Malaysia is facing financial difficulty. I read a report from an analyst that Malaysia depends a lot on oil revenue and that, without the revenue, Malaysia will be a bankrupt nation.
I wish to give a suggestion to the new finance minister of Malaysia, Mr. Lim Guan Eng, on how he can increase the revenue for the government and also give a lot of spending power for Malaysians.
My suggestion may help to solve the debt problem for the Malaysian govt and also increase the wealth of their citizens.
What is this suggestion?
I will describe it as - follow the successful example adopted by Singapore over the past decades.
I do not want to appear to be arrogant. This approach has also been adopted successfully by many other countries, and in particular, Australia, China, Japan - just to name a few.
My suggestion is - increase the property prices in Malaysia by 20 percent.
How can this help the Malaysian economy?
All existing property owners will feel wealthier through the increased property values of their properties. Just imagine the spending power from the newly created wealth.
How will this increase the revenue of the government?
The government can sell 99 year leasehold land at a high price. It can also levy a development charge of 20% on the value of newly developed property built on privately owned land.
It is similar to the practice in Singapore over the past decades.
The revenue that will accrue to the government will be tremendous. It will provide revenue to the government to meet its budget expenses and also, hopefully, to reduce the debt.
Can buyers afford to pay the higher prices of properties, after the development charge of 20% is applied?
The answer is - yes, look at Singapore. People are paying high prices, even for 99 year leasehold public housing. They can afford to pay the higher prices as they can get bank financing. The banks provide the financing for the higher price of the property
If you look beyond Singapore to many other countries, you will find the same phenomena.
Will this backfire? Maybe it will. Maybe it will not.
This is how I suggest the finance minister approaches the change.
The first step is to announce a policy of imposing a 20% development charge on property development that will be implemented in stages over the next three years. It will start at 5%, and followed by 5% for each following year, until it reaches 20%.
I can imagine a large flood of buyers into the property market, to catch the prices at the lower rates of development charge.
Foreign buyers will also come into the property market in droves. I am sure that the government will want to control the foreign buying in some appropriate way. The foreign buying will strengthen the ringgit currency.
Can Malaysians afford the higher prices of properties? I believe that this should not be an issue, if they can get bank financing.
I repeat - the higher property prices will make existing property owners feel well off. This will unleash a large amount of consumer spending that will be good for the domestic economy.
Will an increase of 20% in property prices be harmful to the economy? I think not. Malaysian properties will still be very inexpensive, compared to properties in Singapore and many other cities.
There will be other ramifications from this policy. I do not have all the answers. I am sure that the finance minister of Malaysia and his economic experts will be able to handle them.
By the way - please give the disputed waters and the air access to Singapore. You do not need it. We do.
And remove the ban on vegetables, fish and eggs. Let your farmers enjoy a higher price for these products during the festive season. Do not force Singapore to look for alternative sources for our food supply.
I wish all the best to the government and people of Malaysia. I hope that you will be able to build a robust economy.
Tan Kin Lian
I wish to give a suggestion to the new finance minister of Malaysia, Mr. Lim Guan Eng, on how he can increase the revenue for the government and also give a lot of spending power for Malaysians.
My suggestion may help to solve the debt problem for the Malaysian govt and also increase the wealth of their citizens.
What is this suggestion?
I will describe it as - follow the successful example adopted by Singapore over the past decades.
I do not want to appear to be arrogant. This approach has also been adopted successfully by many other countries, and in particular, Australia, China, Japan - just to name a few.
My suggestion is - increase the property prices in Malaysia by 20 percent.
How can this help the Malaysian economy?
All existing property owners will feel wealthier through the increased property values of their properties. Just imagine the spending power from the newly created wealth.
How will this increase the revenue of the government?
The government can sell 99 year leasehold land at a high price. It can also levy a development charge of 20% on the value of newly developed property built on privately owned land.
It is similar to the practice in Singapore over the past decades.
The revenue that will accrue to the government will be tremendous. It will provide revenue to the government to meet its budget expenses and also, hopefully, to reduce the debt.
Can buyers afford to pay the higher prices of properties, after the development charge of 20% is applied?
The answer is - yes, look at Singapore. People are paying high prices, even for 99 year leasehold public housing. They can afford to pay the higher prices as they can get bank financing. The banks provide the financing for the higher price of the property
If you look beyond Singapore to many other countries, you will find the same phenomena.
Will this backfire? Maybe it will. Maybe it will not.
This is how I suggest the finance minister approaches the change.
The first step is to announce a policy of imposing a 20% development charge on property development that will be implemented in stages over the next three years. It will start at 5%, and followed by 5% for each following year, until it reaches 20%.
I can imagine a large flood of buyers into the property market, to catch the prices at the lower rates of development charge.
Foreign buyers will also come into the property market in droves. I am sure that the government will want to control the foreign buying in some appropriate way. The foreign buying will strengthen the ringgit currency.
Can Malaysians afford the higher prices of properties? I believe that this should not be an issue, if they can get bank financing.
I repeat - the higher property prices will make existing property owners feel well off. This will unleash a large amount of consumer spending that will be good for the domestic economy.
Will an increase of 20% in property prices be harmful to the economy? I think not. Malaysian properties will still be very inexpensive, compared to properties in Singapore and many other cities.
There will be other ramifications from this policy. I do not have all the answers. I am sure that the finance minister of Malaysia and his economic experts will be able to handle them.
By the way - please give the disputed waters and the air access to Singapore. You do not need it. We do.
And remove the ban on vegetables, fish and eggs. Let your farmers enjoy a higher price for these products during the festive season. Do not force Singapore to look for alternative sources for our food supply.
I wish all the best to the government and people of Malaysia. I hope that you will be able to build a robust economy.
Tan Kin Lian
1 comment:
Malaysia's problem is wages can't keep up with inflation, if people have higher pay, they could afford to buy properties, esp the bumis.
Mahathir is now trying to copy Singapore's education policy, equip people with relevant skills and knowledge thru education, so they could get jobs that pay well. Thus the prompting of using English as it's the only medium of instruction for science, Maths and IT.
Tun realises over the decades, the use of Bahasa Malaysia has impeded peoples's grasp of the above valuable skills, now he's trying to do damage control. Due to Malaysia following Islamic world trend becoming religious, many young Malays very good at religious studies, but this can't bring home the bacon.
When we speak to young Malaysians in English, many can't reply well.
When the majority race could have good jobs, then could afford property, Govt could collect more property taxes, income taxes, etc., and fill up the Nation's wallet. Thus, no use putting the cart in front of the horse, if people can't afford to buy property, and loaded foreign buyers are looked upon with resentment.
Yes, Malaysia must diversify beyond oil revenues, just look at Saudi Arabia and Brunei, also trying the same.
But time is not on the side of Dr. M, it takes decades to reverse wrong policies, and the Doc is too old, plus PH is a rojak Party, very fragile like a pack of cards.
Last but not least, corruption is universal in Malaysia, it's like the octopus tentacles, not easy to chop off. You could even get around the 1m ringitt minimum property price foreigners pay.
Najib's implementing the GST revenue collection is right, but 6% is far too ambitious, people can't take it with their low wages.
Not easy for Malaysia, perhaps the Japs could offer help.
Malaysia is at the opposite end of Singapore on the pendulum, Malaysia Govt is poor but many Malaysians are rich, while Singapore Govt is loaded compared to ordinary Singaporeans. The saving grace for us is the recent enbloc sales that created a lot of $m Singaporeans. So we are more blessed in a way.
Pray for Malaysia to get out of this rut, benefits Singapore too. Anwar must get into active Govt participation quickly, if DR M is incapable to manage in some way, Anwar could take over easily. He has no option to lie low. The honeymoon is well over.
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