Frankly Speaking: Oct 11-17, 2010

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Is the Jetson story over?

Kumpulan Jetson Bhd’s founder and managing director Datuk Teh Kian An seems to be making a comeback to the company based on his recent moves to increase his shareholding in the construction firm.

Last week, he emerged as a substantial shareholder with a 6.33% stake, of which 2.9% was deemed direct. The shares were transacted at RM1.18 to RM1.21 each.

Teh and his brother Tee Keng Kok, an executive director of Jetson, had disposed of their stakes in the company to the Naza brothers, Sheikh Mohd Nasarudin and Sheikh Mohd Faliq, last year at 70 sen apiece. It was said then that Teh had wanted to exit the company and that the offer was an opportunity for him to do so.

However, Teh’s recent acquisitions say otherwise. Instead, the exit of the Naza brothers seems imminent.

While Teh’s return seems likely, whether it will spark a mandatory general offer (MGO) remains to be seen. An MGO was triggered when Teh sold his stake to the Naza brothers, which the brothers undertook. However, it failed to garner much of a response.

And speaking of MGOs, it’s interesting that there has been no development so far on whether the Naza brothers, together with another director Chow Chee Kin, accidentally triggered one a few months ago. Chow was the former CFO of Naza Trading and had joined the Jetson board at about the same time as the Naza brothers.

In June this year, Chow acquired a 4.2% stake in the company. This, together with the stake the Naza brothers held via their vehicle Superior Pavillion Sdn Bhd, amounted to more than 33%.

After being queried by Bursa Malaysia, Jetson announced that Chow and Superior Pavillion were not parties acting in concert.

To date, whether Bursa or Securities Commission Malaysia found the company’s declaration acceptable is not known.

Whatever the case, with Teh’s reappearance, the drama at Jetson is far from over.

If it’s not duties, what is it then?Last week, Deputy Minister of International Trade and Industry Datuk Jacob Dungau Sagan dismissed a suggestion that high import and excise duties were the reasons for higher vehicle prices in Malaysia.

Vehicle owners may beg to differ because imported cars in Malaysia are known to cost more than in other countries.

For example, a Toyota Wish is going for about RM150,000 in Malaysia, whereas in Taiwan, the same model can be bought for NT$729,000 (RM73,280) to NT$865,000. The Toyota Wish is not the only model. There are a few other examples that avid motorists can rattle off.

Why are we paying double the price? Is it not the duties on car imports that are making the prices here much higher than in other countries?

The deputy minister may see the picture differently. In fact, he also said that the prices of vehicles here were fixed by companies based on market considerations such as the cost of components, exchange rates and transport costs.

There is some truth in his statement. But an overriding factor is the high excise tax regime which is dictating the net selling price of vehicles. Although import duties have generally come down, excise duties have gone up. So, was there any reduction in the duties on vehicles? Not really, unless the car was manufactured by Proton or Perodua.

According to the local tax structure for the automotive sector, the higher the local content, the higher the rebate for the manufacturers. That’s why Proton and Perodua cars are cheaper than others.
So, if it is not the high taxes, one has to wonder what the cause of exorbitant car prices here is.

Qualities that add valueAs Malaysia aims to transform itself into a high-income economy, valuable lessons can be learnt from the state of the integrated circuit (IC) industry in Malaysia in comparison to those in Taiwan and Korea, which have captivated the world with their achievements in information technology.

These three countries started off at about the same level in the IC industry in the 1970s, but while Taiwan and South Korea supported incubators to upgrade their technological capabilities, Malaysia continued to engage largely in the low-end activities of assembly and packaging. Today, South Korea’s Samsung shapes DRAM chips,

the building blocks of computer functionality, while Taiwan Semiconductor Manufacturing Co (TSMC) is at the forefront of producing computer logic semiconductors and devices.

Central to government support for the high investments involved — RM10 billion for a wafer fabrication plant is common — is an accountable vetting, monitoring and appraisal framework. Both South Korea and Taiwan instilled that discipline in their IC industries, but not Malaysia.

This message emerged at an inaugural public lecture last week by Khazanah Nasional Chair Prof Rajah Rasiah of the Universiti Malaya Centre for Regulatory Studies.

Not surprisingly, Samsung and TSMC were the second and fourth largest IC companies in the world by revenue in 2008. In DRAM production, two South Korean firms had the largest market share while five Taiwanese firms were among the top nine in 1H2009.

The policy measures these countries adopted included macro-micro coordination, subsidised credit and market support, acquisition of tacit and experiential knowledge through engagement with their diaspora, and domestic production of human capital.

Noting the severe human capital deficit in Malaysia, Rasiah pointed out that the crux of a country’s economic advancement lies in developing its domestic capability. Clearly, there are no short cuts.

 
This article appeared in Corporate page, The Edge Malaysia, Issue 827, Oct 11-17, 2010