FOCUS On POVERTY alleviation, not income creation for billionaires–Mahathir’s outdated policy prescriptions

January 16, 2019

FOCUS On POVERTY alleviation, not billionaires —Mahathir’s outdated policy prescriptions

by P. Gunasegaram

Image result for the malaysian maverick by barry wain

QUESTION TIME | When Prime Minister Dr Mahathir Mohamad sank low to say that wealth should be distributed equally among races, he indicated plainly that he has no solid plan to increase incomes and alleviate poverty for all Malays and Malaysians. His priorities are elsewhere.

Note that he talks about the distribution of wealth, not increasing incomes, which is more important because this is what will eventually result in a proper redistribution of wealth by valuing fairly everyone’s contribution  to wealth creation.

During his time as Prime Minister previously for a very long 22 years from 1981 to 2003 out of 46 years of independence at that time – nearly half the period of independence – he had plenty of opportunities, but squandered them.

He did not care for the common Malay, but was instead more focused on creating Malay billionaires overnight through the awarding of lucrative operations handled by the government or government companies previously, such as roads, power producers, telecommunications and others.

He depressed labour wages by bringing in millions of workers from Indonesia, and subsequently Bangladesh and the Philippines, to alter the religious balance in Sabah. A significant number of them became Malaysian citizens over the years, altering the overall racial and religious balance in the country.

By doing that he let his own race down, many of whom were workers and small entrepreneurs whose incomes were constrained by imported labour. Even now, Mahathir has not shown a great willingness to increase minimum wages, which will help many poor Malays and bumiputeras increase their incomes.

As Mahathir himself well knows, distribution is not an easy thing. Stakes held by others cannot be simply distributed, but they have to be sold, even if it is at depressed prices as it was under the New Economic Policy or NEP, when companies wanted to get listed.

Instant millionaires

There are not enough Malays rich enough to buy these stakes, but many of them in the Mahathir era and earlier, especially the connected elite, became rich by purchasing the 30 percent stakes for bumiputeras that had to be divested upon listing by taking bank loans.

By simply flipping the stakes on the market at a higher price after they were listed, they pocketed the difference and became instant millionaires.

Image result for the permodalan nasional

It was Mahathir’s brother-in-law – the straight, honest and capable Ismail Ali – who was the architect behind the setting up of Permodalan Nasional Bhd or PNB to hold in trust for bumiputera stakes in major companies. PNB now has funds of some RM280 billion and has been enormously successful in this respect.

But Mahathir, with advice from Daim Zainuddin who became his Finance Minister, still cultivated selected bumiputera leaders, many of them Daim’s cronies, and gave them plum deals. A slew of them who were terribly over-leveraged got into trouble during the 1997-1998 financial crisis.

The government, often through Khazanah Nasional Bhd, had to rescue some of the biggest ones, resulting in Khazanah holding key stakes in many companies such as Axiata, CIMB, PLUS and so on. Recently, the government has been talking about, not surprisingly, selling these stakes to investors, accusing Khazanah of not developing bumiputera entrepreneurship, which was not anywhere in its original aims.

It becomes more obvious what Mahathir is talking about. Redistribution of wealth now will come out of the selling of government (Khazanah) and PNB stakes to individual Malay entrepreneurs to equalise wealth distribution among the races. To make it more palatable, some willing Indian entrepreneurs, too, may be found.

The modus operandi will be to sell the stakes when prices are depressed and perhaps even to offer a bulk discount to these so-called entrepreneurs who, of course, will not only be among the elite, but who are cronies. That will ensure a steady flow of funds into Bersatu in future from donations to help make it the premier party in the Pakatan Harapan coalition.

Image result for the malaysian jomo and gomez

Mahathir knows full well that equal wealth distribution is impossible – it’s never been done anywhere before and makes wealth acquisition disproportionate to intelligent effort and hard work, a sure recipe for inefficiency, corruption and patronage. As eloquently argued by prominent political economy professor Terence Gomez, patronage is king in new Malaysia – if it was cash during Najib’s time.

Mahathir does not have the wherewithal to lead anymore, if he ever had it in the first place. Eight months after GE14, he is still bereft of a plan to increase incomes and improve livelihoods. He needs to recognise he does not have one and that he stays in power because of the strength of the other parties in the coalition.

Wrong direction

The only way to close the wealth gap is to increase future incomes across all races. Anything else is the expropriation of other people’s wealth. In the meantime, the holding of wealth in trust by state agencies is perfectly acceptable because the income comes back to the government.

This can be wisely used to improve the quality of education, get better quality investments, raise productivity and hence labour wages, and provide equal opportunities for growth and innovation among all communities. As so many people have said before me, you can equalise opportunities, but not outcomes.

So far, 61 years of UMNO-BN have not managed to equalise opportunities for all as the government education system is in shambles, among others. And eight months of Harapan is heading in the wrong direction under Mahathir.

Despite Bersatu being a party expressly formed to fight for Malay rights, Mahathir’s party had the lowest support from Malays of parties looking after Malay rights, including Umno, PAS, PKR and Amanah.

He is still stuck in a mode to widen his rather narrow and vulnerable power base (his Bersatu won only 13 seats of 52 contested, the worst win rate of any party in the coalition) unethically by attracting tarnished MPs from Umno into the Bersatu fold, in the process willing to break agreements with other coalition partners and doing/advocating things which are against the principles of a properly functioning democracy.

He has also said he will not honour some manifesto promises, saying that these were made when Harapan did not expect to win the elections – a rather lame excuse. He has not even made solid moves to undo repressive laws introduced by his predecessor Najib Abdul Razak.

Mahathir, obviously, has no intention plan to improve the livelihood of the common Malay and all Malaysians;  he is stuck in old-school forced distribution which is injurious to the economy, maybe even fatal in the long term.

 Malaysians don’t want the creation of Malay (or any other ) billionaires from government wealth.

Old wine in a new bottle is still sour. E-mail:

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



Trump vs. the Economy


Trump vs. the Economy

December 30, 2018  by

Between publicly chastising US Federal Reserve Chair Jerome Powell and escalating his trade war with China, US President Donald Trump has finally rattled the markets. While investors were happy to look the other way during the first half of Trump’s term, the dangerous spectacle unfolding in the White House can no longer be ignored.

NEW YORK – Financial markets have finally awoken to the fact that Donald Trump is US president. Given that the world has endured two years of reckless tweets and public statements by the world’s most powerful man, the obvious question is, What took so long?

For one thing, until now, investors had bought into the argument that Trump is all bark and no bite. They were willing to give him the benefit of the doubt as long as he pursued tax cuts, deregulation, and other policies beneficial to the corporate sector and shareholders. And many trusted that, at the end of the day, the “adults in the room” would restrain Trump and ensure that the administration’s policies didn’t jump the guardrails of orthodoxy.

These assumptions were more or less vindicated during Trump’s first year in office, when economic growth and an expected increase in corporate profits – owing to forthcoming tax cuts and deregulation – resulted in strong stock-market performance. In 2017, US stock indices rose more than 20%.

But things changed radically in 2018, and especially in the last few months. Despite corporate earnings growing by over 20% (thanks to the tax cuts), US equity markets moved sideways for most of the year, and have now taken a sharp turn south. At this point, broad indices are in correction territory (meaning a 10% drop from the recent peak), and indices of tech stocks, such as the Nasdaq, are in bear-market territory (a drop of 20% or more).

Though financial markets’ higher volatility reflects concerns about China, Italy and other eurozone economies, and key emerging economies, most of the recent turmoil is due to Trump. The year started with the enactment of a reckless tax cut that pushed up long-term interest rates and created a sugar high in an economy already close to full employment. As early as February, growing concerns about inflation rising above the US Federal Reserve’s 2% target led to the year’s first risk-off.

Then came Trump’s trade wars with China and other key US trade partners. Market worries about the administration’s protectionist policies have waxed and waned throughout the year, but they are now reaching a new peak. The latest US actions against China seem to augur a broader trade, economic, and geopolitical cold war.

An additional worry is that Trump’s other policies will have stagflationary effects (reduced growth alongside higher inflation). After all, Trump is planning to limit inward foreign direct investment, and has already implemented broad restrictions on immigration, which will reduce labor-supply growth at a time when workforce aging and skills mismatches are already a growing problem.

Moreover, the administration has yet to propose an infrastructure plan to spur private-sector productivity or hasten the transition to a green economy. And on Twitter and elsewhere, Trump has continued to bash corporations for their hiring, production, investment, and pricing practices, singling out tech firms just when they are already facing a wider backlash and increased competition from their Chinese counterparts.

Emerging markets have also been shaken by US policies. Fiscal stimulus and monetary-policy tightening have pushed up short- and long-term interest rates and strengthened the US dollar. As a result, emerging economies have experienced capital flight and rising dollar-denominated debt. Those that rely heavily on exports have suffered the effects of lower commodity prices, and all that trade even indirectly with China have felt the effects of the trade war.

Even Trump’s oil policies have created volatility. After the resumption of US sanctions against Iran pushed up oil prices, the administration’s efforts to carve out exemptions and bully Saudi Arabia into increasing its own production led to a sharp price drop. Though US consumers benefit from lower oil prices, US energy firms’ stock prices do not. Besides, excessive oil-price volatility is bad for producers and consumers alike, because it hinders sensible investment and consumption decisions.

Making matters worse, it is now clear that the benefits of last year’s tax cuts have accrued almost entirely to the corporate sector, rather than to households in the form of higher real (inflation-adjusted) wages. That means household consumption could soon slow down, further undercutting the economy.

More than anything else, though, the sharp fall in US and global equities during the last quarter is a response to Trump’s own utterances and actions. Even worse than the heightened risk of a full-scale trade war with China (despite the recent “” agreed with Chinese President Xi Jinping) are Trump’s public attacks on the Fed, which began as early as the spring of 2018, when the US economy was growing at more than 4%.

Given these earlier attacks, markets were spooked this month when the Fed correctly decided to hike interest rates while also signaling a more gradual pace of rate increases in 2019. Most likely, the Fed’s relative hawkishness is a reaction to Trump’s threats against it. In the face of hostile presidential tweets, Fed Chair Jerome Powell needed to signal that the central bank remains politically independent.

But then came Trump’s decision to shut down large segments of the federal government over Congress’s refusal to fund his useless Mexican border wall. That sent markets into a near-panic, and the government shutdown was soon followed by reports that Trump wants to fire Powell – a move that could turn a correction into a crash. Just before the Christmas holiday, US Treasury secretary Steven Mnuchin was forced to issue a public statement to placate the markets. He announced that Trump was not planning to fire Powell after all, and that US banks’ finances are sound, effectively highlighting the question of whether they really are.

Recent changes within the administration that do not necessarily affect economic policy making are also rattling the markets. The impending departure of White House Chief of Staff John Kelly and Secretary of Defense James Mattis will leave the room devoid of adults. The coterie of economic nationalists and foreign-policy hawks who remain will cater to Trump’s every whim.

As matters stand, the risk of a full-scale geopolitical conflagration with China cannot be ruled out. A new cold war would effectively lead to de-globalization, disrupting supply chains everywhere, but particularly in the tech sector, as the recent ZTE and Huawei cases signal. At the same time, Trump seems to be hell-bent on undermining the cohesion of the European Union and NATO at a time when Europe is economically and politically fragile. And Special Counsel Robert Mueller’s investigation into Trump’s 2016 election campaign’s ties to Russia hangs like a Sword of Damocles over his presidency.

Trump is now the Dr. Strangelove of financial markets. Like the paranoid madman in Stanley Kubrick’s classic film, he is flirting with mutually assured economic destruction. Now that markets see the danger, the risk of a financial crisis and global recession has grown.

Nouriel Roubini, a professor at NYU’s Stern School of Business and CEO of Roubini Macro Associates, was Senior Economist for International Affairs in the White House’s Council of Economic Advisers during the Clinton Administration. He has worked for the International Monetary Fund, the US Federal Reserve, and the World Bank.



UMNO, PAS can’t stand in the way of progressive Malay politics

December 29, 2019

UMNO, PAS can’t stand in the way of progressive Malay politics

by  Dr. Rais Hussin


COMMENT | A train will eventually carry less and less cargo when the single track on which it operates begins to sag. But this is not a problem with a double-track system.

UMNO and PAS have erred by using such a single-track system( Money Politics). The mechanisms which they have used or intend to use to take Malays, Muslims and Malaysians forward will falter – either before they can reinvent themselves as parties that put the people’s welfare first, or before they perish from hauling too much for too long while struggling for their survival.

Similarly, if Bersatu sticks to the mentality of old, it too will fail. By privileging cash, connections, contracts and concessions, UMNO has become nothing but a cabal – a party defined and driven by the politics of what political scientists call kaumiyah or tribes.

These tribes may align themselves to current, former or prospective presidents of UMNO, but they will all sink as Umno is now officially a party associated with thieving and thuggery.

Even when the International Convention on the Elimination of All Forms of Racial Discrimination (Icerd) was not ratified, UMNO still insisted on a street rally. By urging its remaining war horses to take to the streets of Kuala Lumpur, the party has become a throbbing and bleeding sore.

And as the above was done, another elite group of UMNO putera and puteri, also working for their own benefit, are hard at work trying to upstage their elders in the party – making UMNOo Youth into a spear against the shield of the old aristocracy.

With such internal warfare, UMNOo can no longer vouch for bangsa, agama dan negara (race, religion and country). It is now hollowed out, with its only legacy the attempted misuse of every GLC and GLIC under its watch, from Permodalan Nasional Bhd to Lembaga Tabung Haji to Ministry of Finance Inc.

PAS, having formed a quasi-pact with UMNO that seeks to salvage what remains of the former’s vote bank, has either directly and indirectly tried to sanitise the soiled legacy of the former ruling party.

Instead of speaking out against the excesses of 1MDB, and the many ‘mini 1MDBs’, PAS has chosen to remain solemnly quiet on all fronts. Such connivance is done in order to benefit PAS, both as the future kingmakers and spoilers of parliamentary democracy of Malaysia.

Bersatu cannot claim to be a white knight. As a new party, it is bound to have many chinks in its armour. Nor can it claim to be invincible and undefeatable. If May 9 demonstrated anything, it is the power of the people to get rid of the old and tiresome kleptocrats.

But as a Malay party – whose associate members can be non-Malays – Bersatu understands the importance of creating a ‘New Malay’ mindset to steer Malays, Muslims and Malaysia forward. This is where Bersatu has a double-track system in every single endeavour.

In the public sector, Bersatu is not obsessed with dominating every branch and twig of the government. No Malay cronies have sprung up in Bersatu. Indeed, Bersatu believes a strong and stable government that is also smart. As and when needed, a government led by Bersatu, with the blessing of Pakatan Harapan, will be pro-private sector.

In the private sector, Bersatu does not want to dominate the entire business landscape. Bersatu wants Malay entrepreneurs of all stripes to flourish together with people of other races in Malaysia.

The fact that Bersatu can work with the Finance Minister from DAP is a case in point. Whatever pro-Malay agenda Bersatu may have, it has the option to stick by its allies that are also pro-Malaysia.

Insofar as Islam is concerned, Bersatu has also worked closely with Amanah, a party that believes in rahmatan lil alamin (Islam as a blessing for all). Neither Bersatu nor Amanah believes in any ideas that are racially chauvinistic: both parties believe in working closely with people of all faiths, not just ‘other’ faiths.

Thus, when the unrest in Seafield erupted, Home Minister and Bersatu president Muhyiddin Yassin was quick to condemn the incident, indeed to contain it as a non-racial issue stemming from a land dispute that was politicised by Umno and PAS as an affront to Malayness.

The only thing Malay in the riots was the heroism of the late Muhammad Adib Mohd Kassim and his colleagues to rush in to douse the fire of the burning cars where none dared to tread.

If Bersatu in the post-May 9 landscape has any specific inspiration, it is the courage and bravery of Muhammad Adib. Unsurprisingly, Dr Siti Hasmah Mohamad Ali even dedicated a violin recital to him. Why? Precisely because of his selflessness to live up to the creed of New Malaysia.

Prime Minister and Bersatu chairperson Dr Mahathir Mohamad hasn’t said much, for he too believes that mere words would have tarnished Adib’s deeds, and how he led by example just weeks prior to the second annual general assembly of Bersatu.

Berani kerana benar’ (in truth we find courage) the old Malay proverb goes. And ‘Bersatu kerana benar‘, as the New Malaysia and all Malays must be.

RAIS HUSSIN is a supreme council member of Bersatu. He also heads its policy and strategy bureau.

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




In Defense of the Fed

December 26, 2018

jerome powell fed

In Defense of the Fed

Despite howls of protest from market participants and rumored threats from an unhinged US president, the Federal Reserve should be congratulated for its commitment to normalizing interest rates. There is simply no other way to break the US economy’s 20-year dependence on asset bubbles.


NEW HAVEN – I have not been a fan of the policies of the US Federal Reserve for many years. Despite great personal fondness for my first employer, and appreciation of all that working there gave me in terms of professional training and intellectual stimulation, the Fed had lost its way. From bubble to bubble, from crisis to crisis, there were increasingly to question the Fed’s stewardship of the US economy.

Image result for trump and the fed

That now appears to be changing. Notwithstanding howls of protest from market participants and rumored That now appears to be changing. Notwithstanding howls of protest from market participants and rumored unconstitutional threats from an unhinged US President, the Fed should be congratulated for its steadfast commitment to policy “normalization.” It is finally confronting the beast that former Fed Chairman Alan Greenspan unleashed over 30 years ago: the “Greenspan put” that provided asymmetric support to financial markets by easing policy aggressively during periods of market distress while condoning froth during upswings.

Since the October 19, 1987 stock-market crash, investors have learned to count on the Fed’s unfailing support, which was justified as being consistent with what is widely viewed as the anchor of its dual mandate: price stability. With inflation as measured by the Consumer Price Index averaging a mandate-compliant 2.1% in the 20-year period ending in 2017, the Fed was, in effect, liberated to go for growth.

And so it did. But the problem with the growth gambit is that it was built on the quicksand of an increasingly asset-dependent and ultimately bubble- and crisis-prone US economy.

Greenspan, as a market-focused disciple of Ayn Rand, set this trap. Drawing comfort from his tactical successes in addressing the 1987 crash, he upped the ante in the late 1990s, arguing that the dot-com bubble reflected a new paradigm of productivity-led growth in the US. Then, in the early 2000s, he committed a far more serious blunder, insisting that a credit-fueled housing bubble, inflated by “innovative” financial products, posed no threat to the US economy’s fundamentals. As one error compounded the other, the asset-dependent economy took on a life of its own.

As the Fed’s leadership passed to Ben Bernanke in 2006, market-friendly monetary policy entered an even braver new era. The bursting of the Greenspan housing bubble triggered a financial crisis and recession the likes of which had not been seen since the 1930s. As an academic expert on the Great Depression, Bernanke had argued that the Fed was to blame back then. As Fed Chair, he quickly put his theories to the test as America stared into another abyss. Alas, there was a serious complication: with interest rates already low, the Fed had little leeway to ease monetary policy with traditional tools. So it had to invent a new tool: liquidity injections from its balance sheet through unprecedented asset purchases.

The experiment, now known as quantitative easing, was a success – or so we thought. But the Fed mistakenly believed that what worked for markets in distress would also spur meaningful recovery in the real economy. It raised the stakes with additional rounds of quantitative easing, QE2 and QE3, but real GDP growth remained stuck at around 2% from 2010 through 2017 — half the norm of past recoveries. Moreover, just as it did when the dot-com bubble burst in 2000, the Fed kept monetary policy highly accommodative well into the post-crisis expansion. In both cases, when the Fed finally began to normalize, it did so slowly, thereby continuing to fuel market froth.

Here, too, the Fed’s tactics owe their origins to Bernanke’s academic work. With his colleague Mark Gertler of NYU, he argued that while monetary policy was far too blunt an instrument to prevent asset-bubbles, the Fed’s tools were far more effective in cleaning up the mess after they burst. And what a mess there was! As Fed governor in the early 2000s, Bernanke maintained that this approach was needed to avoid the pitfalls of Japanese-like deflation. Greenspan concurred with his famous “mission accomplished” speech in 2004. And as Fed Chair in the late 2000s, Bernanke doubled down on this strategy.

For financial markets, this was nirvana. The Fed had investors’ backs on the downside and, with inflation under control, would do little to constrain the upside. The resulting “wealth effects” of asset appreciation became an important source of growth in the real economy. Not only was there the psychological boost that comes from feeling richer, but also the realization of capital gains from an equity bubble and the direct extraction of wealth from the housing bubble through a profusion of secondary mortgages and home equity loans. And, of course, in the early 2000s, the Fed’s easy-money bias spawned a monstrous credit bubble, which subsidized the leveraged monetization of housing-market froth.

And so it went, from bubble to bubble. The more the real economy became dependent on the asset economy, the tougher it became for the Fed to break the daisy chain. Until now. Predictably, the current equity market rout has left many aghast that the Fed would dare continue its current normalization campaign. That criticism is ill-founded. It’s not that the Fed is simply replenishing its arsenal for the next downturn. The subtext of normalization is that economic fundamentals, not market-friendly monetary policy, will finally determine asset values.

The Fed, it is to be hoped, is finally coming clean on the perils of asset-dependent growth and the long string of financial bubbles that has done great damage to the US economy over the past 20 years. Just as Paul Volcker had the courage to tackle the Great Inflation, Jerome Powell may well be remembered for taking an equally courageous stand against the insidious perils of the Asset Economy. It is great to be a fan of the Fed again.

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.


Cambodia: The extraordinary journey of a resilient banker

December 23, 2018

Cambodia: The extraordinary journey of a resilient banker

By: Eric Ellis
Bun Yin, CEO, CIMB Bank_780

CIMB’s boss in Phnom Penh, Bun Yin, is the only Cambodian to run an international bank anywhere, but that’s not the only remarkable thing about him: the fact that he’s alive to do so is another.


Few international bankers can claim to have learnt their deal-making skills during a genocide. But Bun Yin, chief executive of Malaysian-owned CIMB Cambodia, is not your average banker – and his homeland is no normal financial market.


Yin, 62, is a veteran of Phnom Penh’s fast-developing banking sector, a genial man nearing the end of a 37-year career that neatly tracks Cambodia’s recovery from the terror of the Pol Pot years. The only Cambodian to run an international bank.

Yin is regarded by peers, competitors and staff as a pioneer of modern Cambodian banking, a tribute he modestly waves away. As for CIMB Cambodia, Yin tells  Asiamoney that he is “quite pleased” with how business has developed since 2010, when he first joined from Campu Bank, and since 2015 when he took over as CIMB Bank’s Chief  Executive.


CIMB Cambodia’s net profit rose 23% to $7.8 million in 2017, of which 44% was derived from commercial banking; the bank expects pre-tax profit for 2018 to reach $14 million, up about 40% from the previous year’s figure of $10.1 million. Yin’s family, too, seems to be thriving, and is influential in Phnom Penh.

An adult son and daughter have their own businesses, while another US-educated son runs one of Cambodia’s leading law firms and is an authority on the country’s banking code. Though the bank is part of Malaysia’s CIMB Group, all of the 340 staff working across 14 branches and business centres are Cambodian, with an average age under 30. That youthfulness reflects the country generally because so few of Cambodia’s older generation survived the Pol Pot era. Yin’s talents, such as his education and a capacity for foreign languages, were considered a death sentence under the Khmer Rouge.

To be a banker was my inspiration since my school time – Bun Yin, CIMB Cambodia


CIMB Cambodia has financed a range of local and foreign companies in construction, engineering and commodities. Some of Cambodia’s biggest companies bank with CIMB.


Yin has known some of them since their early days: when he worked at Campu; he provided some of these then-small and medium-sized enterprises with their first loans. “There are many companies in Cambodia, in trading, importing and construction, who started with me when they were small and now they have become big companies,” Yin says. “When I came to join CIMB, all these clients supported me.” Cambodia’s banks have coined it during two decades where average annual growth has been 7.6%, the world’s sixth-fastest-growing economy, according to the World Bank. Cambodia’s biggest domestic bank Acleda, which is part-owned by Japan’s Sumitomo Mitsui Bank Corp, reported taxed profit of $91.68 million in calendar 2017. The number two bank, Canadia, which has close ties to the government, earned a net profit of $72 million in 2017.

Outlook positive


The IMF gives a qualified forecast that the good times will continue, although the European Union has warned that Cambodia could lose its $6 billion-a-year privileged trading access to the bloc if the country’s autocratic strongman Hun Sen, Asia’s longest-serving leader and a former Khmer Rouge communist commander, doesn’t address growing human rights concerns. “Cambodia’s economic outlook is positive, although there are downside risks,” the IMF noted in a recent statement, highlighting macro-financial risks and governance issues. “Bank credit, increasingly concentrated in the real estate and construction sectors, is expected to grow around 20% in 2018,” it says, adding that “concerns about credit quality, external funding, increasing concentration in the real estate sector and unregulated lending by real estate developers and high credit growth and growing systemic importance of microfinance institutions continue to pose risks to financial and macroeconomic stability.” While CIMB Cambodia has seen strong growth in consumer lending (up 30% year-on-year as of the end of September 2018) and commercial lending (up 35%), its non-performing loan ratio has fallen from 0.27% to 0.19% in the same period and compares with an industry average of 2.4%, according to the bank’s figures.
Image result for From CIMB’s office high in the Hong Kong-built Exchange Square tower in Phnom Penh
EXCHANGE SQUARE lies at the heart of Phnom Penh’s emerging financial district, overlooking one of the city’s best parks. Construction began in September 2013, with completion by end of 2016.


From CIMB’s office high in the Hong Kong-built Exchange Square tower in Phnom Penh, it’s easy to see evidence of the boom. Cambodia’s sprawling riverine capital reveals new construction in all directions.


A decade ago, it took barely 15 minutes to drive the 10 kilometres from Phnom Penh’s airport to downtown; now it can take more than an hour in gridlocked traffic. Phnom Penh has become an apprentice Bangkok as Cambodians have leapt enthusiastically from Lenin to LinkedIn. Billions of dollars of Western aid and, more recently, state-directed financing from China, have helped. “Cambodia has changed a lot from where we were,” Yin says. Flashback to the ‘killing fields’ madness between 1975 and 1979: the Khmer Rouge seized control of Cambodia in the regional power vacuum at the end of the war in neighbouring Vietnam. Yin was in his late teens, recently married and with hopes of a banking career. “To be a banker was my inspiration since my school time,” he says.



But in Pol Pot’s ‘new society,’ banking, finance, indeed all business was abolished, and money too. The central bank was looted and then symbolically blown up as redundant. Schools and colleges, factories and industry were shut down.





The National Bank of Cambodia was symbolically destroyed by the Khmer Rouge after it abolished money.


Private property was seized, and agriculture collectivized. Borders were closed to seal off Cambodia from foreign ‘cultural pollution.’ Entire cities were depopulated as millions of urban ‘parasites’ were marched to the countryside for ‘purification’. Yin was one of them. This was the dystopia of Pol Pot’s ‘Year zero’. Yin was one of those at risk: he was educated and from a relatively well-to-do family in Phnom Penh, with some ethnic Chinese ancestry. His family owned a Volkswagen car, a luxury at that time. His wife taught French and Yin also spoke the language of Indochina’s former colonial rulers, as was mandatory at school.



Khmer Rouge classified city-dwellers such as Yin as expendable ‘new people’, innately opposed to the agrarian revolution and in need of ‘re-education’ or worse. A chilling slogan of the day directed at new people stated that ‘to keep you is no benefit, to destroy you is no loss.’

In early 1976, the Khmer Rouge came for him. Yin’s crime was that he spoke French, and he was thus condemned as an intellectual.


Like millions of his countrymen, Yin was marched to the rice fields outside Kratie in the remote north east of Cambodia, about 300 kilometres from Phnom Penh. He toiled there for two years, pulling rice and cutting bamboo, sometimes working beside the remains of those who had died from exhaustion, malnutrition or a cadre’s bludgeoning.


“My wife and I were talking about something and someone heard from the street,” he says. “The Khmer Rouge said I was a puppet of foreign powers. I didn’t know what that meant. We were considered as intellectual people as we were able to speak another language.”


Like millions of his countrymen, Yin was marched to the rice fields outside Kratie in the remote north east of Cambodia, about 300 kilometres from Phnom Penh. He toild there for two years, pulling rice and cutting bamboo, sometimes working beside the remains of those who had died from exhaustion, malnutrition or a cadre’s bludgeoning.



After Vietnam finally overthrew the Khmer Rouge in 1979, Yin recovered from his ordeal in his mother’s home village for a year before returning to Phnom Penh to look for a job. But many in his wider family were not so fortunate. An estimated two million Cambodians, or a quarter of the population, died during one of history’s most gruesome genocide.

Four decades on, Yin’s lingering memory of his time in Kratie is of the unbearable bugs in the rice fields there. He had noticed local peasants smoked a tobacco that kept insects away, so he started smoking too.


“The tobacco became a very important commodity,” he recalls.  Field work would begin at 4am, but Yin would rise earlier to tend a secret tobacco patch. Trading the cheroots with Khmer Rouge cadres helped save his life.

Yin remembers Cambodia’s riel banknotes re-appearing around 1980, when the central bank had to virtually give them away, such was the lack of confidence in the old currency.


Field work would begin at 4am, but Yin would rise earlier to tend a secret tobacco patch. Trading the cheroots with Khmer Rouge cadres helped save his life. “Three times they were going to kill me,” he says, “and three times I survived. I gave tobacco to others in the field in order to gain friendship with them. With that generosity, I managed to have many friends who were helping me when I had trouble.” When Vietnam ousted the Khmer Rouge, it replaced Cambodia’s Mao-inspired autarky with Vietnam’s Soviet model.



Yin remembers Cambodia’s riel banknotes re-appearing around 1980, when the central bank had to virtually give them away, such was the lack of confidence in the old currency.


The central bank was rebuilt from scratch in 1979. Yin started his career in an arm of the bank in 1981.


His first job in banking started in 1981 under the communist systems of the Phnom Penh Municipality Bank, an arm of the central National Bank of Cambodia which had been re-opened only 18 months earlier. The current governor of the central bank, Chea Chanto, was Yin’s boss at the municipal bank. From 1984 to 1987, the central bank sent him to study at the ministry of finance’s faculty of finance, accounting and banking.


“The system was socialist,” remembers Yin. “There were no private banks. All the capital came from the central bank. It’s a bit different than the commercial banks now. We did the payroll for all the government civil servants.”


The UN administration ushered in a boom for Cambodia. That legacy remains evident today: the dollar is still preferred over the riel, despite repeated entreaties by the authorities to favour the local currency. Awash with foreigners and their aid dollars, the country’s first private banks opened in the run-up to the UN’s arrival. Malaysia had been a signatory to the 1991 peace accord and, at Kuala Lumpur’s urging, Teh Hong Piow’s Public Bank began Campu Bank in Phnom Penh in 1992, among the first foreign banks to enter the market.


Through the 1980s, Vietnam-backed Cambodia was in a civil war with Khmer Rouge guerrillas and remained Hanoi’s client state until 1991 when an international peace agreement installed the United Nations as Cambodia’s government ahead of democratic elections in 1993.


The new banks were desperate for competent local staff; in the absence of a conventional banking sector, the central bank was an obvious place to look. Yin was hired in Public Bank’s first intake, joining as a credit officer and steadily rising through the ranks to become deputy general manager. In 2010, he was headhunted by CIMB.




Today, the avuncular Yin is something of an industry treasure in Cambodia’s small banking community. “He’s a legend,” says Joe Farrugia, an Australian who runs the local offshoot of Hong Leong Bank, CIMB’s Malaysian rival. “Bun Yin is a charming man, very straight and a very good operator.”


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At Campu, deputy general manager Ong Ming Teck says Yin “was born and bred here, about 20 years with us. When he first came, he could hardly speak English.” Yin also became a minor social media sensation after CIMB’s visiting former chief executive, Nazir Razak, posted a selfie with him on his Instagram account, describing his “incredible personal journey.”


The thread under the image was swamped with emojis, requests to meet ‘Uncle Yin’ and comments like “inspiring,” “determination” and “awesome.”

Says Razak: “Watching him thrive today as a banker shows how we should never give up hope.” So what makes a good banker in Cambodia, according to Yin?

He says his years in the rice fields taught him a valuable lesson, one that saved his life then and would make his career.


Says Razak: “Watching him thrive today as a banker shows how we should never give up hope.” So what makes a good banker in Cambodia, according to Yin?


He says his years in the rice fields taught him a valuable lesson, one that saved his life then and would make his career. “I learned my principle that everything must be two ways,” he says. “When you help people, people will help you back. It’s good to be friendly, for mutual benefit. That builds a trust, and that has always served me well in my career, even up to today, after 37 years as a banker.



You must learn to control yourself, to have discipline. As a leader, you must set an example for your staff.”


Four decades later, the Khmer Rouge still casts a shadow over Cambodia’s emergence to normality.  The day after Asiamoney meets Yin, Phnom Penh is in a reflective state; two senior Khmer Rouge leaders, Pol Pot’s deputy Nuon Chea and Cambodia’s former head of state Khieu Samphan, are finally convicted of genocide.



It’s taken almost four decades to bring these old tyrants to account. But memories of the time remain fresh for some. “This was an unaccountable madness for all Cambodians, including myself,” Yin says. “It became a history that everybody should not forget, to prevent its recurrence. The most important thing for our new generation is to look forward.”

Malaysians still count on bolder economic reform

November 13, 2018

Malaysians still count on bolder economic reform

Author: Editorial Board, ANU

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The widely unanticipated ousting of Malaysia’s government in May not only left political analysts scrambling for explanations. It also had economists wondering what was in store for the economy.

The Najib Razak government had presided over relatively strong growth (5.9 per cent in 2017), low unemployment (around 3.5 per cent) and sound macroeconomic fundamentals. The eclectic group that gathered around former prime minister Mahathir and Pakatan Harapan (Alliance of Hope) to send the former government on its way had a less than stellar economic resume. Its campaign was mobilised around restoring good governance and unabashedly populist economics.

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Finance Minister Lim Guan Eng –Emulate Tun Tan Siew Sin-Take Care of our money and please don’t sleep on the Job

The promise of a sounder revenue base was abandoned with the scrapping of the goods and services tax (GST). The future of economic reform and sound economic management looked distinctly uncertain. The government’s first move on the economic front saw it outsource consideration of pressing economic and other national issues to a Council of Eminent Persons. The Council consulted widely with key academic, business and government stakeholders in developing an agenda for economic reform and delivered a report to government in August.

Despite the promise of transparent governance, the contents of the Council’s report have remained confidential. Meanwhile Finance Minister Lim Guan Eng focused his early efforts on exposing the former government’s accumulation of debt and corrupt contracting, alongside abolishing the GST and reintroducing petrol subsidies — prudent if poorly sold policies of the Najib government. While there has been silence on economic reform, there’s been a hive of activity from the new government on the governance front.

Mahathir sent a clear message to ministers that elected officials and civil servants are expected to act in the people’s interests. The pursuit of former prime minister Najib and his associates on corruption charges, the separation of powers for key agencies, push back on the empire that had developed around the Prime Minister’s Department and promises to end the most egregious political appointments are among the promising early signs of large-scale governance reform. Economic governance is also set to benefit under the recently updated Eleventh Malaysia Plan priorities. It affirms commitments to improve fiscal frameworks, tackle corruption-affected tender processes, strengthen the competition regulator and enhance frontline service delivery. The 2019 Budget released on 2 November supports these reforms with specific measures and resources. Action and optimism surrounding getting institutions fixed has staved off criticism about the lack of action on economic reform.

The revised Plan and the government’s first Budget were expected to provide clarity about the new government’s medium-term economic reform agenda. Despite the short-term fiscal bind, the hope was that ambitions for economic reform would match those for governance.

As this week’s lead article by Stewart Nixon notes, the commitment to reform in key areas is underwhelming.

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

Malaysia has a low level of taxation revenue and public expenditure, but the government’s role in the economy is still pervasive. As Nixon observes, ‘The highly centralised top-down federation (that cripples local government initiative) and government ownership of more than half the local stock market ensure that the vast majority of economic activity is directly affected by the state.’ There is a worrying disconnect between government rhetoric recognising the need to act in these areas and policies under the Review and Budget that would achieve the opposite.

Perhaps the biggest drag on Malaysia’s economic performance and handicap to its breaking through the middle-income trap is flailing human capital development. Nixon writes, ‘It is therefore a positive that human capital retains high policy priority in Malaysia — commanding its own pillar in the Mid-Term Review and the highest share of budget expenditure.’ But while the government is pursuing worthwhile measures to address immediate skills mismatches, invest in school infrastructure and raise the quality of education, it still lacks a plan to address key shortcomings, including an outdated learning culture, centralised decision-making and politicisation.

As Nixon identifies, ‘The large program of policies favouring Malays and other indigenous groups (Bumiputera) in the Mid-Term Review is another possible economic destabiliser.’ The hope that Mahathir’s more representative government would bring an end to the country’s long-running and ill-targeted affirmative action program is still just a hope. The Review simply reaffirms the government’s commitment to continuing it while the budget extends discrimination into the digital arena. ‘Outdated and divisive policies serve to perpetuate negative perceptions of the majority Malays, deter investment and encourage the brain drain of discriminated-against minorities,’ says Nixon.

The challenge over time will be to build the tax base and put in place a transfer system that targets need and addresses universal problems of inclusiveness. Reforms that reduce pervasive federal government presence across the economy and influence in local governance are a high priority. Without these changes, tackling corruption-riddled systems of political patronage will be a job that’s never properly done.

The continuation and extension of pro-Bumiputera policies represents a disappointing failure to promote a more inclusive approach to ethnic relations. Fixing Malaysia’s floundering education system is also now a top priority.

If ever a government had the mandate and popularity to progress a bold reformist economic agenda in Malaysia it is now. Taking the leap to developed economy status rests on challenging reforms in areas of well-publicised and politicised weakness. Instead, the government’s first major economic policy announcements delivered mixed messages on debt reduction, unproductive handouts, minimalist tax tinkering and increased dependence on SOEs and their dividends.

Post-election uncertainties affecting investor confidence, the looming global trade wars and emerging-economy financial risks all call for more determined fiscal re-prioritisation and bolder structural reform to send a strong signal that the new government has the nous and determination to meet the people’s economic expectations.

The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.