Crunch time for Malaysia on economic reform


November 15, 2018

Crunch time for Malaysia on economic reform

by Stewart Nixon

http://www.eastasiaforum.org/2018/11/04/crunch-time-for-malaysia-on-economic-reform/

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Prime Minister Mahathir Mohamad’s honeymoon period after he swept to power in Malaysia may now be facing an economic reality test. Mahathir’s recent admission that his pre-election promises exceeded what can possibly be delivered is just the start. Analysts and investors alike are now hanging on further details of the government’s economic policy priorities.

In the six months since Pakatan Harapan (Alliance of Hope) under Mahathir ended more than six decades of one-party rule in Malaysia, the new government has taken a measured approach to policy development, allowing inexperienced ministers to get on top of their portfolios while it enjoyed electoral grace.

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“Under-investment in human capital is perhaps the single biggest drag on Malaysia’s economic development. It is therefore a positive that human capital remains a high policy priority in Malaysia — commanding its own pillar in the Mid-Term Review and the highest share of budget expenditure. Some of the worthwhile measures include policies to address immediate skills mismatches, invest in school infrastructure and raise the quality of education.”– Stewart Nixon

The release of the Mid-Term Review of the Eleventh Malaysia Plan, as well as the government’s first budget, throws some light on where the government might head on economic policy. Stronger governance and alleviating cost of living pressures are underlined as priority areas, along with greater regional development, entrepreneurship and digitalisation. These priorities represent positive investment in government effectiveness and inclusiveness. But there are questions about economic policy direction.

The Mid-Term Review provides a blueprint loaded with high-level aspirations that would represent an impressive reform agenda if translated into successful policies. But aspects of the Review raise questions about the government’s real capacity to navigate medium-term risks. The 2020 balanced budget target has been abandoned and the budget deficit has widened to 3.7 per cent of GDP (with an aim to reduce this to 3 per cent of GDP by 2020), while public investment — most notably in major rail and pipeline projects — is set to contract.

The cancellation and postponement of mega rail and pipeline projects has rightly been applauded on governance grounds, but the fallout presents some economic risks. Debate about future infrastructure needs has been sidelined by fear mongering about debt. Investors also now face higher levels of uncertainty and risk. While Chinese investors have been hit hardest by the cancellations, both governments appear to have so far handled the diplomacy of recontracting deftly.

The Review also foreshadows a host of new expenditure in healthcare, social protection, rural infrastructure and the environment that will need to be financed by either undeclared budget cuts in other areas or additional revenues.

Revenue raising — or the failure to address the need for it — is a serious weakness in government plans. Tax revenue has fallen to around 13 per cent of GDP — compared to the OECD average of over 34 per cent — and the government’s decision to dump the goods and services tax (GST) for a narrower ‘sales and service’ tax will accelerate the decline. The budget estimates tax revenue at just 11.5 per cent of GDP in 2019.

The Mid-Term Review hints at plans to diversify indirect taxes and increase non-tax revenue. Increasing indirect taxes appears ambitious after the noisily populist anti-GST campaign, while non-tax revenue is code for increasing dependence on revenues from state-owned enterprises (SOEs). The budget highlights this, reporting a 33 per cent drop in indirect tax revenue in 2018 and dividend hikes on PETRONAS in particular amounting to a doubling of non-tax revenue by 2019.

The budget hits some easy targets with higher taxes on property gains, sugar beverages, casinos, imports and online services. However it ignores potential reforms to wealth and property taxes or to the income tax system that currently covers only 15 per cent of workers and transfers very little from rich to poor households.

While the Malaysian government’s footprint may be low in taxation and expenditure, its participation in the economy is pervasive. The highly centralised top-down federation (that cripples local government initiative) and government ownership of more than half the local stock market ensure that the vast majority of economic activity is directly affected by the state.

Despite enabling the corruption scandals that brought down the former government, SOE dominance is not earmarked for meaningful reform in the near future. The budget speech declares that stakes in ‘non-strategic’ government businesses are to be reduced, yet if anything the Mid-Term Review is a blueprint for reinforcing paternalistic control of local governments and enhancing the primacy of SOEs. This is moving the Malaysian economy in the wrong direction. Rather, the government needs to focus on decentralising local governance and diluting SOE market concentration.

The large program of policies favouring Malays and other indigenous groups (Bumiputera) in the Mid-Term Review is another possible economic destabiliser. There was much hope that Mahathir’s more representative government would bring an end to the country’s long-running and ill-targeted affirmative action program. Yet the Review simply reaffirms the government’s commitment to continuing it. Outdated and divisive policies serve to perpetuate negative perceptions of the majority Malays, deter investment and encourage the brain drain of discriminated-against minorities.

Underinvestment in human capital is perhaps the single biggest drag on Malaysia’s economic development. It is therefore a positive that human capital remains a high policy priority in Malaysia — commanding its own pillar in the Mid-Term Review and the highest share of budget expenditure. Some of the worthwhile measures include policies to address immediate skills mismatches, invest in school infrastructure and raise the quality of education.

Still, the perpetuation of myths that low-skilled foreign workers are a drag on the economy and misguided plans to curb migrant inflows through increased levies and by further outsourcing responsibility to businesses with a vested interest in increasing numbers raise doubts about whether the government understands the extent and causes of Malaysia’s human capital deficiencies.

In the face of headwinds from global economic crises and trade wars, ambitious reforms are a must for Malaysia’s new government. Replacing current unproductive and populist measures with a medium-term policy platform that tackles distortions and disadvantage would not only enhance the country’s economy but also give needed weight to the government’s economic credentials.

Stewart Nixon is a Research Scholar in the Crawford School of Public Policy, The Australian National University. He is lead author of a new report from the Asian Bureau of Economic Research in the Crawford School on the Malaysian economy and was co-author of the OECD’s inaugural Economic Assessment of Malaysia.

Directions for Malaysia’s Economic Policy


October 28, 2018

Directions for Malaysia’s economic policy

by Cassey Lee / Khmer Times
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History repeats itself but often in slightly different ways. So it is with the tabling of the Mid-Term Review of the Eleventh Malaysia Plan (MTR-11MP) on October 11 by Prime Minister Mahathir Mohamad.

Some 34 years ago, in March 1984, Mr Mahathir unveiled the mid-term review for the Fourth Malaysia Plan (4MP) (his first since assuming power in 1981). The Eleventh Malaysia Plan (11MP) is the country’s latest five-year development plan covering the period 2016 to 2020. It serves as a tool for medium-term economic planning. The mid-term review of the Plan essentially takes stock of the progress achieved half-way through its implementation period.

Though both the 4MP and 11MP were crafted under heightened fiscal constraints and contained significant new policy directions, there are some notable differences. A key difference is that the new policy directions in the MTR-11MP are noticeable but contain less implementation details. This is to be expected, as the new Pakatan Harapan (PH) government, which came into power in May, probably only had about three to four months to shape the MTR-11MP report. Work on the report commenced in October 2017 and was supposed to be tabled in Parliament by July or August.

Taking this time-constraint into account and the fact the new administration has had to struggle with a host of concurrent issues (including fiscal consolidation), the report is nevertheless a compelling read as it provides the first broad overview of the future directions of the PH government’s economic policies.

The report itself is divided into two major components. The first component which covers chapters two to eight provides reviews of the six strategic thrusts of the 11MP which were crafted by the Barisan Nasional government.

Aside from providing statistical updates on the progress achieved, the reviews are generally critical in the sense that they often attribute problems to existing institutional deficiencies. This then leads to the second component of the report (chapters 10 to 15), each of which contains one of the six “pillars” or new policy directions.

These are: (i) reforming governance towards greater transparency and enhancing efficiency of public service, (ii) enhancing inclusive development and well being, (iii) pursuing balanced regional development, (iv) empowering human capital, (v) enhancing environmental sustainability through green growth, and (vi) strengthening economic growth.

Comparing the MTR-11MP with the 11MP, there are some similarities in the themes and emphases of the two reports e.g. human capital, environmental sustainability and inclusiveness.

The significant departures from the original foci of 11MP are in pillar (i) on institutional reforms and pillar (iii) on regional development.

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The institutional reforms detailed in chapter 10 are likely to have drawn from the report from the Institutional Reforms Committee which submitted its final report in July. The reforms include policies to strengthen check and balance mechanisms, revive the spirit of federalism, deepen the anti-corruption agenda and drive political reforms.

One political reform proposal that has received media attention is the implementation of a two-term limit for the Office for the Prime Minister, Chief Minister and Menteri Besar. Given the importance of institutions as key determinants of long-term economic development and growth, the emphasis on institutional reforms is both appropriate and encouraging.

The renewed emphasis on regional development is refreshing and surprising. Surprising, because regional development was largely neglected during Mr. Mahathir’s first term as Prime Minister (1981-2003). Though the 11MP did promote the development of regional economic corridors, the new emphasis is on reducing state-level developmental gaps that have persisted. The report contains proposals to improve development allocations to less-developed states, namely, Sabah, Sarawak, Kelantan, Terengganu, Kedah and Perlis.

This strategy is both equitable and politically astute – the latter because the PH government needs to win the trust of rural Malay voters in northern Peninsular Malaysia and East Malaysian voters before the next general election.

Dr Cassey Lee is Senior Fellow, and co-coordinator of the Malaysia Studies Programme, at the ISEAS-Yusof Ishak Institute. This article first appeared in ISEAS Commentary and it can be read at https://bit.ly/2PgakFW

Dr Kua Kia Soong hits out at PH ‘flip-flops’ ahead of 100-day milestone


August 15, 2018

Dr Kua Kia Soong hits out at PH ‘flip-flops’ ahead of 100-day milestone

Suaram Adviser Kua Kia Soong also says Putrajaya appears more interested in playing the blame game than getting down to business.

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Dr Kua Kia Soong, prominent activist,former Isa detainee, and prolific analyst, today accused the Pakatan Harapan (PH) government of flip-flopping on a number of issues, just days before the administration led by Dr Mahathir Mohamad marks its first 100 days in power.

Giving the example of the Unified Examination Certificate (UEC), Kua Kia Soong asked why it would take five years to recognise it when PH had stated in its manifesto that it was ready to accept it. He said other issues included the oil royalty promised to East Malaysia and the abolition of highway tolls.

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In July, Mahathir announced in Parliament that Putrajaya would honour its promise to provide 20% royalty to petroleum-producing states. But he later clarified the statement, saying the 20% payment would be based on profit instead of royalty.

The Suaram Adviser said it was also unacceptable that local elections could only be held after three years. “Delaying reforms in unacceptable. A really important reform we want to see concerns the redistribution of wealth,” he added.

Dr. Kua was speaking at Suaram’s presentation of its report card for PH’s first 100 days in government.He said following the election, Putrajaya seemed more interested in playing the blame game than getting down to business.

“We read news of the missing goods and services tax (GST) money, yet there has been no movement. Have the Police or Attorney-General acted on it? We should be told what happened to the money within a week,” he said.

He also took issue with Tabung Harapan Malaysia, a fund established to help settle the country’s RM1 trillion debt, saying he could not accept “sob stories” related to the initiative.

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“It’s about the management of the economy to plug the leaks, not the piggy banks of little boys,” he said, referring to the story of a youth who donated his savings to the fund.

As for the government’s war on kleptocracy, Kua asked why authorities had yet to zoom in on former Sarawak chief minister Taib Mahmud, who was accused of corruption in the past.

“And why haven’t Mahathir and his children declared their assets?”

New Malaysia’s Underclass: What to do?


June 11, 2018

New Malaysia’s Underclass: What to do?

by Dr. Lim Teck Ghee

“What’s important is that we will need to think out of the box and have the courage to challenge long held orthodoxy; or we will end up with more of the same old Malaysia”.–Dr. Lim Teck Ghee

Underclass by Definition

  1. the lowest social stratum in a country or community, consisting of the poor and unemployed.

  2. a group of people with a lower social and economic position than any of the other classes of society; “they are an underclass who lack any stake in popular capitalism and who are caught in the dependency culture”

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Poverty right in the heart of Kuala Lumpur

In the euphoria and after glow of the recent election and current preoccupation with correcting the excesses and abuses of the Barisan Nasional (BN) government, it is all too easy to forget about or ignore the plight of the Malaysian poor and underclass class.

Whatever is the actual poverty situation – we can expect the dispute over definition and numbers to continue endlessly – and whether we can believe the previous government’s boast that only 1% of the country’s households can be considered to be poor – the reality confronting our politicians and policy makers is that the country’s underclass (and this includes many more households than just those adjudged to be living below the poverty line) is sizable, growing and has remained relatively intractable and unyielding to the billions of ringgit poured into the group in the last few Malaysia Plans.

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A young Penan Maiden–A victim of Neglect

Why have so many socio-economic development and poverty alleviation projects failed to make a significant dent in the plight of the underclass should be an important part of the discourse among politicians. It also needs to be a concern for all stake players engaged in forging a new Malaysia that does not replicate the missteps, mistakes and wrongly focused projects and programmes deployed by the previous government in dealing with the underclass.

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Barisan Nasional Leaders in Sarawak–where are they today?

Here are some suggestions on the fresh start needed in Pakatan’s development planning which can make a greater impact in tackling the multitude of obstacles and problems that stand in the way of improving the lives of the underclass:

  1. Ditch or minimize approaches which reinforce rather than reduce dependency. Malaysia is not at the same development stage that it can afford the extensive social safety nets found in developed nations. Expensive subsidy programmes of any kind – and this includes the replacement for BR1M, and petrol subsidies – should be pruned back and targeted at a small number of the most vulnerable such as the elderly or female headed households. Able working age adults below a certain age – say 60 years – should not be eligible for any form of subsidy programme.

  2. Review all costly agricultural and rural development projects to assess their impact and real benefits. In view of continuing rural to urban migration, it is in urban and semi-rural areas where the underclass is mainly clustered and where public expenditure will have greater impact on the poor and vulnerable.

  3. Fragile families are a significant contributor to the intergenerational reproduction of poverty and should be a key concern for the authorities. They are also likely to be a major factor accounting for the racial and class disparities which have caused so much angst within the nation since the tendency towards fragility seems to be more pronounced in the Malay and Bumiputra community.

  4. Together with a focus on fragile families, there is a need to jumpstart the national family planning programme which has been put in cold storage for several decades. It is clear that given the relationship between very large and large families and underclass status – evidence for this can be found in many countries around the world – early family planning interventions will be able to help many large-sized poor and middle class families avoid later life marginalization by improving their socio-economic position through better planning and early intervention in their childbearing practices.

  5. A community’s socio-cultural and religious practices may either stand in the way or assist in the upward mobility of its most needy members. There needs to be an openness and readiness for politicians and policy-makers to discuss these issues and take corrective action even if it may involve touching on sensitive or taboo concerns.

  6. We have had a top down approach to development which has resulted in a stream – even, torrent – of opportunities and rewards especially for the elite and their support group in the civil service and professional class.  This top down approach, compounded by leakages and corrupt practices, needs to be replaced with, or at least complemented by one where resources and opportunities are directly channeled to and managed by groups at the community and grassroots levels. Although the decision has been made to abolish JKKKP’s, a revival of JKKK’s with membership of these committees extended to include youth and women members can provide an impetus to local level development. When led by motivated community leaders, JKKK’s can become a catalyst in local level development and slow down the burgeoning of the underclass.

  7. Experience in other countries has shown that the great wealth of technical expertise and human resources brought to bear on anti-poverty work – especially in terms of the administrative apparatus engaged in planning and implementation – has turned out to be a liability by diverting resources away from the target group to pay for staff salaries and operating costs. Some of the most reputable NGOs in other parts of the world engaged in anti-poverty work have ended up with three quarters or more of donor funds being used to meet administrative expenses. Information on public expenditure intended for poverty and underclass target groups should be widely disclosed and disseminated, especially to the target groups to ensure transparency and accountability.

  8. Lastly, in view of the fact that the larger proportion of the underclass comprises members of the Malay community, it is imperative that successful members of the community step up to the plate to help the less fortunate members move out of their depressed situation. This has to begin with a critical and honest appraisal of the causative factors found within the community which accounts for why the Malay underclass continues to grow despite the government’s best efforts in the last fifty years.

       Image result for the orang asliThe Orang Asli of Malaysia

What’s proposed here is an example of the changes – and paradigm shifts – needed to conventional strategies and current wisdom if we are to make greater progress in arriving at a fairer and more equal society.

They may or may not work. What’s important is that we will need to think out of the box and have the courage to challenge long held orthodoxy; or we will end up with more of the same old Malaysia.

GE-14: Malaysians Voted for Big Change. Now work hard for its success. There is no such a thing as a free lunch


May 15, 2018

GE-14: Malaysians Voted for Big Change. Now work hard for its success. There is no such a thing as a free lunch

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By Janice Fredah Ti

http://www.freemalaysiatoday.com

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Pakatan Harapan–Stop Bickering and Got on with the Business of Government

Let’s examine the word “revolution”. It’s usually used to describe the forceful or even violent overthrow of a government by a huge part of the population. It brings to mind chaos, fighting, tear gas and chemical-laced water unleashed against citizens; citizens fighting the authorities; police, ambulances, sirens, injuries and even death.

However, my understanding of the word “revolution” is not limited to just that. Revolution, to me, means a big change. It means any movement or activity brought about by concerned citizens to bring about a paradigm shift in the mindset of fellow citizens, that will hopefully eventually effect a major shift in any given political or socioeconomic situation through entrepreneurship, education, the ballot box and others.

Let us hope there will be more to come and lot of changes in personnel in the civil and foreign service and GLCs.

Given that, a revolution is hard to define. It’s hard to determine when it starts or comes full circle. But a half-revolution – that is what I’d like to explore today.

Given our unique political conundrum, made worse by economic uncertainty, Malaysians cannot be faulted for toying with the word “revolution”. One minute, we’re plagued by political fatigue and on the verge of giving up; the next, someone mentions “revolution” and we’re instantly energised!

But what exactly is a revolution in the Malaysian context? Are we managing our expectations, are we leaving things to chance, are some people blindly following so-called leaders, and are others being misled?

Many of us do not like the fact that we are dependent on opposition political parties for any possible change in government. However, many believe that we are. Efforts to create a meaningful and sizeable third force by informed and concerned citizens over the years have met with very little success. Smaller parties like PSM are doing great work but unfortunately, they have not been accepted into the main opposition coalition, perhaps due to ideological differences.

The main opposition pact, Pakatan Harapan (PH), consists of PKR, DAP, PPBM and Amanah. We also have the runaway faction of the standalone PAS, PSM and other smaller parties. Putting aside PAS for now, what is PH doing in terms of effecting a paradigm shift in the minds of the general population to bring about the much needed change in government?

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Governing Malaysia is no circus with clowns. It is hard work and sacrifice. There is no such a thing as a free lunch.

PH parties have been fighting among themselves. They were involved in multi-cornered fights in the Sarawak state elections, giving the enemy an easy victory much to the bewilderment and disappointment of those who placed their hope in them. Are we to trust them with federal power if they can’t sort themselves out in state elections?

Some remain silent while others flip-flop on important matters like RUU 355. Shouldn’t PH, as the main opposition coalition, have a collective stand on major issues concerning the people?

PKR’s Dr Wan Azizah Wan Ismail even went on record in an interview with Al Jazeera to say, albeit vaguely, things most would not like to hear on the hudud issue. She closed the interview by saying she was only a seat-warmer for Anwar Ibrahim.

DAP’s arrogance meanwhile has shot through the roof, what with the production of tacky video clips which supposedly serve to amuse a particular set of audience. And more than one DAP representative has used racial slurs in a public speech.

That’s just the tip of the iceberg as far as Malaysia’s main opposition coalition is concerned, but it should not be taken lightly.

As if the ruling government’s circus of incompetent and corrupt members was not bad enough, the main opposition has started its own circus as well.

It all began with a major upset that occurred in the already-polarised nation torn apart by a government gone mad. A movement started by former Prime Minister Dr Mahathir Mohamad emerged out of no where in 2016, and to date, all it has succeeded in doing has been to further divide the people, much to the amusement of the ruling government.

Why has this happened? Why is the nation divided by a new movement that didn’t quite accomplish its mission?Because it was started by none other than Mahathir himself, and supported by a string of stars in a line-up consisting of the ever-important who’s who of opposition political parties and civil movements.

For several months there was major confusion, debates, quarrels, and coffee shop talk that resulted even in the loss of friendships as people could not understand why others supported or refused to support such an initiative.

Some are adamant that the engineer of Malaysia’s current situation cannot be supported at any cost; that it would be an insult to former ISA detainees and their families (who, by the way, are very much alive and among us still); that he has never been sorry for what happened or for what resulted in Malaysia today; and so on and so forth.

This group of people think if Mahathir wants to start something, by all means he should but it is way too early to throw any support behind him. Others meanwhile are inclined to think that since Mahathir is taking this step, he should be supported regardless of his past deeds or association with current UMNO leaders, or for that matter, even his personal agendas if any.

The second group just want Barisan Nasional’s (BN) current top guy out, it seems. Some are fine with a reformed UMNO in the event that Mahathir does return to his former party, while some hope he will continue leading the opposition. Some don’t care about anything as long as the current top guy (Najib) is out. Who is right and who is wrong?

The leaders of some civil movements became involved, resulting in many Malaysians jumping into the fray to sign the Citizens’ Declaration without too much consideration. If you believe this is the right thing to do, well, they have rightly influenced people to the right path, otherwise they have misled them.

I am sure many would not disagree that a huge number of Malaysians would support and sign anything without question or analysis for the simple reason that their idols are there.

I personally think they have misled the people – not all, but many. We could argue until the cows come home, but don’t we all know of someone who has regretted signing the Citizens’ Declaration for one reason or another? This is the first step towards the grand disunity about to besiege the nation.

Based on the premise that a revolution is the result of unity and a paradigm shift in the minds of citizens, is this a revolution… or half a revolution?

Then came the formation of Mahathir’s new party PPBM, which initially accepted only Bumiputera membership. This was later revised to allow non-Bumiputeras to become associate members with no voting rights. I’m not sure how many, but I’ve been made to understand that quite a few non-Bumiputeras accepted this arrangement, including my own friends.

Have we not fought against racism for so long? Have we not complained about the current administration’s racially biased policies? Have we not completely despised groups like Perkasa (coincidentally, Mahathir is the VIP patron) and the infamous Ikan Bakar Tak Laku? And we are now told to accept a new racist party into the main opposition fold, because apparently, “we have no other choice”.

It’s mind-boggling, but again – is this leading us to the revolution we seek, or only half a revolution?

After an agonising wait, GE14 has finally been called. Most of us have been there, done that, seen and heard it all. Social media, which is a big part of many voters’ lives, is threatening to explode with the insults and quarrels from both sides of the political divide.

Understandable, many want change. But what change? Change is a process and a journey, not an event called GE-14. And a change to something worse is also called change.

PH, which has been entrusted to make this change, is now led by the very same person whom many acknowledge laid the foundation for the kleptocratic and autocratic government that we have today. To make things worse, he recently sought to exonerate himself from two of the nation’s saddest and darkest events: Ops Lalang and the prosecution of Anwar Ibrahim. How convenient!

For those who must believe that it takes a thief to catch a thief, please carry on. For the rest of us, this is not palatable. It was never an issue of forgive and forget, but more of what possible reforms PH can bring forward with Mahathir in the coalition. What reforms could possibly take place with someone who apologises and makes a U-turn in six hours? PH is taking us for a ride, lock, stock and barrel.

Someone once said, “Change can never take place from the level of consciousness it was created.”PH – are you leading us to a revolution, or half a revolution?

If PH is serious about change and good governance, why are its parties, particularly PKR, fielding last-minute parachute candidates, worse still those who are not local, for state seats? Last-minute decisions for something as important as what they call “the mother of all elections”?

The power struggle is so blatant, and they are trying to tell us that they are for the people? How are they different from the very people they wish to bring down – BN? Try harder next time, PH.

PH, we want a revolution, not half a revolution. Many are angry at my disapproval and constant bashing of PH, as well as what they call my idealism. They say I am seeking perfection when the reality is that it doesn’t exist. I don’t think idealism is exactly the opposite of realism, but let’s save that for another day. If idealism involves not voting for a half-baked opposition coalition which could have presented itself as a sincere catalyst of change through real hard work and good planning, I am fine with idealism for now.

Happy voting, abstaining, or spoiling of votes!

Janice Fredah Ti is an FMT reader.

The views expressed by the writer do not necessarily reflect that of FMT.

 

 

Najib Razak’s Gua Tolong Lu, Lu Tolong Gua Survival Economics


October 22, 2017

Malaysia’s Economic Policy--Najib Razak’s Gua Tolong Lu, Lu Tolong Gua Survival Economics

by MP Liew Chin Tong@www.malaysiakini.com

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MP SPEAKS | The suffix “-nomics” is a popular media term to denote a certain type of economic idea or just a form of ridicule against political rhetoric.

“Najibnomics” is an attempt to show off Najib’s set of clearly articulated economic ideas to drive the nation forward. But is it even real?

On October 27, 2017, Prime Minister Najib Abdul Razak in his role as finance minister will present his ninth Budget to the Parliament.

Najib took over from Abdullah Ahmad Badawi as Finance Minister following a tense negotiation on September 17, 2008.

The 2009 Budget was presented by Abdullah on August 29, 2008. Najib then succeeded Abdullah as prime minister on April 3, 2009.

The only time Najib was close to articulating a framework was during the launch of the now defunct (and discredited) “New Economic Model” on March 31, 2010, a year into his premiership.

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In a recent interview with Malaysiakini, Professor KS Jomo (photo) had this to say about the New Economic Model:

“Let us be clear about this. The New Economic Model, or NEM, is really a wishlist of economic reforms desired from an essentially neo-liberal perspective. That does not mean it is all good or all bad. It contains some desirable reforms, long overdue due to the accumulation of excessive, sometimes contradictory regulations and policies.

“Although the NEM made many promises and raised expectations, most observers would now agree that it has rung quite hollow in terms of implementation despite its promising rhetoric. As we all know, the NEM was dropped soon after it was announced for political reasons, and has never been the new policy framework it was expected to be.”

I share Jomo’s sentiment that NEM was more or less a wishlist from the neo-liberal perspective. But at least there was a plan.

New Economic Model, RIP

Three key takeaways from NEM are worth noting.

First, Malaysia could no longer depend on just capital investments, be it foreign or local, or having more foreign unskilled labour. What is required is productivity through innovation.

Second, social inclusiveness was one of the three key pillars in the NEM. The other two being “high income” and “sustainability”.

“Inclusiveness” is World Bank’s shorthand for “inequality”. Even in 2010, it has been identified that inequality is one of the major concerns that the Malaysian economy has to confront.

Third, NEM argues that more economic decision-making powers should be devolved to state and local governments, and not concentrated in the hands of the central government.

Worse still, economic decisions are increasingly concentrated in the hands of Najib himself, bypassing the cabinet entirely.

The key recommendations of NEM are listed as follow:

Not that I agree with NEM entirely, but, again, there was a framework and a plan.

Less than three months after the launch of NEM, Najib presented the 10th Malaysia Plan, prepared by the Economic Planning Unit of the Prime Minister’s Department, in June 2010.

NEM was prepared by a group of senior economists with relatively broad-based consultations with the wider society.

The Malaysia Plan has become a bureaucratic routine. The two documents – NEM and the 10th Malaysia Plan – did not seem to “talk” to each other.Najib has no conviction. He has no clear idea of which ideas to adopt. As soon as NEM was launched, it was shuttered prematurely – after protests by some right-wing Malay groups.

Minimum wage and BR1M

While NEM was ostensibly killed by right-wing groups, the actual killer was Idris Jala’s Performance Management and Delivery Unit (Pemandu).

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Idris Jala–Malaysia’s Super Bullshitter

Najib’s then supposed economic troubleshooter Idris Jala packaged some of NEM ideas into the “Economic Transformation Programme” (ETP) which focused on the so-called high-impact “Entry Point Projects” (EPP).

Between 2009 and 2011, Najib was telling the investor community that he intended to “liberalise” the Malaysian market, with rules for some 27 sectors relaxed.

Beyond that, he neither articulated any coherent economic ideas nor pushed for significant reforms apart from proposing a minimum wage and the cash handout programme 1Malaysia People’s Aid (BR1M).

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Only Raja Petra Kamaruddin wants him to stay because he is a beneficiary of Najib’s Gua Tolong Lu, Lu Tolong Gua Policy

The opposition and the trade unions had long called for the implementation of the minimum wage. Najib agreed to implement minimum wage in the hope to take the sails out of the opposition’s wind.

BR1M was even more interesting. The then Pakatan Rakyat policy committee, of which I was a member, announced in July 2011 that it planned to focus the “bottom 60 percent” with a comprehensive set of economic reforms.

Najib’s government answered Pakatan Rakyat’s plan with BR1M to pacify the bottom 60 percent.

Making rating agencies happy

Post-May 2013 general election, the Prime minister’s focus was on pacifying the rating agencies.

The emerging markets suffered sudden currency slides in May and June 2013 in what was termed a “taper tantrum” as the US Federal Reserve indicated its intention to scale back monetary easing.

Rating agencies panicked and started to look at the weaknesses of Asian economies.

Najib’s knee-jerk reaction was to form a “fiscal policy committee” which has a membership almost identical with the weekly “Majlis Ekonomi” (Economic Council) meeting that bypasses the proper full cabinet deliberation on economic matters.

The fiscal policy committee committed to keeping the deficit at three percent and eventually achieving a balanced budget in 2020.

To this end, subsidies were cut, government services were slashed and the Goods and Services Tax (GST) was recommended in the 2014 budget speech (presented in 2013, the first Budget after the last general election).

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From then on, Najib’s economic policies were reduced to ensuring that the rating agencies were happy and the government has sufficient revenue to pay for its excesses. Nothing about refashioning the economy or any long-term vision.

It’s all about Najib’s survival

The year 2015 was probably Najib’s annus horribilis. Oil prices dropped dramatically since October 2014, and as a consequence, the ringgit plunged too.

From March 2015 onwards, details of the 1MDB scandal emerged and subsequently, in July 2015, details about the “donation” into Najib’s personal account surfaced.

Najib sacked then Deputy Prime Minister Muhyiddin Yassin, then Attorney-general Abdul Gani Patail and then Rural and Regional Development minister Shafie Apdal (now in Jail) on July 28, 2015.

In September 2015, in order to deal with the trust deficit, a special economic committee (JKE), which included Nazir Razak (right in photo), Najib’s respected banker brother, was formed to advise the government on economic policies.

There is reason to believe that the JKE no longer meets. Even if it has met, Najib has no time for any views. By now, it is about his survival and nothing else.

Since late 2015, the government has decided on the propaganda line that the Malaysian economy is doing very well under Najib, and whoever claims otherwise is bordering on economic treason or sabotage.

Minister in the Prime Minister’s Department in charge of the Economic Planning Unit (EPU) Abdul Rahman Dahlan, who also doubles as BN strategic communications director, typified this approach.

The government is no longer prepared to listen to the grouses of ordinary Malaysians who suffered the triple blows of GST implementation, the stiff depreciation of ringgit and government austerity (cuts to subsidies, health, welfare and education funding).

“There is no crisis!” So Najib and his associates believe. There are even court jesters who sing praises of the wonders of “Najibnomics”.

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But just like the emperor with no clothes, at some point, probably at the ballot box, the voters will call his bluff. By then, perhaps many of us will realise that Najib has had no serious economic policy for the past nine years as finance minister and more than eight years as Prime Minister.In the end, it’s all about “Nothing-nomics”.

LIEW CHIN TONG is the MP for Kluang and DAP national political education director.