A Lesson from Keynes for our Government

May 14, 2013

Keynes

In the long run, we’ll live to 300 and work

May 10th 2013, 22:12 by W.W. | HOUSTON

JOHN MAYNARD KEYNES’S contention that “in the long-run, we’re all dead”, is hard to dispute. Niall Ferguson, a professor of history at Harvard, raised hackles recently by suggesting that Keynes’s seeming indifference to the welfare of future generations had something to do with the fact that he was childless and gay.

As it happens, Keynes wasn’t at all unconcerned with the long run and was actually making a point about the danger of economic theorems that encouraged governments to believe that short-run economic interventions, such as goosing the money supply during a downturn, are futile. Keynes’s keen interest in futurity is on full display in his famous essay, “Economic Possibilities for our Grandchildren“, in which the economic conditions of the long run is probed with great insight.

As Ezra Klein points out, Keynes was impressively prescient about the extent of future economic growth, but less so when considering how we would respond to plenitude. Keynes saw the possibility that we would simply consume more, but he speculated hopefully that we would use our wealth to enjoy meaningful leisure, and that

the love of money as a possession — as distinguished from the love of money as a means to the enjoyments and realities of life — will be recognised for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease.

That is to say, in the long run, before they’re dead, our grandchildren will be gentle persons of leisure disgusted by the work of getting and spending. Alas, we are not.

Keynes’s mistake, according to Mr Klein, is that he failed to see that

Humanity’s true nature evolved around the economic problem and, with the economic problem solved, it has simply applied itself to a simulacrum of the economic problem.

In the United States, the economic problem that organizes many of our lives is not that we don’t have enough. It’s that we don’t have quite as much as those who have more. That’s an economic problem that, almost by definition, can never be solved.

Another way to put this is that scarcity is a relative notion, and thus can never be overcome. It’s a good point, though I have different complaints with Keynes’s forecast.

First, Keynes is too myopic about the definition of “the long run”. That the living ever dwell at the frontier of time seems to encourage a fallacious sense that the hour is getting late. That the end is nigh is deep in the DNA of Christian Western culture. Friedrich Hegel and Francis Fukuyama spotted the end of history just ahead of them. “Latter Day Saints” hoard potable water and canned goods in their cellars.

Environmentalists tout a sort-of pagan eschatology. Yet, for all we know, this is the morning of humanity, and the modern era of economic growth was but a light breakfast. Suppose that in 50 years a great breakthrough extends the average lifespan by hundreds of years.

Our grandchildren will look upon the present age of so-called abundance as the end of the original human era, during which a terrible and absolute scarcity of time prevailed. It’s really not at all clear that even the richest of us is that much less poor than our hunter-gatherer forebears. If the hour is early, it may be that we are poorly prepared to understand what it would even mean to solve “the economic problem”, the problem of scarcity.

My second complaint is that Keynes’s assumption about the superiority of leisured pursuits is dogmatic rather than reasoned. Though Keynes saw quite clearly that the English aristocratic class seldom made the best use of its leisure, it’s hard not to see his bias against commerce and consumption as a vestige of aristocratic ideology about the inherent degradation of market activity.

The idealisation of bohemian artistic and intellectual life, and the dogma of its superiority over the bourgeois commercial life, that prevailed among Keynes’ Bloomsbury friends, and prevails still among artists and intellectuals, is a remarkably sturdy remnant of our feudal legacy. No doubt the persistence of economic striving has more than a little to do with humanity’s deep-seated anxieties about relative position, as Mr Klein suggests.

Perhaps if we felt no need to keep up with the Joneses and Mendozas and Patels, it would not be the case that so many of us sincerely like working, like earning, like buying, and find a great deal of meaning in it. Perhaps if we had no positional impulse, we’d find luxurious stretches of leisure time less intolerably enervating.

Perhaps. It seems simpler and less question-begging to say that we keep on working long hours and buying lots of stuff because, whatever the ultimate cause, we take less satisfaction in the occupations of non-commercial leisure.

http://www.economist.com/blogs/democracyinamerica/2013/05/keynes

Malaysian government-linked corporations crowd out private investment

May 1, 2013

April 25, 2013

by Jayant Menon, ADB and ANU, and Thiam Hee Ng, ADB

Private investment in Malaysia never fully recovered from the impact of the Asian financial crisis.

Foreigners have continued to shun Malaysia, but it now seems that even domestic investors are fleeing, with Malaysia becoming a net exporter of capital since 2005. One explanation for the sluggish performance of domestic private investment relates to the crowding-out effect of the growing dominance of government-linked corporations (GLCs) in many sectors. The influence of GLCs, however measured, is both widespread and pervasive.

The GLC share of operating revenue is approximately one-third in the aggregate, and they control more than half the industry share in utilities, transportation, warehousing, agriculture, banking, information communications and retail trade. GLCs employ around 5 per cent of the national workforce and account for approximately 36 per cent and 54 per cent, respectively, of the market capitalisation of Bursa Malaysia and the benchmark Kuala Lumpur Composite Index.

The pervasiveness of GLCs suggests they may present a formidable barrier to both competition and the entry of new private firms. This is also evident in their ability to exercise significant market power and use their special access to government and regulatory agencies to their advantage. Provisions in the government’s affirmative action program, the New Economic Policy (NEP) and its more recent incarnations also tend to favour GLCs, such as through government procurement restrictions.

Indeed, many GLCs were spawned as vehicles to achieve the redistributive objectives of the NEP. Since a key target was to increase the Bumiputera (Malay and indigenous peoples) share of wealth, rather than income, to 30 per cent, GLCs seemed the perfect instrument. While this target has yet to be met, the wealth share of Malays has increased at the same time that income inequality within the Malay community has worsened considerably. Many point to the rise of GLC-centred crony capitalism and a culture of corruption and patronage as contributing to this rise in inequality.

Recognising the problems with GLCs, and in a bid to improve the investment climate, the government launched its 10-year Transformation Programme in May 2004, with divestment of GLCs a key objective. With the deadline looming, progress has been lacklustre — of the 33 GLCs up for divestment, only 15 had been completed as of February 2013. Worse still, this limited divestment has been offset by new investments, with a spate of acquisitions by GLCs in private sector finance and property development for instance, making it more of a diversification than a divestment program.

So, are GLCs really crowding out private investment? For the first time, we provide empirical evidence on this relationship using a detailed dataset of 443 publicly listed firms covering the period 2007 to 2011 from Oriana. After accounting for the other determinants of investment, it is clear that a stronger GLC presence generally has a discernible negative impact on private investment. Also in question is whether there is a threshold effect when it comes to the share of GLC presence in an industry; that is, whether private firms tend to invest less to begin with if the share of GLC revenue in an industry is particularly large.

It would seem that when GLCs account for a dominant share of revenues in an industry, investment by private firms in that industry is significantly negatively impacted. Conversely, when GLCs do not dominate an industry, the impact on private investment is not significant. Even by varying the threshold by 10 percentage points in both directions, this change does not affect the original finding of a significant negative relationship between GLC share and private investment.

To revive private investment in Malaysia, the government must not only redress its growing fiscal deficit, but also expedite its program of divestment. While a growing fiscal deficit and the rising dominance of GLCs may both be crowding out private investment, a genuine privatisation program designed to reduce the role of GLCs would also address the fiscal constraint, providing a further boost to the investment climate. An improvement in overall governance and transparency would be an important, indirect, plus.

Jayant Menon is Lead Economist at the Office of Regional Economic Integration, Asian Development Bank, and Adjunct Fellow at the Arndt-Corden Department of Economics, the Australian National University.

Thiam Hee Ng is Senior Economist at the Office of Regional Economic Integration, Asian Development Bank.

The views expressed in this paper are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank, or its Board of Governors or the governments they represent.

http://www.eastasiaforum.org/2013/04/25/malaysian-government-linked-corporations-crowd-out-private-investment/

Governments should be colour-blind

May 1, 2013

Social Policies

Time to scrap affirmative action

Governments should be colour-blind

Apr 27th 2013 |From the print edition

ABOVE the entrance to America’s Supreme Court four words are carved: “Equal justice under law”. The court is pondering whether affirmative action breaks that promise. The justices recently accepted a case concerning a vote in Michigan that banned it, and will soon rule on whether the University of Texas’s race-conscious admissions policies are lawful. The question in both cases is as simple as it is divisive: should government be colour-blind?

America is one of many countries where the state gives a leg-up to members of certain racial, ethnic, or other groups by holding them to different standards. The details vary. In some countries, the policy applies only to areas under direct state control, such as public-works contracts or admission to public universities. In others, private firms are also obliged to take account of the race of their employees, contractors and even owners. But the effects are strikingly similar around the world (see article).

The burden of history

Many of these policies were put in place with the best of intentions: to atone for past injustices and ameliorate their legacy. No one can deny that, for example, blacks in America or dalits in India (members of the caste once branded “untouchable”) have suffered grievous wrongs, and continue to suffer discrimination. Favouring members of these groups seems like a quick and effective way of making society fairer.

Most of these groups have made great progress. But establishing how much credit affirmative action can take is hard, when growth also brings progress and some of the good—for example the confidence-boosting effect of creating prominent role models for a benighted group—is intangible. And it is impossible to know how a targeted group would have got on without this special treatment. Malays are three times richer in Singapore, where they do not get preferences, than in next-door Malaysia, where they do. At the same time, the downside of affirmative action has become all too apparent.

Awarding university places to black students with lower test scores than whites sounds reasonable, given the legacy of segregation. But a study found that at some American universities, black applicants who scored 450 points (out of 1,600) worse than Asians on entrance tests were equally likely to win a place. That is neither fair on Asians, nor an incentive to blacks to study in high school. In their book “Mismatch”, Richard Sander and Stuart Taylor produce evidence that suggests affirmative action reduces the number of blacks who qualify as lawyers by placing black students in law schools for which they are ill-prepared, causing many to drop out. Had they attended less demanding schools, they might have graduated.

Although the groups covered by affirmative action tend to be poorer than their neighbours, the individuals who benefit are often not. One American federal-contracting programme favours businesses owned by “socially and economically disadvantaged” people. Such people can be 87 times richer than the average American family and still be deemed “disadvantaged” if their skin is the right colour. One beneficiary of South Africa’s programme of “Black Economic Empowerment” is worth an estimated $675m; he is also the deputy president of the ruling party. Letting members of certain groups charge more and still win public contracts is nice for the few who own construction firms; less so for the many who rely on public services. The same goes for civil-service quotas. When jobs are dished out for reasons other than competence, the state grows less competent, as anyone who has wrestled with Indian or Nigerian officialdom can attest. Moreover, rules favouring businesses owned by members of particular groups are easy to game. Malaysians talk of “Ali-Baba” firms, where Ali (an ethnic Malay) lends his name, for a fee, to Baba (a Chinese businessman) to win a government contract.

Although these policies tend to start with the intention of favouring narrow groups, they spread as others clamour to be included. That American federal programme began by awarding no-bid contracts to firms owned by blacks, Hispanics and Native Americans; now it covers people with ancestry from at least 33 countries. In India 60% of the population are eligible for privileges as members of scheduled castes, tribes or “other backward classes”. Such policies poison democracy by encouraging divisions along lines drawn by discriminatory rules. The anger thus stoked has helped stir bloody conflicts in India, Rwanda and Sri Lanka. And such rules, once in place, are almost impossible to get rid of. In 1949 India’s constitution said quotas should be phased out in ten years, but they are now more widespread than ever. America’s policies have survived decades of legal pushback, though not unscathed.

The content of their character

The University of Texas (UT) justifies discriminating in favour of black people not on the ground that society owes it to them, but because, it claims, a diverse university offers a better education to all its students. That is a reasonable argument—some companies benefit from understanding a variety of customers, for instance, and the police probably keep order better if enough of them share a culture with the neighbourhood they patrol—but it does not wash for most institutions. In UT’s case, although colleges benefit from a diversity of ideas, to use skin colour as a proxy for this implies that all black people and all Chinese people view the world in a similar way. That suggests a bleak view of the human imagination.

Universities that want to improve their selection procedures by identifying talented people (of any colour or creed) from disadvantaged backgrounds should be encouraged. But selection on the basis of race is neither a fair nor an efficient way of doing so. Affirmative action replaced old injustices with new ones: it divides society rather than unites it. Governments should tackle disadvantage directly, without reference to race. If a school is bad, fix it. If there are barriers to opportunity, remove them. And if Barack Obama’s daughters apply to a university, judge them on their academic prowess, not the colour of their skin.

From the print edition: Leaders

___________________

Malaysia

A Never Ending Policy

Elections in May could mark a turning point

Apr 27th 2013 | KUALA LUMPUR |From the print edition

To see the Video [click]  http://econ.st/ZkVObv

THE policies which favour ethnic Malays and other indigenes at the expense of Malaysia’s ethnic Chinese and Indian citizens are an oddity in the realm of state discrimination. It is not unusual that they favour a majority, the two-thirds of the population known as the bumiputra, or sons of the soil. But it is peculiar that their Chinese and Indian targets have never ruled Malaysia.

Their presence in the country, though, was encouraged under British colonial rule without the consent of native Malays. After independence this became a source of grievance, one exacerbated by the minorities’ wealth. In 1969 mobs burned Chinese shops, killing hundreds. The government responded with a “New Economic Policy” (NEP) aimed at improving the lot of the bumiputra with preferences in university admissions and for civil-service jobs. Billed in 1971 as a temporary measure, the NEP has become central to a system of corrupt patronage.

Attacking that system is the main plank of the opposition’s campaign in the election to be held on May 5th—the first since independence in which it has a real, if small, chance of beating the ruling Barisan Nasional coalition, dominated by the United Malays National Organisation. Both government and opposition agree that the system of discrimination should be dismantled, but the government fears alienating the hardline Malay vote.

Provisions that require a certain proportion of the shares of any publicly quoted company to be in bumiputra hands, and that favour bumiputra-owned firms for various government contracts, undoubtedly enrich a few well-connected Malays. And the policies seem good for bumiputra civil servants: the civil service is now 85% Malay, if one excludes teachers. But they do little for the rest. “There has been little or no trickle-down effect, and I think more bumiputra know this today,” says Wong Chen of Pakatan Rakyat, the main opposition party. The increasing wealth of ethnic Malays in past decades echoes rising fortunes across South-East Asia, casting doubt on the idea that affirmative action has been a particular help.

Malaysia’s Chinese and Indian citizens chafe at being second-class citizens. Quotas in university admissions are particularly resented. Most universities in Malaysia reserve 70% or more of their places for bumiputras. Chinese and Indian students flock instead to private and foreign ones. Those who leave often stay away. A World Bank study in 2011 found that about 1m Malaysians had by that stage left the country, which has a total population of 29m. Most were ethnic Chinese, and many were highly educated. Some 60% of skilled emigrants cited “social injustice” as an important reason for leaving Malaysia. This exodus makes it a less attractive place to invest in.

Supporters of the NEP argue that, without such assistance, Malays will not catch up economically or academically. Critics worry that it dulls their incentives to excel. There is evidence of a skills gap. Nearly half the managers at Malaysian manufacturing firms surveyed by the World Bank said that the ability of local skilled workers to handle information technology was either “poor” or “very poor”. Mahathir Mohamad, a former Prime Minister who in his time extended the reach of the NEP, lamented in 2002 that bumiputras too often treat university places as “a matter of right”, neglecting their studies.

A survey in 2008 found that 71% of Malaysians agreed that “race-based affirmative action” was “obsolete” and should be replaced with a “merit-based policy”. The ruling coalition pays lip service to such ideas and has tinkered with the racial preferences—lowering, for example, the fraction of a company’s shares that has to be in bumiputra hands when a service company goes public. The opposition argues for “colour-blind” affirmative action—that is, policies that favour the poor in general, rather than the bumiputra specifically. But are enough of the sons of the soil ready to make the change?

From the print edition: Briefing

http://www.economist.com/news/briefing/21576654-elections-may-could-mark-turning-point-never-ending-policy

Margaret Thatcher by Charles Moore; Not for Turning by Robin Harris – Review

April 28, 2013

by Andy Beckett, The Guardian, Wednesday 24 April 2013 13.57

Two authorised biographies have lots of new material. Do they have a new honesty too, asks Andy Beckett

How much more is there to say about Margaret Thatcher? That these biographies have the same phrase in their title is not a promising start. Nor is it a title – taken from one of her most self-mythologising moments, her studiedly defiant speech to the doubting 1980 Conservative conference – that suggests these heavy volumes will be leavened with too much fresh or independent thinking. Robin Harris worked with Thatcher, often “closely” in his words, for a quarter of a century from the late 70s, as a speechwriter, ghostwriter, adviser, organiser and diehard supporter.

In her memoirs, she calls him “my indispensable sherpa”. Charles Moore has been one of Britain’s best-known right wing journalists for equally long. Since Thatcher’s death, he has seemed happy to mix his promotional duties as an author with defending her against, as he put it on Question Time, “People who are horrible … promoting the idea that she is [sic] very divisive.”

Moore was chosen by Thatcher to be her official biographer in 1997. It was the year her party finally lost power: her reputation, it was reasonable to assume, was going to need some protecting. “The arrangement that Lady Thatcher offered me,” writes Moore, “was that I would have full access to herself … and to her papers. She would assist all my requests for interviews with others … As a result of her support … the then Cabinet Secretary, Sir Richard Wilson, gave permission for all existing and former civil servants to speak freely to me about the Thatcher years, and allowed me to inspect government papers, held back from public view under the thirty-year rule.”

Moore has exploited this unique access with thoroughness and skill; but a sense of the British establishment granting favours to one of its own hangs over this book, and is never quite dispelled.

Harris began his book in 2005, the year of another post-Thatcher Tory general election defeat. Despite the existence of the Moore project, it appears she was keen to collaborate with Harris too.

He reprints a letter from her: “I can think of no one better placed than you to tackle the subject … You know, better than anyone else, what I wanted our reforms to achieve.” Elsewhere in his preface, Harris pointedly describes Moore’s book as “a further, ‘authorized’ work”.

As Prime Minister, one of Thatcher’s ambitions was to make Britain more competitive; posthumously, it’s clear that included her biographers.

Yet as in the utilities she privatised, competition sometimes doesn’t produce much choice for consumers. Both these books begin, as almost every Thatcher biography has for decades, with a reverent depiction of her Grantham childhood, all formative hard graft and small town English virtues, which in the retelling – not least by Thatcher as a rising politician – has long become as sepia-tinted as a rustic Hovis advertisement.

Moore describes her ambitious shopkeeper father as “tall, with piercing blue eyes and wiry blond hair”; Harris calls him “tall, blond and blue-eyed”. As a young girl, writes Harris, Thatcher had “a sweet smile, beautiful hair, flashing blue eyes”. Here, as in much of the rightwing writing about her since her death, Thatcher seems to be becoming a sort of Tory Evita.

But then Harris’s book wakes up. In Grantham and afterwards, he abruptly remarks, Thatcher “would never be very interested in people’s personalities … only in their actions – and specifically those of their actions that directly concerned her.” Further tart assertions about her personality and habits quickly follow.

When she ate, food would be “hoovered up as quickly as possible”. When she worked on official papers as Prime Minister, she often sat “in her [Downing Street] study in a high-backed chair … Over the years her feet wore a hole in the carpet. She refused to have a new one and had a patch inserted.”

In political conversation, “She had no real sense of place … adopting even in private discussion the same aggressive and self-justificatory stance as she would in a hostile television interview.” As a thinker, although she carried a collection of excerpts from Winston Churchill’s speeches and broadcasts in her handbag, Harris writes, she “did not have much historical sense, merely some rather romantic and fanciful historical notions”.

After all the eulogies, it is refreshing to read about an odd, driven, believable person – rather than some abstract national saviour or demon. In his confident generalisations about Thatcher, Harris is like a long-faithful courtier freed by a monarch’s death to speak the truth about them. He is not that interested in piling up evidence for his assertions. Like an article in the Spectator, the writing can be lordly rather than logical, and the word “probably” appears more often than in most biographies. Much of the book is closer to memoir or polemic – you need to take it on trust.

The recounting of Thatcher’s dark-horse dash through the Conservative party pack and tumultuous premiership is efficient rather than revelatory. There are slow stretches where Harris summarises and justifies her policies, one by one; and equally relentless but more quotable attacks on Thatcher’s many Tory enemies and allies-turned-nemeses, such as her chancellors Nigel Lawson (“too clever by half”) and Geoffrey Howe (“raddled with bitterness”).

Moore is more measured. His dense, intricate volume, the first of an intended two, follows Thatcher only up to the autumn of 1982, less than a third of the way into her premiership. For now at least, this cut-off date robs his version of her story of the always-compelling element of rise and fall – the latter vividly and emotionally depicted by Harris – and instead makes Moore’s Thatcher narrative like one of the economic graphs in Thatcherism’s boom years: jagged but generally upward.

There are some surprises, though. Thatcher’s sister Muriel, barely mentioned by other biographers, is revealed as the recipient of frank letters from the teenage Margaret. Of an Oxford university boyfriend, pre-Denis, also previously undetected by biographers, she writes: “Tony hired a car and we drove out to Abingdon to the country inn ‘Crown and Thistle’. I managed to borrow a glorious royal blue velvet cloak … I felt absolutely on top of the world as I walked through the lounge … and everyone looked up.” That Thatcher had a bit of a life before parliamentary politics claimed her in the early 50s is a less sensational discovery than some of the publicity around this book has trumpeted; but Moore, with typical care and perceptiveness, produces a clever coda to his account of the Tony relationship.

In 1974, long after it was over, Tony, now a stockbroker with a professional interest in the housing market, produced a scheme for council tenants to buy their homes. As the shadow minister responsible for housing, Thatcher invited him to the Commons. “She made only the most glancing acknowledgement of their old acquaintance and got straight down to the policy, towards which she was very receptive.”

Jamie Hodgson/Getty Images

This is Moore’s first book (Harris has written or ghostwritten half a dozen), and its prose is understated and less partisan than his journalism. Occasionally, the long, controlled paragraphs curl almost imperceptibly into dry wit. In the mid-60s, he writes, “At the highest levels of the [Tory] party … suspicions were aroused that the rise of Margaret Thatcher might represent some sort of threat to male peace and tranquility.” Nor is Moore a total prisoner of his many sources.

Their testimony is weighed, and sometimes contradicted. Even Muriel, who granted a rare interview, is corrected when she claims that Margaret was too busy to go to their father’s funeral, with reference to Margaret’s “two engagement diaries of the period” and a report in the Grantham Journal.

There is a downside to all this neat dovetailing of material and elegantly murmuring, High Tory style. Thatcherism was in many ways an unsubtle, unstable political project, exhilarating or brutal depending on where you stood; yet only the exhilaration feels fully present in Moore’s narrative, for all his conscientious detailing of Thatcherism’s 70s and 80s ups and downs. Part of the problem may be the slightly sketchy way he deals with the world beyond.

There is not quite enough sense of the social texture of Britain, and how that changed, as Thatcher rose, and how that change helped her. Similarly, events outside Westminster that proved pivotal for her – the 1978-9 winter of discontent that probably won her the 1979 election; the 1981 urban riots that so undermined her early premiership – are recorded too briefly and cursorily. Meanwhile, Moore’s politics surface unhelpfully when he caricatures postwar Britain as in “steep decline”, the economy under Labour in the 60s as a “car crash”, and the IMF that eagerly helped do away with British social democracy in the 70s as “impartial”.

As much of the debate since her death has shown, there are still plenty of takers for this doomy, simplistic view of pre-Thatcherite Britain. But present-day historians are becoming steadily less keen on it, and the struggles of our Thatcherised economy since 2007 don’t augur too well for the long-term reputation of books that present her rule as having solved all our problems.

Moore is more nuanced than that; unlike Harris, he offers a few quiet but stinging criticisms of her policies, for example on council house sales, which led to “the gradual build-up of a housing shortage which, in 1979, had not existed, and the stoking, for the future, of a housing bubble”.

Malaysia’s fiscal future and the general election

April 28, 2013

Author: Liam Hanlon, Cascade Asia Advisors (04-23-13)

Malaysia’s 13th general election, scheduled for 5 May, is shaping up to be the tightest in the country’s near 60-year history.

The ruling coalition, Barisan Nasional (BN), should slightly edge out the opposition, Pakatan Rakyat (PR), but will probably fail to reclaim the coveted two-thirds majority necessary to amend the constitution. Behind the divisive rhetoric of this unofficial campaign season, however, neither camp has formulated a viable, long-term solution to one of Malaysia’s most insidious problems: fiscal imprudence.

Malaysia’s struggles with public finances are nothing new. With the exception of a brief period in the mid-1990s, Malaysia has long maintained a fiscal deficit, and in 2012 its budget deficit was one of the region’s largest, at 4.5 per cent. It has also done little to reign in public debt, which at 53.7 per cent of GDP in 2012 sits right under the debt-ceiling threshold of 55 per cent of GDP.

Although Malaysia’s deficits aren’t inherently irresponsible, they do reflect a concerning trend of ‘hidden’ public debt. This includes contingent liabilities, such as government guarantees on debt and ‘off balance sheet’ borrowings, which have more than doubled since Najib Razak took office in 2009. This debt surge comes from government entities that fund massive transportation and infrastructure projects.

It is not inconceivable that these liabilities may eventually find their way onto the federal balance sheet. Additionally, the government’s revenue stream, which has remained unimpressively low, is too heavily reliant on the state oil company PETRONAS, responsible for almost 35 per cent of federal revenues.

Underpinning many of these structural issues is a proclivity for subsidies and cash handouts, particularly when an election is on the line. As BN recovered from the political shock of the 2008 election that saw PR erase its parliamentary majority, Najib unleashed budgets saturated with voter-friendly measures.

The 2013 budget provided bonuses to over 1.3 million civil servants, cash for low-income families, smart phone rebates and a cut in the income tax rate. These additions reflect the political reality that prudent fiscal management does not carry votes in Malaysia. Malaysians frequently lament the rising cost of living, making subsidies politically expedient for anyone running for office.

Malaysia’s 13th general election is no different. PR’s leader, Anwar Ibrahim, and Najib are competing for the hearts and minds of Malaysia’s electorate, promising to deepen their pockets, shower them with gifts and reduce their taxes. Anwar unveiled his election manifesto 25 February, outlining an agenda replete with election sweeteners. He promised free secondary education, lower car prices, an increased minimum wage, and greater oil revenues for Sabah and Sarawak.

Najib revealed his electoral platform on 6 April, proffering his own brand of populist pledges. He promised to raise the annual cash handout for poor households from US$165 to almost US$400, build one million new affordable homes and similarly subsidise car prices. Najib also delayed the implementation of a goods and services tax (GST), which would expand the tax base and ease the government’s dependency on oil revenues. The electoral payoffs for these political ploys make it risky for any leader to advocate for long-term fiscal management.

However unpromising this election cycle has been, one policy prescription has emerged that could drastically alter Malaysia’s financial future. PR has advocated reforming the country’s longstanding quota system favouring Malays, opting instead for a system based on socioeconomic status. Eliminating racial preferences in public contracts could conceivably yield more efficient and useful government investments, and free up revenue for the high subsidies PR wants to dole out.

More importantly, this reform will reinvigorate Malaysia’s domestic competitiveness and empower truly disadvantaged segments of society. If implemented correctly, it would signal to the international investment community that business in Malaysia no longer runs on cronyism and race-based politics. Touting an improved investment environment could position Malaysia to better compete for much-needed foreign investment in the region, easing pressure on the government to drive investment.

To be fair, Najib has taken strides to roll back some of the archaic policies benefiting Malays. In 2009, he overturned a longstanding requirement for certain companies to sell at least 30 per cent of their shares to Malays. But the prime minister stopped short of addressing the bulk of preferential racial policies that infuriate ethnic Chinese and Indian Malaysians, particularly those in education and government contracts.

The United Malays National Organisation is still the most influential party component in BN, essentially guaranteeing that Malay interests will continue to guide the coalition’s policies. Regardless of Najib’s own ambitions, institutional impediments to achieving reform in this area may be too powerful to overcome.

Indeed, the policies of neither BN nor PR instil much confidence in the country’s medium-term fiscal future. Malaysia’s electoral politics fail to reward fiscal prudence and instead encourage shortsighted economic measures. But if the government cannot extract racial considerations from the economy, Malaysia risks falling deeper into financial mismanagement.

Liam Hanlon is a political analyst at Cascade Asia Advisors, a research and strategic advisory firm focused on Southeast Asia.

http://www.eastasiaforum.org/2013/04/22/malaysias-fiscal-future-and-the-general-election/

Najib’s zombie apocalypse

April 15, 2013

by Mariam Mokhtar@http://www.malaysiakini.com

In keeping with the unhealthy obsession with cerita hantu (ghost stories) and the supernatural, which is displayed by the rakyat – especially the Malays – caretaker Prime Minister Najib Abdul Razak should be applauded for converting some Malaysians into zombies.

The living dead are characterised by their lack of self-awareness and the inability to think for themselves. Najib’s zombies may not crave human flesh, but they do feast on cash handouts and freebies. In the zombie culture, human brains are considered a delicacy.

Perhaps UMNO has seized on the rakyat’s minds as a means to spread their evil. They have mentally enslaved us and used this exploitation to satisfy their greed for material goods, and hunger for power.

Six decades ago, Malayans had to decide – either continue to be ruled by the British, or accept change and take charge of running the country. The operative word was change.

We had to manage the nation’s finances, defend the country and administer self-rule. It was no mean feat. Malayan brains, intellect, and toil made Malaya (later Malaysia), a success story. Change to self-rule required the combined effort of Malayans, and not just one particular section of the community.

Change took place in 1957. It can happen again in 2013. Today, the word ‘change’ is anathema to our leaders. Our great-grandparents were more open-minded and embraced change more readily, but Najib and former PM Dr Mahathir Mohamad are trying to deceive us when they say that change is not necessary.

Najib may have promised to deal with corruption after GE-13, but why should we believe him? For years, we witnessed his failure to address problems in society.

If he was worried about graft, why did he employ leaders who were corrupt? Najib appointed Mohd Isa Abdul Samad as chairperson of FELDA despite objections from the public and criticism from Mahathir, who is no stranger to money politics.

Going to the Polls

In three weeks time, we go to the polls. What will happen then?  If we elect BN, aren’t we condoning a government which is corrupt, and which breaks the laws whenever it chooses? The corruption network involves people from the junior office boy to the PM. Those at the bottom make petty sums whilst those at the top amass huge rewards. There has been little enforcement despite plenty of evidence, but the complaints of the public have been completely ignored.

Restoring confidence in the Government?

If the Opposition were to win GE13, what steps should they take to restore confidence in the government? Anwar has reiterated that he will not go on a witch-hunt; but he cannot ignore the rakyat’s desire for justice. Many lives have been crushed, families destroyed, livelihoods devastated and communities ravaged, because of corrupt BN leaders.

Many people have painful experiences to relate. The business deal of one acquaintance was scuppered by allegedly dodgy people in the Defence Ministry. After years of maintaining a good working relationship with his American and Taiwanese partners, millions of ringgits were lost when the ministry supposedly reneged on a deal.

Despite spending vast sums on engaging lawyers and waiting at the court’s pleasure, this man learnt – after a brief appearance in court – that his case had been dismissed. He lost everything.  In Malaysia, justice goes to the highest bidder. There are presumably several cases of miscarriages of justice like this in the country as well.

So, should a new government purge all officials and businesspeople connected with the previous BN regime? To what extent should this process be continued? Should the top brass and business cronies only be punished? Should the crony business be made to cease operations?

It is easier to deal with those at the top, whose personal gain and lust for power broke several laws. Their unexplained wealth can be traced, by the paper trail, to offshore bank accounts and overseas properties.

Will the more educated among us adopt a different approach to the cleansing ritual? Mahathir’s brand of politics left deep trenches in the minds of many Malaysians.

How will the different sections of the community react to the purge post-GE13? How should we treat the junior civil servant, who in the old regime, took advantage of a crooked system?

Perhaps, the more obscure cases will be found in the private sector, where businesses helped prop up the UMNO government in deals that enriched both corrupt politicians and business people. How should the new regime resolve these cases? It would be naive to think that any government contract came without strings attached.

How should civil servants or businesspeople who denounced the corrupt practices of the old regime be dealt with in the new order? Should their positions be enhanced? What if their actions were entirely self-serving when they jumped ship?

How would you deal with the civil servants who refused to become involved in corrupt acts of the previous government? Do you promote them despite their lack of expertise and seniority? How would the new government deal with false accusations? How would they deal with politicians who are Trojan horses of frogs?

Not enough time, resources

After GE13, we cannot go after everyone whom we perceive to be corrupt because we do not have the time and resources to manage this laborious process. Anger and resentment will simply build and this will feed into the rakyat’s racial and religious prejudices, as well as accentuate other insecurities.

To add to the problem, our judiciary and police force have been corrupted by Mahathir. We will have to find a system to maintain law and order in the transition from the old guard until a just and effective police force and judicial system is formed.

We certainly must recover the large sums, several of which are said to be in excess of RM40 billions which have been allegedly stolen by several BN ministers and tycoons acting in collusion with them.

Najib’s incessant refrains of “I help you, you help me” to the rakyat has created a zombie apocalypse in Malaysia. Therefore, radical change is necessary to reclaim our souls and save the nation.

Fareed Zakaria on Maggie Thatcher

April 15, 2013

http://www.nst.com.my

I GREW up admiring Margaret Thatcher. It was obvious to many of us in India in the 1970s that socialist economics didn’t work and that Thatcher’s radical reforms were the right course, one we wished someone would advocate in India. (It took 12 years and a massive crisis for that to happen.)

Her plans to cut taxes, privatise industry and deregulate have been vindicated by history, but that doesn’t tell us much about what to do today.

Consider the world in 1979, when Thatcher came to power. The average Briton’s life was a series of interactions with government: Telephone, gas, electricity and water service, ports, trains and airlines were all owned and run by the state, as were steel companies and even Jaguar and Rolls-Royce. In almost all cases, this led to inefficiency and sclerosis. It took months to get a home telephone line installed. Marginal tax rates were ferociously high, reaching up to 83 per cent.

Britain was not unusual. In most European countries, the state had as large a role atop the “commanding heights” of the economy. And while the United States was always far more free-market-oriented, even top US tax rates in the 1970s were in the range of 70 per cent, and government tightly regulated telecommunications, transportation and finance.

Throughout the Western world, the consensus was that large-scale state intervention was needed to achieve growth and prosperity. That’s why a conservative Republican President, Richard Nixon, said in 1971, “I am now a Keynesian in economics”. (The phrase often misattributed to him, “We are all Keynesians now”, was actually written by the libertarian economist Milton Friedman, in Time magazine in 1965.)

Today’s world is completely different. Thirty years of privatisation and deregulation have swept through industries as varied as telecommunications, airlines and finance. In most sectors, it is hard to find a major state-owned company in the Western world.

Thatcher privatised 50 companies, and governments in Europe, Asia, Latin America and Africa followed the same course.

Taxes have been slashed everywhere. The top marginal tax rate in India in 1974 was 97.5 per cent. (Really.) Today, the top rate is 40 per cent. In the United States in 1977, taxes on capital gains and dividends were 39.9 per cent; last year, the rate was 15 per cent.

In 1977, corporate American tax rates were close to 50 per cent; now they are 35 per cent, and most companies pay a much lower rate.

These changes have taken place under conservative, liberal and even socialist governments. As Peter Mandelson, architect of the Labor Party’s rise in the 1990s, declared, “We are all Thatcherites now”.

(Note that Thatcher rolled back the regulatory state but not the welfare state.) During her 11-year reign of radical free markets, the state’s role in the overall economy grew.

She never spoke out against Britain’s nationalised healthcare. While cutting some taxes she substantially raised others (on consumption), ensuring that deficits didn’t grow too large.

Thatcher’s ideas resonated because they were an effective antidote to the problems of the times. In the 1970s, the Western world staggered under the weight of oil shocks, rising wages, rocketing inflation, slowing productivity and growth, labour unrest, high taxes and sclerotic state-owned companies. These are not the problems we face now.

Today, American and European workers struggle to keep up their wages as technology and globalisation push them down. Western economies face global competition, with other countries building impressive infrastructure and expanding education and worker training.

There is a two-track economy where capital does well but labour does not, where college graduates thrive but those without strong skills fall behind and where inequality is rising not just in outcomes but also in opportunities.

Against this backdrop, would a further round of deregulation do much? Would cutting taxes from around 40 per cent unleash growth, especially when it would mean even larger deficits?

The Simpson-Bowles plan, often seen as a practical solution to the US fiscal problems, raises tax revenue by US$2.6 trillion and hikes the rates on both capital gains and dividends.

Margaret Thatcher was, in her own words, a “conviction politician”, but she was successful because her convictions addressed the central problems of her time. The ideas that work now will be those that solve our problems, not those of the 1970s.

Vote to end the Era of Mahathirism

April 9, 2013

GE-13: End the Era of Mahathirism?

by Dr Neil Khor@http://www.malaysiakini.com

COMMENT: Former British Prime Minister Margaret Thatcher died yesterday. Within minutes, Facebook and Twitter were buzzing. Almost everyone old enough to remember her when she was PM said in unison that her death was “the end of an era”.

Those who know of her only from the recent Academy Award-winning film based upon her life have also huddled irrationally together “to express their sympathy” for someone they have never met or even heard of until very recently.

This phenomenon of missing someone whom we do not know personally is a by-product of the influence of the mass media on our lives. Social networking has made this effect more pervasive, creating group identities.

This new situation means that leaders have to be celebrities to win elections.That was why Najib Abdul Razak asked Malaysians whether we trusted him or Anwar. He was addressing young voters, who will decide if BN claws back its two-thirds majority.

The politician as celebrity started with Thatcher, one of the world’s most ‘constructed’ leaders. Her global image was as coiffured as her hair. Nothing was left to chance and there was no time to spare in her sprint to transform herself into a celebrity prime minister. The first woman British PM, she led the way with Barack Obama as her media savvy heir.

Thatcher did not have many admirers but she had many imitators. Imitation, as the British know so well, is the best form of flattery. In Malaysia, she wrote in her autobiography, “there was a man who said ‘buy British Last’, I let him host CHOGM and he never turned back”. No other Third World Leader learnt his lesson better than Malaysia’s Dr Mahathir Mohamad.

Today, Mahathir is seen as the BN’s last great hope. He is campaigning for BN because he feels indebted to BN for all the years it has supported him.

Unlike so many other ingrates, Mahathir knows how to repay his debts. There is little doubt in the minds of most Malaysians that he continues to pull the levers in the BN. He can decide when a BN prime minister should step down and whom to elevate.

Mahathir modeled himself on the world leaders of his generation. This did not include nationalist leaders of the Third World but the ‘strong’ leaders of the West. Thatcher was one of them.

There is very little in the public domain about their relationship except for a little-known book about the Pergau Dam project. In it, the man who promoted ‘Buy British Last’, was actively courting British arms manufacturers.

‘All the world’s a stage and we merely players’, especially so when Mahathir launched the very public anti-British campaign while in private, British commercial interests proliferated.

Malaysia and Singapore remain the West’s strongest allies in Southeast Asia. Mahathir’s adroit handling of his public persona as the ‘voice of the Third World’ and his masterful facilitation of Western interests have ensured ‘peace’ for Malaysia.

Thatcher may have dismantled industrial Britain but Mahathir used FDI from the West to industrialise Malaysia. The reality is that Malaysia has remained ‘safe’ and secular under BN and especially during Mahathir’s long administration.

He successfully kept the Islamists at bay. This is the “devil you know”, so do you really want to take risks?

Mahathir’s immense influence

As we await the countdown to GE13, many of the older generation will be looking back nostalgically to the time when we had a strong leader.There was nothing silly that came out from the mouth of the PM like “the era of government knows best is over”. There were no direct handouts, no need to massage the inflation figures and no ambiguity about the national vision.

There were no ‘ifs’ and ‘buts’ when implementing policy. If the press was pesky, we simply closed down the papers. If the royals went too far, we removed their immunity from prosecution. When the judiciary began to veer off course, we removed the Lord President.

And the PM led the BN to five electoral victory never losing its two-thirds majority because so many Malaysians voted for them. The PM was never more popular than the party.

Whilst both Thatcher and Mahathir rose above all their contemporaries to emerge as ‘strong’ leaders by mastering the media and cultivating an image as ‘conviction politicians’, enter the Internet and the rise of social media.

In the case of Mahathir, the social media was the tool he used to get his message across. He unseated his hand-picked successor by systematically demolishing Abdullah Ahmad Badawi , who will be forever remembered as the “sleeping PM”.

Today, Mahathir is once again using his immense influence over the electorate to make sure the BN wins big in the coming GE. He said very clearly that the BN formula is the only one that works because Malaysians will never be mature enough to see beyond their own race and religion.

He celebrates Ibrahim Ali and PERKASA as custodians of the special Malaysian formula of ‘Malay leadership’ of a diverse multi-ethnic nation. He has made it clear that Selangor needs to be saved from another term of Pakatan Rakyat rule.

Some call this fear-mongering but it is a great pincer strategy. Whilst Najib is free to portray himself as cosmopolitan and a strong proponent of 1Malaysia, Mahathir appeals to the baser instincts of Malaysians at the lower end of the economic ladder.

Preying on their insecurities and the basic instinct to survive, he is indeed paying BN back for all the years the coalition has been of service to him. It was, after all the MCA and Gerakan, that saved him when UMNO was declared illegal in 1988 and when the Malays abandoned UMNO in 1999.

By supporting Perkasa and Ibrahim (left in photo), Mahathir has set the stage for the ultimate triumph of his worldview and his formula for Malaysia. Tunku Abdul Rahman recognised this cynical view and rejected Mahathir, dying outside of UMNO and the coalition he fled.

The same with Hussein Onn, who preferred to join Semangat 46 that was led by Tengku Razaleigh Hamzah. When Najib fails to obtain the two-thirds majority that he so confidently thinks he can get, Mahathir will be there to tell us that Malaysians have rejected 1Malaysia.

So, to those who want to see Thatcher’s death as the end of an era – that is, the end of the era of divisive politics, of cynicism and of egomaniacal leaders – please think again.

It was the political philosopher Edmund Burke who said “those who have been intoxicated with power can never willingly abandon it”. So it is with Mahathir and his quest to ‘save’ Malaysia, the Malaysia created in his own image.

It is now up to us to go to the polls and decide for ourselves whether it is truly the end of the Mahathir era!

Malaysia’s Najib Unveils Poll Manifesto Similar to Anwar’s

April 8, 2013

By Barry Porter & Manirajan Ramasamy – Apr 8, 2013 10:22 AM GMT+0800

Malaysian Prime Minister Najib Razak pledged to fight corruption, bring down living costs and build a pan-Borneo expressway if his coalition retains power in elections due in a matter of weeks.

These were all policies mooted by opposition leader Anwar Ibrahim in his manifesto released six weeks earlier than the one Najib’s governing National Front unveiled at a weekend rally in Kuala Lumpur. The Election Commission meets this week to set a date for polls after the Prime Minister dissolved parliament on April 3.

Malaysian Prime Minister Najib Razak promised more specialist graft courts and greater public disclosure of government contracts if the National Front is allowed to extend its 55 years of unbroken rule.

“They had the benefit of time to study our manifesto over the past month and incorporate some elements,” Ong Kian Ming, a political analyst at Kuala Lumpur’s UCSI University and an Opposition election strategist, said by phone. “Unlike us, there’s nothing in there about electoral reform. That’s something a lot of people are concerned about.”

In the lead-up to the polls, Najib has boosted government spending, distributed a second round of cash handouts to the poor, and raised salaries of civil servants, police and the military. He also delayed implementing a goods-and-services tax and froze plans to wind back state subsidies on essential items. The manifesto offers increased handouts for the poor, and lowered car costs and broadband fees.

“My sincere apologies to all Malaysians if we have done anything wrong,” the Prime Minister said in a speech at the rally, broadcast live on national television. “At the end of the day, we are ordinary humans. If we are given a strong mandate, I can assure you that we will do better in the next five years.”

Housing, Health

Najib promised more specialist graft courts and greater public disclosure of government contracts if the National Front is allowed to extend its 55 years of unbroken rule. Among the pledges are more affordable housing, and improved health care and transportation, including a high-speed rail link between Kuala Lumpur and Singapore.

“A lot of the ideas have already been mooted by the opposition, like lowering car prices, cheaper Internet and a pan-Borneo highway,” James Chin, professor of political science at the Malaysian campus of Australia’s Monash University, said by phone yesterday. “Najib talked mostly about things that are popular with the people. He didn’t give details on macro- economic issues like implementing GST and cutting state subsidies.”

Worst Performer

To stay in power, Najib, 59, must see off a resurgent opposition led by Anwar, a former Deputy Prime Minister. Brokerages including Bank of America Merrill Lynch and Citigroup Inc. expect an even closer election result than in 2008, when the National Front retained power by its narrowest margin since Malaysia’s independence from Britain in 1957.

The risk of the ruling coalition losing seats in the election has helped make the FTSE Bursa Malaysia KLCI Index Southeast Asia’s worst-performing benchmark in 2013. The stock gauge is down 0.3 percent this year, compared with a 14 percent gain in the leading index in Indonesia and a 7 percent increase in Thailand’s benchmark gauge.

The KLCI was trading 0.2 percent lower as of 9:58 a.m. in Kuala Lumpur today, while the ringgit was little changed to the dollar at 3.0564.

Najib, who inherited a country in recession when he replaced Abdullah Ahmad Badawi as leader mid-term in 2009, wants a mandate to complete his economic and government reforms started less than three years ago. He’s focusing on his track record in boosting investment and improving incomes as he seeks a popular mandate for the first time.

Fighting Corruption

Malaysia’s economy has shown resilience in the face of the global slowdown, expanding by more than 4 percent for each of the 13 quarters to the end of 2012, according to data compiled by Bloomberg. Private investment has tripled since Najib began his economic-transformation program in September 2010, rising 25 percent last year to 139.5 billion ringgit ($46 billion), according to government data.

Almost half of the voters surveyed in a poll by the Merdeka Center for Opinion Research said fighting graft is a more pressing issue for the next government than taming inflation or boosting foreign investment. The survey of 1,021 voters was conducted from January 23 to February 6 on the country’s peninsula and had a margin of error of 3.07 percent.

While Malaysia moved to 54th from 60th place among 176 countries in Transparency International’s Corruption Perceptions Index last year, it was ranked last for bribery among 30 nations surveyed. About 3,000 executives from 30 countries were asked whether they’d lost a contract in the past year because competitors had paid a bribe. In Malaysia, 50 percent said yes, the Berlin-based advocacy group said.

Anwar’s Allies

The National Front is “committed to doing much more to combat the scourge” of corruption, according to its manifesto, which emphasized its experience in government and urged voters not to “gamble away” the future.

Anwar’s three-party People’s Alliance (Pakatan Rakyat) Opposition coalition comprises his own multiethnic People’s Justice Party, the Chinese-majority Democratic Action Party, and the Pan-Malaysian Islamic Party, which wants to expand Shariah law.

The People’s Alliance won control of five of Malaysia’s 13 states in the 2008 election. The National front later won back Perak state when several lawmakers defected.

The opposition currently holds 75 of 222 parliamentary seats, while Najib’s alliance has 137, according to the Malaysian Parliament website. Anwar predicted a minimum 10-seat majority for his alliance in a March 8 interview.

Najib’s manifesto said Malaysia would seek a non-permanent seat on the United Nations Security Council to play a greater role in regional peace, promoting moderate Islam and inter-faith harmony. A National Front government would support the establishment of a Palestinian state, and humanitarian efforts in Gaza, the West Bank, southern Thailand and Mindanao in the Philippines, it said.

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To contact the reporter on this story: Manirajan Ramasamy in Kuala Lumpur at rmanirajan@bloomberg.net

To contact the editors responsible for this story: Stan James in Hong Kong at sjames8@bloomberg.net; Rosalind Mathieson in Singapore at rmathieson3@bloomberg.net

State Your Policies On National Finances UMNO-BN and Pakatan Rakyat told

April 8, 2013

Malaysia’s Prominent Economists and Political Scientists to UMNO-BN and Pakatan Rakyat: State Your Policies On National Finances

Recent financial crises have visited economic calamity upon ordinary citizens in the countries of the East and West alike. Experience tells us that there can be no complacency about a nation’s financial state.

Concerns voiced in various reports and the media call for special attention to Malaysia’s finances and their management. These concerns are:

A record-breaking capital flight out of Malaysia.

Financial watchdog Global Financial Integrity (GFI) reported that a total of RM880 billion of funds were illegally transferred out of the country between 2001 and 2010.

A sharply rising trend in government debt.

This debt almost doubled from RM274 billion at the beginning of 2008 to RM502 billion at the end of 2012. International Monetary Fund (IMF) statistics expect it to grow by RM277 billion to RM779 billion in 2017.

Incomplete information about the Malaysian government’s full exposure to debt.

The official figures for government debt exclude debts that are called contingent liabilities. These include off-balance-sheet borrowings and the debts of banks, government-linked companies and other private-sector enterprises that the government has guaranteed to pay off in the event that these entities default. One estimate of these hidden debts in 2011 placed it at RM117 billion.

Rapid growth of the share of total government debt owed to foreign holders. This has soared from 0.1% in 2003 to 6.7% in 2006, 11.8% in 2009, and 26.8% in 2012. Although 97% of this debt remains Ringgit-denominated, this trend is a cause for concern, and compromises future policy autonomy as well as heightens exposure to capital flight in the event of financial panic.

Possible massive losses by 1Malaysia Development Bhd.

Recent revelations indicate that this strategic company, wholly owned by the government of Malaysia and tasked to lead in market driven initiatives to help transform the Malaysian economy, may have incurred losses of as much as RM4 billion through mispricing of its bond issue.

Inconsistencies in Bank Negara reports regarding Malaysia’s total debt.

While one portion of Bank Negara’s statistics tallies with the official total debt of RM695.4 billion for 2011 and RM737.6 billion for 2012, elsewhere in its reports it is implied that Malaysia’s total debt is more than twice larger, at about RM2.025 trillion for 2011 and RM1.743 trillion for 2012. The latter would ordinarily be considered crisis-level figures.

Fears of an imminent credit bubble in Malaysia and other East Asian countries.

Households in Malaysia have amassed a consumer debt in excess of RM600 billion according to an IMF country report. Various financial analyses claim that Malaysia, Thailand, Singapore and Taiwan are at risk of a household debt crisis.

The lack of sustainability of Malaysia’s GDP growth.

Rapid liquidations of natural capital such as petroleum and forests to finance deficit spending or to fulfill debt obligations have adverse economic and ecological implications for present and future generations. Moreover, unproductive investments and expenditures are recorded as positive GDP in the national accounts even if they yield returns that do not cover borrowing costs.

A lack of discipline in adhering to Malaysia’s statutory ceiling for debt. The ceiling has been raised on the debt limit from 40% of GDP set in 2003 to 45% in 2008 and subsequently to the present 55% in 2009.

The above details signal an alarming trend. Decisive action is required to safeguard Malaysia’s development potential and forestall a crisis situation such as in Greece.

In line with public interest, therefore, and as a first step towards democratising the management of government finances, we, the undersigned, call upon Barisan Nasional and Pakatan Rakyat, the main contenders for government in the 13th Malaysian general elections, to openly lay out detailed policy positions on how they intend to manage the nation’s finances.

In their policy briefs on national finance and debt, the two political coalitions must provide the following minimum feedback:

1. Justify the projections for the borrowings that they anticipate making in the coming five years under their respective watch;

2. Spell out plans for tackling fiscal deficits and ballooning government and household debts;

3. Explain how their election manifesto promises on government spending will be consistent with sustainable debt and resource management;

4. Declare their commitment to investigating illegal financial outflows and repatriating these monies as prescribed by the United Nations Convention against Corruption;

5. State explicitly whether they will support the foundations of public transparency and accountability in our national finances by

(i) establishing a continuously updated ‘debt register’ that will be publicly available on the Internet, which records the stock of debts, the sources of these debts, interest/dividend payments made on these and details of the uses made of these borrowings;

(ii) establishing a multi-partisan parliamentary committee for debt oversight and approval;

(iii) holding public fora and referenda on spending or debt decisions of great import; and

(iv) other possible measures.

We urge the two major political coalitions to produce their national finance and debt policy briefs focusing on the proposals set out above as soon as possible.

The voters of this country deserve to go to the voting booths with better knowledge of what to expect in the management of Malaysia’s finance and debts from the new government in power.

Signatories

Dr Cheong Kee Cheok

Dr Fatimah Kari

Dr Terence Gomez

Dr KJ John

Dr Cassey Lee

Dr Lee Hwok Aun

Dr Lim Teck Ghee

Dr Rajah Rasiah

Pak Sako

Dr. Rozilini M Fernandez- Chung

Dr. Yew Siew Yong

BRICS challenge the World Bank and the IMF in Development Finance

April 2, 2013

by Bunn Nagara (03-31-13)@http://www.thestar.com.my

A prospective new financial architecture promises to reform and improve development finance for the world.

FIVE countries came together during the week to grab international headlines over how they might, as a group, change the world: Brazil, Russia, India, China and South Africa (BRICS).

And they would do so in the most tried-and-tested way imaginable: financially, as a single economic entity. As a bloc BRICS may effect change on a global scale, but the grouping would still do so in the traditional way of flexing economic muscle.

The annual BRICS summit held during the week in Durban, South Africa, focused on what that muscle can do – challenge the World Bank and the International Monetary Fund in the way development finance is conducted, as well as the Western dominance that has prevailed in both Bretton Woods institutions.

Those institutions were never meant to be that way, of course, as a reading of their founding texts would show. But any initial magnanimity soon gave way to self-interest: US and European dominance of the World Bank and the IMF respectively was to be a Western “consensus” imposed on the world like a global neo-colonial regime.

Interestingly, the original BRIC as both a term and a grouping originated not in any of the initial four countries or the developing world, but in the US itself.

None other than Goldman Sachs’ Asset Management Chairman Jim O’Neill coined the term in 2001 for those countries he believed would outpace the US in total GDP by 2020.

At the turn of the century Brazil, Russia, India and China were merely regarded by some as emerging economies developing under their own steam.

After O’Neill’s coinage they held their first summit in 2009 and invited South Africa to join them a year later, and BRICS was born.

Since then, BRICS as both concept and entity has had vigorous growth and a vibrant youth. It compares favourably with the IMF and the World Bank, both pushing 70 years and weighed down by limiting conditionalities and outmoded economic ideology.

Both institutions typically adopt a cold, mechanistic approach to development that prioritises market interests over human needs. Their Western bias is also a throwback in a 21st-century world of shared global interests and aspirations, and a world in which Western economies themselves are in trouble.

In contrast, BRICS as a bloc of emerging economies serves as a bridge between the developing Third World and the developed First World. It seeks to narrow that yawning chasm by focusing on reviving global growth and ensuring macroeconomic stability.

Those virtues that had once been the preserve of the West have become its elusive goals. The “developed” and the “emerging” (mostly, once “developing”) economies have traded places.

The new global bank that BFICS wants to establish is expected to emphasise infrastructure development and trade. The first represents solid investment in development for the future, and the second works as an economic multiplier for further growth.

On paper, BRICS countries account for almost half the world’s population and just over a quarter of world trade. But more important than these bare figures is how Brics economies have been driving global growth for years, as acknowledged by the World Bank itself.

The idea for a new global bank arose only last year. So how the measured progress at the Durban summit is perceived depends at least as much on the observer: is the glass half-full or half-empty?

Some of the most difficult decisions, such as financing modes, remain unresolved. Its primary purposes like the operation of funds in project financing and a contingency fund as crisis buffer will take more time to work out.

Pessimists may cite how the absence of agreement on even the quantum of fund contribution from each country bodes ill for BRICS. Basing the contribution on economic capacity makes sense, but concerns were expressed over how that would inevitably make a hulking China dominant.

A standard sum of US$10bil (RM31bil) from each country as seed capital was then considered, following a Russian proposal, but the final decision was left until later.

Optimists would say that far from weak indecision, this showed an openness about not wanting any country to dominate, with agreement on equality with a fair and manageable quantum for all.

However, realists may say that in such financial matters China would still eventually dominate. To that, it can be said that dominance by a single country was never a problem before, given the prominent US role and influence in the World Bank and the IMF.

At this point some may say it was precisely because of single-power dominance that had compromised the work of the Bretton Woods institutions. It might then be observed that a new global bank dominated by China would only balance the World Bank (and the IMF), which it would complement rather than replace.

Some observers may see crippling incompatibility in the different political systems within BRICS.But such diversity need not be an obstacle, particularly when all countries now work within a global capitalist system.

President Vladimir Putin, often cited in Western circles as a modern incarnation of the Soviet bear, even insisted that a new global bank “must work on market principles only.” And “communist” China is not only a major and enthusiastic player in global markets, but – to former British foreign minister David Miliband – has even acted as a saviour of Western capitalism.

What worries fans of the IMF and World Bank is not how a new global bank as competitor will “steal their business,” but how it may force both to be more democratic and more sympathetic to the developing world. Who else but those currently dominating them in Washington and Brussels would object?

Japan as an emerging economy itself decades ago had its chance to forge a new alternative in international finance with the Asian Development Bank, but blew it.

The former coloniser in Asia seeking to make good in its post-war period, with US partnership, soon settled into establishment mode alongside its Bretton Woods equivalents. A new global bank established by BRICS will be a welcome addition to the existing financial institutions.

Its continental and political diversity would also make a slide into betraying its noble purpose more difficult.

Late last year, Brazil suggested that the proposed bank should be modelled on ASEAN’s Chiang Mai initiative.This is a time for a sharing of experiences when each can learn from the rest, not of jealous exclusion and unfounded fears of rivalry.

In time, perhaps even the World Bank and the IMF can find it in themselves to accommodate and welcome new financial institutions operating on their “turf”.At least that would help them return to their initial noble calling.

ASEAN needs to remain on course for integration by 2015

April 1, 2013

by Farish A. Noor@http://www.nst.com.my

DEALING WITH FUTURE CHALLENGES: Southeast Asia needs to remain on course for integration by 2015

IN the space of a week, several worrying developments have taken place close to our Southeast Asian region which merit our attention.

It was reported that a flare-up occurred in the South China Sea when a Chinese vessel fired flares at a Vietnamese fishing boat. China has since stated that the clash was due to the fact that the Vietnamese vessel was fishing in Chinese territorial waters — though China’s claim on vast areas of the South China Sea is precisely the issue that has to be resolved in the first place.

Then came the news that North Korea has decided to cut off its military hotline to South Korea, coming at a time when North Korea has demonstrated an increasingly bellicose stance towards the South, and its allies.

North Korea’s threats of engaging in war with its neighbour, and the even more serious threat of taking its confrontation further afield, has stirred anxiety among other countries in East Asia that wish to de-escalate the potential for conflict in the region.

While all of this is happening, we in ASEAN need to remain on the course towards ASEAN integration by 2015. For, whether we like it or not, and whether we are ready for it or not, the pace and momentum have been set by developments that have accumulated over the past decade.

ASEAN today is more integrated than ever before, with ASEAN countries spreading their investments far and wide across the region, and building floating economies where their capital has been dispersed overseas as well: a smart strategy of not putting all of one’s eggs in one basket, and to link our economies closer with the awareness that what-ever happens to one Asean country in the future will impact on the rest of ASEAN as well.

It is with these factors in mind that we need to retain faith in ASEAN and ASEAN’s capacity to absorb changes and contingency whenever they arise.

The recent security crisis as a result of the incursion by some armed Filipinos into Malaysian territory cannot, and should not, be a reason to stall the process of ASEAN integration in the near future.

I raise these concerns now as I feel that we need to do more to boost the level of inter-ASEAN contacts and co-operation in the years to come as we will be dealing with some real challenges in the decade ahead.

For a start, ASEAN needs to come together to deal with the very real shift of power that we will see soon.

China’s forays into the South China Sea have to be understood in the context of its internal regional politics, and the need to feed the country’s massive population.

The relative decentralisation that has taken place in China over the past decade means that the southern provincial governments have been left to fend for themselves when dealing with the challenge of food production and food distribution.

The growth of China’s fishing fleet and their increased visibility further south of the Chinese coast is an indication of China’s growing need to feed itself, and the changing demographics of China’s southern cities and coastal regions.

Like it or not, ASEAN has to find a way to cater to its own food security needs while not antagonising a powerful neighbour like China.This can only happen if ASEAN can work in cooperation with one another, and not when some ASEAN countries are harbouring long-held primordial historical claims on other parts of neighbouring countries.

To put it bluntly: ASEAN cannot continue to bicker about historical claims of the past when the pressing needs of the moment are more urgent.Then there will be the challenge of dealing with the waning of American power, as well as the decline of Europe as an economic partner.

Here, too, ASEAN needs to come together to adjust to the new realities on the ground and to work together rather than against each other.

The decline of American power, coupled with the rise of China’s economic power, entails a shift in the polarities of regional power as well. But for ASEAN to adjust to these changes, and to benefit from them as a region, it has to behave like a regional pact in the first place.

In the recent past, some ASEAN countries have opted to deal with either the US or China unilaterally.The Philippines, for instance, cooperated with China when it came to the survey of the South China Sea, without inviting its other ASEAN neighbours (though Vietnam was later brought into the project as well).

Ideally, ASEAN states should recognise that what is good for the region is good for them as well, and the spirit of ASEAN cooperation needs to be upheld and further strengthened all the time.

As the countdown to ASEAN integration in 2015 continues, it is hoped that the ASEAN spirit and its culture of inter-state dialogue will be further enhanced.

ASEAN has come in for a bit of criticism over the past decade, and accused of institutional inertia and group-think among elites.

But this does not mean that more meaningful people-to-people contact cannot be enhanced as well, or that ASEAN cannot think out of the box to deal with complex issues such as diaspora communities, overlapping communities and our complex past.

What is needed, however, is faith in the ASEAN dialogue process; and also the awareness that apart from the European Union, ASEAN is the only other multi-state body that has prevented wars between states since 1967.

Anyone who doubts the importance of that can simply look at the deteriorating situation between the two Koreas and learn to appreciate the value of dialogue and cooperation.

A New Concert of Nations

March 26, 2013

In 1990, a billion people earned enough income to consider making discretionary purchases. By 2010, the figure had more than doubled.

by Tom Nagorski (03-19-13)@http://online.wsj.com

The Indian scholar Brahma Challaney recently gave a talk at the Asia Society in New York about the coming global water-supply crisis. It was a dispiriting forecast: drought and pollution, even wars over water. That same morning brought dreary news from other fronts: a fresh threat from North Korea, another atrocity in Syria, a frightening smog alert from Beijing.

Anyone feeling the weight of the world’s woes will be grateful for Kishore Mahbubani’s “The Great Convergence,” a sweeping survey that proves to be, in large measure, a counterweight to global gloom and doom. Mr. Mahbubani, Dean of the Lee Kuan Yew School of Public Policy in Singapore, is under no illusions about the troubles we face, but he takes the longer view, reaching back a few decades to see an upward trend and to marvel at how far we have come.

Under Mr. Mahbubani’s lens, we see a plunge in the rates of extreme poverty and early-childhood deaths; a rise in literacy; a drop in the number of armed conflicts. “Major interstate wars,” says Mr. Mahbubani, “have become a sunset industry.” The good-news numbers are remarkable. In 1990, one billion human beings earned enough income to consider making discretionary purchases beyond mere necessity; by 2010, the figure had more than doubled. Mr. Mahbubani has lived this change. He was raised, he says, in “a typical third world city . . . [with] no flush toilets, some malnutrition, ethnic riots and, most importantly of all, no sense of hope for the future.” The city was Singapore, today an economic juggernaut with a per-capita income that outranks America’s.

Such statistics are presented as evidence of a “great convergence,” a phrase that Mr. Mahbubani first spotted in a Financial Times column by Martin Wolf, in which the columnist was describing a convergence of global interests, values and economic fortunes. Of course, nothing says “convergence” like the rush to connectivity, and while we know this story well, Mr. Mahbubani’s treatment still startles: Eleven million cellphone subscriptions, world-wide, in 1990; 5½ billion today. In 1985 the world’s fastest computer, the Cray 2, the size of a washing machine, was prohibitively expensive and required coolants to avoid overheating. Today the Cray 2′s match is the iPad 2, and it runs on 10 watts of power.

The Great Convergence

By Kishore Mahbubani
(PublicAffairs, 315 pages, $26.99)

Mr. Mahbubani is a big-picture writer and thinker, a Thomas Friedman with a strong Asian perspective, and like Mr. Friedman he is inclined toward the aphorism or analogy. When he eventually leaves his world-is-improving narrative to fret about future geopolitics, he does so with a maritime metaphor: “People no longer live in more than one hundred separate boats. Instead they all live in 193 separate cabins on the same boat. But this boat has a problem. It has 193 captains and crews, each claiming exclusive responsibility for one cabin. However, it has no captain or crew to take care of the boat as a whole.”

This passage sounds Mr. Mahbubani’s second theme: If we are gaining ground and converging in inspiring ways, we still lack an effective architecture for global governance. The need is critical, Mr. Mahbubani believes, because that metaphorical boat may soon run into an iceberg. The new arrivals in the Asian middle class, for example, will expect the trappings of success: a car, a refrigerator and so on, and our planet won’t be able to support them. For Mr. Mahbubani, the answer is some kind of global stewardship, one especially concerned with the environment, the economy and security. In short, we need a global referee.

But how to get there? Mr. Mahbubani skewers existing structures—the United Nations, the International Monetary Fund, the G-20—as either ineffectual or beholden to the great powers. The largest carbon emitters, to take a favorite example, have rejected global protocols (the U.S.) or signed them and pursued a “development first” strategy (China and India). It’s hard to argue with Mr. Mahbubani on that point but also hard to see how a new global architecture is possible when the great powers aren’t interested.

One great power, of course, is particularly uninterested, and in these pages Mr. Mahbubani casts the U.S. as an arrogant actor, a hegemon with no patience for multilateralism. Here his argument weakens from overreach. America’s frustration with the U.N. is not, as he argues, merely a matter of self-interest; it is also rooted in real concerns about mismanagement and certain U.N. policies.

As for Mr. Mahbubani’s charge that the U.N. acts only “when the residents of Park Avenue” (his phrase for the five permanent members of the Security Council) are affected, that just isn’t so. We have seen U.N. interventions in Somalia, Kosovo and Libya, none of which was exactly a “Park Avenue” interest.

But Mr. Mahbubani has a good idea for reforming the Security Council itself (a kind of staggered, tiers-of-influence plan), and he has good questions for Americans. Are we ready to accept being “No. 2″ on the global stage, at least by certain metrics? In fewer than five years China’s share of global income (only 2% two decades ago) will surpass that of the U.S., and yet the political discourse in America suggests an unwillingness to face that outcome, let alone plan for it. “The West will not lose power,” Mr. Mahbubani writes. “It will have to share power.”

In the end, he remains hopeful because he really believes it’s the long view that matters. If Southeast Asia—a war-torn, poverty-riven corner of the globe only a half-century ago—is today a region of peace and prosperity, then, Mr. Mahbubani believes, much else is possible. “In this rapidly changing world of ours,” he writes, “. . . miracles can happen.”

Mr. Nagorski is Executive Vice President of the Asia Society and the author of “Miracles on the Water: The Heroic Survivors of a World War II U-Boat Attack.”

A version of this article appeared March 20, 2013, on page A13 in the U.S. edition of The Wall Street Journal, with the headline: A New Concert Of Nations.

http://online.wsj.com/article/SB10001424127887324590904578288022370871376.html

The Oracle of Jalan Syed Putra speaks — (Part 1)

March 24, 2013

http://www.nst.com.my

WHENEVER Tun Daim Zainuddin is not orbiting the globe, he will be holed up in his work station at Wisma YPR (Yayasan Pok Rafeah, named after his late mother).

His desk is one sprawling clutter of printouts and financial analyses helpfully sent daily by an organisation headed by a friend — a former Prime Minister of a neighbouring Asian country.

The hallway is in a different galaxy. It is virtually an art gallery. He owns more than 2,000 paintings. Some paintings are now worth 10 times what he paid for. He was chairman of the National Art Gallery before he joined the cabinet. The lawyer-turned-housing developer who later became Finance Minister (twice) is not selling.

The range of passions is bewildering. He is a fan of Datuk Shah Rukh Khan. Daim is a significant shareholder of a bank with many branches in Africa. He is chairman of the AFC (Asian Football Confederation) audit committee.

At 74, he plays badminton with increasingly younger mates. And he displays a Manchester United replica jersey autographed by Sir Bobby Charlton.

“I am a busybody,” he explained as he greeted New Straits Times journalists — A. JALIL HAMID, RASHID YUSOF and HARIZ MOHD — and photographer, ZAHARI ZAKARIA, to kickstart a series of exhaustive interviews.

Daim, who had precipitated a near-crash of the stock market in 1994 with his “sell” advice and later named “chief conspirator” by Datuk Seri Anwar Ibrahim, has since sparked a media frenzy for a new reason.

It is political punditry, having correctly predicted the outcome of the March 2008 general election; so the NST prodded him for new predictions. We probed his political allegiance and provoked him even as the sessions shifted focus from one hot topic to another.

By the time we were done, newer perspectives and insights had been gleaned from the political events of the 1997 Asian Financial Crisis, the future of UMNO, Datuk Seri Najib Razak, Anwar Ibrahim, Tun Dr Mahathir Mohamad, Lee Kuan Yew, to the rise of China and the Arab Spring (which he jokingly referred to as “the Arab Fall”).

The resultant Qs and As will run in two parts. This instalment deals mostly with the immediate political questions.”If you ask me, between the two, Najib or Anwar, I would choose Najib.”

The second half of the interview, which will be published tomorrow, discusses, among others, key events in the “Mahathir Years”.

Question: Tun, since your retirement, you have given a number of interviews to the Chinese dailies, but hardly any to the mainstream media. Any particular reason for this?

Answer: I have been asked to give so many interviews, but all they wanted to know is when will the elections be held and what is my prediction of the outcome. So, before the election, which I predict will be by next month (he laughs), this will be my last interview.

I don’t want to give any more interviews because all of you only ask about the elections and it’s quite tiresome.

Also, I don’t want people to misquote me. I heard people say that I had said BN would win only three states. That is not true. You must read my answers in full. I said BN, in particular UMNO, must work hard, stay united and put up the best candidates to win.

Yes, I have given interviews to Chinese press mostly. The Chinese wanted to understand the thinking of the Malays. To address their concerns, I must know what is in their minds, their fears and their aspirations and they wanted to know if our economic policies are right. They want peace in the country and they know to have peace, you need political stability.

Have you read their articles on government policies? Someone will whisper to the government about this or that paper, or that this writer is being anti-establishment.

I say, “Stop!” I have read their articles. While they do criticise, they are not being anti-establishment. You argue with facts and statistics. The process will produce a healthy debate.

 Question: So, for you, being critical does not mean one is anti-establishment. Are you also saying that the pattern of voicing out may not necessarily cost Barisan Nasional votes?

Answer: Precisely. That is my central argument. I have always advocated a robust debate. Over the years, I personally do find certain policies objectionable, but I am still a supporter of the government as there are more good policies than bad.

For the rest of the nation, if you disagree with government policies, yes, go ahead and criticise, but constructively. I would fear more for the country if people gave up and didn’t care. I believe that it is only when you care that you want things to be for the better, that you voice out. A passive passionless society will be a disaster for the country.

Question: Still on politics associated with the Chinese community, parallels had been drawn between DAP and PAP (People’s Action Party). Is this a fair comparison?

Answer: I don’t think there is much of a relationship.I think Lee Kuan Yew does not have much respect for DAP’s leadership. The quality is not there. Earlier on, yes, when they had a branch here, when Devan Nair was here, and Zain Azahari joined the PAP. Zain is still around and practises law. I think there were many intellectuals who joined the PAP. That would be the crowd who would follow Kuan Yew.

The PAP is more intelligent and more calculating, very suave in their approach. The DAP is really a Chinese party. It’s not a multiracial party. It’s chauvinistic, but claims to be Malaysian Malaysia.

You can see in its last party election, members don’t want even a single Malay to be in the top leadership. This is very clear. That is their idea of Malaysian Malaysia. Whatever their leadership may claim, their members are their main drivers.

Pas has similar problems. When the issue of kalimah Allah cropped up, the leadership thought they could simply follow the lead taken by Anwar. But the grassroots responded by rejecting the stand of its leadership. And the Majlis Syura also said “no”.

If the Chinese don’t understand this, they will be sorely mistaken when push comes to shove.

Question: What about Parti Keadilan Rakyat (PKR)?

Answer: PKR has always been a one-man show. Its history is a party fighting for Anwar. They are former UMNO members. Later, some liberals joined them, taken in by the rallying call of justice and fairness, but it’s just pure “sloganeering”. It is actually fighting just for one man, not even for justice. Who have they fought for? What cause have they pursued? See the stand on Palestine. It is a question of justice and humanitarian cause. They support Israel.

Question: And Pakatan Rakyat?

Answer: When you are elected to Parliament, you debate in Parliament. We do it in a civilised way. We elect people and we address them as “The Honourable Member”. PKR is a party born from the streets. So, it will always return to the streets. That is their culture. So, you can see demonstrations in the streets organised, or supported by them. PAS was never like that. The DAP was never like that.

Anwar had repeatedly said there would be Arab Spring-like demonstrations should Pakatan lose in the next general election because of what they deem as “cheating”.

He has set the stage to justify their losses if they lose in the next general election.Pakatan is prepping the people so that they can scapegoat the government and the Election Commission.

First, we are not an Arab country. And second, if there is rigging in previous general elections, how did Pakatan win five states in 2008?

Arab Spring has turned out to be Arab Fall (for the lack of a unifying leadership and instability it has induced).

Question: Arab Fall?

Answer: You should read the history of Egypt under King Farouk, then only can you understand the mood and feelings at the time of the coup in 1952.

I visited Egypt at the end of my studies in the late 1950s and it saddens me how these freedom fighters had failed to run their countries successfully.

They had failed to raise the standard of living of their people and during my last visit a few years back, there’s still the same poverty.

You must read Gamal Abdul Nasser’s Revolt of the Nile. It is a small book but it has frightened the West that they compared him with Hitler. We are not from the Arab World. You must understand the background of the Middle East, why it is not happening and will not happen here in the East.

You want deaths in our streets? You want to see bloodshed? (Pan Arab nationalism dated back to July 1952 when Gamal, a colonel in the Egyptian army, led his secret group “Free Officers” to overthrow King Farouk 1, who was the king of Egypt and Sudan.

(His successful revolt was made an example by several other military officers in the Arab world to dethrone their monarchs, including Iraqi General Abd al-Karim Qasim in 1958 (the coup against the Hashemite monarchy) and Libyan Muammar Gaddafi, who led a group of young military officers, to overthrow King Idris 1 in 1969.)

Question: What of Malaysian politics and the changing geopolitical landscape and events elsewhere?

Answer: China and Japan had demonstrated their qualities as genuine friends of this country at the height of the Asian Financial Crisis.

China decided not to devalue its currency, while Japan handed Malaysia a US$5 billion (RM15.6 billion) soft loan. Its then vice-finance minister Eisuke Sakakibara told me not to tell the Americans of the gesture.

The United States did not want to help us, for reasons too numerous to enumerate here.Anwar has this tendency of toeing the American line.

If anything happens to Malaysia’s economy, the US and European countries, whose economies are falling apart, would not bother to help.

If we keep toeing the American line, what would our friends think? They were the ones who helped us, while the US tried to sink us.

China is now the second largest economy and it is growing.President Barack Obama has quickly visited Myanmar and tilted his foreign policy towards the Pacific, which is about balancing the influence of China.

There is already an economic crisis now in Europe, the US and Japan.China, India, Brazil and Russia all are slowing down; we must not have the wrong team to manage the economy.

The danger here is somebody with no experience, who has shown no capability of handling the last crisis.  There is going to be a big danger that we may go down. And nobody is going to help us. Because the US, their good friend, and  Europe will not be helping us. They   are in trouble themselves.

 It is dangerous if Pakatan under Anwar is to lead the country. I am worried as he does not have the depth in economy, always needed people to tell him –  what to think and what to do.

  So far, there has not been even one significant idea from Anwar as the economic adviser to the Selangor government. Worse, Selangor has badly handled its water issue, which had dismayed developers, investors  and the people.    Of course, they will blame everything on the Federal Government despite the fact the Langat 2 water  project was planned  before they came to power in the state.

Why doesn’t he become economic adviser to Kelantan and Kedah if Pakatan believes he is good?Think seriously.  Think of our future.

Question: Anwar believes that he is destined to become the next Prime Minister.

Answer: Well, destiny is an act of God.  You can be only one heartbeat away from that post but man proposes, God disposes. I think God still loves Malaysia (smiles).

Question:  What are BN’s chances in the general election? Will it be able to secure a two-thirds majority?

Answer: There you go again, the election questions.   Well, I would say Barisan will win. It is good that the government (BN) thinks it can get a two-thirds majority. That should  be their target.

UMNO has about 3.3 million members, MCA about one million and MIC, about 600,000. That’s already about half of the voters. Now, you only need some support from the fence-sitters, you should then  be able to win.  But BN must put new and clean candidates who are  acceptable to voters.

But before BN can win, there must be unity within the coalition. If they are not united, Pakatan will do better. That’s what happened in 2008. Stay united, be loyal and don’t sabotage.  We need a steady and experienced hand. Only BN has the experience.

We have gone through crisis after crisis, and recovered  very quickly.   We have to tell the Chinese that we cannot experiment.   Look at Japan.   Look around us.   Look at Britain.   Study what is happening.

Question:Personally, do you want to see Najib win this election?

Answer: If you ask me, between the two, Najib or Anwar, I would choose Najib. I will give Najib the chance. Give him the mandate and see whether he delivers because Anwar has had his chances, but he blew them.

I want Najib to win because I don’t think Anwar is the right candidate to be Prime Minister. I believe he will mess up the country by getting advice from the likes of the  IMF (International Monetary Fund), World Bank and Wolfowitz (Paul Wolfowitz, former World Bank president).

I will support Najib, but he must fight corruption and crime, strengthen the nation’s security and review the education system. Make English compulsory in all national schools.

Without English, we are  dead, especially the Malays. The Malays must realise, without English they cannot compete. We must insist on English as a second language.

 It was not a mistake to change the medium of instruction from English to Bahasa Malaysia.   It is the language of the nation and of unity.   If we don’t speak the same language, how do we understand one another?

The mistake was in the policies which were to promote Bahasa Malaysia, it had to be at the expense of English.  We should not have to kill English to make Bahasa Malaysia the lingua franca of the country.

 If possible, we should  learn Arabic, because the rich Arab countries will be where the money comes from.

  On the nation’s security, every day in the media and on television, there are news reports of  murder and  crime. You say our country is safe, but if people don’t feel safe, they will not believe you   regardless of the statistics.

 On corruption, tell the rakyat  that the government is serious in wanting to get rid of it. But it cannot do it alone, it needs the rakyat’s help. Raise the awareness of rakyat on the evils of corruption and get schools involved in it. Educate the students. If the government and rakyat work together, we can succeed. It is a two-way thing. The government  alone cannot fight corruption. People must be clean and honest. Don’t just blame the government. Tepuk sebelah tangan tak berbunyi.   If people are honest and clean, the government, too, can be clean.  The government must come down strongly on  those who are corrupt.

Question:  The pledges and promises Najib  made, are they good for the country?

Answer: Give Najib a chance. Five years. Test him. Give him the mandate. He is doing a fairly  good job. Let’s see him deliver and continue with his transformation policies.

Najib should reshuffle the cabinet. Bring in new faces. People think he is carrying too much deadwood in the cabinet. Most are already  past their use-by date.

CIMB Chief endorses Najib Tun Razak as Prime Minister

March 21, 2013

by Chong Pooi Koon@http://www.bloomberg.com

Nazir Razak, Head of Malaysia’s second-largest bank, is speaking out for his brother to be returned as Prime Minister amid concern the ruling alliance could lose more seats in polls that must be held within weeks.

“The present Prime Minister has a very clear path forwards in terms of the transformation of the economy,” Nazir, the chief executive officer of CIMBGroup Holdings Bhd., said in a Bloomberg Television interview with Susan Li in Hong Kong. “If there’s a change there, it would disappoint investors and they would have to relook at their view of Malaysia.”

Elder brother, Najib Razak, is facing the most competitive general election in Malaysia’s history after the National Front coalition won the last poll in 2008 by its narrowest margin in more than five decades. The Opposition, campaigning on an anti- corruption platform, is heading for victory, its leader Anwar Ibrahim, said this month.

The benchmark FTSE Bursa Malaysia KLCI Index has fallen 3.7 percent after closing at a record on January 7, the worst performing major gauge in Southeast Asia this year, according to data compiled by Bloomberg. The ringgit has slumped 2 percent this year.

CIMB has been Malaysia’s biggest debt arranger and most prolific underwriter of initial public offerings for the past four years since Nazir’s brother became Prime Minister, according to data compiled by Bloomberg. The stock more than doubled in value between Najib’s inauguration in April 2009 and the end of 2012. It has since slumped six percent as polls approach, the worst performing lender on the KLCI, Bloomberg data show.

‘Election proxy’

“CIMB is seen as a direct election proxy because of the relationship of the CEO to the Prime Minister,” Alan Richardson, a Hong Kong-based fund manager who helps oversee about $110 billion for Samsung Asset Management Company, said by phone. “If the election result is seen as comfortable for Najib and Barisan Nasional, that stock will go up.”

The Kuala Lumpur-based lender helped to arrange the country’s three biggest share-sales last year. Palm oil producer Felda Global Ventures Holdings Bhd. raised $3.3 billion, IHH Healthcare Bhd. sold $2.1 billion of stock and Astro Malaysia Holdings Bhd. issued $1.5 billion of shares.

Malaysia’s IPO market grew to become the world’s fifth largest last year, up from 14th in 2011, according to data compiled by Bloomberg. It overtook more established financial hubs, raising $6.8 billion, the data show.

Najib, 59, has streamlined bureaucracy and opened up more industries to foreign investors. Private sector spending has tripled since 2009, with government revenue at a record last year and the budget deficit shrinking, according to a government report released this week.

Corruption, monopolies

Najib’s National Front coalition is seeking re-election after holding power for more than five decades in the face of a resurgent opposition led by Anwar. The prime minister took over mid-term after Abdullah Ahmad Badawi stood aside to take responsibility for the 2008 election result. The Premier must dissolve parliament by April 28 for vote to be held within 60 days.

Anwar’s People’s Alliance (Pakatan Rakyat) has promised to clamp down on corruption, abolish monopolies and bring down living costs if it comes to power, according to its manifesto.

“If there’s a change in government, it’s actually an opportunity for investors to gain more in the long term,” Ong Kian Ming, a political analyst at Kuala Lumpur’s UCSI University and an opposition election strategist, said by phone. “In the short term, yes, there would be some jitters. Significant structural reform would lead to better economic policies that would make the country more competitive in the long run.”

ASEAN expansion

CIMB has also grown abroad through acquisitions, most recently buying some of Royal Bank of Scotland Group Plc’s Asia- Pacific investment banking interests and a controlling stake in Bank of Commerce in the Philippines.

Southeast Asia will see more investment banking deals this year, albeit smaller in size compared to 2012, Nazir said.

“Thailand will be very active this year and Indonesia too will be interesting,” the 46-year-old said in yesterday’s interview. “The action in ASEAN will be more broad-based. Last year was more like Malaysia leading the show.”

The nation’s $288 billion economy grew at the fastest pace in 2 1/2 years last quarter as Najib boosted spending ahead of the election. GDP rose 6.4 percent in the three months through December from a year earlier, after a revised 5.3 percent gain in the previous quarter.

Transformation plan

Najib’s government has identified $444 billion of private- sector-led projects, including a mass-transit railway and oil storage, to steer growth in the current decade under an economic plan unveiled after he came into power in 2009. He also aims to cut Malaysia’s budget deficit to 3 percent of gross domestic product by 2015 from 4.5 percent last year, according to the government report this week.

“I totally understand why the market can be a little bit edgy,” Nazir said. “Relevant to many markets, the role of government in the Malaysian economy is important.” The election outcome is “important to the future direction of the country economically.”

-BLOOMBERG

Najib sees early achievement of Vision 2020 Goals

March 20, 2013

by Barry Porter@http://www.bloomberg.com

Prime Minister Najib Razak said the nation may reach high-income status two years ahead of target, as he seeks to convince voters of his economic achievements before elections due within weeks.

Gross national income could rise to RM1,931 per capita (US$15,000) in 2018, earlier than a target of 2020, Najib said in a televised speech late yesterday. The measure has increased 49 percent since 2009, to RM12,838 (US$9,970) last year, the government estimates. Najib also pledged to give annual cash handouts to low-wage earners.

“The time has come for Malaysians to make a decision and I hope you make the right choice,” said Najib, 59, without indicating when the election will be held. He must dissolve Parliament by April 28 and hold a vote by the end of June.

Najib, who inherited a country in recession when he replaced Abdullah Ahmad Badawi as leader in 2009, is focusing voters on his efforts to boost investment and improve incomes as he seeks a popular mandate for the first time. The ruling National Front coalition won the last election in 2008 by its narrowest margin in more than five decades, prompting Abdullah to hand over the leadership mid-term.

A nation is considered high income when GNI per capita meets or exceeds RM16,066 (US$12,476), according to the World Bank. In 1991, former premier Mahathir Mahathir laid out a 30-year plan known as Vision 2020 aimed at earning Malaysia high-income status by the end of the current decade.

Investment rises

Malaysia’s total investment grew 19.9 percent in 2012 compared with 6.5 percent in 2011, accounting for 26.7 percent of gross domestic product, according to a report on the nation’s so-called Economic Transformation Program released by the Prime Minister yesterday. Private investment climbed 22 percent to 139.5 billion ringgit (US$45 billion) in 2012, driven by spending on manufacturing, services and mining, according to the report.

“Najib’s comparative advantage is to try to portray himself as an economist and an economic success, which may hit home in middle-class areas,” Bridget Welsh, Associate Professor of political science at Singapore Management University, said by phone. “He’s mostly concerned about a public relations image. The Opposition tends to focus on ordinary people and micro issues, like wages and the cost of living.”

Infineon Technologies AG, Europe’s second-largest maker of semiconductors, said in May it will spend 4 billion ringgit over 10 years to expand its wafer-fabrication facilities in Malaysia’s north. Germany’s Evonik Industries AG plans to start a specialty chemicals manufacturing venture with Petroliam Nasional Bhd. within a US$20 billion refining and petrochemicals complex in southern Johor state.

‘Track record’

Najib can use the economic program to argue that “the current administration has got a track record in organizing big public projects and getting the private sector involved,” said Gerald Ambrose, who oversees the equivalent of RM5.31 billion (US$1.7 billion) as managing director of Aberdeen Asset Management Sdn in Kuala Lumpur.

Since taking charge, Najib has streamlined bureaucracy and opened up more industries to foreign investors. His government identified RM1,389 billion (US$444 billion) of private-sector-led projects to help champion in the current decade, ranging from oil storage to a mass railway, under the economic plan.

Malaysia’s economy grew at the fastest pace in 2 1/2 years last quarter as Najib boosted spending ahead of the election that will test his grip on power. GDP rose 6.4 percent in the three months through December from a year earlier, after a revised 5.3 percent gain in the previous quarter.
Poverty, education

“We must not rest on our laurels,” Najib said in the report. “Malaysia must continue to address issues such as poverty, labour productivity, environment sustainability and education, while factors in the external economy are likely to remain demanding in the foreseeable future.”

The architecture, engineering and quantity-surveying services sub-sectors are expected to be ready for liberalisation exercise this year, Bernama reported, citing Pemandu’s report.

Southeast Asian nations from Indonesia to the Philippines have shown resilience to the faltering global economy as local demand rises. Najib has increased government expenditure, extending cash handouts to low-income families and raising civil servants’ salaries in the lead-up to voting.

Government revenue was the highest on record last year at an estimated 207 billion ringgit, enabling the government to afford socio-economic programs and give money to the poor, according to the report by the government’s Performance Management and Delivery Unit, or Pemandu.

The budget deficit narrowed from 6.6 percent of GDP in 2009 to 4.5 percent last year and is expected to shrink to 4 percent this year as the government seeks to balance the budget by 2020, according to the report.

Resurgent Opposition

Najib’s National Front coalition is facing a resurgent Opposition led by Anwar Ibrahim, which currently holds 75 seats in Malaysia’s 222-member parliament. The prospect of an even closer election result has helped make the FTSE Bursa Malaysia KLCI Index the worst performing Asian benchmark this year, Citigroup Inc. said in a report this month.

The benchmark stock index has dropped 4.1 percent since closing at a record on Jan 7. It ended 0.3 percent higher yesterday before the report. The ringgit climbed 0.2 percent to 3.1255 per dollar. Its 2.2 percent drop this year makes it Asia’s fifth-worst performing currency among 11 tracked by Bloomberg.

Najib is more popular than his government, according to the Merdeka Center for Opinion Research. His approval rating slipped to 61 percent last month from 63 percent in December, according to a survey of 1,021 voters conducted January 23 to February 6 on the country’s peninsula. By contrast, 48 percent of respondents said they were “happy” with the government, according to the poll published February 26.

-BLOOMBERG

http://www.kinibiz.com/story/corporate/9933/gtp-etp-2.0-target-can-be-achieved-by-2020.html

Bogor to Bali: Building an Asia-Pacific Community

March 20, 2013

Insight: Bogor to Bali: Building an Asia-Pacific Community

by Jusuf Wanandi & Tan Khee Giap | Insight |The Jakarta Post (02-22-13)

Almost 20 years ago, leaders of the Asia-Pacific region met in Bogor to “chart the future course of our economic cooperation, which will enhance the prospects of an accelerated, balanced and equitable economic growth not only in the Asia-Pacific region, but throughout the world”. In just a few months, Asia-Pacific Economic Cooperation (APEC) leaders will again meet in Indonesia, Southeast Asia’s largest economy. How far has the region come in achieving those goals and what more needs to be done?

The headline achievements are impressive. To note just one, incomes in the region have more than doubled since 1994 from an average of US$10,000 to more than $23,000.

The journey to where we are today has not been easy. The region has been buffeted by economic crises, first in 1997-1998 and then in 2008-2009. This crisis is not yet over, a number of APEC members recently enacted stimulus measures to kick start growth, such as QE3 in the US and Japan’s new attempt to reflate its economy. There is a possibility of a new stimulus in China in response to a deteriorating external environment.

These measures, while focused on domestic growth, have some unintended consequences. We are seeing rising capital flows into Asia that pose challenges, including the need to minimize the risks of asset bubbles and excessive credit expansion. There is already talk of “currency wars” and competitive devaluations. While the rhetoric makes for exciting reading, the world is far too complex for simplistic reasoning.

At the outset of the crisis, many had feared a descent into beggar-thy-neighbor polices, but thus far, through the actions of the G20 and APEC, we have avoided this. At this critical juncture, when nationalist sentiments are rising, we need more cooperation and understanding. APEC is the embodiment of bridging differences and must continue to play its role in bringing a diverse community together.

While APEC has done well in terms of freeing up trade and investment, the world that it occupies has changed. In 1994, bilateral trade deals were the exception, today they are the rule.

Even this is changing. The ASEAN Regional Comprehensive Economic Partnership Framework will consolidate the ASEAN+1 agreements into a single area and the Trans-Pacific Partnership agreement hopes to build on the Pacific 4 agreement. Outside our region, the US and the EU are talking about a trans-Atlantic trade agreement, which would create the single biggest market in the world.

These massive trade groups, while potentially building blocs to multilateralism, can make outsiders feel excluded. This is a dangerous path to go down and this region, through APEC, with its spirit of inclusiveness and openness, should ensure that no economy is left out.

However, strong headline growth has masked a dirty secret — income disparities have been growing both among and within regional economies. APEC leaders have long talked of the need for growth to be equitable — both in Bogor and in recent years such as in 2009 in Singapore — with a call to “foster inclusive growth” and in Yokohama where it was a key dimension of the APEC Growth Strategy.

The Millennium Development Goals (MDGs) set the objective of universal primary education by 2015. In this region, we should move ahead and aim to provide all our citizens with the skills to participate in this competitive global economy. While some economies have done particularly well in increasing tertiary education participation, for example in South Korea where the ratio has increased from 35 percent to almost universal enrollment since 1994, others lag behind.

However, enrollment rates are not a panacea. One need only look at high unemployment rates among recent graduates in parts of Europe to see this. Emphasis must be on flexibility and resilience. There is a need for educational institutions and businesses to work together to help to develop skills of our peoples to fulfill their potential. This requires a change in culture in both business and education providers.

Even if our people possess the skills to compete, they cannot do so if they are not connected to the market. We need our people and our businesses — large and small — to be able to connect to where opportunities exist. The Asian Development Bank (ADB) estimates that East Asia alone needs to invest some $8 trillion in infrastructure.

Much of this would be in transportation but a critical part of the creative economy is access to information. Access to the Internet varies tremendously in the region, from 2 to 84 in every 100 in Papua New Guinea and South Korea, respectively.

Another aspect of the integration process is how do our businesses reap the opportunities that lie ahead? It has been conventional wisdom that multinational corporations account for 70 percent of global trade, while at the same time small and medium enterprises (SMEs) account for 90 percent of all businesses.

The idea that products are made in one particular country has given way to the idea of being “made in the world”. The emergence of global value chains opens up opportunities for SMEs to participate, but SMEs face a distinct set of problems going global as trade rules and compliance costs disproportionately impact smaller businesses, and their access to finance and information about overseas markets is limited.

A focus on these three areas: education, infrastructure and barriers to SME participation, could help make a major difference to addressing APEC’s goals of equitable and inclusive growth in the years ahead. Calls for addressing inequality should not be misconstrued as calls for the redistribution of wealth — that has already been tried and failed. Making growth equitable and inclusive are essential to the region’s goal of community building — that is one in which we share a sense of common destiny and purpose.

These issues will be addressed during a conference organized by the Pacific Economic Cooperation Council (PECC), the Singapore National Committee for Pacific Economic Cooperation (SINCPEC) and the Indonesian National Committee for Pacific Economic Cooperation (INCPEC) on February. 22-23.

Jusuf Wanandi is the co-chair of the Pacific Economic Cooperation Council and vice-chair of the Board of Trustees of the Centre for Strategic and International Studies (CSIS) in Jakarta.

Tan Khee Giap is the chair of the SINCPEC and co-director of the Asian Competitiveness Institute (Singapore) at the Lee Kuan Yew School of Public Policy, NUS.

http://www.thejakartapost.com/news/2013/02/22/insight-bogor-bali-building-asia-pacific-community.html