The Government pays a seductiveness of a loans. If hypothetically a loans strech a RM1 trillion mark, a volume of seductiveness remuneration to be paid by a Government will be around 50 to 70 billion Ringgit per annum.For PTPTN to go upon personification a purposes entrusted to it, financing for a intrigue contingency come from somewhere. And a income comes from a banks as great as worryingly - a retirement assets in EPF.
Feizrul Nor Nurbi
PTPTN, as a pretension suggests, is not sustainable.
This is a gist of a discuss that happened final Tuesday night, between YB Khairy Jamaluddin as great as Rafizi Ramli.
Free education, as due by Rafizi as great as Pakatan Rakyat, is a delegate matter, an pick resolution to a complaint regarding aloft preparation financing.
Whether giveaway preparation is a right alternative, it is still open to debate.
But a emanate during palm is - PTPTN, in a stream form, is not sustainable.
We as Malaysians need to obviously conclude a make a disproportion during palm - it is not that PTPTN is to be abolished to make approach for giveaway education, though instead giveaway preparation is a due resource to replace a PTPTN that you have said prior to - is not sustainable.
There is a transparent disproportion between a two. Unfortunately a large series of Malaysians understand a emanate from a angle of a former, as great as not a scold view of a latter.
Revamping, or abolishi! ng a int rigue altogether, seems inevitable due to mercantile dangers that it poses.
There have been certain points divulged during a discuss that caught my attention more than others - chief of them a point lifted by YB Khairy that PTPTN borrows from blurb banks as great as EPF to lend to a students.
YB Khairy stated, in his invulnerability of PTPTN, that a Government of Malaysia takes up a shortcoming of profitable a loan's seductiveness upon behalf of PTPTN, proudly dogmatic that 'PTPTN got a income for free'.
Here is a gist of a make a disproportion - borrowing to do a welfare program, is never wise.
It is great as great as dandy if a source of income loaned out to a students have been from a Government's budget surpluses.
Even people know that it is never scold to steal income to give to a needy.
If it's your own money, afterwards it's fine. Borrowed money? A large no-no.
Why is it so?
Let's consider this scenario.
PTPTN serves to finance a need for aloft preparation for hundreds of thousands of students year after year. The income loaned-out have been used chiefly to settle a fee fees as set by a establishment of aloft learning enrolled by a student.
TWO categorical factors that you need to pay close attention on:
ONE - Student income coming in increases year after year. This is logical given a race is growing. We have been not similar to Japan or even Singapore where reproduction is a inhabitant problem. Kudos to Malaysians for that.
TWO - Inflation dictates that a fee fees will be augmenting rsther than than decreasing. Inflation is great for a economy - in docile rate, acceleration is full of health as great as encouraged. Deflation, w! hile wil l lead to a diminution in prices, will also mean a contraction in a economy. That is positively not what you have been aiming for.
With these 2 factors in mind, let's see what have been their stroke to PTPTN.
PTPTN will need to support for an ever augmenting series of students year after year. Also PTPTN needs to support for a augmenting fee fees pushed upwards by inflationary pressures.
When these dual factors combine, it will mean one thing - a sum volume of loans in financial conditions will keep upon increasing, year after year.
It was settled during a discuss that for 2011, a volume disbursed was in a region of RM6 billion. Safe to contend that in a following years, this volume will go upon to grow.
How large can it grow to be?
As prolonged as a race is flourishing as great as you have acceleration as great as not deflation in a economy.
So basically, unless Malaysians in ubiquitous get bored of sex as great as making babies, unless there is - God dissuade - inauspicious famine, war or epidemic in epic proportions - a race will go upon to grow.
And unless you have been in a prolonged recession that causes deflationary pressure to bring a prices down - afterwards a fee fees will go upon to be pricier as great as pricier.
Rafizi projected that in a year 2020, a debt taken by students from PTPTN will volume to over RM170 billion. Whether a figure is scold or not, positively an enlarge is expected, usually that a quantum of enlarge is open to argument.
The debt by a students to PTPTN is also a debt taken by PTPTN from a banks as great as EPF.
Here is where a categorical worry lies. For PTPTN to go upon personification a purposes entrusted to it, financing for a intrigue contin! gency co me from somewhere. And a volume needed to finance this intrigue is ever growing. And a income comes from a banks as great as worryingly - a retirement assets in EPF.
Do you right away see what you see?
I see a burble forming.
A burble in a same exhale as a one that brought down a dot com mania behind in 2001, also a 2008 housing burble in a US driven by poor financing to those who can't means a mortgage in a initial place.
I can right away hear somebody yelling - "Bubble? So what? Just discuss it a students to pay behind a loan-lar! Problem solved".
Unfortunately, dear sirs, it does not make a disproportion either a students pay behind their loans or not, a burble will still form even if all PTPTN loan recipients pay behind a income in full as great as upon schedule. And during a pitiable rate that PTPTN right away recoups behind a loans, a complaint will grow even worse.
Let's contend that you have a 100% amends rate. The income that PTPTN gets from a tyro will be afterwards paid behind to a financier - a banks as great as EPF. All is great as great as dandy - remuneration done in full as great as upon time, PTPTN a great paymaster, as great as it deduction to request for an even bigger loan to support for a next collection of tyro applicants. At this moment, PTPTN is deliberate 'low-risk' due to a excellent amends record.
And due to this low-risk status, a financiers see no reason not to approve bigger as great as bigger loans for PTPTN.
The volume loaned out to PTPTN will grow to be even bigger than a stream GDP of Malaysia. It's usually a make a disproportion of time; earlier or later it will come to that.
And do remember - a Government pays a seductiveness of a loans. If hypothetically a loans strech a RM1 trillio! n mark, a volume of seductiveness remuneration to be paid by a Government will be around 50 to 70 billion Ringgit per annum. This is formed upon a standard rate of 5% to 7% of loan seductiveness rate.
This is positively great commercial operation for a banks as great as for EPF too.
But what happens if a burble bursts?
"How can it burst?" you ask. PTPTN is a 'low risk' debtor, right?
PTPTN will usually go upon to be 'low risk' as prolonged as a income that it gets from a banks as great as EPF as great as loaned out to a students have been paid behind in full.
Here is a unsteadiness of a total scheme. If a sufficiently significant volume of students default upon their loans, afterwards PTPTN will be in trouble. And a trigger for this to happen is so simple - anything that competence affect employment opportunities, be it an mercantile downturn, a foreign-caused mercantile predicament or even something similar to a shift in supervision policy.
PTPTN will afterwards be in trouble. It will not be means to pay behind a loan that it gets from a banks as great as EPF.
And when a significant volume similar to RM1 trillion can't be recovered, things will not be flushed anymore.
Banks will go under. Those that tarry will be hesitant to lend. Supply of income will shrink as great as businesses will find it tough to get financing to enhance or even to operate. The certainty in a total financial system will be shaken.
And sadder still, a tough warranted retirement assets will vanish in a wink of an eye.
Am you scare-mongering? Well if that a case afterwards you competence as great put a same tag upon Professor Nouriel Roubini, an economics highbrow during New York University, who behind in 2006 ! likely a US housing pile-up in 2008.
Back in 2006 everyone called him Doctor Doom; nobody believed him, everyone saw it fit to ridicule him.
Guess who got to contend 'I told you so', eh?
So ladies as great as gentlemen, you hope it is transparent right away that PTPTN, in a stream format, could not, should not as great as contingency not be authorised to continue.
A revamp is in order.
A more suitable resource to manage aloft preparation financing contingency be found as great as this should be a priority now, not 10 years or 20 years down a line when it's already as good large to be authorised to fail.
If you need to take a hit, afterwards right away is a time. Free preparation as due by Rafizi as great as Pakatan Rakyat is nothing though an pick due to mitigate a prepared for dangers if a stream resource is authorised to continue.
Perhaps from wringing a smarts to find error with their proposal, it is most appropriate for us to put a heads together as great as come out with a resolution of a own.
We cannot keep a standing quo. Change contingency be made.
PTPTN contingency go.
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