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


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.

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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’
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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.

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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

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

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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.

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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.

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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).

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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.