Haris Onn Hussein: The Chosen One?


October 15, 2o14

Haris Onn Hussein: The Chosen One?

by Din Merican

Lembah Sari Sdn. Bhd with commercial links to Dato’ Haris Onn Hussein, the son of Haris Onn Husseinformer Prime Minister of Malaysia, Tun Hussein Onn, brother of Minister of Defence Hishammuddin Hussein and cousin to Prime Minister Najib Tun Razak was recently awarded a contract for the printing of security-labels for liquor and beer from the Royal Malaysian Customs Department. The contract is worth some RM77 million.

The Edge Malaysia on September 12 reported that the contract was to design, print, store, supply and distribute banderols (tax stamps) for liquor (including beer) between 2014 and 2019. The company would also supply the department with authentication devices and necessary training. The letter of acceptance from the Customs Department was received by Lembah Sari on July 21, 2014.

With this latest award, Dato Haris who owns Duke Highway now effectively monopolises the security labels for all locally produced and imported cigarettes, as well as beer and liquor, in the country. He is very rich for life.

My initial reaction to this news was one of disbelief but upon some reflection I realise  that  the political elite in our country has been doing this sort of deals for a long time hidden from public scrutiny. You do not need special skills or knowledge to get lucrative business deals. All you have to do is to take full advantage of your connections and you are super wealthy almost overnight.

In Cambridge educated Dato Haris’ case, the fact that his grandfather was Dato Onn Jaafar, his father, Tun Hussein was Prime Minister, and so was his uncle, Tun Razak coupled with the fact that his first cousin is Prime Minister and elder brother is  Minister of Defence puts him in  a very privileged position to receive business offers, directorships  and cushy contracts.

So we can say that without powerful connections, he would not have made it in the commercial world. He is not alone, of course. Tun Mahathir’s sons,  Mirzan, Mokhzani and Mukhriz are privileged ones so are the children of UMNO elites and Cabinet Ministers.

Today, we are a divided nation in terms of rank and status, race and religion and income. Woe betide those of us who are egalitarians. The powerful and privileged will lord over us ordinary Malaysians who are condemned to lead a life of constant struggle for equity and justice.

People like Haris Onn and his kind lead a life of luxury and comfort. They are the chosen ones to whom life comes easy.  Even President John F. Kennedy  said that “[T]here is always inequity in life.  Life is unfair.” That is no comfort. But isn’t the role of government to strife for equity and equality of opportunity.

Malaysian Prime Minister’s 2015 Budget Speech


October 15, 2014

Malaysian Prime Minister’s 2015 Budget Speech

Below are my comments:

Najib at the Press ClubThe Budget Speech was a pathetic demonstration of our Prime Minster’s inability to come clean or present the big picture. The point is not about what he said but what was not said. Most of the 30 pages of the speech were devoted to the spending side which essentially was all about handouts and a laundry list of projects that will benefit  UMNO warlords and their cronies.

Very briefly:

GST & Income Taxes: The GST will yield RM 23.2 billion but with the repeal of Sales Tax (RM13.8billion), net increase will be RM 9.4 billion. This means a net burden on middle and low income households whose incomes are stagnating . This burden is on top of the hit from the withdrawal of subsidies on fuels. True enough the PM hands back in some by way of an increase in BR1M and a few other handouts. Nevertheless, the net outcome is that middle and low income households will bear the brunt. He next lowers corporate and personal income tax – the beneficiaries are the rich, the well-connected and the tycoons and their corporations.The budget ignores all sense of equity and fairness. The effect is that the wide income disparities that exist will be further widened.

Macro-Economic Picture: Najib’s speech hardly provides any details about the basic fundamentals that were used. He essentially painted the usual rosy picture – 5 to 6% growth in GDP. This is higher than what the IMF has projected ( 5.2%).  Najib does not say a word about inflation. Note IMF is projecting inflation at  4.1 % in 2015 a jump from 2.9% in 2014. The tables in the Treasury Economic Report show some detail — key is that Private Consumption and Investment growth will be slower in 2015. Overall growth will thus depend on the public sector.

The critical issue of public debt is dismissed in a sentence or two. He is telling us like the snake oil salesman “ Trust me, the deficit will be 3.0 % next year!” No details are given on how we  can get there! Nor are we told what the hidden contingent liabilities are or how much off budget borrowing there has been or will be in the year ahead. There is not  even a whisper about the ballooning size of private household debt last reported to be in excess of 85% of GDP.

 Najib also hardly makes mention of the huge illicit capital flight that continues or the brain drain that directly impact adversely on his vision of a knowledge based, innovative, high tech economy. He repeats the mantra of joining the ranks of the developed high income countries by 2020. That is a pipe dream given the lower rates of growth experienced in the recent past and now projected.

Here is a bombshell about which we hear not a pip from Najib or for that matter in the media. The bombshell is reported in the Treasury Economy Report. The Economic Report discloses that Malaysia’s external debt totals RM 729 billion, equivalent to 67.6 percent of GDP. This compares with a debt level of RM 335.6 billion or 31.1 percent of GDP before the revision. This more than doubling of the external debt cannot be swept under the carpet.  It should be sounding alarm bells.

The Report goes into a long discourse about revised international standards for debt reporting being the reason for a sudden rise in the level of foreign debt. Under the new definition non-resident holdings of local currency debt, loans and credits and non-resident financial flows are treated as external liabilities.

The Treasury Report offers a weak justification for the high level of external debt asserting that the rapid growth of the bond market has led to sizable increases in the participation by non-residents in lending in the Malaysian market.

However, the Report fails to point out that a sizable part of the debt is short-term (with a ratio of 47.6 percent to GDP). Such short term debt is by nature volatile and subject to flight in periods of uncertainty.  It would appear that we did learn lessons from the 1998 East Asia Crisis which was triggered by the withdrawal of short term funds. It is highly irresponsible to ignore the dangers and not have clear policies to address a potential devastating crisis.

 By the way, speaking of the Treasury Economic Report, here is an indication of sheer incompetence: Take a look at Table 1.3 – Key Economic Data of Selected Developing Countries. Yes, the Whiz kids in the Treasury have taken upon themselves the task of reclassifying Australians and the Russians as part of the Developing World.  It is also noteworthy that Asia’s third largest economy (India) does not merit mention.

Bottom line: Judging by the way the Government is managing the economy, by 2020 we shall as a country, already trapped in the middle income group,  move into the sub-category of Highly  Indebted Countries.

How I wish I could be more generous. For a more sympathetic commentary please read Tan Sri Dr. Ramon Navaratnam’s article [ http://www.freemalaysiatoday.com/category/highlight/2014/10/14/many-thanks-for-the-goodies-mr-pm/%5D

–Din Merican

 

Anwar Ibrahim’s Response to Najib’s 2015 Budget Proposals


October 13, 2014

Anwar Ibrahim’s Response to Najib’s 2015 Budget Proposals

Anwar Ibrahim Ops Leader

When I said I had great difficulty in understanding our Finance Minister’s 2015 Budget Speech which he delivered to our august Parliament last Friday, I could not have been more serious. PM Najib’s slogans and acronyms left me puzzled, in particular his National Blue Ocean Strategy (NBOS).

This concept was borrowed from Blue Ocean Strategy, a book published in 2005 and written by W. Chan Kim and Renée Mauborgne, Professors at INSEAD and Co-Directors of the INSEAD Blue Ocean Strategy Institute. Based on a study of 150 strategic moves spanning more than a hundred years and thirty industries, Kim & Mauborgne argue that companies can succeed not by battling competitors, but rather by creating ″blue oceans″ of uncontested market space. They assert that these strategic moves create a leap in value for the company, its buyers, and its employees, while unlocking new demand and making the competition irrelevant. The book presents analytical frameworks and tools to foster organization’s ability to systematically create and capture blue oceans. (Source: http://en.wikipedia.org/wiki/Blue_Ocean_Strategy)

That was why I sought the help of my friends, associates and readers of this blog to explain Najib’s 2015 Budget proposals in simple layman’s terms. But judging from the number of responses I received by way of comment, the 2015 Budget was not taken seriously.

Here is a speech (below) in Parliament by Dato’ Seri Anwar Ibrahim, Opposition Leader and former Minister of Finance. His response to Najib’s 2015 Budget  proposals makes a lot of sense to me. Despite my occasional disagreements with the politics and antics of the Opposition leader, I acknowledge that in debating the 2015 Budget, the Opposition leader presented an excellent critique in Parliament. Please judge it for yourself and then make your comments.–Din Merican

Let us listen to Jack Jones


October 12, 2014

Let us listen to Jack Jones before this Sunday Fades into Eternity

What a week it was, which ended with Najib’s NBOS Blue Ocean Strategy Budget Speech.  Read http://www.blueoceanstrategy.com/malaysia-nbos/book/

BUT I do not know what he meant when he made this statement ( quoted below). Can someone out there help me since I cannot understand his high flown English:

“From an economic perspective, when we achieved independence 57 years ago, we developed the country based on agriculture before progressing to a modern industrialized economy. Next, we moved into the upper-middle income phase. We are now moving towards a services-based economy.

In brief, the objectives, principles and thrusts of the three Outline Perspective Plans, ten Malaysia Plans, New Economic Policy, National Development Policy, National Vision Policy and since 2010, the National Transformation Policy, have all focused on poverty eradication, increasing income and restructuring of society.

This is with the aim to achieve socioeconomic goals; diversify the commodity-based economy; human capital development; enhancing competitiveness of the public and private sectors; higher value chain; inclusive development; as well as transformation of the Government, economy, social and politics.

Clearly, our former leaders in their wisdom have carried out responsibilities to develop Malaysia in their own mold. The struggle started with Tunku Abdul Rahman, followed by Tun Abdul Razak who had implemented development and restructured society, to Tun Hussein who maintained peace and unity.

MNBOS

Tun Mahathir modernised the country while Tun Abdullah emphasised human capital development. Further,the present Government is committed to driving growth with a broader approach to place Malaysia on a strong foundation.”

I rather relax with Jack Jones and leave the interpretation of the above statement which I took from his 2015 Budget Speech in Parliament last Friday in your good hands. Here Jack Jones for your listening pleasure.–Din Merican

 

 READ:

http://w1.nst.com.my/polopoly_fs/1.655080.1413190203!/menu/standard/file/Economic-Report-2014-2015.pdf

 

 

Lame excuses for opting out of varsity rankings


October , 2014

Lame excuses for opting out of varsity rankings

by Dr. Kua Kia Soong@www.freemalaysiatoday.com

TimesHigherEducation300The reasons cited by Malaysian universities for not participating in the Times Higher Education Supplement’s Top 400 World University Rankings (THES) are suspect and unbecoming of a country that has launched its visionary Education Blueprint. In the words of the Prime Minister:

“Education is a major contributor to the development of our social and economic capital. It inspires creativity and fosters innovation; provides our youth with the necessary skills to be able to compete in the modern labour market; and is a key driver of growth in the economy. And as this Government puts in place measures under the New Economic Model, Economic Transformation Plan and Government Transformation Plan to place Malaysia firmly on the path to development, we must ensure that our education system continues to progress in tandem. By doing so, our country will continue to keep pace in an increasingly competitive global economy.”

In the THES World University Rankings 2012-2013, not a single Malaysian university was included in its Top 400 list for the second consecutive year.

For local universities to cite a lack of funds as the cause for this demise is rather lame when education expenditure in recent decades has been prodigious. The Malaysian Government has sustained high levels of investment in education over the 55 years since Independence, and according to the Education Blueprint:

“As early as 1980, the Malaysian federal government’s spending on primary and secondary education, as a percentage of Gross Domestic Product (GDP), was the highest in East Asia. In 2011, the amount spent, at 3.8% of GDP or 16% of total government spending, was not only higher than the OECD average of 3.4% of GDP and 8.7% of total public spending respectively, but also at par with or more than top-performing systems like Singapore, Japan, and South Korea (Exhibit 1). In 2012, with an education budget of RM37 billion, the Government has continued to devote the largest proportion of its budget, 16% to the Ministry. This demonstrates the very real commitment the Government has to education as a national priority.”

National Education BlueprintIn last year’s budget speech, the Prime Minister said the government would ensure that the implementation of the National Education Blueprint achieves the objective of placing Malaysia in the top one-third category of the world’s best education within a span of 15 years.

As a result, the education sector received the biggest allocation out of all the other sectors with RM54.6 billion or 21 per cent provided in Budget 2014 in an effort to enhance educational excellence.

The Prime Minister said the government would focus on strengthening public and private higher learning institutions towards producing quality graduates who met the demands of the job market.

He said RM600 million would be provided in research grants to public institutions of higher learning in the quest to improve the status of research universities by increasing research and the number of articles for publications in international journals.

Malaysia’s McKinsey-commissioned Education Blueprint liberally cites international student assessments, such as the Programme for International Student Assessment (PISA) and the Trends in International Mathematics and Science Study (TIMSS), as a means of directly comparing the quality of educational outcomes across different systems.

Likewise, at the tertiary level of education, the THES is a gauge of academic excellence that compares the performance of universities across the globe in research, teaching and quality of education in their campuses.

For UM to claim that it is “not yet in a strong enough financial position to compete with richer, older and better-ranked universities” is disingenuous when we bear in mind that UM and NUS both come from the same pedigree. (NUS is among the world’s top 20.) They started as one university in 1949.

Politicians and academicians alike would do well to read Hena Mukherjee & Poh Kam Wong’s excellent paper on “NUS/UM: Common Roots, Different Paths” (2014 Centre for Human Resources Development, Vietnam) to draw lessons from the experiences of the two universities: their missions post-independence; the thrust of the secondary school system in preparing students for tertiary education; their strategies for institutional management, nurturing of undergraduate and postgraduate students, and academic staffing; policies regarding internationalisation of students and faculty; and their inter-connections with global advances.

The history of UM demonstrates that politics and national-level policies can severely constrain the institutional development of a public university. This can have significant long-term consequences in terms of limiting its capacity and culture to pursue academic excellence and ability to compete internationally.

The victimising of academics and students for merely commenting on national issues such as the controversial Sedition Act shows that the authorities also need to win the hearts and minds of the major stakeholders, viz. lecturers and students in order to inculcate a new vibrant culture on campus.

Student leaders would be unwise to support the move to opt out of the THES ranking since there is no valid reason for any university in the world to pursue excellence at the expense of quality of education and a culture of academic and student autonomy. Participation in varsity rankings is intended to drive academic institutions towards improved quality rather than, as has been suggested, as a mechanism that degrades the quality of education and campus culture for students.

Malaysian universities would do well to sustain efforts that use world rankings as a benchmark and source of motivation for progress. The government should stop using “transformation” merely as a buzz word but inspire our local universities to match a new vision and new targets. Doesn’t transformation suggest an ante- and post-facto comparison?

As with the other national targets, it is ultimately one that requires the political will to stay the course over the long term. And to stay the course, our universities need an objective gauge to compare academic excellence and the quality of educational outcomes across different systems. Thus, dropping out of the THES varsity ranking is simply not an option.

Kua Kia Soong is an adviser to SUARAM

1MDB: A Financial Time Bomb (?)


October 7, 2014

1MDB: A Financial Time Bomb (?)

by Tony Pua@www.malaysiakini.com

Prime Minister Najib Abdul Razak will on Friday announce the Federal Government’s 2015 Budget. However, any announcement by the Prime Minister without addressing the extravagance of 1Malaysia Development Bhd (1MDB) and its debt of RM36 billion will be missing the massive elephant in the room.

Najib as Finance MinisterShould the 100 percent Finance Ministry-owned 1MDB collapse with the burden of its debt, and with the financial community getting increasingly worried and restless with this possibility, Najib will go down in history as the Prime Minister who will possibly bankrupt the Malaysian government.

Due to explicit and implicit guarantees by the Federal Government, 1MDB has accumulated a debt exceeding RM36 billion within a short span of only five years, some of which are already due and require immediate repayment.

In fact, according to Kinibiz.com, 1MDB plans to raise another RM8.4 billion in sukuk to finance its activities this year. At the same time, it is also busy rescheduling its short-term debts to avoid immediate default throughout the past year.

According to the Singapore’s Business Times, the above rescheduling of debt has come at an expensive price of 2.5 percent interest above the annualised cost of funds, on top of RM20-30 million in upfront fees.

central-bank-of-malaysiaThe report said the real threat of default had “ruffled the feathers of Malaysia’s top banking circles as well as the country’s banking regulator, Bank Negara”.

The financial distress in 1MDB is so serious that the government has been forced to renege on its promises to the market of fair and open tenders for Independent Power Producer (IPP) contracts to ensure the lowest cost of electricity supply to Tenaga Nasional Bhd.

The government has  awarded an IPP contract to 1MDB despite the latter not having bid the lowest price. Subsequently, the government decided to eschew the open tender process altogether to award 1MDB a 50MW solar power plant in March and another 2,400MW gas-fired power plant in August this year. The shocking concern is that the 2,400MW power plant isn’t required till 2021 but it has been awarded via direct negotiations now.

The above actions are clearly expensive bailout exercises of the Federal Government to enable 1MDB to secure sufficient revenue to list its power plant projects. 1MDB desperately needs to do so in order to raise urgent funds to repay its burgeoning debt.

1MDB overpaid for expiring IPP companies

This is especially  since 1MDB overpaid for expiring IPP companies in 2012, which has resulted in a massive impairment of RM2.7 billion recorded in the financial statements ending March 2013.

The irony of the massive cash call is that 1MDB actually has RM7.18 billion in liquid assets, mysteriously invested offshore in the Cayman Islands. The investment has generated a pitiful 5.76 percent in returns recorded in 2013, despite the fact that the cost of funds for 1MDB is in excess of six percent.

Prime Minister Najib must provide a convincing answer as to why these funds residing in well-known, secretive tax havens have not been repatriated home for the much-needed funding for 1MDB’s local projects.

Najib must also provide a detailed road map and explanation for 1MDB’s splurge of RM1.38 billion for 238 acres of land in Penang, where it promised to build 9,999 units of low-cost and affordable housing a mere six days before the last general election.

For more than a year now, 1MDB has done absolutely nothing with the acquisition, which was paid with debt raised from financial institutions. The Prime Minister’s pet project, 1MDB, is able to single-handedly bring down the entire Malaysian financial system. The desperation of the Federal Government in awarding the company with lucrative contracts and cut-price prime property assets cannot be more obvious.

The RM36 billion direct and indirect contingent liability for the federal government4th PM of Malaysia casts a deep and dark shadow over any possible improvements in our budget deficit to be announced by Najib.

To quote former Prime Minister Dr Mahathir Mohamad himself: “The money for 1MDB is not from the country’s surplus. It is a debt. Billions of ringgit in debt that is added to the already-high national debt. The national debt must be paid. If not, we will be bankrupt like Argentina. A country that has been facing a deficit every year could not possibly pay off a debt this big.”

TONY PUA is DAP’s Petaling Jaya Utara MP.