Short Position


  • Economy
  • Saturday, 19 Oct 2019

The government noted that medical tourism was a “rapidly expanding” sector, growing 17% annually from 2015 to 2018

Medical tourism needs more work

Medical tourism is the way to go. The government is spot on in making this a focus in Budget 2020. It is allocating RM25mil to the Malaysian Healthcare Tourism Council (MHTC) for this.

The government noted that this was a “rapidly expanding” sector, growing 17% annually from 2015 to 2018. Its aim is to strengthen the position of Malaysia as the preferred destination for health tourism in Asean for oncology, cardiology and fertility treatment.

The MHTC has its work cut out for it. While Malaysia gets a fair number of medical tourists -- estimated at 1.2 million last year alone according to MHTC -- there is still a huge market just in Asia that remains untapped.

We know that a fair number of Indonesians, mainland Chinese and Singaporeans come to Malaysia for medical treatment.

This has largely been the result of private healthcare providers in Malaysia, primarily in Penang, Malacca and the Klang Valley, doing a fair bit of their own marketing to attract patients. However, there are other countries that remain largely untapped such as Bangladesh, Myanmar, Vietnam, Laos and the Philippines.

The well-heeled from these countries are heading to Singapore and Thailand for much of their treatment.

This is a shame, considering that Malaysia is arguably a better option going by our pricing, services available and our language advantage.

Apparently, going by anecdotal evidence, the reason why most of these medical tourists bypass Malaysia is their difficulty in securing visas to get here.

Part of the reason could be this: that Malaysian immigration authorities are very averse to allowing more citizens from these countries to enter Malaysia easily, considering the huge number of their workers already present here. Hence, the strata of genuine medical patients who can afford top-level private healthcare in Malaysia may also face a tough time getting into our country.

Perhaps this is something that the MHTC should look into. The MHTC should be in a good position to do so, considering the increased allocation it will be receiving, courtesy of Budget 2020.

It’s more like flying drones, not cars

Entreprenuer Development Minister Datuk Seri Mohd Redzuan Mohd Yusof’s “flying car” project has been the butt of jokes in and out of Parliament. To many, the minister was not making sense at all with his notion of the third national car project when he first broached the subject matter more than a year ago.

The truth is that the concept of the flying car is not entirely new. It is the pet project of technology companies specialising in drones and communications searching for a breakthrough in urban air mobility.

Several companies are developing one and two-seater drones that can lift people in a bid to come up with flying cars. Among the leading players are EHang of China and Vertical Aerospace that is based in the United Kingdom.

In the latest development, telecommunications company Vodafone of UK has signed an agreement with EHang to develop an air traffic control system for drones and aerial taxis.

Vodafone’s objective is to come up with a drone-management system to ensure that the object stays away from sensitive areas such as airports and important facilities.

Vodafone picked EHang because the Chinese company is an established drone manufacturer that hopes to produce `flying cars’ capable of transporting goods and people.

The agreement between Vodafone and EHang is to blend the former’s communications technology with the latter’s prowess in drone technology.

The key is companies vying for a slice of the “flying car” market have poured in billions to make it a commercial success. EHang, for instance, has made thousands of flights of `flying cars’ without any commercial returns.

In Malaysia, we have the ambition to be a leading `flying car’ manufacturer. But do we have the financial resources to keep putting in money until it becomes a commercial success?

The answer is simple – we don’t have that kind of money.

Even if `flying cars’ do come into the market sooner than 2030, would it be affordable for the people? The answer once again is in the negative.

So, while the minister’s `flying car’ project should not be the butt of jokes, it is far from commercial reality.

What’s new at PLUS?

The toll issue with the highways in Malaysia has always been contentious. The prized asset in corporate Malaysia has been now subject to numerous takeover offers from private suitors with even the government now angling for an 18% reduction in toll rates.

The fact that there are at least four direct takeover offers for PLUS means that there is a lot of benefit to anyone that takes over the cash cow highway operations.

The history behind PLUS was that it was the centrepiece in the restructuring of the Renong group and in restructuring Malaysia’s biggest corporate debtor years ago, the toll rates were gazetted into law to give it the contractual certainty in revenue increases.

Ultimately, Khazanah Nasional Bhd and the Employees Provident Fund (EPF) privatised PLUS and there was good reason for doing so. The low cost of funding and secured cash-flow profiles made ownership of the highways almost risk-free if the deal was structured right. And it was, with the executives at the EPF commenting that the returns from PLUS were beyond what they had comprehended.

Forget about the profits/losses shown by PLUS. Cashflows are super strong and with any highway, the cash-flow profile rises strongly towards the end of the concession. The suitors who are now proposing to take over PLUS know this too and hence there are so many parties angling for the takeover of PLUS.

For the owners of PLUS, it is about giving up a lucrative asset. Like anything, there is always a price and that can be more closely quantified given the structured and predictive nature of the cashflow from the operations.

But Khazanah and the EPF said it best. The question ultimately is, who benefits from the cash that PLUS generates? Under Khazanah and the EPF, that benefit goes to the people of Malaysia. The returns from PLUS go towards bumping up the returns the EPF gives to its members. Remove that and there is no guarantee that the EPF can make that kind of return from the cash it gets should it sell PLUS. If the returns turn out to be worse after a one-off bumper return, then it will become a political issue which the government has to answer for.

And it is that return that gives the suitors the confidence that they are able to maintain or cut toll rates, given that there is an extension to the concession period in most of the private offers.

Ultimately, it will come down to the simple question of who benefits from PLUS. Lower toll rates and people will pay less, but that can lead to lower returns for many of the population’s retirement benefit. It is not a simple cost benefit analysis, but should politics be carved out of it, then the answer will be to keep the status quo.


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Medical tourism , flying car , PLUS

   

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