FOCUS On POVERTY alleviation, not income creation for billionaires–Mahathir’s outdated policy prescriptions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FOCUS On POVERTY alleviation, not billionaires —Mahathir’s outdated policy prescriptions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

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.

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.

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.

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Old wine in a new bottle is still sour. E-mail: t.p.guna@gmail.com

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

 

 

The thinkers M’sian politics have come to rely on

January 1, 2019

Opinion  |  Phar Kim Beng

https://www.malaysiakini.com/columns/458442

COMMENT | If one has had the benefit of following Malaysian politics since 1970 – a lifetime to many – several thinkers who have influenced the course of Malaysian history have become household names.

 

Dr. Rais Saniman

The New Economic Policy (NEP), for example, was the handiwork of Rais Saniman and Just Faarland. Both believed in affirmative action, though critics who panned NEP have often pointed out that affirmative action is meant for the “minority” – not the majority.

Come what may, Malaysia would have been a racial havoc if NEP, despite all its imperfections, have not been working. Take some of the latest statistics on household income, for example.

Research by Khazanah Research Institute has shown that four out of five Malaysians would retire without sufficient pensions when they turn 55 or 60. Indeed, 15 percent of Malaysia’s population would exceed 60 years of age by 2023, according to Muhammad Khalid, the economic advisor of Prime Minister Dr Mahathir Mohamad. At this rate, Malaysia will begin to age sooner than expected.

The works of the late professor Syed Hussein Alatas has also been wonderfully powerful, as he referred to corruption as a “cancer” that can eat away the health – and wealth – of the country. Events between 2009-2018, through 1MDB, have proven that and more. Our national debt is now at USD 280.7 billion, while our GDP is merely USD 320 billion.

The scholarship of professors Terence Gomez and KS Jomo have proved to be just as monumental, if not powerful. Since 1990, both scholars have warned of the insidious effects of “privatisation,” which if done incorrectly, can lead to “piratisation,” where the wealth nest of the government and the people are held captive by the vested interest of the narrow band of elites.

While little has been said, or, revealed about the scholarship of Salleh Yappar, a professor at Universiti Sains Malaysia, his papers have identified various forms or varieties of “Islamism”.

They range from the sort one sees in Sufism, such as the order of Nashbandi, to the reformist movement of Angkatan Belia Islam Semalaysia. In fact, Salleh listed close to nine forms of Islamism in Malaysia between 1957-1990. Some of them involves cult like movements like Al Arqam, which has since been banned by Mahathir during his first tenure as Prime Minister.

Though, not strictly Malaysian, the works of William Case at University of Nottingham in Malaysia, have revealed the potentiality of a “pseudo democracy,” that is still “semi authoritarian,” in nature as Australian National University professor Harold Crouch called it.

Other commentators like Patricia Martinez, Noraini Othman, even Dina Zaman, indeed, Marina Mahathir, have warned about the danger of ignoring the gender bias that is embedded in most interpretations of religions.

Instead of “lowering one’s gaze,” as a man is urged by some religious scriptures to do, over domineering male preachers have insisted that women should cover themselves from head to toe.

Come what may, some of the Malaysian scholars in Borneo deserve greater mention too. Professor Jayum Jawan who has an interesting take that Sarawak was never colonised by the British government, let alone James Brooke, is interesting to say the least.

It calls into question the very fabric that makes the Federation of Malaysia: should the rights of the federal government always be greater than the states at hand, including Sarawak, even though it has a history that is unique compared to Peninsular Malaysia?

Elsewhere, professors Chandra Muzaffar,   Dr. Lim Teck Ghee, Francis Loh Kok Wai and Khoo Kay Jin have always highlighted the importance of liberating Malaysia from the iron rule of the bureaucratic or single-party state, especially the feudalism of UMNO.

Indeed, commentators like P. Gunasegaran and Ho Kay Tat have been invaluable to understanding 1MDB, backed by foreign scholarship by Tom Wright and Hope Bradley at Wall Street Journal.

The works of Nanyang Technology University professors Farish Noor and Joseph Liow Chin Yong in Singapore, as was the superb commentary of Dr Ooi Kee Beng, even politicians like Liew Chin Tong and Ong Kian Ming over the years, have made a “New Malaysia” more and more plausible.

That being said, two of the most tenacious thinkers are without a doubt Mahathir and Prime Minister-in-waiting Anwar Ibrahim. Both are determined in their ideals to make Malaysia stronger and better, though with some nuance too.

Mahathir seems sold on the idea that Look East can redeem Malaysia. Anwar, on the hand, believes that the rise and fall of Malaysia depends on the extent to which it can engineer its own “Asian Renaissance.”

Come what may, 2019 and 2020, are not going to be about transition from one reigning to another incoming Prime Minister only, but the extent to which both can master the art of promoting their ideas and ideals. These ideas and ideals must work too, without which Malaysia is back to the square one of 1970 if not earlier.

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PHAR KIM BENG is a multiple award-winning head teaching fellow on China and the Cultural Revolution at Harvard University.

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

Jomo named National Academic Figure

November 28, 2018

by Bernama 

Economist Jomo Kwame Sundaram was announced as the 12th National Academic Figure at the National Academic Awards (AAN) ceremony in Putrajaya last night.

 

Jomo, 66, a former assistant secretary-general for Economic Development in the United Nations, is an expert in political economy of development, especially in the Southeast Asian region .Jomo received RM200,000, a trophy and a certificate.

 

 

The National Academic Figure award is presented to academicians who are committed, wholly engaged and always contributing to the discovery and development of knowledge, wealth generation and fulfilling the aspirations of the tertiary institution as a national development vehicle.

Meanwhile, Juan Joon Ching, a professor with Universiti Malaya, was announced as the most promising academician award winner. This award is given to affluent scholars under the age of 40.

Earlier, Mahathir in his speech expressed hope that the awards would motivate the individuals to pursue further excellence while setting a benchmark for others to emulate.

“Without their (academicians’) support, I believe we cannot build a knowledgeable generation that is par excellence, and at the same time produce balanced individuals for the development and progress of the country,” the Prime Minister said.

– Bernama

 

Political financing reforms should top PH Government’ s political agenda – Jomo

Koh Jun Lin  |  Published: September 27, 2018@ http://www.malaysiakini.com

Reforming how political activities are financed in Malaysia should be on top of the government’s political agenda, said the former Council of Eminent Persons member Jomo Kwame Sundaram.

He said Malaysia has a “very decadent” political system that had been abused, giving examples such as the 1MDB scandal and the inflated costs of the East Coast Rail Link (ECRL) project and two gas pipeline projects that have since been cancelled.

“It is important to recognise that we have a system of political financing which has been so abused that we cannot get ourselves out of this, unless we develop a legitimate, accountable, system of political financing. “So, I would put the whole system of political financing at the top of the list of political priorities that needs to be addressed by the current government,” he said.

He was speaking as a panellist at a talk titled “The Way Forward for Malaysia” last night together with Rembau MP Khairy Jamaluddin Abu Bakar in Kuala Lumpur last night. The event was organised by the Oxford and Cambridge Society of Malaysia and was attended by approximately 170 people.

Former Prime Minister Najib Abdul Razak has been accused of siphoning money from 1MDB and SRC International and using part of the money to fund political activities through his personal bank account. Najib had maintained that the money had come from foreign donors.

Malaysiakini set up a microsite in July detailing some of the outflows from one of his bank accounts to political entities.

After Najib was implicated in the 1MDB scandal in 2015, he set up the National Consultative Council on Political Financing (JKNMPP) that went on to produce 32 recommendations to reform political financing in Malaysia.

However, the reforms were not in place in time for the 14th General Election.

ECRL ‘a hoax’

As for the ECRL project, Jomo described it as a hoax that is not part of China’s Belt and Road Initiative projects, and would not be able to pay for itself even if its development expenses are written off.

The government has claimed the cost of the project is RM81 billion – compared to the previous administration’s estimate for RM55 billion – adding it is worth no more than RM30 billion.

China Communications Construction Company Limited (CCCC) Vice-President Sun Ziyu has defended the cost of the project.

Meanwhile, Jomo said there needs to be consensus involving all political parties in Malaysia on what needs to be done to tacklecorruption, where political financing is only a part of the problem.

Otherwise, he said there won’t be much progress in the area.

“I have a great deal of concern with addressing other sources of corruption, and this of course is very, very important and necessary to address. But we have a very decadent and corrupt economic system as well as a political system. In other words, we have been thoroughly compromised,” he said.

Read More: How political financing is done in other countries https://www.malaysiakini.com/news/444827

CEP’s Dr. Jomo Kwame Sundaram–A Life of Public Service

September 24, 2018

The Council of Eminent Persons (CEP), sometimes described as the Council of Elders, was set up to advice the Prime Minister Dr Mahathir Mohamad’s new Pakatan Harapan government.

However, the CEP has also attracted a fair amount of controversy, including criticisms from within Harapan about the council’s role and powers.

One of the council’s members, economist Jomo Kwame Sundaram, addresses those criticisms in a question-and-answer format.

Question: You have been quite quiet since you were appointed to the CEP.

Jomo: Yes. Given all the speculation and tendentious publicity, I did not feel it was helpful to provide more fuel to the fire. As you know, myths about the CEP thrived, and all manner of things were attributed to the CEP, often wrongly.

There were also things we did in our individual capacities, which were being attributed to the CEP. As a result, the initial goodwill, credibility and legitimacy the CEP enjoyed were undermined, and instead of being an asset to the government, especially the PM, we became the butt of many criticisms, including from within the Harapan coalition, largely due to misunderstandings and misperceptions.

I think I speak for all CEP members that if the PM needs our services, we will gladly serve in our individual capacities, and hopefully, become less of a liability to him.

Why are you reported to be against publication of the CEP report?

The issue is complex and nuanced. First, producing a single report for publication was not in the PM’s appointment letter or announcement.

Undoubtedly, some other bodies in the past, viewed by many as precedents, did produce reports after working for much longer periods, but some did not. For example, Tun Razak’s National Consultative Council after May 1969 did not do so.

Our brief was to help the PM, and the new government, with some immediate tasks at hand, especially the PH manifesto pledges for the first 100 days. To do that well, we tried to offer advice as soon as possible for him to consider and act upon, which is different from producing a report after 100 days.

But a report has been submitted to the PM?

While CEP members were agreed on most matters, there were also some disagreements, for example, on government-linked companies. As is known, some of us disagreed on privatisation policy decades ago, which has a bearing on contemporary debates.

It may be impossible to resolve some such differences, even after further discussion. In such situations, what does one do? Remain silent, or publish the chair’s view, as long as that is made clear.

The CEP chairperson has come under particular criticism from certain quarters.

Former CEP Chairman Tun Daim Zainuddin–The Silent Man of Action

I am not sure what you are referring to, but his longstanding relationship to the PM was undoubtedly crucial to the CEP’s establishment and functioning, and the object of criticism by his or the PM’s detractors.

There were also many criticisms of his trip to China, but again, such criticisms were undeserved, in my view. Governments dispatch special envoys all the time to deal with sensitive matters discreetly.

But you were a critic of the earlier Mahathir administration.

Indeed, I was critical of some aspects, but if you read what I wrote, my criticisms were always intended to improve government policy, and I also shared his aspirations for the country, especially development, industrialisation, Wawasan 2020, economic nationalism, nation-building, the so-called Asian financial crisis.

The CEP has not been meeting after the 100 days, but yet a report has just been submitted to the PM.

While we have not met or reviewed draft reports since, our chair has been helping the MACC on certain urban land abuses, as he should. Remember he has vast experience in such matters for half a century, even before he was involved with UDA, the Urban Development Authority.

Some CEP meetings were like master classes where I personally learnt more than I could ever hope to learn from reading.

So, are you for or against publication of the report?

It is really up to the PM. There are many options, including partial publication. Remember there are some highly sensitive matters, in terms of official secrecy as well as other matters which may be sensitive in terms of market behaviour, international diplomacy or even legal procedure.

As someone who has been critical of the abuse of secrecy in the past, I must also acknowledge that there are legitimately sensitive matters, and full transparency may not always be in the public interest.

If the CEP had a different proposal on some issue from the one eventually adopted by the Harapan government, what is the point of publicizing such differences with the government of the day after the fact? It is likely to be used by detractors for their own purposes rather than for better purposes.

Also, as you know, two committees were set up. The Institutional Reform Committee prepared a long report with a view to publication, and the PM may wish to publish it. The other one on 1MDB has contributed to expediting investigation and action, but I doubt their recommendations were intended for publication.

So, you will have nothing to show for your 100 CEP days?

Serving the national and public interest was our priority, not publicity or publications.

What are you doing a month after the CEP’s 100 days ended?

No longer an elder, I already feel younger.Many people expect me to write about the CEP, its work and its recommendations. I have no such plans, but am very busy with earlier unfinished and postponed work as well as new work to help the new administration, preferably under the radar.

Finance: Partying like it’s 1998

August 16, 2018

Partying like it’s 1998

by Paul Krugman

And now for something completely similar.

Dr Paul Krugman in the United States

“How it works: stop the explosion of the debt ratio with some combination of temporary capital controls, to place a curfew on panicked capital flight, and possibly the repudiation of some foreign-currency debt. Meanwhile, get things in place for a fiscally sustainable regime once the crisis is over. If all goes well, confidence will gradually return, and you’ll eventually be able to remove the capital controls.

Malaysia did this in 1998; South Korea, with U.S. aid, effectively did something like it at the same time, by pressuring banks into maintaining their short-term credit lines.”–Dr Paul Krugman

For a while, those of us who devoted a lot of time to understanding the Asian financial crisis two decades ago were wondering whether Turkey was going to stage a re-enactment. Sure enough, that’s what seems to be happening.

Here’s the script: start with a country that, for whatever reason, became a favorite of foreign lenders, and experienced a large inflow of foreign capital over a number of years. Crucially, the debt thus incurred is denominated in foreign currency, not domestic (which is why the U.S., also a recipient of large inflows in the past, isn’t similarly vulnerable — we borrow in dollars).

Dr. Jomo Kwame Sundaram in Malaysia

At some point, however, the party comes to an end. It doesn’t matter much what causes a “sudden stop” in foreign lending: it could be domestic events, like appointing your son-in-law to oversee economic policy, it could be a rise in U.S. interest rates, it could be a crisis in another country investors see as being similar to you.

Whatever the shock, the crucial thing is that foreign debt has made your economy vulnerable to a death spiral. Loss of confidence causes your currency to drop; this makes it harder to repay debts in foreign currency; this hurts the real economy and further reduces confidence, leading to a further decline in your currency; and so on.

The result is that foreign debt explodes as a share of GDP. Indonesia came into the ’90s financial crisis with foreign debt less than 60 percent of GDP, roughly comparable to Turkey early this year. By 1998 a plunging rupiah had sent that debt to almost 170 percent of GDP.

How does such a crisis end? If there is no effective policy response, what happens is that the currency drops and debt measured in domestic currency balloons until everyone who can go bankrupt, does. At that point the weak currency fuels an export boom, and the economy starts a recovery built around huge trade surpluses. (This may come as a surprise to Donald Trump, who appears to be levying punitive tariffs on Turkey as punishment for its weak currency.)

Is there any way to short-circuit this doom loop? Yes, but it’s tricky. What you need to reduce the costs of crisis is a combination of short-run heterodoxy and credible assurances of a longer-run return to orthodoxy.

How it works: stop the explosion of the debt ratio with some combination of temporary capital controls, to place a curfew on panicked capital flight, and possibly the repudiation of some foreign-currency debt. Meanwhile, get things in place for a fiscally sustainable regime once the crisis is over. If all goes well, confidence will gradually return, and you’ll eventually be able to remove the capital controls.

Malaysia did this in 1998; South Korea, with U.S. aid, effectively did something like it at the same time, by pressuring banks into maintaining their short-term credit lines. A decade later, Iceland did very well with a combination of capital controls and debt repudiation (strictly speaking, refusing to take public responsibility for the debts run up by private bankers).

Argentina also did quite well with heterodox policies in 2002 and for a few years after, effectively repudiating 2/3 of its debt. But the Kirchner regime didn’t know when to stop and turn orthodox again, setting the stage for the country’s return to crisis.

And maybe that example shows how hard dealing with this kind of crisis is. You need a government that is both flexible and responsible, not to mention technically competent enough to implement special measures and honest enough to carry out that implementation without massive corruption.

That, unfortunately, doesn’t sound like Erdogan’s Turkey. Of course, it doesn’t sound like Trump’s America, either. So it’s a good thing our debts are in dollars.