (the one led by your favourite Obama) announced that they would be buying over the “toxic debt” via a US1 trillion fund. That is to say, US govt is going to buy worthless papers, though once perceived as lucrative investments. When someone is willing to buy these worthless papers, it means there is a market price for it.

Can you see the “5-year-old protons” and the “psycho man” in the above scenario? Don’t be surprise if companies holding these worthless papers can suddenly announce profit and bonus payments start to roll again.

Did the Obama administration which gave birth to so many American wannabes just did a… … …


1 year ago… A day in Paris… Lawatan ke sekolah… A Paris analysis

2 years go… Some of Mom’s wishes… 2nd chance with Mom – why is it enough

The story of Mr. Suck Plime

There was this piece of property, owned by Mr. Dog. However, he didn’t buy it to stay. His sole intention is to look for a new buyer and make a quick gain from the sale. One day, a Mr. Suck Plime came and inquired about the property.

“$1,000,000 and it’s yours” Mr. Dog said.
“What the…! This is just a tiny piece of shit!”
“Yeah, but that’s the going price. Don’t worry, you can sell it for $1,200,000 in no time.”
“How can you be sure?”
“Mr. Cat sold it to me for $800,000 just a few months ago. And before that, Mr. Cow sold it to Mr. Cat at $600,000. And before that, it was Mr. Goat who sold it to Mr. Cow at $400,000. All that happened in less than 2 years!”
“No shit!” Mr. Suck Plime is obviously intrigued.
“Yeah, just look for a Mr. Sucker Plime and he will buy it from you for $1,200,000. Then Mr. Sucker Plime and sell to Mr. Suckest Plime at $1,400,000. Piece of cake!”
“But I am just a garbage collector, how am I going to get a $1,000,000 mortgage?”
“Don’t worry, the bank will lend it to you. You just have to pay higher interest. That’s all. No worries, Mr. Sucker Plime will come before you even need to pay the first instalment!”

Indeed, all these small banks and mortgage houses were more than eager to lend money to the likes of Mr. Suck Plime, Mr. Sucker Plime and Mr. Suckest Plime. It didn’t matter whether all these Plimes are toll collector, garbage collector or even unemployed. As long as they are willing to pay higher interest, they will get the mortgage they want. If a lawyer is paying say 5% interest, all these Plimes might be paying something like 30% interest.

While all these Mr. Suck Plimes are selling to many Mr. Sucker Plimes, all the banks and mortgage houses also wanted to make quick money. So they all brought their accounts to the financial magicians a.k.a. investment bankers and told them that they have thousands of Mr. Suck Plimes who owe them money. And the beautiful thing was that all these Mr. Suck Plimes will be paying incredibly high interest to these banks and mortgage houses.

Lets say a bank claimed to have 10 Mr. Suck Plimes owing them a total of $10m and they will be making $3m per annum for the next 10 years from these Mr. Suck Plimes. In simple mathematics, this bank will have about $40m in 10 years time.

“10 years is a long time. I don’t mind selling all these debts and future income worth $40m for $25m right now” the bank told the financial magicians a.k.a. investment bankers.

But ya’ know, these banks and mortgage houses underestimated the financial magicians. They are not the usual bunch. They are the top grade magicians from companies like LaiMun Brudder and Goman Sex. In similar comparison, we are talking about footballers from Manchester United and handbags from Gucci. Get the drift?

These magicians not only can turn 1 + 1 = 3, they can turn 1 + 1 and then look to you and ask… “How much do you want it to be?” And so… jili jala bingling bonglong hocus pocus estrocious petronius woosh woosh and voila… the $40m worth of debts and future income can now be sold at… $50m! Of course, the magicians took a big chunk of it from that.

But the question is… sell to who?

And so, these magicians went to some big banks like ZeeTee Bank and KongKong Bank and told them about these “good stuff”. You must be thinking, if ZeeYee Bank and KongKong Bank are big banks, surely they not simply purchase investments.

Now imagine if Alex Ferguson comes to Malaysia and told the Malaysian team coach that Zewt is the best striker in the country, what do you think the coach will do? If Gucci picks up a bag from Petaling Street and then put it up in its store and tell you, that’s the current design, what would you do?

Yes my friend, reputation is important. And all these big banks happily bought all the debts over, which have been magically transformed into wonderful investments. Not only that, these big banks also summoned their internal magicians to do another round of magic and try to sell some of the investments to other people. Many went for it.

While all the above are happening, let us not forget, all the big $$$$$$$ depends on whether Mr. Suck Plime can sell the property to Mr. Sucker Plime and then sell it to Mr. Suckest Plime.

Lo and behold, to many Mr. Suck Plimes, no Mr. Sucker Plime appeared. To those Mr. Sucker Plimes, Mr. Suckest Plime was not forthcoming. That’s when the bubble burst. Now if you recall, all the Plimes are merely this and that collectors or unemployed, they are very low income earners. There is no way they will be able to pay off millions in mortgages.

What happened?

They ran… cabut… MIA… woosh… gone with the wind. Those who didn’t run away just go to the small banks and mortgage houses and said “Sorry, no money”. When all these happened, big banks like ZeeTee Bank and KongKong Bank who bought over huge investments originated from Mr. Suck Plime borrowings which supposedly guaranteed huge profit suddenly realised their investments now worth nothing… zero… kaput… kantoi!

And that is the story of Mr. Suck Plime, purely fictional of course.

Did you enjoy the story? Or would you want a more detailed and technical version?


1 year ago… A piece of humour in the current light

2 years go… Go with the flow vs. blog for a show… A close encounter with the rempit kind

A theory of 2 companies

Imagine there are 2 companies, Company A and Company B. Both companies are in the same business in town, and their business is rather specialised. This means the workers in this business can only work in Company A or B in this town.

Both companies are actually doing quite well despite the current economic condition. But one day, the big boss of Company A decided to downsize the company. Certainly, with the bad economic state, it’s not that difficult to obtain regulatory approval.

And so Company A retrench say… 30% of its personnel. Of course, they don’t really call it retrenchment. Packaging is important so it’s usually called voluntary separation scheme, flexible separation scheme, this scheme and that scheme. No matter what the call it, people will lose their job. The 70% remaining people in Company A will then become fearful thus will not dare to demand for increment or bonus.

With this, then Company B suddenly went on a recruitment drive and recruited the 30% workers in the market that only Company B can employ, due to their specialised skills. Of course, these 30% workers will employed by Company B at a much lower salary than before. Well, they have been retrenched, not much choice right?

Interestingly, Company B then retrench 30% of its original staff strength. These 30% being retrenched are not the newly employed ex-Company A workers, they are the existing ones. Made sense right? You employ all the ex-Company A workers cheaply, you can then get rid of those in current payroll who are getting much higher pay. Naturally, this also sends a chill to existing Company B workers thus they too do not dare to demand for increment and bonus.

More interestingly, Company A too went on a recruitment drive and employ the 30% retrenched ex-Company B workers. Of course, they are employed at a much lower salary compared to their previous employment in Company B.

In conclusion, 30% of staff changed working place between Company A and Company B resulting in massive reduction in staff cost. The non-retrenched staff paranoid about losing their job thus will not ask for increment and bonus resulting in an even more massive reduction in cost. Since both companies are actually doing well despite the economic crisis, there is a sudden increase in profit.

The big bosses of the 2 companies claim credit for the profit increase and pocket a fat bonus…

It’s just a theory… anyone got a morale of the theory?

Did all the money suddenly just disappear?

Many people have been asking me about the current financial crisis. How did it all begin? What exactly happen? Why so many companies suddenly go bankrupt or near collapse? Why suddenly so many countries in recessions (except for almighty Malaysia)?

Did all the money suddenly just disappear? It can't be, right?

The textbook answer to such question is blame the most talked about things in the world… “sub-prime”. Now, to understand what exactly happen will be very technical and I will probably have to write pages. Even that, I may not have written it accurately. So let’s leave that aside.

In addition to that, I believe sub-prime is not exactly the cause. I am of the zewtpinion that sub-prime is merely the point at which the real cause of the finally spill over. I believe the real cause to the current financial crisis is that there is a flaw in the law of wealth generation. Yeah, a pretty bold statement from a person who isn’t exactly an economist.

Generally, the law of wealth creation sounds rather simple. Tom has 10 bucks, he spends it on Dick’s restaurant for lunch. Then Dick spends the 10 bucks he earned on Harry’s restaurant for dinner. Harry then spends it on Zewt’s bar at night for a drink. In that single day, 3 persons recorded an income of 10 bucks; 3 persons can declare they made 10 bucks that day. 30 bucks will be recorded as GDP (correct me if I am wrong) and probably, 30 bucks will be taxed. But in reality, how much is there in the first place? Only 10 bucks.

That may seem rather simple and some may argue that perhaps Dick and Harry will have to record 10 bucks as expenditure. That is true, though not entirely accurate. But then again, the complexity will come when money is placed in the bank and then the same amount of money is lent out by the bank to another person. Top that up with business being carried out on credit terms, things just turned into one whole big mess.

Consider this…

Tom has 100 bucks, he places it in the bank.
The bank lends it to Dick for his business.
Dick shows his 100 bucks to Harry and purchase 100 bucks worth of goods from Harry.
But Dick tells Harry he will only pay him in 3 months.
Harry record 100 bucks worth of sales.
Harry pledges his business to another bank and to lend another 100 bucks.
Harry buys a 100 bucks house.

In reality, how much money is there in the above scenario? 100 bucks? Maybe 200. But Tom will claim he has 100 bucks in deposit. Dick has 100 bucks in cash. Harry has 100 bucks in receivables and another 100 bucks worth of assets. Do you get what I mean?

If you open up the published audited accounts of any profitable listed companies and if a company shows that it has a net profit of RM10m. Do you seriously believe that the company has got RM10min cash? Most probably not.

This is a signboard located in New York called the US debt clock. It records the amount of national debt of America. It has just been adjusted to add an additional digit as the amount keeps increasing and has not hit US10 trillion. And the amount will only keep increasing, indicating that America will never be able to pay off these debts.

In short, many people out there in the world, could be individuals, banks, companies or even countries have got receivables (i.e. debt) worth US10 trillion which will never be repaid. But these people think they have money as their deposit book or accounts show they do. But in actual fact, they don’t.

2 days ago, US announced a US20b bail out for Citigroup. In that announcement, it was also said that they will guarantee “hundreds of billions of risky assets”. So suddenly, these “risky assets” aren’t so risky anymore; all because the US govt said so. But how much these “hundreds of billions of assets” now worth. Try and go ask around…

So if you think only Malaysians like to swipe the credit card, then you are wrong. The whole world have been swiping on a giant credit card and “sub-prime” somehow caused a malfunction in the credit card chip causing the whole mechanism to fail. Suddenly, the world realise that many people who claim to be rich aren’t exactly rich. And all these I guarantee this we guarantee that is just to make sure the world continue to believe that everyone is still rich, please continue to spend.

Did all the money suddenly just disappear? No, the money was never there in the first place.

If your boss wants to axe you...

Seems like Development Bank of Singapore (“DBS”) has taken the lead in wielding the axe. Last Friday, it was reported the DBS Group is cutting 900 jobs in an effort to control escalating costs in the light of the current economic crisis. With so many investment banks in Singapore, such trend is expected to continue.

Just today, I was told via an e-mail that a particular Big-4 accounting firm in Hong Kong will be lining up similar fate for their non-performer. It is expected that such activities will begin to pick up pace this month as I was told job-cutting usually will not take place in December due to Christmas. Talk about empathy…

What about Malaysia then? Are you afraid that you will lose your job?

If you look at this side of Asia, one would consider that Hong Kong, Singapore and Malaysia are somewhat the financial hubs. Of course, Malaysia is very far away compared to the former 2 with Shanghai not too far behind. This would mean that a lot of big multinational corporations have operations in HK, Singapore and Malaysia.

Now, if such corporations want to cut jobs, I think they will attack HK and Singapore first and probably spare Malaysia. Why?

Say you have a senior finance manager in the Malaysian operating unit, his pay is probably RM10,000? A similar position in Singapore will probably dollar to dollar if not more. Let’s say it is SG$10,000. A similar position in HK will be a killer. I would say someone earning RM10,000 in Malaysia will be securing at least HK$60,000 for a similar position there.

Can you see what I am trying to get at?

Most, if not all multinationals consolidate their results using US$ as the common currency. So when they convert RM10,000, SG$10,000 and HK$60,000 into US$, they will realise that Malaysians (those residing in Malaysia) are the cheapest of the lot. So if you are looking to cut cost, where should you attack first?

Like the saying goes… someone has to do to job, unless the company goes bankrupt. So don’t be surprise if suddenly, Malaysians are promoted to regional roles overseeing this part of Asia. After all, it’s quite economical solution. But while we may get to keep our job, that doesn’t mean we will get a raise though…

So if your boss wants to retrench you and if your company has got operations in Singapore and HK, you may want to ask him to promote you instead.

Tuesday reflection on a recession

Late last month, I wrote an entry which hovers around…

Recession is bad for poor…
Recession is worse for the rich…
But recession is worst for those who are poor but think they are rich…

Some commented and disagreed with the above saying that the poor will be badly hit. Well, did I say a recession will be a good thing to the poor? Put it this way, when a recession hits, no one will be spared.

Why did I say a recession will be worse for the rich, generally at least? For your information, a lot of rich people have got their wealth slashed by more than half in the last couple of weeks.

Of course, with half of their wealth gone, many of the rich are still left with plenty to spare. That is actually quite true but it does not change the fact that rich are affected more compared to the poor. Anyone here got their wealth slashed by more than half?

And then there are those who commented and said about their fear of losing their jobs and unable to pay their mortgage and car instalment…

Well…

If you have been earning RM4,000 to RM6,000 a month and you are driving a nice and big Japanese car and at the same you bought a RM400,000+ apartment… or worse… if you are earning that amount of money and you are driving a BM or a Merz and living in a nice luxury condo in Mont Kiara… don’t you think you belong to the third category above?

Oh yes, the usual crime-rate-will-increase. You mean crime rate in this country… THIS COUNTRY… will improve if there is not recession?

Let me reiterate… a recession is bad. And it appears that this is going to be the mother of all recession. Just in case you didn’t know, the last version of such recession started World War II.

In the last couple of weeks, I have witnessed that greed will always present in everyone’s heart. Everyone is just trying to make the best out of the situation. The middle class jumped into the share market thinking that it was the worse. The rich whine and whine about losing so much money and needed to make back what they have lost when they still have millions with them. The poor are thinking about using their lifelong saving to “capture the opportunity”.

Everyone just want to profit. And I see a lot of rich people trying to trick middle class and poor people into believing that they can profit so that the rich can regain their wealth. This is why I think I think a recession is good. It will put some realign the lives of many… a healthy reshuffling of wealth as some call it.

And is the worst over? Well, someone said that 2 weeks ago… and also last week. And probably, someone will also say the same thing this Friday.