This article first appeared in The Edge Malaysia Weekly on June 22, 2020 - June 28, 2020
IT is 7pm on a wet Thursday last week, when Finance Minister Tengku Datuk Seri Zafrul Aziz walks in and greets us in a 12th floor room at the Treasury building in Putrajaya. The former banker has had a long day, and we are not his final appointment.
Dressed in green batik — “every Thursday is batik day for civil servants” — the former banker, exactly 100 days into the job, settles down for what turns out to be a candid hour-and-a-half chat. He speaks on a wide range of topics, from the economy — three stimulus packages had to be put through within the first 88 days because of the Covid-19 pandemic — to government-linked-company appointments, and the woes of MAS and AirAsia.
The Edge: Is this your last appointment for the day?
Tengku Zafrul: I’ve got an 8.30pm with Petronas.
Are you asking for money?
We don’t ask for money until we need it lah.
Did you hesitate taking this job?
Of course.
How did your appointment come to be?
I don’t know who advised the prime minister. The thinking was they wanted a technocrat for a few positions. I got a call.
From whom?
From the PM. If it were from anyone else, I wouldn’t have believed it. I said I’ll think about it and said okay a couple of days later. [It was] time to give back (to the country).
Were you quite convinced when you accepted?
I had to consult the family. I didn’t want to ask my friends because I wasn’t quite sure if they could keep a secret. (laughs) It was a tough decision.
You’re relatively young and this will be the end of your banking career.
If you look at my career, there were new challenges every time. When I was an analyst, I [knew I] wanted to achieve certain things. When I went to banking, I wanted to be CEO of an investment bank [but] I never thought I’d be CEO of a financial group. When I became CEO of a financial group, my thinking was maybe I’ll work until I’m 50 and then do something else on my own [but] now [at 47], I’m doing civil service work. Being in government is another milestone, another new challenge.
So you saw it as a new challenge and that was why you accepted?
That was the second reason. The main [reason I took the job], corny as it may sound, is that I thought I should help out. It is national service for me, personally... not just because I’m taking a big [cut] on the compensation side, but this is just so completely different. But it is to do something good. I did not take this job to become a politician. I want to be in this job as a technocrat.
What is the transition like from banker in the private sector to a government minister? You’re on the other side of the table, so to speak.
Yeah, usually I have to go see Bank Negara. Now, Bank Negara comes to see me (laughs).
Was that when it hit you that you’re really on the other side?
Bank Negara is independent under the Bank Negara Act since 2009 but obviously, we work together when it comes to economic policies. They focus on the monetary side, we focus on the fiscal side.
The biggest change has been that the [job] focus previously [in the private sector] had always been more narrow. It was about shareholders, clients, staff — these were the stakeholders. The solutions when you have a challenge, as a CEO of a bank, you can learn from others as well, in a way, you know what the available tools are.
But in government, you do have business-as-usual challenges but today, we are faced with challenges never seen before, not just [in] Malaysia, but everywhere.
That’s the most challenging part of the transition. So, we really need to think out of the box for solutions. So far, working here with the ministry, working with other ministries and working with the private sector, the crisis, in a way, brought all of us together to find a solution for the economic side.
If you look at Prihatin and Penjana, the amount of RM295 billion today is because of the support that we got from the various government institutions, GLCs and the private sector. That was how we got to that number. The actual government fiscal injection is about RM45 billion, still big, but [the overall stimulus package] tapped into many parts of the Malaysian ecosystem.
Did you fulfil any secret wish by taking this job?
Not really. Actually, today (June 18) is my 100th day. The first 88 days, I had to do three [stimulus] plans. Honestly, I didn’t have a chance to think about anything [else]. We’ve been working very hard to focus on areas where we can help the economy and the people. A lot of time was spent in the office. We’ve not taken any break, except for Raya, and Raya was only one day for us. We’ve only taken two Sundays off because we are in crisis mode, like it or not. But it is improving.
I’ve been so busy that I haven’t had a chance to think about what I would have wanted to do differently. It’s been what’s today’s issue, how do we tackle it, because Penjana is a dynamic plan. We have to tackle issues that come up. Dynamic and agile means if there are issues and challenges, we resolve it, it cannot be a plan that is static.
You’ve said that only RM45 billion is direct fiscal injection and you’ve already tapped many institutions to chip in. Is this it already? What if more needs to be done?
When doing Prihatin and Prihatin+ — we injected RM35 billion — that question was also posed to me: Is this it? The answer is we have to spend on the fiscal side. As long as we can afford to pay back the debt, if the need arises to support the economy, we should [spend].
These are unprecedented times. If we look at what we’re doing, it is not all that dissimilar to what other countries are doing. They are also spending to help their country.
What we don’t want is our capacity and the infrastructure that we have today to collapse to the point that when we do see a recovery [from the pandemic], it will take us too long to recover [economy-wise].
So the limit [to direct fiscal injection] will be an amount where we think we can no longer pay back the debt. Today, we are forecasting fiscal deficit of around 5.8% to 6%. We have reached 6.7% before in 2009, so we still have room. The other barometer will be our debt-to-GDP number, which is less than 55% today. In fact, that 55% is a statutory limit that we imposed on ourselves. Other countries don’t have that and we can, of course, go to Parliament and request for [the limit to be raised] should we need to spend more to support the economy and the people. So we will see but what’s important is the discipline, when things get better, when things normalise, we must reduce the fiscal deficit back to a number that is sustainable in the longer term. This has to be a one-off.
If you look at Penjana and Prihatin, for example, the Bantuan Prihatin Nasional, that is about RM11.5 billion to 10.8 million people. That is a one-off. Next year, God willing, it won’t be happening again because we are assuming a better economy next year. That reduces your deficit need by RM11.5 billion. So, if you look at many of the initiatives that we did, [they are] not recurring, which is very important because that will help us reduce the deficit.
The other thing is the assumption on GDP. This year, we are assuming 0.5% to -2% still. That’s by Bank Negara. We are assuming 3Q and 4Q we will improve and based on that, the likelihood is that most probably we will be in a technical recession this year, but what’s more important is for us to bounce back. Once we bounce back, the GDP number should be positive next year. The consensus of the top 30 analysts is about 5% [GDP growth in 2021], the forecasts from the World Bank, Asian Development Bank and the like are also above that for next year.
So we assume that growth next year is around 5% based on [the] consensus number, which is the denominator [improving] and plus the numerator, which is the debt, going down, the fiscal deficit should improve next year.
[We must] make sure that the capacity of the country is still there, manufacturing, tourism is also key. When tourism opens, for example, if all the hotels don’t survive, if the tour operators don’t survive, when we reopen, there will be nothing for the people to come back to.
So that’s why we need to keep as much of the capacity that we have, the skills, the infrastructure but what’s also key is that this is also an opportunity for us to make structural changes for the longer term. Penjana and Prihatin are for the shorter term.
When we talk about Budget 2021, when we talk about the 12th Malaysia Plan, this is a chance to do some fixing (for the longer term). There are industries and companies, Covid-19 or no Covid-19, that will be under tremendous pressure to change their business model.
You’ve given us a number of things to think about. Back to the question of affordability. Debt servicing is already 15% of government revenue and the government still hasn’t specifically said how it is going to supplement government income and it is hard to introduce new taxes when everyone is struggling. We do understand a lot of the spending is one-off and the government has said the deficit will come down when things are better but how much debt can we still afford to take on? Have you engaged sovereign rating agencies for feedback on affordability thresholds?
We engage with the agencies all the time. In fact, after Penjana, we spoke to Fitch, S&P and also Moody’s. The concern is that we must make sure we look at the economy in the longer term. We must have the fiscal discipline to reduce the fiscal deficit after this crisis. Every country is doing the same thing. If we are the only one increasing our deficit this way, of course the rating agencies would question what we are doing but they’re saying we’re doing the right thing because they know that if we don’t do it, the economy will collapse longer term. They [rating agencies] want to be sure that we will [once the crisis is over] be as disciplined as we were before. In 2009, [fiscal deficit] was 6.7% of GDP [and] we reduced it all the way down close to 3%. They want to see that again. Of course, we say we will.
My time frame and the time frame that they are looking at is three years to bring the [fiscal deficit] level down below 4%. Within four years, we are going to try to reduce it to below 4%.
Would we see new revenue-raising measures in Budget 2021?
We are looking at many areas when it comes to revenue improvement or optimisation but the timing is key because when the economy picks up, it is important that we support the economy.
For Penjana, RM8 billion of it is tax forgone because of incentives ... we focus on the sectors we want to build [so we] have to give something to get investments into the country, bring employment and help GDP growth. The investments have to be value-added investments, more technology, less cheap manpower. We want to focus on that.
Even when we look at tax measures, we have to look at how we package it for the longer term and the timing [for implementation] because if the economy is in difficulty, the last thing we want to do is increase taxes. But when the economy improves, people must understand that the tax incentives have to be less.
Budget 2021 will be announced on Nov 6. Between now and November, we will address how we want to move forward with the revenue measures.
We hope there will not be a second wave [of Covid-19]. The numbers are looking good. We’ve flattened the curve and it remains flat as the economy opens up in stages. We hope that by the third and fourth quarter, a travel bubble will be in place. We are looking at opening up borders to countries that are also considered “green” [clear of Covid-19] like us to stimulate the economy further.
[But] projections for second-quarter [GDP] is going to be negative.
It’s a question of how negative …
Yes, because of the MCO (Movement Control Order). We’ve only got one month to restart the economy properly. It took a month for us to reopen because we’ve got to reopen in stages. Look at our hospitals today, capacity is 20%. One of the main reasons we did the MCO was to make sure that our healthcare system will not be under stress. Now, things are okay and we should be open for business.
You spoke of a recovery from next year. Is a V-shaped recovery out of the question at this point?
I think we are still looking at a V shape from next year. First-quarter (2020) GDP was 0.7%, second quarter [will be] negative. How big a negative depends on how fast the economy reopens… many people forget that because 2Q is a negative, the base is low ... We’re hoping that the third quarter will be positive, just slightly, but we don’t know. But the fourth quarter is going to be key, whether we see a V-shape recovery or not. Fourth quarter will be key.
By the fourth quarter, we would have opened our borders, — hopefully, with things under control — to more countries because Malaysia is also part of the whole supply chain when it comes to our export sector. We are also assuming that the global economy improves in line with what the IMF (International Monetary Fund) and The World Bank is saying. That’s when countries opens up and demand goes up.
Today, our challenge in Malaysia after May 4 when we opened up [is that] demand didn’t really pick up. People didn’t really go to the shops yet.
You’ve shared recently that you’re no longer looking at Samurai bonds. How are borrowing costs for the government now? Global interest rates have come down but Petronas recently raised bonds at more expensive rates than five years ago. How are you controlling borrowing costs, given that the government is going to be borrowing for a number of years still?
We think there is no need to raise foreign bonds, that’s why we didn’t do any foreign borrowings, and the Samurai bonds is one example. The reason being we have enough [domestic] liquidity. The market is deep enough. In fact, the whole fiscal package, whatever borrowings we needed, were all done domestically.
We do have a foreign borrowing limit as well — the statutory limit is RM35 billion. We are today at RM30 billion, so we have about 15% capacity to borrow but RM5 billion is only US$1 billion, so it is not really big in absolute terms.
And of our total [debt] portfolio, less than 3% are in foreign currency, so we don’t have to worry so much about [currency] movements. Our total debt exposure to foreign currency is very low.
The [borrowing] rate is so cheap, below 3% for 10-year MGS (Malaysian Government Securities). Of course, OPR (overnight policy rate) cut helps.
Last year, the government’s borrowing cost was still just below 4% ...
Yes, but there has been a 100 basis points cut in the OPR.
Petronas was raising together with Qatar … and many oil and gas companies were raising money at the same time. Petronas raised US$6 billion (RM25.7 billion) — that’s more than my whole package. We’re not even asking them [for dividends].
You’ve said several times that you’re not asking Petronas yet for more dividends …
Yes, not yet. It all depends on whether things get worse or not.
Many people still see Petronas as the traditional source of extra money for the government …
But it was only one time. Malaysia only tapped Petronas one time [for a special dividend] last year. During the 1997 crisis, Petronas made investments but [being tapped by the government] directly was only last year.
Domestic liquidity is sufficient [for the government] and we’re only borrowing using MGS and that’s done through Bank Negara.
You’ve come up with three [stimulus] packages so far. Is it too early to see whether there are signs of successes or indications that more needs to be done already? Are there already positive signs? What are you looking at to determine whether more packages needs to be rolled out?
We formed Laksana a week after I came into office because it is all about execution. When it comes to execution, it is not just the KPI, whether, for example, we have this Geran Khas Prihatin where every micro SME (small and medium enterprise) will get a RM3,000 grant. It is not whether we’ve disbursed the money, it is about what they used the money for and [whether] the business survives. That is still [too] early [to tell].
We have a very data-based monitoring system cut across 53 ministries and agencies because there are implementing agencies for every incentive that we announced. Now, it is [whether] the money has been disbursed. From next month (July) onwards, we must measure the outcome.
For Bantuan Prihatin Nasional (BPN), where we’ve given RM11.5 billion to 10.8 million people, the multiplier is great because it goes directly to the people’s pockets and the majority is to the B40, so they will spend it. For the companies, the whole idea is to help make sure they keep employees. So, wage subsidies, plus hiring subsidy, plus cheap loans — did they survive or not, did it help? We only launched in April and now it is the end of June, so July is when we start measuring the outcome along with the disbursement, especially among the SMEs.
Danajamin is looking at [helping] the bigger companies. They have different challenges.
It is still early days and we don’t know how bad it will it be for Corporate Malaysia. Do you foresee the need to set up Danaharta, a CDRC (Corporate Debt Restructuring Corp) that we had during the 1997/98 Asian financial crisis (AFC)?
Danaharta is still here. We never closed it down but we never activated it [after AFC]. If you remember Danaharta and Danamodal, the reason for their existence was to help banks. [During AFC] NPLs (non-performing loans) were up and Danaharta was there to buy up the NPLs and Danamodal was there to help recapitalise the banks.
Today, the banks are in a much stronger position than before. This is not a financial crisis. Banks are in a much better shape than before or else they wouldn’t be able to give that six-month moratorium. They have enough liquidity. The capital buffers of the banks today is RM121 billion. In 1997, it was RM39 billion, so it is three times more.
[The banking system] is able to withstand this better. It is more difficult to have a V-shaped recovery in a financial crisis because to have a V-shaped recovery, the whole ecosystem has to work, especially the banks, because the banks are the intermediary. [Today] they are still able to lend. Loans growth is still there. That wasn’t the case during the AFC.
You’ve said that from next month, you will be trying to track the outcome and many people are wondering if we’ve done enough to stop permanent damage to the economy. You’ve talked about giving money to B40 and they’re spending and you’ve said this is not a financial crisis. Is there still danger of this turning into a financial crisis, in the sense that there are businesses that were very viable but may no longer be in the new normal? Even safe investments for rental yield are hit because of what’s happening to the retail sector. Do you know what is the extent of banks’ exposure to vulnerable sectors hit by Covid-19?
We know. The banks know. We’ve aggregated and done various stress tests. It really depends on how badly the economy is hit. Right now, the positive thing is that the economy has restarted.
On the question of whether we can eliminate the risk, the answer is no. We can only mitigate [the damage] and help as much as we can. The unemployment rate will go up. It was 5% in April, [and] before that, it was 3.9%, so it is creeping up.
We are really in uncharted territory. I don’t have a crystal ball to forecast with 100% certainty but I am a bit more optimistic because we have restarted and we have restarted well and we must not have a second spike in Covid-19 [cases].
Malaysia is an open economy, (so) the faster the global economy recovers, the faster Malaysia will benefit. We have many reasons to hope that our big trading partners and neighbours will also quickly sort things out.
The third reason why I’m optimistic is because of where the domestic economy is heading. We have an opportunity here to garner support for all the plans we have today. We’ve done a lot of fiscal injection. Monetary policy continues to help us as well. Since January, we’ve had a number of rate cuts. I know I’m not supposed to comment on this …
You already did …
I did but (I was not quoted in full). I said I don’t get consulted on this (rate cuts) but my personal view is there is room but …
But whether [more rate cuts are] necessary and still working …
That’s right. There is plenty of room. Monetary policy is longer term in nature in terms of impact, but fiscal policy impact is faster. So we have to have a balance of both.
In a nutshell, you are reasonably optimistic, for all the reasons you gave, that economic turmoil won’t spiral down to a financial crisis?
That we won’t. I know your concern is, yes, the banks are in a healthier state today, yes, the banks have stronger capital buffers — but what if the businesses, which the banks lend to, do get impacted so badly, the banks’ NPL (non-performing loans) will go up and hit the banks. Right? So that’s why I talked about the stress tests. The stress tests have assumed this kind of scenario, where X percentage of NPL will go up, but because of the capital buffers, they will still be okay. Of course, it (NPLs) will go up, for sure.
But how severe an impact do the stress tests assume?
Look at the retail sector, the real estate sector, basically domestic consumption. People are very cautious about spending still, especially amid rising unemployment and pay cuts.
Yes, the stress test will assume the worst-case scenario. As I mentioned earlier, [GDP] growth this year would probably be in negative territory. But is that enough to bring us down into a financial crisis? The answer is no. I think we have enough buffers. To say that it won’t be affected, obviously not. It WILL be affected but it will be strong enough to withstand the impact.
The banking industry itself is very concerned about potentially high NPLs, post the six-month moratorium.
Yes, it will go up, for sure.
Is there a danger of it rising to levels higher than what we saw in the AFC?
That one we don’t know. You must look at the businesses affected, how badly are they affected? Loans can be restructured. We must look at NPLs where the companies are no longer in existence, no longer doing anything. Otherwise, all loans can be restructured.
Can the banks handle it and the heavy impact on their profitability? Additionally, they are not allowed to impose additional interest on loans like hire purchase and Islamic fixed rate financing under the moratorium. We’re not going to reach a situation where banks post losses?
If the bank posts losses, I don’t know … depends on the bank, that can be for any reason. I was talking about the capital side. You have to ask the banks [about profitability]. I look at it in aggregate. The banks, it all depends on what their [lending] portfolio is like. If the bank has big [exposure] to one sector or one company, then of course, if the balance sheet is not enough, the bank gets hit. So it’s not the right way to look at profitability. You have to look at the whole, whether it is systemic or not.
Will the loan moratorium be extended beyond the six months?
That one is up to banks. We cannot tell them what to do. This six-month moratorium was an idea, and they obviously agreed to it. They have their own view on this, but in this case, we had consensus. Whether they will continue with another six months, or three months, we will ask them, but it really is up to them, we cannot force them.
So you’re not sending signals for them to do so?
No. Let’s see, [the moratorium] is until September, and it’s now only June. But in my view, today, we should look at it in a more targeted way because the first moratorium was an automatic moratorium. Even people who don’t deserve it, get it. According to the numbers, many of them did not decline. But we cannot make it automatic [next] time around because there are many of these people who probably can afford [to pay] and still have jobs. So let’s then target people who are unemployed, let’s target companies who really need it, then it’s fairer. In my view, they [the banks] should continue [the loan moratorium] for those people who are in need, which means restructuring their loans.
So you are asking banks to provide more assistance?
I’ve not asked yet, it’s still early days.
You say the banks are still strong. You’ve probably done studies … if you were to nudge them to maybe extend [the moratorium] for another three months, the capital structure shows that they are able to afford it?
Can.
So, in that sense, it IS an option?
It is an option. But we can’t force them.
Can we talk about airlines? We’ve seen governments around the world, from Singapore and Hong Kong to Germany, come up with rescue packages for the airlines. There is a reason Khazanah has MAS as a strategic asset — it’s about connectivity and that helps everything. Does the government intend to help and, if so, how? You’ve said before you won’t bail out the airlines.
You have to define what is [a] bailout. When I said [no] bailout, it really means that if we want to help the companies, it has to be to help the companies, not the shareholders. Let’s say Company X [is in trouble], and then you buy the owners out. Now, that is what I mean by bailout because, one, it’s not fair because it is government money and, two, it’s politically suicidal. So that’s a bailout.
The money [to help] has to go to the company, none to the shareholders.
We will try our best to help the industry. The banks (and) the airlines are free to tap on loans that are guaranteed jointly with the government, like Danajamin. Danajamin loans are available to all sectors. Twenty per cent of the risk is taken by the banks, and 80% of the risk is actually guaranteed by the government. So, logically, banks should take the risk [to lend] because we are taking more risk than them.
But will the banks want to?
I don’t know, but I guess the banks will have to look at their risk appetite and the return on the loans, knowing that 80% is guaranteed.
Secondly, if you look at the incentives, the tax, the wage subsidies and all that … will help [the airlines] to a certain extent.
But if you look the companies themselves, Covid-19 or no Covid-19, the airlines have always had challenges. What they are facing today in Malaysia is a structural challenge, so they also have to address that themselves.
For the government, we look at their shareholders to see whether [there is] any commercial solution that is viable.
For me, as a [part of] Khazanah’s board, we look at MAS. And MAS obviously will have its plans. But at the Minister of Finance level, there is no intention, no plans to give money to Khazanah to inject into MAS.
So, no cash injection, no soft loan?
No, not at the Minister of Finance level. Khazanah as the shareholder (of MAS) will have to sort this out. They can borrow, they can inject [cash] if they really have to — as you said, it is a strategic asset, right? Or they can find a partner. We hear some airlines are talking to partners. So, they have to find a solution first. And none of them have come [to us], actually, to ask for money to buy them out. They’ve only asked for soft loans.
What has AirAsia asked for?
They’ve shared with us a lot of their concerns on SOPs (standard operating procedures) to fly again, which we have addressed to make it more palatable based on [that recommended by the] International Air Transport Association. I think we were more strict than the [rest of the] world. But that has been addressed. And then looking at all the other incentives, whether we can help them on the wage subsidy, increase the limit … these kinds of things.
On the loan side, I think they are talking to the commercial banks. They have not asked [the government for loans].
We have not given soft loans to anyone. You give to one, you have to give to all. We support the various sectors through the current financial infrastructure. For example, we have the RM1 billion tourism fund with Bank Negara in Penjana, which is meant to help the industry, the RM10 billion SRF, etc.
So, bigger companies like airlines should talk to Danajamin [for loan guarantees].
So, for MAS, Khazanah has to settle. AirAsia has to find loans on its own.
Like any other company.
Is the government prepared to let the airlines collapse and deal with thousands of job losses? You’re going to face backlash either way, whether you help or not.
True. We will look at it when the time comes. But as of now, like I said, they have not asked for us to buy them out, nor to give them free money. Just loans. And we’ve said, in terms of loans, you can tap on the banks.
What’s your view on a potential merger between MAS and AirAsia?
If you look today at where they (MAS and AirAsia) are, it really has to be done commercially. Whether they feel it is something good (or not), I leave it to them.
But personally, I think, if the merger is good for the country, for the aviation sector, then they should do it. But we won’t force. My view is that we shouldn’t force any consolidation, be it this sector or any other sector. Not banking either.
On Khazanah, has there been any change in their mandate? Previously, they’ve talked about the possibility of making Khazanah an entity that could generate income for the country in the longer run.
But they are supposed to do that, right? They’re not supposed to be loss-making.
Despite what Khazanah has been saying, there’s still talk about Khazanah being wound down, a lot of assets being sold.
No, no, no.
Could you help clarify the government’s position on what Khazanah is to Malaysia?
Khazanah’s mandate continues. There is no change in direction or mandate for Khazanah. We’re very clear about that. We have had our first Khazanah board meeting, and we have another one coming up. In that first Khazanah board meeting, the prime minister was very clear that they must continue with the current mandate they have. There is no change in direction.
There is also talk about heavy job cuts at Khazanah.
It’s up to the management. But the mandate is still the same.
Do you want Khazanah to continue selling non-core assets? If so, what?
It has to be clearly defined what non-core is. Non-core for one group may be core for another.
They have put it into a bucket between strategic and commercial. I think the strategic ones will have a different approach and the commercial ones will have a different approach. So, to me, they can continue that and whatever they do, as long as it is done the right way, we’ll be supportive. I don’t believe in micro-managing [Khazanah managing director Datuk] Shahril [Ridzuan] and the team. We meet every quarter and when there is [a need] to call for a meeting because of certain transactions, then only are we called upon.
On the recent spate of politicians being appointed as chairmen of GLCs and Ministry of Finance companies …
Oh, the chairmen. At least we didn’t change the CEOs (laughs). The CEOs of Telekom, Tenaga, Bursa, Khazanah are still the same. You want me to continue with [counting] the number of CEOs that were changed the last two years under the Pakatan Harapan government? So you prefer us to change the CEO or chairman? (laughs).
What’s your view, though, of these changes? Shouldn’t we be letting the best talent head such companies? For banks and certain institutions like Tabung Haji, it is actually legislated that we can’t have politicians as the chairman. Shouldn’t it be the same for corporates as well?
No, I think it is up to the corporate. There are different views on how you want to appoint someone to the board. Which board are you talking about? TNB?
Do such appointments come to you?
The Ministry of Finance will have a say, but obviously the decision is that of the company and the major shareholder.
So you’re not overly concerned …?
No, as long as the governance is in place. Can the chairman of Tenaga, for example, really make decisions (on his own) that will impair the company? There is a board. (Can) one person on the board make such big decisions alone and also execute it at the management level when he is non-executive? Chairmen are non-executive.
The power lies more with the management when it comes to the execution. So that’s why you have checks and balances at the board. And at the board, you have independent directors as well to check on the non-independent directors. (A chairman appointed by the shareholder is non-independent.) At the same time, there is management. So, there are checks and balances. If you are not happy with a decision (of the shareholder), the board resigns. If the management don’t want to carry out a decision [of the board], the management resigns.
But should politicians even have any place as heads of companies?
You’ve got to be fair. You’re assuming every single politician is crooked.
But their interests may not be aligned with the company’s, there could be conflict of interest. There is the notion of it being an avenue of patronage.
Maybe that’s your view. But, I think many others may have a different view also.
Of the huge projects — MRT3 (Mass Rapid Transit Line 3), HSR (Kuala Lumpur — Singapore High Speed Rail), ECRL (East Coast Rail Link), affordable housing — which one will have the biggest impact on economic recovery that you will prioritise?
When you look at the Prihatin and Penjana packages, every incentive has a multiplier. The ones that you’ve just mentioned, which are all construction, (will generate) some of the highest multipliers.
There’s no one priority over the other, of these major projects?
All will go [on]. [But for] HSR, no, we’ve got an extension to discuss that until the end of the year.
The rest, MRT3, LRT2, ECRL, those will continue. In fact, we are asking them to accelerate because they had stopped [work] for two months, not doing anything. We just had an MRT meeting and we told them to accelerate.
How about on social distancing on public transport?
I think the MCO was too effective. We are the worst in the surveys in terms of “most fearful of Covid-19 nation” in the world! It’s not good, in a way, because it takes longer to recover. You talk about private consumption — it’s 60% of GDP. If you look at Penjana again, the thinking behind it is, we [set] RM30 a month, RM1 a day [unrestricted] travelling [to get] people to go out. We have e-Penjana, about RM750 million, where we put about RM50 in e-wallets but [it] cannot be spent online, you’ve got to go out to spend. And to get that RM50 and the matching RM50 from the e-wallet providers, you have to download the MySejahtera app so that they can feel safe when they go out. When people go out, they want to feel safe.
So, these things will slowly bring confidence back to people to go out. You can see, every week, people are going out more.
Is the government worried about the property sector and the health of some of our property giants?
We are watching this closely. This is also another sector that has structural issues, whether or not there is Covid-19. There has been oversupply, especially in the commercial space, and even residential, to a certain extent, in certain areas and categories. That is being watched. We have some incentives in Penjana to help them. But helping [the sector at this stage] doesn’t really help the economy as much because they (unsold stock) have already been built, so the multiplier will not be there. It’s basically selling stock that couldn’t sell.
But sales transactions will still count.
Yes, but the multiplier is not that much. But yes, we are watching this closely, and that’s why we have this home ownership programme, the stamp duty (exemptions) to help the sector.
Will all these people who’ve received the cash handouts, is there concern that because they are getting free money from the government, they won’t get back to work? Those who’ve taken up the six-month loan moratorium also have spare cash. What happens after the six months and the end of the cash handouts?
The cash handouts have already stopped. There is no more. We’ve paid the RM11.5 billion Bantuan Prihatin National and that was to help Malaysians — not just B40, but also M40 — to mitigate the impact of the MCO, because they can’t go out and they can’t work. A lot people in the informal sector couldn’t get a salary as they couldn’t work on a daily basis. Looking at the numbers, 12.7 million have already gone to work, so hopefully, not as many will need this help. Bantuan Sara Hidup continues — there’s a payment in July for them, which is already budgeted for in the Budget.
The one on the moratorium, it depends again on how the economy picks up. How many people have enough money to pay? Those who don’t, I think the banks will come in to restructure [the loans] … they have no choice. It’s (a question of) how many of them. That’s why the correlation to the unemployment rate and the GDP is key, because that will have a correlation to NPL.
On the Budget. You are prepping for July already to present the …
I have to present the Supplementary Bill on the stimulus package.
Will the government be doing accrual accounting?
Not yet. I think the plan is for 2021. We’ll see.
Earlier in the interview, you talked about relooking the economy to future-proof … that probably will come in …
In Budget 2021. But Tok Pa (Datuk Seri Mustapha Mohamad, Minister in the PM’s Department) is doing a good job engaging the stakeholders on the five-year plan. That one, I want to see the tough decisions, because that is key to us. There’s an opportunity here to fix a lot of things. Because what I can do for Penjana and Prihatin is really about survival in the short term. But in the longer term, Budget 2021 will be a mid-term plan, but you will see a lot of focus in building that foundation for the longer term. Tabling of the 12th Malaysia Plan will be in January.
When you say ‘opportunity to fix a lot of things’, could you share maybe one or two things?
Yes, one is our labour force. We have over two million foreign workers but they are basically doing low-value-added stuff, so this is an opportunity for automation, technology. So labour force is about reskilling … this RM2 billion that we are spending on reskilling and upskilling is a start, because we need to look at people, honestly, to retrain a lot of Malaysians to be prepared for the Fourth Industrial Revolution. So we need to spend a lot on our human capital.
Internet and digitalisation — are you also finding the money for this or is this up to the Malaysian Communications and Multimedia Commission (MCMC)?
No, that’s part of the National Fiberisation [and Connectivity Plan], which we want to accelerate. Because, what we’ve seen, in the MCO period … the uptake when it comes to e-commerce and all that has accelerated. According to one study, 40% of Malaysians who never used e-commerce are now using. And the thing is, for these people, after Covid-19, after [a] vaccine, it will be the new normal for them. From a new normal, it becomes a permanent normal. The money that we have put aside for digitisation of SMEs is key because, as more people get used to buying things online, the SMEs who are sticking to the old business model will be left behind. Similarly, for rural areas, for students, we need to give them support, by making sure the infrastructure is there. The MCMC plan is there, but we will need to accelerate that.
What is your deepest worry as you pass your third month?
Covid-19. That we would get too complacent. The SOPs that we have should not be taken for granted. You can still go out, but the SOPS are there.
A few states now have had zero cases for months — Perlis, for example. We need to monitor closely, so that’s why SOPs are important, so when something happens, we can quickly act. Because if the economy closes down again, then I have to worry a lot more … everything [in terms of our projections] is off the table then.
So the next three months will be the critical period to see whether or not there is permanent damage? Is it fair to say that?
I think we will see after the third-quarter’s numbers.
As a final question, something to leave Malaysians or businesses who are concerned about their future. Can you give them any assurance that the government or Ministry of Finance has their back?
That’s why when you asked the question about the deficit — is this IT [that we are doing for them]? — the answer is no, because we need to help our companies as much as we can. The people as well, indirectly, through the companies but directly to the vulnerable sector, because it’s key, right?
Save by subscribing to us for your print and/or digital copy.
P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.