On the proposal for a Bank of Johor

Joint Media Statement by DAP Johor Chairman Liew Chin Tong and Johor Opposition Leader Gan Peck Cheng on 15th April 2016

At the opening of Johor State Assembly on 14th April, Sultan Ibrahim Sultan Iskandar, Sultan of Johor, proposed that a Bank of Johor be formed to provide housing loans or funds for public infrastructure, as well as for funds to be kept and also serve as a channel for investment.

According to Tuanku Sultan, the Bank of Johor can draw its sources from the RM 3 billion reserve of the Johor State Government, as well as the RM7.5 billion funds from various Johor government-linked corporations.

DAP Johor welcomes the proposal to form the Bank of Johor.

The Bank of Johor should focus on helping small and medium industries and agriculture sectors to transform. There is a dire need for various sectors in Johor to move away from dependence on unskilled foreign labour in order to end the vicious cycle of low wage, low skill and technology and low productivity.

The primary objective of the Bank of Johor should be a commitment to ensure that Johor achieves a high wage, high skill and technology and high productivity virtuous cycle.

There is an urgent need to help industries and agriculture sectors to move up the ladder and compete at a different level in order to provide high wage jobs for Johoreans in the hope that Johoreans need not work in other countries say in a generation’s time.

The current SME Bank and Agro Bank have not lived up to the expectations to provide the small and medium industries and agriculture sectors the funding they needed.

The commercial banks have not been focusing on growing our industries and agriculture sectors. The commercial banks are too indulgent in property and vehicle loans, or loans to large scale firms, having scant regards for small and medium industries and agriculture sectors.

According to information from Bank Negara, in 2014, major commercial banks provide an average of 60.14% loans to households sector (mainly for property and vehicle loans) while only 9.09% of loans are channeled to agriculture, manufacturing, mining and utilities.

Therefore, a Bank of Johor we envisage is one that helps transform the state to be a great state for agriculture and SME-run industries to thrive.

The Bank of Johor should try as much as possible to minimise its exposure to real estate/property loans.

First, the major commercial banks have been excessive in lending to the real estate/property sector; and the real estate/property is not a productive sector;

Secondly, when an application for housing loan is rejected, often it is because the applicant does not have sufficient income. Giving a loan to them will mean plunging them to perpetual financial misery. It may be a form of predatory lending.

Third, the government, federal and state, should therefore built more rent or rent-to-buy housing schemes to meet the housing needs of low income and even middle income families.

And if there is massive transformation in industries and agriculture sectors that pay Johorean workers much better, then they naturally qualify to borrow for property purchases from commercial banks.

Fourth, the limited reserve and funds of Johor State Government and GLCs should be used strategically to improve Johor’s long-term productivity. As real estate/property sector is not a productive sector, the exposure of Bank of Johor to the sector should be minimized.

DAP calls on the State Government to consult widely and explore the feasibility of the Bank of Johor initiative to ensure that it will help Johor’s long-term growth potential.

Liew Chin Tong
Gan Peck Cheng