Welcome to Malaysia’s Brave New World

November 5, 2018

by: John Berthelsen

https://www.asiasentinel.com/econ-business/malaysia-brave-new-world/

“Euphoria is dying off and bodies like Bersih, he continued, have started criticizing the new government. Many from civil society are keeping silent. “I suppose the saving grace is that Najib and his cohorts are gone. But that can’t console people forever.”_- J. Berthelsen

Six months into the rule of Malaysia’s new reform government, the bloom has started to fade as the Pakatan Harapan coalition attracts growing criticism while it seeks to find its feet against the political and economic debris left by the outgoing Barisan Nasional, driven from power on May 9 after six-plus decades in office.

The problems the government faces were starkly outlined on Nov. 1 by Finance Minister Lim Guan Eng in a marathon 14,000 word speech outlining the 2019 budget, in which he stated that the previous government, which he characterized as “kleptocratic,” had understated debt and liabilities by nearly 40 percent, rising to a stunning RM1.05 trillion (US$256.8 billion) in an effort to hide corruption, and that debts from the scandal-scarred 1Malaysia Development Bhd development fund could total as much as RM43.9 billion, not including RM7 billion in interest secretly paid on 1MDB debts using taxpayer money illegally.

To Malaysia’s credit, the frighteningly poisonous racial equation, in which ethnic Malays make up about half the population, the Chinese 23 percent and Indians 7 percent, with the rest split between expatriates and bumiputera tribes in East Malaysia, seems to have cooled markedly. The previous government’s attempt to use fundamentalists Islam to pound minorities has largely ceased although UMNO and the fundamentalist Parti Islam se-Malaysia continue to attempt to fan the flames. It remains to be seen what strains there are between the Chinese-dominated Democratic Action Party, Mahathir’s Parti Bersatu Pribumi, and Anwar Ibrahim’s moderate, urban Malay Parti Keadilan Rakyat – and what internal strains there are inside PKR.

The country is faced with a long series of monumental tasks – rebuilding a judiciary that was thoroughly corrupted by the previous government’s 61 years in power. The education system is a shamble, built on Malay privilege instead of academic achievement.  Lim called attention to educational shortcomings with a long series of measures allocating funds to lower-income students, upgrading failing schools and educational infrastructure, training and vocational education programs. Other sources say the government is being hamstrung to a certain extent by a civil service loyal to the previous government.

A series of murders including that in 2006 of Mongolian translator and party girl Altantuya Shaariibuu, AMBank founder Hussain Najadi and prosecutor Kevin Morais (pic above), all believed to be at the hands of high government officials, remain to be solved or even looked into.

The new government, caught by circumstances, has compounded its problems by campaigning against a deeply unpopular Goods and Services Tax (GST) implemented by the government of former Prime Minister Najib Razak, and then actually repealing it once in office, leaving a gigantic hole in government revenues.

‘–at the same time it has agreed to go along with Mahahir’s ill-conceived hobby horse, another national car project.

…That is despite 30-odd years of his previous ill-conceived hobby horse, the Proton national car, which cost the treasury billions of ringgit and billions more to consumers in lost opportunity costs from paying through the nose for heavily tariffed competitors. “- J. Berthelsen

It is seeking to fill the hole with a variety of piecemeal taxes – at the same time it has agreed to go along with Mahahir’s ill-conceived hobby horse, another national car project. That is despite 30-odd years of his previous ill-conceived hobby horse, the Proton national car, which cost the treasury billions of ringgit and billions more to consumers in lost opportunity costs from paying through the nose for heavily tariffed competitors.

“There was a lot of euphoria when Pakatan won the elections, but expectations were also very high,” said a prominent business source in Kuala Lumpur. “They have a small window. If they don’t deliver, that window will start closing.  But unfortunately, politicians will be politicians. They are inexperienced, and the euphoria is wearing off. So far, we have had no exciting government programs. New Malaysia is like Old Malaysia, minus Najib Razak and his 40 thieves.”

Najib and his wife Rosmah Mansor have both been arrested and are expected to go on trial next year. Hundreds of millions of dollars have been confiscated by Malaysian and US authorities although hundreds of millions more, perhaps billions, remain outside he government grasp.  Jewelry, handbags, watches, cash and other riches belonging to Rosmah that have been confiscated total at least US$273 million, putting her in a league even above Imelda Marcos, the wife of the late Philippine strongman Ferdinand Marcos, who held the public record for corruption. It remains to be seen if the Najibs surpass it.

The businessman’s assessment could be a bit pessimistic.  The government has abolished with capital punishment and the press appears to remain largely free despite reluctance on the part of the government to abolish a “fake news” bill pushed through at the last minute by the previous administration in an effort to muzzle pre-election critics.

But a sedition act used against the previous government’s foes remains on the books and has been used against critics. Civic organizations including Suaram have called attention to government inactions on a variety of rights issues. There is also concern on the part of the Coalition for Free and Fair Elections, known as Bersih, and others that MPs from the thoroughly disgraced United Malays National Organization are migrating to Parti Pribumi Bersatu Malaysia, headed by once and current Prime Minister Mahathir Mohamad, diluting the reformist zeal of the Pakatan Harapan coalition.  Although as many as 40 UMNO MPs are said to be contemplating such a move, Mahathir said they would be vetted individually and known crooks would be kept out.

But, said Kim Quek, a spokesman for opposition leader Anwar Ibrahim’s Parti Keadilan Rakyat in an email, “I foresee mounting tension when UMNO MPs slip into Bersatu, one after another quietly, causing endless suspicion…and mounting public disapproval.”

The headwinds outlined by Finance Minister Lim paint a pessimistic picture for both business and government. With the Trump administration cracking down on trade in Washington, DC, and the global economy beginning to slow, the budget, at a record RM314.6 billion, is forecast to run 3.7 percent of GDP in the red with economic growth expected to slow to 4.8 percent from 5.9 percent in 2017.  The ringgit, Malaysia’s currency, has fallen by 10 percent against the US dollar, in line with troubles across the world as interest rates rise in the United States, causing a flight out of emerging markets.

Lim, in his speech, set out a series of measures designed to help business and vowed to get government out of commerce, saying “clearly, government owned companies have been competing directly with private companies in non-strategic sectors. The outcome was the apparent ‘crowding out’ of private sector investments where private companies are unable to grow and compete.”

The private sector, he said, must lead, and the finance ministry is expected to establish a task force designed to evaluate and reduce duplication of functions,  a ray of hope that the country’s notorious rent-seeking government-linked companies, which funneled millions from inflated contracts to UMNO, could be cut back and its even more notorious cronyism could be reduced.

“Going forward, the government will focus its expenditure and investments only in strategic sectors and areas where the markets are unable to meet the needs of the people,” he said..

Nonetheless, business investment remains lackluster while the sector tries to figure out which way the government is going to go.

“Malaysia will undoubtedly be affected by the US-China trade war given that both these countries are among our top three trading partners,” Lim said in his budget speech. Exports remain a significant driver of the economy, particularly including electronics, oil and gas and palm oil.

Comeback kids: Like Dr M, other political figures have had second and even third acts during their careers, including (from left) Netanyahu, Abe, Berlusconi and Churchill    

Leadership remains somewhat unsettled, with Mahathir, at 93 the world’s oldest government leader, committed to staying for two years after the formation of the government. Anwar Ibrahim, now 71, has been waiting in the wing for decades, from the time when he was Mahathir’s chosen successor only to be fired and jailed after disagreements in 1998. Although he said he would study abroad and recover from his most recent imprisonment, he forced a by-election to return to parliament a few weeks ago, disconcerting some of his followers, who accused him of acting too quickly.

In the meantime, two of Anwar’s deputies – Mohamad Azmin Ali, the Minister of Economic Affairs, and Rafizi Ramli, the Parti Keadilan general secretary,  are staging their own internecine squabble to become deputy party leader with an eye to succeeding Anwar, raising concerns over party – and coalition – unity.  Pakatan Harapan remains a work in progress. Azmin is said to be aligned with Mahathir, Rafizi with Anwar.

That raises the spectre of Mahathir and Anwar continuing to try to do in each other despite public pledges of amity, including Mahathir campaigning for Anwar in the Port Dickson by-election that brought him back into the parliament.

“The Harapan guys thought that since they couldn’t get worse than Najib, people would continue to support them,” another source said. “They forget that there will always be alternatives; if not in the next five years, then in the next 10 maybe.  Inflation is creeping up; wages have not gone up; new taxes are being introduced and people still struggle to put food on the table. Business is slow; businessmen are not re-investing as they are unsure of this government’s policies.”

Award winning Journalist John Berthelsen

Euphoria is dying off and bodies like Bersih, he continued, have started criticizing the new government. Many from civil society are keeping silent. “I suppose the saving grace is that Najib and his cohorts are gone. But that can’t console people forever.”

A New Malaysia? #3: reform roadblocks with Bridget Welsh & Shamsul AB

August 19, 2018

http://www.newmandala.org

Synopsis

In this podcast, New Mandala’s editor Liam Gammon talks to Associate Professor Bridget Welsh about how the institutions Pakatan Harapan inherits from BN complicate reform efforts, and ANU’s Dr Ross Tapsell talks to Prof Shamsul AB about the social and ideological constants that GE14 didn’t change.

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This podcast was produced with the support of the Malaysia Institute and the ANU College of Asia and the Pacific.

A Hundred Days of Prevarication

August 15, 2018

Press statement by Kua Kia Soong, SUARAM Adviser

The GE-14 election defeat of the BN which had ruled the country since 1957 was testimony to the determination of the Malaysian people and civil society who had opposed BN rule for decades. Sixty-one years of BN domination had included 22 years with Prime Minister Mahathir at the helm. The Malaysian people chose to cast their votes for the PH coalition because PH had promised in their GE14 manifesto to implement wide ranging reforms that made them seem radically different from the governance experienced under the BN.

In the first 100 days of the new PH government, we find that their report card scores around 20% based on their own promises alone. The flip flopping over the abolition of BTN and National Service shows the importance of civil society to voice our opposition to such bitterly toxic and noxious institutions in the country. Nor do their promises consider the more urgent comprehensive list of reforms that civil society has long argued is of higher priority. On top of all that, we have witnessed a disturbing trend of autocratic decision making and policies symptomatic of the old Mahathir 1.0 era.

Sacrifices at the altar of the trillion-ringgit debt mountain

The convenient opt out clause for the new government is to pile much of the blame on the previous administration including the accusation of them of having run up a debt of RM1 trillion, or 80% of our GDP and apparently stealing RM19 billion of GST refunds. That blame frame then provides the new government with an emotional basis for gaining sympathy by starting a ‘Tabung Harapan’ and appealing for donations. While the way in which this fund will be used remains unclear, it is probably the only fund in the world set up with the apparent aim of trying to plug a country’s debt hole. It is telling that while a little boy has contributed his piggy bank to the fund, the two richest men in the country who happen to sit in the “Council of Eminent Advisors” have not made a comparable sacrifice to the fund.

As for the actual size of the national debt, there is dispute between economists depending on whether we include government guarantees and lease payments under public-private partnerships. The size of Malaysia’s government debt in international statistics for 2017 is actually 64% of GDP, compared to China’s 65%, Singapore’s 110%, US’ 108% and Japan’s 236%. Clearly, what is at stake is the country’s economic fundamentals, which the new Finance Minister assures us are still strong. It also depends on how the debt is financed since relying on overseas borrowing can carry higher risks. It also depends on the country’s prospects for economic growth. Japan has one of the largest public sector debts in the world but it also has a large pool of domestic savings on which to draw.

Nonetheless, this mythical “trillion-ringgit debt mountain” has become an altar on which promises made by PH in the GE14 manifesto are sacrificed – local government elections, new approved Chinese schools, minimum wage, abolishing highway tolls and postponing PTPTN loans. This is definitely not acceptable as an excuse for putting off these urgent election promises since PH had assured us that they could manage the economy once they had ousted BN.

But then the much-trumpeted review of all mega projects so as to reprioritise and reduce the debt mountain is not consistent with the approval of the Penang Transport Master Plan nor with the recently announced Proton 2.0 project by the PM. The Infrastructure Development Minister Peter Anthony has also announced that a dam costing RM2 billion will be built at Kampung Bisuang in Papar when Parti Warisan Sabah had promised to scrap the Kaiduan Dam project.

Back to privatising national assets and Proton 2.0

So far, the new PH government has not spelled out their fundamental difference in economic policy from the old BN regime. What we have heard so far is the alarming news of the return of the old discredited Mahathirist policies, namely, privatisation of our national assets in the name of Bumiputeraism and the revival of the national car, Proton 2.0.

 

The PM has said that the sovereign wealth fund, Khazanah will be privatised for the benefit of Bumiputeras. Malaysians need to be reminded that during the financial crisis of 1997/98, it was Khazanah that had stepped in to take over the assets of the failed companies owned by the Bumiputra crony capitalists in Renong, MAS and TRI. After taking over the assets, Khazanah revamped these GLCs with professional managers and better rules of governance. Khazanah currently owns 51% of PLUS Expressways, with the EPF owning the other 49%. By end 2017, the net worth of companies under Khazanah was RM125.6bil. Thus, Khazanah is successfully achieving its purpose of creating a sovereign wealth fund for the benefit of ALL Malaysians. Its expressed purpose never has been to be privatised to Bumiputera crony capitalists.

Mahathir’s privatization drive during his first term (1981-2003) was a boon for private crony capital, especially those linked to UMNO. Malaysian tax payers were the losers since these erstwhile profitable public utilities were sold for a song to the private capitalists and we became captive to UMNO-linked monopolies, such as the North-South Highway operator. Furthermore, these failed crony capitalists had to be bailed out with our money during the financial crisis of 1997/98.

During these 100 days, the Prime Minister has also announced the revival of yet another national car, or Proton 2.0. After the fiasco of Proton 1.0 and the huge cost to Malaysian taxpayers, our public transport system and Malaysian consumers, it is unbelievable that such a failed enterprise could be supported by a PH leadership full of former critics of the first Proton project. Another national car project will surely fail with further losses to the national coffers and we will have to underwrite the losses. The PH government won’t have 1MDB to blame for that anymore. We should further note that one of Mahathir’s former crony capitalists, Syed Mokhtar Al-Bukhary, owns a majority 50.1% in Proton Holdings through DRB-Hicom. This hare-brained idea to start another national car project reminds me of what somebody said about politicians: “Politicians are people who, when they see light at the end of the tunnel, go out and buy some more tunnels…”

Back to Mahathirist autocracy

It is truly alarming that no Cabinet member nor “eminent person” in the CEF has voiced any objections to Mahathir’s proposed plans to privatise Khazanah and to start another national car. They will have to bear collective responsibility for the consequences in the event of its failure. We are witnessing the same “silence of the lambs” culture for which the DAP used to criticise the BN leaders under Mahathir 1.0 with the new ministers saying “We’ll leave it to the prime minister” and “I’ll discuss this with the prime minister to let him decide”, ad nauseum.

The PH manifesto prohibits the PM from also taking over the Finance portfolio but Dr Mahathir has in the 100 days taken over the choicest companies, namely Khazanah, PNB & Petronas under his PMO. It is the return to the old Mahathirist autocracy. Was the Cabinet consulted in the decision to start Proton 2, privatise Khazanah, Malaysia Incorporated and the revival of the failed F1 circuit?

 

The appointment of Prime Minister Dr Mahathir Mohamad and Economic Affairs Minister Azmin Ali to the board of Khazanah Nasional Berhad also goes against the PH manifesto promise of keeping politicians out of publicly-funded investments since it leads to poor accountability. Only by insisting on boards being comprised of professionals and on rigorous parliamentary checks and balances for bodies such as Khazanah can we ensure a high level of transparency and accountability. Mahathir’s response to this criticism was the old feudal justification: “I started Khazanah so why can’t I be in it?” In other words, “Stuff your high ideals and democratic principles!”

We will have to wait for Lim Guan Eng’s memoirs in the future to see how he responded to Mahathir leaving him out of Khazanah. Did the PM even discuss this with him? After all, Khazanah is still under MoF Inc. If the finance minister is left out of the Khazanah board, how will he be privy to what the Khazanah board is doing? No doubt Mahathir knew that having given the DAP Secretary-General the Finance Minister post, he could get away with anything…

Consistency in the war on kleptocracy

The new PH government had pledged to wipe out kleptocracy and this promise was key to the victory at GE14. They have disappointed the people of Malaysia and especially Sarawakians who have seen the wealth of their state sucked dry by the rapacious greed of the kleptocrats there. The PH government has not yet acted to make the former Chief Minister Taib Mahmud declare all his assets and those of his spouse and family’s. The PH Government has shown us that where there is a political will in getting to the root of the 1MDB scandal, there is a way to get rid Malaysia of corruption and crony capitalism. However, by letting off his long-time ally in Sarawak, Taib Mahmud, arguably the richest man in Malaysia, the Prime Minister makes his campaign against the former PM Najib look like a personal vendetta. The Prime Minister has also failed to lead by example and declare his assets and those of his spouse and children’s.

Conflict of interest having corporate heads in Councils

The Constitutional status of the appointed ‘Council of Eminent Persons’ has already been called into question especially when the Chairman of the Council, Daim Zainuddin is in a position in which he is able to call up judges and even represent the Government in negotiating with the Chinese Government over their investments in Malaysia. Now it has been reported that the Perak government has established the State Economic Advisory Council (SEAC) with corporate heads of MK Land Bhd, KL Kepong Bhd and Gamuda Bhd as “eminent advisors”.

There is gross conflict of interest with such arrangements when these corporate leaders still have interests in the local and international corporate scene. It is well known that Daim Zainuddin has corporate and banking interests all over the world. His business interests extend beyond banking to other key sectors of the country’s economy such as plantations, manufacturing, retailing, property development and construction.

Delaying urgent reforms is unacceptable

Using the excuse of the government debt to delay local government elections which have been suspended in our country since 1965 is not acceptable. It is a simple matter of abolishing a provision under the Local Government Act 1976 and reviving the Local Government Election Act in order to introduce local government elections. If the PH government is prepared to see billions going down the drain with the revived Proton 2.0 project, don’t tell us there is no money for running local council elections please.

It is equally absurd to tell Malaysian Independent Chinese Secondary School graduates that their UEC certificate can only be recognised in five years’ time. The UEC certificate went unrecognised by the BN for 61 years even though it has internationally proven its efficacy with thousands of graduates since 1975. This is a serious breach of promise in the PH GE14 manifesto since more than 80 per cent of Chinese voters voted for PH because of this promised reform. The only steadfast decision made by the Education Minister so far is the decision that students will have to wear black shoes instead of white ones.

Many lawyers have pointed out that the repeal or review of our laws that violate basic human rights can be expeditiously accomplished within the first 100 days of the new PH government. These include abolishing laws that allow detention without trial, namely, the Security Offences (Special Measures) Act 2012 (Sosma), Prevention of Crime Act 1959 (Poca), and the Prevention of Terrorism Act (Pota) 2015.

It is alarming to hear the Law Minister Datuk Liew Vui Keong say recently that the PH government is now reconsidering its initial pledge to abolish several contentious laws including, the Sedition Act 1948, Prevention of Crime Act (Poca) 1959, Universities and University Colleges Act 1971, Printing Presses and Publications (PPPA) Act 1984 and the National Security Council (NSC) Act 2016. This is totally unethical backtracking on the PH GE14 manifesto.

The death penalty is a violation of human rights and must be abolished. Meanwhile, there ought to have been an immediate moratorium on all executions pending abolition and commuting the sentences of all persons currently on death row. The implementation of the Independent Police Complaints & Misconduct Commission (IPCMC) and other recommendations of the Royal Police Commission in 2005 is long overdue to ensure transparency and accountability by the police and other enforcement agencies such as the MACC.

During the 100 days under the PH government, we have witnessed the Sedition Act and the CMA still being used against activists and prevarication on the issue of child marriages. We have also seen the rule of law being flouted when a Minister in the PM’s Department can order the removal of portraits of LGBTQ Malaysians from an exhibition in Penang. Just as alarming is the statement by another Minister that cyanide used by gold miners in Bukit Koman is perfectly safe and non-hazardous to people or the environment.

Reneging on manifesto promises

From the failure by the PH government to fulfil their election promises in the 100 days, it is clear that the GE14 manifesto was drafted in a slipshod manner in order to secure populist votes. These include the promises to abolish toll from the highways within the stipulated time promised; no firm position regarding the PTPTN loan repayments; wavering on the promise to pay a 20 per cent instead of 5 per cent royalty to oil producing states based on revenue from gross production; the deduction of a percentage from a husband’s EPF contributions to go into the accounts of his wife, etc. PH has so far implemented less than half of their election promises. Will the PM apologise for reneging on these election promises?

Real reforms we expect in “new” Malaysia

Within the first year of the PH administration, Malaysians expect serious transformational reforms that will reconstitute truly democratic institutions and improve the lives of the 99 per cent and especially the B40 Malaysians. Of the highest priority, we expect urgent initiatives to implement the 8 key reforms including:

1. An end to race-based parties and policies especially replacing race-based policies with needs-based measures that truly benefit the lower-income and marginalized sectors and basing recruitment and promotion in the civil and armed services strictly on merit;

2. Re-instatement of our democratic institutions including bringing back elected local councils and enacting a Freedom of Information (FoI) Act at federal and state levels;

3. Zero tolerance for corruption and political leaders who have been charged with corruption must step down while their case is pending in the courts;

4. A progressive economic policy that will renationalize privatised assets, especially land, water, energy, which belong to the Malaysian people instead of local and foreign capitalists, opening up GLCs to democratic control of the people and directing them to implement good labour and environmental policies;

5. Redistribute wealth fairly through progressive taxation on the high-income earners, their wealth and property and effective tax laws to ensure there are no tax loopholes for the super-rich;

6. A far-sighted and fair education policy with equal opportunities for all without any racial discrimination with regard to enrolment into all schools including tertiary educational institutions;

7. Defend workers’ rights and interests especially their right to unionise and a progressive guaranteed living wage for all workers, including foreign workers;

8. People-centred and caring social policies including an effective low-cost public housing programme for rental or ownership throughout the country for the poor and marginalized communities;

9. Prioritise Orang Asal rights and livelihood by recognizing their rights over the land they have been occupying for centuries, prohibiting logging in Orang Asal land and ensuring all Orang Asal villages have adequate social facilities and services;

10. Sustainable development & environmental protection by allowing all local people to be consulted before any development projects and all permanent forest and wildlife reserves are gazetted.

The lesson of the first 100 days of the PH administration teaches us that, as always, civil society must be ever vigilant to push for these reforms because the government of the day will drag its feet and renege on these election promises when they have the opportunity.

 

Mahathir and the new National Car Project

August 9, 2018

Mahathir and the new National Car Project–Doomed to Failure Again

by John Berthelsen@www.asiasentinel.com

In 1984, a young researcher at a prestigious Malaysian thinktank wrote an exhaustive review of then-Prime Minister Mahathir Mohamad’s plan to partner with Mitsubishi Motors of Japan to produce a so-called national car. The sum and substance of the researcher’s report was: Don’t do it. It would be an economic disaster that would also limit consumer choice.

The report was leaked to a reporter for the Asian Wall Street Journal, then the New York-based WSJ’s Asian edition, which ran the story. The think tank’s chief quickly shot it down, saying it was only a draft, and never mind.  Fast forward a couple of decades, and learn just how prophetic the researcher’s warning was.

Mahathir went ahead and midwifed his proposal, of course, which became Perusahaan Otomobil Nasional (Proton). In the ensuing three-plus decades of its existence, the car, part of Mahathir’s move to move the country away from its resource-based economy to heavy industrialization, can only be described as a disaster.

Eventually in June 2017 – allegedly, partly to find funds to bail out the flailing 1Malaysia Development Bhd., which was enveloped in scandal – Prime Minister Najib Razak’s government would sell 49.9 percent of Proton to China’s Zejiang Geely Holding Group and effectively cede control over it to the automaker Geely.

But for everybody breathing a sigh of relief at having managed to get rid of the albatross hanging around Malaysia’s neck, the idea of a national car is back, along with Mahathir, who led the take-no-prisoners campaign to get rid of the corruption-plagued Najib in the country’s May 9 general election.

The 93-year-old Mahathir appears to want to bring back the country to where it was when he left office in 2003 after the first 23 year stint as premier, also reviving a proposal to build Malaysia’s half of a bridge over the Singapore causeway that nobody wants. It has won the name “crooked bridge” because it would have to be built to connect to Singapore’s half of the causeway since the island republic has no plans to replace its half of the bridge.

Ominously, Mahathir, has been appointed chairman of the board of Khazanah Nasional Bhd., the government’s premier investment vehicle, or more likely has appointed himself. Appointed along with him are allies Mohamed Azmin Ali, Mohd Hassan Marican, Sukhdave Singh and Goh Ching Yin. It was Kazanah that would ultimately take control over Proton, raising fears that Mahathir’s second incarnation as premier will result in amassing the same kind of power that he amassed in the 1980s and 1990s.

Against the advice of virtually everybody, Mahathir has gone to Japan, possibly to seek a joint venture partner to build another car despite the failure of Proton, which in characteristic Mahathir fashion was blamed on everybody else.

Entrepreneur Development Minister Mohd Redzuan Yusof announced last week that the government expects to launch what has been called “national car project 3.0” by 2020 in a move described as strategy to revitalize the national automotive industry.

But if past is inevitably prologue, Malaysia would do wise to heed the critics. Rafizi Ramli, the Vice President of Parti Keadilan Rakyat, urged that the project be reconsidered, saying no such plan had ever been discussed in the governing Pakatan Harapan coalition. No attempt has been made to assess the cost, no decision has been taken which agency would assume responsibility, no move has been made to abolish swingeing excise taxes on cars.

 

The saga of the Proton Saga – the name given the first national car – is contained in “Malaysian Maverick,” the highly regarded biography of Mahathir written by the late Wall Street Journal editor and columnist Barry Wain, who pointed out that for most of its existence, Proton lost RM35,000 (US$8,587 at current exchange rates) on every car sold.

Proton’s dubious success, Wain wrote, “came at a heavy cost to Malaysian consumers: taxes ranging from 140 percent to 300 percent on imported vehicles, and up to 40 percent on cars locally assembled from imported kits.”

Proton cost Malaysia’s taxpayers billions in direct subsidies and untold billions more in opportunity costs as those who didn’t want a rebadged Mitsubishi Lancer were forced to pay enormous excise taxes on foreign-made cars. Thousands went ahead and bought Toyotas, Hondas and Nissans anyway, paying the extra freight. They also bought even more-expensive Mercedes-Benzes and Jaguars anyway despite the extra cost.

Already dated by the time Malaysia started importing the Lancer kits, the car was lackluster at best. Given Malaysia’s population at that point of fewer than 30 million, it was impossible to gear up to beat the economies of scale enjoyed by Toyota, Honda, Nissan and other manufacturers, who turned out millions of cars every year in their home bases and satellite plants.  Attempts to sell Protons overseas failed. Cars sold in China and England, for instance, had no heaters because they weren’t necessary in Malaysia. In order to sell the car in the UK, 400 technical modifications had to be made.  In the end, exports accounted for only about 10 percent of sales.

Worse, as Wain wrote, the country’s thriving assembly industry, which employed thousands, was decimated by the favoritism shown to Proton. By contrast, Thailand welcomed the entry of foreign firms to assemble cars there, ultimately becoming the export hub of Southeast Asia and ending up what was called the “Detroit of the East.”

Read this: http://autobuzz.my/2016/09/27/feature-seven-things-may-not-know-proton-saga-video/

As Proton attempted to increase local content, with Malaysian engineers and designers producing more and more of the components of the cars, they fell even further behind, unable to compete with the technical expertise of the Japanese, Koreans and other carmakers.

In the end, there was little to show for Proton other than the Malaysian Islamic hood ornament, a symbol of pride. Mitsubishi “bailed out of Proton in 2004, ending a two-decade partnership that proved extremely profitable for the Japanese group” at the same time Malaysia was left “with dozens of uncompetitive local auto parts makers and vendors.”

Now Mahathir wants to do it again. He may get his way.  But the national car encapsulates a more worrisome concern for the country, and that is that the ideas that failed – besides Proton but including a long string of grandiose projects — cost the exchequer as much as RM100 billion in mismanagement and corruption, according to Wain’s book. Mahathir during the campaign that ousted the massively corrupt Najib Razak claimed he was now willing to share power and ideas. The car is a disturbing throwback, and raises the possibility that there are more such projects in the wings. For those who read Wain’s 2009 book, revised and updated in 2012, it might pay to go back and reread it.

ASEAN Car, National Car and What else–Let’s Get Real, not Sentimental

June 29, 2018

by Bunn Nagara@www,thestar.com.my

The international marketplace can be an unforgiving arena, if the hard economic realities of global markets are replaced by sentimentality or nostalgia. 

A “national car” in Vietnam or Malaysia tends to miss the wood for the trees. Larger regional realities determine the local prospects, not the other way round. All goods and services are subjected to tough market realities.–Bunn Nagara

THERE is a pattern and a rhythm in global markets that, when acknowledged and heeded, can yield profits – but when denied or confronted may lead to loss and pain.

Asia’s two largest economies, China and Japan, are set to face off in South-East Asia in at least one sector: automobiles.

The signs of this looming challenge are becoming observable, as the portents of the rivalry settle steadily into place. A “national car” in Vietnam or Malaysia tends to miss the wood for the trees. Larger regional realities determine the local prospects, not the other way round. All goods and services are subjected to tough market realities. A temporary reprieve may come only with costly subsidies or tariffs which then render items uncompetitive over the longer term.

Among the realities of the global auto market are, first, that the motorcar is the single most costly consumer item commonly sold across borders. Second, of all the global consumer items traded daily, the car is probably the least nationally oriented. Parts come from all over the world, plants are established abroad for cost and other reasons, and companies from abroad buy proud “national” firms producing even the most prestigious brands.

Britain’s Jaguar Land Rover was bought by America’s Ford, and then by India’s Tata. Britain’s most prestigious marques, Rolls Royce and Bentley, were bought by Germany’s Volkswagen which also bought Italy’s supercar Lamborghini and France’s pride Bugatti, besides Spain’s Seat and Czechoslovakia’s Skoda.

Lamborghini was previously taken over by the Swiss (Mimrans), then the Americans (Chrysler), and then Indonesians (V’Power) and Malaysians (MyCom).

China’s Geely bought Sweden’s Volvo, the London Taxi Company, Germany’s prestigious Daimler (Mercedes) Benz, the US “flying car” company Terrafugia – and Malaysia’s Proton and Lotus.

Proton had earlier acquired Britain’s iconic sports car company, Lotus. Ownership “promiscuity” in the auto industry across borders is spread all round.

Some of these acquisitions may not be 100% but they are still substantial. Geely, for example, owns 49.9% of Proton and 9.69% of Benz, both being the single largest stake in these companies. Among the earliest across borders was General Motors’ acquisition of Germany’s Opel in 1929, after which Opel models were still sold in the UK as “British” Vauxhall. Last year Opel was acquired by France’s Groupe PSA which incorporates Peugeot and Citroen.

The pace and number of cross-border auto acquisitions continue to grow, along with the scale. It is a game for the super cash-rich, making independent national operations unviable while squeezing the prospects of new startups. In ASEAN countries today, mega competition on Level Two between Japanese and Chinese auto firms is shaping up. Even Korean companies are only looking in to see if there is a possible opening.

Sales of individual cars to consumers on Level One continue for all marques, but sales of whole auto companies (Level Two) are the new name of the game. Apart from direct competition between Japanese and Chinese corporations, competition is growing between their locally named subsidiaries – and between rival compatriot firms. The result may see South-East Asian auto companies functioning largely as proxies of parent Chinese and Japanese firms.

SAIC Motor, China’s biggest auto firm which also assembles US and European brands, wants Thailand as the regional production hub for export to other countries. Japanese companies had set that example in this region and are still trying to keep the “flag flying.” Toyota has raised its stake in the Philippines, as has Mitsubishi, with increased investments in factories for larger output. However, higher levels of local technical input are still limited at best.

The international auto acquisitions market has also involved prestigious car design firms. Vietnam’s first car company Vinfast proudly announced engaging Italy’s Pininfarina, which designed Ferrari and Maserati models – and which was bought earlier (76%) by India’s Mahindra.

Developing countries may be smitten by the “national car” bug, while developed countries are more interested in producing sophisticated high-value systems that can be incorporated into all cars: among them, AI for self-driving cars. These high-end components are the real value-added skills in auto production today, rather than basic parts assembly so commonly found in Third World car factories.

Ultimately, the issue is the degree of local content along with the technical input rather than a hidebound obsession with a “national” car. Production and ownership promiscuity across borders means that cars no longer have distinct nationalities.

 

Thailand produces some two million cars a year, more than half for export, about as many produced as all the other ASEAN countries combined. It has no national car project since it manufactures only automotive components and assembles cars from other countries. Nonetheless its automobile sector is widely regarded as economically successful, employing more than half a million people and accounting for 10-15% of GDP. Most of the world’s auto parts and automobile manufacturers operate in the country.

A lack of high-end technical inputs for greater value-added has however been limiting to growth. Lately the auto sector pledged to scale up the technical ladder, with attractive government-supported incentives for environmentally clean designs.

Indonesia has ambitious plans for boosting its auto sector, encouraged by rising local demand since 2012 but still hampered by limited exports. It therefore risks mistaking local demand for overseas demand, which has been only 20% of Thailand’s.

Within ASEAN, Indonesia is the biggest country with the biggest population and economy, but its auto sector has not been competitive internationally. Government support through protectionism is no answer. Now the Indonesian auto sector may be facing another challenge – competition from elsewhere in ASEAN such as Vietnam. Its structural inefficiencies remain a persistent problem.

A study by Prof Sadayuki Takii found that the problems include weak or minimal local content and government protection contributing to a lack of competitiveness. The same conditions may be found in other ASEAN countries.

Another reality in the global auto market is how successful companies come from countries with a sizeable domestic market providing healthy competition nationally. Through the years, market discipline made these companies competitive internationally and fit to compete against companies in other countries. Protectionism however works in the opposite direction.

Indonesian President Joko Widodo has been toying with the idea of an “ASEAN car,” which would bring together engineering skills across this region to produce a competitive world-class item. This desire still exceeds the capacity or the prospect, unfortunately.

Countries in ASEAN still need to get over the lack of substantive technology transfer if they are to acquire the real skills that make the auto sector competitive. Increasing investments by Japanese and Chinese firms at largely parts assembly level are contributing to the problem. But who can say no to immediate investments offering more jobs?

Beyond technology transfers, local players also need to become innovative on their own. That has yet to happen. Another problem to resolve is the growing competition between ASEAN countries. The competing concepts of “regional car” and “national car” are in a zero-sum game.

The Philippines also wants to be the regional auto manufacturing hub within a decade. This national-centric approach, typical of the region, retards regional integration and prospects for the ASEAN Economic Community.

The more likely prospect is to become local outposts for larger Chinese or Japanese firms.

Bunn Nagara is a Senior Fellow at the Institute of Strategic and International Studies (ISIS) Malaysia.

Bunn Nagara

 

Trump appeases an authoritarian Malaysian Prime Minister to The White House

September 13, 2017

By Editorial Board, The Washington Post

The Post’s View

Opinion

 

Malaysian PM Najib Razak reviews an honour guard at The White House. Romeo Ranoco/Reuters

PRESIDENT TRUMP has made a habit of embracing authoritarian rulers he regards as friendly, without regard for their subversion of democratic norms or gross human rights violations. Yet his meeting with Malaysian Prime Minister Najib Razak at the White House on Tuesday sets a new low. Not only is Mr. Najib known for imprisoning peaceful opponents, silencing critical media and reversing Malaysia’s progress toward democracy. He also is a subject of the largest foreign kleptocracy investigation ever launched by the U.S. Justice Department.

U.S. investigators have charged that Mr. Najib and close associates diverted $4.5 billion from a Malaysian government investment fund for their own uses, including $730 million that ended up in accounts controlled by the Prime Minister. Justice first filed civil suits seeking the freezing of some $1.7 billion in assets in the United States, including real estate, artworks and stakes in Hollywood movies; more recently, the department asked that those actions be put on hold while it pursues a criminal investigation. Mr. Najib has not been charged with a crime and denies wrongdoing, but the U.S. investigation prompted speculation in Malaysia that he could be arrested if he set foot on American soil — not good PR for a leader who is obligated to call an election sometime in the next few months.

[Here’s what President Trump should tell Malaysia’s prime minister]

With his White House invitation, Mr. Trump has neatly gotten Mr. Najib off that hook and provided him with what the regime will portray as a tacit pre-election endorsement. Despite his repression, Mr. Najib could use that sort of help: In the last election, in 2013, his party lost the popular vote and retained power only because of the gerrymandering of election districts.

President Trump and other top American officials, left, met at the White House with Prime Minister Najib Razak of Malaysia and his delegation, right .The Post’s Editorial states: “The best way for the United States to build a stronger alliance with Malaysia and bolster its independence from China is to encourage those in the country who support liberal democratic values — while holding Mr. Najib accountable for his human rights violations, as well as any financial crimes he may have committed in the United States”.

If the White House received anything in exchange for that huge political favor, it’s not evident. That’s particularly unfortunate because Mr. Najib’s regime is not only a conspicuous violator of human rights but a relative friend to North Korea. The regime of Kim Jong Un has exported workers to Malaysia to earn hard currency. Kim Jong Un’s estranged half brother was murdered in Kuala Lumpur’s international airport — so far with no consequences for Pyongyang.

Mr. Trump isn’t the only  U.S. President to pursue a policy of appeasement toward Mr. Najib. Barack Obama was the first appeaser who played golf with and visited the Malaysian Prime Minister in Malaysia.

Mr. Trump isn’t the first U.S. President to pursue a policy of appeasement toward Mr. Najib. President Barack Obama golfed with the Prime Minister and flattered him with the first visit by a U.S. President to Malaysia in nearly half a century. Like Mr. Obama, Mr. Trump may imagine that courting Mr. Najib is a necessary counter to China, which has hosted him twice in the past year and wooed him with promises of about $100 billion in investments. Yet Mr. Najib’s corruption and disregard for democratic norms mean he will inevitably prefer the values-free patronage of Beijing over alliance with Washington.

The best way for the United States to build a stronger alliance with Malaysia and bolster its independence from China is to encourage those in the country who support liberal democratic values — while holding Mr. Najib accountable for his human rights violations, as well as any financial crimes he may have committed in the United States. If Mr. Trump makes a start at that on Tuesday, he could begin to mitigate the error of inviting Mr. Najib to the White House.

https://www.washingtonpost.com/opinions/global-opinions/trump-welcomes-an-authoritarian-to-the-white-house/2017/09/11/9d19f51c-9707-11e7-b569-3360011663b4_story.html?utm_term=.e59f606520a0