Investment & Market Trends

KUALA LUMPUR: Petroliam Nasional Bhd (Petronas) is expected to lose a portion of revenue for not being the sole gas aggregator in Sarawak. In a note, RHB Investment Bank Bhd (RHB IB) said there have been increasing talks about Petronas facing a potential capital expenditure (capex) cut following news of Petroleum Sarawak Bhd (Petros) taking over the buying and selling of Sarawak’s natural gas from Petronas. The transition will start in the second half of 2024. “We may see some potential operational disruption in the near term before much clarity or a clear resolution is achieved between Petros and Petronas. “However, we believe that ultimately, both parties would want to maximise production especially when oil prices are expected to remain stable,” it added. Moreover, RHB IB opined that a drastic domestic capex cut by one party is not sustainable in the long run as it would eventually imperil Malaysia’s oil and gas (O&G) position in the region. Previously, Petronas allocated a capex of RM300 billion between 2023 and 2027 (RM50 billion per annum) which includes a domestic average capex spending of RM22.6 billion per annum (5-year capex of RM113 billion). The investment bank said Petronas spent RM52.8 billion capex in the financial year 2023, with an almost equal split between its domestic and international portfolio. “The upstream and gas segments accounted for 52% and 22% of the domestic capex, respectively, and the transfer of the sole gas aggregator role to Petros may lead to a more prominent capex cut in the gas segment. “While we may see some potential operational disruption in the near term, we still assume a resolution to be achieved between these 2 involved parties without jeopardising existing productions and future domestic investments to capture the rising global gas demand,” it said. The investment bank said the earnings impact on Petronas remains uncertain, but the move may affect its ability to spend. Overall, despite the rising uncertainties over Petronas’ direction and strategy, RHB IB still maintained its overweight call on the O&G sector. For now, the investment bank continues to favour the upstream services players with greater exposure in the maintenance-related space, as they provide greater earnings resilience, coupled with corporations with international diversification such as Yinson, MISC and Bumi Armada. — BERNAMA

BATU KAWAN: Malaysia has the right manufacturing landscape and enablers to capitalise on the global medical devices industry’s bright prospects. Investment, Trade and Industry Minister, Tengku Datuk Seri Zafrul Abdul Aziz said the global medical devices industry is projected to grow to US$887 billion by 2032 from US$542 billion projected for 2024. “Malaysia has what it takes – a solid foundation, a thriving ecosystem, the strong political will to engineer the rapid growth of our manufacturing industry by engaging key stakeholders, particularly industry members themselves. “The nation can be a manufacturing hub for medical devices, allowing global brands to serve the ASEAN market, with its 670-million population or even the Asian market, with its 4.7-billion people,” he said at the groundbreaking ceremony of Plexus Corp’s sixth manufacturing facility, Plexus Bridgeview in Penang. Tengku Zafrul said that Plexus’ focus on Semiconductor Capital Equipment as well as the Healthcare and Life Sciences sector aligns with the priority sectors under NIMP2030. “This will create a strong manufacturing ecosystem, driven by dynamic partnerships between leading global companies and Malaysian firms, powered by world-class talents. “This is what will make Malaysia a manufacturing and services hub for Asia,” he added. Plexus Regional President, Victor Tan said the establishment of the new Plexus Bridgeview facility demonstrates its commitment to growth within the region and provides a strong opportunity to meet the growing needs of its valued customers while simultaneously elevating the local small and medium industries. He said the state-of-the-art facility, located on a sprawling 8.09 hectares-plot, will encompass an impressive cutting-edge infrastructure, with an estimated investment of RM1 billion over the next 3 years. “This expansion will also create an estimated 1,800 new employment opportunities of high-skilled jobs in the region,” he added. Since its establishment in Malaysia over 20 years ago, Plexus has grown to employ more than 10,000 team members. In a separate statement, Malaysian Investment Development Authority (MIDA) Chief Executive Officer, Sikh Shamsul Ibrahim Sikh Abdul Majid said the agency is thrilled to see Plexus Corp’s commitment to expanding its operations in Malaysia. “Our country’s robust electrical and electronics ecosystem, the exceptional capabilities of our local talent, and our well-developed semiconductor supply chain provide the perfect foundation for investors like Plexus Corp. “We are optimistic about the opportunities this investment will bring for Plexus Corp, the local community and the industry. We look forward to Plexus Corp’s continued advancement in Malaysia,” he added. — BERNAMA

SINGAPORE: There is overwhelming interest in the proposed Johor-Singapore Special Economic Zone among Singapore businesses, according to a Singapore Business Federation (SBF) working group report that was recently released. Key findings of the JS-SEZ Singapore Business Working Group (SBWG) ‘Greater Together: Two Economies, One Ecosystem’ report revealed that 93% of respondents view Johor as an attractive investment destination with 50% already operating in the state. According to the statement, the report was based on findings from SBWG’s engagement with 160 Singapore businesses across various industries from March to June 2024 which sought to gather insights, feedback and suggestions to enhance the JS-SEZ development. The SBWG identified 3 key success factors for the JS-SEZ, drawing on complementary economic strengths, steadfast commitment from both Singaporean and Malaysian governments and the importance of embracing experimentation and agility. The report also highlighted significant challenges that need to be addressed to ensure JS-SEZ’s success such as gaps in the manpower landscape in Johor, easing the cross-border movement of people and goods, as well as the fragmented and complex investment facilitation landscape between Singapore and Johor. In the area of manpower, the group recommended creating a unique labour ecosystem that leverages the strengths of both economies, combining Singapore’s management and research and development (R&D) capabilities with Johor’s technical skills for execution and operations supporting various industries. Key proposals include developing harmonised workforce regulations, investing in each other’s workforce to enhance manpower capabilities and bridge skill gaps, and establishing talent acquisition programmes. “Nearly 60% of businesses engaged reported difficulties in sourcing technical and skilled workers in Johor, with additional issues in attracting Singaporean talent to work across the border,” the statement said. Businesses also attributed the manpower crunch to employment pass issues (60%), skill gaps in the Malaysian labour force (58%) and salary mismatch (21%). To improve cross-border movement, the SBWG advocated for streamlined customs and border clearance processes, including implementing a passport-free QR code clearance system and digitised cargo clearance. The upcoming Johor Bahru-Singapore Rapid Transit System (RTS) Link, slated for 2026, was also viewed as pivotal in addressing these logistical challenges. Other suggested improvements include developing enhanced border crossing hubs with automated clearance using biometrics and investing in efficient multi-modal connectivity. “In fact, 36% of businesses engaged expressed hopes for better connectivity in terms of a special immigration lane for people, to facilitate smoother travel,” the report said. To facilitate smoother movement of goods, the SBWG recommended implementing streamlined customs and border clearance procedures, harmonising tax and tariff policies, developing integrated transport networks and logistics infrastructure, and enhancing digitalisation and e-commerce enablement. Some 55% of businesses cited difficulties in handling tax issues and 48% indicated that more expedient cargo clearance would be crucial to enabling the efficient flow of goods. The current investment facilitation landscape between Singapore and Johor was identified as fragmented and complex, with businesses reporting obstacles in obtaining necessary permits and licences. “58% of businesses engaged expressed a desire for a joint investment promotion agency to market the zone and facilitate investor engagement and 33% desired a platform to facilitate collaboration and networking opportunities amongst each other for self-help and support” according to the report. To overcome this, SBWG recommends streamlining investment approvals and offering attractive tax incentives, developing robust legal and regulatory frameworks, providing comprehensive business facilitation services, and enhancing the interoperability of financial systems. Commenting on the report, SBWG Chairman Teo Siong Seng said businesses had been very forthcoming during the survey, signalling their interest in the success of the JS-SEZ. “This is not just another project. It is a potential game-changer for both Malaysia and Singapore. By bridging our economies, we are creating new opportunities that will benefit businesses on both sides of the causeway,” he said. Malaysia High Commissioner to Singapore Datuk Dr Azfar Mohamad Mustafar said JS-SEZ gives leverage to both Singapore and Malaysia in the region but feedback from the industry is important for its success. “In the past, when we did this, we tried to do it on each other’s side. For example, when we do Iskandar Malaysia, we try to get investors from Singapore to come to Malaysia but I think the model is no longer workable for the future we are facing. We need to look at Singapore and Malaysia, especially Johor as a unit, so investors looking at the region can look at Malaysia and Singapore as places where they can invest,” he added. — BERNAMA

KUALA LUMPUR: The banking sector is undergoing unprecedented change with the swift evolution of technology and to keep up with the latest trend, the banking workforce must equip themselves with the relevant information and necessary skills. The Asian Institute of Chartered Bankers (AICB) Chief Executive, Edward Ling said that the fast use of technology and automation has raised concerns that technology will replace humans, nevertheless, contrary to this idea, it is critical to focus on continual learning, upskilling and reskilling of the workforce. “It is more on learning about how to improve your work productivity, your performance by tapping into artificial intelligence (Al) and that is something that eventually all organisations would want to achieve,” he said during a media roundtable session. The session was conducted in conjunction with the third edition of the Malaysian Banking Conference (MBC) themed ‘Banking in the Era of GenAl – Reshaping Banking, Innovating for the New Economy and Accelerating Sustainability’. The 2-day event was organised by AICB and the Association of Banks in Malaysia (ABM) and drew over 600 delegates from local and international financial institutions. Malayan Banking (Maybank) Bhd Group Technology, Data and Digital Human Capital Director Shameem Farouk said from the bank’s standpoint, Maybank is striving to equip its staff which will make them continuously in demand. “No entity has a grasp or can control the economy and we may not be able to guarantee jobs, but what we can do is prepare the workforce so that in the event of any eventuality, the workforce would have skills that are continuously in demand. “The reality today is that the talents in technology are so much in demand, there is lack, tech talent is scarce and so, when we upskill our workforce now with newer skills such as digital marketing skills, social media marketing skills, digital market intelligence, they become more valuable and irreplaceable,” she said. Shameem also said that the current banking workforce needs skills to deal with greater challenges. “For instance, we receive about 20,000 emails every day and a new skillset does help them and the bank,” she added. The roundtable discussion also addressed the incorporation of technology from an Islamic banking perspective of which the panellist stated that Islamic banking, like conventional banking, necessitates technological capabilities. Silverlake Group Islamic Finance and Innovative Services Chief Executive Officer Othman Abdullah said on top of technological needs, there is another aspect of syariah requirement, such as syariah audit, which should be done continuously. “All these require technological tools for those in the syariah departments and syariah committees, that is what we are lacking now,” he said. Meanwhile, the Malaysian banking industry is at the forefront of a revolutionary transformation as it embraces the power of generative artificial intelligence (GenAI) in redefining banking operations, risk management, customer experiences and capacity building. According to Accenture’s Banking in AI 2024 report, banks are likely to benefit more from GenAI than any other industry. Effective adoption and scaling of GenAI could lead to a 30% increase in employee productivity and potentially boost revenue by up to 6% in 3 years. To foster a highly adaptable workforce that excels and remains relevant in a constantly evolving landscape, AICB is also leading the development of the Future Skills Framework for the Malaysian financial sector with the Islamic Banking and Finance Institute Malaysia and the Malaysian Insurance Institute, which will be launched on 22 July 2024. — BERNAMA

KUALA LUMPUR: The collection of consumption-based tax revenue has decreased following the re-implementation of the sales and service tax (SST) to replace the goods and services tax (GST), according to the Finance Ministry (MoF). The MoF said after the GST was introduced in April 2015, RM37.7 billion was collected for 2015; RM55.7 billion for 2016; RM60.5 billion (2017); and RM30.9 billion (2018) until May 2018. SST collection, after it was re-implemented was RM5.4 billion from September 2018 to December 2018; RM27.6 billion (2019), RM25.2 billion (2020); RM25.5 billion (2021); RM313 billion (2022); and RM35.4 billion (2023), the ministry said. “Overall, the GST collection from April 2015 until it was abolished in May 2018 amounted to RM184.8 billion while the total SST collection was RM150.4 billion between September 2018 and 2023,” MoF said in a written response posted on the Parliament’s website. This was in response to a query regarding tax revenues and national reserves rose after the SST was reintroduced and was the SST one of the main reasons for the continuous price increase in goods. Comparing the total revenue collection between the GST implementation period and that of the SSTs, the average annual SST collection was 51.6% lower against the GST due to the smaller scope of the SST, said the MoF. “The main factor for the lower collection in the SST is due to the smaller scope of the SST, which covers 41% of all goods and services sold in the market compared to 76% under the GST, according to the MoF. Meanwhile, the MoF said other factors such as demand and supply, global commodity prices, prices of imported goods and foreign currency exchange rates also affect the pricing of goods and services and the SST cannot be considered as the main reason for the continuous rise in prices. “In addition, there are also traders and service providers who take advantage by increasing the price of goods sold to make excessive profits despite not being affected by the imposition of SST,” said the ministry. — BERNAMA