Cambodia economic update : maintaining high growth (English)

May 29, 2015

Cambodia economic update : maintaining high growth (English)


Angkor Wat

Cambodia continues to enjoy robust growth, albeit at a slightly slower pace. Real growth in 2014 is estimated to have reached 7.0 percent. The garment sector, together with construction and services, in particular finance and real estate, continues to propel growth. However, there are signs of weaknesses in garment and agricultural production that are slightly slowing growth.

Overall macroeconomic management remains appropriate. Fiscal consolidation continues with further improvements in revenue collection resulting from enhanced administration. Poverty continues to fall in Cambodia (poverty headcount rate in 2012 was 17.7 percent) although the pace of poverty reduction has declined significantly.

Cambodia-Battambang_ProvinzCambodia’s real growth rate is expected to moderate to 6.9 percent in 2015 and 2016, as it confronts stronger competition in garment exports, continued weak agriculture sector growth, and softer growth in the tourism sector. Recent developments include: the garment sector continues to be one of Cambodia’s main engines of growth, the external position remains stable, supported by healthy foreign direct investment inflows, underpinning the overall macroeconomic stability, Exchange rate targeting continues to support price stability, inflation has eased significantly with continuing depressed food prices and the recent decline in oil prices, and financial deepening continues, supporting economic expansion as deposit and credit growth accelerated quickly in 2014.–World Bank. 2015. Cambodia economic update 

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May 28, 2015

Phnom Penh

Corruption is the Root of Malaysia’s Scandals and Problems–Lessons to Learn

by P.


QUESTION TIME: Malaysia had no major financial scandals – as in billion-ringgit ones – until the infamous case of Bumiputra Malaysia Finance or BMF emerged in the early eighties and captured the imagination of the press and the public.

Before we are a bit quick to point the finger at former Prime Minister Dr Mahathir Mohamad  for that, let’s point out that Mahathir became Prime Minister only in 1981, after BMF, Bank Bumiputra’s wholly-owned Hong Kong subsidiary, started loaning money to George Tan’s Carrian group, eventually amounting to RM2.5 billion in all.

The loans were made between 1979 and 1983, which means that loans continued to be made to Carrian even after Mahathir became Prime Minister, implying that Mahathir cannot be totally absolved.

Carrian was a rising star in the Hong Kong property market then but subsequently went bust, making it the biggest bankruptcy in Hong Kong at the time. The scale of the scandal was simply enormous and record-breaking, putting Malaysia on the top of the list in terms of banking failure at that time.

The question is what was a unit of Bank Bumiputra, a bank set up to provide bumiputras access to funding as part of the effort to increase their participation in business, doing lending money to a Hong Kong property group? This was at that time, the largest banking scandal in the world and the interest in it spiked further when a Bank Bumiputra senior officer sent to Hong Kong to investigate was murdered and his body dumped in a banana plantation.

The end-result of the entire hugely complicated affair was that few people were brought to account and even the main person involved in the scandal, George Tan, spent just three years in jail. BMF’s then chairperson  spent a long time fighting extradition to Hong Kong from the UK.

Eventually he pleaded guilty in Hong Kong, but in an interview with Malaysia’s The Sun in a pub in London, he disavowed any wrong-doing in 2008, saying he was the fall guy. According to Lorrain (photo), Bank Bumiputra was getting deposits of RM50 million a month from national oil corporation Petronas and had nowhere to put it to use. Hence Hong Kong and the Carrian loans.

Much like 1MDB, it looks like a money-making scheme gone wrong. The underlying problem was a total lack of proper governance at the bank and the movement of money out of it. Was it a desire to make money for the bank and hence for the country or was it a plot to siphon out money for the benefit of individuals?

There have been many others scandals since – too many to go into detail in this article. Bank Bumiputra’s rescue several times in the billions of ringgit, Maminco, Perwaja Steel, Malaysia Airlines’ sales and repurchase, the Renong debacle, the huge forex losses at Bank Negara Malaysia (BNM) in 1992 – they all held one thing in common, the breakdown of corporate governance due to political interference.

The BNM scandal is worth going into in some detail. While official accounts put it at around RM10 billion, other estimates place it at around RM30 billion, the actual figure masked by adjustments to reserves, accounting tricks and even the alleged depreciation of the ringgit to improve BNM’s reserve position in ringgit terms.

Another dubious first

In BNM’s case, it was a political decision – Mahathir gave the go ahead for BNM to take positions – speculate in other words – on the foreign exchange market, to obtain gains for the country. That’s unheard of for a central bank, and BNM is probably the first and only central bank to have engaged in such activities on such a scale among the central banks of the world – yet another dubious first and a record breaker for Malaysia.

The shame is that except for this one blemish, BNM has been largely a well-managed and run central bank with impeccable people at the top with a reputation for integrity. It has been a reliable watchdog, keeping the nation’s banking system from spiralling down out of control under some of the worst economic conditions.

But the interfering hand of the politician – in this case Mahathir – and the approval of clearly taboo practices for central banks sullied that and resulted in covert foreign exchange operations that few knew about even within the bank and the huge losses of billions of ringgit eventually which could no longer be hidden.

It is worth remembering that all of the other ones apart from the BMF scandal occurred during Mahathir’s long 22-year tenure as PM. Even the BMF scandal ran for part of Mahathir’s time, when loans were actually increased to the Carrian group in an attempt to recover money eventually.

Mahathir’s successor Abdullah Ahmad Badawi had few such large scandals but there were many allegations of patronage made with respect to his son, son-in-law and brother, and also references made to the so-called fourth floor boys – a coterie of close advisers who were supposed to have great influence in decision-making. But to Abdullah’s credit, it was under his tenure that the government-linked companies (GLCs) transformation programme was started, an ambitious attempt to reform GLCs many of which were being managed badly with former civil servants at the top.

Khazanah Nasional, which is wholly-owned by the government, under Azman Mokhtar and which held many of the GLCs under its umbrella spearheaded the transformation, by bringing in professional managers as well as setting KPI targets, standards and rulebooks, amongst others.

Even the GLCs which were not under Khazanah were subject to scrutiny and new standards. There was a tremendous improvement in performance, accountability and adopting best practices although there was and still is greater room for improvement.

But his successor Najib Abdul Razak negated a huge part of the transformation when along came 1MDB, first formed as Terengganu Investment Authority or TIA, which in a space of five years had assets, many of them dubious and unverifiable, of RM51 billion and liabilities of RM48 billion. It was built on a towering edifice of debt never before seen in Malaysia, much of it guaranteed by the federal government.

1MDB is wholly-owned by the Minister of Finance Inc and is not subject at all to all the governance procedures required of other GLCs. It operates rather covertly, makes no public reports like Khazanah does yearly beyond what is required by statute and gives very little information of its operations.

Now evidence has surfaced in the form of an amendment to 1MDB’s memorandum and articles of association (MAA) in August 2009 that requires major financial commitments and other major decisions by 1MDB to be approved in writing by the prime minister.

If this had continued to be in place the question arises as to whether he had given approval to all of 1MDB’s major transactions. If he has not, that implies that many of 1MDB’s transactions would have been directly against the MAA.

As we saw this is not the first time such a lack of governance has happened in Malaysia. The question is why does it continue to happen.

The root causes

One root cause is the continued abuse of the bumiputera agenda. Such was the case with Bank Bumiputra where others took advantage of the bank, set up to help bumiputeras gain access to funding, to channel funds into Hong Kong for their own purposes leading to massive losses of money.

In subsequent years, Bank Bumiputra continued to lend money to well-connected bumiputra owners many of whom never repaid their loans, eventually making the bank bankrupt. That included UMNO which owed Bank Bumiputra RM300 million at one time for loans associated with the Putra World Trade Centre.

In the guise of helping bumiputras, much money was siphoned off out of financial institutions but very few people were brought to book. Such practices were accepted as part of the ordinary course of business.

Other reasons for such covert operations are to raise political slush funds which could be used during elections, although many suspect a huge part of these funds go into individual pockets where they are tacitly accepted as a part of patronage politics. Such reasoning and the channelling of funds into the pockets of party bigwigs around the country muffles criticism of the practices from within UMNO.

Also much of the public funds are wasted and lucrative contracts and concessions are awarded to privileged businessmen who contribute to party funds. Often, these businesses inflate construction prices to cream off profits while the inflated figures allow them to charge more for services they provide.

The underlying problem is the system – as long as there is money politics and excessive powers vested in the hands of the executive it will continue to happen over and over again. As long as no one is brought to account for past transgressions, it will encourage more people to cheat; after all what do they have to lose?

We simply need a commitment to cut corruption and patronage from the top downwards if things like 1MDB are not to happen again. If that’s not forthcoming from the current government despite all the pressure put on it, the public needs to exercise its democratic rights.

P Gunasegaram is founding editor of KINIBIZ which produces an online business news portal and a fortnightly print magazine.

Prime Minister Najib’s Economic and Financial Powerhouse–Impressive Captains

May 28, 2015

Phnom Penh

Prime Minister Najib’s Economic and Financial Powerhouse–Impressive Captains

Horse-trading, money changing hands, contracts finalising, projects reviewing and the list goes on. That’s what is happening now, as the mother of all scandal – 1MDB – about to enter another new month this year. Bets are on the table that by hook or by crook, Pprime minister Najib Razak and his wife Rosmah Mansor may have a smooth sailing after all.

 In fact, Najib and Auntie Rosy are ready to pull Mahathir and his family down together, if that’s what it will take to win this war. Clearly, only one team will emerge victorious, and the loser will not be able to get a “face-saving” exit this time. With the present social networking age, the loser will be remembered in a disgraceful manner.

1MDB RM42 Billion - Thank You For Your SupportWhat’s rather amazing is the fact that Bank Negara (Central Bank) governor Zeti Akhtar Aziz was the only individual who had not spoken about 1MDB scandal, until today, despite the institution being dragged into the drama by Najib numerous times. First, Najib cried 1MDB money couldn’t be repatriated back home because the central bank would make a big issue out of it.

 Subsequently, Najib bitched that BRIM, a project where Santa Claus gives away free cash to people, was actually an idea from the central bank, not from his administration. Still, Zeti didn’t raise a finger but kept an elegance silence, as if she was sleeping on the job. Today, she finally opens her mouth.

Apparently, Zeti had received a report from MAS (Monetary Authority of Singapore) about an account linked to the debt-ridden strategic investment firm at the Swiss-based BSI Bank. As expected, she wouldn’t reveal anything, using “confidentiality” as the excuse. Governor Zeti should know better than anyone else about “helping” Najib Razak, so let’s hope she doesn’t do something stupid.

 Besides forming alliances and recruiting betrayals, this war of the century – Mahathir vs Najib – will see losers being wiped out not only from the political landscape, but also about business cronies losing everything. Hence, the stake is not merely RM42 billion of 1MDB debt alone, but billions of new business contracts.

Besides forming alliances and recruiting betrayals, this war of the century – Mahathir vs Najib – will see losers being wiped out not only from the political landscape, but also about business cronies losing everything. Hence, the stake is not merely RM42 billion of 1MDB debt alone, but billions of new business contracts.

Najib vs Mahathir - WarLike it or not, this “Clash of the Titans” does not only affect politicians and businessmen, but also small investors such as stock market traders, speculators, gamblers, punters or whatever name you wish to call yourself. If Najib wins, the status quo remains. But if he losses, which is very likely, you may want to avoid certain stocks or companies related to his cronies.

 Could that be one of the reasons why his own brother, Nazir Razak, appears to be on the enemy’s camp? Actually, it makes perfect sense to distance himself from big brother Najib. The stake is simply too high. It’s a foolish move to defend his own brother, and in the process losses everything in CIMB, the same way Rashid Hussein lost RHB because he aligned himself with Anwar Ibrahim.

Malakoff IPO - Billionaire Syed Mokhtar EmpireGet ready for a super lengthy write-up on Najib Razak’s cronies below. This is not a complete list though. But some cronies such as Vincent Tan (Berjaya Group), Quek Leng Chan (Hong Leong Group), Teh Hong Piow (Public Bank Berhad), Syed Mokhtar Al-Bukhary, Ananda Krishnan are considered as UMNO-cronies, not Najb-cronies.

 { 1 }  Nazir Razak, 49

  • CIMB Group Holdings Berhad (KLSE:CIMB, stock-code 1023): Chairman
  • Khazanah Nasional Berhad (KNB): Director
  • Employees Provident Fund (EPF): Chairman of the Investment Panel Risk Committee
  • Malaysia International Islamic Financial Centre: Executive Committee member

Najib Razak Cronies - Nazir RazakNazir Razak, the youngest brother, is the most well known. He obtained a Master of Philosophy at Cambridge University. He is a career banker, joining CIMB Investment Bank almost 20 years ago and rising through its executive ranks to become its CEO in 1999. Perhaps the most business-savvy within the Razak family members, Nazir is infamous for his controversial acquisition of Southern Bank from owner Tan Teong Hean.

Following the merger of CIMB and Bumiputra-Commerce Bank, to become Bumiputra-Commerce Holdings Bhd (BCHB), Nazir became CEO of the merged group and later Chairman of CIMB Group. Informed observers widely believe Nazir advises Najib on finance and economic policy issues. However, the relationships between all the Razak brothers with PM Najib are in a bad shape due to wife Rosmah Mansor.

 { 2 }  Ahmad Johari Razak, 59

  • Ancom Berhad(KLSE: ANCOM, stock-code 4758): Non-Executive Chairman
  • Hong Leong Industries Berhad(KLSE:HLIND, stock-code 3301): Non-Executive Director
  • Daiman Development Berhad(KLSE: DAIMAN, stock-code 5355): Non-Executive Chairman
  • Sumatec Resources Berhad (KLSE: SUMATEC, stock-code 1201): Non-Executive Director
  • Malaysian Resources Corporation Berhad (KLSE: MRCB: stock-code 1651): Independent Director
  • Deutsche Bank (Malaysia) Berhad: Director
  • Daiman Golf Berhad: Non-Executive Director
  • Courts Mammoth (M) Berhad (delisted-privatised): Non-Executive Chairman

Najib Razak Cronies - Ahmad Johari RazakJohari Razak, the second eldest brother and a close friend of Perak Sultan Nazrin Shah. He is a lawyer and senior partner at Shearn Delamore & Co, a large law firm  located at Wisma Hamzah-Kwong Hing, Kuala Lumpur. His areas of practice include corporate and commercial joint ventures, mergers and acquisitions; corporate restructuring; and the listing of public companies.

He was believed to play a vital role during the 2009 Perak constitutional crisis, which saw the collapse of Pakatan Rakyat state government. This enabled brother Najib Razak scored important brownie points, as a great political tactician, at least in the eyes of UMNO members.

Coincidentally, 1MDB, currently in hot soup over RM42 billion debt scandal, had lendings from a consortium of six foreign banks led by Deutsche Bank. With the prospect of 1MDB declares a default over the syndicated loan amounting to US$975 million, Deutsche Bank Singapore and other banks such as BSI Singapore, RBS Coutts could seek early repayment.

 { 3 }  Mohamed Nizam Razak, 56

  • Mamee Double-Decker (M) Berhad (delisted-privatised): Non-Executive Director
  • Yeo Hiap Seng (M) Berhad (delisted-privatised): Non-Executive Director
  • Other directorship: Synergy Track Sdn. Bhd., Deutsche Bank (Malaysia) Bhd., Noah Foundation, Hong Leong Foundation, National Children Welfare Foundation, Yayasan Rahah, and Yayasan Wah Seong.

Najib Razak Cronies - Mohamed Nizam RazakNizam Razak studied politics, philosophy, and economics at Oxford University. He was a stockbroker and CEO of PB Securities Sdn Bhd in the 1990s. He is currently a non-executive director in several once-publicly listed companies including Mamee Double-Decker (M) Bhd and Yeo Hiap Seng (M) Bhd, which have since been taken private.

 He used to serve as non-executive director at Hiap Teck Venture Bhd and Delloyd Ventures Bhd, and like brother Johari, Nizam is also a director of Deutsche Bank. Together with UMNO money carrier Syed Mokhtar they were once eyeing for the 19.4% stake in DRB-Hicom held by the family trust of late Yahaya Ahmad. Today, Syed Mokhtar owns DRB.

 { 4 } Mohamed Nazim Razak, 53

  • Hong Leong Bank Berhad(KLSE: HLBANK, stock-code 5819): Non-Executive Director
  • Hong Leong Capital Berhad (KLSE:HLCAP, stock-code 5274): Non-Executive Director
  • XiDeLang Holdings Limited (KLSE: XDL, stock-code 5156): Deputy Chairman
  • 7-Eleven Malaysia Holdings Berhad (KLSE: SEM, stock-code 5250): Non-Executive Director
  • Hong Leong Islamic Bank Berhad: Non-Executive Director
  • Other directorship: The Legends Golf & Country Resort Bhd., Batu Caves Centrepoint Sdn. Bhd., BTS Land Capital Sdn. Bhd., Century Tower Industries Sdn. Bhd., Digiport (M) Sdn. Bhd., etc

Najib Razak Cronies - Mohamed Nazim RazakNazim Razak, the fourth brother  who married former host of TV3’s Nona show, Norjuma Habib Mohamed, studied architecture in the UK. He is Chairman of Meru Utama Sdn Bhd, an outdoor advertising company that received a seven-year advertising concession in 2007 to advertise the Kuala Lumpur International Airport and Low-cost Carrier Terminal (LCCT).

 Nazim is also a director of Eng Wah Organization Limited, a Singapore-based business involved in cinema operations, film distribution and rental of retail and office space. He is a Chairman of the Governing Council of Masterskill, a private University/College (the Pro Chancellor is Raja Azureen Raja Azlan Shah, the daughter of the late Sultan of Perak) and Director of OYL Industries (a subsidiary of Hong Leong Group of Companies).

 { 5 }  Tan Kay Hock, 67

  • Johan Holdings Berhad(KLSE: JOHAN, stock-code 3441): Chairman and CEO
  • George Kent (M) Berhad(KLSE:GKENT, stock-code 3204): Chairman
  • Jacks International Limited: Chairman
  • Iskandar Regional Development Authority: Member
  • Malaysian Humanitarian Foundation: Director

Najib Razak Cronies - Tan Kay HockWhen Tan Kay Hock, a golfing buddy of Prime Minister Najib Razak, was awarded the systems work for the RM1.1 billion Ampang light rail transit (LRT) line extension project in July 2012, it raised eyebrows because the company was better known as manufacturers and suppliers of water meters. Mr Tan denied his company, George Kent, won due to political links.

Now that his golfing buddy Najib is in hot soup over 1MDB’s RM42 billion debt scandal, will the Prime Minister expedite the Kuala Lumpur-Singapore High Speed Rail project before getting the boot? Most importantly, will Tan Kay Hock’s 25-years of “friendship” with Najib helps George Kent secure the jewel of rail projects?

{ 6 }  Shahril Shamsuddin, 54

  • SapuraKencana Petroleum Berhad(KLSE: SAPCRES, stock-code 8575): Executive Director and President and Group CEO
  • Sapura Industrial Berhad(KLSE: SAPIND, stock-code 7811): Deputy Chairman
  • Sapura Resources Berhad(KLSE: SAPRES, stock-code 4596): Non-Executive Director
  • Sapura Secured Technologies Sdn. Bhd. (private division of Sapura Group): President and CEO

Najib Razak Cronies - Shahril ShamsuddinShahril Shamsuddin of Sapura Group and his family is well known to have a very good relationship with Najib’s family. His father, Shamsuddin Abdul Kadir, the founder of Sapura Group, was however aligned to former premier Mahathir Mohamad. Later, the merger between Mahathir’s son (Mokhzani Mahathir) Kencana Petroleum and SapuraCrest Petroleum forming today’s SapuraKencana in 2012.

However, both Mokhzani and Shahril couldn’t see eye to eye, due to differences of opinion between both co-founders in the running of SapuraKencana, not to mention about who really has better capability helming the country’s largest oil and gas services firm. Subsequently, Mokhzani resigned as vice chairman this year (March 2015).

{ 7 }  Mohamed Azman Yahya, 51

  • SymphonyHouse Berhad (KLSE: SYMPHNY, stock-code 0016): Group CEO, Founder
  • Symphony Life Berhad(KLSE: SYMLIFE, stock-code 1538): Executive Chairman
  • Scomi Group Berhad(KLSE: SCOMI, stock-code 7158): Non-Executive Director
  • PLUS Expressway Berhad(delisted in 2012): Non-Executive Director
  • Ekuiti Nasional Berhad: Director
  • AIA Group Limited: Non-Executive Director
  • Khazanah Nasional Berhad (KNB): Director

Najib Razak Cronies - Mohamed Azman YahyaMohamed Azman Yahya, director of Khazanah, and founder and group chief executive officer of Symphony House Bhd, an outsourcing firm. He is also the ex-CEO of Pengurusan Danaharta Bhd and sits on several advisory panels for the development of the capital market, venture capital, and public service delivery system.

 Despite his supposedly wide experience in charge of national asset management, he couldn’t do anything to help the once rotting Malaysian Airline Systems. However, Azman Yahya, one of Najib’s six trusted individuals, was allegedly conspired with Nor Mohamed Yakcop and cheated Halim Saad in a UEM-Renong takeover deal back in 2001.

 { 8 }  Rohana Mahmood, 61

  • Paramount Corporation Berhad(KLSE: PARAMON, stock-code 1724): Non-Executive Director
  • AMMB Holdings Berhad(KLSE: AMBANK, stock-code 1015): Non-Executive Director
  • Sime Darby Berhad(KLSE: SIME, stock-code 4197): Non-Executive Director
  • RM Capital Partners Sdn Bhd (spin off from Ethos Capital): Chairman and Founder.
  • AmInvestment Bank Berhad: Non-Executive Director

Najib Razak Cronies - Rohana MahmoodRohana was the chairman and co-founder of Ethos Capital, a RM200 million private equity firm, which through its Ethos Consulting was involved in the National Automotive Policy that resulted in the abuse of APs to selected individuals associated to Khairy Jamaluddin, son-in-law of former prime minister Abdullah Badawi. Among all cronies, Rohana Mahmood stands out as deeply embedded in the Najib family’s commercial interests.

Together with Omar Mustapha Ong, a former special assistant to Najib Razak, they once had their eyes on EPF’s RM300 billion fund to manage. She and another close aide of Najib, Abdul Razak Baginda (linked to gruesome murder of Mongolian Altantuya), are co-founders of an independent think-tank, Malaysian Strategic Research Centre. Najib was chairman of the think-tank, now disbanded.

 { 9 }  Azman Mokhtar, 54

  • Axiata Group Berhad (KLSE: AXIATA, stock-code 6888): Chairman and Non-Executive Director
  • Khazanah Nasional Berhad (KNB): Managing Director and CEO
  • Iskandar Investment Berhad: Chairman

Najib Razak Cronies - Azman MokhtarAzman was Managing Director and co-founder of the infamous consulting firm BinaFikir, which proposed WAU (Wide Unbundling Asset) in 2002 to save ailing Malaysian Airline System (MAS). Amusingly, under his poor leadership, MAS made bigger losses. Azman then proposed Penerbangan Malaysia Berhad (PMB), which also lost money.

Azman Mokhtar, who is running Khazanah, Malaysia’s sovereign wealth fund which in effect controls CIMB along with the country’s national pension scheme, is one of six trusted individuals personally picked by Najib for ideas on issues ranging from economy, capital markets and general business soon after Najib was appointed Finance Minister.

Comically, the supposedly genius Azman Mokhtar couldn’t turn around MAS for the second time, in a MAS-AirAsia share swap exercise. He probably has the longest list of “failed” restructuring and business ventures – tuna fishing venture losses of RM120 million, Parkway Holdings’ RM935 million losses, and whatnot.

 { 10 }  Mohd Nadzmi Mohd Salleh, 61

  • Konsortium Transnasional Berhad(KLSE: KTB, stock-code 4847): Chairman and Managing Director
  • Transocean Holdings Berhad(KLSE: TOCEAN, stock-code 7218): Chairman and Managing Director
  • V.S. Industry Berhad(KLSE: VS, stock-code 6963): Non-Executive Director
  • JT International Berhad: Chairman
  • Express Rail Link Sdn Bhd (ERL): Chairman
  • Nadicorp Holdings Sdn Bhd: Chairman
  • Trisilco Folec Sdn Bhd: Chairman

Najib Razak Cronies - Mohd Nadzmi Mohd SallehMohd Nadzmi, the chairman and MD of express bus operator, Konsortium Transnational Bhd. The former Proton boss was called upon by the Government in 1996 to revive the ailing public transport company. He is one of the six trusted individuals personally picked by Najib for ideas on issues ranging from economy, capital markets and general business soon after Najib was appointed Finance Minister.

He was former PM Mahathir’s prodigy and has expertise in transportation. Nadzmi had tried bidding for Proton numerous times, when the national car maker’s profits came under pressure. German’s Volkswagen and American’s General Motors had held talks with Proton management but the sensitive issue of “over-protection” ownership hindered any further strategic alliance.

 { 11 }  Mohd Salleh Bakke, 61

  • Sime Darby Berhad(KLSE: SIME, stock-code 4197): President, Group CEO
  • Eastern & Oriental Berhad(KLSE: E&O, stock-code 3417): Non-Executive Director
  • Sime Darby Property Berhad: Non-Executive Director
  • Yayasan Sime Darby: Non-Executive Director
  • Northern Corridor Economic Region (NCER): Director
  • Other directorship: Sime Darby Energy & Utilities Sdn. Bhd., Sime Darby Healthcare Sdn. Bhd., Sime Darby Plantation Sdn. Bhd., Sime Darby Industrial Holdings Sdn. Bhd., Sime Darby Bhd., Eastern & Oriental Bhd., Sime Darby Energy Sdn. Bhd., Sime Darby Motors Sdn. Bhd.

Bakke was formerly the Group President & Chief Executive Officer of Felda Global Ventures Holdings Berhad. His previous directorship and chairmanship involvement included Permodalan Nasiona Berhad (PNB), Pengurusan Danaharta Nasional, Bank Islam Malaysia, Lembaga Tabung Haji and whatnot.

But none of the above beats his latest “involvement”, or at least his “knowledge” about the explosive 1MDB’s RM42 billion debt. Bakke was the chairman of 1MDB from 11-Aug-2009 till his resignation on 19-Oct-2009. So, was he involved in the approval of US$700 million, allegedly siphoned to Good Star Ltd, a company owned by Jho Low?

 { 12 }  Lodin Wok Kamaruddin, 61

  • Affin Holdings Berhad(KLSE: AFFIN, stock-code 5185): Deputy Chairman
  • Boustead Heavy Industries Corporation Berhad (KLSE:BHIC, stock-code 8133): Chairman
  • Boustead Holdings Berhad (KLSE:BSTEAD, stock-code 2771): Deputy Chairman and Group Managing Director
  • Boustead Plantations Berhad (KLSE:BPLANT, stock-code 5254): Vice Chairman
  • Pharmaniaga Berhad (KLSE:PHARMA, stock-code 7081): Chairman
  • 1Malaysia Development Berhad (1MDB): Chairman
  • Lembaga Tabung Angkatan Tentera (LTAT): Chief Executive
  • Other directorship: UAC Berhad, MHS Aviation Berhad, FIDE Forum, Badan Pengawas Pemegang Saham Minority Berhad, Affin Bank Berhad, Affin Islamic Bank Berhad, Affin Hwang Investment Bank Berhad and AXA Affin Life Insurance Berhad.

Najib Razak Cronies - Lodin Wok KamaruddinThe mention of LTAT and Boustead will easily give away the type of business Lodin specialises in. He’s essentially the “Chief of the Armed Forces Fund Board”, making him very powerful and super rich. His Boustead Heavy Industries was notorious for getting all the contracts building military ships for the government, but can never delivered them (*grin*). But that was just the tip of an iceberg.

 What many didn’t realise was the fact that Lodin Wok was one of the directors of Perimekar Sdn Bhd until 2010, when the explosive procurement of two French-made submarines was revealed. The Scorpene scandal, which involved RM534.8 million in commission, and later the gruesome murder of Mongolian Altantuya speaks volumes about Lodin’s relationship with Najib. He also sits on the boards of Affin Bank Bhd, one of Perimekar’s bankers.

 { 13 }  Ismee Ismail, 51

  • Syarikat Takaful Malaysia Berhad(KLSE: TAKAFUL, stock-code 6139): Chairman
  • TH Plantations Berhad(KLSE: THPLANT, stock-code 5112): Non-Executive Director
  • BIMB Holdings Berhad(KLSE: BIMB, stock-code 5258): Non-Executive Director
  • Bank Islam Malaysia Berhad: Non-Executive Director
  • Edra Global Energy Berhad (formerly known as 1MDB Energy Group Berhad): Director
  • Lembaga Tabung Haji: Group Managing Director and CEO
  • 1Malaysia Development Berhad (1MDB): Director

Najib Razak Cronies - Ismee IsmailIsmee Ismail began his career at Arab Malaysian Development Berhad in 1987. He later joined the Shell Group of Companies in Malaysia and held various positions including the Head of Forex and Banking of Shell Malaysia Ltd and Group Accountant of Shell Malaysia Trading Sdn. Bhd.

 He is currently the Group Managing Director and Chief Executive Officer of Lembaga Tabung Haji. Prior to that, he was the Chief Executive Officer of ECM Libra Securities Sdn Bhd and a Director of ECM Libra Capital Sdn Bhd. What’s in the limelight now is the prospect of Tenaga Nasional Berhad bailing Edra Global Energy Berhad, to the tune of RM16 billion. Did he also has his hand in Tabung Haji’s recent acquisition of 1MDB’s lands?

 { 14 }  Robert Kuok Hock Nien, 92

  • PPB Oil Palms Bhd (KLSE: PPB, stock-code 4065)
  • Malaysian Bulk Carriers Berhad (KLSE:MAYBULK, stock-code 5077)

Najib Razak Cronies - Robert KuokWith net worth of US$12.4 billion (Forbes, May 2015), the world’s #110 richest but Malaysia’s richest man, Robert Kuok is a legend. His empire – Kuok Group – controls a fleet of listed companies in Hong Kong, Singapore and Malaysia. PM Najib Razak used to visit “Uncle Kuok”, who was a childhood friend with second Prime Minister Tun Razak.

Together with third PM Hussein Onn, the trio’s friendship went back to their school days at Raffles School Singapore. Interestingly, Singapore’s first Prime Minister – Lee Kuan Yew – was one of their classmates. Although Robert Kuok has brilliantly diversified most of his fortune out of Malaysia, there’re still some “leftovers”.

 { 15 }  Other Public-Listed Companies / Financial Institutions

  • 1MDB - Bail Out Progress Report - EPF, KWAP, Finance Ministry, Tabung Haji, TakafulTenaga Nasional Berhad (KLSE: TENAGA, stock-code 5347):- possibility of bailing out 1MDB’s Edra Global Energy Berhad to the tune of RM16 billion
  • Employees Provident Fund’s (EPF):- RM200 million bond investment in 1MDB; RM1.5 billion investment in Panglima Power Sdn Bhd (PPSB)and Jimah Energy Ventures Sdn Bhd (JEV).
  • Retirement Fund Inc. (KWAP):- Invested RM1.4 billion in 1MDB’s various subsidiaries: Bandar Malaysia Sdn Bhd, 1MDB Energy Limited, 1MDB Global Investment Limited, and Jimah Energy Ventures Sdn Bhd (JEV). There was also the controversial sale and leaseback of a commercial office tower with 1MDB Real Estate Bhd (1MDB RE)
  • Lembaga Tabung Haji:- has invested RM920 million bond in 1MDB’s real estate development Bandar Malaysia and last month, bought 0.63ha from the Tun Razak Exchange (TRX) financial district.

Najib will have two eyes meeting with his Finance Minister on 1MDB

Phnom Penh

dinat UCThis is a parody of sorts. It is arguably one of the best jokes I have heard on the 1MDB Scandal in recent months. Yet it rings true because it is what I had suspected for a long time. Prime Minister Najib Razak has been talking to himself and sleepwalking in the wee wee hours of the morning. He has been trying to convince himself that 1MDB has no problems whatsoever. Tun Dr. Mahathir, Tony Pua and Rafizi Ramli in the Opposition and the rest of us are making 1MDB the pretext to demand his resignation. It is the Finance Minister who should take full responsibility.

On his instructions the MACC with Tunku Abdul Aziz as its adviser cum leader of the investigation team will now look into the matter, leaving no stones unturned. I am sure that given MACC’s sterling record, they will recommend to the Attorney-General that the Minister of Finance should be charged for corruption and fraud.

The Auditor-General who will absolve the Prime Minister of any wrongdoing will likely find that Chairman Lodin Wok Kamaruddin and other 1MDB Directors have failed to perform their fiduciary duty diligently, and the management team led by a certain hot shot Mr. Arul has been dishonest and there is sufficient evidence to prosecute them. For that, Prime Minister deserves our applause for taking decisive  action to bring the 1MDB saga to a closure.–Din Merican


Najib will have two eyes meeting with his Finance Minister on 1MDB

PUTRAJAYA: Govt sources confirmed today (May 25) that upon his return from Japan, Prime Minister Najib Razak will attend a private two-eyed meeting with the Finance Minister to discuss ongoing problems with the heavily indebted 1MDB wealth fund.

“The PM knows ultimately the buck stops with him,” said a source, “but given 1MDB is a subsidiary of the Ministry of Finance, the Finance Minister must shoulder some responsibility for the rampant mismanagement of the nation’s funds.”

“Also attending the meeting will be 1MDB’s Chairman of the Board of Advisers as 1MDB was his idea, and was likely fully-aware of the fund’s unfortunate investment decisions.  The BN Chairman and President of UMNO will also sit in to weigh the damage 1MDB’s land sale to Tabung Haji did to the government’s credibility.”

Political transparency watchers were impressed with the move, “Hopefully with these great minds attending the two-eyed meeting we may soon learn ultimately who is responsible for this costly 1MDB train wreck!”

  – See more at:

Why auditors can’t guarantee there was no fraud at 1MDB

May 25, 2015

Why auditors can’t guarantee there was no fraud at 1MDB


Published: 25 May 2015 7:00

The backers of 1Malaysia Development Bhd (1MDB) have argued that because international accounting firms like KPMG and Deloitte have signed off all 1MDB’s accounts from FY2010 to FY2014, this meant no money has gone missing and no fraud has occurred.

Mm_Cover_NEW_1068.inddThis argument has been used to justify the not-so-eloquent silence of the management and board of directors of 1MDB, who have refused to respond to questions posed to them about various transactions and the movements of billions of ringgit.

They hide behind that argument despite the fact that 1MDB has run into serious cash-flow problems and can no longer service its debts, and so many questions have been raised about the whereabouts and nature of the so-called Available-For-Sale Investments valued at RM13.38 billion in its accounts for financial year ended March 31, 2014.

Critics of 1MDB have been asked to back off and let the Auditor-General complete his work to review the audit of 1MDB.

The argument that because 1MDB’s accounts have been signed off by auditors meant that no fraud has occurred and that money was not missing is flawed. It shows that these people do not know what they are talking about.

They have badly misinterpreted, deliberately or otherwise, the role of external auditors and they do not understand the meaning of an auditor’s report when the auditors sign off the financial statement of a company.

There are no auditors in this world who will agree that their signing off on an account can in any way or form be interpreted to mean that they confirm or guarantee that the accounts are completely true, accurate and do not contain any misstatements, by fraud or error.

The International Standards for Auditing guidelines for auditors state that the external auditor is responsible for obtaining reasonable assurance that the financial statements, taken as a whole, are free from material misstatement, whether caused by fraud or error.

That reasonable assurance is based on the external auditor trusting that the management and board of a company have carried out their fiduciary duties and were not involved in any fraud or have concealed any fraud.

Owing to the inherent limitations of an audit, there is an unavoidable risk that material misstatement may not be detected, even when the audit is planned and performed in accordance with international accounting standards.

The risk of fraud is higher than those of error because fraud usually involves sophisticated and carefully organised schemes designed to conceal it.

Therefore, it is not the role of an external auditor to determine whether fraud has actually occurred. That is the responsibility of the country’s criminal and legal system.

Malaysian_financial_scandals-graphic-240515-the_edgeIndeed, auditors call the discrepancy between what the public expects and what auditors do as an “expectations gap”.

Let us now take a closer look at Deloitte’s audit report issued to 1MDB on November 5, 2014, for the financial year ended March 31, 2014. The fact that it was issued more than seven months after the year-end in itself should raise concerns.

Para 2: The directors of the company are responsible for the preparation of these financial statements so as to give a true and fair view. The directors are also responsible for such internal control as the directors determine what is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Para 3: Our (Deloitte) responsibility is to EXPRESS AN OPINION on these financial statements based on our audit… and perform the audit to obtain REASONABLE assurance about whether the financial statements are free from material misstatement.

The above remarks by Deloitte is a standard template statement issued by auditors to most companies. What is important to note are the following:

1. The directors of 1MDB are ultimately responsible for the accounts in so far as they give a true and fair view. The directors are also responsible for internal controls that are necessary to enable the financial statements to be free from misstatements, whether due to fraud or error. This is NOT the responsibility of the auditor.

2. The auditors only express an opinion that they, as external auditors, have done what is necessary to obtain REASONABLE assurance about whether the financial statements are free from material misstatement.

3. Critically, the external auditors DO NOT express an opinion on the effectiveness of the company’s internal controls.

In short, while auditors should be able to detect defective keeping of accounting records, they cannot detect falsified accounting documents. And neither can they question management decisions on, say, an investment that it made.

The questions asked of 1MDB mainly relate to the effectiveness of internal controls and corporate governance:

– Who approved the agreements and the various payments made since 2009?

– Why were funds diverted from what they were approved for? Why was money sent to an account controlled by Jho Low?

– Why did 1MDB overpay for the power assets, the Penang land and the commissions to the bankers like Goldman Sachs?

– Who verified and agreed to pay the US$700 million to PetroSaudi, purportedly as settlement of a loan?

– Why was Jho Low giving instructions to the management on matters of 1MDB?

– Who agreed to the Aabar options and then agreed to a termination settlement that cost 1MDB US$1 billion?

All these major issues that have been raised are about internal controls, decision-making and corporate governance at 1MDB.

Deloitte, in their audit report, had clearly stated they are NOT expressing any opinion on the effectiveness of 1MDB’s internal controls.

So, please stop passing the buck to Deloitte or using the fact that it signed off on the accounts, to say that nothing wrong has happened and that everything at 1MDB is fine.

And since the auditor-general has merely been asked to audit the work of Deloitte, it is most likely the case that his mandate is no more than that of Deloitte.

It is clear. The board of directors is responsible in ensuring the accounts are true and fair. The board is responsible for internal controls to ensure there is no fraud.

The auditor only expresses a reasonable opinion. Nothing more.


The corporate sector, at home and around the world, is littered with many examples of corporate fraud that escaped the scrutiny of auditors. In a few cases, auditors were also culpable, if not outright complicit.

The largest corporate fraud ever in the world was US energy giant Enron, whose US$78 billion market value was wiped out in days. Former Enron President Jeff Skilling is still serving a 24-year jail term.

And its auditors, Arthur Andersen, one of the Big Four accounting firms in the world then, had to cease operations.

Bernard Madoff’s US$65 billion Ponzi scheme is evidence that funds under management, with third-party valuations by international institutions, may also be subject to misappropriations and fraud. Madoff is currently serving a 150-year sentence in prison.

An article was published in the November 20, 2012 issue of Forbes magazine, on how Hewlett-Packard (HP) lost US$5 billion on a US$11.1 billion acquisition.

HP said it had to write down the value of UK software company Autonomy because it was inflated through serious accounting improprieties, misrepresentation and disclosure failures.

That scam tainted all the auditors involved – Deloitte as the auditors for Autonomy and Ernst & Young, the auditors for HP – for not detecting the fraud.

Need we say more? – May 25, 2015.

UMNO leaders complicit in 1MDB cover-up

May 24, 2015

Phnom Penh

Umno leaders complicit in 1MDB cover-up


by Matthias Chang@

Najib and the Devil WomanThe Prime Minister cum Financial Minister (above), being a member of Parliament cannot be deemed ignorant of this fraudulent misrepresentation. Answers to parliamentary questions, whether from backbenchers or the opposition, are vetted before presented in Parliament. If the cash has been “diverted” or “unaccounted for” there is a basis for a charge of criminal breach of trust by all the relevant personalities involved in the transaction. There may also be elements of corruption.–Matthias Chang

It is elementary, Mr.Najib. You cannot be ignorant of what constitutes cash. Even a child knows what cash is, and when cash is deposited in a bank, the bank statement would reflect the cash deposited in the bank. Any paper or document other than cash cannot be deposited and reflected in a bank statement as cash.

Documents such as share certificates, treasury notes or bonds or other documents that are not considered as money, when deposited in a bank for whatever reason or placed in a fixed deposit box are never ever reflected in a bank statement.

The Minister of Finance, treasury officials, and members of the 1MDB Board of directors and its advisers are all experienced in finance and cannot by any stretch of the imagination be deemed ignorant of what is cash.

The balance sum amounting to US$1.103 billion is not some chump change and, when converted to Malaysian ringgit, would be more than RM3 billion. Therefore it is inconceivable that the Prime Minister, who is also the Finance Minister, and senior officials in the Ministry of Finance and Bank Negara do not know the difference between cash deposited in a bank and some “paper assets” to be held by the bank in Singapore, allegedly as custodian.

Therefore it is unpardonable that the Prime Minister, who is also the Finance Minister, and senior officials in the Ministry of Finance and Bank Negara do not know the difference between cash deposited in a bank and some “paper assets” to be held by the bank in Singapore, allegedly as custodian.

So when Ministry of Finance replied to Tony Pua’s queries in March 2015, surely its officials must have checked with the bank in Singapore or examined the relevant documents from 1MDB before confirming that 1MDB had “redeemed its balance of investment from the Cayman Islands in cash and transferred it to BSI Singapore”.

However, MOF has now issued a contradictory statement. A news report said, “The Finance Ministry has corrected its Parliamentary written reply in March that said the US$1.1 billion transferred by 1Malaysia Development Bhd (1MDB) from Cayman Islands to Singapore was not in cash.

“According to the latest written reply to Petaling Jaya Utara MP Tony Pua, the Ministry said the money that was “redeemed” was in the form of assets in US dollars.”

We cannot but agree that this is the Malaysian scandal of the century. Heinous and despicable crimes have been committed.


  1. For MOF to have issued the statement in March, forged documents must have been presented to show that cash was in fact deposited. This was corroborated by the current CEO, who said recently that the bank statement reflected that cash was so deposited. But the bank in Singapore has denied that cash had been deposited.
  2. The criminal offence of fraud and forgery is prima facie established and all the relevant personalities concerned with this transaction must be charged and it is for them to offer their defence in a court hearing
  3. When the statement by MOF/Prime Minister was made in Parliament that cash was deposited when it was not true, the august house was misled by a fraudulent misrepresentation. It was a blatant contempt of the house. The entire country was misled. The rakyat was cheated and led to believe a falsehood.
  4. In the past, members of Parliament were suspended for making a mere misrepresentation with no adverse financial consequences to the country. The members were penalised because the misstatement constituted an affront to the integrity of the proceedings of Parliament as well as to Parliament itself.
  5. The Prime Minister cum Financial Minister, being a member of Parliament cannot be deemed ignorant of this fraudulent misrepresentation. Answers to parliamentary questions, whether from backbenchers or the opposition, are vetted before presented in Parliament.
  6. If the cash has been “diverted” or “unaccounted for” there is a basis for a charge of criminal breach of trust by all the relevant personalities involved in the transaction. There may also be elements of corruption.
  7. The period between the March 10 and May 20 announcements in Parliament would by any measure be construed as a period when there was a massive cover-up. And all those personalities involved are accomplices in this cover-up.

The Deputy Prime Minister, the heads of Wanita UMNO and UMNO Youth and the members of the party’s Supreme Council, have failed to demand answers and to insist on seeing all the relevant documents so as to verify for themselves the truth or falsehood of the allegations brought by all concerned citizens. They should have done so especially after the bank in Singapore had declared the banking documents showing cash was deposited was a forgery. Alarm bells ought to have rung loud and clear, but these leading members of Umno chose to bury their heads in the sand and slavishly declare their so-called undivided support to the Prime Minister.

The Board of 1MDB even had the audacity to threaten to sue any one who dared question its integrity. Shame on you, UMNO.

The Prime Minister must resign and if UMNO leaders do not demand the resignation of the Prime Minister and continue to use their public office to deny this irrefutable confession by the MOF then they are all complicit in this heinous crime.

All the UMNO leaders who have accused Tun Mahathir Mohamad of wrongfully criticising the Prime Minister and sounding the alarm bells and raising the red flag of imminent crisis should humbly seek forgiveness not only from him, but from the entire country. The rakyat demands a public apology and the culprits must be charged in court for their crimes.

Matthias Chang is a Barrister and once served as the political secretary of Dr. Mahathir Mohamad

University of Malaya Development Economist on 11MP

May 23, 2015

Phnom Penh

11th Malaysia Plan (2016-2020)

Highlights of the 11th Malaysia Plan (2016-2020)

* Private consumption and investment to drive growth, resulting in a 7.9% per annum rise in gross national income (GNI) per capita.

* Four strategies to boost economic fundamentals: 1) Unlocking the potential of productivity to ensure sustainable and inclusive growth; 2) Promoting investment to spearhead economic growth; 3) Increasing exports to improve trade balance; 4) Enhancing fiscal flexibility to ensure sustainable fiscal position.

* Real private consumption is expected to increase at an average rate of 6.4% per annum.

* Public investment to grow at 2.7% per annum, or an annual average of RM131bil in current prices, driven by the Federal Government development expenditure and capital spending of non-financial public enterprises (NFPEs).

* Private investment is expected to grow at 9.4% per annum, with an estimated average annual investment of RM291bil in current prices.

* Productivity GDP growth underpinned by significant increases in productivity, with less dependence on inputs from capital and labour. Contribution of multi-factor productivity to GDP growth is targeted to increase to 40%, while that of capital is expected to reduce to 44% and labour to 16%

Federal Government financial position:

* Federal Government revenue to increase from RM1.050 trillion in 10MP to RM1.408 trillion in 11MP.

* GST to bring in average of RM31.4bil revenue per year over the next five years compared to an average of RM15.5bil collected through the sales tax and services tax during the Tenth Plan, which will strengthen the fiscal position.

* Review of dividends received from Government-linked companies and undertaking greater joint audit efforts by the Inland Revenue Board and the Royal Malaysian Customs Department.

* Revenue is targeted to expand by 7.9% per annum and the dependence on oil-related revenue to decline to 15.5% by 2020 from 21.5% in 2015.

* Operating expenditure to increase from RM1.031 trillion in 10MP to RM1.289 trillion

*Development expenditure to increase from RM223.6bil to RM260bil — half of the amount for infrastructure. Focus will be on the economic and social sectors.

* Federal Government to reduce fiscal deficit from 3.2% to 0.6% by 2020.

* Federal Government total debt to be reduced from 53.3% of GDP to 43.5% by 2020.

* Current account balance of the balance of payments to remain in surplus and record RM46.5bil or 2.6% of GNI by 2020.

Equity ownership:

* Bumiputera individual equity ownership will be expanded by allowing withdrawal from Account 1 of the Employee Provident Fund to purchase ASB2 units, which provide competitive long-term returns at minimal risk.

* New funding mechanisms, such as waqf investment fund and private equity for investment will be created through crowd funding to invest in profitable and high potential companies.

Inflation and labour market:

* Accommodative monetary policy and administrative measures will continue to ensure price stability. Inflation during 11MP to remain low, averaging 2.5% to 3% per annum.

* Economy to maintain full employment with an estimated unemployment rate of 2.8% by 2020.

* Employment to grow at a slower rate of 2.1% per annum to reach 15.3 million by 2020, with additional 1.5 million jobs created.

* Inflation to remain low, averaging 2.5% and 3% per annum.

* Labour productivity to increase from RM77,100 in 2015 to RM92,300 in 2020

* GNI per capita to reach RM54,100 (US$15,690) in 2020

* Average monthly household income to increase from RM6,141 in 2014 to RM10,540 in 2020

* Share of compensation of employees to GDP to increase from 34.9% in 2015 to at least 40% in 2020

* Malaysian Wellbeing Index to increase by 1.7% per annum, an indicator of improvement in the well-being of the rakyat.

University of Malaya Development Economist on 11MP

by Dr. Lee Hwok

COMMENT: The just released Eleventh Malaysia Plan (11MP) strives to inspire, cajole and rally us toward 2020. I have no problem in general with slogans, catchphrases, cheerleading, or even a dash of hyperbole. The document has to contain some of that. However, the mandate to tug at our hearts does not give licence to toy with the facts.

11th Malaysia Plan This 11MP handles some data in a bizarre, anomalous manner. The most prominent of 11MP’s six multidimensional goals rests on flawed foundations. And it is difficult to believe that errors and confusions – of a most rudimentary nature – are committed innocently.

I have confidence enough in the capability of our civil service to correctly and carefully present statistical analyses and projections. I suffer a confidence deficit with regard to the independence of this process from political influence.

The first two of the multidimensional goals for 2016-2020 in 11MP read as follows:

1. Real Gross Domestic Product (GDP) to expand at five to six percent per year.

2. The Gross National Income (GNI) per capita to reach RM54,100 (US$15,690) in 2020.

Of course, these two goals top the list; they are necessary to achieving a high income status for our country. And, by now, we may be familiar with the national target of US$15,000 in GNI per capita, the threshold for qualifying as a high income economy.

Goal No 2 is more definitive – GNI per capita summarises the overall level of economic development – while Goal No 1 constitutes the means to get there. GDP must maintain a certain growth rate to carry an economy to high income territory.

Monitor target growth in real values

But the 11MP goes against conventional practice and basic logic of evaluating income growth in real terms. Instead, the 11MP puts the GNI per capita target in nominal terms. In other words, it does not take inflation into account. This is mind boggling.

It is imperative to monitor and target growth in real values instead of nominal values. If income grows by five percent and inflation raises the price levels by six percent, one is actually worse off. Real income has registered a minus one percent  change; it has shrunk.

Let’s go back to where this high income business started. The New Economic Model (NEM) in 2010 established high income status as one of three key policy objectives, with the bar set at GNI per capita of US$15,000. Pass that mark and Malaysia qualifies as high income.

The NEM correctly put this threshold in real terms; that report specified that US$15,000 in 2020, in real terms, was the equivalent of US$17,725 in nominal terms (NEM Part 1, page 87). That’s about US$16,500 at today’s exchange rate. The 11MP has lowered that target to US$15,000 in nominal terms, or current prices (11MP, page 2-14).

Growth has fallen behind NEM schedule

The fact is, Malaysia’s economic growth has fallen behind the NEM’s schedule. But to get back on track requires substantially higher growth rates – which are obviously a very hard sell. Witness Goal  No 1:  Five to six percent real GDP growth per annum, a believable range.

According to the NEM’s projections and aspirations, Malaysia would register a real GDP growth rate of 6.5 percent a year over 2010-2020. We have only achieved 5.3 percent in the first half of this decade. By mathematical necessity, we will need to grow faster than 6.5 percent in the second half, to compensate for the prior shortfall.

Specifically, to remain on track for high income status by 2020, the Malaysian economy must sustain real growth of 7.7 percent per year over 2015-2020. Who would want to deliver that message to an informed, discerning, sceptical rakyat living in uncertain times and accustomed to steady but modest growth? I understand the reluctance to tell that story.

Instead of coming clean and saying that, well, it will be nearly impossible to reach the high income mark by 2020 (but our dignity is not bound up in such status; we’re still worthy as a nation), the government slides the goalpost. Instead of the NEM’s original high income target of US$17,725 in current prices, the 11MP now guns for US$15,000 in current prices, and pretends they’re the same.

Now, the empirical discrepancies

Thus UMNO-BN can declare success and extract gratitude. How might we respond to these empirical discrepancies? Some might say, it’s not a big deal, these are mere technicalities.

Yes, at one level this is a technical skirmish. Even so, there is a big, suspiciously deliberate aberration that must be addressed. Why target US$15,000 in nominal terms, instead of in real terms, like any almost fully-developed country would?

But this is far more than an issue of statistical correctness. This government is staking its legitimacy on driving Malaysia to a high income status, it is claiming credit for ushering us down this last leg to the many splendours of Vision 2020. Proper reporting and handling of data, at root, testify to the level of honesty, truthfulness and integrity of our policies.

Vision 2020 envisages a society that is progressive, confident, secure, scientific, mature, and virtuous in many other ways.This government declares interest in leading Malaysia in that direction. Then it effectively commits statistical doping.

Dr. LEE HWOK AUN is a Senior lecturer with the Department of Development Studies, University of Malaya, Pantai Valley, Kuala Lumpur, Malaysia