December 16, 2017
December 15, 2015
Complacency Will Be Tested in 2018
by Stephen S. Roach@ http://www.project-syndicate.org
Despite seemingly robust indicators, the world economy may not be nearly as resilient to shocks and systemic challenges as the consensus view seems to believe. In particular, the absence of a classic vigorous rebound from the Great Recession means that the global economy never recouped the growth lost in the worst downturn of modern times.
“World GDP growth is viewed as increasingly strong, synchronous, and inflation-free. Exuberant financial markets could hardly ask for more.I suspect that today’s consensus of complacency will be seriously tested in 2018”.–Stephen S. Roach
NEW HAVEN – After years of post-crisis despair, the broad consensus of forecasters is now quite upbeat about prospects for the global economy in 2018. World GDP growth is viewed as increasingly strong, synchronous, and inflation-free. Exuberant financial markets could hardly ask for more.
While I have great respect for the forecasting community and the collective wisdom of financial markets, I suspect that today’s consensus of complacency will be seriously tested in 2018. The test might come from a shock – especially in view of the rising risk of a hot war (with North Korea) or a trade war (between the US and China) or a collapsing asset bubble (think Bitcoin). But I have a hunch it will turn out to be something far more systemic.
The world is set up for the unwinding of three mega-trends: unconventional monetary policy, the real economy’s dependence on assets, and a potentially destabilizing global saving arbitrage. At risk are the very fundamentals that underpin current optimism. One or more of these pillars of complacency will, I suspect, crumble in 2018.
Unfortunately, the die has long been cast for this moment of reckoning. Afflicted by a profound sense of amnesia, central banks have repeated the same mistake they made in the pre-crisis froth of 2003-2007 – over staying excessively accommodative monetary policies. Misguided by inflation targeting in an inflationless world, monetary authorities have deferred policy normalization for far too long.
That now appears to be changing, but only grudgingly. If anything, central bankers are signaling that the coming normalization may even be more glacial than that of the mid-2000s. After all, with inflation still undershooting, goes the argument, what’s the rush?
Alas, there is an important twist today that wasn’t in play back then –central banks’ swollen balance sheets. From 2008 to 2017, the combined asset holdings of central banks in the major advanced economies (the United States, the eurozone, and Japan) expanded by $8.3 trillion, according to the Bank for International Settlements. With nominal GDP in these same economies increasing by just $2.1 trillion over the same period, the remaining $6.2 trillion of excess liquidity has distorted asset prices around the world.
Therein lies the crux of the problem. Real economies have been artificially propped up by these distorted asset prices, and glacial normalization will only prolong this dependency. Yet when central banks’ balance sheets finally start to shrink, asset-dependent economies will once again be in peril. And the risks are likely to be far more serious today than a decade ago, owing not only to the overhang of swollen central bank balance sheets, but also to the overvaluation of assets.
Will the Republican Tax Plan work?
That is particularly true in the United States. According to Nobel laureate economist Robert J. Shiller, the cyclically adjusted price-earnings (CAPE) ratio of 31.3 is currently about 15% higher than it was in mid-2007, on the brink of the subprime crisis. In fact, the CAPE ratio has been higher than it is today only twice in its 135-plus year history – in 1929 and in 2000. Those are not comforting precedents.
As was evident in both 2000 and 2008, it doesn’t take much for overvalued asset markets to fall sharply. That’s where the third mega-trend could come into play – a wrenching adjustment in the global saving mix. In this case, it’s all about China and the US – the polar extremes of the world’s saving distribution.
China is now in a mode of saving absorption; its domestic saving rate has declined from a peak of 52% in 2010 to 46% in 2016, and appears headed to 42%, or lower, over the next five years. Chinese surplus saving is increasingly being directed inward to support emerging middle-class consumers – making less available to fund needy deficit savers elsewhere in the world.
By contrast, the US, the world’s neediest deficit country, with a domestic saving rate of just 17%, is opting for a fiscal stimulus. That will push total national saving even lower – notwithstanding the vacuous self-funding assurances of supply-siders. As shock absorbers, overvalued financial markets are likely to be squeezed by the arbitrage between the world’s largest surplus and deficit savers. And asset-dependent real economies won’t be too far behind.
In this context, it’s important to stress that the world economy may not be nearly as resilient as the consensus seems to believe – raising questions about whether it can withstand the challenges coming in 2018. IMF forecasts are typically a good proxy for the global consensus. The latest IMF projection looks encouraging on the surface – anticipating 3.7% global GDP growth over the 2017-18 period, an acceleration of 0.4 percentage points from the anemic 3.3% pace of the past two years.
However, it is a stretch to call this a vigorous global growth outcome. Not only is it little different from the post-1965 trend of 3.8% growth, but the expected gains over 2017-2018 follow an exceptionally weak recovery in the aftermath of the Great Recession. This takes on added significance for a global economy that slowed to just 1.4% average growth in 2008-2009 – an unprecedented shortfall from its longer-term trend.
The absence of a classic vigorous rebound means the global economy never recouped the growth lost in the worst downturn of modern times. Historically, such V-shaped recoveries have served the useful purpose of absorbing excess slack and providing a cushion to withstand the inevitable shocks that always seem to buffet the global economy. The absence of such a cushion highlights lingering vulnerability, rather than signaling newfound resilience – not exactly the rosy scenario embraced by today’s smug consensus.
A quote often attributed to the Nobel laureate physicist Niels Bohr says it best: “Prediction is very difficult, especially if it’s about the future.” The outlook for 2018 is far from certain. But with tectonic shifts looming in the global macroeconomic landscape, this is no time for complacency.
*Stephen S. Roach, former Chairman of Morgan Stanley Asia and the firm’s chief economist, is a senior fellow at Yale University’s Jackson Institute of Global Affairs and a senior lecturer at Yale’s School of Management. He is the author of Unbalanced: The Codependency of America and China.
December 7, 2017
The Moment of Truth for Malaysia’s Race-Based Politics
As the UMNO General Assembly gets underway, the time has come to deal with the long-term negative consequences of the party’s Malay-centrism.
by Dr. Ooi Kee Beng
After all the analysing done by pundits on Malaysia’s political dynamics in the post-Mahathir period, the country has now come to the strange point of being in a potential pre-Mahathir period.
There is now the more-than-theoretical possibility that 92-year-old former Prime Minister Mahathir Mohamad will return to lead the country, should the opposition coalition win the coming general election. Though unlikely, the chances of that happening are not exactly slim.
In many ways, Malaysia has been locked in a period of transition for two decades. One could say this was triggered by the Reformasi movement in 1998 when the country’s two top leaders fell out with each other, and behind that, by the socio-economic travails ignited by the Asian Financial Crisis; or one could claim that it began with Mahathir’s retirement in October 2003, or that it started with the surprising results of the 2008 elections when the ragtag opposition managed on election night to win five of the 13 states.
Behind these unending trends lies the fact that a new generation of young leaders – some inspired by the 1998 protests but most thrust into the limelight in 2008 – have been waiting impatiently to take over but are still playing merely a supporting role, not only because the old leaders are still active but also because of the solidity of the discursive and economic domination of the ruling Barisan Nasional coalition over the rural population in particular.
Then there was the advent of the internet news media, a prominent milestone of which was the founding of the Malaysiakini news website in 1999. This was followed a decade later by The Malaysia Insider (brought to its knees by political pressure in 2016 and since resurrected as The Malaysian Insight) and by other websites. Social media also appeared after the turn of the century to act as an effective new tool for political activism.
Where the opposition parties are concerned, we have seen its major coalitions evolve from the Barisan Alternatif in 1999 to Pakatan Rakyat in April 2008 to Pakatan Harapan in 2015, which since then has evolved to include two newly formed Malay-based parties: Parti Amanah Negara (splintered from the Islamist Parti Agama SeMalaysia (PAS) and Mahathir’s Parti Pribumi Bersatu Malaysia (consisting of Umno dissidents).
The dominant United Malays National Organisation (UMNO) has in the meantime gone through its own transformation, taking more and more conservative racial and religious stances the more its defences crumble, which they did in 2008 and 2013. Abdullah Badawi’s huge popularity in 2004 dissipated surprisingly quickly, and his replacement, Najib Razak, the present prime minister, went from being much more popular than his party at the time of his rise to power to being a big burden to its reputation today.
Transitions that go on and on are of course not really transitions any more. Instead, they define the new normal, if for no other reason, then surely by virtue of the fact that the status quo has over time managed to dig itself in. Malaysian politics in the 21st century is now best described as a state of trench warfare. How, or if, this will end any time soon is the big question.
The return of Mahathir in politics should thus be of the greatest interest to Malaysianists. What are the dangers that Mahathir, a man who has been at the heart of Malaysian politics since the 1960s, sees in the Najib administration which brought this nonagenarian out of retirement so fully that he would form a new party, bring it into the fold of the opposition coalition, and manoeuvre himself into the chair of this body?
Why does he eat humble pie the way he has done, and approach Anwar Ibrahim, the man he so mercilessly sacked in 1998 and put in jail, for rapprochement? Why has he been traversing and criss-crossing the country, with his faithful and aged wife in tow, whipping up dissent against Najib, the son of the man who brought him in from the cold in 1972.
Few know more than him how UMNO politics and Malaysian governance have relied on dubious processes covering corruption, political patronage, vote manipulation, mass media control, and draconian laws. What is different now?
The fact that he calls his new party a “Pribumi” party, highlighting the fact that it is a Malay-based party, is key to understanding what the situation in Malaysia is today, at least to his mind. Bersatu is also a race-based party that immediately and paradoxically wishes to go into coalition with Pakatan Harapan, whose expressed concerns are about good governance and not racial one-upmanship, and in which the Democratic Action Party (DAP), long dubbed by Umno as an anti-Malay Chinese-chauvinist party, is a founding partner.
Within that nascent coalition are three de facto Malay-based parties, the other two being Amanah, and Anwar Ibrahim’s Parti Keadilan Rakyat. For the coming elections, these are arrayed alongside the DAP against Umno, the major Malay-based party, surrounded by its weaker or neutered Barisan Nasional allies, and tentatively supported by the Islamist PAS.
No wonder there is talk about a pending Malay voter tsunami against the federal government in the coming elections. The time seems to have come when the Malay community has to deal with the long-term negative consequences of Umno’s Malay-centrism on Malaysian nation building. The economic burdens on the lower classes are heavy, while national economic figures remain positive, and Umno governs in the face of four Malay parties in opposition to it. (No doubt, PAS seems more willing to put in its lot with Umno than with the others).
One big definite change over the last few decades has been the emergence of a large enough educated urban Malay middle class whose members appreciate the social stability and cultural pride that only good governance can bring instead of acting out of highly augmented fear of economic and political irrelevance as a community.
The Bumiputra policy was never supposed to be a goal in itself. In fact, the success of Malay-centric nation building requires Malaysian nation building to remain successful. It is here, I believe, that Mahathir’s dilemma lies. Malay-centrism alone will get the Malays nowhere. As a slogan, Malay-centrism rings hollow if the country becomes ever more divided, the poorer classes become ever poorer, and nothing in its present trajectory promises stronger reasons for national pride in the immediate future.
Reforming Malay politics into a shape that accepts the multiculturalism that so clearly marks Malaysian society and that recognises the challenges the digital age poses seems to be the goal, for Mahathir and many others. There is real fear that Malay-centrism a la Umno has lost the plot, and acting in denial of this fact, is dragging the Malay community – and the country as well – into a political black hole.
Dr. Ooi Kee Beng is the Executive Director of Penang Institute. The think tank is funded by the state government of Penang, one of three states in Malaysia administered by the opposition, including one under PAS
December 6, 2017
by Jomo Kwame Sundaram and Anis Chowdhury
Malaysia has been named by Forbes as one of the top recipients of foreign direct investment, followed by Singapore, Vietnam, Indonesia and India.
Foreign direct investment (FDI) is increasingly touted as the elixir for economic growth. While not against FDI, the mid-2015 Addis Ababa Action Agenda (AAAA) for financing development also cautioned that it “is concentrated in a few sectors in many developing countries and often bypasses countries most in need, and international capital flows are often short-term oriented”.
UNCTAD’s 2017 World Investment Report (WIR) shows that FDI flows have remained the largest and has provided less volatile of all external financial flows to developing economies, despite declining by 14% in 2016. FDI flows to the least developed countries and ‘structurally weak’ economies remain low and volatile.
FDI inflows add to funds for investment, while providing foreign exchange for importing machinery and other needed inputs. FDI can enhance growth and structural transformation through various channels, notably via technological spill-overs, linkages and competition. Transnational corporations (TNCs) may also provide access to export markets and specialized expertise.
However, none of these beneficial growth-enhancing effects can be taken for granted as much depends on type of FDI. For instance, mergers and acquisitions (M&As) do not add new capacities or capabilities while typically concentrating market power, whereas green-field investments tend to be more beneficial. FDI in capital-intensive mining has limited linkage or employment effects.
Technological Capacities and Capabilities
The National Bank of Cambodia’s decision in March, 2017 to raise the minimum capital requirements of financial institutions in order to strengthen and stabilise the financial sector has led to an increase in foreign capital flowing into the banking sector, according to industry experts. Underpinned by political stability and business friendly policies, Cambodia is expected to register robust real economic growth in 2017 in excess of 7 per cent per annum.
Technological spill-overs occur when host country firms learn superior technology or management practices from TNCs. But intellectual property rights and other restrictions may effectively impede technology transfer.
Or the quality of human resources in the host country may be too poor to effectively use, let alone transfer technology introduced by foreign firms. Learning effects can be constrained by limited linkages or interactions between local suppliers and foreign affiliates.
Linkages between TNCs and local firms are also more likely in countries with strict local content requirements. But purely export oriented TNCs, especially in export processing zones (EPZs), are likely to have fewer and weaker linkages with local industry.
Foreign entry may reduce firm concentration in a national market, thereby increasing competition, which may force local firms to reduce organizational inefficiencies to stay competitive. But if host country firms are not yet internationally competitive, FDI may decimate local firms, giving market power and lucrative rents to foreign firms.
The South Korean government has long been cautious towards FDI. The share of FDI in gross capital formation was less than 2% during 1965-1984. The government did not depend on FDI for technology transfer, and preferred to ‘purchase and unbundle’ technology, encouraging ‘reverse engineering’. It favoured strict local content requirements, licensing, technical cooperation and joint ventures over wholly-owned FDI.
In contrast, post-colonial Malaysia has never been hostile to any kind of FDI. After FDI-led import-substituting industrialization petered out by the mid-1960s, export-orientation from the early 1970s generated hundreds of thousands of jobs for women. Electronics in Malaysia has been more than 80% FDI since the 1970s, with little scope for knowledge spill-overs and interactions with local firms. Although lacking many mature industries, Malaysia has been experiencing premature deindustrialization since the 1997-1998 Asian financial crises.
China and India
From the 1980s, China has been pro-active in encouraging both import-substituting and export-oriented FDI. However, it soon imposed strict requirements regarding local content, foreign exchange earnings, technology transfer as well as research and development, besides favouring joint ventures and cooperatives.
Solely foreign-owned enterprises were not permitted unless they brought advanced technology or exported most of their output. China only relaxed these restrictions in 2001 to comply with WTO entrance requirements. Nevertheless, it still prefers TNCs that bring advanced technology and boost exports, and green-field FDI over M&As.
Thus, more than 80% of FDI in China involves green-field investments, mostly in manufacturing, constituting 70% of total FDI in 2001. China has strictly controlled FDI inflows into services, only allowing FDI in real estate recently.
Although long cautious of FDI, India has recently changed its policies, seeking FDI to boost Indian manufacturing and create jobs. Thus, the current government has promised to “put more and more FDI proposals on automatic route instead of government route”.
Despite sharp rising FDI inflows, the share of FDI in manufacturing declined from 48% to 29% between October 2014 and September 2016, with few green-field investments. Newly incorporated companies’ share of inflows was 2.7% overall, and 1.6% for manufacturing, with the bulk of FDI going to M&As.
FDI policies need to be well complemented by effective industrial policies including efforts to enhance human resource development and technological capabilities through public investments in education, training and R&D.
Thus, South Korea industrialized rapidly without much FDI thanks to its well-educated workforce and efforts to enhance technological capabilities from 1966. Korean manufacturing developed with protection and other official support (e.g., subsidized credit from state-owned banks and government-guaranteed private firm borrowings from abroad) subject to strict performance criteria (e.g., export targets).
Indeed, FDI can make important contributions “to sustainable development, particularly when projects are aligned with national and regional sustainable development strategies. Government policies can strengthen positive spillovers …, such as know-how and technology, including through establishing linkages with domestic suppliers, as well as encouraging the integration of local enterprises… into regional and global value chains”.
(This article was originally published in Inter Press service (IPS) news on November 21, 2017)
November 30, 2017
English in the National Schooling System: Time for a Policy Shift
by Dr. Lim Teck Ghee
The past few weeks has seen renewed attention on the re-establishment of English medium schools (EMS) in the country.
A combination of concerned and highly credible stake-players has come out in favour of the return to what was previously not just a medium of national schooling for young Malaysians. EMS was also the source of most of the leadership capability in economy and society, and a major reason for the country’s high international standing.
Led by royalty in the person of HRH Sultan of Johor, Sultan Ibrahim Sultan Iskandar, the campaign for EMS is now supported by Minister in the Prime Minister’s Department Datuk Seri Abdul Rahman Dahlan and concerned civil society leaders from the G25 group.
For a long time, it was the indefatigable Datin Noor Azimah Abdul Rahim, chairman of the Parent Action Group for Education (PAGE), whose group waged an often-lonely battle to promote the expanded use of English in our national educational system.
The indefatigable Datin Noor Azimah Abdul Rahim
Today the drive to restore ECMs to similar status as Chinese and Tami schools in the national system has been expanded. But it needs to be taken up by our political leaders if it is to succeed.
For what has been standing in it way – and it continues today – has been basically politics which has triumphed over national interest and the freedom for parents to choose the medium of instruction they want for their children.
As pointed out by HRH Johor Sultan, there are politicians who are in “self-denial” and who choose to play politics with education by being “heroes of their races”.
“They talk about “nationalism” but they too send their children to boarding schools in Australia and the United Kingdom.”
HRH Sultan has also expressed confidence that “if we have an education system based on a single stream for students from a young age, we will be able to create a community which is more harmonious and can work together to face challenges in the future.”
Although all communities have been disadvantaged by the absence of English medium schools in the national system, it is beyond doubt that it is the Malay community which has been most handicapped or punished by the political policy and insistence by misguided cultural zealots for the Malay masses to be restricted in their choice of schools to Malay medium ones, or to Islamic schools where the medium of instruction is Arabic.
Should a study be undertaken of the class divide which has emerged in Malay society during the last two or three decades, it is very likely that it will find that a contributory – perhaps the major – factor has been the ability of upper class Malays to access English education either in the MARA system or through private English education medium schools locally and abroad.
Students in the national Malay medium schools and graduates from public universities with Malay as the medium of instruction are not only severely handicapped in local private sector employment where English language fluency is a prerequisite especially for higher end jobs. They are also increasingly marginalized in this era of global markets and competition where a command and mastery of the English language is indispensable to knowledge acquisition and upward mobility.
Malaysia needs to re-establish itself as a bilingual country
This fact of growing Malay disadvantage and deepening socio-economic inequality – should there be no policy change – was not spelt out by the influential G25 grouping in its recent press statement which supported the call by Johoreans for English medium schools.
But it was probably in the minds of G25 members as they seek a return to establishing Malaysia as a bilingual country with Bahasa Melayu as the national language, and English the second language as is found in many of the most advanced non-English speaking nations of the world.
In a press statement, G25 noted that as a trading nation Malaysia needs to have a workforce with a high proficiency in English.
“G25 supports the establishment of the EMS as an alternative stream under the national school system. English is a language for acquiring knowledge. We are in support of initiatives that will help in the growth of the economy and improve the well-being of Malaysians”
Taking Finland as an example, the group has argued that “Finland’s education success is based on ensuring that everyone has equal opportunities to study.”
https://www.smithsonianmag.com/innovation/why-are-finlands-schools-successful-49859555/ In Malaysia UMNO idiots meddle in Education while they send their kids to study abroad.
This is not the case in Malaysia where there is no level playing field between the private and national school systems and where parents who wish to have their children enrolled in English medium schools cannot afford the expensive fees that are the norm for private schools.
G25’s call needs be emphasized: “We need to learn from past mistakes, and ensure that the implementation of the English-medium schools follows a model with a proven track record”
November 27, 2017
Devils’ to Friends – how China’s communists won over Malaysian PM Tunku; Hussein Onn clung to race-based politics
COMMUNIST DEVILS? PLEASE, PRIME MINISTER
Malaysia has had six Prime Ministers since independence. I have known all six. The first, Tunku Abdul Rahman, had tremendous rhythm. He was a well-educated man, having graduated with a law degree from Cambridge. If you talk of brains, Tunku was brilliant, and very shrewd. His mother was Thai, and he had that touch of Thai shrewdness, an ability to smell and spot whether a man was to be trusted or not. Tunku was less mindful about administrative affairs. But he had a good number two in Tun Razak, who was extremely industrious, and Tunku left most of the paperwork to Razak.
Tunku was like a strategist who saw the big picture. He knew where to move his troops, but actually going to battle and plotting the detailed campaign – that was not Tunku. He’d say, “Razak, you take over. You handle it now.” In that sense, they worked very well together. In my meetings with Tunku, he demonstrated some blind spots. He had a bee in his bonnet about communism. One day, when we had become quite close, he said to me, “Communists! In Islam, we regard them as devils! And Communist China, you cannot deal with them, otherwise you are dealing with the devil!” And he went on and on about communists, communism and Communist China. I responded, “Tunku, China only became communist because of the immense suffering of the people as a result of oppression and invasion. I think it’s a passing phase.” He interjected, “Oh, don’t you believe it! The Chinese are consorting with the devil. Their people are finished! You don’t know how lucky you Chinese are to be in Malaysia.” I replied softly, “Tunku, as Prime Minister of Malaysia, you should make friends with them.”
Years later, when Tunku was out of office, he was invited to China. Zhao Ziyang, then Premier, entertained him in the Great Hall of the People in Beijing. Tunku travelled with a delegation of 15 Chinese businessmen who were good friends of his. On his way to China, Tunku stopped in Hong Kong and I gave them dinner. Then on his way out of China, he stopped in Hong Kong and we dined again. I asked him for his impressions. All of his old prejudices had vanished! He didn’t even want to refer to them. He just said the trip had been an eye-opener. “They are decent people, like you and me,” he said. “We could talk about anything.” From then onward, you never heard Tunku claim that the Chinese Communists were the devils incarnate.
FRIENDS, NOT CRONIES
One thing I will say for Tunku: he had friends. His friends sometimes helped him, or they sent him a case of champagne or slabs of specially imported steak. He loved to grill steaks on his lawn and open champagne, wine or spirits. His favourite cognac was Hennessy VSOP. Tunku would also do favours for his friends, but he never adopted cronies.
When Tun Tan Siew Sin was Finance Minister, Tunku sent him a letter about a Penang businessman who was one of Tunku’s poker-playing buddies. It seems the man had run into tax trouble and was being investigated by the tax department, and he had turned to Tunku for help. In his letter, Tunku wrote, “You know so-and-so is my friend. I am not asking any favour of you, Siew Sin, but I am sure you can see your way to forgiving him,” or something to that effect.
Siew Sin was apoplectic. He stalked into Tun Dr Ismail’s office upstairs and threw the letter down. “See what our Prime Minister is doing to me!” Tun Dr Ismail read the letter and laughed. “Siew Sin,” he said, “there is a comic side to life”. Ismail took the letter, crumpled it into a ball and threw it into the waste-paper basket. He then said, “Siew Sin, Tunku has done his duty by his friend. Now, by ignoring Tunku, you will continue to do your duty properly.” That was as far as Tunku would go to help a friend. Cronyism is different. Cronies are lapdogs who polish a leader’s ego. In return, the leader hands out national favours to them. A nation’s assets, projects and businesses should never be for anyone to hand out, neither for a king nor a prime minister. A true leader is the chief trustee of a nation. If there is a lack of an established system to guide him, his fiduciary sense should set him on the proper course.
A leader who practices cronyism justifies his actions by saying he wants to bring up the nation quickly in his lifetime, so the end justifies the means. He abandons all the General Orders – the civil-service work manual that lays down tendering rules for state projects. Instead, he simply hands the projects to a Chinese or to a Malay crony. The arms of government-owned banks are twisted until they lend to the projects. Some of these cronies may even be fronting for crooked officials.
Tunku was unnerved by the riots of May 13. After the riots he was a different man. Razak managed to convince him and the cabinet to form the National Operations Council, a dictatorial organ of government, and Razak was appointed its director. Parliament went into deep freeze. By the time the NOC was disbanded, Razak had been installed as Prime Minister. Tunku felt bewildered. He had helped the country gain independence and had ruled as wisely as he could, yet the Malays turned against him for selling out to the Chinese. In fairness to Tunku, he had done nothing of the sort. He was a very fair man who loved the nation and its people. But he knew that, if you favour one group, you only spoil them. When the British ruled Malaya, they extended certain advantages to the Malays.
When the Malays took power following independence on 31 August 1957, more incentives were given to them. But there was certainly no showering of favours. All of that came later, after 1969. The riots of May 13, 1969, were a great shock to the system, but not a surprise. Extremist Malays attributed the poverty of many Malays to the plundering Chinese and Indians. Leaders like Tunku Abdul Rahman, who could see both sides, were no longer able to hold back the hotheads. The more thoughtful leaders were shunted aside and the extremists hijacked power. They chanted the same slogans as the hotheads – the Malays are underprivileged; the Malays are bullied – while themselves seeking to become super-rich. When these Malays became rich, not many of them did anything for the poor Malays; the Chinese and Indians who became rich created jobs, many of them filled by Malays.
ON PRO-MALAY POLITICS
I vividly recall an incident that occurred within a few months after the May 1969 riots. I was waiting to see Tun Razak when a senior Malay civil servant whom I knew very well came along the corridor of Parliament House and buttonholed me. He asked, “What are you doing here, Robert?” I replied, “Oh, I’m seeing Tun.” He snarled, “Don’t be greedy! Leave something for us poor Malays! Don’t hog it all!” I could see that, after May 1969, the business playing field was changing. Business was no longer clean and open. Previously, the government announced open tenders to the Malaysian public and to the world. If we qualified, we would submit a tender. If we won the contract, we would work hard at it, and either fail or succeed. I think eight or nine times out of ten we succeeded.
But things were changing, veering more and more towards cronyism and favouritism. Hints of change were there even before the riots. I was hell-bent on helping to develop the nation: that’s why I went into shipping, into steel – anything they asked of me. Even among the Malays there were those who admitted their weaknesses and argued for harnessing the strength of the Chinese. Mind you, that may have created more problems. If they had harnessed the strength of the Chinese, the Chinese would ultimately have owned 90 or 95 per cent of the nation’s wealth. This might have been good for the Malaysian economy, but bad for the nation.
Overall, the Malay leaders have behaved reasonably in running the country. At times, they gave the Malays an advantage. Then, when they see that they have overdone it, they try to redress the problem. Their hearts are in the right place, but they just cannot see their way out of their problems. Since May 13, 1969, the Malay leadership has had one simple philosophy: the Malays need handicapping. Now, what amount of handicapping?
The Government laid down a simple structure, but the structure is full of loopholes. Imagine that a hard-working, non-Malay Malaysian establishes XYZ Corporation. The Ministry of Trade and Industry rules that 30 per cent of the company’s shares must be offered to Malays. The owner says, “Well, I have been operating for six years. My par value of 1 ringgit per share is today worth 8 ringgit.” Then the Ministry says, “Can you issue it at 2 ringgit or 2.50 ringgit to the Malays?” After a bit of haggling, the non-Malay gives way. So shares are issued to the Malays, who now own 30 per cent. But every day after that, the Malays sell off their shares for profit. A number of years pass and then one day the Malay community holds a Bumiputra Congress. They go and check on all the companies. Oh, this XYZ Corporation, the Malay shareholding ratio is now down to seven per cent. That won’t do. So the Malays argue that they’ve got to redo the shareholding again. Fortunately, the ministry usually acts as a fair umpire and throws out such unscrupulous claims.
It’s one thing if you change the rules once to achieve an objective agreed to by all for the sake of peace and order in the nation. But if you do it a second time, it’s robbery. Why is it not robbery just because the government commits it? And when people raise objections, it is called fomenting racial strife, punishable by three years in jail. As a Chinese who was born and grew up in Malaysia and went to school with the Malays, I was saddened to see the Malays being misled in this way. I felt that, in their haste to bridge the economic gap between the Chinese and the Malays, harmful short cuts were being taken. One of the side effects of their zeal to bridge the economic gap was that racism became increasingly ugly. I saw very clearly that the path being pursued by the new leaders after 1969 was dangerous. But hardly anyone was willing to listen to me. In most of Asia, where the societies are still quite hierarchical, very few people like to gainsay the man in charge. As in The Emperor’s New Clothes, if a ruler says, “Look at my clothes; aren’t they beautiful?” when he is in fact naked, everybody will answer, “Yes, yes sir, you are wearing the most beautiful clothes.”
THE EAR OF THE PRIME MINISTER
I made one – and only one – strong attempt to influence the course of history of Malaysia. This took place in September 1975 during the Muslim fasting month. Tun Razak, the second Prime Minister of Malaysia, was gravely ill with terminal leukaemia, for which he was receiving treatment in a London hospital. My dear friend Hussein Onn, son of Dato Onn bin Jafar, was Deputy Prime Minister, Minister of Finance and acting Prime Minister in Tun Razak’s absence. He was soon to become Malaysia’s third Prime Minister. I went to Kuala Lumpur and sent word that I wanted to have a heart-to-heart talk. On the phone Hussein said, “Why don’t you come in during lunch time. It is the fasting month. Come to my office at about half past one. There will be no one around and we can chat to our heart’s content.”
Hussein and I go back to 1932 when we were in the same class in school in Johor Bahru. Shortly afterwards, his father fell out with the then-Sultan of Johor and the family moved to the Siglap area of Singapore.
My father would often spend weekends with Dato Onn. Two or three years later, Hussein returned to Johor Bahru and we were classmates again at English College from 1935 to 1939. Hussein’s father, Dato Onn, did not have a tertiary education. But he read widely and was very well informed. He was a natural born politician, a gifted orator in Malay and in English. He was a very shrewd man with a tremendous air of fine breeding even though he was not from Malaysian royalty. When you were in his presence, you knew you were in the presence of someone great. Dato Onn would go on to found UMNO, the ruling party of Malaysia, and become one of the founders of the independent nation of Malaysia. He set a tone of racial harmony for the nation – and he practised it. Our families were close.
So, I went to call on his son, my old friend Hussein Onn in 1975. His office was in a magnificent old colonial building, part of the Selangor Secretariat Building. In front of it was the Kuala Lumpur padang, where, in the colonial days, the British used to play the gentlemen’s games of cricket and rugby. I climbed up a winding staircase and his aide showed me straight to his room. There was hardly another soul in that huge office complex. After greeting one another, I warmed up to my subject with Hussein very quickly. I said, “Hussein, I have come to discuss two things with you. One is Tun Razak’s health. The other is the future of our nation.” I said, “You know, Razak has been looking very poorly lately. We all know he has gone to London for treatment.” Hussein interrupted: “Tun doesn’t like anybody discussing his health. Do you mind if we pass on to the next subject?” I said, “Of course not.” I continued, “I had to raise the first subject because that leads to the next subject. Assuming Razak doesn’t have long to live – please don’t mind, but I have to say that – you are clearly going to become the new Prime Minister in a matter of months or weeks.”
“I’m listening,” he said. “Hussein, we go back a long way. Our fathers were the best of friends; our families have been the best of friends. In our young days, you and I always felt a strong passion for our country, which we both still feel. Whatever has happened these past years, let’s not go backwards and ask what has gone wrong and what has not been done right. Let’s look at the future. If there was damage done, we can repair it.”
Hussein listened patiently. I pressed on, “First, let me ask you a few questions, Hussein. What, in your mind, is the number of people required to run a society, a community, a nation with the land mass of Malaysia?” This was 1975, when the population was about 12.5 million. He didn’t reply. For the sake of time, I answered my own question. “Hussein, if I say 3,000, if I say 6,000, if I say 10,000, 20,000, whatever the figure, I don’t think it really matters. We are not talking in terms of hundreds of thousands or millions. To run a society or a nation requires, relatively speaking, a handful of people. So let us say six or seven or eight thousand, Hussein. And of course this covers two sectors. The public sector: government, civil service, governmental organisations, quasi-governmental bodies, executive arms, police, customs and military. The private sector: the economic engines; the engines of development, plantations, mines, industry.
“The leaders of these two sectors are the people I am referring to, Hussein. If we are talking of a few thousand, does it matter to the masses whether it becomes a case of racially proportionate representation, where we must have for every ten such leaders five or six Malays, three Chinese, and one or two Indians?” I continued, “Must it be so? My reasoning mind tells me that it is not important. What is important is the objective of building up a very strong, very modern nation. And for that we need talented leaders, great leadership from these thousands of people. If you share my view that racial representation is unimportant and unnecessary to the nation, then let’s look at defining the qualifications for those leaders.
“Number one, for every man or woman, the first qualification is integrity. The person must be so clean, upright and honest that there must never be a whiff of corruption or scandal. People do stray, and, when that happens, they must be eliminated, but on the day of selection they must be people of the highest integrity. Second, there must be ability; and with it comes capability. He or she must be a very able and capable person. The third criterion is that they must be hard-working men or women, people who are willing to work long hours every day, week after week, month after month, year after year. That is the only way you can build up a nation.”
I went on, “I can’t think of any other important qualifications. So your job as prime minister, Hussein – I am now assuming you will become the Prime Minister – your job will then be from time to time to remove the square pegs from the round holes, and to look for square holes for square pegs and round holes for round pegs. Even candidates who fulfil those three qualifications can be slotted into the wrong jobs. So you’ve got to pull them out and re-slot them until the nation is humming beautifully.”
“You’re going to be the leader of a nation, and you have three sons, Hussein. The first-born is Malay, the second-born is Chinese, the third-born is Indian. What we have been witnessing is that the first-born is more favoured than the second or third. Hussein, if you do that in a family, your eldest son will grow up very spoiled. As soon as he attains manhood, he will be in the nightclubs every night because Papa is doting on him. The second and third sons, feeling the discrimination, will grow up hard as nails. Year by year, they will become harder and harder, like steel, so that in the end they are going to succeed even more and the eldest will fail even more.”
I implored him, “Please, Hussein, use the best brains, the people with their hearts in the right place, Malaysians of total integrity and strong ability, hard-working and persevering people. Use them regardless of race, colour or creed. The other way, Hussein, the way your people are going – excessive handicapping of bumiputras, showering love on your first son – your first born is going to grow up with an attitude of entitlement.” I concluded, “That is my simple formula for the future of our country. Hussein, can you please adopt it and try?” Hussein had listened very intently to me, hardly interrupting. He may have coughed once or twice. I remember we were seated deep in a quiet room, two metres apart, so my voice came across well. He heard every word, sound and nuance. He sat quietly for a few minutes. Then he spoke, “No, Robert. I cannot do it. The Malays are now in a state of mind such that they will not accept it.”
He clearly spelt out to me that, even with his very broad-minded views, it was going to be Malay rule. He was saying that he could not sell my formula to his people. The meeting ended on a very cordial note and I left him. I felt disappointed, but there was nothing more that I could do. Hussein was an honest man of very high integrity. Before going to see him, I had weighed his strength of character, his shrewdness and skill. We had been in the same class, sharing the same teachers. I knew Hussein was going to be the Malaysian Prime Minister whom I was closest to in my lifetime. I think Hussein understood my message, but he knew that the process had gone too far. I had seen a picture developing all along of a train moving in the wrong direction. During Hussein’s administration, he was only partially successful in stemming the tide. The train of the nation had been put on the wrong track. Hussein wasn’t strong enough to lift up the train and set it down on the right track.