‘Billion Dollar Whale’ won’t exonerate Najib – and Shafee knows it


September 25, 2018

‘Billion Dollar Whale’ won’t exonerate Najib – and Shafee knows it

Opinion

COMMENT | Muhammad Shafee Abdullah, the lead counsel of former Prime Minister Najib Abdul Razak, affirmed last week that Tom Wright and Bradley Hope’s ‘Billion Dollar Whale: The Man Who Fooled Wall Street, Hollywood, and the World’ can strengthen the case of the defence.

The book apparently describes Low Taek Jho as the “puppet master” who led Najib into various fake and nefarious financial transactions with 1MDB, many of which are now hanging like the sword of Damocles over the head of Najib and his wife, Rosmah Mansor.

Since Low is the mastermind, the argument goes, all responsibilities of financial misdoings can be attributed to him. There is a huge flaw to this argument, and Shafee knows it.

In all cases of criminal breach of trust and money laundering, the deed has to pass through four vital stages. First, there must be the intention or plan to cheat, which is clearly manifested in 1MDB, since it was essentially a special purpose vehicle (SPV) that was meant to be a false sovereign fund.

Related image

 

Low Taek Jho + FLOM Rosmah Mansor= 1MDB Scandal= Najib in Sungei Buloh

This SPV has had no business model from its inception in 2009. While it could pile on debt, even remove the whole board at will, it never come close to having any revenue-generating activities. Thus, the intention to cheat was inherent from the very beginning.

Secondly, there has to be a plan of implementation. The financial transactions in Dubai, Geneva, Hong Kong, Singapore and the offshore financial accounts in Seychelles and the British Virgin Islands, there was indeed a grand plan to transfer the money in and out of the global financial system.

Opening the door

Image result for shafee abdullah

Shafee Abdullah should know that the buck stops at Najib’desk, or is he too dumb?

Indeed, if Shafee (photo above) wants to use the book by Wright and Hope to bolster his legal defence, then other sections of the book are equally illuminating.

The authors argue, for example, that without the seedy offshore financial system, Low could not have pulled off the world’s biggest heist. This was a white-collar crime of the utmost size and magnitude, that eventually brought down Najib and the whole government of BN government on May 9.

 

Also, criminal breach of trust and money laundering both involve implementation. Despite revelations on possible wrongdoing by MPs and various reports, it remained parked under the Finance Ministry. Throughout the whole process, there was no plan to unearth any evidence of wrongdoing, and no arrests were made.

Plus, it wasn’t just Low and his accomplices who enjoyed a wild life, but Najib and Rosmah as well, especially given their lavish lifestyle.

Lastly, if they could live beyond their means, it can only mean that they breached the ceiling of their spending powers many times over – especially since Najib, from the age of 23, was not supposed to benefit from any trappings of public office other than that which the government has provided.

Thus, the intent, planning, implementation and accomplishment were all there from 2009, only to be exposed more globally by 2015.

As far as Malaysians are concerned, the fall of UMNO and BN is indictment enough. But it helps if the courts can indict not just the mastermind and Najib, but every unsavoury character in the madcap charade that burned through public funds – the lack of which is preventing the new government from having the necessary financial means to help the country prosper immediately again.

Given the huge national debts and contingent liabilities of RM1.09 trillion, which is almost 80 percent of the GDP, it goes without saying that Shafee may not be cognisant of the sheer gravity of his client’s alleged crimes.

Little wonder that Shafee himself is being charged over receiving RM9.5 million to prosecute Anwar Ibrahim in 2014, whose guilty verdict has since been expunged from all criminal records due to a full royal pardon.

Shafee looks to be entering the wrong defence, precisely because he has zero options left. Using a book cannot exonerate Najib and his spendthrift wife any more than the salacious details of the book can be prevented from being known by the public.

It is all too late for the wolves of Putrajaya.


PHAR KIM BENG was a multiple award-winning Head Teaching Fellow on China and Cultural Revolution in Harvard University.

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

CIMB Group Nazir Razak’s Departure sends the wrong message: Competent Professionals are not wanted, only politics matter


September 25, 2018

CIMB Group Nazir Razak’s Departure sends the wrong message: Competent Professionals are not wanted, only politics matter

by Ho Kay Tat@www.malaysiakini.com

Image result for CIMB's Nazir Razak

 

“Don’t be afraid to speak up – express your opinions with honesty.”–Nazir Razak. He has integrity. I admire him for this rare attribute. It is the reason why Nazir is respected and highly regarded in Cambodia. He will be missed by his staff as a role model of professionalism.–Din Merican

COMMENT | CIMB Group Holdings Bhd chairperson Nazir Razak was an early and vocal critic of 1MDB and the opaque manner it was managed.

It is, therefore, sad that he is now a casualty of the 1MDB fallout, as the new government which came to power on the back of public anger over the financial scandal makes further leadership changes at government-linked companies (GLCs).

Most people will point out that Nazir had received money (now discovered to have originated from 1MDB) from his brother Najib as contribution to be passed to others for the 2013 general elections. Like many, he would not have imagined back then that the money came from 1MDB and he has since expressed regret about what he did. It was a mistake.

When 1MDB was set up in September 2009, Nazir had questioned the need for another sovereign wealth fund and the fact that 1MDB was not governed under the GLC framework of governance. After 1MDB issued its first bond – the RM5 billion 30-year sukuk arranged by AmBank Bhd – he criticised the mispricing of the bond, which was issued at a steep discount and carried a high coupon rate of 5.75% despite being guaranteed by the government.

Suspicious about where 1MDB was heading, Nazir issued a directive that CIMB does not do any business with it. It was a decision which upset some of his staff because of the loss in potential revenue from corporate lending and investment banking transactions, and there were billions worth of deals between 2010 to 2013.

When the troubles at 1MDB began to surface with the delay in the release of its audited accounts sometime in late 2013, Nazir worked hard behind the scenes to engage his brother and other senior government officials to address the problems. He warned them of the threat an implosion of 1MDB would pose to the country’s financial well-being – which is what has happened now.

After it became clear to him that no action will be taken, Nazir began to make his views public especially via his Instagram postings.

In January 2014 he penned an article ‘Remembering My Father, Tun Razak’ as an oblique reminder to his brother not to taint the reputation of their father.

Nazir wrote that one minister who served under his father told him: “As the custodian of the nation’s coffers, his frugality was legendary. You had to account for every cent, or he would be on your back.”

In February 2015, responding to a New York Times article which quoted a Najib’s spokesperson as saying that the prime minister was wealthy because he had inheritance money, Nazir and his three other brothers issued a statement to dispute what was said.

“We wish to put on record that Tun Abdul Razak was a highly principled man, well-known to all who knew him for his frugality and utmost integrity and any statement or inference to the contrary would be totally false and misleading to his memory and to his service and sacrifices for the nation.

“We take issue with anyone who taints his memory, whatever the motive. We would also like to add that our whole family is united on this issue,” said the statement which was signed by Nazir, Johari, Nizam and Nazim.

Attacked by pro-UMNO bloggers

Nazir was among those who pressed for Parliament to investigate and he criticised 1MDB’s first CEO Shahrol Halmi and Arul Kanda Kandasamy when they refused to attend the inquiry by the Public Accounts Committee (PAC).

Because of his criticisms of 1MDB, Nazir was attacked by the mainstream media controlled by UMNO as well as by UMNO-sponsored bloggers. He and his family were also victims of a blogger – Ahrily90 – who posted vicious attacks on them.

The Edge on Feb 4, 2015 exposed that this blogger was the same person who attacked our chairperson Tong Kooi Ong and Dr Mahathir Mohamad who, like Nazir, had been asking questions about 1MDB.

Ahrily90 was also behind two websites (since taken down) that promoted Jho Low as a smart financier and generous donors to various charities. This confirmed to us that our criticisms of 1MDB were correct and that Jho Low and his cohorts were getting uncomfortable with all the questions we were asking.

It was a frustrating time for us as our efforts were going nowhere. 1MDB, by then led by Arul Kanda, kept refuting our reports and denied that anything was wrong.

Image result for nazir razak and Tun Razak

 

I can reveal that The Edge and Nazir worked together, in our respective ways, to expose the wrongdoings at 1MDB to get the government to act against those responsible.

Work was done behind the scenes for a solution. But none could be found.

Instead, in July 2015, Najib sacked his deputy Muhyiddin Yassin and removed investigators. And The Edge and The Edge Financial Daily were suspended as part of the crackdown.By then, there was nothing more Nazir could do.

He was misled by his own brother. Nazir was also personally conflicted – his brother was the creator of the monster that he had warned against. Despite that, Nazir was probably the only corporate leader who had publicly voiced out concerns about 1MDB. He could have chosen to keep quiet.


HO KAY TAT is publisher of The Edge.

The above commentary was originally published here. The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

Malaysia: The Economy is in bad shape. Thank you, UMNO


September 18, 2018

Malaysia: The Economy is in bad shape. Thank you, UMNO

by Phar Kim Beng@www.malaysiakini.com

Image result for Najib Razak is Malaysia's best economist

Former Prime Minister Najib Razak should be awarded the 2018 Nobel Prize in Economics for his management of the Malaysian Economy. He pioneered the 1MDB method of robbing the Malaysian Treasury.

COMMENT | The Malaysian economy is in bad shape. Very bad.

Revisiting the 2014 magnum opus of the Prime Minister’s new Economic Advisor Dr. Muhammed Abdul Khalid, The Colour of Inequality: Ethnicity, Class, Income and Wealth in Malaysia, we see that Malaysia’s income gap has not changed much from 1957 levels, when the country first gained independence.

Between 1990 and 2018, Malaysians on the whole gained little, except the very rich. Muhammed describes a small breakthrough in 2012, but there is no telling if this was due to fiscal spending to ward off the effects of the 2007-2008 global financial crisis.

Muhammed’s reliance on the Statistics Department’s Household Income Survey, while illuminating, is not entirely convincing, especially when paired with numbers or assertions culled from Pemandu, the now-defunct government-funded performance delivery unit.

Image result for The poor in kuala lumpur

 

In other words, the actual picture of the Malaysian economy could be worse than what Muhammed actually describes.

Income from the manufacturing sector, for example, has been on the decline, which may be due to the over-reliance on cheap foreign labour – with an estimated 5.5 million migrant workers in the country – which further depresses the cycle of Malaysian wages.

Indeed, Muhammed correctly notes that “90 percent of each ethnic group does not have any liquid savings, and would not be able to survive more than few months in case they lose their source of income or employment”.

Ticking time bomb

This is not a very pleasant picture, even if it is colour blind. Why? The danger lies in the ticking time bomb that cuts across all races and groups. When the income chasm widens, people tend to blame one another for their problems, which in turn accentuates social, political, religious and racial tensions.

While democracy can ameliorate the tensions, it cannot overcome them completely. What democracy cannot structurally and systematically solve, groups of all religious and ideological fancies might rise to plug the policy gaps. When they do so, inter- and intra-ideological or religious pressures will only become more acute.

When political parties refuse to have elections, or postpone them indefinitely, they become blindsided by what the people want, which in turn hastens their own demise, as witnessed with Umno and BN.

Knowingly or unknowingly, as the book was completed well before the May 9 polls in which a kleptocracy was defeated, the above was one of the key takeaways of Muhammed’s simple but sophisticated book.

A bad economy will skew a political party’s fate, even if it well-larded with cash, corruption and connections. Reading the book now, after the 14th general election, it almost seems like a eulogy to UMNO-BN.

Barely a trickle

But The Colour of Inequality is also a sad indictment of how politicians and corporate leaders have steered the mighty Malaysian ship aground.

Image result for the colour of inequality ethnicity class income and wealth in malaysia

As Muhammed (photo, below) notes, most companies simply refuse to pay their workers well. When they don’t, and with less than nine percent of workers unionised, the bargaining power of the workers is overwhelmingly diminished, leaving them to the mercy of their corporate masters.

 

If the book is anything go by, the whole of Malaysia is sputtering to a halt – despite a GDP that “grew from RM5.1 billion in 1957 to RM1 trillion in 2012”. With the national debt now standing at RM1.09 trillion, Malaysia is caught in the vice-like middle-income trap.

The infamous trickle-down economics, for the lack of a better term, is not just non-existent here; wealth seems to be flowing upwards. Given when it was written, The Colour of Inequality references the Occupy Wall Street, where the 99 percent were trying, seemingly in vain, to challenge the grip of the exalted one percent.

In any case, widespread disempowerment is a phenomenon that should not be happening if the state and the market, as is the case in Malaysia, have vouched to work in tandem to help the poor – as reflected in the National Economic Policy and its derivatives.

But although Malaysia as a whole was becoming richer, the income differentials of Malaysians is growing wider. The lethal brew of myriad income determinants and gangly systems of income distribution have conspired to render the middle and working classes disempowered.

As Muhammed puts it: “(As of 2012), the top 20 percent held more than 52.1 percent of all wealth, while the bottom 40 percent held less than eight percent. The distribution of liquid assets was very extreme – the top 20 percent had 95 percent of all financial wealth, while the bottom 80 percent had only five percent.”This shouldn’t be happening

This process of emasculation should not be happening. Especially not after 61 years of independence.

In 1958, there were only 3,000 Malay taxpayers out of the overall of 33,000 taxpayers. A decade later, of the 1,488 students in Universiti Malaya – the only university in the country at the time – who graduated with a BSc, only 69 were Malays. Only four of the 408 who graduated with an engineering degree were Malays.

“During the same period,” Muhammed adds, “only 12 Malays graduated from the medical faculty, representing less than 10 percent of the total medical faculty graduates.”

But while the number of Malay graduates, technocrats and universities between 1970-2018 have risen dramatically, the chasm between rich and poor continues to stay the same, if not widened.

Statistics from the Employees Provident Fund (EPF) show that 92 percent of the people are earning less than RM 6,000 a month; four out of 10 Malaysians have no pensions at all; close to 40 percent earn less than RM3,000 per month; 25 percent of Malaysians have no properties to their names; and the money that pilgrims save for the hajj is spent entirely on the hajj, leaving their children with nothing to draw on.

Muhammed adds that it is “estimated that there were only 150,000 inter (-racial) marriages in Malaysia, a small figure in a population of 28 million”. Wealth, or, the lack of it, tends to have the same clustering effects in one group and one race.

An epilogue

One thing that Muhammed does not address at length is the extent to which the state can compel GLCs and GLICs to remunerate their workers well, or at least put a cap on the salary differentials between those at the top and the workers at the bottom.

Additionally, in the aftermath of the financial crisis and Occupy Wall Street, the honeycomb, gig, platform and sharing economy has emerged. If more people put their minds together, more bottom-up solutions – as manifested by Uber, Grab, Air BnB and other forms of electronic commerce – can and will emerge.

But are Malaysians ready for this, beyond the template of the digital free trade zone offered by Alibaba? Or will the proverbial cheese of Malaysians once again be consumed wholesale by a flood of new migrants from China, India and the rest of the world?

Come what may, Malaysians have to work together and understand the structural and systemic reforms that are needed beyond the mere creation of a few digital unicorns.

They need to empower themselves through education, especially online education, even if this involves disciplining themselves to start taking self-enrichment courses – including learning management systems such as edX or Class Central.

If anyone is in need of more inspiration, Muhammed’s book is the best place to start.

The Colour of Inequality, if not redressed, will lead to the panic of inequality, in which only the paranoid will survive. Especially because it is only another 20 years or so before Malaysia starts greying, a process that took European societies a century to experience.


PHAR KIM BENG was a multiple award-winning Head Teaching Fellow on China and Cultural Revolution in Harvard University.

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

Lies, damned lies and fairy tales


September 13, 2018

Lies, damned lies and fairy tales

Image result for Bullshit Najib

COMMENT

Unlike the past, I am not going to address you as “Yang Berhormat” (YB). I am not being impolite. Translated, it means the “Right Honourable”. Your conduct over the funds of the 1Malaysia Development Fund (1MDB) has been nothing honourable.

I pride myself as a journalist. It will not need a forensic auditor and time-consuming investigations to poke holes in your assertions and contentions over the past two days.

I have been keeping tabs on the issues related to the 1MDB’s missing billions over the years. You have vindicated my belief that a massive attempt had been made to cover the shenanigans in the company, especially with its finances. Through your statements, you attempt to imply that you’re an angel who has been falsely ostracised and vilified by political opponents.

Image result for New book on 1mdb by WSJ

On Monday, you issued a statement, with documents, to show that you received US$100 million (RM420 million) from Saudi Arabia’s King Abdullah Abdulaziz Al Saud. I will accept this on face value, but I am wondering what took you so long to release the letter? It was dated February 1, 2011.

You could have released the letter to counter the Asian Wall Street Journal (WSJ), which broke the story in July 2015. You could have avoided the entire furore and the rakyat would have believed and trusted you. Who knows, you could still be the Prime Minister today. And if that had happened, this commentary would have never seen publication!

 

Even when the US Attorney General Jeff Sessions branded your dealings as “kleptocracy at its worst”, you maintained elegant silence. Understandably so – with one letter, you could supposedly account for only a fraction of the US$681 million (RM2.6 billion) which found its way into your personal account in AmBank.

Like DAP stalwart Lim Kit Siang and the majority of right-minded Malaysians, I believe you had been feeding the public with a series of misinformation – aided and abetted by your then cabinet colleagues, your aides and cronies. No one believed you then and no one believes you now on anything you say on 1MDB.

Even WSJ journalists Tom Wright and Bradley Hope (who broke the story and extensively covered the scandal) don’t believe you. Neither do Clare Rewcastle Brown and Sarawak Report and any journalist worth his salt.

Wright and Hope say you were not offering anything new with this disclosure and maintain that the bulk of the RM2.6 billion banked into your account came from 1MDB.

These days, when a currency with all the security features and watermarks can be counterfeited, one does not need sophisticated equipment to produce letterheads in colour on expensive Conqueror paper bearing the emblem of any royal household. I remain to be corrected.

Hence, it is not surprising that Wright noted: “The documents you (Najib) have included are partly misleading (i.e. the wire transfers, which shield the true origin of the funds) and based partly on alleged fraud (the letter purporting to be from the Saudi prince, which was created to mislead regulators and banks.)”

But if you thought that your statement on Monday would have been swallowed by gullible Malaysians, you were wrong. We read only one chapter from Grim’s Fairy Tales. You did yourself no credit with the second chapter with yet another piece of fiction yesterday.

 

The second chapter was an attack on Kit Siang  saying you had issued some proof of the money donated from Saudi Arabia to your personal account. Really?

Image result for New book on 1mdb by WSJ

“Returning stolen money is not the real issue. You should be answering questions on the billions in your bank, your wife’s extravagances, your stepson’s movies, his millions on gaming tables and the apartments in New York and London”.– R. Nadeswaran

 

The Malay Mail quoted you as saying: “Prior to GE 14, Kit Siang along with DAP often asked ‘where is the RM2.6 billion?’ I want to ask Kit Siang before I reveal more documents and explanations, would the YB admit that I have returned some or all the RM2.6 billion, but the facts are deliberately omitted by Pakatan (Harapan)?”

The questions you should answer

Returning stolen money is not the real issue. You should be answering questions on the billions in your bank, your wife’s extravagances, your, stepson’s movies, his millions on gaming tables and the apartments in New York and London.

If the Arab prince (pic below) had only wired US$100 million (RM420 million), where did the balance in your personal account come from? Then again, why return more than US$500 million (RM2.1 billion)?

I find your distraction humorous, entertaining and amusing. We are coming close to the modern day alter-ego of Robin Hood who did just the opposite – robbing the poor to pay the rich.

Common sense dictates this question: Why was the money from the Arab royalty sent to your account via a circuitous and convoluted way before it ended up in Singapore’s Tanore Finance, which then transferred the money into your account?

Couldn’t the money be wired via a bank in Saudi Arabia? Similarly, why send the money back to Tanore instead of the prince’s account?

Image result for jho low 1mdb

The Penang-born Arab who is known for his lavish ways at Malaysia’s taxpayers expense.

We now know who were the owner/beneficiary of this company. They were inexplicably linked to one man – Low Taek Jho or Jho Low (photo). You don’t remember him or you want to say you have not met him? Just to refresh your memory: You and your family holidayed on his yacht and pictures of this outing have gone viral.

You, your Comical Alis and cronies tried to discredit the US Department of Justice (DOJ) report and used it to parrot it as “an attempt by foreigners to overthrow a democratically elected government”.

The DOJ report could not have been more succinct and unequivocal. Paragraphs 339 to 348 outline the flow of funds to an account belonging to “Malaysian Official 1” (MO1). Former BN propaganda chief, Abdul Rahman Dahlan confirmed (to the BBC) that you and MO1 were indeed the same person.

Image result for Tony Pua

Thank You, Tony Pua, for 1MDB Expose

Para 340 says: “On or about March 21, 2013, Tanore transferred US$620,000,000 into an account at AmBank in Malaysia, whose beneficiary was listed as “AMPRIVATE BANKING-MR.” The wire transfer was processed through correspondent bank accounts at JP Morgan Chase and Wells Fargo in the United States. On or about March 25, 2013, an additional $61,000,000 was wired from the Tanore Account to the same account at AmBank, for a total of $681,000,000.”

What have you got to say about this? Where does this fit into your scheme of things? The courts will decide on your innocence or guilt. In the meantime, if there is going to be a third chapter, don’t take Malaysians to be fools with your implausible, unbelievable and far-fetched stories. If you have to say something, let it be the truth and nothing but the truth.


R NADESWARAN says that Najib should put everything on the table and come clean which could be points for mitigation in the current situation. Comments: citizen.nades22@gmail.com

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

Malaysia-China Relations: China Risks a Neocolonialist Tint


September 3, 2018

Malaysia-China Relations: China Risks a Neocolonialist  Tint

By: Toh Han Shih

https://www.asiasentinel.com/opinion/malaysia-china-risks-neocolonialist-tint/

Image result for Mahathir in China 2018

 

At the end of his August 17-21 China visit, Malaysian Prime Minister Mahathir Mohamad announced that US$22 billion of Chinese-backed infrastructure projects in his country would be temporarily or permanently cancelled. The world will be watching China’s subsequent actions to see whether they will take on a neocolonialist tint.

The Belt and Road Initiative is Chinese President Xi Jinping’s grandiose plan to connect China with South, Central and Southeast Asia, the Middle East, Russia, Africa, Latin America and Europe through infrastructure projects including roads, ports, airports and railways.

The broad geographic reach of the BRI, as it has come to be known, has raised questions whether China intends to use this project for imperial expansion. As Asia Sentinel has previously reported, Sri Lanka, Cambodia and Pakistan have found themselves so deep in debt to the Chinese that there are fears political domination will follow. The risk is that Malaysia is on the same course.

The postponed Malaysian projects include an East Coast Rail Link and two energy pipelines.  Mahathir said told a Beijing press conference on Aug. 21 that the three would be “deferred until such time we can afford, and maybe we can reduce the cost also if we do it differently. It’s all about borrowing too much money which we can’t afford, can’t repay, and also we don’t need those projects for Malaysia at this moment.”

The vast majority of the funding for three — US$20 billion for the rail link and US$2 billion for the pipelines – has been supplied by the Export-Import Bank of China (Exim Bank), a state-owned policy lender. Chinese state-owned firms are the main contractors of these three projects, raising criticism that Malaysians are being denied jobs, as they have been in several countries where the belt and the road have reached.

At a press conference of China’s Ministry of Foreign Affairs on the same day, when asked about the cancellation of these projects, a Chinese foreign ministry spokesman said, “Of course, cooperation between any two countries may encounter some problems, and different views may emerge at different times. These problems should be properly resolved through friendly consultations without losing sight of the friendship enjoyed by the two countries and the long-term development of bilateral ties, which, I can assure you, is also an important consensus reached during Prime Minister Mahathir’s visit to China.”

Image result for Mahathir in China 2018

Dr. Mahathir Mohamad with Ali Baba’s Supremo Jack Ma

Mahathir was tactful enough not to criticize China for these stalled projects, but to lay the blame on his predecessor Najib Razak, who had approved them projects while he was Malaysia’s premier. After being ousted in a shock defeat in the Malaysian elections on May 9, Najib is facing corruption charges over the hugely mismanaged and corrupt 1Malaysia Development Bhd, backed by the Ministry of Finance.

However, Mahathir warned China against being a neocolonialist. At a press conference in Beijing with Chinese Prime Minister Li Keqiang on August. 20, when asked by Li whether he supported free trade, Mahathir replied, “I agree free trade is the way to go, but, of course, free trade should also be fair trade. We do not want a situation where there is a new version of colonialism happening because poor countries are unable to compete with rich countries, therefore we need fair trade.”

Ironically, Chinese state propaganda expresses similar opposition to colonialism, in its messages conveyed in two Beijing museums, the National Museum and the China Railway Museum. As stated part of the reason for the Republican Revolution of 1911 was the Chinese people’s opposition to foreign domination of China’s railroads. By 1911, foreign powers, including Russia, Japan, Germany, Britain and France, controlled 93 percent of China’s railways, a display in the National Museum pointed out. The Qing government had to pay off huge debts to foreign banks which had bankrolled these railroads.

Around the turn of the 20th century, the Qing government nationalized railways owned by private Chinese businesses, then sold them to foreign interests. This sparked a rebellion, causing the Chinese imperial government to transfer troops from the Chinese city of Wuhan to quell a rail revolt in Sichuan province. As a result, the Wuhan garrison was undermanned, which enabled an uprising in Wuhan to succeed in October 1911, which in turn toppled the Qing dynasty.

Going forward, the Chinese government must avoid provoking resistance to Chinese-funded infrastructure projects in BRI countries whose governments and peoples fear dependency, just as China was reduced to a semi-colonial state by foreign dominance of its infrastructure. Currently, BRI projects are mostly financed by Chinese state-owned banks, just as foreign banks funded most of the railway in China during the Qing dynasty.

At the Aug. 20 press conference, Mahathir expressed his wish that Beijing will be sympathetic to Malaysia’s heavy debt and help resolve its fiscal problems. At the press conference on August 21, the 93-year old leader said, “I believe China itself does not want to see Malaysia become a bankrupt country.”

The Chinese government has a vested interest in ensuring Malaysia’s economy is not sunk by crushing debt if Beijing and Chinese state-owned firms wish to avoid a repeat of the derailment of a US$7.5 billion rail project in Venezuela.

On April 11, 2013, the South China Morning Post reported that this 475 km railway, built by the state-owned China Railway Group, was delayed because the Venezuelan government was unable to pay the entire US$7.5 billion contract. The Venezuelan government owed China Railway US$400 million to US$500 million, Li Changjin, the chairman of China Railway, was quoted as saying. “The reason is the Venezuelan government has no money.”

Onsite media reports in 2016 showed China Railway’s facilities in its Venezuela project were apparently abandoned.

Since 2013, Venezuela’s economy has been in a dire state, with high inflation and difficulty repaying its debts. If Beijing wants the BRI to succeed in countries like Venezuela and Malaysia, it must ensure that costly infrastructure projects do not harm these countries’ economies. Otherwise, trade and investment between them and China will suffer.

Image result for China's ECRL Project

During their August 20 meeting, Xi told Mahathir their nations should have pragmatic cooperation, seeking innovative new models of cooperation. Xi must find viable models of cooperation over BRI if he wishes to avoid blowback against Chinese projects in Malaysia. Only then can Xi demonstrate that Belt and Road is not a Trojan Horse for Chinese imperialism, and convince nations to accept the vast infrastructure projects.

Toh Han Shih is a Singaporean writer in Hong Kong

Malaysia: Protect our Financial and Economic Resilience


August 29, 2018

Malaysia: Protect our Financial and Economic Resilience

by Martin Khor

http://www.thestar.com.my

Image result for happy national day malaysia 2018

As we found out in the 1997-99 financial crisis, and as the Turkey implosion is now reminding us, it is crucial to defend our economic independence, and that can be done only by keeping out of a debt crisis.

IT’S a few days more to National Day. It’s a good time to remember that nothing is more precious than our independence, where we have the right and means to determine our own economic and social policies.

With that freedom and space, the country and its leaders must then make and implement good policies and practices that improve the people’s lives and well-being.

This is easier said than done. A wrong turn on the road can land the country in trouble, and its independence can even be snatched away.

The new Pakatan Harapan government has highlighted how government borrowings had increased explosively under the previous regime, until the country was on the brink of a debt crisis.

Image result for Malaysia in Debt

Averting that trap has correctly been a top priority of the government during and after its first 100 days.

Prime Minister Tun Dr Mahathir Mohamad’s trip to China last week was aimed at addressing the high cost of three projects. Their cancellation or postponement results in compensation costs, but these will be less wasteful than pouring money into the over-priced projects.

Image result for malaysia national debt 2018

Malaysia’s ex-Finance Minister thinks that he is a Fiscal Genius. He has been charged with corruption and abuse of power.

There is also the 1MDB saga and many other direct or government guaranteed loans that went sour. If loans are taken for projects that do not yield enough revenue to service the debts, they add to the problem. And if the total loans are huge, the government is in trouble.

Since the federal government debt has reached one trillion ringgit or more, it is imperative to bring it down to a manageable level. Not an easy job at all.

Already a large part of the government budget must be set aside to service the debt, with less available for operations and development.

Some of the Pakatan manifesto promises will have to take longer to fulfil because there is less money. Many understand that saving the country from economic disaster is more important than having goodies now that we can’t afford.

For example, cancelling all highway tolls just can’t be done now, and may be unwise even later; at the least, it should be selectively done. Revenue should be raised for example by increasing “sin taxes” on cigarettes and gambling, and by new taxes on sugar-filled products, including soft drinks.

Many projects on the drawing board or in the pipeline should be reviewed. Even some projects that make sense may need to be postponed. Those that are not economically feasible – they can’t yield sufficient revenue – should not be implemented, unless they are really urgently needed.

Besides their overly high cost estimates, some projects have projected revenues that are unrealistically hiked up, for example, those that rely on over-blown estimates of the numbers of people who will use a highway or a train service.

In designing and carrying out reforms, it is important that the government ensures that the costs of policy adjustments do not fall on the bottom sections of society.

While the focus has been on government debt, it is also necessary to carefully manage the country’s external debt. These are debts owed to foreigners and foreign institutions by the government and its enterprises, private companies and banks.

In recent years, the country’s external debt has been growing, reaching RM936bil at end-June. This comprises the external debt of government (RM184bil), banks (RM354bil), other institutions including companies (RM387bil) and monetary authorities (RM12bil).

About two-thirds of the total debt is denominated in foreign currency (mainly US dollars) and a third (mainly government bonds) are ringgit-denominated.

Though the external debt level is high, Malaysia currently does not have a problem servicing it. The international reserves – RM421.7bil at end-June – are sufficient to cover the debt servicing costs. There is a need, however, to keep close tabs because the international situation has darkened considerably. And many countries, Malaysia included, are affected.

A “perfect storm” has in fact started. The United States has stopped pumping billions into its banking system, thus reversing its quantitative easing policy. So there is now less liquidity and US interest rates are rising.

Funds that surged into emerging economies are moving out. Currencies of developing countries are declining against the US dollar, and their stock markets are declining. The trade war is adding to the gloom.

All that’s needed is a trigger to set off a chain of events. This seemed to have arrived with the currency crisis in Turkey.

The country was already very vulnerable, with a big current account deficit, large external debt, low foreign reserves and high inflation. When the US doubled the tariffs on Turkey’s steel, that triggered an exodus of funds from Turkey and a fall in its currency, which has lost 40% of its value against the US dollar since the start of the year.

The Turkish government is now in full battle mode, trying to keep the country from having to go to the International Monetary Fund for a bailout. It is in a tough fight trying to defend its economic independence.

Spooked by the Turkey crisis, on top of the trade war, foreign funds in the past few weeks have been leaving many developing countries, including Malaysia.

The dreaded term “contagion effect” is increasingly used to describe the situation. Most vulnerable are countries that have high external debts, current account deficits and low reserves. Fortunately Malaysia is not in the frontline of these crisis-prone countries.

But there is global turbulence on the near horizon, and we should prepare for it, on top of the efforts to control the domestic problems of government debt, budget deficit, unviable projects, a high cost of living and a host of social issues.

As we found out in the 1997-99 financial crisis, and as the Turkey implosion is now reminding us, it is crucial to defend our economic independence, and that can be done only by keeping out of a debt crisis.

A country forced to take a bailout loan from the IMF faces conditions that are often humiliating and inappropriate. It loses its independence.

So let us happily celebrate the Merdeka anniversary, for there is much to be glad about this year with a new government that brings the promise of a New Malaysia.

But let us also remind ourselves of the importance of retaining enough freedom to make our own policies, and to ensure we do make the right policies to maintain and defend our economic independence and national sovereignty.

Martin Khor is adviser of the Third World Network. The views expressed here are entirely his own.