Stealing Money from the National Treasury is an Act of Treason


June 17, 2018

Stealing Money from the National Treasury is an Act of Treason–so, Najib Razak is a Traitor

by Mariam Mokhtar@www.asiasentinel.com

Image result for Najib is a CrookIt takes time, but Justice will come eventually to Najib Razak and Rosmah Mansor

 

 

93-year-old Dr. Mahathir Mohamad, who heads Malaysia’s reform coalition Pakatan Harapan, has lost no time in knuckling down to work. A week after he assumed office in the wake of the political earthquake of the country’s May 9 general election, he terminated the contracts of 17,000 political appointees as a drain on public expenditure.

The move was hailed by a public taken aback  by the numbers of people involved, although some are concerned that the shock and awe of Mahathir’s move would generate the same kind of guerilla underground that cropped up when Paul Bremer, the American proconsul in Iraq, disbanded the army and civil service in 2003. That played a major role in the eventual creation of the Islamic State which has terrorized Syria and Iraq for the past several years.

Nonetheless, the sackings are looked upon by Malaysia’s 31 million people as just the start of the cleanup of decades of appalling corruption. Police seized 72 bags alone of loot from deposed Prime Minister Najib Razak’s residence in the days after the May 9 election, of which 35 contained RM114 million (US$28.6 million) in cash in 26 different currencies. Another 35 bags contained jewelry and watches, and 284 boxes were filled with designer handbags including Ellen Birkin bags by Hermes that can cost upwards of US$200,000. The former Premier is not likely to go hungry. He is believed to have hundreds of millions more stashed overseas. Famously, in 2013 US$681 million appeared in his personal account at Ambank in Kuala Lumpur and almost immediately was moved overseas.

The biggest mess, of course, is the state-backed development fund 1Malaysia Development Bhd., from which US$4.5 billion is said by the US Justice Department to have disappeared in corruption and mismanagement. Mahathir has said the scale of corruption is even greater and has demanded a full explanation. The Finance Ministry, now under Lim Guan Eng of the Democratic Action Party, says Malaysia’s total government debt and liabilities exceed RM1 trillion (US$250.7 billion).

The number of no-bid contracts awarded to crony companies and government-linked companies – now termed by many to be government-linked crookedry – is overwhelming.

Mahathir for instance cancelled a high-speed rail contract from Kuala Lumpur to Singapore that cost RM70 billion which, with other government commitments including operating expenses over 20 years ran the total to RM110  billion. “Estimates are that in a proper open tender, the project could have been done for a maximum of RM25 billion,” said a well-placed business source in Kuala Lumpur.

Equally questionable is a contract for Malaysia’s Eastern Corridor Rail Line, awarded to a Chinese company at RM67 billion. The payment was time-based, not on a completion basis. As such, 40 percent of the total payment has been made while only 7 percent of the work has been completed. The project cost is widely believed to have been a subterfuge for Chinese help in paying off 1MDB’s massive debt.

Next is the Sarawak and Sabah gas pipeline, again awarded on time-based payments with 87 percent of RM9 billion paid and only 13 percent of the work completed.

Contracts such as these are aplenty. The gadfly website Sarawak Report reported on June 10 that a car rental company headed by an official with a Barisan-aligned party in Sarawak received a RM1.25 billion no-bid contract to install solar energy facilities for 369 Sarawak schools. The three-year contract, allegedly steered by Najib himself, has been underway for 18 months. Not a single solar power unit has ever been installed.

But beyond that, dozens of government-linked companies have been found to be paying exorbitant salaries to their executives. Malaysia has the fifth highest number of GLCs in the world, for which Mahathir himself must share the blame, since many came into existence during the 22 years he headed the government from 1981 to 2003.

Image result for Najib is a Crook

Many are household names – the national car project Proton, now peddled to China’s car company Geely; the national energy company Petronas, the electrical utility Tenaga Nasional, the electric utility Telekom Malaysia, the Tabung Haji Pilgrimage Fund, the Federal Land Development Authority, Malaysian Airlines, The Majlis Amanah Rakyat (Malay People’s Trust Council), the Sime Darby plantation and property conglomerate.

Publicly traded GLCs currently comprise 36 percent the market capitalization of Bursa Malaysia and 54 percent of the benchmark Kuala Lumpur Composite Index according to a study by the think tank Institute for Democracy and Economic Affairs. They employ 5 percent of the national workforce.  According to the study, government bailouts of GLCs have “resulted in a huge drain on the public purse.” They include RM1.5 billion for Proton in 2016 and RM 6 billion for Malaysia Airlines in 2014.

”One estimate suggests that around RM85.51 billion has been used to bail out GLCs over the past 36 years,” according to the report putting pressure on commercial interest rates as a result of recurring budget deficits that “may have been a separate factor operating to crowd out private investment, at the margin.”

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As an example of exorbitant salaries, the Transport Minister, Anthony Loke, told reporters that the executive chairman of the Aviation Commission (MAVCOM), retired Gen. Abdullah Ahmad, drew a monthly salary of RM85,000 (US$21,325). The figure is over four times the basic recorded salary of the Malaysian Prime Minister and is similar to the salary of millionaire CEOs of successful private enterprises.

Veteran journalist, R Nadeswaran, formerly of The Sun Daily, reported that his investigations into MAVCOM, an independent body established in 2015 to regulate economic and commercial matters relating to civil aviation, revealed that RM570,000 had been paid in directors’ fees, and a further RM770,000 on directors’ travel and accommodation.

More revelations have followed. One “former minister turned adviser” in Najib’s Prime Minister’s Office received a monthly wage of RM200,000 (US$50,177), which is about 10 times Najib’s official salary. Other “advisers” were paid from RM70,000 upwards per month in a country where per capita income on a PPP basis is RM26,900 annually.

Other ministries, together with the newly-revitalized Malaysian Anti-Corruption Commission (MACC), have been directed to investigate the various GLCs and political appointees  Apart from the allegations of huge bonuses and exorbitant salaries, it has also been alleged that officials of various GLCs collaborated with contractors to submit false claims for maintenance work. The MACC is investigating.

The almost daily revelations of cronyism and large-scale corruption have been described by one Malaysian as akin to “Chinese water torture,” when water is slowly dripped onto a person’s forehead and drives the restrained victim insane.

Loke’s disclosure also prompted the veteran MP, Lim Kit Siang, Mahathir’s onetime adversary turned ally, to demand transparency and public accountability in the wages of the heads of the GLCs. He proposed the implementation of a public website showing the perks, salaries and remuneration of all GLC heads and members.

Lim wanted to know how many of the heads of the GLCs are political appointees and how many of the UMNO/Barisan Nasional appointees have resigned since Najib lost power.

Malaysians responded swiftly to Loke’s report. One person multiplied Loke’s figure by the number of existing GLCs and was astounded by the money which taxpayers had to fork out for GLC directors’ fees. Who approved the salaries of the board members in this public regulatory body?

Image result for Anwar Ibrahim

 

A Foreign Friend In Cambodia asked me, “Din, is your recently pardoned felon running a parallel government?”  And I answered, “For Malaysia’s sake, I hope not.–Din Merican

Surprisingly, the revelations over the GLCs are in contrast to those by newly released and pardoned former Opposition leader, Anwar Ibrahim, the PM-in-waiting, who told a crowd in Perak that chief ministers should not rush to take action against GLCs, and to refrain from being vengeful.

“I have no problem with GLCs, if their performance is good and the Menteri Besar (Chief Minister) thinks it’s appropriate to continue, we accept (the continuance),” unless, he added, “that it was proven at the federal level,  there was wasteful overlapping and excessive payment of allowances to political figures.”

Malaysians demanding intense scrutiny of GLCs wonder what to make of the PM-designate’s remarks and actions.

Mariam Mokhtar is a Malaysia-based reporter and regular contributor to Asia Sentinel.

Economists vs. Scientists on Long-Term Growth


March 4, 2018

Economists vs. Scientists on Long-Term Growth

Artificial intelligence researchers and conventional economists may have very different views about the impact of new technologies. But right now, and forgetting the possibility of an existential battle between man and machine, it seems quite plausible to expect a significant pickup in productivity growth over the next five years.

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CAMBRIDGE – Most economic forecasters have largely shrugged off recent advances in artificial intelligence (for example, the quantum leap demonstrated by DeepMind’s self-learning chess program last December), seeing little impact on longer-term trend growth. Such pessimism is surely one of the reasons why real (inflation-adjusted) interest rates remain extremely low, even if the bellwether US ten-year bond rate has ticked up half a percentage point in the last few months. If supply-side pessimism is appropriate, the recent massive tax and spending packages in the United States will likely do much more to raise inflation than to boost investment.

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It is hard to know who is right: neither economists nor scientists have a great track record when it comes to making long-term predictions. But right now, and leaving aside the possibility of an existential battle between man and machine, it seems quite plausible to expect a significant pickup in productivity growth over the next five years.–

There are plenty of reasons to object to recent US fiscal policy, even if lowering the corporate-tax rate made sense (albeit not by the amount enacted). Above all, we live in an era of rising inequality and falling income shares for labor relative to capital. Governments need to do more, not less, to redistribute income and wealth.

It is hard to know what US President Donald Trump is thinking when he boasts that his policies will deliver up to 6% growth (unless he is talking about prices, not output!). But if inflationary pressures do indeed materialize, current growth might last significantly longer than forecasters and markets believe.

In any case, the focus of economists’ pessimism is long-term growth. Their stance is underpinned by the belief that advanced economies cannot hope to repeat the dynamism that the US enjoyed from 1995-2005 (and other advanced economies a bit later), much less the salad days of the 1950s and 1960s.

But the doubters ought to consider the fact that many scientists, across many disciplines, see things differently. Young researchers, in particular, believe that advances in basic knowledge are coming as fast as ever, even if practical applications are taking a long time to develop. Indeed, a small but influential cult touts the Hungarian-American mathematician John von Neumann’s “singularity” theory. Someday, thinking machines will become so sophisticated that they will be able to invent other machines without any human intervention, and suddenly technology will advance exponentially.

If so, perhaps we should be far more worried about the ethical and social implications of material growth that is faster than humans can spiritually absorb. The angst over AI mostly focuses on inequality and the future of work. But as science fiction writers have long warned us, the potential threats arising from the birth of silicon-based “life” forms are truly frightening.

It is hard to know who is right: neither economists nor scientists have a great track record when it comes to making long-term predictions. But right now, and leaving aside the possibility of an existential battle between man and machine, it seems quite plausible to expect a significant pickup in productivity growth over the next five years.

Consider that the main components of economic growth are increases in the labor force, increases in investment (both public and private), and “productivity,” namely the output than can be produced with a given amount of inputs, thanks to new ideas. Over the past 10-15 years, all three have been dismally low in the advanced economies.

Labor force growth has slowed sharply, owing to declining birth rates, with immigration failing to compensate even in pre-Trump America. The influx of women into the labor force played a major role in boosting growth in the latter part of the twentieth century. But now that has largely played out, although governments could do more to support female labor force participation and pay equity.

Similarly, global investment has collapsed since the 2008 financial crisis (though not in China), lowering potential growth. And measured productivity growth has declined everywhere, falling roughly by half in the US since the tech boom of the mid-1990s. No wonder global real interest rates are so low, with high post-crisis savings chasing a smaller supply of investment opportunities.

Still, the best bet is that AI and other new technologies will eventually come to have a much larger impact on growth than they have up to now. It is well known that it can take a very long time for businesses to reimagine productive processes to exploit new technologies: railroads and electricity are two leading examples. The pickup in global growth is likely to be a catalyst for change, creating incentives for firms to invest and introduce new technologies, some of which will substitute for labor, offsetting the slowdown in the growth of the workforce.

With the after-effects of the financial crisis fading, and AI perhaps starting to gain traction, trend US output growth can easily stay strong for the next several years (though, of course, a recession is also possible). The likely corresponding rise in real global interest rates will be tricky for central bankers to navigate. In the best case, they will be able to “ride the wave,” as Alan Greenspan famously did in the 1990s, though more inflation is likely this time.

The bottom line is that neither policymakers nor markets should be betting on the slow growth of the past decade carrying over to the next. But that might not be entirely welcome news. If the scientists are right, we may come to regret the growth we get.

 

Malaysia’s Grand Poobah’s Chequebook Diplomacy in Washington DC


September 15, 2017

Malaysia’s Grand Poobah’s Chequebook Diplomacy in Washington can be strategic, admits Ambassador Emeritus Dennis Ignatius

www,malaysiakini.com

 

COMMENT | Prime Minister Najib Razak’s recent White House soirée has brought Malaysia an unprecedented level of scrutiny and negative publicity. All major US newspapers, for example, unanimously panned the visit, highlighting the inappropriateness of inviting someone linked to an ongoing Department of Justice (DOJ) investigation (into 1MDB-related money-laundering charges).

Image result for Najib and Trump in Washington DC

Najib’s Chequebook Diplomacy–Helping America Great Again impresses Donald J. Trump

It is a measure of just how far his reputation has fallen internationally after once having been feted everywhere as a reformist and moderate Muslim democrat. It is also a reminder of how little all of this really matters in a world dominated by realpolitik and the pursuit of strategic advantage.

Certainly, Najib himself didn’t appear to lose too much sleep over all the bad press. For him, the visit was clearly about positioning himself for the next elections and burnishing his credentials as a well-respected international leader able to run with some of the most powerful leaders in the world.

Image result for Najib and Trump in Washington DC

Taken together with earlier high-profile meetings with President Xi Jinping, King Salman Abdulaziz Al Saud and Prime Minister Narendra Modi, the meeting with Trump, as well as Britain’s Theresa May, lends credence to Najib’s narrative that under his stewardship, Malaysia has become “a rising star” and a “global player.”

While the urban crowd and opposition supporters will no doubt shake their heads in disbelief, it will play well with Najib’s rural base, effectively neutralising the 1MDB issue, arguably Najib’s most troublesome political challenge.

Najib’s grand strategy

Beyond the optics and the controversy over 1MDB, the visit also revealed a side to Najib that will surely drive the opposition to further despair: he is proving to be a far better strategist than he’s been given credit for.

He has parlayed the powers of his office and all the levers of state control at his disposal to successfully play off both China and the US to his advantage.

It might be recalled that he deliberately pivoted to China after his falling-out with the Obama Administration.

In Beijing, last year, he complained about foreign meddling, of being treated unfairly, of being lectured to by Western powers. In not so many words, he went on to contemptuously dismiss the US and other Western powers as has-beens with no future in Asia and hinted about a new strategic partnership with China.

It appears that Washington, already alarmed at China’s growing clout in the region, quickly got the message. Washington will now play along to get along.

Furthermore, with a more amoral (some would say unscrupulous) occupant in the White House to do business with, and with Beijing beginning to get too demanding (as witnessed by the unravelling of the Bandar Malaysia deal), Najib might have also seen the need to recalibrate the balance between the US and China.

Image result for Najib and Trump in Washington DC

Playing the China-US Hedging Game

Better relations with Washington will now give Najib more room to manoeuvre. It will also allow Najib to undercut opposition criticism that he is too close to China.

He has thus put both Washington and Beijing on notice: be nice to me and I’ll be nice to you. It is, in fact, the global application of his domestic political approach: as he once told Chinese Malaysians, “If you show support [for UMNO-BN] we have no problem giving more… if not, difficult lah.”

Though it is still too early to predict how all this will turn out, no other prime minister has displayed such a flair for big power gamesmanship as he.

Buying his way to respectability

In order to demonstrate to both the US and China that they have much to gain both strategically and economically by being supportive of his administration, Najib has resorted to a form of chequebook diplomacy hitherto only used by rich and powerful countries – promising contracts, investments and big-ticket purchases in exchange for support and endorsement.

With China, Najib generously granted PRC corporations billions of ringgit in infrastructure contracts, even favouring PRC contractors over our own.

He has also earned the undying gratitude of President Xi by wholeheartedly embracing the latter’s One Belt One Road (Obor) initiative, dismissing concerns about the viability and lack of transparency of many Obor projects.

And under his watch, Malaysia made its first purchase of defence equipment from China.

In Washington, Najib opened his chequebook once again promising to buy more than RM42 billion in new aircraft for Malaysian Airlines (MAS), RM300 million in fighter jets for the Royal Malaysian Air Force (RMAF), and to direct RM12 billion to RM16 billion in new investments from the Employees Provident Fund (EPF) and Kazanah Nasional to US infrastructure projects.

He also promised to “persuade” AirAsia to switch from British-made Rolls Royce engines to American-made GE engines.

No doubt, this was all music to Trump’s ears, a small contribution to making American great again.

American officials, of course, deny the visit will have any impact on the DOJ investigations but does anybody really believe that Najib would have made all those expensive promises simply to make Trump feel good?

After this, expect European and Japanese salesmen-politicians to come knocking at our doors with hat in hand and high praise for Najib on their lips. For so long as there’s money to be made, inconvenient issues like human rights and good governance will not be allowed to get in the way.

Cost of Najib’s generosity

The downside, however, is that Malaysia’s already beleaguered opposition, as well as its human rights defenders, can now expect no sympathy or moral support from the US and other democracies.

Najib has neatly turned the tables on his detractors; far from isolating him internationally, he has now marginalised them at home.

Worse still, the nation will have to pay a heavy price for Najib’s extravagant chequebook diplomacy.  We are already heavily indebted to China; now we will be driven into even greater debt with billions of new borrowing to pay for Najib’s Washington promises.That the government of a cash-strapped developing country, which has had to impose a new tax (GST) on its own hard-pressed and long-suffering populace just to stay afloat, would offer such an extravagant economic boost to one of the richest economies in the world is both unprecedented and mind-boggling.

DENNIS IGNATIUS, a former Malaysian ambassador, firmly believes that we should put our trust not in the leadership of politicians but in the sanctity of great institutions – our secular and democratic constitution, a democratically-elected parliament, an independent judiciary, a free press and a government fully accountable to the people. He blogs here.

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ASEAN Chair and President of the Philippines Rodrigo Duterte to meet Donald Trump


May 1, 2017

Today's WorldView

by Ishaan Tharoor

ASEAN Chair and President of the Philippines Rodrigo Duterte to meet Donald Trump in Washington DC

Over the weekend, the White House announced that President Trump had invited President Rodrigo Duterte of the Philippines for a visit to Washington, following what was deemed a “very friendly conversation” over the phone between Trump and his counterpart in Manila.

Despite the close ties between the United States and the Philippines, the move surprised Trump’s critics and allies. In his 10 months in power, Duterte has become one of Asia’s most controversial leaders. He has presided over a vicious drug war that has seen thousands killed by extrajudicial hit squads — encouraged, say critics, by Duterte’s explicit orders. Last week, a Filipino lawyer filed a complaint at the International Criminal Court, accusing Duterte and 11 other Filipino officials of mass murder and crimes against humanity. (Duterte has shrugged off the filing and said it will not deter his campaign.)

The complaint takes into account the killings of 9,400 people stretching back to 1988, when Duterte became the Mayor of the southern city of Davao and began making his reputation as a tough guy willing to do anything to crack down on crime. “The situation in the Philippines reveals a terrifying, gruesome and disastrous continuing commission of extrajudicial executions or mass murder,” read the complaint. An estimated 8,000 people have been killed since Duterte became President last summer (2016).

None of this seemed to faze the White House. In the readout of the phone call, the only mention of Duterte’s astonishing record of violence seemed to be a positive one. It said that the two leaders “discussed the fact that the Philippines is fighting very hard to rid its country of drugs, a scourge that affects many countries around the world.”

White House Chief of Staff Reince Priebus did his best to evade the thrust of the question when asked on ABC’s “This Week” if human rights were no longer a concern for the Trump Administration.

“Absolutely not,” responded Priebus. “It doesn’t mean that human rights don’t matter, but what it does mean is that the issues facing us, developing out of North Korea, are so serious that we need cooperation at some level with as many partners in the area as we can get.”

Mourners carry the coffin of a person shot dead by unidentified gunmen north of Manila on April 8. (Francis R. Malasig/European Pressphoto Agency)

Mourners carry the coffin of a person shot dead by unidentified gunmen north of Manila on April 8. (Francis R. Malasig/European Pressphoto Agency)

The importance of securing strong Filipino support in dealing with North Korea is highly debatable. But administration officials indicated that the overture to Duterte may be part of a broader and much-needed mending of fences.

“The White House statement could be seen as implicit support, but perhaps is better understood as offering common ground for engaging with Duterte,” said Natalie Sambhi, a Research Fellow at the Perth USAsia Center in Australia, to The Post.

U.S.-Filipino relations took a turn for the worse last year, Duterte’s first in office and the final one for Barack Obama.

“The relationship between the United States and the Philippines soured under President Barack Obama, who criticized Duterte’s bloody war on drugs,” reported my colleagues. “Not one to take criticism lightly, Duterte snapped at Obama on a few occasions, telling him to ‘go to hell’ and, at one point, using the Tagalog phrase for ‘son of a bitch’ or ‘son of a whore’ when addressing the then-U. S. president. In September, Obama canceled a meeting with Duterte, whom he called a ‘colorful guy.‘ ”

(Obama is hardly the sole target of Duterte’s notoriously salty language: He used similar words for Pope Francis, too, and has sparked global headlines with rape jokes, admiring references to Adolf Hitler, boasts about mass killing and an insistence at one point that he would eat the livers of suspected terrorists. Even Trump was on the receiving end: “Donald Trump is a bigot, I am not,” Duterte told the Associated Press last year.)

The tensions saw Duterte publicly drift toward China. In a speech in Beijing last year, he told his Chinese audience that “I’ve realigned myself in your ideological flow.” He has inked billions of dollars of deals with China, Japan and other countries in the region. As my colleague Emily Rauhala wrote earlier this year, Duterte is playing an opportunistic game, wooing all whom he can as part of a new “independent” foreign policy. But, as Rauhala noted, his efforts fly in the face of public opinion and the country’s political establishment, which largely backs the United States and is wary of Chinese expansionism in the South China Sea.

Duterte is shown the way by Chinese President Xi Jinping before a signing ceremony in Beijing in 2016. (Ng Han Guan/Associated Press)

Duterte is shown the way by Chinese President Xi Jinping before a signing ceremony in Beijing in 2016. (Ng Han Guan/Associated Press)

The other lens through which to view Trump’s invitation to Duterte is that of the American President’s apparent penchant for strongmen. While the European Union called for an investigation into the referendum last month that conferred vast new powers upon Turkish President Recep Tayyip Erdogan, Trump was the first Western leader to congratulate Erdogan on his victory. He also hosted Egyptian President Abdel Fattah al-Sissi, a coup-plotting former army man whose regime carried out a ruthless crackdown on Islamists and dissidents. No matter the geopolitical scenario, Trump seems to have a genuine affinity for men of action who brook little dissent.

“If Duterte were not immune as Head of State, he would be barred from admission into the United States,” noted John Sifton, the Asia Director of Human Rights Watch, in an emailed statement. “Existing U.S. laws and policy prohibit visas and entry to persons against whom credible allegations of gross human rights abuses have been made.”

Sifton goes on: “The invitation is an abomination, just as Trump’s invitation to Sissi was an abomination, and although his personality traits would seem to make it impossible, Trump should be ashamed of himself. By effectively endorsing Duterte’s murderous ‘war on drugs,’ Trump has made himself morally complicit in future killings.”

Malaysia-China Relations: Not China but we are the financially irresponsible and reckless nation


April 4, 2017

Malaysia-China Relations: Not China but we are the financially irresponsible and reckless nation

by P. Gunasegaram@www.malaysiakini.com

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Malaysia’s sudden, new-found amour with China in a plethora of business deals worth hundreds of billions, coming in the wake of the 1Malaysia Development Bhd (1MDB) scandal where RM40 billion is already at risk or  wasted, is tremendously worrying.

The huge amount of China borrowings that will accompany such deals, with delayed payment for up to seven years in some cases, will put the country in grave economic danger in the future as many of the infrastructure projects are not viable.

If some of the projects do not raise enough cash flow to start repaying the massive borrowings by the time payments are due, a great strain will be imposed on the country’s financial position and may even result in it becoming unable to meet its obligations, leading to default.

Already, the involvement of China state-owned firms in 1MDB-related projects such as buying power assets and taking stakes in property development ventures have raised legitimate fears that some of these may involve quid pro quo arrangements in other deals which may benefit Chinese firms.

In other words, putting it bluntly, Malaysia may be giving China plum deals in return for help in covering the hole of over RM30 billion in 1MDB. More on that later but first, here’s a list of some mega deals made.

1. Purchase of 1MDB’s power assets for RM9.83 billion cash in November 2015.

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The purchase was made by China General Nuclear or CGN, putting power assets which were purchased from Malaysian private hands into a China state company. That rubbishes any claim that 1MDB was a strategic development company. The price was considered inflated, leading to speculation that other projects will go to China to compensate for this.

2. Purchase of 1MDB land for RM7.4 billion.

Less than two months later, on New Year’s Eve in 2015, 1MDB sold a 60% controlling interest in Bandar Malaysia to a consortium comprising Iskandar Waterfront Holdings and China Railway Engineering Corporation, a China state company. The latter holds a 40% stake in the venture. This is a highly questionable deal surrendering control of one of 1MDB’s two flagship projects to others, including a China company, when there is enough local property development expertise. It lends credence to there being a quid pro quo deal with China.

3. China is expected to get high-speed rail project costing RM40-80 billion.

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The high-speed rail project between Kuala Lumpur and Singapore is expected to go to a China firm despite international tenders being planned. Interestingly, the Kuala Lumpur terminus is at Bandar Malaysia.

4. The RM55 billion East Coast Rail Link (ECRL) project announced in November 2016.

China will both fund and build this project which has a seven-year delayed payment provision. Essentially a double-tracking project linking the east coast states with the west, there has been no economic viability study on it. There are genuine fears that the construction cost is terribly overstated and it is unviable.

5. A proposed RM200 billion port development in Port Klang.

China is supposedly in the running for this massive project if it does see the light of day. This is a long-term project which again may be unnecessary considering the number of ports being developed concurrently now.

6.The RM42 billion Melaka Gateway project in September 2016.

This includes four islands – three man-made, in a RM30 billion deal with China companies – a port, a bulk-and-break terminal, ship building and ship repair, mixed development, shopping complexes, ferry terminals, marina and so on. Where is the demand for these going to come from?

7. The RM400 billion gross development value Forest City off Johor.

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This massive development on four man-made islands, which may eventually house 700,000 people, is being developed by a China company, effectively in a joint venture with the Johor Sultan. Considering that it is a property development which local players could easily have undertaken, what is the rationale for bringing in yet a Chinese company into this?

Not for altruistic reasons

There are more. Prime Minister Najib Abdul Razak, after a visit to China in November, came back with memoranda of agreement for RM144 billion worth of projects. That list includes ECRL and the Melaka Gateway projects but not the others, which means there are several more projects worth tens of billions of ringgit.

What is very alarming about these projects is their dubious economic value, leading to strong suspicion that they could well be related to covering a hole of over RM30 billion in 1MDB – the Auditor-General’s Report on 1MDB reportedly says US$7 billion could not be accounted for.

In fact, the Financial Times of the UK reported in December that 1MDB is preparing to make a repayment with Chinese assistance to Abu Dhabi’s state-owned fund in settling a US$6.5 billion (RM28.6 billion) dispute over an alleged breach of contract.

The move to begin repaying what 1MDB owes Abu Dhabi’s International Petroleum Investment Company (IPIC) was confirmed by two people familiar with the matter, the FT said.

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Najib Razak and Big Momma

China has been approached as a source of funds for 1MDB, the FT said, citing three people with knowledge of the matter, one of whom said Malaysia would swap assets for financing.

China is of course not doing all of this for altruistic reasons but to further its own interests. First, it aims to get work for its companies and sometimes its own people – it sends in its own workers for many projects.

Two, if countries are unable to repay their debts, then more assets will have to be handed over to China and the affected countries become ever more indebted and linked to China in other ways, furthering China’s aim of strategic and military influence, as this article titled ‘China’s debt-trap diplomacy’ eloquently points out.

As a small country, Malaysia has been rather adept at playing the role of the nimble kijang or deer which keeps itself from getting crushed when elephants fight. But 1MDB’s problems may be leading us down a path which is even more dangerous than the garden path the so-called strategic development company led us up on earlier.

P GUNASEGARAM says throwing good money after bad is a lousy deal which only the desperate make. Email: t.p.guna@gmail.com.

Malaysia: Impact of defunding Public Universities


January 24, 2017

Malaysia: Impact of defunding Public Universities

by Dr. Lee Hwok Aun
Published in The Edge, January  16, 2017

Malaysia’s public universities are headed for troubled waters and it is unclear whether our policy makers and executers are even on the lookout. The university rankings business is a debatable one, but I bring it up here because it is the government’s ultimate performance benchmark, and recent developments underscore the detachment of officialdom from the institutions’ woes.–Dr. Lee Hwok-Aun

Image result for Defunding Malaysian Public UniversitiesMalaysia’s Finance Minister Najib Razak–Presiding over a soon to be financially insolvent nation

Malaysia’s public universities are headed for troubled waters and it is unclear whether our policy makers and executers are even on the lookout. The university rankings business is a debatable one, but I bring it up here because it is the government’s ultimate performance benchmark, and recent developments underscore the detachment of officialdom from the institutions’ woes.

The University of Malaya’s rise to #133 on the QS World Universities score sheet in 2016, its best position ever on this rankings scheme, was greeted on campus with surprise, nonchalance, and a dash of despair. The sentiments are distinct from previous years. When UM inched up the rankings, from #156 in 2012 to #146 in 2015, these small and steady gains brought relief, and a bigger hop from #167 in 2011 to #156 in 2012 infused a sense of accomplishment. Research grants were quite abundant, there was support for internationalization, for recruiting and retaining talent. Universities were basically supported, we seemed to be doing things better; improvement in the rankings made sense.

Then came the funding cuts. Federal budget allocations for universities were slashed by 12% in 2015, 15% in 2016, and 19% in 2017. UM took the biggest hit in 2016, when it suffered a 27% shortfall from the previous year. And here lies the trigger of despair. This defunding spree, coinciding with a major leap in the rankings, might be taken as vindication, and perhaps embolden further budgetary constriction.

The government will be perilously mistaken to do so. Continual aggressive defunding brings three significant deficits on Malaysia’s public universities.

First, a personnel deficit. Severe fund-slashing compels severe cost-cutting, shock therapy induces desperate measures. Contract staff are one of the first on the chopping block because the funds for this specific category of employees have dried up. Many contracts have not been renewed, and they are not substituted with allocations for part-time instructors or new recruits. Financial dispensability, however, does not equate with importance to core activity and service. Numerous academic departments count on contract academic staff to teach core courses and produce research and publications.

As contract staff are ushered out, the same workload gets distributed among the remaining staff, increasing their burden and contributing to the second deficit, in morale. Academics will likely see burdens increased, while concerns toward the funding cuts are typically dismissed by invoking the seemingly non-negotiable policy of reducing public subsidization of university expenditure. The Higher Education Blueprint 2015-2025 outlined new funding formulae, with performance-based allocations and per student funding as appealing new features. This formulae is to be rolled out on a “gradual”, “gate-staged” basis.

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ISEAS-Yusuf Ishak Institute Senior Fellow, Dr Lee Hwok-Aun

“Performance funding” is especially contentious. If fixated on numbers and not adequately anchored to the public interest and long-term objectives, as seems to be the case, there is every potential for the system to be gamed, for example, by lowering academic rigour to boost completion rates and student satisfaction, or pursuing quantity over quality of research. Given these complexities, one would expect the policy to be agonizingly deliberated, and gradual and systematic if implemented.

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But Universiti Malaya and Universiti Kebangsaan Malaysia have already, for 2016 and 2017 respectively, been administered huge funding cuts of 27% and 31%. Why? Enrolments have not fallen precipitously, nor have the universities massively scaled down operations. Have they performed so badly? The lack of coherence and transparency in the targeting of funding cuts, compounded by drained research grant reservoirs, are disconcerting, and cannot be good for morale in the academic community.

Some initiatives with good potential risk derailment. At the University of Malaya, to allow for academics to play to their relative interests and strengths, different career tracks – focused on research or teaching – are also being rolled out. But in the hasty pursuit of extracting more output from less resources, research track targets have been made frighteningly difficult to hit. Few select that option, and some – the more diligent, productive, conscientious ones – have been forced to take it against their wishes, to the detriment of their morale.

What of the next generation of academics? Policy brims with rhetoric of talent development, and reference to the Higher Education Talent Roadmap, but the Malaysian approach diverges from the practices in recognized institutions. Globally leading universities excel by attracting talent, then trusting them, through their dynamism, creativity and self-motivation, to research, teach and contribute to public knowledge with light monitoring. Malaysian universities are increasingly inclined to do the opposite – micromanaging rewards for formulaic outcomes, distrusting the industry and capability of staff, monitoring for compliance and resisting change, which seriously risk repelling and losing talents that are drawn to institutions that safeguard trust, autonomy and freedom.

Which brings us to a third deficit that can grow as public financing shrinks: our international profile. Malaysia’s public universities, having made inroads in internationalization, could see these gains reversed. The public universities are subject to the public services employment scheme, including the rule that a non-citizen cannot be hired on a permanent basis. All non-Malaysian academics are on contract, predominantly short term. The more contracts are not renewed, the less international our profile. Will Malaysia’s public higher learning institutions, especially the research universities, become more domestic, less global? That might happen, and if so, our presence on the world academic stage will fade. A specific recruitment scheme for public universities, promoting secure employment of international academic staff, is worth considering.

The presumption that rebalancing of university funding sources and reducing of government subsidy necessitates budget cuts also warrants scrutiny. These can be achieved by maintaining the federal allocations, while facilitating growth in other sources. There is currently a baffling downward spiral and multiple moving targets. Both the share of government subsidies and the overall expenditure of universities are falling – why?

Suppose a university currently spends RM100 million and receives RM90 million from government, in line with the current 90% subsidization rate. Expenditure of RM120 million in ten years would be a reasonable projection. If the government share declines to 70%, then in ten years – a “gradual” rollout as the Blueprint stipulates – the government’s contribution would amount to RM84 million, or basically holding steady, not dropping steeply.

Will the government assess the impact of the funding cuts and reconsider the policy – at least its pace and severity? This will take courage, since reducing public funding has been high on the higher education agenda for a decade, and the government defends the deep cuts apparently as a mark of its resolve.

But at the rate we are cutting funds, it will be impossible to avoid deficits in personnel, morale, and international profile.

Dr. Lee Hwok Aun is Senior Fellow at ISEAS-Yusuf Ishak Institute.