Malaysian Reactions and the Political Calculus of Prime Minister Najib’s White House Visit


October 19, 2017

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Number 401 | October 18, 2017

ANALYSIS

Malaysian Reactions and the Political Calculus of Prime Minister Najib’s White House Visit

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On September 12, 2017, Malaysian Prime Minister Najib Razak met with US President Donald Trump in the White House as part of his three-day visit to the United States. Within Malaysia, reactions to the meeting – in terms of both optics and substance – are bitterly divided; falling mostly along political lines. Notwithstanding the domestic reactions, Trump’s invitation to the controversial Malaysian prime minister and the deliberate shirking of the 1 Malaysia Development Berhad (1MDB) issue during the visit leave Najib in a position of perceived strength as he looks to extend his tenure as Prime Minister.

Meeting Hailed as a Milestone by Some, a Disgrace by Others

The Trump-Najib meeting went smoothly in diplomatic terms, with both leaders treating each other warmly and discussing agreeable agenda items. In the public meeting Trump extolled Malaysia’s role in investing in the United States, countering ISIS, and limiting its ties with North Korea. The Malaysian prime minister in turn offered “a strong value proposition” to the United States in terms of helping boost the US economy and being a loyal partner in eradicating terrorism. A joint statement addressed enhancing US-Malaysia defense ties, Malaysia’s progress to obtain visa free status to the United States, the situation in the South China Sea, the Rohingya crisis, and protecting human rights. If there were any private disagreements, they were not leaked.

For Najib’s domestic supporters and prominent government lawmakers, the meeting with Trump was seen as an unprecedented success and a legitimization of Najib as Malaysia’s elected leader. The optics couldn’t be better. The invitation to visit the White House was the first since former Prime Minister Abdullah Badawi visited in 2004 and comes in the first year of the Trump presidency. Additionally, Najib’s visit was the second by an ASEAN leader, after Vietnamese Prime Minister Nguyen Xuan Phuc, and ahead of Prime Minister Lee Hsein Loong of Singapore – traditionally America’s most trusted Southeast Asian partner.

Substantively, Najib’s supporters saw the meeting and its deliverables as recognition of Malaysia as a key strategic partner and successful economy. In public remarks during the meeting in the Cabinet Room between the Malaysian delegation and Trump administration officials, Trump praised Najib’s domestic counterterrorism efforts against ISIS, highlighted Najib’s reluctance to do business with North Korea any longer, and hailed Malaysia as a big investor in the United States. Malaysia’s mainstream and government-affiliated media emphasized this, crediting Najib with expanding Malaysia’s international profile and role. Najib also scored a PR win with the US-Malaysia joint statement that condemned the violence against ethnic Rohingyas in Myanmar, touting it as a promise kept to Malaysians to raise the issue with the United States.

Image result for Trump and Najib at The White HouseGua Tolong Lu, Lu Tolong Gua (You help me, I help you)

This rosy picture of Najib’s visit, however, did not reflect the opinions of all Malaysians. Many – especially opposition supporters – while acknowledging the importance of their leader meeting the US president, focused on Najib’s personal and political gains, rather than gains for Malaysia. To them, optics surrounding the meeting were questionable. First, Najib and his entourage were alleged to have stayed at the Trump International Hotel, giving the impression that Najib sought to curry favor with Trump. Given media attention on possible conflicts of interest on the part of the US President, the decision to have a presence at the Trump hotel seemed like a calculated risk Najib was willing to take. Second, the glaring absence of a joint press conference during Najib’s visit to the White House reinforced the view among Najib’s opponents that he was skirting controversial questions – namely the 1MDB scandal and political repression in Malaysia.

Image result for Malaysia buys BoeingMany Malaysians were dismayed by the commercial “value proposition” offered by Najib to the United States.

 

In terms of deliverables, many Malaysians were dismayed by the commercial “value proposition” offered by Najib to the United States. Najib had announced that Malaysia Airlines, whose majority stake is owned by state sovereign wealth fund Khazanah Nasional, will purchase high-capacity, long-distance Boeing aircraft worth $3 billion, with the possibility of more purchases in the future. Additionally, Najib stated that Malaysia’s retirement fund, the Employers Provident Fund (EPF), intended to invest $3-4 billion in Trump’s initiative to redevelop American infrastructure. Malaysians were indignant at possible diversion of funds to the US instead of fixing deteriorating infrastructure back home. And with the rising cost of living being a sore point for many people, the political opposition ridiculed Najib as being aloof and for selling Malaysia’s assets for his personal benefit. Najib’s fiercest critic, former Prime Minister Mahathir laughed at the idea of a developing country helping a developed country and opined that this was another illustration of Najib giving money to obtain political support.

“Exercises, training, and interoperability are the new emphases, and many Southeast Asian countries – unlike most in the South Pacific – no longer need extra funding to participate in exercises.”

The importance of protecting human rights aspect in the joint statement will appear ironic to many Malaysians as the authorities have been prosecuting opposition members and dissenters and stifling civil society activism in recent years

1MDB – the Elephant in the Room    

  
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The 1MDB issue was conspicuously left out at the Trump-Najib Meeting

At the time of the meeting, the 1MDB scandal continued to dog Najib. The US Justice Department was in the midst of civil lawsuits seeking to seize US assets worth about $1.7 billion linked to 1MDB. But the subject was conspicuously left out in all official proceedings. The only response from the White House communications when quizzed by reporters after the meeting was that they weren’t aware of conversations that came up in the meeting.

To Najib, his political coalition, and supporters, this omission was strategically crucial because it lent legitimization to Najib’s position as Malaysia’s leader and it gave him a strong case to repudiate the opposition’s charge linking him to the 1MDB scandal. Najib flying in to meet Trump without being denied entry or arrested by US law enforcement – as was claimed would happen by the political opposition – was spun by Najib’s supporters as proof that the opposition’s 1MDB allegation was nothing more than a political ploy. Domestically, Najib hopes to capitalize on this by allaying suspicions supporters and political fence-sitters have about his culpability in the scandal.

About the Author

Matthew Kah Weng Wong is a former researcher at the East-West Center in Washington. He can be contacted at matthew.wongkw@gmail.com.

The East-West Center promotes better relations and understanding among the people and nations of the United States, Asia, and the Pacific through cooperative study, research, and dialogue.

Established by the US Congress in 1960, the Center serves as a resource for information and analysis on critical issues of common concern, bringing people together to exchange views, build expertise, and develop policy options.

The Asia Pacific Bulletin (APB) series is produced by the East-West Center in Washington.

APB Series Editor: Dr. Satu Limaye, Director, East-West Center in Washington
APB Series Coordinator: Peter Valente, Project Assistant, East-West Center in Washington

The views expressed in this publication are those of the authors and do not necessarily reflect the policy or position of the East-West Center or any organization with which the author is affiliated.

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How not to be poor, Irwan Serigar-style


October 3, 2017

COMMENT: This is going to be a rather brief reaction to my friend Nadeswaran’s article. It is easy  for Mr. Siregar to comment about foreigners like Indonesians, Bangladeshis and Filipinos making a living. He forgot that the Malays are making big bucks by being UMNO cronies and parasites sucking blood out of the economy.

Nades has not mentioned one thing about the Irwan Serigar-style and that is, one has to convert to Islam, use Muslim name, be more Malay than a Malay, and finally become Najib’s cheerleader. Both Serigar and Ali Hamsa  got it right and both are prosperous with directorships and status for a long long time to come (beyond the age of 70).–Din Merican

How not to be poor, Irwan Serigar-style

By R. Nadeswaran@www.malaysiakini.com

COMMENT | As one steps off the escalator at a supermarket in Petaling Jaya, there are makeshift stalls in the walkway leading to the shopping trolley rack. The mobile phone repair and accessory stall cannot be missed. Manning it are two Bangladeshi and business is booming.

Down the aisle, there’s a Pakistani in salwar-kameez pushing his ware – carpets. Further down, is an Indonesian woman selling telukung (head scarves). The murukku stall opposite the money changer is staffed by a Sri Lankan.

In the neighbourhood kopi tiam, two Filipinas are busy on the grill dishing out chicken chops and steaks. Elsewhere, the Burmese cook is frying Hokkien mee.

Yes, Treasury Secretary-General Mohd Irwan Serigar Abdullah is right. Foreigners are surviving and thriving in Malaysia. He argued that if Indonesians can make a living here, Malaysians should be more prosperous.

Well said, Sir. But has it ever occurred to you that in each of the instances cited above – and in the case of Indonesian traders in Chow Kit – they are all operating illegally, if not through dubious means.

Foreign workers are allowed into the country through work permits – applied by and issued to employers. Conditions in such permits stipulate their scope of employment. More importantly, nothing in these documents state that they can engage in business or be self-employed.

Are authorities closing one eye?

So, how do they end up behind the wok or engaged in selling shirts and jeans, or for that matter, pisang goreng? Aren’t these activities prohibited? If so, are we to assume that these are illegal immigrants?

 

Therefore, how come they can apply and get licences? Are the local authorities ‘tutup satu mata’ (closing one eye) and approving such applications? One may argue that they have valid work permits but the caveat and government’s ethos include: No hawker or petty trading licences for foreigners. If they don’t have licences, why aren’t they being shut down?

So, are some local authorities defying government policies and using their powers as little Napoleons to milk the system for their own benefits? Or is the Ali-Baba system flourishing in a different way? Previously, if it was the Malays who were selling or leasing their licences to the Chinese, now the trend is for Malay traders to ‘pajak’ (lease) their licences to their Indonesian brethren.

So if the licence was an issue, it has been ‘kau tim’ (settled) and rules and regulations have been compromised. But how do foreigners occupy and operate in hawker centres that are actually owned by local authorities?

Parasitic rent-seekers

A similar arrangement comes into play. The local (usually a political party minnow with connections) is allocated the stall and pays a rental of RM60 monthly to the council. He then ‘pajak’ (leases) the stall for RM1,000 to the foreigner. For doing nothing, he gets RM940. Why should he work when he is making money by sitting at home and shaking legs? He is part of the rent-seeking crowd, perhaps on a smaller scale.

Aren’t these the same traits we see before each festive season when “special” trading licences are issued? Even the Malaysian Anti-Corruption Agency (MACC) probed claims that licences change hands for a few thousand ringgit. Why work when you can sit back and enjoy the fruits of your connections?

The Immigration Department does not approve work permits for “salesmen” – but a walk along Petaling Street in Kuala Lumpur will reveal that Bangladeshis are now running the operations for the ‘towkay’ (boss). Even if they have permits as general workers, engaging in a different trade certainly breaks the law.

“If they have hands and legs and can walk, they can make a living in Malaysia,” says Irwan Serigar. But these are not enough. Are locals accorded the same opportunities to use their talents and skills and become entrepreneurs?

Irwan Serigar proudly pronounces that “if we go to Chow Kit, half of them are Indonesians”. Yes, Sir, but how and why have they been allowed to operate there? Isn’t the policy of the government to promote local petty traders?

Local authorities are quick to “raid” local traders for the slightest breach of licencing laws but yet, these foreign traders have been allowed to operate and thrive. The Immigration Department’s crackdown, for some unknown reasons, has never covered hotspots like Chow Kit.

Being able-bodied does not take the ordinary local man anywhere. Let us not forget the politics of patronage, where even the guy who puts up the posters or arranges the chairs at the ceramah expects to be rewarded in one way or another. A hawker’s stall guarantees him life-long pension!

With the election around the corner, don’t expect a clean-up of the rent-seeking culture that has entrenched itself in the system. While the small man gets three figures from his small operation, in existence are vultures who earn millions through similar arrangements.

Unless the government has the will and determination to put an end to such a system, local traders will continue to be sidelined and be subservient to foreigners who have learnt the workings of the system.

 

Najib’s RM43bil Boeing purchase that wasn’t


September 26, 2017

Najib’s RM43bil Boeing purchase that wasn’t

by P. Gunasegaram@www.malaysiakini.com

For Najib to use this process and to further even offer to persuade AirAsia to buy General Electric engines from the US is rather disingenuous to say the least and puts these two Malaysian airlines in a needlessly uncomfortable position, constraining their full range of options.–P. Gunasegaram

Image result for Najib at thr White House with Donald TrumpDid Donald Trump buy Najib’s Value Proposition–Gua Tolong Ekonomi Amerika? Say what you like about President Trump, he is no fool. He could recognise a con artiste 12,000 miles away. One could speculate that State Department and Secretary of State Rex Tillerson would have advised the US President not to take the Malaysian Prime Minister too seriously. –Din Merican

 

A QUESTION OF BUSINESS | Prime Minister Najib Razak had to dig deep to offer US President Donald Trump something tangible but even the much-touted US$10 billion, or RM43 billion, Boeing jet purchases turn out to be less than what they seem.

In his meeting with Trump earlier this month, Najib offered three things to help the US economy, including what Trump said was US$10-20 billion to buy Boeing jets and General Electric engines. Najib thanked Trump for the meeting and said that he came with a value proposition to “strengthen” the US economy.

“I come with three specific proposals,” he said. They were: 1. Increase the number of Boeing planes committed from 25 B-737s and eight 787 Dreamliners with the “strong probability not possibility that 25 more 737 Max10” will be bought in the near future. Within five years, these would be worth “beyond RM10 billion”. Also, Najib said he will try and persuade AirAsia to buy GE engines.

2. The Employees Provident Fund (EPF) has so far invested over US$7 billion in equity in the US and intends to invest a further US$3 billion to US$4 billion “to support your infrastructure re-development in the US”.

3. Malaysian sovereign fund Khazanah Nasional has investments of US$400 million in Silicon Valley in high-tech investments. It intends to increase investment here.

Enough has been said about his proposals to “strengthen” the US economy and the US$10 billion plus purchases of Boeing jets taken together with EPF’s and Khazanah’s investments will be a mere drop in the ocean of an economy in 2016 of nearly US$19 trillion (over RM80 trillion). Even US$20 billion is just 0.0001 percent of US$19 trillion, showing how little Najib’s offers will help the US economy!

The EPF already has a policy of overseas equity investments and the US, which has the largest equity market in the world, must be a major target market for the EPF already to diversify its portfolio and increase its returns – nothing new there. Ditto for Khazanah Nasional’s US$400 million investment in Silicon Valley which may increase in the future.

But even the RM43 billion that Malaysia is offering in terms of jet purchases may well not turn out to be the full sum that Malaysia Airlines will spend on Boeing jets.

After confusion over its future fleet policy and purchases, with talk of reopening European routes closed during the rationalisation and flying again to the US west coast and seeming contradiction with its earlier fleet programme, Malaysia Airlines issued a statement to clarify the proposed purchases.

The airline said it has a firm order of 25 Boeing 737 aircraft “with everything else being optional”.

“The options, as well as a variety of other arrangements including the recent MoU with Boeing, will allow us to have some flexibility in deciding which aircraft suits our operational environment best,” it said.

Disingenuous offer

In 2016, Malaysia Airlines made 25 firm orders for the 737-MAX8 aircraft and 25 options. The statement said. “The aircraft were ordered as pure replacements for existing planes, due for replacement beginning 2019.”

“In June 2017, we entered into a new agreement with Boeing to allow us to choose their new larger 737-MAX10 aircraft for 10 out of the previous firm order of 25 737-MAX8. With this agreement, Malaysia Airlines can decide to take either the MAX8 or MAX10. The MAX10 aircraft are expected to commence delivery in early 2021.”

That means the only firm order is for the 25 Boeing 737-MAX8 and MAX10 aircraft. While the statement did not give the cost, at a price of around US$100 million a plane, 25 will cost around US$2.5 billion or RM10.8 billion, about a quarter of the RM43 billion of Boeing purchases bandied about.

But the addition of the eight Boeing 787 Dreamliners is something new, although it remains an option for now as well as the additional option to purchase a further 25 Boeing 737s. However, Najib’s statement at the meeting with Trump implied the Dreamliner purchase was already committed while there was “probability not possibility” of the extra 25 Boeing purchases.

Malaysia Airlines said in its statements that it has been exploring various options for wide-body  aircraft, for possible delivery in 2018 and 2019, “to address the rapid growth in international sales which requires additional wide-body aircraft”.

 

While it has been talking about replacing the Airbus 380 on the KL-London route with the lower capacity Airbus 350, there was no previous discussion of using the Dreamliner for any of the routes it has been planning to reopen or initiate.

Malaysia Airlines said the list price for the eight Boeing 787-9 Dreamliner aircraft is some US$2.5 billion and it “will negotiate extensively to ensure the best value on confirmation of order”.

It added that if the order is confirmed, the initial 787-9 Dreamliner deliveries are planned for operating Asian services. “The growth of the Malaysian economy and the increasing globalisation will allow these aircraft to commence new long-haul services from 2020 onwards if sufficient profitable demand exists,” Malaysia Airlines said.

Clearly, Malaysia Airlines is still rethinking its options for its fleet. For Najib to use this process and to further even offer to persuade AirAsia to buy General Electric engines from the US is rather disingenuous to say the least and puts these two Malaysian airlines in a needlessly uncomfortable position, constraining their full range of options.

That has all the hallmarks of not just political expediency but desperation to show publicly that the US, despite the extensive investigations of 1MDB by its Department of Justice which has unearthed at least US$4.5 billion in theft, still endorses him as a leader.

But it looks like that Boeing deal and the other announcements have boomeranged on him, putting him on even more a slippery slope than before. It will be pretty hard for Najib to spin that the Trump meeting was a triumph although attempts are being made to do just that.


P GUNASEGARAM says suppressing truth is much like holding a ball under water – it has a way of surfacing and resurfacing despite attempts at keeping it submerged. E-mail: t.p.guna@gmail.com.
Read more at https://www.malaysiakini.com/columns/396288#x4aDtSofJBgqsH4q.99

 

MAS Fleet Modernization–Massive Investment for Malaysia


September 19, 2017

COMMENT: Managing a national airline is demanding business. Buying  and selling planes is an integral part of it.  Buying an aircraft, in my opinion, is not like buying groceries in a supermarket.  It involves judicious financial and technical evaluation. Planes have to be replaced from time to time and old ones sold. Safety of passengers is always a major consideration and that is why we should not make a political issue of the recent announcement by the Prime Minister Naib Razak in Washington DC  at The White House of the massive MAS-Boeing deal and the signing of the Memorandum of Understanding between them on September 12, 2017.

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The MAS-Boeing Deal during Prime Minister’s recent visit to see President Donald J. Trump at The White House.

I used to be Sime Darby’s representative when we were consultants to Boeing on aircraft sales to MAS. It was during the time in 1980s when Tan Sri Aziz Abdul Rahman was the Chairman and Dato Kamaruddin Ahmad was Managing Director. My Boeing counterparts were Jim Chorlton and Walter Nielsen.

The Boeing representatives (I knew both Jim and Walter well and held them in high esteem) were thoroughly professional and so were my counterparts in Malaysia Airlines  who were competent and tough negotiators.

I know for a fact that MAS Board never authorised the acquisition of new planes unless the management made a solid commercial and financial case for them. I do not think that this practice has been abandoned today.

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Boeing–The Next Generation 737

I know also that Boeing was not interested in selling planes unless they are also convinced that MAS needed them. The fact that MAS and Boeing have a long term relationship is because Boeing is respected and trusted as a reliable and technically competent business partner.

As recently as late July this year, I flew on a  MAS Boeing 737-200 aircraft to return to Phnom Penh. It was an old aircraft, at least 10-20 years old. So I think, MAS is making the right decision to take an option for 25 Boeing 737 aircraft. It is because their fleet of 737s needs to be replaced for economic, financial and safety reasons.–Din Merican

MAS Fleet Modernization–Massive Investment for Malaysia

A QUESTION OF BUSINESS | Among Prime Minister Najib Razak’s puzzling announcements in his much-heralded meeting with US President Donald Trump was that Malaysia would spend US$10 billion, or a massive RM43 billion, purchasing passenger aircraft from US’ Boeing.

Flanked by top advisers in the Cabinet Room, Najib told Trump that Malaysia Airlines would buy 25 Boeing 737 jets and eight 787 Dreamliners, and would probably add another 25 737s in the near future – a deal he said would be worth more than US$10 billion within five years.

These came as a bolt from the blue as the purchase of the eight 787s is something which Malaysia Airlines Bhd, the government’s wholly-owned airline through Khazanah Nasional Bhd, has not announced before while the airline is actually in the process of cutting down on its narrow-bodied 737 fleet.

It is still making losses while it maintains it will turn around to profit in 2018. Reports put the loss at over RM450 million in 2016, at a time when airlines worldwide were making money.

According to the International Air Transport Association, airline industry profits reached a cyclical peak in 2016 of US$35.6 billion (US$153 billion), and is still strong at an estimated US$31.4 billion (RM135 billion) for 2017, expected to be the eighth year in a row of aggregate airline profitability.

That Malaysia Airlines is making large losses at a time when many airlines are making good or even record profits does not bode too well for the company. Contrast with low-cost leader AirAsia which made a net profit of over RM2 billion for 2016, up from RM541 million in 2015.

Over the past few years, Malaysia Airlines has been scaling back operations under a RM6 billion rationalisation programme which saw it cut back many routes and mothball some of its existing aircraft while laying off thousands of staff.

Its Chief Executive Peter Bellew even told Reuters in April that its six Airbus 380s, the largest passenger aircraft in the world, are being put into a new airline that will use it to fly passengers undertaking the Muslim pilgrimages of haj and umrah.

The news agency reported that Malaysia Airlines has been trying to find a use for its A380s since it failed to sell them. The airline previously said the A380s do not make economic sense at a time when it is cutting costs.

The airline has flip-flopped from its earlier policy of becoming a regional carrier and announced a change in its wide-body aircraft policy. According to CAPA Centre for Aviation, Malaysia Airlines is planning to launch a new long-haul route in 2018, using its new A350 fleet.

“Destinations in continental Europe are under evaluation. London has been Malaysia Airlines’ only destination in Europe since early 2016, when the flag carrier suspended services to Amsterdam and Paris as part of the last phase of its network restructuring project.

“Malaysia Airlines plans to use four A350s to replace A380s on its twice-daily London service under a recently accelerated schedule which includes transitioning the first London flight in 1Q2018. The other two A350s were initially intended for medium haul routes within Asia Pacific, including Auckland, but are now earmarked for a new not yet decided long-haul route.”

As a result, Malaysia Airlines will be reducing capacity on the Kuala Lumpur-London route by over 40 percent before the start of the 2018 peak summer season. First class capacity will shrink by 50 percent, and business class capacity by nearly 50 percent, while economy seat capacity will be cut by approximately 40 percent, CAPA quoted Bellew as having said.

Confusing policy

Malaysia Airlines is also planning to nearly double the size of its passenger widebody fleet over the next few years – from 21 aircraft to 36 aircraft, CAPA said. The lease of approximately 15 additional A330s will enable Malaysia Airlines to upgauge several routes from the 737-800 as it shrinks its narrow-body fleet.

It is clear from this that Malaysia Airlines plans did not include the purchase of Boeing 787 Dreamliners. That raises the question of whether Najib is taking into account the interests of Malaysia Airlines, whose confusing policy, flip-flops and extreme lack of transparency already are major problems for an airline already under rationalisation.

Also confusing is the addition of up to 50 Boeing 737s to the purchase at a time when Malaysia Airlines has been widely reported to be cutting its reliance on narrow body aircraft, those typically used for short trips with limited carrying capacity.

While Malaysia Airlines plans to expand its widebody fleet by approximately 15 aircraft over the next three years, it plans to reduce its narrow-body fleet by a similar number. Bellew told CAPA in June that Malaysia Airlines had completed negotiations covering the return of six 737-800s in the second half of 2017, resulting in a reduction in the narrow-body fleet from 54 to 48 aircraft. He added that he expects the 737-800 fleet will be reduced by a further eight aircraft over the next few years, to approximately 40 aircraft.

Commitments to purchase 25 narrow-bodied Boeing 737s with further commitments to purchase another 25, are clearly contradictory to what Malaysia Airlines had planned to do just three months ago.

Najib’s announcements were made to garner Trump’s support in the US and to brighten up an increasingly gloomy image he has in Malaysia. They are not in the interests of Malaysia Airlines and the country in general, continuing upon other bad, desperate decisions he has made recently which are downright dangerous to the country.

He should have left the decision on buying aircraft entirely to the management and board of Malaysia Airlines. The problem is not necessarily government ownership but bad appointments by government compounded by ill-informed government interference.


P GUNASEGARAM is an independent consultant and writer. E-mail: t.p.guna@gmail.com.

 

The mealy-mouthed cowardice of America’s elites after Charlottesville


August 23, 2017

The mealy-mouthed cowardice of America’s elites after Charlottesville

by Fareed Zakaria

https://www.washingtonpost.com

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Much of the United States has reacted swiftly and strongly to President Trump’s grotesque suggestion that there is a moral equivalence between the white supremacists who converged last weekend on Charlottesville and those who protested against them. But the delayed, qualified and mealy-mouthed reactions of many in America’s leadership class tell a disturbing story about the country’s elites — and the reason we are living in an age of populist rebellion.

The least respected of today’s leaders are, of course, politicians. The public largely views them as craven and cowardly, pandering to polls and focus groups. And that is how too many Republican officials have behaved in the face of Trump’s words and actions. With some honorable exceptions, men and women who usually cannot stop pontificating on every topic on live TV have suddenly gone mute on the biggest political subject of the day.

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HR McMaster with Donald Trump.

I know. They worry about the base, about primaries, about right-wing donors. But shouldn’t they also worry about their country and their conscience? Shouldn’t they ask themselves why they went into public service in the first place? And if they see someone at the highest level trampling on the values of the country, shouldn’t they speak up — directly, forcefully and without qualification?

Business leaders, meanwhile, are still among the most respected and envied people in the United States. They run vast organizations, get paid on a scale that makes their predecessors from just 25 years ago look middle-class, and live in a bubble of private planes, helicopters and limousines. In other words, they have all the wealth, power and security that should allow them to set standards and lead.

Image result for US Business Leaders are cowards

Again, with some honorable exceptions, business leaders have been cowards. Most of them surely think Trump is a charlatan, a snake-oil salesman. In the past, some chose not to do business with him because they believed he was unethical. Others were initially amused by his candidacy but regarded his rhetoric on trade, immigration and refugees as loathsome. And yet, almost none spoke out against him. Few even distanced themselves after Trump blamed “many sides” for the violence in Charlottesville. Had Merck chief executive Kenneth Frazier not resigned from one of Trump’s advisory boards and Trump not doubled down on his initial comments, it is unclear how many other CEOs would have spoken out. And even then, some jumped ship from the advisory councils only when it became clear that there was really no alternative.

The United States’ technology pioneers might be the most admired people on the planet. They are viewed as smart, innovative and successful. Many are not just rich but also claim to be wise beyond words, prophets of the future who opine on space travel and artificial intelligence. Can they not see what is going on right here on Earth at the White House and condemn it?

Where are evangelical Christian leaders on a matter of basic morality? While some have made their voices heard, it is striking how many have not, or have even endorsed Trump’s comments. Do they have a burning moral duty to speak out against transgender bathroom access but not neo-Nazi violence?

The United States once did have more public-minded elites. But they came from a small, clubby world, the Protestant establishment. Not all were born rich, but they knew they had a secure place atop the country. They populated the nation’s boardrooms, public offices and best schools. This security gave them greater comfort in exercising moral leadership.

Today we have a more merit-based elite, what is often called a meritocracy. It has allowed people from all walks of life to rise up into positions of power and influence. But these new elites are more insecure, anxious and self-centered. Politicians are likely to be solo entrepreneurs, worried about the next primary or fundraiser. CEOs live with the constant fear that they might lose their jobs or that their company might lose its customers in an instant. Religious leaders worry that they will lose congregants. These groups may not think they have the luxury to be high-minded, but they do. They are vastly more secure than most people in America, or in human history. If they cannot act out of broader interest, who can?

The public figures who deserve the most praise this week are the military brass. In a remarkable act of leadership for people who actually work under the president, the heads of five branches of the armed forces independently issued statements unequivocally denouncing racism and bigotry. Perhaps this is because the military has been the institution that has most successfully integrated the nation’s diverse population. Perhaps it is because the military remains an old-fashioned place, where a sense of honor, standards and values still holds. The military chiefs have shown why they still command so much respect in the country. America’s other elites should take note.

 

Whither MAS (Malaysia Airlines) in a Political Blame Game


July 18, 2017

Whither MAS (Malaysia Airlines) in a Political Blame Game

by P. Gunasegaram@www.malaysiakini.com

But the way it is going, it may be that Malaysia Airlines may eventually become somewhere between a low-cost and full-service airline, neither here nor there, floundering between small profits and losses – an inconsequential airline in other words. What a comedown for a once proud brand!–P. Gunasegaram

During electioneering, it is common to make political capital out of everything. Malaysia Airlines Bhd was not spared when Prime Minister Najib Abdul Razak blamed one of his “predecessors” at a Hari Raya open house earlier this month for “horrendous decisions”.

Résultat de recherche d'images pour "Malaysia Airlines A380"

Malaysia Airlines (MAS)An Inconsequential  National Carrier

He was very obviously referring to former Prime Minister Dr Mahathir Mohamad, although he did not name him. But to be fair, Mahathir was not responsible for the latest disaster at Malaysia Airlines. Paradoxically this happened largely during Najib’s time.

This latest disaster which resulted in losses of billions of ringgit and required a RM6 billion injection of capital and privatisation in 2014 by Khazanah Nasional Bhd, the previous major shareholder and now sole shareholder, resulted after Malaysia Airlines was turned around in 2007.

What Najib was referring to was the previous disastrous privatisation of Malaysia Airlines, to a Mahathir-Daim crony Tajudin Ramli who bought a controlling near 30% stake in the airline in 1994 for RM1.8 billion. After mismanaging the airline into the ground, he sold back his stake in the airline to the government – at the same price – in 2000. The market price was less than half that.

Turned around in 2007

Najib’s immediate predecessor Abdullah Ahmad Badawi brought in Idris Jala from Shell to turn around Malaysia Airlines in 2005, the same Idris who would head the Performance Management and Delivery Unit or Pemandu at the PM’s Department in 2009 and join the cabinet.

Two years later, in 2007, Malaysia Airlines had turned around. In Idris’ first year on the job, he reduced the losses to RM133 million and turned the company back into the black with a record profit of RM853 million in 2007, according to this letter written by a former investor relations manager at Malaysia Airlines, Song Eu Jin, to Malaysiakini.

“The profit in 2007 was the highest in MAS’ corporate history and was earned through a massive operational cost reduction of RM745 million as well as on the back of record revenues of RM9.4 billion. The profit numbers were real as reflected in the cash balance at that time of RM5.3 billion which had grown from RM1.5 billion at the end of 2005, when Idris joined MAS (Malaysia Airline’s forerunner),” the letter said.

But in 2009, Idris left Malaysia Airlines to join Najib’s cabinet and head Pemandu. A succession of CEOs after him proved to be incapable and sent the airline down back into losses of billions of ringgit yet again. And no mistake about it, this happened during Najib’s time.

Horrendous decisions but by whom?

This is what Najib said at the open house: “The history of MAS was fraught with, I would say, horrendous decisions in the past. I’m not going down that road but that was a nightmare that was inflicted upon MAS that was done by one of my predecessors.

“But I will put it right. I will make sure MAS recovers and becomes one of the leading airlines in the world,” said Najib to applause from thousands in the audience present at the event. How ironic that is when the latest problems occurred during his time entirely.

I have followed the Malaysia Airlines saga over the years – from the 80s onwards and read up its history before that. Idris did turn the airline around solidly although it incurred a huge hedging loss of RM557 million in 2009 on fuel when fuel prices fell. The contracts had to be marked to market.

The way he did this was to focus on two things – yield and load factor. Yield represents the unit amount that the airline got from selling tickets and load factor is a measure of how much aircraft are filled. The right pricing of seats results in the best combination in terms of unit revenues from seats sold and load factor to maximise revenue.

In practice, this revenue management system is extremely complicated and uses sophisticated computer modelling which critically requires right inputs. That focus helped Malaysia Airlines increase revenues, helped along by an important fact – the airlines’ services were among the best in the world, as measured by Skytrax, the industry standard by which airlines are measured. Skytrax gave five-star status to Malaysia Airlines, with less than two handfuls among hundreds of airlines in the world qualifying.

Meantime, on the cost side, Malaysia Airlines’ was among the lowest in the world for full-service carriers but still advances were made here as well. The combined reduction in costs with an accompanying increase in revenues was what turned Malaysia Airlines around under Idris.

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Subsequent CEOs lost focus. They thought budget carrier AirAsia was the competition when Malaysia Airlines was a full-service, five-star airline. Yield dropped, load factors went up too much but still revenues were not enough. Fuel prices continued to climb, exerting further pressure. Revenue management deteriorated. And then came the two unfortunate crashes of 2014 (MH 370 and MH 17) which depressed revenues even further.

When Khazanah Nasional came in with their recovery programme during and post privatisation in 2014, I was flummoxed – nothing about revenue management, it was about cutting costs. But with unit costs for Malaysia Airlines still among the lowest in the full-service industry, revenue management was the key.

Enter Mueller

Khazanah Nasional went on a worldwide search for a CEO and found Christoph Mueller, a German, who reputedly turned around Ireland’s Aer Lingus. He joined in May 2015. He continued with extreme cost-cutting, shrunk the airline to a regional one, maintaining one flight to Europe, London. He made a deal with Emirates (the airline) for code sharing, all but killing Malaysia Airlines’ more international routes.

I was not impressed with him – turnaround means making unprofitable routes profitable, not cutting them and keeping only profitable ones – any fool can do that and show a profit, albeit a shrunken one which will never recover to the levels seen before. It meant that Malaysia Airlines’ main competitors would be the low-cost airlines – yes, AirAsia again.

Mueller’s cost-cutting would lose Malaysia Airlines five-star rating, one of its main assets. Because of the drop in level of service as a result of severe cutbacks, Malaysia Airlines asked not to be rated anymore. Insiders maintain to me that he was scathing about that rating, saying that many airlines had better service than Malaysia Airlines.

That and the frequent reference to Malaysia Airlines’ previous two crashes – both of which could not be pinned on the airline itself – made me wonder whether he was the best person to be running Malaysia Airlines. On the one hand, he runs down highly-rated services, on the other he makes frequent references to crashes to show his difficult position, both not in the interests of the airline itself.

Barely a year into his three-year tenure, Mueller announced his intention to resign “for personal reasons” but six months later in September 2016, he joined Emirates as chief digital officer, the same airline with which he negotiated the code-share agreement as CEO of Malaysia Airlines. What a conflict of interest!

On balance, my opinion is that Mueller was bad for Malaysia Airlines and I find it difficult to understand why his hiring did not have stringent conditions attached about joining competitor airlines.

His successor Irishman Peter Bellew, who took over in July 2016, was then chief operations officer at Malaysia Airlines. He was hired from low-cost airline Ryanair and had no experience in a full-service airline before that. However, he has said that Malaysia Airlines is trying to regain its 5-star status.

Recently I travelled to and fro London on Malaysia Airlines and the service and quality of food have indeed improved, a good sign. But it will take more than that to successfully turn around Malaysia Airlines.

An inconsequential airline

A targeted profit only in 2018 is rather late in the day given that most airlines made good profits recently because of the sharp drop in fuel prices. Despite all that cost-cutting and low fuel prices, Malaysia Airlines is bleeding. Why?

The answer lies in revenue management – how come Malaysia Airlines fares can be lower than AirAsia’s which is a low-cost airline. Surely that is indication that prices have been too low, especially since load factors remain high? Malaysia Airlines has got revenue management wrong and it still remains suspect.

And then strategy – how can you expect to succeed regionally as a full-service airline when there are so many low-cost airlines in the space? Surely you must try the longer international routes and make them profitable instead.

The times I have flown to London on the airline, the flights were full on the A380s. Yet Malaysia Airlines has plans to downgrade this route using lower capacity, smaller A350s. This will substantially reduce its competitiveness in terms of comfort relative to other major full-service carriers.

One more thing, since privatisation nobody knows how much money Malaysia Airlines is losing and what are its yields and load factors. Its performance has become rather opaque because the quarterly reports are not anything like what it was before when it was publicly listed. That makes it more difficult to make conclusions.

But the way it is going, it may be that Malaysia Airlines may eventually become somewhere between a low-cost and full-service airline, neither here nor there, floundering between small profits and losses – an inconsequential airline in other words.

What a comedown for a once proud brand!


P GUNASEGARAM says that Malaysia Airlines has been repeatedly grounded by poor management, not by the alleged inefficiency of its staff. E-mail: t.p.guna@gmail.com.