Short position - Healthcare costs, sustainability disclosures, last mile delivery

Big is not always beautiful

IN business, scale and size are comparative advantages businesses seek to attain.

Of course, the ability to command superior margins is paramount but when there is heft and weight behind a business enterprise, then the influence that exists in the business world is too large to ignore.

Merger and acquisition activities serve as a means towards that journey. Bigger businesses often command better pricing power given the share of the industry they have. As IHH Healthcare Bhd plans to gobble up Ramsay Sime Darby Healthcare Sdn Bhd, it brings into question just what is the larger entity is going to mean not for the shareholders of IHH, but more so for the healthcare paying public.

No where in the justification for the merger is the ability to bring some control to healthcare costs. It is always about higher profit.

As it stands, Bank Negara is already looking into the critical issue of healthcare inflation.

They acknowledge that healthcare inflation is accelerating at a way faster pace on a historical basis and given the direction of such costs, it is going to become a serious issue.

As claims go up, and that is based on what hospitals are charging their patients, so will healthcare charges and premiums the public will have to pay for future medical insurance.

The question is whether there needs to be some sort of antitrust element or in our case, anti-competitive basis before such a merger is approved apart from looking to bring some cost control in the provision of healthcare in the country.

With living costs becoming such a hot issue, the ever rising cost of medical treatment also needs to be tackled.

By ignoring that, the government may be implicitly saying they will remain the provider of last resort, regardless of the cost.

That cost is something taxpayers will be paying for and as healthcare becomes unaffordable, then there is an urgent obligation to look into controlling the private sector cost of healthcare as what is being provided is still a public welfare service.

The need to tackle that is also important given how housing and even now education costs have spiralled beyond the affordability of the average citizen aiming to give the best for their families on both counts.

Enhancing climate disclosures

THE US Securities and Exchange Commission (SEC) said this week that it is going to require public companies to disclose their direct greenhouse gas emissions and have them verified by third parties. Companies would also have to include data on their indirect emissions such as emissions derived from energy that they purchase. The SEC is also proposing a ‘scope 3’ level of emission, whereby the measurement must also include assessing emissions from products a company buys from third parties and their company officials, business travels as well as the end use of goods sold by the company. While it is extensive, it should be noted that if these proposals are yet to be finalised – they are at a stage of being released for public comment.

The new rules will mark the first mandatory disclosures issued by the SEC on climate risk.

Locally, the Securities Commission (SC) has launched a sustainable and responsible investment roadmap for the Malaysian capital market in the bid to posit the country as a regional sustainable and responsible investment as well as green financing centre.

Under the Listing Requirements of Bursa Malaysia, listed issuers are required to include in their annual reports, a Sustainability Statement, comprising a narrative statement of the listed corporation’s management of material economic, environmental and social risks and opportunities.

Last July, Bursa Malaysia, in partnership with FTSE Russell launched the FTSE4Good Index to identify and recognise Malaysian companies, which demonstrate a leading approach to addressing environmental, social and governance (ESG) risks.

Last month, SC chairman Datuk Syed Zaid Albar said that the regulator is working to introduce market-based instruments to enable transition finance in Malaysia, thereby broadening financing options for companies at various stages of their sustainability journey.

This, he added would address the risk of greenwashing. As co-chair of the Joint Committee of Climate Change with Bank Negara, the SC has been working with the industry to develop reference guides to advance the financial sector’s response against climate change risks.

Clearly, Malaysia is doing its bit towards laying a strong foundation as the bar rises on how companies’ handle environmental and social issues related to their businesses.

Courier squeeze

WITH 109 licences for courier services already issued as of October 2020, it is no surprise that the government had decided to freeze such licences. Recall that a two-year moratorium was imposed on the issuance of courier, effective from Sept 14, 2020 until Sept 15, 2022.

In a statement then, the Malaysian Communications and Multimedia Commission (MCMC) said that decision was taken under the licensing authority of the Postal Service 2012 Act and can be reviewed at any time based on needs which arise.

Having too many players operating the last-mile delivery service had already led to unhealthy competition, to the detriment of players like incumbent Pos Malaysia Bhd.

In many countries around the world, the last-mile delivery is limited to a few players to compete, mostly local players, so as a means to protect the industry and ensure a decent but not overly competitive landscape.

So, when the MCMC had made the stand that no new entrants would be allowed into the industry, that spelt some kind of reprieve for existing players.

However, recently, a new player emerged in this space.

One wonders how much price throwing the new player will bring into the market, which in turn would have a ripple effect on the whole industry.

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