Leadership Reminders from Tun M

Tun M MSLS

A refreshing keynote speech by Tun Mahathir at MSLS XII on Aug 11 2018. I can’t recall the last time a Malaysian politician spoke about the importance of having good values and be so genuine.

Tun M spoke of how given his age, he has seen the rapid rise of nations and nations that fail to mobilize. Nations that thrive are of a people with a good value system.

He spoke of Japan. He clarified he’s no blind fan of Japan, he remembers what the Japanese did during WW2 but it’s important to acknowledge their value system enabled them to rapidly rise after WW2.

The value system of the Japanese is that of a strong sense of shame. If they are entrusted with a task, failure to deliver will have them committing suicide.

Tun Mahathir spoke about the importance of having a good value system and how we must demand it of our leaders.

1) The first value is that of hard work. We need to learn to admire and aspire to be people that work hard. (He joked that its self praise but he works hard)

2) The second value is that of honesty and trustworthiness. He linked it to PTPTN – it is given to you as a trust and you should pay it back. Else your leakage is no different than that of 1MDB.

3) Tun then spoke of the importance of a leader having ideas, of having more ideas than one’s followers. To have ideas, you must have experience and knowledge, which you can attain by reading. With ideas, you will be equipped to tackle problems.

4) A leader needs to be brave and ready to take risks – more risks than his/her followers. Be like the generals of the olden days who are in battle with the soldiers, not one today and far removed from the risk.
#malaysia #malaysiabaharu

Need for National Housing Commission

  1. Affordable housing is an issue whose severity is jointly agreed by the previous and current government. Pakatan Harapan in its manifesto, commented on the ineffectiveness of PR1MA in delivering its mandate and committed that it will develop 1 million affordable homes. 
  1. Affordable housing delivery under the Barisan Nasional government was fragmented – surprising given the fact that it is such an important issue, unsurprising if you consider that perhaps everyone wants to take credit. There were four (4) ministries involved in affordable housing with every state having policies obligating developers to develop housing below a certain price as part of their larger development.

    ASJ_Commission_Pic1

    MOF has Syarikat Perumahan Negara Berhad (SPNB), KPKT has MyHome, PMO has PPA1M and PR1MA and Federal Territories Ministry has RUMAWIP.

  1. A review of PR1MA reveals that though it was mandated in 2011 to deliver 500,000 homes, it was not well equipped. Land availability was a major stumbling block – it obtained only 108 acres for development and after 7 years of being established, PR1MA only completed 11,000 homes. 
  1. KPKT has called out to the states to request that land be made available for affordable housing development. Selangor was the first (hopefully first of many) to reply that they will allocate land. While this is a good development, there is still room to optimise economies of scale.
  1. KPKT has spoken to say that a National Housing Council will be established and that a single entity will be created, bringing together PR1MA, UDA Holdings, SPNB, RUMAWIP, PPRT, PPA1M under one roof. These statements begs further clarification – will National Housing ‘Council’ be like ‘Council’ of Eminent Persons meaning it is a platform for deliberation? What is required is an entity for delivery. On the single entity to be created, the unavailability of land is still left unaddressed.
  1. Commissions are useful to centralised delivery and give regulatory powers. Using the example of Suruhanjaya Pengangkutan Awam Darat (SPAD), it was created to address fragmented delivery of public transportation and under one roof, it achieved streamlined planning and delivery.

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The Idea

  1. Putting #5 and #6 together, I believe KPKT should consider creating a National Housing Commission.

    At inception, the Commission must receive allocation of land from each state and its role would be to design, develop and manage affordable housing. The commission would also be tasked to do planning and policy research, which among other things, coordinate collection of data so demand and supply on a district level could be analysed.

    Given the size of acreage and standardised designs, the commission should work with supplier to order in bulk so material costs can be driven down. As designs are standardised, the commission may engage contractors to construct. States must give discounts to land premiums and statutory costs and if MOF can consider, facilitation fund should be provided for external infrastructure costs should certain lands require additional infra to improve accessibility.

    As a matter of governance, the commissioners can consist of representatives of each State as well as private sector players.

 

The government of the day should learn from past shortcomings and its idea of a single entity must be properly enabled at inception – it would be unfortunate to see a half-baked entity complaining of tied hands down the road.

 

 

Ideas For Housing

Housing in an area of national development I feel strongly for and with the advent of Malaysia Baru, I hope government may have stronger political willpower to address housing issues which have been addressed somewhat unsuccessfully by the previous administration.

Khazanah Research Institute and Bank Negara individually have conducted a thorough as-is analysis of the housing/affordable housing situation, both providing well thought solutions to address the situation. I would like to provide additional ideas to the ones provided by KRI and BNM:

1. Revitalizing community centers

Community centers in Malaysia is an underutilised asset. Every constituency has it but it is used mostly for badminton or weddings.

A good neighborhood design is one that facilitates interaction – a community center needs to do exactly that, to enable frequent interaction.

In Singapore, community centers are being transformed. The concept is as follows: lots for F&B are added to community centers. There will be an anchor tenant (usually McD or Starbucks as it brings the crowd) but other tenants are given a ceiling price per item for them to sell. The idea is simple – if you live in an affordable house but don’t have affordable food to go to, it’s not really an affordable lifestyle or community. Community centers is also a place for people to teach and learn skills, from casual to proficient. Have a piano for people to teach and learn, hall for tae kwon do and halls for free movie. As how the economist Raj Chetty mentions, good neighborhoods enable upward mobility, making our community centers more useful is a good first step.

Pictures from Tampines West Community Club, as an example:

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Starbucks on Ground Floor with more F&B outlets on 1st Floor
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Sports court which doubles up as a Screening Hall

2. Policies to reduce construction cost

Buying a home is much like buying anything, it is a function of two things: the price of the item and how you pay for it. From the media engagements with the new minister, a lot of focus is given to fixing the latter – working with MOF and BNM on fixing loan eligibility, encouraging Rent-To-Own. More needs to be done to address how you drive sale price down – and as developers simply push cost to customers, asking how stakeholders can drive construction cost down.

Affordable housing in Malaysia is a cross-subsidy model. What this means is developers make a loss building and selling affordable homes but make their profits from building commercial/service apartments on adjacent plots. For the government to deliver 1 million homes, this model cannot work. Developers need to innovate to be able to build and sell homes at ~RM250,000 and still make a profit. To complement innovation, the government needs to assist to drive construction costs down via addressing policies that push costs up.

Compliance cost needs to be addressed and reduced for affordable housing projects: statutory costs to CIDB, IWK, TNB, Syabas should be reduced. Different states also charge various costs differently – this should be reduced and standardized. State governments need to reduce land premiums, standardize cemetery cost and contribution to Improvement Service Fund should be waived.

The other area which requires standardisation is planning requirements. The final say on most matters lie with local authorities which makes standardisation difficult. One planning guideline that needs to be addressed is number of car parks. Certain local authorities require 1.5 bays per unit with 10% of total bays for visitor carpark. Car park bays are expensive – on a podium, it could cost ~RM35,000 per bay. If the government provide public transport infrastructure (which is in line with PT modal split targets), reducing car park bays to 1 bay for 1 unit would enable cost reduction.

 

Tabung Haji-TRX Deal: Understanding Governance and Compliance to Shariah

If you were to engage in a transaction (say, for example, for the purchase of a car) with a questionable party (say, a drug dealer) where the terms of transaction is clear, price is agreed and there is a willingness to transact. Does it still make this transaction Shariah compliant?

I say No.

I read with great interest the recent purchase of TRX land by Tabung Haji. How the Chairman Azeez “miscommunicated” and how the Chairman of the Tabung Haji Shariah committee says the process checks out and the deal is Shariah compliant. I am not trying to discount the opinion of the Tabung Haji Shariah committee chairman, however, Shariah compliance takes into consideration more than just due process. Shariah compliance and governance requirements takes into consideration two additional factors: the integrity of the parties as well as the objectives.

Advisors and practitioners of Shariah law will be able to provide many case studies on how this is true. Examples include case studies how financing Coca-Cola expansion is non-Shariah compliant due to its questionable financial support to Israel and even a case on fundraising a company where a small subsidiary of the company is in the business of printing pornographic material deems the whole company non-Shariah as a whole.

Integrity of the parties is important in Shariah. Tabung Haji is an honourable name and 1MDB is a tainted name. 1MDB has questionable elements as part of its operations, e.g. what was the money at Cayman Islands used for and what is the truth of the PetroSaudi deal?

1MDB has failed the test on integrity of parties and objective of transaction thus, it is my opinion that this transaction is not Shariah compliant. Tabung Haji management is quick to say that they shall immediately sell the land in question, even at a profit. Clearly, Tabung Haji management has lost the plot – if the first transaction is not Shariah compliant, the second sale does not make it right by Shariah definition. While it makes great commercial sense that Tabung Haji has made gains in such a short time, it does not make its original transaction Shariah compliant and as Shariah compliance is a requirement for Tabung Haji deals, a wrong has clearly been committed.