Govt may seek higher dividends, sell assets

The balance of the financing for the stimulus package will have to come from tapping domestic sources of borrowing such as issuing MGS


THE government may press for higher payouts from government-linked investment companies (GLICs) and state-owned firms and consider selling off some assets to help fund its economic stimulus package, experts said.

Socio-Economic Research Centre (SERC) ED Lee Heng Guie said with oil revenue expected to shrink due to the collapse of crude oil prices, the government will have to reprioritise its operating and development expenditure and consider ways to boost its revenue to finance the stimulus package.

“These will include requesting some GLICs and institutions such as Bank Negara Malaysia, Khazanah Nasional Bhd and Petroliam Nasional Bhd (Petronas) to pay higher investment income.

“Some asset disposals could be considered, though the timing is not conducive to get better prices,” he told The Malaysian Reserve.

Lee said the balance of the financing would have to come from tapping domestic sources of borrowing such as the issuance of Malaysian Government Securities (MGS).

Petronas has already been forced to consider raising its dividend this year by up to RM10 billion to support the RM260 billion stimulus package, Bloomberg reported, citing sources. The state oil company had earlier pledged an annual dividend of RM24 billion this year.

The government has so far announced three stimulus packages worth a total RM260 billion — nearly a fifth of the country’s GDP, to prop up the domestic economy amid the Covid-19 outbreak.

Among the initiatives are cash handouts, wage subsidies, tax rebates, discounts on utility bills and a six-month moratorium on existing bank loan repayments.

The stimulus also includes a total direct cash injection of RM35 billion from the government, which will raise the fiscal deficit by 0.7% to -4.7%, Bernama quoting Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz as saying on TV3 earlier this month.

The direct cash booster jab will be funded by domestic borrowings and government funds, while the government remains committed to fiscal discipline, Tengku Zafrul added.

“It is a daunting task to plan for the upcoming budget in October as it will depend on the recovery process of the economy, the strength of domestic demand, business survival and sustainability in 2021,” Lee said.

“This will impact the collection of tax revenue in addition to the still lower oil revenue due to weak oil prices.

“Petronas’ dividend for 2021 is expected to be dented by lower profits in 2020,” he added.

Meanwhile, Institute for Democracy and Economic Affairs (IDEAS) senior economist Adli Amirullah said the government must conduct a detailed cost and benefit analysis and come up with an estimated cost that they may bear in the long run before reaching a decision to finance the stimulus package.

“Theoretically, the government can opt to borrow money or tap into its reserves. But it is very important for the policymaker to be very careful before deciding to use either of these tools,” he said.

Requests for a higher payout from Petronas suggest that the move to replace the Goods and Services Tax with the Sales and Services Tax has forced the government to rely more on dividends, Adli added.

“That is why I think that the government must broaden the indirect taxes and start to not rely much on dividends from state-owned enterprises or GLICs for long-term benefit,” he said.

Petronas paid a dividend of RM54 billion last year including a RM30 billion one-time special payment after the government revised its consumer tax policy.

In 2018, Khazanah declared an annual dividend of RM1.5 billion despite recording its first loss in over a decade worth RM6.27 billion. The sovereign wealth fund announced a dividend of RM1 billion last year after returning to the black.