Encouraging The Poor To Smoke Cigarette

The government cannot afford to hike the prices of cigarettes through taxes, Dzulkefly Ahmad told Dewan Rakyat today despite the health dangers smoking causes.

He said the move would drive Malaysia’s bottom 40 per cent of income earners, the B40 group, to turn to the black market for cheaper smokes, citing studies by the Finance Ministry that have shown that illicit cigarette consumption is now at 60 per cent.

He added that in the long run, raising the prices of legitimate cigarettes would cost the government more in terms of revenue loss and treating smoking-related illnesses.

“If we raise the cigarette prices until it is not affordable to the B40 group, then they will turn to the cheaper illicit cigarettes that will expose them to a series of non-communicable diseases (NDC):  chronic pulmonary disease, chronic cardiovascular disease, lung cancer.

“So we need to calculate the cost benefit analysis against the spread of illicit cigarettes,” he said in reply to Pakatan Harapan backbencher and Subang MP Wong Chen who wanted to know if the government will adhere to World Health Organisation recommendation of 75 per cent taxation per stick.

Dzulkefly said that currently the cost to treat the three top NDC related to smoking is RM2.29 billion, adding that the government subsidises 67.5 per cent of the treatment cost with 32.5 per cent paid by the patient.

The treatment cost is 0.7 per cent of the nation's GDP, he said.

A 2017 Health Ministry study on tobacco control have shown that if Malaysia does not take a more firm stance regarding cigarette control it will cost the government RM7.04 billion by 2025.

Tracking Your Savings

A recent survey has shown that 22% of Malaysians do not keep track of their savings, and 24% do not keep a budget and financial records.

Visa Country Manager for Malaysia Ng Koon Boon said this at the launch of the "Treat Your Money Right" initiative which is a collaborative between credit card services provider Visa and the Credit Counselling and Debt Management Agency (AKPK) in conjunction with World Savings Day.

Ng added also revealed other interesting insights into Malaysians' money management behaviour derived from the Visa Financial Literacy Study 2018 survey.

"Sixty percent of Malaysians keep enough money to meet their basic needs, 67% consider saving for emergencies as their ultimate motivation, 45% have a hard time-saving money and 54% try to give away as much of their money as possible to good causes and social investments," he said.

Ng said the study proved that it was important for Malaysians to understand their individual money management styles.

"Partnering with AKPK to launch this campaign is apt since our research shows a number of Malaysians have room to improve their budgeting and saving techniques.

"We believe that all Malaysians should learn how to manage their finances to plan and prepare for various stages of their lives so that they can have a better future" he said.

AKPK general manager Azman Hasim hopes to encourage as many Malaysians to take a more active interest in planning their finances and not just focus on savings.

"The first step in becoming better at anything, especially on the topic of money, is to challenge yourself (to better manage your finances)," he said.

Visa and AKPK invite members of the public to challenge themselves in the "Treat Your Money Right" Facebook competition.

The competition welcomes participants to take the" what's your money management personality? "quiz and share a savings tip and an anecdote that best describes their best money management personality on Facebook.

The Facebook competition began today and ends on Nov 14.

Participants stand a chance to win RM5,000 and eight units of Apple watch Series 3 amongst other prizes.

Female MotorTaxi Thailand

Hair pulled back tightly as she lounges on her red scooter, Ar is a rare sight among the male-dominated ranks of Bangkok's motortaxi riders plying their trade on the Thai capital's treacherous roads.

A veteran of seven years who works in the bustling On Nut district, Ar is among the thousands of women drawn to the work as gender roles in Thailand evolve, attracted by the flexible hours, decent wages, and a sense of autonomy.

She welcomes the changes as offering a chance for women to gain more independence.

"I am glad there are more opportunities for women to become 'motorsai'," she said, referring to the road warriors whose distinctive orange jackets line the streets of Bangkok.

"A new generation of women now have to be tough and brave."

Although no official figures are available, observers say more women are choosing to brave the risky traffic-logged roads and discrimination for the flexible work schedule, which allows them ownership over their lives.

Chaloem Changtongmadun, president of Thailand's Motorcycle Taxi Association, said that working as a motorsai offered women a level of freedom not available in offices, shops or factories.

"Women don't find the work convenient when they become pregnant, take maternity leave or visit their hometown," he told AFP.

"They feel a closer connection with their families than when they worked in companies."

He believes that women today make up roughly 30 percent of Bangkok's 98,000 registered drivers although others say the numbers are probably lower.

In many parts of the Thai workforce gender expectations are still at play, with women typically filling service industry jobs and clerical positions. 

"Thailand still has very blatant gender discrimination," said Kyoko Kusakabe, a professor at Bangkok's Asian Institute of Technology where she studies women's employment in the informal economy.

That is in spite of women shouldering many of the family responsibilities, especially in times of crisis, Kusakabe said.

Women are more likely to take up low-paid work in the informal economy while men "stay unemployed to look for a better job", she explained.

- 'Now things have changed' -

Chaloem also attributes the increase in recent years to the struggling economy, which has been under pressure since a military junta took over in 2014.

Thailand's ever-shifting political landscape -- where courts and coups have undercut civilian rule since 2006 -- has hampered growth in what has been dubbed a "lost decade".

"Many people lost their jobs or couldn't make enough money to take care of themselves and their family," Chaloem told AFP.

Thailand also has one of the highest numbers of road deaths in the world, and Bangkok's motortaxi drivers embrace a life on the edge to provide a transport lifeline, weaving skillfully between long lines of cars.

As the industry has become more regulated, the drivers are now less vulnerable to abuse from shadowy mafias demanding monthly payments.

Mototaxi queues -- known as "wins" -- also function in a more democratic fashion, like holding elections of leaders and allowing members of a queue to vote on certain decisions.

However, most of the women still require the support of a male relative in order to join a line, where there is usually a lot of competition.

Waiting for her turn on a shady Bangkok street in the Ari neighbourhood, Paveena -- who goes by the nickname Yaya -- says she could only secure her position because her brother vouched for her.

"My brother asked the win owner if I could borrow one of their (orange vests) so I could make more money," 36-year-old Yaya told AFP, explaining the second job was needed to support her family after the death of her mother four years ago.

Today, she earns about 1,200 baht (US$37) for a full day's work -- a relatively high income compared to Thailand's daily minimum wage of 330 baht.

Being able to make her own schedule also gave her the freedom to juggle her other job of selling school stationery.

Yaya said leaving a life of routine to buzz through the streets even helped her deal with her grief.

"Driving helped me get through the loss of my mother because I didn't have to think so much... I just drove," Yaya said.

Buayloy Suphasorn, 53, started 17 years ago and is considered a pioneer as one of the first female drivers on her win.

"Some men didn't want to sit on my bike because I'm a woman," she recalled, adding that they thought she would be a bad driver.

"But now things have changed."

Malaysian Retirement Updates

Financial security in old age has never been more important, what with declining birth rates and increasing longevity.

For many Malaysians and Asians who in the past used to depend on their children and grandchildren as a primary source of income post retirement, the pressure is increasing as people are living longer but having fewer children to support them.

Not surprisingly, retirement income systems worldwide are under pressure.

Mercer, a leading global professional services firm, recently launched its annual Melbourne Mercer Global Pension Index (MMGPI), revealing important information on how some 34 countries are preparing for tomorrow’s ageing world.

Among the 34 pension systems measured, there is wide gap among the systems around the world with scores ranging from 39.2 for Argentina to 80.3 for The Netherlands

The Netherlands and Denmark come up tops (with scores of 80.3 and 80.2 respectively), both offer A-grade world class retirement income systems with good benefits.

The index indicated that Malaysia maintained a stable C rating, compared to some Asian countries, coming up ahead of Japan and South Korea, but behind Singapore.

On Malaysia’s Global Pension Index score, Mercer Malaysia CEO Hash Piperdy says: “Malaysia maintains a stable C rating but action needs to be taken to address our ageing nation – over five million Malaysians are expected to be over 60 years old by 2030, and nearly 10 million will be over 60 by 2050.

“Malaysia’s sustainability score has decreased from 61.2 to 60.5, based on the index. There still exists a gap which poses risks in terms of the long-term sustainability in the system due to the ageing population, and the need to address it is crucial as there are still many Malaysians without sufficient pension savings on top of the Employees Provident Fund (EPF). It is high time for industry and community groups to look into Private Retirement Schemes (PRS) and other ways to boost long-term savings,” he adds.

Malaysia’s retirement income system is predominantly based on the EPF which covers all private sector employees and non-pensionable public sector employees. Under the EPF, some benefits are available to be withdrawn at any time (under pre-defined circumstances including fund education, home loans, or severe ill health) with other benefits preserved for retirement.

Introduced in 1951, the scheme makes it compulsory for employees to contribute 11% of their salary towards their personal EPF account. Employers are also required to contribute 13% of the salary for employees earning RM5,000 and below, and 12% if the employee’s salary is more than RM5,000.

Although the guaranteed base dividend rate for EPF is 2.5% per annum, Malaysians have been enjoying an average 6.02% for the last 10 years (2008-2017).

This high EPF dividend rate has given many Malaysians a false sense of long-lasting financial security.

The institution suggests that the minimum savings EPF members should have at age 55 is RM228,000. This equates to a monthly withdrawal of RM950 to cover basic needs for 20 years. However, according to a 2016 survey by the Department of Statistics Malaysia, the average household expenditure of Malaysians was RM4,033.

EPF reported that only 18% of members have the minimum savings target of RM228,000 in their account by 55.

Mercer points out that the overall index value for the Malaysian system can be increased by:

> Increasing the minimum level of support for the poorest aged individuals;

> Raising the level of household saving and lowering the level of household debt;

> Introducing a requirement that part of the retirement benefit must be taken as an income stream; and

> Increasing the pension age as life expectancy continues to increase.

Making Good Progress - Piperdy says a well-functioning social security system is needed, one where an income stream is provided rather than just a lump sum payment upon retirement.

“This could be something like the CPF Lifelong Income For The Elderly (CPF LIFE) scheme that they have introduced in Singapore. By having this, people don’t outlive their savings and there is less reliance on family support. However you have to build up that nest egg before you can drawdown on it,” he says.

Piperdy commended the EPF’s efforts and said that there are already a lot of good steps being taken, and there is still time to improve on the system. However, there are fundamental changes that need to made because the population is aging fast.

“Aging is accelerating. Some 20 to 30 years ago, Malaysians used to have families with 6 to 7 childen, but now its under 2 children. This is definitely going to create pressure,” he says.

He said that people are now expected to live on average for another 20 years after they retire.

In recent years, there has been an increasing trend where people do not withdraw their EPF in one go.

“The beauty of drawing down this way is that the remaining money in the EPF benefits from the dividends,” he says.

The other issue is an older retirement age.

Piperdy says that as people are living longer today, it is important to have more flexible retirement ages. Afterall, the economy is changing and people don’t stay with the same company for most of their lives anymore.

“Instead of having a hard cut-off at 55 or 60, perhaps we could have flexible retirement so that an individual can carry on working while concurrently drawing down on their EPF, before gradually moving on to full retirement.”

“If you are 55 today, try not to withdraw your entire EPF savings in one lump sum. You can also defer the age where you stop working. Just by contributing a little bit more, that money goes very far – you will be drawing down on that extra contribution for the next 20 years. These small steps can make a big difference,” says Piperdy.

Multiple Sources - Piperdy says that to have that income stream, one must build up on one’s nest egg so that there is a decent amount first.

“To build it up, this simply means more contributions. One way is via the PRS. In an A-rated or a high B-rated pension system, an individual has multiple sources of contributions.

“The Netherlands and Denmark have multi-tiered retirement plans. For example they have social security scheme which provides a basic income for everybody. That is supplemented by company pension plans.

“So perhaps the social security part covers 10% to 15% of retirees’ needs, while a further 30% to 40% comes from company pension plans. The remainder comes from private savings or investments,” he says.

In Malaysia, it is still the EPF that most people rely on. Piperdy feels there are opportunities to develop more company pension plans as the infrastructure is already in place.

“The Securities Commission and the government introduced the PRS a few years ago. Its got some RM2bil in assets, and has been successful so fast, although it is on a voluntary basis. I would like to see more incentives for employers to set up these plans for their staff,” he says.

For some background, the PRS is a voluntary long-term savings and investment scheme designed to help individuals save more for their retirement.

Each PRS offers a choice of retirement funds from which individuals may choose to invest in based on their own retirement needs, goals and risk appetite. The fund options under PRS are intended to enhance long-term returns for members within a regulated framework.

The year 2017 was a record year for the PRS, attracting the highest number of new members to the savings fund since its launch five years ago. Total members grew by 36% to 301,279 in 2017, from 221,235 in 2016.

Meanwhile total asset under management (AUM) of the 56 existing PRS funds rose by 47% to close the year at RM2.23bil, from RM1.51bil in the year before.

Piperdy would suggest eventually having auto-enrollment of these savings plans as one way to broaden the contribution base.

“Everyone complains that money is tight, but who is going to miss 1% of their salary.If that 1% increases to 2% in a few years, that makes a huge difference later on in life,” he says.

Holistic Approach - Author of the study and senior partner at Mercer Australia, David Knox says that the natural starting place to having a world class pension system is ensuring the right balance between adequacy and sustainability.

“It’s a challenge that policymakers are grappling with. For example, a system providing very generous benefits in the short-term is unlikely to be sustainable, whereas a system that is sustainable over many years could be providing very modest benefits. The question is – what’s an appropriate trade-off?” he says.

Knox adds that it’s not enough for a system to be sustainable or adequate. In some countries, broad coverage has been successfully accomplished through compulsory workplace pension systems or in some cases, auto-enrolment arrangements.

Knox says that governments need to ensure these schemes include everyone so that the whole workforce is saving for the future. This includes contractors, self-employed, and anyone on any income support, be that parental leave, disability income or unemployed benefits.

The Mercer Index uses three sub-indices – adequacy, sustainability and integrity – to measure each retirement income system against more than 40 indicators.

The overall index value for each system represents the weighted average of the three sub-indices. The weightings used are 40 percent for the adequacy sub-index, 35% for the sustainability sub-index and 25% for the integrity sub-index.

The different weightings are used to reflect the primary importance of the adequacy sub-index which represents the benefits that are currently being provided together with some important system design features.

The sustainability sub-index has a focus on the future and measures various indicators which will influence the likelihood that the current system will be able to continue to provide these benefits into the future.

The integrity sub-index includes several items that influence the overall governance and operations of the system which affects the level of confidence that the citizens of each country have in their system.

Roti Canai, Teh Tarik, Obesity & Diabetes

The rising cases of diabetes and obesity are a cause of concern in Malaysian society, says a specialist.

Seremban KPJ Specialist Hospital General Upper GI Surgeon Dr A. Vijaya Shankar urged the public to avoid eating at 24-hour restaurants as it contributes to obesity and diabetes, highlighting the main culprits for the problem being roti canai and teh tarik.

“Even though people already know that roti canai contains high calories and teh tarik has high sugar contents, they just don’t care because these are the popular food items amongst the population.

“People are used to hang out at 24 hours restaurants and enjoying their roti canai and teh tarik. This isn’t healthy and they contribute to the rising cases of obesity and diabetes,” he said when met after the closing ceremony of Obesity Week 2018 celebration at Dewan Anugerah at the KPJ Seremban hospital. The program was attended by the hospital CEO Maisarah Omar.

Dr Vijaya said roti canai and teh tarik are popular because they are easy to prepare within 5 minutes.

“We no longer cook our own meals like in the olden days. Those days, people walk everywhere, tend to their gardens and do yard work, and because of their lifestyle, they were much healthier in the long run.

“These days, people ignore the content of their food, too lazy to exercise or walk which cause them to suffer a lot of illnesses. Sometimes, we need to live like those in the olden days. We should eat right and have a healthier lifestyle. The easiest thing we can do is to climb stairs,” he said.

He adds that more women are obese compared to men, and 40% of adults are obese.

“Children are also getting fatter due to genetics and also because they are following their parents’ eating habits. Find healthier food and avoid 24-hour restaurants,” he advised.

He said obesity, high cholesterol, high blood and diabetes cause metabolic syndrome that could lead to heart attack, stroke and death.

Meanwhile, Maisarah said the programme was conducted to ensure the hospital’s 617 staff control their weight and their health.

“Starting from last year, the management decided that every employee will get an increase of 2% to their KPIs if they take care of their health. We want them to show a good example for our patients,” she said.

SST on General Insurance

About four million general insurance policy holders who renewed or purchased their policies during the Goods and Services Tax (GST) tax-holiday period will be affected by the Sales and Services Tax (SST) regime, says the General Insurance Association of Malaysia (PIAM).Affected policy members included those who purchased or renewed their motor, fire or personal accident insurance during the zero-rated GST period from June to August.

When they purchased or renewed their policies during the tax holiday, they made a lump-sum payment for 12 months. But the zero-rated period was only effective from June to August, which means they still have to pay the SST for the remaining nine months beginning from September,“ he said during a press conference on the upcoming 3rd ASEAN Insurance Summit (3rd AIS) here today.

PIAM had appealed to the Ministry of Finance (MoF) for a SST waiver.  “We told the MoF that the number of affected policy holders, at four million, is quite big. So, it makes sense for them to consider favourably our request. PIAM should have passed an endorsement to collect the chargeable tax from affected policy holders, but no action had yet been taken.

In August, PIAM issued a statement calling on the government to remove the SST for general insurance products. Other than the impact on policy holders who renewed or purchased products during the tax holiday, the SST was a contrast to the former service tax regime, which would not apply to insurance policies purchased by individuals.

PT Asuransi Jiwasraya Delayed Payment

PT Asuransi Jiwasraya, the oldest life insurance company in Indonesia, is forced to delay payment of insurance policies due this month. The postponement of payment was carried out to 711 bancassurance products worth Rp 802 billion. Investment mistake is suspected to be the cause of the company’s liquidity difficulties, leading to a failure to pay the policies.

Seven banks sold Jiwasraya’s bancassurance product, JS Proteksi Plan, which was issued five years ago. They are Bank Tabungan Negara (BTN), Standard Chartered, Bank KEB Hana Indonesia, Bank Victoria, Bank ANZ, Bank QNB Indonesia, and Bank Rakyat Indonesia (BRI).

“We as a state-owned company together with shareholders are seeking funding to fulfil obligations to policyholders,” as quoted from a copy of Jiwasraya’s letter to one of the banks selling the JS Proteksi Plan on 10 October.

In the letter, Jiwasraya said the payment was postponed due to liquidity difficulties in its finances, even though the state-owned insurance company showed a positive performance in the 2017 financial report, with a profit of Rp 2.4 trillion.

There is a possibility of fraud in Jiwasraya’ case. Hence, the Minister of State-Owned Enterprises (SOE) Rini Soemarno asked the Supreme Audit Agency (BPK) and the Development and Finance Comptroller (BPKP) to conduct an investigative audit.

According to her, liquidity pressures that made Jiwasraya fail to pay bancassurance policies occurred due to investment errors. The company placed its funds in equity repos. Repo transactions (repurchase agreement) are loans provided with stock collateral. The loans offer high interest rates because of its high risk. This is why Jiwasraya was bold enough to issue insurance products, such as JS Proteksi Plan in 2013, by offering high interest rates.

Problems came up when the capital market weakened and stock prices plummeted. The company cannot sell the shares that became collateral for the loan because its value declined. Jiwasraya, as the lender, will suffer a financial loss if it forces to sell the stock when its price is low.

The SOE Ministry detected this irregularity after getting a report from Asmawi Syam, who was just appointed as President Director of Jiwasraya in May 2018. There were discrepancies in assets and liabilities in last year’s financial report.

Based on the report, Jiwasraya’s net profit was recorded at Rp 2.4 trillion, rising 37.64 percent compared to the previous year. Net premium reached Rp 21.8 trillion, up 21.52 percent. Investment return rose 21.09 percent to Rp 3.86 trillion.

However, Asmawi saw irregularities in the financial report and asked PricewaterhouseCoopers (PWC) to re-audit the report. Based on the audit results, Jiwasraya’s net profit did not reach trillions, but only Rp 360 billion last year.

When confirmed, Asmawi refused to give a full explanation about the causes of liquidity pressures that led to delay in payment of maturing policies. “We are currently being audited by BPK and BPKP. If we get the results, we will release it,” he said. So far, the indication is that Jiwasraya’s liquidity difficulties occurred due to mistakes in investment management. Most of the managed funds were invested in securities in the capital market, while the rest was placed on land and properties.

According to the Financial Services Authority (OJK), two things that make Jiwasraya experience liquidity difficulties. First, the investment performance trend has declined along with the recent weakening of the capital market performance. On the other hand, Jiwasraya promised high returns to its customers.

Jiwasraya cannot simply sell its investment shares when the price is low. “If it [investment] is disbursed now to pay it [policy], the result is a cut loss. If there is a cut loss in a SOE, it could be accused of harming the state,” said OJK Deputy Commissioner for Non-Banking Financial Industry Moch Ihsanuddin in Jakarta, Thursday (18/10).

Second, the premium revenue also fell. Jiwasraya’s total premium revenue was Rp 21.9 over the past year, but it has not reached Rp 8 trillion until this month. These two things worsen the company’s liquidity. Revenue from investment and premium cannot cover the liquidity difference. OJK has actually warned Jiwasraya to maintain liquidity so that its obligations to policyholders can be fulfilled.

As a result of this late payment, Jiwasraya’s management offers two options to the policyholders. First, roll over which means a one-year contract extension on the customers’ fund. It provides a 6 percent interest per year for this option. As of 15 October 2018, Jiwasyara had paid interest of Rp 96.58 billion for 1,286 JS Proteksi Plan insurance policies. The payment is the interest from the maturing premium worth Rp 802 billion.

Second, Jiwasraya is asking for more time to do the payment in the next few days to its customers who still want to withdraw their investment funds. The delay in payment will be compensated with an interest of 5.75 percent per year. This additional daily interest is calculated based on the number of days of delay starting from the due date until the claim is paid. “We are doing our best to pay it. Hopefully, it can be completed soon,” Asmawi Syam said.

OJK will continue to monitor the solutions offered by the company to its policyholders and wait for the completion of BPK’s investigations. The financial authority cannot make its own decisions in Jiwasraya case. A coordination is required with the SOE Ministry and Finance Ministry that represents the government as the shareholder of Jiwasraya.

“OJK has taken care of this issue to make people calm. Delay (in payment) is only for bancassurance products,” said OJK Chief Executive for Non-Banking Financial Industry Riswinandi.

Almost Bankrupt - Jiwasraya's financial difficulties are not only happening now. Four years ago, Dahlan Iskan revealed a bankruptcy issue in the company, which was founded in 1859. Dahlan, who was the SOE Minister at the time, said Jiwasraya in 2014 had escaped the threat of bankruptcy for having to bear its previous financial burden of Rp 6.7 trillion.

The burden stemmed from the 1998 financial crisis, which brought difficulties to the banking and financial world. Banking was made easier due to massive bailout from the government, while the insurance industry did not get it. The problems experienced by Jiwasraya can be solved in two ways – addition of capital or zero coupon bond. At the time, the government was not able to provide additional capital due to limitation of state finances.

The Finance Minister had actually reviewed and processed the provision of zero coupon bond facilities, but it was cancelled following the emergence of Bank Century case that also needs bailout. There is no other way, Jiwasraya must find its own solution. This company must be able to save the future of its agents (almost 10,000 people) and employees (more than 1,200 people).

Technically, Jiwasraya should have been declared bankrupt in 2009. The company’s assets were much smaller than its obligations to policyholders. The difference reached Rp 6.7 trillion. Jiwasraya’s management under the leadership of Hendrisman Rahim believes they will rise from adversity. 

As a result, Jiwasraya managed to improve its operational performance and secured the trust of policyholders, shareholders, reinsurers, OJK, Taxation Directorate General, and all related parties. “The trust was ultimately “sold” or “reinsured” to international insurance institutions,” as quoted from Dahlan Iskan’s article “Free of Rp 6.7 Trillion at the Age of 155” published on 18 August 2014.

With this good performance, the Taxation Directorate General gave approval for Jiwasraya to carry out asset revaluation with special facilities. OJK also continued to assist the company’s restructuring efforts. In a short time, Jiwasraya eventually managed to get out of the entanglement of financial burden and was able to pay big taxes in 2014.