People in the know (in this case they work with Petronas) say that Petronas is planning another round of staff reduction early next year.  Petronas meaning the group.

Its a cost cutting exercise to save Petronas plenty money.
First to go will be about 1000 contract staff, including contractors.
Then that will be followed by up to another 4000 staff at Petronas and its subsidiaries.

Talk is staff who have worked 5 – 10 years (middle management level?) will be let go. These will be folks in the (up to) RM10,000 salary per month category.

If we take RM10,000 as the average, this exercise will save Petronas over RM40 million per month !! Or RM480 million a year.  Including savings in EPF contributions , staff insurance etc the savings could be RM500 million a year. That is a lot of money.

This is actually a follow up from my earlier comments on Wednesday :

Wednesday, September 13, 2017

Ketuanan Economists : I Hope You Can Understand This, Ceteris Not Paribus

The point to note is that even Petronas our national oil corporation cannot sustain the easy money system anymore. What do I mean by the easy money system here ?

Entry level engineers with Petronas are paid around RM5000 per month.
This is a very attractive salary.
In the real world, entry level engineers may start off with RM2k – RM3k salary.
Petronas pays almost double the market rates.
Within five years of joining Petronas, their engineers can be making RM8000 per month.

All this was sustainable by high oil prices.

Now the days of high oil prices are over.

Things have to come down to earth.

Resource rich developing economies often take the path of directly dishing out  their national wealth.  Things get complicated when racial quotas, affirmative action, to appease a non-democratic systems of government and other complications are involved.

So countries like Kuwait, Saudi Arabia, Qatar, the UAE, Brunei and Malaysia have been doing this for a long time.  In this list the citizenry does not even pay income taxes (except for Malaysia).  Money is just dished out.

So their physical development, social advancement etc are paid for by burning the nation’s natural resources. It is not achieved through the peoples’ own inventiveness, competitiveness, creativity or entrepreneurship.

The people do not create their own wealth or create new wealth. (There will be some but not enough to sustain their society.)

On the other hand ALL advanced economies (negara maju) sustain themselves through the collection of taxes – mainly income and corporate taxes.  And the taxes are derived from the inventiveness, competitiveness, creativity and entrepreneurship of their people.

The more productive their people become, then the more wealth the people can create. The government will then collect even more taxes.  The administration of the state becomes better and more efficient. The quality of life of the entire citizenry becomes better.

Now in Malaysia, Brunei, Saudi Arabia etc the oil money is drying up.

These countries are now realising that THEY DO NOT HAVE A TAX PAYING SOCIETY !!

In Malaysia with a population of 30 million people (some say 32 million) and a workforce of over 14 million people – there are only 2.1 million taxpayers.

About only 1 in 15 Malaysians is a taxpayer.

Now it is most likely that these 2.1 million taxpayers in Malaysia have the capacity to generate their wealth, to pay taxes on that wealth and then still have enough money / capital left over to keep generating new wealth. In other words, they can sustain their income generation, even after paying taxes.

The GST too is not a major hassle for them because despite GST (which diminishes their wealth) they still have enough left over to sustain their wealth creating capacities.

On the other hand, the people who are on the list of 7.1 million BR1M recipients, those who cannot survive without the free money system, the affirmative action etc will have their wealth diminished by taxation (like GST) without an ability to regenerate new wealth (or an insufficient level of capacity). They become poorer through taxation. And the GST cuts across everyone including 12 year old schoolchildren.

In Malaysia it is NOT ceteris paribus (all other things are NOT equal).

What will happen folks is that without the free money system (burning Petronas oil wealth)  there is going to be severe upheaval among the people who are on that BR1M and other free money handout lists.

Now this is where we have to be clever in everything that we do.

Everything counts. It does not help create a large taxpaying society if we award large projects to China which can just as easily be undertaken by Malaysians (tak kira Malaysian Chinese, Indians, Malays and bumiputras). Malaysian is Malaysian.

If Malaysians undertake large projects they will be operating from home. They will hire locals. They will pay money to local employees. The profits they make will likely be reinvested in Malaysia. Our money will circulate inside our country. That is how you create more new wealth.   When more new wealth is created, there will be a larger tax base for the government to collect taxes.  The government and the country becomes richer.

More and more jobs will be created because there will be spinoffs. Local lawyers will hire more lawyers. Local accountants will hire more accountants. We will need more truckers and lorries, more food caterers, more technicians, more bank ATMs etc etc.  More jobs will be created.

But if we award large projects to China where they bring in everything from China including materials and people and then they take back all the profits to China and elsewhere then there will be much less new wealth creation in the country.   There will be much less re-investment in this country.

Yes we will have the completed project but we would have missed out in adding the value by ourselves (value added) in our own country by our own people.  Smaller developers would not have become bigger developers, engineers would not have been promoted, architects would not have advanced further in their careers. That is where we will miss out on creating a larger and tax paying workforce.

We can award projects to China if they bring in technology and know-how that we do not have and MORE IMPORTANTLY if they are coming here to invest THEIR OWN MONEY.  That they create new jobs for Malaysians and buy Malaysian products and materials.  PLUS  they take full commercial risk.  Then its ok.  It will also help to create that larger Malaysian  tax paying workforce which we need to pax taxes (because our oil money is running out – you can see I have to repeat myself because I am likely addressing some really dumb people here).

Why award projects to foreigners when locals can do the job equally or better?

In the same way I was always perplexed why that stupid mamak awarded a banking license to Al Rajhi Bank? Islamic brotherhood? Arab brotherhood?  Or was it Robbing Hood?

Why not award a banking license to a Malaysian company?

Tak kisah lah Cina, Melayu, India, Iban, Kadazan or whoever.

Why give a banking license to a foreign Arab owned company?

What value added can they bring?

Since when are Arabs identified with banking?

Arabs have no technology.

And now Arabs have no more money.

And obviously their banking and commercial skills are lacking.

Otherwise Arab countries would not be among the poorest in the world.

And now once again in the year 2017  the  Al Rajhi Bank Saudi Arabia has been linked to funding the Al Qaida terrorist network. They are being sued in a US Court.  Just Google “Al Rajhi Bank’s al Qaeda terror links” and you will read  this :

“The 10 defendants in the lawsuit include Al Rajhi Bank (1120.SE),  aviation contractor Dallah Avco,  the Mohamed Binladin Co, the Muslim World League, and other charities.

They were accused in the lawsuit of having “aided and abetted” the attacks through a variety of “activities in support of al Qaeda” in the years leading up to them.

“But for the assistance provided by defendants,” the lawsuit said, “al Qaeda could not have successfully planned, coordinated, and carried out the September 11th attacks, which were a foreseeable and intended result of their material support and sponsorship of al Qaeda.”

So now we have an al Qaeda linked bank pula.  Why are you all so stupid?

If you gave a banking license to Malaysians like  Ghazali Hashim,  Lim Hong Loong, Syed Akbar Ali, Apit Kitingan, Abang Senang or Muthupalaniappan for sure we could have created a successful Malaysian bank that will create new wealth inside Malaysia, by Malaysians and for Malaysians. The profits will also be reinvested inside Malaysia.

 Then our taxpayer base will also grow, to much larger than 2.1 million taxpayers  (now minus the 5000 who are going to be laid off by Petronas soon).

 Dont be afraid about the Chinese, Indians, Mamaks, Ibans or Kadazans.  They are all Malaysians. Patriotic Malaysians.  A Tamil speaking fellow now is the Chairman of Tabung Haji and also  Ahli MT Dumbno.  Isnt that assimilation?

 Akhir kalam,  this is now the 21st century.

From the 18th century the British brought  the Indians and Chinese and others to Malaya.

Over a 100 years later in the 20th century (in 1970) we formulated the New Economic Policy.

So the NEP was formulated in the 20th century (1970) to address issues that were created in the 19th century.

Now it is 2017 ie the 21st century.

The dynamics have changed.

We have to relook our planning to suit the 21st century.

There is no more need to look at race, religion and all that.

That is 19th century.

We just need jobs, jobs and more jobs. For everyone.

We need new wealth creation, for everyone and by everyone.

We need economic growth. Itu saja.

For those who can compete and generate wealth, GST is not an issue.  Income taxes are not an issue. They can pay GST / income taxes etc from their profits (or their surpluses).

For those who cannot compete (the BR1M folks, the free handout folks, the easy money folks)  the GST only  eats into their savings. They have no surplus. They will become poorer.

So we need to expand the numbers of our taxpayer base (income and corporate taxes).

From 2.1 million taxpayers we need to get to something like 7.0 million taxpayers who can compete openly and freely and earn enough wealth to become members of the elite club known as taxpayers. Income taxes and corporate taxes.

In the developed economies the figure is above 50% of the workforce who pay taxes. That is why they can be so rich and their standard of living is so high. They have societies which have a capacity to be productive and generate wealth. Taxable wealth.

The oil money is running out.  Petronas may soon delete another 5000 names from that list of  2.1 million taxpayers.

Faham ke semua ini?

Or is it too much to think about?

Malas nak memikir?

OutSyed The Box ini tension sangat lah.