The Kuantan plant will be the state's first foreign direct investment since 2007 and will make 800 wind towers annually for the international market.


Pahang has bagged a US$80 million (US$1 = RM3.42) investment from Singapore-based Eco Tower Sdn Bhd to set up a plant that will make wind towers, tall structures that produce electricity using the wind.

Pahang Menteri Besar Datuk Seri Adnan Yaakob said the plant, located in Kuantan's Gebeng industrial park, will be the state's first foreign direct investment since 2007.

Eco Tower chief executive officer Joseph Lim said the privately-held company will use Pahang as its base to make 800 wind towers annually for the international market which includes the US, Europe and China.

"We aim to generate US$37 million in revenue in the first year of operations and US$120 million in the second year and increase capacity at the Gebeng plant by fourfold in the future to meet international demand," Lim told reporters in Kuala Lumpur yesterday.
Lim had earlier inked a deal to buy 29.8ha of land in the industrial park from Perbadanan Kemajuan Negeri Pahang.

The land purchase is part of the US$80 million investment which will be spread out in two phases, of which phase one involves an investment of US$30 million while phase two an investment of US$50 million,

The plant is scheduled to start operations in the first quarter of 2011.

Eco Tower is owned jointly by private investors from Malaysia and Singapore and other foreign investors.

Eco Tower, which started its business in heavy steel manufacturing, will finance part of the project by seeking funds from venture capital firms that focus on renewable energy.

Adnan said the investment, which provides 500 jobs, will create an opportunity to spin off many local small and medium scale enterprises to invest in renewable energy.

WITH China's President Hu Jintao visiting Malaysia next week, speculation is swirling that the Malaysian government may finally seal a deal to sell 10 per cent of planter Sime Darby to a Chinese group.


Media reports that Malaysia had offered China the stake in Sime, the country's biggest palm plantation firm by land ownership, first emerged in September, but were dismissed by Prime Minister Datuk Seri Najib Razak as pure speculation. The chatter about the agreement that could be worth about US$1.6 billion (US$1 = RM3.42), is back, with one investment bank spelling out likely implications of the possible deal.

"Sime Darby could also spin off its plantations business, with a Chinese state-owned company taking a direct stake, since there would be little strategic value in its property and car businesses," said the research report, obtained by Reuters through an investment banking source.

The source was not authorised to have the bank's name cited because the report was meant for internal use.
Sime did not reply to an email from Reuters on the market talk. Based on Sime's market value, a 10 per cent stake would raise US$1.6 billion.

The company's China operations accounted for 11 to 12 per cent of its revenue and 3 to 4 per cent of operating profit in fiscal 2008 and there is strong potential for growth given the size of China's population.

Sime shares have jumped 71 per cent this year, outperforming a 42 per cent rise in the broader market index and a 57 per cent gain in the plantation index.

The Malaysian government and various state funds own almost 70 per cent of Sime, the country's largest company valued at about US$16 billion, and Najib has said he wants companies with close links to the government to become more efficient.

China's strategic backing will enhance Sime's business in the country, where it is involved in motor and heavy equipment distribution, water treatment services, port operations, property development and palm oil sales and marketing.

Hu will visit Malaysia from November 10 and 11 on his way to the Apec meeting in Singapore, and will hold talks with Najib.

Analysts have previously said Sime needs a big overhaul, including possibly listing its prized plantations business and selling its underperforming motor unit, to boost valuations and compete better with fast-growing rivals.

The deal, if it materialises, is expected to serve the national interests of both countries as well as Sime's, which has invested US$1 billion in six business segments in China.

The research report said China is keen to dilute Singapore-listed Wilmar's dominance in the Chinese edible oil market and may see the Sime investment to pursue this, said the investment bank's research report.

Wilmar plans to list its China business to tap investor interest in the biggest market and to raise cash for acquisitions.

Sime's top management has been promoting its strategy of entering China's edible oil market in global roadshows in recent months and the stake sale could help fund that expansion.

Referring to the possible deal, the research report said: "While it is a noble idea and has the blessings of the Chinese government, execution remains the underlying risk." By finalising a deal with Sime, China, which imports a third of its edible oil demand, stands to lock in future supplies with demand growing at about 5 per cent per year.

China is Malaysia's main market for refined palm products, importing about 300,000 to 400,000 tonnes of refined palm olein a month.

Sime currently exports about 10 per cent or 200,000 tonnes of its palm oil to China. Malaysia is the second biggest palm oil producer in the world, after Indonesia.

Refined palm olein is used as a cooking oil and for the production of noodles, soap and margarine.

China has aggressively eyed commodity-related assets overseas, including the now aborted US$19.5 billion deal to acquire a stake in Rio Tinto and more recently, the US$7.2 billion takeover of Canada's Addax Petroleum by Sinopec. - Reuters

The palm oil industry has been much in the news lately over allegations about its effects on wildlife habitats and the region's ecological health.

MUCH of the conversation has been marred by misconceptions and outright falsehoods emanating from activist groups based in Europe. As the Roundtable for Sustainable Palm Oil meets this week in Kuala Lumpur to discuss the present and future of the industry, an honest assessment of the industry and its impact on the economy and environment is in order.


The palm oil industry has emerged as a critically important source of economic vitality for Malaysia and the broader region over the past two decades. And it is important to understand what has been driving this growth.

We produce an excellent product and should not apologise for that fact. Palm oil has turned out to be a versatile and valuable vegetable oil. In many respects, it is the single best vegetable oil on the global market. It is used as a cooking oil throughout Asia, as a food ingredient in the global processed food trade and as a biofuel powering transport systems across the planet. It is because of the enormous value added to consumers - and, as we will see in a moment, to the planet itself - that palm oil has become so much in demand.

In the process, this growth in the palm oil industry has provided badly needed jobs to many parts of the developing world, from Asia to Africa to Latin America. In Malaysia alone, the palm oil industry directly accounts for close to half a million jobs. The resultant tax revenues fill the public's coffers and sustain our infrastructure and education systems.
Palm oil is one of many natural endowments in this part of the world - others include cocoa, coconuts, rubber, sugar - the cultivation of which has made it possible for nations to generate an aspirational middle class, the backbone of all economically self-sufficient societies.

None of these facts is appreciated by our critics who come from wealthy developed countries and have no sense of the genuine challenges facing the developing world. Instead, they focus on the potential risks and problems attendant to natural resource harvesting. So let's look at Malaysia's record in historical context.

Throughout their history, many European nations plundered their natural resources, such as forest lands. They gave no thought at the time to the long-term consequences of their rapid exploitation.

Indeed, this short-sightedness drove their colonial period. As they exhausted their domestic resources, they travelled the world, uninvited, looking to exploit the natural endowments of other nations.

Europeans badly overharvested their lands, and their forests and other natural endowments have never fully recovered from that earlier period.

Contrast this history with Malaysia's. As the commercial palm oil sector developed, industry teamed up with policymakers to ensure that Malaysia's natural endowments would be respected while permitting the nation to harness the economic value of its resources for the benefit of the public. As a result, Malaysia has put 50 per cent of its land off-limits to commercial harvesting. This is a policy that takes the prudent long view, and it is one we wholeheartedly support.

In addition, the industry has partnered with government to ensure that the commercial harvesting that takes place limits the impact on the broader ecosystem and wildlife habitats.

Of special concern are Malaysian orang-utans who live and thrive in our forest lands. One reason for setting such a large percentage of the country's natural habitat off-limits - a percentage that is by orders of magnitude larger than any European nation - is to protect orang-utans and many other species of wildlife. And so industry and government have worked hand in glove to protect orang-utans with a variety of special protection programmes.

There is an irony to the anti-palm-oil campaigns that have been launched by a small group of activist organisations in London and northern Europe. In some respects, palm oil is the greenest of all the world's vegetable oils. Its caloric density is much higher than corn, soya or rapeseed oil, meaning it has more nutritional bang for your buck than alternatives. This means its relative ecological footprint is smaller.

What's more, as a transport fuel, it is far more energy-efficient than its global competitors, especially ethanol and rapeseed oil. This, too, means that its ecological footprint is smaller on a relative basis than other offerings.

As the world desperately seeks a way beyond the era of carbon-rich, dirty fuels - particularly coal and petroleum that were used by Europeans to power their economic rise - vegetable oils from Asia have emerged as an important part of the planet's fuel mix. So it is unfortunate and somewhat odd that Europeans - who bear a large measure of responsibility for the carbon crisis the world confronts today - would demonise the greenest of all the vegetable oils on the market. Why have they not demonised corn and rapeseed oil as well? Perhaps it is because that is what their nations produce domestically.

From almost its very beginning, the palm oil industry has laboured to produce environmentally responsible and sustainable palm oil, even willing to see the prices of its products rise in the marketplace as a result (sometimes to the point of alienating customers). But activist groups continue to move the goal lines, making new demands that will do little to actually help the environment. Meanwhile, the myriad benefits of sustainable palm oil, which I have only barely touched on here, are ignored by these same critics. They can't have it both ways.

The palm oil industry provides jobs and incomes to those who need it; satisfies consumer demand for quality cooking and food ingredients; and is powering a greener energy future across the planet. If only all industries, or activist groups, could boast such achievements, the world would be a better place.

GENTING Malaysia Bhd (3182) has given its employees a 12 per cent salary increase under its 10th collective agreement signed between the company and Resorts World Employees Union.


"Employees will receive overall salary adjustment ranging between RM60 and RM210 subject to positions and added responsibilities," said Genting Malaysia president and chief operating officer Datuk Lee Choong Yan.

Some 6,500 staff will benefit from the increment. At the signing ceremony in Kuala Lumpur yesterday, Resorts World Employees Union was represented by its president Robert Vijendren and witnessed by Human Resources Minister Datuk S. Subramaniam.

Employees will also enjoy additional income for split allowance, food and beverage counter crew allowance and cashier allowance.
Genting also agreed to a RM1,000 increase under the hospitalisation benefits which was previously RM4,500 to RM5,500 annually. - btimes

Gold prices surged to a new high Tuesday on news that India's central bank bought US$6.7 billion worth of gold from the International Monetary Fund.

December gold jumped as high as $1,087, before settling up $30.90, or 2.9 percent, at $1,084.90 an ounce on the New York Mercantile Exchange. Prices are now up 22.7 percent for the year.

India's purchase of about 200 metric tons of gold was a strong indication of the investment demand for the precious metal.


"To see a central bank buy at this kind of level shows there are going to be a lot of other buyers out there," said David Beahm, vice president of economic research at Blanchard & Co., a precious metals investment firm.

"It signals that there are people out there that think the price is going to continue to go up," he said. Beahm sees gold rising to as high as $1,150 an ounce by the end of this year.

India, along with China and Russia, have indicated interest in buying gold as a way to diversify their holdings in dollar-denominated assets.

The U.S. dollar has weakened considerably this year amid record-low interest rates, which have encouraged investors to look for higher-yielding assets, like stocks and commodities.

Buying gold is seen as a way to hedge against a weaker dollar and the threat of inflation.

On Tuesday, gold rose even as the dollar moved higher against other major currencies in early trading, breaking away from its traditional inverse relationship with the U.S. currency. The dollar later retreated.

The IMF has set out to sell about 400 metric tons of gold this year in an effort to shore up its finances and increase lending to developing countries.

India's purchase represents about half of that amount.

IMF is the world's third largest holder of gold, after the United States and Germany.

Other precious metals followed gold higher.

December silver soared 74 cents, or 4.5 percent, to $17.18 an ounce, while December platinum rallied $18.10 to $1,353 an ounce.

December copper futures rose 1.1 cents to $2.956 a pound.

Energy prices also rose Tuesday. Light, sweet crude for December delivery rose $1.47 to $79.60 a barrel.

Gasoline futures added 1.01 cent to $2.0004 a gallon, while heating oil futures gained 2.73 cents to $20.733 a gallon.

Many investors are eager to hear what the Federal Reserve has to say about the economy and its outlook on interest rates at the end of a two-day policy meeting on Wednesday.

If the Fed were to give a more upbeat outlook on the economy and signal that it may raise interest rates sooner rather than later to ward off inflation, the dollar could rise, potentially crimping foreign demand for commodities and hurting prices.

Dollar-denominated commodities become more expensive for foreign buyers when the greenback rises.

But the dollar could weaken further and thereby boost commodities prices if the Fed maintains its stance that it plans to keep interest rates low for the foreseeable future.

On the Chicago Board of Trade, December wheat futures rose 1 cent to $5.1575 a bushel, while corn for December delivery rose 7.75 cents to $3.09 a bushel.

January soybeans rose 12.5 cents to $10.105 a bushel.

Other soft commodities were mixed. Sugar and cocoa rose, while coffee fell. - AP

Courts Mammoth’s Malaysian business is not up for sale, Courts Mammoth Sdn Bhd country director Chris Yong said in a statement yesterday.

He was responding to a Reuters report quoting sources that Baring Private Equity Asia had hired Swiss bank UBS to advise on the sale of its Malaysian portfolio company Courts Mammoth, in a deal that may fetch US$300mil.

“Having recently rolled out our rebranding campaign, we remain committed to strengthening our operational, financial and consumer framework – enabling Courts to have a stronger foothold as the largest consumer electronics and furniture retailer in Malaysia,” Yong said.

Courts, once listed in both Kuala Lumpur and Singapore, was taken private in 2007 by a private equity consortium including Baring and Topaz Investment Worldwide for about US$84mil.



The Reuters report said UBS had been looking for bidders for Courts, which also operates businesses in Singapore, Indonesia and Thailand, for some months but initial market response had been tough, mainly on price concerns.

Yong said that since 2007, the company had been owned by Asia Retail Group, one of South-East Asia’s largest retail organisations, whose main shareholders were “private equity that naturally engage in investments and acquisitions of businesses.”

“The group remains focused on its growth plans in Singapore and Malaysia, and that progress will inevitably attract external interest at some point in time. At this time, the company is not in any negotiation to sell but has been considering strategies to advance its growth and scalability,” he added.

Quoting sources, Reuters said UBS was mainly helping Baring seek private equity buyers to take over Courts as Baring aimed to cash out from its investment and focus more on the Greater China market, including mainland China, Hong Kong and Taiwan.

It may be possible by transferring properties to a company, but there are many pitfalls to consider

AT the recently concluded budget seminar of our firm, a major focus of the 650 attendees was the proposed real property gains tax (RPGT) of 5% to be imposed on disposals of property after Jan 1.

Resigned to the inevitability of the tax and the futility of objections, the ingenious ones posed the question to us on the possibility of tax minimisation by transferring their current properties to a company before Jan 1.

The plan calls for properties which were acquired many years ago at a cheap price (say RM1mil) to be transferred to a company controlled by them at the prevailing market price (say RM3mil).

The transfer will be effected before Jan 1, thus attracting no RPGT on the disposal.

In the future when the property is disposed off by the company, the company will only be taxed on the capital gain over and above the new cost of RM3mil.

If the disposal price by the company is RM4mil, the company will only pay tax on the capital gain of RM1mil (RM4mil less RM3mil) at the rate of 5%, thus resulting in RPGT of RM50,000.

A very ingenious idea indeed. The comparison of taxes payable shows a tax saving of RM100,000 calculated as seen in the table.



Before anyone embarks on such a potentially lucrative move, one has to bear in mind many of the pitfalls, some of which are discussed below.

Date of disposal

For the purpose of this discussion, the term “chargeable assets” is used to refer to properties and other assets that can be caught under RPGT.

Chargeable assets include shares in real property companies which are companies that predominantly hold assets in the form of properties or shares in other real property companies. Only chargeable assets disposed on Jan 1 or after will be assessed to RPGT. Those disposed of from April 1, 2007 to Dec 31, 2009 will not. A day is literally night and day for tax purposes!

But the term “disposal date” has a technical definition and it is not the date when the sales price is paid over as we usually consider a sale to be. In sales circles, as they say, a sale is not a sale until the money is collected!

However, for RPGT purposes, a sale is a sale on the day a written agreement is entered into.

Hence, the date that a sale and purchase agreement is entered into for the sale of a property is usually the date of disposal for RPGT purposes. But what if there is no written agreement?

The law provides that the date of disposal is the earlier of two dates – the date that the sales price is fully received or the date that the ownership is transferred. Disposals of this nature may have disposal dates being deferred to a later date, which may fall in the 5% taxable period!

Likewise, disposal dates may be deferred even much later if the sale is dependent on securing approvals from the “Government or an authority, or committee appointed by the Government” – for example, the state government, the Securities Commission (SC) or Foreign Investment Committee.

For these “conditional contracts” which are covered by Para 16 of Schedule 2 of the RPGT Act, the disposal date is when the last of the approvals is obtained.

If a sale and purchase agreement is signed in December 2009 that is subject to SC approval which is obtained in February 2010, the disposal will be treated as having taken place in 2010 and thus subject to the 5% RPGT!

Stamp duty on the transfer

Stamp duty is imposed on the documents for the transfer of title; for example, the memorandum of transfer for transfer of property.

The rates applicable are fairly steep for properties which range from 1% to 3% with the highest rate of 3% being applicable for transfer prices which exceed RM500,000.

Transfers of shares attract duty at the rate of RM3 for every RM1,000 of the transfer price or 0.3%.

However, to avoid stamp duty, one may wish to transfer the property without the transfer of title; for example, the owner holds the property in trust for the company.

What if no transfer of title is effected as in these circumstances? Will the issue of tax avoidance then arise? Perhaps.

Anti-tax avoidance in the RPGT Act

Section 25 of the RPGT Act contains the general anti-avoidance provisions which allow the tax authorities to disregard transactions, vary transactions or impose taxes that should have been imposed.

The law specifies that this right is available if the transactions had the effect of “altering the incidence of tax”, “relieving a person from tax liability” or “evading or avoiding any liability which would otherwise have been imposed”.

Besides these general anti-tax avoidance measures which are also found in the Income Tax Act to discourage income tax avoidance, Section 25 of the RPGT Act also provides for persons who provide loans to related parties; for example, Mr A providing loans to Company A which is owned by him.

The law provides that if Company A sells a property and the property was financed by a loan provided by Mr A, the disposal may be regarded as a disposal by Mr A and not by Company A.

However, the cost of acquisition to Mr A is the market value of the property when Company A acquired the property from Mr A. If Company A had acquired the property from Mr A at the true market value, this anti-tax avoidance provision of the RPGT Act should not pose any problem.

Previous rules by Ministry of Finance (MOF)

A few years ago, the Government had granted a similar tax free period from June 1, 2003 to May 31, 2004.

During that period, the MOF had issued some guidelines to curb the avoidance of RPGT by mandating that any disposal of property must be evidenced by a sales and purchase agreement which must be duly signed and stamped within the exemption period.

Sale of property to a company in exchange for shares

Care should be taken if the property owner transfers a property to a company controlled by him in exchange for shares, or at least 75% in the form of shares. If the transfer is done this way, the shares may be considered to be chargeable assets.

In the future when these shares are sold, the gains will be subject to the RPGT of 5%. The cost of shares for RPGT purposes is not the par value of the shares but the price paid by the property owner for the property plus incidental expenses incurred by him on the acquisition; for example, legal fees.

As such, if Mr B transfers a piece of property acquired for RM1mil to his company (Company B) at market price of RM3mil in exchange for 3 million RM1 shares, and the shares are subsequently sold for RM4mil, the gains on disposal are calculated at RM3mil which is RM4mil sales price less the acquisition price to Mr B of RM1mil.

Indirectly therefore, Mr B is taxed on his full capital gains and not merely on the gains made by Company B owned by him.

RPGT or income tax?

Another aspect which has deep implications is whether the disposer had held the property as stock-in-trade or as a long term investment.

If held as stock-in-trade, the gains on disposal will attract income tax whereas if held as a long term investment, the gains will attract RPGT.

Some property investments which are disposed as part of a quick sale, or as a single isolated transaction in circumstances which give it a cloak of “adventure in the nature of trade”, could be caught under income tax.

Due to space constraints, we are unable to elaborate on this issue. If these disposals are caught under income tax, what then is the advantage of disposing the properties before Jan 1 if the disposer has to pay income tax at 25% on the gains upfront?

The obstacles can be quite challenging as seen above and careful navigation of the tax law is necessary. But I am sure good tax advisers will find a way out of the conundrum! - thestar