Saturday 8 February 2014

Approved, deferred and now, REVOKED

My Say by Tong Kooi Ong (The Edge issue Feb 10-16, 2014)

On Oct 7, 2013, I wrote in the Forum pages about the need to reject corporate kings working hand in hand with political elite to stop competition and argued that we should instead be pushing for fair competition and economic inclusion.

When the private sector is allowed to operate freely and competitively, the people and the nation benefit from greater efficiency, innovation, lower costs and superior products and services. 

An example I used was the application by The Edge Communications Sdn Bhd for a publishing permit to print a general daily newspaper called FZ Daily.

On Aug 20, 2013, the Home Ministry (KDN) approved the licence.  But one week later on Aug 28, we received another letter from the Ministry saying that the license approved just over a week earlier was now “deferred”.  No reason was given and neither was there any indication for how long.

I believe I know the reason and explained it in my column on Oct 7 last year.

Two months later, we wrote to the Ministry for an explanation. We did not receive any response.

On Nov 19, our lawyers filed an application for judicial review and the affidavit in support. In other words, we asked the Court to decide on the legality of the actions taken by the Ministry.

On the morning of Feb 5, 2014, The Edge’s application for leave to commence judicial review proceedings was heard before Justice Datuk Zaleha Yusof.  The Attorney General's Chambers did not object and leave was granted.  

In the afternoon, The Edge received a letter from the ministry saying that the FZ Daily licence has been REVOKED. The letter was dated Jan 21, 2014. Again, no reason was given.

The Printing Presses and Publications Act 1984 was amended in 2012 on the prime minister’s expressed desire for greater press freedom. After all, Malaysia prides itself on being a beacon for democracy and a global voice for moderation.  And freedom of the press is integral to any democratic and free society.

Under Section 13 of the Act, the minister can revoke a printing permit if the said publication contains anything that is prejudicial to public order or national security. But since FZ Daily never even had the opportunity to go to print, the decision to revoke the permit could not have been made under this section of the Act.

Section 6 (2) is the only other option for the revocation of a printing permit issued by KDN. This section states “The Minister may at any time revoke or suspend a permit for any period he considers desirable”.

I do not believe the law intends to give any one person such absolute discretion. It would contradict the democratic values and principles we so proudly proclaim to have.  We must expect that in any fair and just society, there will be reasonable grounds for a particular action taken by the authority.

But what reasonable grounds could there have been for the ministry to approve, defer and then revoke the permit for FZ Daily before the first copy even hit the stands?

To say I am intrigued by this whole affair is an understatement.  But what else is there to say in this MY SAY?

Chronology of events

Oct 19            The Edge applies for a permit for Fz Daily
Oct 31            Kementerian Dalam Negeri (KDN) asks for a revised mock-up and printer’s licence
Nov 1             The Edge supplies the mock-up
Nov 2             The Edge faxes a copy of printer’s licence to KDN
Nov 9             KDN confirms the application is being processed

Aug 20           KDN grants a one-year approval and asks for 
                       payment of licence fee
Aug 22          The Edge makes a payment of RM2,000 to KDN
Aug 28           KDN “defers” the license approved
Oct 31            The Edge writes to KDN for an explanation
Nov 19           The law firm representing The Edge - Raja Daryl and Loh - files an application for  judicial review and an affidavit in support
Nov 25            Hearing date fixed for Feb 5, 2014, before Yang Arif Datuk Zaleha Yusof for  leave to seek judicial review
Dec 9             Cause papers are served on the Attorney General’s Chambers

Feb 5(am)     The Edge’s application for leave to commence judicial review proceedings is heard before Justice Zaleha. The AG's Chambers did not object.  Leave is granted.
Feb 5(pm)      KDN letter arrives.  The licence for Fz Daily dated Aug 20, 2013, has been revoked. See KDN letter attached.
Letter from KDN

Thursday 6 February 2014

Anxious period of uncertainties

This week, The Edge Malaysia carried a special report, The State of The Nation. It addresses the various issues of what you need to know about the economy, stock market and politics today.

Here are a few highlights:
  1. There is no imminent or immediate economic crisis. However, the risk bandwidth has widened substantially.
  2. Malaysia has a grace period of up to two years to successfully reform, rejuvenate and implement its transformation policies. These include widening its tax base, reducing subsidies, cutting wastages and leakages in government spending, instilling fiscal discipline, improving its current account surplus and increasing private sector competitiveness by eradicating rent-seeking and monopolistic practices.
  3. Theoretically, the country could sustain its fiscal deficit by printing more ringgit.  In reality, there are limits. 
  4.  Foreign holdings of MGS (Malaysian Government Securities) are very high and the current account surplus is vulnerable. Too much of the government’s revenue is dependent on oil, and its operating expenditure is stubbornly rising.
  5. In an environment where issues of politics, economics, race and religion are politicized, the bet is that politicians will likely resort to populist policies, or do nothing. They would be reluctant to push through painful and unpopular – but right – decisions.
  6. Any sharp rise in US interest rates (the long-term yield is already steepening) or a major decline in oil and commodity prices will quickly reduce this two-year grace period we have to fix the problems.
  7. Malaysian stock prices, based on fundamentals, are currently overvalued. Earnings growth will slow, interest rates will rise and capital outflows by foreign investors will likely continue.
  8. Even if some foreign equity funds return to emerging markets should the US economic recovery be weaker than expected, the upside for Malaysian equities will be limited relative to the region. Since March 2013, the FBM KLCI has outperformed other benchmark indices in the region due to heavy buying by domestic institutional funds. If foreign appetite for equities in this region returns, the laggards and cheaper markets are likely to be re-rated upwards first.
  9. Foreign holdings of MGS will fall further with the expected global rise in interest rates.  The current level of almost 45% foreign ownership is one of the highest in the world, and creates a risk. When foreigners exit their holdings of MGS, the locals must replace them. This will require a re-balancing of the portfolios of major local funds such as the Employees Provident Fund (EPF) into MGS, leaving them less room to increase their equity investments.
  10. The biggest risk going forward is that no amount of local institutional fund buying will be able to counter any accelerated and concurrent selling by both foreign and retail investors in the equities and bond markets.
  11. At this stage, our view of the Malaysian stock market is that the potential risks overwhelm the potential rewards.

Using the horse as the analogy, given that this year is the year of the wooden horse in the lunar calendar, The Edge argues that for Malaysia, it is not a wooden but a WOUNDED HORSE.

The horse was overstretched the last few years, galloping strongly after being fed with financial steroids.

The fiscal indiscipline and consumption spree of the last few years were facilitated by the massive injection of cheap global liquidity and an enormous expansion in domestic bank loans to consumers.

The steroids are now being gradually withdrawn. Liquidity is moving out of emerging markets and interest rates are set to rise globally.

Below is the performance of major global stock markets since the start of the year of the horse:

                                    Index on        Index on
                                    30 Jan            5 Feb              % Change
Dow Jones                15,848.61      15,440.23      Down 2.58%
NASDAQ                     4,123.13        4,011.55       Down 2.71%
FTSE 1000                 6,538.45        6,457.89       Down 1.23%
DAX                             9,373.48        9,116.32       Down 2.74%
Nikkei 225                 15,007.06      14,180.38      Down 5.51%
Hang Seng                22,035.42      21,269.38      Down 3.48%
STI                               3,027.22         2,960.09       Down 2.22%
FBM KLCI                   1,804.03         1,785.88       Down 1.00%
Looking at the performance of the global stock markets so far, this horse is certainly not galloping. Whether this was due to the poorer than expected US and Chinese manufacturing data or the strengthening Yen, is really quite secondary. 

The point is that the world is in an anxious period of uncertainties.

These stock markets not only fell over the last few trading days, but more significantly, it was universal with major single-day plunges in stock prices.

Japan’s Nikkei 225 plunged 4.18% and Hong Kong’s Hang Seng fell 2.89% on 4 February, while the Dow Jones Industrials Average fell 2.61% on 3 February.

Over the course of the coming months, The Edge will discuss these issues and attempt to provide essential insights, analysis and understanding.

And on every issue of The Edge for 2014, there will be a The State of The Nation Update, highlighting recent developments in the form of updating and analyzing further the charts used in the original report. This will help you track the key variables to assist you in making informed business and investment decisions.

For those of you without a copy of the special report by The Edge, The State of The Nation, we will send a free complimentary copy to you if you write to
The Edge (Special Report), Level 3, Menara KLK, No. 1, Jalan PJU 7/6, Mutiara Damansara, 47810 Petaling Jaya, Selangor

You may also call The Edge at (603) 77218037 (Liz or Anita) or email: