CNN on Najib Razak’s Homage to The Donald at The White House


September 13, 2017

CNN on Najib Razak’s Homage to The Donald at The White House

Generous Malaysian Prime Minister Najib  Razak will help The United States Economy, This pledge was made to The Donald when he paid his homage to the US President at The White House.–Din Merican

A New Way to study Economics


September 13, 2017

A New Way to study Economics

by John Cassidy

https://www.newyorker.com

Image result for The New Way to study Economics

Dealing with Unemployment,Inequality, and  Poverty

With the new school year starting, there is good news for incoming students of economics—and anybody else who wants to learn about issues like inequality, globalization, and the most efficient ways to tackle climate change. A group of economists from both sides of the Atlantic, part of a project called CORE Econ, has put together a new introductory economics curriculum, one that is modern, comprehensive, and freely available online.

In this country, many colleges encourage Econ 101 students to buy (or rent) expensive textbooks, which can cost up to three hundred dollars, or even more for some hardcover editions. The CORE curriculum includes a lengthy e-book titled “The Economy,” lecture slides, and quizzes to test understanding. Some of the material has already been used successfully at colleges like University College London and Sciences Po, in Paris.

The project is a collaborative effort that emerged after the world financial crisis of 2008–9, and the ensuing Great Recession, when many students (and teachers) complained that existing textbooks didn’t do a good job of explaining what was happening. In many countries, groups of students demanded an overhaul in how economics was taught, with less emphasis on free-market doctrines and more emphasis on real-world problems.

Traditional, wallet-busting introductory textbooks do cover topics like pollution, rising inequality, and speculative busts. But in many cases this material comes after lengthy explanations of more traditional topics: supply-and-demand curves, consumer preferences, the theory of the firm, gains from trade, and the efficiency properties of atomized, competitive markets. In his highly popular “Principles of Economics,” Harvard’s N. Gregory Mankiw begins by listing a set of ten basic principles, which include “Rational people think at the margin,” “Trade can make everybody better off,” and “Markets are usually a good way to organize economic activity.”

The CORE approach isn’t particularly radical. (Students looking for expositions of Marxian economics or Modern Monetary Theory will have to look elsewhere.) But it treats perfectly competitive markets as special cases rather than the norm, trying to incorporate from the very beginning the progress economists have made during the past forty years or so in analyzing more complex situations: when firms have some monopoly power; people aren’t fully rational; a lot of key information is privately held; and the gains generated by trade, innovation, and finance are distributed very unevenly. The CORE curriculum also takes economic history seriously.

The e-book begins with a discussion of inequality. One of first things students learn is that, in 2014, the “90/10 ratio”—the average income of the richest ten per cent of households divided by the average income of the poorest ten per cent—was 5.4 in Norway, sixteen in the United States, and a hundred and forty-five in Botswana. Then comes a discussion of how to measure standards of living, and a section on the famous “hockey stick” graph, which shows how these standards have risen exponentially since the industrial revolution.

Image result for The New Way to study Economics

The text stresses that technical progress is the primary force driving economic growth. Citing the Yale economist William Nordhaus’s famous study of the development of electric lighting, it illustrates how standard economic statistics, such as the gross domestic product, sometimes fail to fully account for this progress. Befitting a twenty-first-century text, sections devoted to the causes and consequences of technological innovation recur throughout the e-book, and the information economy receives its own chapter. So do globalization, the environment, and economic cataclysms, such as the Depression and the global financial crisis.

Given the breadth of its coverage, the CORE curriculum may be challenging to some students, but it takes advantage of being a native online product. (In Britain, a paperback version of the e-book is also available.) The presentation features lots of graphs and charts, and, in some cases, students can download data sets to create their own. The quizzes are interactive, and the presentation is enlivened by potted biographies of famous dead economists (Smith, Keynes, etc.) as well as video interviews with eminent living ones, such as Thomas Piketty.

Image result for The New Way to study Economics

Unlike most textbooks, the CORE e-book was produced by a large team of collaborators. More than twenty economists from both sides of the Atlantic and from India, Colombia, Chile, and Turkey contributed to it. (Two of them, Suresh Naidu and Rajiv Sethi, teach at Columbia and Barnard, respectively.) The coördinators of the project were Wendy Carlin, of University College London, Sam Bowles, of the Santa Fe Institute, and Margaret Stevens, of Oxford University. The Institute for New Economic Thinking provided some funding to help get things off the ground.

The members of the CORE team deserve credit for responding to the critics of economics without pandering to them. They have produced a careful but engrossing curriculum that will hopefully draw more young people into economics, and encourage them to continue their studies. (At University College London, students who took the CORE course did better in subsequent economics classes than earlier cohorts who took a more traditional introductory course.)

But the CORE material isn’t just for incoming students. It will also reward the attention of general readers and people who think they are already reasonably conversant with economics. (Personal testimony: Having gone through some of the material in detail, I think I might finally understand the Malthusian model and how to calculate bank leverage ratios!) All this, and the price can’t be beat.

 

Trump’s Malaysia Swamp


September 7, 2017

Did Tillerson tell his boss he’s repeating an Obama mistake?

The Editorial Board

Image result for Najib and Obama Golf

Will Donald Trump be conned by Najib like how he sweet talked Barack Obama? The WSJ suggested that the U.S. could find a diplomatic excuse in Hurricanes Harvey and Irma or congressional battles to cancel the September 12 White House Meeting. Helping Mr. Najib at this critical moment is a mistake.

A visit to the White House is a diplomatic plum that world leaders covet. So why is President Trump bestowing this honor on Malaysian Prime Minister Najib Razak, who jailed an opposition leader and is a suspect in a corruption scandal that spans the globe?

Mr. Najib will visit the White House next week for a presidential photo-op that could help him win the next general election and imperil Malaysia’s democracy. Yet it isn’t clear that Mr. Trump and Secretary of State Rex Tillerson are getting anything in return for associating with a leader their own Justice Department is investigating. This could set them up for a repeat of the way Mr. Najib humiliated Barack Obama.

Image result for 1mdb najib

 

Mr. Najib oversaw the creation of 1MDB, a state-owned fund that was supposed to attract foreign investment. The U.S. Justice Department alleges that the Prime Minister and his associates looted the fund of $4.5 billion. The DOJ has filed civil lawsuits to freeze more than $1.6 billion of assets allegedly stolen from the fund. Five other nations are also investigating, and Singapore has convicted five financiers of money laundering and fraud. Mr. Najib hasn’t been charged and denies wrongdoing, and Malaysia’s Attorney-General cleared him.

Image result for Rex Tillerson and Najib Razak

Prime Minister Najib Razak and US Secretary of State Rex Tillerson

Under Mr. Najib, Malaysian authorities also conducted a six-year prosecution against opposition leader and former Deputy Prime Minister Anwar Ibrahim on dubious charges of sodomy, for which he was sentenced to five years in prison. That legal farce helped Mr. Najib’s party win a narrow victory in the 2013 election.

Image result for Najib andTrump

The Art of the Deal or Gua Tolong Lu, Lu Tolong Gua

So how should the U.S. engage a troubled Malaysia? Mr. Obama cozied up to Mr. Najib and chose to ignore the prosecution of Mr. Anwar when he made the first visit by a U.S. President in 60 years to Kuala Lumpur in April 2014. Eight months later, he invited Mr. Najib for a showy round of golf in Hawaii.

But that precedent is not consistent with Mr. Trump’s promise to “drain the swamp” of Washington politics. Two months after that golf round Mr. Anwar was jailed again. And shortly after Mr. Obama made nice with Mr. Najib, Frank White Jr. , who served as co-chair of President Obama’s re-election committee before becoming a lobbyist for Malaysia, sold a stake in a 1MDB-linked solar technology firm back to the fund for $69 million.

The benefits of communing with Mr. Najib aren’t obvious. Perhaps Mr. Tillerson thinks Malaysia will help tighten the financial screws on North Korea, which has long used the country as a business hub. But Mr. Najib isn’t likely to stop his strategic drift toward China. Keeping 1MDB afloat will require cash infusions, and China, eager to help fellow authoritarians, can deploy its One Belt, One Road slush fund. Mr. Najib can then buy off the opposition and consolidate power.

If Malaysia slides into dictatorship, it will almost surely fall into Beijing’s orbit. The U.S. relationship depends on Malaysia remaining a viable democracy. That’s why helping Mr. Najib at this critical moment is a mistake.

Mr. Trump will be told that it’s too late to cancel the meeting, but the U.S. can find a diplomatic excuse in Hurricanes Harvey and Irma or congressional battles. Any embarrassment is better than giving a scandal-tainted leader a White House photo-op.

Appeared in the September 7, 2017, print edition.

1MDB Scandal –Potential Witnesses for DOJ fear retaliation if they talk to US Investigators


September 7, 2017

1MDB Scandal –Potential Witnesses for DOJ fear retaliation if they talk to US Investigators

by Bloomberg

Image result for 1mdb

Possible witnesses to the alleged looting of billions of dollars from 1Malaysia Development Bhd are too scared to talk to U.S. investigators because they fear retaliation, according the Federal Bureau of Investigation.

Some people in “certain foreign countries” already assisting the criminal probe are concerned for their safety, while others say it’s too dangerous to cooperate, according to an FBI request to keep the names of its informants secret from the alleged masterminds of the 1MDB conspiracy.

Individuals who would otherwise be willing to provide information have told the government they’re worried about putting “the safety and security of both themselves and their families at serious risk,” the FBI said Tuesday in a federal court filing in Los Angeles.

Image result for jho low
Will he squeal to save his family fortune in exchange for immunity from prosecution?

The trusts holding the assets on behalf of Low, Aziz, al Qubaisi and their families are contesting the forfeiture actions and oppose the request to put the civil cases on hold. The Low trusts have asked the U.S. to supply it with the identities of witnesses, sources of evidence, and thousands of documents that are relevant to the criminal investigation, according to the FBI.

Image result for Kevin Morais

Kevin Morais was threatened when he did not want to accept the bribes”

The FBI cited Malaysian news reports of local officials who have been arrested because of their purported role in investigating the 1MDB embezzlement. As recently as August 30, Malaysian media reported that the driver of former Malaysian Attorney General Abdul Gani Patail was shot and wounded as a possible warning to the former prosecutor not to cooperate with the U.S., the FBI said.

Abdul Gani opened the initial 1MDB investigation, according to the FBI’s filing. He was replaced as attorney general in 2015.

Image result for Trump and Najib

Najib Razak and Donald Trump–The Art of the Deal–Lu Tolong Gua, Gua Tolong Gua, senang saja ma

The U.S. investigation is part of a global effort to track how much of the $6 billion that 1MDB raised for development projects was embezzled or involved in money laundering. Switzerland, Singapore and Luxembourg are among the countries also investigating the roles played by banks and individuals.

Najib, who until last year was the chairman of 1MDB’s advisory board, has denied any wrongdoing and was cleared by Malaysia’s attorney general. Low issued a statement in June, in response to a second round of forfeiture lawsuits, saying the U.S. government was continuing “inappropriate efforts to seize assets despite not having proven that any improprieties have occurred.”

In those cases, the Justice Department alleged that a $1.29 million heart-shaped diamond and a $3.8 million diamond pendant Low gave in 2014 to his then-girlfriend, actress Miranda Kerr, were bought with stolen money.

Image result for Riza Aziz and Rakan, ma

Low allegedly also gave a $3.2 million Picasso painting to actor Leonardo DiCaprio, who played the lead in “The Wolf of Wall Street,” a movie the U.S. says was financed Aziz using misappropriated 1MDB funds.

The case is U.S. v. “The Wolf of Wall Street,” 16-cv-05362, U.S. District Court, Central District of California (Los Angeles).

by BLOOMBERG

 

 

A Rogue Currency Trader’s Confession–Bursting Bank Negara Malaysia


September 7, 2017

A Rogue Currency Trader’s Confession–Bursting Bank Negara Malaysia

 

Text of Statement by Khazanah Nasional Berhad’s Deputy Chairman Tan Sri Nor Mohamed Yakcop before Royal Commission on Bank Negara Forex Fiasco

Image result for nor mohamed yakcop deputy chairman, khazanah nasional berhad

The Rogue Currency Trader–No Excuses for Recklessness

The forex losses happened. There is no denying it. There is also no denying my accountability for the forex losses. I accepted my fair share of the accountability for the forex losses and resigned from BNM. At that time, it appeared to me to be a sad end to my 25 years of service to the nation, through Bank Negara Malaysia.–Nor Mohamed Yakcop

Introduction

I joined Bank Negara Malaysia (BNM) in September 1968. I was promoted to the post of Manager, Banking Department in 1986.

The Banking Department was responsible for external reserves management, regulation of the domestic money market, including the discount houses, development of Islamic banking, approval of domestic bond issues, managing the Export Credit Refinance Facility (ECR), development of new financial institutions and promoting trade by way of Bilateral Payment Arrangement (BPA) with other central banks in developing countries. When I resigned from BNM in April 1994, I held the post of Advisor. I re-joined BNM again, as an Advisor, in September 1998, after the implementation of the Unorthodox Measures, which I will describe later in my statement. I served in BNM in that capacity until April 2000. In May 2000, I was appointed as the Economic Advisor to the Prime Minister, and subsequently, in January 2004, I was appointed as the Minister of Finance II. In April 2009, I was appointed as Minister in the Prime Minister’s Department responsible for the Economic Planning Unit (EPU). I retired in May 2013, and joined Khazanah Nasional Berhad as Deputy Chairman in June 2013.

Image result for nor mohamed yakcop

Policy imperatives of active external reserves management by BNM

Prior to 1985, BNM was not active in external reserves management, including forex trading, given the relative stability in the international foreign exchange market.

The situation changed in 1985. On 22 September 1985, five OECD countries, met in private at the Plaza Hotel in New York and decided among themselves, without consulting other countries, that the Yen and the German Deutsche Mark should be strengthened significantly against the US dollar by way of market intervention. This is known as the Plaza Accord. The Plaza Accord was historic because it was the first time central bankers agreed to intervene in the currency market in such a big way and the first time in history when governments set target foreign exchange rates to be achieved through active intervention.

One important outcome of the Plaza Accord was that the exchange rate of the Yen versus the US dollar strengthened sharply. (The Yen strengthened from 240 Yen to the dollar in 1985 to 120 Yen to the dollar by early 1988).

The strengthening of the Yen resulted in many developing countries suffering huge losses, since a significant portion of their external borrowings was denominated in Yen. The Malaysian Government, Government agencies, including GLCs, as well as the Malaysian private sector suffered significant forex losses on repayment of Yen loans and foreign exchange revaluation of Yen loans, following the sharp appreciation in the value of Yen arising from the Plaza Accord.

Image result for tan sri jaffar hussein

 

Malaysia’s borrowings in Yen during the early 1980s were mainly for infrastructure building. At that time, the Malaysian bond and sukuk markets were not yet developed to enable large amounts of borrowings for long periods to be obtained domestically in Ringgit. Given that infrastructure projects required long gestation period, the Malaysian government and its agencies chose to borrow in Yen, since, at that time, long term yen loans were available with low interest rates. The borrowings also coincided with the building of major infrastructure projects in the country.

Since the Plaza Accord of September 1985, the international forex market also became much more volatile, with sharp and sometimes erratic movements in the daily forex rates. While the Plaza Accord of September 1985 was intended to strengthen the Yen and the Deutsche Mark, another agreement, the Louvre Accord was signed on 22 February 1987 in Paris by six OECD countries, again without consulting other countries, to halt the over-appreciation of the Yen and the Deutsche Mark, and this created another round of turmoil in the foreign exchange market.

Image result for Lin See Yan

Dr. Lin See Yan–Deputy Governor, Bank Negara Malaysia

This was the background that led to the decision by BNM to begin active external reserves management. I understand that the Commissions attention has been drawn to Allahyarham Tan Sri Jaffar Hussein address in New Delhi, India on 5 December 1988. In that speech the Governor had publicly set out BNM’s rationale for the active external reserves management policy. Let me quote, extracts from that speech by Allahyarham Tan Sri Jaffar Hussein:

“Why are we so active in the market now, compared to before? There are a number of reasons. First, until recently, our external reserves were not large, being only US$4 billion at the end of 1984. This has now increased to US$7.8 billion, thus justifying a more active management of reserves.

Secondly, the exchange rate volatility since the Plaza Agreement of September 1985, had changed the stakes of the game. Whereas in the past an active management of reserves might have made a difference on yield of twenty basis points; it now makes a difference of maybe 500 basis points. So it is worth the trouble. Thirdly, forex trading is today a 24-hour business and there are opportunities throughout the day to deal…

I recall one occasion when some bankers made an attempt to speculate against the ringgit in off-shore centres on one of our national holidays, when they thought we would be closed for the day. To their surprise and cost, we opened up our dealing room during that national holiday and intervened in the off-shore centres to stabilize the ringgit and in the process taught those bear speculators a lesson they are not likely to forget…

…When I joined the Central Bank in 1985 from the private sector, I was informed that the main thrust of reserves management in Bank Negara was to preserve the value of what we have and the main considerations were safety and liquidity. To that, I have added a third and fourth dimension: profit optimization and market expertise.

I basically took the stance that risk-taking in reserves management included not only the risk of losses, but also the risk of falling behind inflation, of not earning as much with our scarce resources as we could. The primary motivation is still to preserve and conserve the value of what we have…

To me, in the last analysis, an active reserves management policy goes beyond the additional return and risks. A key advantage is that the active involvement has given us a greater feel of what is really going on in the foreign exchange and capital markets…

Central banking by decree and fiat can no longer budge markets, but market skills and influence of market psychology can do the trick…

I might also add that in a developing country, where foreign exchange trading skills are scarce, it is the duty of the Central Bank to be the provider of skilled manpower in the market, to be an educator of such technical skills and to be in the forefront of banking and computer technology…….I notice even the Bank of England is now actively adopting this policy”

The Governor’s main point was that the primary motive for the active external reserves management was the mitigation of the downside impact of major changes in foreign exchange rates on Malaysia’s foreign currency assets and liabilities. Let me repeat what the Governor said in New Delhi: “the primary motivation is still to preserve and conserve the value of what we have.” We sought to acquire the skills to manage the external reserves better and also, in a broader context, to assist the nation when required. The larger deals, beyond the limits given to the forex traders, were to protect the external reserves and the value of the Ringgit, by way of diversification. At that time, BNM had no specific limit for such diversification deals.

Image result for nor mohamed yakcop's book on forex trading

 

To understand further the role of external reserves management in achieving the objectives of a central bank, please allow me to elaborate on the link between the stability of the Ringgit exchange rate, monetary policy and external reserves management.

Maintaining a stable Ringgit in the late 1980s to early 1990s

In the Malaysian domestic market, since the late 1980s, there was a continuous large inflow of US dollars by investors, including some short-term inflows or “hot money”. If BNM did nothing, the inflows would have resulted in the Ringgit strengthening significantly from the BNM policy range of between 2.50 and 2.80 against the US dollar. That would have created major implications for the economy, particularly since it would have reduced the competitiveness of Malaysian export sector.

This was an important consideration for a country which is one of the largest trading nations in the world.

14. In order to maintain the stability of the Ringgit, BNM had to buy the excess US dollars from the banks in Malaysia, in its role as the buyer of last resort for foreign currencies in the domestic market. This activity is termed as BNM’s foreign exchange intervention operations. The US dollars were then used by BNM mainly to purchase US Treasury Notes. The yield on the US Treasury Notes in the early 1990s was on average about 4.5 per cent p.a.

If BNM did nothing after mopping up the US dollars, there would be the issue of a large overhang of excess Ringgit in the system, since BNM would have paid Ringgit for its purchase of the US dollars. This large overhang of excess Ringgit in the system would adversely affect BNM’s monetary policy. It would cause the Ringgit interest rates to fall sharply (based on supply and demand), and create inflationary pressures. Therefore, BNM had to borrow back the Ringgit funds that it had provided to the banking system in its intervention operations. The purpose of BNM borrowing back the Ringgit funds from the banks is to neutralize the effect of the original forex intervention in the domestic money market. This is known as the sterilization operation. The borrowing rate that BNM had to incur (during the early 1990s) for the sterilization operation was about 7.5 % p.a.

Therefore, the combination of the BNM intervention and sterilization operations would cost about 3 % p.a. This is because the cost of borrowing back the Ringgit was higher than the yield of US Treasury Notes. This negative margin would be recorded as a loss in BNM’s books. In BNM’s active external reserves management, one consideration was to mitigate this loss.

The issue of moving into an active mode of external reserves management must also be seen in the context of Allahyarham Tan Sri Jaffar Hussein’s philosophy regarding Bank Negara’s role in national development. I need to elaborate on this point because Allahyarham Tan Sri Jaffar Hussein is no more with us, and it is important that we recognize the wisdom of this great man. The Governor believed that by active management of the external reserves, we will be able to acquire the skills, knowledge and experience required to serve the nation, when required, both in developmental activities as well as to overcome any financial crisis that the nation may face in the future. He termed this as “market expertise”.

Lessons for the 1997/1998 Asian Financial Crisis

Indeed, Allahyarham Tan Sri Jaffar Hussein’s foresight regarding market expertise saved the nation during the 1997/1998 financial crisis. In a strange twist of history, the skills, knowledge and experience acquired in BNM enabled the nation to implement the Unorthodox Measures of September 1998. It provided the nation with the ability to frustrate the foreign currency manipulators, whose intention was to destabilize Malaysia and cause chaos in the socio-economic fabric of the nation.

Unlike Thailand, Indonesia and South Korea, Malaysia was able to overcome the financial crisis of 1997/1998, without borrowing a single cent from the IMF or the World Bank or anyone else. We reset the Nation back on the growth trajectory without outside help. The Unorthodox Measures of September 1998 saved Malaysia from dire consequences, following the worst financial crisis in our history, and restored the sovereignty and dignity of our beloved nation.

In economic terms, the result of the Unorthodox Measures of September 1998 is substantial. Just to illustrate using one of many measures of economic gain, the Unorthodox Measures resulted in the market capitalization of the Malaysian stock market recovering from a low of RM 181.5 billion on September 1, 1998 to RM 579.2 billion on March 24, 1999, a gain of RM397.7 billion. The Stock Market Index jumped from 262.7 (September 1, 1998) to 851.7 (March 24, 1999), a multiple of 3.24 times.

Let me briefly illustrate how the skills, knowledge and experience that we acquired from the forex activities in Bank Negara became critical in formulating the Unorthodox Measures of September 1998:

(i) There was great deal of confusion, during the early days of financial crisis of 1997/1998, on the concept of “Offshore Ringgit”. The initial view was that bags full of cash in Ringgit were taken out to Singapore and Malaysian customs officials at the border were instructed to check thoroughly the bags of Malaysians departing to Singapore. Obviously no big amount of cash was found.

I explained to the Prime Minister in 1997 and 1998 that the term “Offshore Ringgit” does not refer to Ringgit physically located outside Malaysia. The bulk of Ringgit will always remain in Malaysia. The term “Offshore Ringgit” refers to Ringgit (in Malaysia) which is owned by foreigners. The currency manipulators borrow the Ringgit, both local Ringgit owned by Malaysians or “Offshore Ringgit” owned by foreigners, to sell the Ringgit for US dollars. This is called short-selling. We knew from our forex trading days that on Black Wednesday (16 September 1992) when Pound Sterling crashed, Soros had borrowed £ 10 billion to short-sell the pound sterling. Therefore, an important aspect of Malaysia’s Unorthodox Measures of September 1998 was to disallow foreigners from borrowing Ringgit to speculate. The concept of “Offshore Ringgit” is very complicated and it took me a few attempts to ensure that the Prime Minister fully understood the term, as you can read from the book.

Image result for nor mohamed yakcop's book on forex trading

Notes to the Prime Minister by Wong Sulong published in 2011. I wrote 5 notes on this subject, namely Note 2 (October 13, 1997), Note 13 (December 12, 1997), Note 25 (May 19, 1998), Note 31 and Note 32 (both on June 29, 1998). Without the knowledge acquired at BNM’s forex desk, we would not have fully understood the concept of “Offshore Ringgit”, which was key to the implementation of the Unorthodox Measures;

(ii). Malaysia initial response during the financial crisis was to increase the interest rate level to stabilize the Ringgit. This created chaos for the many business entities, pushing them to the verge of bankruptcy. We knew from experience that this does not work. During the Black Wednesday incident in United Kingdom, the British Government increased the interest rate from 10% p.a to 12 % p.a. in its desperate attempt to stabilize the pound. But this move was completely ineffective.

Therefore, our Unorthodox Measures involved, among others, bringing the interest rate down, rather than increasing the interest rates, after fixing the exchange rate at RM 3.80 to the dollar, and disallowing foreigners from borrowing the Ringgit for speculative purposes. This significant lowering of the interest rates, as well as our measures of implementing an expansionary monetary and fiscal policy, as part of the Unorthodox Measures, saved many corporations from becoming bankrupt and some banks from becoming insolvent; and

(iii). When we pegged the Ringgit on 2 September 1998, we pegged it at RM 3.80 to the US dollar.

The 3.80 rate was on the weaker side since, based on fundamentals, we could have fixed the rate at 3.50. But we knew that it was better to fix the Ringgit at a slightly weaker rate, anticipating that the market players would feel that, at 3.80, the Ringgit was undervalued and they would therefore buy the Ringgit. We expected that this move would result in large inflow of funds into the country. This is exactly what happened. There were substantial inflows following the peg.

Image result for bank negara malaysia logo

 

There were no outflows, as the market players expected the Ringgit to subsequently strengthen, not weaken. This was something we learned at the forex desk in Bank Negara Malaysia.

In fact, the 45 notes that I wrote to the Prime Minister between October 1997 and August 1998 analysing in detail the 1997/1998 financial crisis and proposing the solution would not have been possible without the market expertise acquired at Bank Negara’s forex desk, thanks to Allahyarham Tan Sri Jaafar Hussein.

I should add that even after Allahyarham Tan Sri Jaafar Hussein and I left BNM, we kept closely in touch meeting regularly for long chats. The last time I met him was in July 1998, a month before he died. We spent two hours discussing about the financial crisis of 1997/1998. I informed Allahyarham that I was working with the Prime Minister to find a solution to the financial crisis, based on the knowledge the he made possible for me to acquire in Bank Negara. He was happy that he had made the right decision on the importance of market expertise and he was confident that we can overcome the crisis. I wrote about this meeting with Allahyarham on 21 August 1998 and it appears as Note 43 in the book “Notes to the Prime Minister” by Wong Sulong. Allahyarham Tan Sri Jaafar Hussein’s contribution to the nation is undoubtedly significant.

My role at BNM in external reserves management in the late 1980s and early 1990s

I was tasked with implementing the external reserves management policy as determined by the BNM’s Board having regard to the considerations I have mentioned above. In so doing, I reported both to the Governor and the External Reserves Committee (ERC). I spoke to the Governor on external reserves management regularly, and certainly whenever there was a large movement in the exchange rates. I also reported to the ERC whenever it met. The membership of the ERC comprised, amongst others, the Governor, Deputy Governor, and the Advisors. Further, there were weekly Senior Officers Meeting, where the external reserves matters were sometimes discussed.

These Senior Officers Meetings were chaired by the Governor, and were also attended by the Deputy Governor, Advisors and all Managers. I did not report to either the Finance Minister or the Prime Minister on any issues regarding external reserves management, as that was not my reporting line.

I was not involved in deciding on the accounting treatment of the losses. In fact, I have no knowledge whatsoever of the accounting treatment.

I was also very careful not to execute any trade by myself, although I had the authority to do so. It was always, without any exception, done by the staff. I did this for the purpose of transparency, so that there would always be more than one person aware of every trade.

BNM made significant gains from its trading activities in the 1980s. The loss does not include the gains made in the 1980s. Based on the period of 1985 to 1993, I believe that the total forex losses will be lower. The significant losses that were incurred in 1992 arose from two unexpected events:

(i) The unexpected rejection in the Danish Referendum of 1992 of the Maastricht Treaty; and

(ii). “Black Wednesday” on 16 September 1992, when the pound sterling was forced out of the European Exchange Rate Mechanism.

In the early 1990s, the European currencies started to gather strength on the basis of the then conventional wisdom that, given the potential for European integration, Europe was going to overtake the United States as the strongest economic power in the World. We subscribed to this view and bought the European currencies and the Pound Sterling.

Unfortunately, following the non-ratification of the Maastricht Treaty by Denmark in February 1992, the value of the European currencies crashed. This was compounded in September 1992 when both the Pound Sterling (and Italian Lira which we did not trade) were forced out of the European Exchange Rate Mechanism despite the best efforts of the far more powerful and wealthy European central banks.

As we were ‘long’ in the European currencies, including the Pound Sterling, we suffered significant losses. We were not the only central bank to have suffered significant forex losses as a result of these events.

Whenever we received information of large inflows of US Dollars from investors, both long-term and short-term, we would decide on whether or not to diversify these inflows into other currencies, depending on the anticipated exchange rate movements. If we expected the US Dollar to weaken, we would purchase European currencies forward based on the expected US Dollar inflows. The size of the purchases would correspond to the anticipated size of the US Dollar inflows.

All the external reserves activities, including forex activities, were based on strategic considerations. Admittedly we misread the turn of the market. As staff of a central bank we naturally believed that the Bank of England would win in its fight against Soros. We had confidence in our fellow central banker and bought Pound Sterling. Unfortunately, the Bank of England lost.

Similarly, our best intelligence was that the Maastricht Treaty would be ratified in the referendum in Denmark in 1992, but unfortunately it was rejected.

We learnt a bitter lesson from these incidents. That lesson proved crucial in helping us formulate policies to defend the country against the currency attacks in the 1997/1998 Asian Financial Crisis, saving the nation hundreds of billions of Ringgit that would otherwise have been lost.

Conclusion

The forex losses happened. There is no denying it. There is also no denying my accountability for the forex losses. I accepted my fair share of the accountability for the forex losses and resigned from BNM. At that time, it appeared to me to be a sad end to my 25 years of service to the nation, through Bank Negara Malaysia.

Image result for nor mohamed yakcop deputy chairman, Khazanah Nasional Berhad

Nor Mohamed Yakcop, Deputy Chairman, Khazanah Nasional Berhad: Rewarded by a grateful national leadership (from Mahathir Mohamad, Abdullah Badawi, and Najib Razak) for distinguished services rendered to Malaysia

However, with the Grace of Allah SWT, I was given the opportunity in 1997/1998 to contribute to King and Country during the financial crisis of 1997/1998. The important point is that the experience in the forex unit during those years proved extremely useful later in saving Malaysia from the devastating effects of the financial crisis of 1997/1998, which otherwise would have caused losses worth hundreds of billions of Ringgit for Malaysia and could have resulted in many Malaysian companies becoming bankrupt, with large scale unemployment and poverty spreading throughout the country. The political stability and the socio-economic framework of the nation would have been destroyed. It was an accident waiting to happen. It did not happen because of the Unorthodox Measures of September 1998, which in turn was conceived and implemented based on the knowledge, skills and experience acquired at the forex desk in Bank Negara Malaysia.

I also contributed to the nation during my second tour of duty in Bank Negara (September 1998 to April 2000) as well in my role as the Economic adviser to the Prime Minister (May 2000 to December 2003) and as a Federal Minister (January 2004 to May 2013). The record speaks for itself.

TAN SRI NOR MOHAMED YAKCOP
Wednesday, September 6, 2017

http://www.theedgemarkets.com/article/tan-sri-nors-full-written-statement-rci-hearing-today

Malaysia: Cabals, Feudalism, and Apartheid


September 4, 2017

Note: Thanks to LaMoy, my buddy in the US, I am able to post my friend Dr. Murray Hunter’s 2015 article. Apparently, it was one of a number of articles Murray wrote on the Malaysian political economy while he was at Universiti Utara Malaysia, Sintok, Kedah. He must have been a pain to the university authorities. Murray now is teaching at one of the top universities in Bangkok, Thailand.

Related imageDr. Murray Hunter

 

Murray and I are in contact with each other on e-mail and Facebook. We are both academicians at institutions that respect academic freedom. It is my intention to invite him to come with Phnom Penh at a mutually convenient time to deliver a few lectures on governance at Techo Sen School of Government and International Relations, The University of Cambodia. –Din Merican

Malaysia: Cabals, Feudalism, and Apartheid

by Dr. Murray Hunter

http://moderndiplomacy.eu/index.php?option=com_k2&view=item&id=1032:cabals-feudalism-and-apartheid-will-these-institutions-damn-malaysia-s-future-prosperity&Itemid=136

Image result for tajuddin abdul rahman timbalan menteriUMNO’s racist Cabinet Minister, Tajuddin Abdul Rahman

 

“I am a businessman, not a politician” Tajuddin Abdul Rahman Deputy Minister of Agriculture and Agro-based Industry at the opening of Herbal Asia, Matrade Exhibition Centre, 1st October 2015.

Unlike most of the rest of the world that is heading along the track of multiculturalism, Malaysia seems to be locked in a limbo of racial introspection it cannot get out of.

 

This introspection is, however, more than mere racism, it is the overt part of an elaborate structure that has maintained a small elite in power for over 45 years, since the notorious May 13th riots back in 1969.

The direct discussion of this subject has basically been criminalized since the 1970s and deemed too sensitive to debate, which means there has been little public discourse on the matter of who really exercises power, how, and for whom within the country.

This has helped to enshrine a structure of political-cabalism, based upon a neo-Malay-feudalism, which has used a form of ‘Malaysian apartheid’ to support this elite in position and privilege over the rest of Malaysians they rule (as opposed to govern).

Ever since the British Colonial era, Malaysia has been divided and described through racial paradigms. The major races that represented the Malay Peninsula got together to negotiate and steer Malaya to independence in 1957, and into the Federation of Malaysia in 1963. Perhaps the most important artefact from this era is the race is still recorded on Malaysian Identity Cards today, which is hurting the sensitivities of a number of Malaysians.

Image result for doctor in the house mahathir

 4th Prime Minister–The Comeback 92-year Old Kid

However with a rekindled Malay nationalistic sentiment remerging in the 1960s, an opportunity after the 13th May 1969 racial riots arose for a group of Malay politicans to seize the reigns of power. Mahathir Mohamad, supported by a group of ‘ultras’ including Syed Nasir Ismail, Musa Hitam, and Tunku Razaleigh, moved to dispose of the then Prime Minister Tunku Abdul Rahman, representing the moderate Malay aristocracy.

(Tun) Abdul Razak Hussein (father of the current Prime Minister) was installed as Prime Minister in what some describe as a ‘coup’ to succeed Tunku Abdul Rahman in 1970.

As Tunku Abdul Rahman had already invoked a state of emergency in 1969 after the 13th May riots, and ruled by decree through the National operations Council, (Tun) Abdul Razak as Prime Minister through was able to use this short window was to pass through the New Economic policy (NEP) without any hindrance, as parliamentary approval wasn’t necessary. The NEP was based upon many ideas within Mahathir Mohamad’s book The Malay Dilemma, extremely controversial at the time.

At the time, the NEP was seen, even internationally as a necessary affirmative action policy. The NEP stipulated the use of quotas in granting educational places at school and universities, the use of quotas in the public service, favouritism to Malays in the granting of business licenses, the development of Malay reserve land restricting non-Bumiputera purchases, subsidies on the purchase of real estate, quotas on public equity holdings, general subsidies for Bumiputera businesses, and exclusive Bumiputera mutual funds (ASN, ASB), which gave better rates of return than commercial banks.

When the Malaysian Parliament was reconvened in 1971, both the Sedition and Internal Security Acts were strengthened to limit any discussion about matters concerning Malay special rights, the Malay rulers, and citizenship, under the premise of preserving ‘intercommunal harmony’. These restrictions also applied to members of parliament, thus weakening the principal of ‘parliamentary immunity’, i.e., the NEP was above parliamentary sovereignty, which attracted much international condemnation at the time.

It is during this time that a concerted covert effort was made to create a ‘secret leadership’ to maintain and support what was called the ‘Malay Agenda’. According to an interview with an anonymous high ranking official within the Razak Government at the time, most executive positions, civil service placements, and high ranking police and army personnel were filled with people sympathetic to the ‘Malay Agenda’.

The author’s source also stated that it was during the Razak era that selected bureaucrats and other people stated creating and acquiring corporate assets with the objective of channeling funds back to UMNO to fight future elections, to ensure victory.

The ‘Malay Agenda’ meant running government and agencies within government with the objective of looking after ‘Malay’ interests ahead of others. The ‘Malay Agenda’ was rarely spoken about in the open but had a wide appeal among all levels of Malay society, including some members of royal families, at the time.

This was the start of crony capitalism in Malaysia, the making of a kleptocracy. This loose ruling political-cabal was developed in the Malay-feudalistic tradition, in the sense that it required giving total loyalty to the leader of UMNO, the Prime Minister, without question.

A very small proportion of this group became very rich through the implementation of this special agenda. These original beneficiaries are now considered socially as the ‘old money’ in Malay society today.

Malaysia rejected multiculturalism for its own form of ethno-religious form of ‘Malaysian apartheid’, supported by the Malay-feudalistic social structure that was enhanced rather than dismantled over the two decades after independence from Britain. The mythology that the Chinese, who already control the economy, also aim to take political control of Malaysia was dissipated as propaganda to install a fear into the Malay population. Propaganda became one of the prime tools used by the government with the formation of the Biro Tata Negara (BTN) to indoctrinate civil servants and students on the “Malay agenda”.

Section 153 of the Malaysian constitution became the proclaimed legal basis of ‘Malaysian apartheid’ measures. The Reid Commission had only intended to be a temporary measure, to be reviewed by the parliament within 15 years. Section 153 states that “….it is the responsibility of the Yang Di-Pertuan Agong to safeguard the special position of the Malays and natives of any of the States of Sabah and Sarawak”, thus turning Malay into political construct, as there is no single Malay tribal grouping. The authorities over the years attempted to Malayanize the indigenous peoples of the Malay Peninsula, the Orang Asli, through encouraging their conversion to Islam and adoption of Malays customs.

When Dr. Mahathir came to the Prime Ministership in 1981 due to then Prime Minister Hussein Onn stepping down because of poor health, he pursued an ambitious agenda which included extending the business interests of UMNO. Much of these business interests were controlled by proxies and nominees such as Tajudin Ramli and Halim Saad. Further, Dr Mahathir with his Deputy Prime Minister Anwar Ibrahim embarked on a program to produce Malay millionaires who would bring up other Malays into the business sphere.

Ironically under Dr. Mahathir, a period of liberalization came with Wawasan(VISION) 2020, where the country grew very optimistic under the premise of ‘Malaysia Boleh’. There appeared to be a great working relationship between the different racial based parties within the Barisan Nasional, and Malaysian appeared to genuinely have pride in their nation.

These short ‘golden years’ for Malaysia were soon eclipsed by the Asian economic crisis of 1997 and the sacking by Dr. Mahathir of his then deputy Anwar Ibrahim in 1998. A bitter election was fought between the BN Government and newly formed Barisan Alternative in 1999, leading to the BN Government winning with a greatly reduced majority.

Image result for Abdullah Badawi

5th Prime Minister/Mr. Clean Abdullah Badawi caught in the UN Iraq Oil For Food Scandal

Many misread the Abdullah Badawi period as further liberalization, although he publically fought corruption. However, Badawi still cracked down hard on dissent such as not allowing open discussion on Malaysia’s ‘social contract’, and allowed the police to act heavy handed at the Bersih rally in 2007. A new group of entities entered into the corporate scene which led to a number of scandals, by the notorious ‘boys on the 4th floor’, who included Khairy Jamaluddin. Dr. Mahathir became Badawi’s chief critic. Badawi’s poor election performance in 2008, and criticism of his apparent enjoyment of the trappings of power led to his replacement with Najib Tun Razak in 2009.

Najib Tun Razak came to power promising a transformation of government and a completely new paradigm in race relations with the well promoted 1Malaysia slogan. However, after being the vanguard of moderation internationally, his actions domestically showed none of the moderation he had promised. Najib was totally silent when organizations like Pekasa made outlandish statements about race.

Image result for Najib Razak

6th Prime Minister Najib Razak caught in 1MDB Financial Scandal

His greatest modus operandi is silence when government organs and NGOs undertake extreme actions in defending Malays and Islam. Najib’s persona as a moderate leader completely disappeared after the poor election performance in 2013, where he personally blamed the Chinese in his ‘Chinese Tsunami’ statement on election night.

Post GE13, has seen a definitive return to repression by the BN Government in power. Its closely aligned newspaper organ Utusan Malaysia has been continually allowed to publish headlines and statements, such as ‘Apa lagi Cina mahu’, which were inflammatory in the post-election environment.

GE13 also weakened the MCA, Gerakan, and MIC to the point where they no longer have any effective say in government, a far cry from their days of great influence within the cabinet during the 1970s and 80s. All political parties became totally subservient groups within an UMNO dominated BN. This is ironically a result of opposition electoral success in 2013.

Extreme groups have been allowed to make anti-Chinese rhetoric and racial insults with impunity under the Najib Government, thus keeping Chinese groups quiet through producing an atmosphere of fear and tension. This is a purposeful tactic to suppress any opposition.

In terms of popular vote, the UMNO-BN Government is now in reality a minority one, capturing less than 50% of total votes cast. However through the first past the post voting system, the BN is almost ensured to continue winning elections in the future. This is especially the case with the poor electoral strategy that the Pakatan Rakyat employed last election, focusing on the urban areas, rather than the rural areas. To compete with the BN, the opposition must make major changes to its electoral strategy, but will come up against a ‘hardened Umno’ organization at grassroots level. In addition, the opposition today is in so much disarray, the effective leader of the opposition to the government appears to be Dr. Mahathir.

Rather than reaching out to win the ‘hearts and minds’ of all Malaysians, UMNO has seen the decline of electoral support for BN component parties as an opportunity to consolidate power within its own right. GE13 has allowed UMNO and the political-cabal that controls it to manoeuvre even more on the ‘Malay Agenda’.

Since 2013, economic and social policy has been allowed to degenerate into blatant racial discrimination, and now has become something even more sinister.

The Malaysian civil service is being cleaned out. For example in Sabah, civil servants from ethnic groups like Dusun/Kadazan are slowly being weeded out and replaced. A bureaucratic ethnic cleansing is going on within the civil service. Other indigenous ethnic groups are no longer acceptable. Likewise, the universities are being cleansed of dissidents. There is a purge going on in Malaysia that has even taken the Deputy Prime Minister and attorney general out. This is supplemented with a clampdown on ‘whistleblowers, and anybody within existing agencies that have potential to turn against the political-cabal. Any potential resistance, including reporters and the media, to the political-cabal that currently controls the country is being eliminated. Malaysia is now facing a repressive phase in government that one has not seen since Dr. Mahathir’s “Operation Lalang” in the late 1980s.Only this time it is much wider.

The effects of this imposed policy of ‘Malaysian apartheid’ upon the country today are profound, and can be summarized as follows:

1.A feudal social structure has been developed with four sections of populace;

i) The Malay elite who rules the country and their associates,

ii) A Malay middle class which is predominantly urban,

iii) A Malay rural class, and

iv)  The rest of the Malaysian population.

Politically, this rural Malay class has kept the Malay elite in power, while the educated middle class is turning away from UMNO.

2. A brain drain is happening from Malaysia at present, which does not only include Chinese and Indian, but Malays as well. The political-cabal of elite leaders aren’t really concerned with this brain drain, as this seen as a good opportunity to weaken potential future opposition. This loss of creative and innovative people is leaving a rent seeking mentality within the country, at a time, creativity and innovation is really needed to develop the Malaysian economy. The leadership have intentionally nurtured the development of an unquestioning population, which is reflected in the Malaysian education system, as the best means to maintain a docile electorate that will not look at political issues like corruption very seriously.

3.There has been a general failure to eradicate poverty throughout rural Malaysia, as limited resources have been used to prop up the feudal warlords of UMNO through ‘white elephant’ rural development projects throughout the country. Many UMNO warlords have made it big through receiving contracts while their areas remain inadequate with basic infrastructure, and rural assistance such as farm extension services and even proper roads and irrigation. There are still large numbers of Malays who cannot afford to attend university, through the lack of any general assistance schemes available in most other countries. Poverty is still a major problem within Malaysia, where the government has been claiming undue successes.

4. The Malaysian economy is skewed with inefficiencies and market restrictions that hinder its transformation into a mature developed sustainable economic system. Companies are allowed to have monopolies, the restricted issuance of import permits has created inefficient markets, and general lack of transparency is making the Malaysian market unattractive to investors. A 2012 Asian Development Bank (ADB) report cites the two main reasons for Malaysia’s net capital outflow as the distortions introduced into the economy by the NEP, and the widespread presence and overbearing influence of Government Linked Companies (GLCs). The restriction of tenders to Bumi companies has created an inefficient Ali Baba business model, which raises the cost of both government and business. GLCs and other government owned companies openly compete with entrepreneurs in the market with an unfair advantage, thus stifling innovation, and the willingness of private individuals to take business risks. Malaysia still needs economic growth to absorb new entrants to the workforce in the coming decade.

5. Meritocracy doesn’t exist within the Malaysian civil service, universities, or other agencies. People are forced to adopt a feudal stance of seeking favour from superiors to get promotions and survive within these organizations. Under such an environment there is no chance for creativity, critical thinking, or even honesty. ‘Ketuanan Melayu’ is now turning hegemonic is a dangerous way that can spill off Malaysian shores. This stands Malaysian in a poor position to be internationally competitive in the future.

6. The divide and conquer political strategy of the Government, use of bullying through third party NGOs, and straight threats and arrogance has had a major effect upon the people of Malaysia. Many have lost hope and respect for the leadership of their country. Many are now resentful. There is potential for outbreaks of violence due to the uncontrollability of some extreme ‘ultra’ groups allowed to roam free in society today. The country thinks in terms of race, even to the point where a near diplomatic incident nearly occurred with China a few weeks ago, the second most powerful country in the world. This is not healthy and will not stand Malaysia well within the international community. The dissent generated by this ‘divide and conquer’ political strategy is fodder that allows the political-cabal to use state apparatus to strengthen their hold on power, as the current spate of arrests indicates.

7. What the policies of the Government and resulting social structure of society has created is a small elite class of rulers who act upon the axiom that ‘we are the law’. Comments by the Defence Minister Hishammuddin Hussein (a cousin of the current prime minister), indicate the ruling elite’s distain even for the constitutional monarchy of Malaysia. The elite is now in an unquestionable position of power unable to be dislodged by the rule of law. They are unashamed by scandal and control all the elements of power through their network of loyalists through the civil service, police, armed forces, and judiciary.

8. Finally, it could be argued that Malay self-confidence has been destroyed and replaced with a national inferiority complex, that the elite can use and play to at their whim. There is a condescending attitude by the elite that ’Malays are backward’ and need special protection by the UMNO -BN Government. Thus a whole section of the population is continually told they need help. The concept of ‘Ketuanan Melayu’, according to UKM Professor Noraini Othman has connotations of enslavement, with a Malay master and servant relationship implied. Tun Dr. Ismail Abdul Rahman went further and said that the ‘special position of the Malays’ in the constitution is a slur on the ability of the Malays.

The political-cabal that was set up in the 1970s by Prime Minister Tun Razak, has been transferred across from leader to leader since that time. Each Prime Minister inherited a complete network of loyalists to the ‘Agenda Melayu’ (Malay Agenda).

This has been their strength. However cracks appeared in this political-cabal when Mahathir tried to make an agreement with both his successors, which according to him have not been kept. In addition, the scandals of the present prime minister are beginning to test those loyal to the “Agenda Melayu’, to the point where some may begin to feel guilty about their loyalty to the current leadership of the political-cabal and ‘spill the beans’. Hence the sackings, demotions, transfers and arrests of late.

This, however, will not mean self-destruction to Malaysia’s political-cabal. It’s a fight over control and not reform. Winner will take all. Perhaps Dr. Mahathir was naïve in thinking that he could still exercise control and influence over this political-cabal, once he stepped down from the leadership of UMNO and the nation. This is one of the biggest mistakes of his political career.

The very nature of UMNO itself, once a party of school teachers, junior civil servants, farmers, and fishermen, which transformed into a party of contractors, small entrepreneurs, and professional rent seekers, will serve Najib well as he tries to consolidate his position. The party is run along feudal lines where booty is distributed around the country through lucrative contracts to those who head the party at state and district levels to maintain their loyalty and support. The influence of this on public policy and development planning is rarely discussed, even though it leads to massive misallocations of funds into projects that have little, if any community or economic benefit. This prevents any policy approach to planning and implementation, drastically lowering the quality of government.

Najib can reward his warlords, maintain their loyalty, and even put more of his loyalists in place for the coming election, win it, and even end up having more power than he has now. This scenario is Dr. Mahathir’s worst nightmare, and why he is working so hard to remove Najib before the next election.

To date very few international bodies have heavily criticized this “Malaysian Apartheid”. The Malaysian Government will continue to get away with repressing its populace with divide and conquer tactics. There is no front against Malaysia, like there was against South Africa. No one interested in putting sanctions upon Malaysia.

However, Swiss Islamic intellectual Dr. Tariq Ramadan foresees a credibility gap for Malaysia in international affairs where he says “As Malaysian Muslims complaining about discrimination by the West, should first acknowledge the injustices against minorities in their own country”. Until Malaysia sorts out its own racism, any stand upon Israel and Palestine seeps into hypocrisy.

This Malaysian Apartheid will continue into the foreseeable future and anybody who tries to oppose it will meet the Roth of bullying tactics to subdue them, as is being played out now with the latest round of arrests. The Malay position will remain a taboo subject for years to come, hence Malaysian sensitivities when any non-Malaysian comments on Malaysian internal affairs.

This also means that the question as to whether the NEP-NDP has been protecting or marginalizing the Malays will not be discussed. This is an important question for the future of Malaysia and the challenges that lie ahead. As former Prime Minister Ahmad Badawi once said “Malays who can’t learn how to walk without crutches will end up in a wheelchair”. Dr. Mahathir took this further and said “Unfortunately, the protection and privileges accorded by the New Economic Policy (NEP) may weaken the Malays further by lulling the next generation into complacency, thinking that the

NEP’s affirmative action will always be there for them to fall back upon….. The NEP can make the users so dependent that their inherent capability regresses.”

This dooms the country into the ‘middle income trap’, where the capabilities, creativity and innovation needed to lift the Malaysian economy into high valued activities, does not exist. Economic and social prosperity is risked so that Kleptocratic rule can continue unabated in Malaysia. Malay self-respect has also been sacrificed in this quest to hold power.

The system of discrimination has only benefited in preserving a feudal hierarchy within Malaysian society where the new lords are political dynasties which are now fighting each other openly using 1MDB as the platform. This is not about corruption, but which family dynasty and surrounding group rules, rather than any promise of social reform.