Saturday, November 06, 2021

2022 Budget Racially Configured, Election Targeted

Racial Configuration

Perhaps the most depressing takeaway from the budget presented in Parliament is that it is the most racially configured of budgets in the nation’s history.  Former de facto law minister Zaid Ibrahim has tweeted: “Nice to be Bumiputeras… billions set aside,” noted Zaid in a tweet. “(This) must be the only country in the world where (the) Budget is race-specific”. He also added that it was also “nice” to be a civil servant since they were “always getting cash handouts”

According to official estimates, budget 2022’s allocation for the Bumiputera community comes up to RM11.4 billion, while the amount for the non-Bumiputera communities is about RM300 million.

It is possible that even this lopsided Bumiputera figure may be an under-estimate. Does it, for example, include the allocations of RM1.5b for Islamic Affairs, RM140 million for Islamic amd ‘pondok’ school maintenance, and various other Bumiputera allocations ‘accidentally’ missed out, hidden or disguised?

We know how official data is manipulated to provide the impression of even-handedness and fairness on racial issues. The current budget statistics may be no exception to the racial sleight of hand practiced by our policy makers to give the impression of an inclusive and non-discriminatory society.

Also unjustifiable and unconscionable is the so-called one-off RM700 for civil servants. 1.3 million civil servants are to receive this besides being also given 5 extra days of unrecorded leave. Amounting to over RM1 billion, this in fact is not the first handout to civil servants during the pandemic period. ‘More money for less work’ seems to be the new motto that the Perikatan government is advocating for the nation’s civil servants.

Election Targeting     

There are other reasons to be concerned about the budget. Development expenditure of RM 76.6 is the largest amount ever budgeted under this heading in Malaysian history and as noted it will be financed broadly from borrowings. The claimed rationale offered is that “pump priming” on this scale is needed to jump start the economy and accelerate growth. In brief, the multiplier effects from public sector investment are needed to get the economic recovery. These expectations are simplistic and flawed. 

In the first place not all of the projected development expenditure will go into real(physical) investment as a sizable chunk will be monetary transfers to loss making GLCs and other entities. Furthermore, the implementation capacity in place is inadequate to take on and deliver projects. The historical record bears testimony to this contention.

Additionally, the desired multiplier effects are unlikely to be available in full as a sizable portion of the development expenditure will be devoted to procurements from abroad e.g. aircraft, weaponry, heavy equipment etc.

The Government takes an over optimistic view regarding private investment. Many of the SMEs that have suffered egregiously as result of the pandemic are unlikely to be able to get into a recovery mode rapidly; new enterprises are unlikely to emerge at a slow pace; and there are uncertainties about FDI flows. 

The macro- economic picture painted to show GDP growth rising 5.5%-6.5% in 2022, up from 3%-4% in 2021. This optimistic growth rate needs to be interpreted with caution as it incorporates the statistical effects of a low base. The issue is: where is the growth going to come from?

The feel good Budget was purely and simply crafted with an eye on an election in the first half of 2022. Other concerns include: 

●       For the private sector, it represents business as usual with big projects to keep the cronies and the current elite fed with projects

●       The budget has focused on spending but ignored any effort to try and fix the revenue side

●       No new policies were announced e.g, rationalization of loss making GLCs; labor market reforms; fixing the problems linked with household debt; addressing the looming challenges associated with an aging population.,

●       Inadequate attention to the needs of SMEs in revival

This budget, as with RM12, has missed opportunities to restructure the economy, make it more competitive, reform education, etc. Instead, it is funding a system that needs revamping, and restructuring the revenue side of government fundraising. More tragically, this budget has failed to deliver relief packages for those in dire need from the Covid crisis.

Looking at the responses across the media by numerous commentators, this first Ismail Sabri budget has failed to satisfy most sections of Malaysian society. The budget is just more of the same.

Substance disappointing, formulation process found wanting

It is also time to take a close look at how the budget is formulated each year. Ministries send in their funding estimates each year, just increasing their requests in expectation, the MOF will approve. There needs to be a more holistic and rigorous scrutiny of spending by a core overviewing team that could utilize ‘zero based budgeting’ scrutiny of ministry and agency requests.

The borrowing needed to formulate this budget will not be repaid by this generation of politicians and civil servant leaders. They are leaving the future generation of Malaysians with the burden of repaying debt.

The budget is also rewarding the unworthy and making the wrong people pay. Those who have been working within a bloated bureaucracy with security have been rewarded, while citizens who have felt the brunt of the Covid crisis are basically left to fend for themselves. Successful corporations that have made profits from innovation are punished.

The budget fails to address the looming challenges the nation faces. It avoids taking on much needed reforms. No thought has been given to addressing how the nation is to cope under stark circumstances when 97 percent of ageing citizens will face a dire future without savings to sustain themselves. Nor was there a hint in the budget or its surrounding ministerial hoop-la that the government intends to reform the fifty year old failed NEP.

In brief, the budget serves neither the short term nor the long term needs of the nation. It is disappointing that the Pakatan opposition has condoned the crafting of the budget. 





Ramesh Chander, Lim Teck Ghee and Murray Hunter

Tuesday, October 05, 2021

Malaysia introducing Harsh New Equity Restrictions - No rescue plan for SMEs suffering from the Covid-19 pandemic



Malaysian prime minister Ismail Sabri Yaakob announced in parliament, while launching of the 12th Malaysia Plan (MP12), that measures will be put in place to restrict the sale of sales in Bumiputera companies only to Bumiputeras. This effectively reduces the ability of Bumiputera shareholders to make potential capital gains on the sales of shares in their companies, due to the inability to make equity sales to non-Bumiputeras and foreign entities. Bumiputra companies will also be seriously hampered in raising capital through equity sales, due to the restricted market they can sell equity. If implemented, Bumiputra entrepreneurs will also find it difficult to sell their businesses, due to the new equity restrictions.

According to former Pakatan Harapan health minister Dzuilefly Ahmad, who is the MP for Kuala Selangor, many Malay business people are angry over this measure, describing it as “suicidal”, which will  kill off the Bumi economy. This latest equity announcement potentially risks creating a two-tiered economy, where Bumiputera companies have draconian equity restrictions placed upon them by the government.

There is no other economy in the world that has such provisions in company law.

There was even more startling news the week before the launch of MP12, where the Ministry of Finance (MOF) announced local freight forwarding firms will be required to have 51 Bumiputra percent equity to renew their customs licenses from the end of next year. This will force many family-built freight forwarding companies to sell out control of their firms, or shut down, draining the international freight forwarding industry of experienced players. This announcement has caused deep rumblings and protests within non-Bumiputra business communities. Those who can exit and relocate, are considering pursuing business opportunities elsewhere. Singapore and Jakarta, as well as foreign companies that are exempted will be the beneficiaries of these racially restrictive measures.

These disruptive government equity announcements come at a time when the economy is on the decline due to the Covid-19 pandemic and corresponding public health restrictions. There have been more than 10,000 bankruptcies to date, since the start of the pandemic. This is on the rise. Both official and informal sector unemployment is increasing. Many SMEs are voluntarily closing, even though the government introduced a debt moratorium. According to World Bank Figures, GDP has declined 4.9 percent over the last 12 months. Pain and suffering is evident across the community, with volunteer food kitchens feeding people without income, and many now relying on charity to survive.  

Is the government trying to pick winners again?

There was some expectation the MP12 would address the plight of businesses due to the Covid-19 pandemic. In contrast, the document was full of Industry 4.0 rhetoric, digital solutions, picking industry winners, and expanding government influence over the business sector. The policies espoused within the MP12 document are totally oblivious to the effect of the pandemic on business, only mentioning the devastation in passing. There is little acknowledgement of the desperation many firms face during this time. The plan provides no recovery strategies for the crippled ones.

Chapter three of MP12 is dedicated to industry, micro, small and medium industry (MSMEs), and entrepreneurship. Once again, the government has selected specific industries it considers will be the growth drivers of the economy. These are the electrical and electronics industry, global services, the aerospace industry, creative industries, tourism, the halal industry, smart farming and biomass products.

Historically, the government has been very poor at selecting industry winners. Malaysia’s biotechnology push during the Badawi administration only led to a number of government corporations that did nothing, except spent money with little value-added return to the economy.

Looking at the latest list, the electrical and electronics industry is primarily made of up big corporations which make their location decisions based upon strategic issues like country cost base, employee pool and quality, supplier availability, and logistics issues. These are variables that take a long time to change. The issues are similar with global services. Multinational corporations will domicile their research, logistics, production, and regional offices based upon similar factors. Increasing the number of global services corporations in Malaysia by 10 percent, based on the statistical figures provided by MP12, would only add RM 2 billion in domestic business spending. It just too difficult to see a four-fold increase in domiciled multinationals over the next four years, as MP12 forecasted.

The aerospace industry is already facing tough times from the pandemic and has been in decline. Forecasts indicate that passenger traffic is not likely to go back to 2019 levels until 2024. Air fleets have been mothballed in storage, and existing players in the industry have drastically cut down their costs to survive financially. It is difficult to see how the Malaysian industry can achieve a three-fold increase over the next five years. Only the air-cargo sub-sector is growing, which was not even mentioned in MP12. The cost, resources to be allocated, and effort needed to create an aerospace cluster, might best be focused upon another industry, until the aerospace industry shows signs of recovery.

Proposed aerospace cluster and development strategy

The measures the MP12 outlines for the creative industry maybe too little to assist the industry to grow, especially with the long-term effects of the pandemic still unknown. The creative industry, as defined in the MP12 is very fragmented and different sub-segments will require specific measures, rather than the generic range of measures the report suggests. The feature film market is completely depressed, due to restricted audiences in public venues, and the whole entertainment business model is currently undergoing flux and transformation into something no one is as yet too sure of. The growing importance of platforms and distribution channels like Netflix and Peacock were not mentioned. Even if growth takes place, the multiplier effects will be limited as compared to the recovery of the SME sector.

The MP12 prescription for the tourism industry, in almost total collapse with the pandemic restrictions, needs much more than a generic revitalization of branding. There is no mention about assisting SMEs that are totally dependent on tourism to survive, and those made unemployed. More than 120 hotels have shut their doors permanently due to the pandemic. There is no assistance offered to these businesses in dire straits from the pandemic, and finding alternative means of income for those directly affected by the drastic decline in tourism. This omission in the MP12 plan will place a major additional burden on the nation’s economic recovery.

The halal industry is rapidly growing internationally and Malaysia isn’t getting a big enough share of this growth. The growth of the halal industry in Malaysia will be directly related to market development, which has been ignored by MP12. Smart farming and biomass industries are very specialized and those companies that are already involved or are likely to enter, are technology-based and highly capitalized companies that don’t need government assistance. The effort could be put into existing farmers who urgently need assistance to survive. They need assistance in production and market development, where more extension is needed and the role of FAMA expanded.

Little to assist ailing small business

MP12 has little to assist the hundred of thousands of existing SMEs, financially stressed from the pandemic. Most of what MP12 lays out for the sector has already been done over a number of years, by multiple agencies. There are numerous mentions of the triple helix, collaboration between institutions of higher education, government and business, without explaining how this concept will be used to assist existing and new businesses. Incubator programs already exist around the country at universities, technical colleges, ministries, and other government agencies. Expanding them will require not just the physical infrastructure, more building, but experienced entrepreneurship teachers and mentors, who are already in drastic short supply. Nothing has been mentioned about how the trainers can be trained.

MP12 calls for encouraging SMEs to adopt innovation. However, it doesn’t explain how. The recommendation that more entrepreneurs should take up research from public universities and research institutes opens up a pandoras box of issues that aren’t easy to resolve. For example, university and research institute intellectual property (IP) policies are restrictive and bureaucracy currently not SME friendly. Secondly, the actual researchers are usually full-time lecturers who have little time to assist SMEs take any piece of research from the R&D stage to the prototype and commercialization stage. In addition, getting funding to do this type of scaling up is extremely limited through agencies like the Malaysian Technology and Development Corporation (MTDC), which is already working at capacity. Finally, although most universities now have an extensive range of registered patents with the Malaysian Intellectual Property Organization (MIPO), not many patents solve real commercial problems.

MP12 talks about widening market access for entrepreneurs, but is silent on how this is to be undertaken. These are the important issues for SMEs that have not been addressed in any detail. The same thing has been said in previous Malaysian Plans, only to be resaid in the next plan.

One has to wonder how much artificial intelligence (AI) and Industry 4.0 are really going to assist under-capitalized SMEs, which can’t make ends meet financially. The majority of Malaysia’s 900,000 SMEs are finding it difficult to pay salaries, let along invest in the future. Perhaps more short-term initiatives like salary assistance to keep people employed would spur more immediate economy activity at present. Most business activities that Malaysia’s set of SMEs undertake at present are not suitable for such concepts as AI and Industry 4.0. The majority of Malaysian SMEs are focused on service, small manufacturing, repair and maintenance, and the food and beverage industries.

Using local materials is a great ideal set out by MP12. Most SMEs already buy local is material quality is suitable, price is competitive and there is a stable supply. To buy raw materials locally, the industries that create them must be set up locally first. This should be market rather than government driven.

MP12 within the industry section talks about negotiating to reduce barriers for cross border trade. This is confusing, as MP12 states in the introduction that the ASEAN Economic Community (AEC) environment is already operating and a series of new Free Trade Agreements (FTA) have already been negotiated. Here it appears the authors of the chapter on industry haven’t read the introduction to the report, making the whole document disjointed.

An example of incoherence in the MP12 document

Above Chapter 3, below introduction

Straight contradictions in the MP12 document

MP12 is extremely disappointing for SMEs. Not only have restrictive new equity laws been introduced, but MP12 is advocating a massive increase of government influence through increased bureaucracy in the economy. This is likely to lead to higher costs of doing business. This will further hinder a market-friendly environment business needs to operate within. Many sunrise industries like smart farming and downstream biomass product production just don’t need government assistance. The wisdom of setting up an aerospace cluster, runs the risk of having the same fate as Malaysia’s steel, automotive, and biotechnology clusters. Billions spent and nothing to show.

MP12 is not Rakyat or people centric, its bureaucratic-centric, bringing more government interference into the business-environment. Bumiputera businesses are now seriously hampered in their ability to raise capital through equity sales. This will weaken them and put them at a disadvantage to SMEs in other ASEAN countries. Non-Malays now have a disincentive to build companies that they will be forced to sell off at some future date, with retrospective regulation threatening ownership and control. This could potentially cause another bout of brain drain and capital flight. Finally, the government has abandoned Malaysia’s 900,000 SMEs to fend for themselves in an economic crisis much worse than the Asian Financial crisis back in 1997.

12th Malaysia Plan: Three Backward Steps




The 12th Malaysia Five Year Plan tabled in the Dewan Rakyat by the Prime Minister is replete with claims of its policies and programs being “game changers”, “catalysts for….”, “enablers” ,etc However, our scrutiny of the document together with the speech by Dato Seri Ismail Sabri, leaves us deeply disappointed as we fail to discern specific policies that qualify that description.

We call the attention of the Government, policy makers and other stake players and holders to the following 3 key longstanding stalled issues that necessitate rethinking and an entirely different set of policy initiatives if the Plan is to meet its goals of a high income country with inclusive and sustainable growth. Our concerns are echoed in part by the Leader of the Opposition, Dato Seri Anwar Ibrahim, and a host of other respected commentators.

To compound matters, the disclosure by the Federation of Freight Forwarders (FMFF) of the Government’s attempt to enforce a drastic restructuring of the freight forwarding industry has been a distraction that has met strong opposition. The proposal to require existing non – Bumiputera firms in the industry to divest 51 percent of equity has been described as tantamount to a robbery and classic “UMNO-ism”. Yet other observers have pointed out the negative vibes this announcement sends to firms in other sectors. If implemented, most if not all independent and credible quarters agree that this will be a contributing factor to further damage the investment climate as well as disrupt the supply chain’s efficiency and productivity which the economy can ill afford.

In our judgement, the Government proposal overturns the solemn undertaking given by Tun Razak that the 30 percent target would not entail takeover of existing assets but would be achieved via growth when he presented the New Economy Policy (NEP) in Parliament. It must also be recalled that the BN Cabinet rejected the initial version of the Industrial Coordination Act which attempted to put in place a regime in which 30 percent of equity in each limited company be made available to Bumiputera investors. We believe the MOF proposal is not only a regressive policy change but also that it is contrary to Article 153 of the Federal Constitution and is likely to be litigated.

We next take up the contentious issue of how the 30 percent equity ownership target is measured. We do so in order to highlight how deeply flawed numbers have come to determine policies that are not in the best interests of the nation. The resulting policy distortions have created a number of negative outcomes that include rent seeking, crony capitalism, widening income disparities in the Bumiputera community and ethnic tensions.

Corporate equity

The 12th Plan errs by suggesting that the 30% target has yet to be attained. This is a debatable contention as the Plan fails to elaborate on how the calculations were done. No reference has been made to research studies that report findings that contradict the official estimates; no credible statistics provided.

It is appropriate to begin with a focus on the nature of this target and the manner in which it is calculated. To set the record straight and once and for all, it is important that we go back to the origins of this target and the manner in which the baseline estimates were calculated.

The baseline numbers of corporate equity used in the formulation of the NEP were calculated by classifying share ownership in both publicly listed and privately owned limited companies. Ethnicity was used as a determining factor; no entities were excluded.

The use of the totality of corporations was in line with the recommended approach advocated in the United Nations ” System of National Accounts” (SNA). The ownership structure of each corporate entity was compiled by taking account of the ethnicity of shareholders. This identification was determined by using the name of each shareholder to assign ethnicity. In brief, the resulting count was that of the number of shares as no ringgit share values were determined.

One reason for this was the non-standard nature of the accounting returns that had been filed by the registered corporations. This was the best that could be done given the nature of the available data and the time constraints under which the Department of Statistics was then operating.

It was further understood that the baseline numbers would be further refined at a later date via a primary collection of data. Indeed, the Department of Statistics did launch the Ownership Survey of Companies with that objective in mind; the survey incorporated a section containing a standardized balance sheet.

The comprehensive data collected provided a basis for using balance sheet values to determine equity, which in turn could be subdivided by ethnicity. The tragedy was that the Economic Planning Unit chose not to tread that path and stuck to the older base numbers. The data from the Ownership Survey of Companies was classified as “sensitive” and not released. This is an omission that can be easily rectified to provide a truer, less politically exploited, picture and understanding of company ownership in Malaysia

The current methodology employed by the government produces a result indicating a shortfall in what has been achieved. The absence of actions to correct the basis for calculating the value of equity holdings has reduced the credibility of the statistics released. These deeply flawed numbers should not under any circumstances underpin important policy making.

Professionally researched empirical studies yield an outcome showing that Bumiputera holdings of corporate equity appropriately valued exceed 30%. This previously was confirmed by an analysis of traded shares in the stock exchange.

It is this aspect of the NEP that needs correction via an adoption of valuations based on a more defensible set of principles. Asset values need to be calculated based on concepts that take account of commercial accounting concepts that happen to be aligned to the SNA.

The re-evaluation can be easily accomplished at a minimum cost as the needed data exists in the files of the Companies Commission of Malaysia. Furthermore, the data is available on an annual basis and can thus be used to track progress or lack thereof at regular intervals. A transparent and timely availability of ownership data would remove a key contributor to policy manipulation and ethnic tensions.

Credible data is a fundamental requirement to support evidence-based policies. Greater transparency in the collection and dissemination of data on equity holdings will contribute to an improved investment climate vitally needed in the aftermath of the Covid-19 pandemic.

Failure to introduce the reforms listed above will continue to impact on race relations and policy distortions. These distortions are likely to potentially lower growth and would run counter to the twin goals of achieving a restructuring of the economy and promoting sustainable growth.

Finally, and perhaps most importantly, there is one reality for any economy that our policy makers and legislators must not forget. The Plan speaks of a decline in the equity held by Bumiputeras resulting from a disposal of shares allocated to them. No account however is taken of the fact that trading of shares is a normal activity. Proceeds from such sales are often invested in other assets e.g. real estate, financial instruments etc. Additionally, many of the elite appear to have transferred their new found wealth off-shore. This is confirmed by the large outward flows recorded in the Balance of Payments together with the consistently large errors and omissions item. If further affirmation is needed, one has only to look at the estimates of capital flight which places Malaysia as the second largest source of capital flowing out of an economy. The time has come to measure wealth in its totality rather than place a component represented by equity capital on a pedestal.

GLCs and Re-energizing the Private Sector

Our initial draft had identified GLCs as a key sector to reform. Not only is the role that government linked companies (GLCs) play in the Malaysian economy widespread and pervasive but among countries in the world, we rank with the highest in terms of SOE presence among largest firms. The negative economic impacts of such a dominant and dominating presence of GLC in the Malaysian economy are well known and need little elaboration.

Since then, we are encouraged that former PM Tan Sri Muhyiddin in his recent address to Parliament has called for a review of GLCs (and GLICs) and voiced the view that they should not be competing with the private sector.

However this opinion is nothing new. In fact it is too little too late. Initially established to facilitate Bumiputera participation in the modern economy, GLCs have over the past 30 years proliferated to take over and control not only the commanding heights of the economy but also to encroach into the mid and lower tiers. GLCs today constitute over 40% of the share market capitalization of all

publicly listed companies and can be considered to be the elephant in the room that has stifled growth, crowded out private enterprise including Bumiputras, and contributed to poor governance practices. Moreover, there is every indication that they are among the main sources, if not the main source, responsible for the growing income disparity in the country, in particular that pertaining to the Bumiputera community.

With its influence over, and links to, the national and state bureaucracy, quite apart from its role in facilitating clientelism, collusion and nepotism of the political elite, GLCs have introduced severe distortions to the market in the products and services provided and have generally raised the costs of doing business whilst not improving economic efficiency at national, state and even local levels.

Earlier Plans had failed to address the out-of-control proliferation of GLCs as well as its other pernicious economic and governance impacts. The most recent round of political appointees to GLC high positions, despite public dismay and widespread condemnation of the practice, gives little confidence that any review will be taken seriously or will result in any reforms.

Hence it is crucial for Parliament in its deliberations on the 12 Plan to not delay any further with implementing policy reform proposals, in particular, the dismantling of rent-seeking and patronage components, that can restore GLCs to an appropriate position and place in the economy as commercial and competitive entities shorn of unnecessary and inflated government privilege or other functions that provide openings for politically driven patronage and misuse of public funds. Such a reform agenda contained in the 12 Plan should include an appropriate divestment programme of the numerous GLCs that have little or no justification for their existence and stand in the way of the private sector’s development.

Revitalizing our Private Sector and SMEs

In tandem with a GLC reform programme, there needs to be put in place a revitalization programme for the private sector, especially directed at small and medium sized enterprises.

It is clear now that Malaysia has lost its competitive edge in attracting multinational corporations. The exodus of many established corporations to Bangladesh, Indonesia, Vietnam, the Philippines and other countries is indicative of this trend. New FDI flows into the country have slowed even in terms of feel good dubious figures touted by MITI. According to the latest data, foreign direct investment (FDI) in Malaysia registered a net inflow of RM14. 6 billion in 2020 as compared to RM32. 4 billion in the previous year. This contraction by 54.8 percent is only partly a result of global economic uncertainties due to the pandemic situation. These corporations as well as the local businesses have also found the price of doing business rising given the negative impact of the regulatory environment. The regulatory regime in place has grown, is stifling and is at the same time subject to uncertainties generated by frequent policy changes as has happened, for example, with the MM2H program for foreigners.

Meanwhile there is every likelihood that a significant proportion of the present number of 900,000 SMEs – if stronger corrective measures are not taken by the Government – will close shop or cut back on operations as a result of the ongoing pandemic crisis which the Plan has failed to adequately address. That this prospect will considerably worsen the poverty and unemployment problems for the country is clear from this profile data

SMEs

– make up one million or 98.5% of all business establishments
– provide two-thirds of all employment
– contribute 40% to the national GDP, and
– are located in all states, all sectors and range in size from micro-enterprises to small and medium.

SMEs are not just a pillar of the economy. They also play a key role in social stability and social cohesion. This vital contribution of SMEs to national unity and harmony has either been ignored or has not been properly acknowledged in Plan documents.

Here it is necessary to remind policy makers and legislators that SMEs are the main source of multiracial partnerships and inter-ethnic linkages, relationships and interaction at many levels, including ownership, labour force and in other spheres. Also not generally known is that 20% of SMEs are owned by women thus contributing to gender equality.

Reviving the SME segment of the economy in the short and medium-term future should be amongst the highest policy priorities of the government in the 12th Plan.

The above difficulties facing the private sector, together with the monopolistic policies favoring the GLCs and the GLICs, and the resultant rising price of doing business needs to be addressed in any clear-sighted and pragmatic plan. Unfortunately despite these stark past and new policy failures, the Plan document is largely silent or evasive. Should the Government fail to take corrective measures in the new Plan we fear that this heavy baggage will be carried forward.

Urgent game changer reforms

The third backward step we have discerned applies not just to a single sector. It relates to a wide range of sectors in which earlier policy reform measures were clearly identified and agreed to by a previous government and where these reform measures have either been ignored, stalled or discontinued.

To recall, thirty years ago at the National Economic Consultative Council (NECC) deliberations to propose the successor to the NEP, no quantitative targets were set in the final report as it was the consensus of the 150 members drawn from political, economic and social sectors and all communities that what was important was not the contentious numerical targets but the necessary capacity building to build and sustain businesses. The 9th Malaysia Plan 1991 to 1995 in fact did not specify such ownership targets.

Likewise ten years ago in 2010 the New Economic Model drawn up for the 10th Plan by one of the most credible and qualified economic teams recruited to chart the country’s socio-economic future eschewed the continuation of a regressive NEP policy which was originally intended to be discontinued after 1990.

Further it identified the following urgent policy imperatives to ensure the nation’s ability to meet the multiple challenges from internal and external factors. These included

– Refocusing from quantity to quality-driven growth. Mere accumulation of capital and labor quantities in the past has been insufficient for sustained long-term growth. To boost productivity, Malaysia needed to refocus on quality investment in physical and human capital.

– Relying more on private sector initiative as the primary engine of growth. This involves rolling back the government’s role in some areas, promoting competition and exposing all commercial entities and activities (including GLCs) without exception to the same rules of the game.

– Making decisions bottom-up rather than top-down. Bottom-up approaches involving decentralized and participative processes that rest on local autonomy and accountability would lead to more accountable and less rent-seeking and crony-driven outcomes

– Redressing unbalanced regional growth. Growth accelerates if economic activity is geographically concentrated rather than spread out. Ripple effects would also come from more effective poverty alleviation and equitable income distribution outcomes and more inclusive and sustainable growth.

– Welcoming foreign talent including from the Malaysian diaspora whilst retaining local talent. As Malaysia improves the pool of talent domestically, foreign skilled labor can fill the gap in the meantime and can generate positive spill-over effects

– Prioritizing the education sector which is a key laggard in the economic transformation of the country. In particular the public higher education sector has not been able to produce the skilled human capital despite being provided with consistently large budget allocations during the past 20 years

– Rightsizing the bloated public sector and rectifying its siloed and ineffective sectors that have impeded investment and productivity

What was unprecedented about the NEM is not only its acknowledgement that falling FDIs and competitiveness, compounded by the brain drain and decline in standards of governance as evidenced by pervasive corruption, rent-seeking and patronage, have put Malaysia behind many of our neighbours in the region. It was also the recognition that the NEP had become a time warp and millstone holding back the development of the country. Hence the need to not simply shift to a higher skilled, more competitive and private sector driven economic ideology but also of the necessity and urgency of deep structural reforms for the country to move out of the middle income trap and reach its true potential.

When drawn up and approved by the Government of Prime Minister Najib Razak, the NEM with its paradigm changing principles and change strategies had the strong support of not only business and professional elites and the country’s movers and shakers but also legislators in Parliament. However it needed to be accompanied by actionable policies and a multi-year commitment to implement them. This has not happened.

Today as the current Parliament sits to deliberate and finetune the 12th Plan package presented, we urge legislators from both sides of the policy divide – and this includes legislators from the period of the adoption of the NEM – not to return to a NEP clone mindset but to use the NEM instead as a reference text to select, support and not marginalize the real game changers that the nation needs or we will risk a further falling back in our economic prosperity and standing among nations.

Conclusion

We believe that the Plan, if implemented as currently presented, is likely to act as a self-inflicted wound that will adversely alter the trajectory for Malaysia’s socio- economic growth and heighten the likelihood of our country becoming further entrapped as a middle-income economy, with a clear risk of going backward in our development and prosperity.

Datuk Ramesh Chander is a former Chief Statistician of Malaysia and a retired Senior Statistical Adviser at the World Bank in Washington D.C.
Dr. Lim Teck Ghee is a former senior official with the United Nations and World Bank.

Thursday, January 16, 2020

Islamic Assault on Malaysia’s Higher Education



According to a former vice-chancellor who pointed out a list of at least 26 newly appointed vice chancellors and deputy vice chancellors, these appointments were not made on merit but rather on the basis of loyalty to Maszlee and Salafi preacher and Perlis Mufti – Muslim legal expert – Mohd Asri Zainul Abidin. The Salafi movement is a revivalist crusade within Sunni Islam that developed in Egypt in the late 19th century as a response to Western European imperialism.
If Maszlee had more time as minister of education, according to the source, both the ministry and almost every top position in Malaysia’s public universities would have been filled with members of an Islamic NGO dedicated to enhancing Islamic teachings and practices in daily life. The NGO is Pertubuhan Ikram Malaysia, which is committed to promoting the interests of Islam through all aspects of society. Other organizations affiliated with Ikram are said to assist in this cause. Although Ikram has a respectable reputation within the Malaysian community, the leadership has been infiltrated by Salafi sympathizers pushing fringe ideas of Islam.
Ikram strongly opposes Shia Islam, seeing it as deviant. The NGO was also strongly opposed to the participation of two Israeli para-athletes in an international swimming competition last year in Sarawak, forcing the competition to be moved to another country, and objected strongly to the staging of a play, “Sex in Georgetown City” last year at the Performing Arts Center in Penang.
As a result, according to several sources in the country’s public higher education system, the ministry became insular in its outlook to education and dedicated to implementing an agenda that would hinder any diverse outlook from educational perspectives. A recent example was a Universiti Malaysia Perlis Vice Chancellor, Dr Ahmad Badlishah, who said there was nothing wrong with controversial exam questions that caused outrage and calls for his resignation across the nation. The multiple-choice question in the university’s Ethnic Relations paper claimed Zakir Naik, a controversial Islamic preacher and fugitive from India on charges of money laundering, is an Islamic icon and spreading true Islam.
Klang Federal MP Charles Santiago complained that other questions were offensive to the Indian community, including one that reportedly read: “These people are dark-skinned people and they are found in Asian countries such as Malaysia and Indonesia: What nation is this?” The multiple-choice answers were given as “1) Negroid; 2) Red Indian; 3) Indians; 4) Bushman.”
The exposure of these exam questions led to a widespread belief that public universities in Malaysia had become platforms for propaganda and indoctrination, giving the young biased ideas about Islam and society.
Members of Ikram that Maszlee appointed to Malaysian public universities in his short time as minister and the dates of their appointment are:
Maszlee also appointed Mohd Saleh Jaafar deputy director general of Higher Education (Private Institution) and Gauth Jasmon as chairman of the Universiti Putra Malaysia Board of Directors.
All are described as loyal to the Ikram leadership, which also appears to be strongly aligned with the Pakatan Harapan government. Consequently, decisions on matters such as Putrajaya’s failure to sign the United Nations International Convention on the Elimination of all Forms of Racial Discrimination (ICERD) in 2018, should be seen in the light that members of Ikram are spread across all aspects of government.
The concern is the reform of the Malaysian education system, not its Islamification. To ensure reform, the sources say, Maszlee’s appointments must be re-vetted as to the suitability to pursue reform within their respective institutions. Otherwise, this Salafist legacy will remain embedded within Malaysian public universities.

Murray Hunter is a Southeast Asia-based development specialist and a frequent contributor to Asia Sentinel.
https://www.asiasentinel.com/society/islamic-assault-malaysia-higher-education



Curing Malaysia’s National Psychosis






With the Year of the Rat approaching on January 25 to be celebrated not by just Malaysia’s Chinese but traditionally the whole country, the vice-principal of SMK Pusat Bandar Puchong 1 school recently demanded that Lunar New Year decorations be removed from the school. 

That is an ominous sign in a polyglot country whose races traditionally have celebrated each other’s holidays. Although in the quite recent past Malays, Chinese, Indians and the other peoples of Malaysia celebrated Hari Raya, Chinese New Year, Christmas and Deepavali together as a symbol of unity, this is now forbidden. 


It fits, however, with other growing attacks on minority religions and cultures. Despite the fact that freedom of worship is enshrined in Article 11 of the Malaysian constitution, that freedom is under threat along with a larger threat against non-Malays.
Although these pressures have been increasing, they are becoming disturbing. A high-ranking Islamic official is arguing Malaysia should be exclusively for the Malays, contrary to the constitution and principles of Islam. The education system is increasingly being used as a propaganda tool to spread racism and distorted views of Islam. The rule of law is not the same for all, where designated people are treated differently by police. 
The themes and arguments within social discussion and outcomes of governance in Malaysia today set the country apart from much of the rest of the world community. Putrajaya’s failure to sign the United Nation’s International Convention on the Elimination of all Forms of Racial Discrimination (ICERD) in 2018 put it in the company of Dominica, South Sudan, Myanmar and North Korea. Concern is growing that institutionalized racism has put the country in a category with the old South African Apartheid regime, which it once vigorously opposed.
Today, government policy, decision-making, leadership and institutional development are all influenced by forces controlling political outcomes that appear more irrational and dysfunctional as time goes on. The divisive ketuanan Melayu (Malay supremacy) narratives are now implanted deeply into the assumptions and beliefs of the ruling elite’s psyche. Police are using the court system to suppress alternative points of view by banning closed-door meetings of legally registered societies, members of a governing coalition party are arrested on alleged terrorist links to a defunct organization, and the prime minister uses innuendo to threaten sectarian retaliation against a community group.
These beliefs are heavily skewing political decision making. This cognitive dissonance has been destructive upon community relations, nation-building, national culture, and even the Malaysian concept of nationhood itself. 
Thus there is a growing national psychosis that has taken reform off the national agenda, as reform challenges the ruling elites’ view of reality. The reform promised by Pakatan Harapan when it took power in May of 2018 now is feared as an attack on authority, status, prestige, and the very security of those in power, as it was prior to the election on the part of the United Malays National Organization. Those fears are currently projected onto the Democratic Action Party, an ethnic Chinese-dominated member of the ruling coalition.
Symptoms of this psychosis are strewn around the national narrative, which has become an instrument of exclusion, where the roles of groups working towards independence have been largely rewritten to serve the perceptions of the leaders of today. The aspirations of Sabahans, Sarawakians, and Orang Asli (the true indigenous people), have been excluded. 
This was seen in one of the final directives given by the ex-education minister Maszlee Malik before he was sacked for appointing a non-Sarawakian, Kamal Mat Salih, as chairman of the board of directors of Universiti Malaysia Sarawak, which has led to criticism and outrage.
As the demand to remove the Lunar New Year decorations shows, today’s narratives are focused on severing empathetic ties between ethnic groups, replacing them with a biased single narrative. Given emphasis on “true Islam” in government schools, more than two generations of Malays now behave according to the beliefs and values incorporated within these narrow vistas of reality. The current national narratives completely fail to encompass any evolving aspirations that promote any semblance of national unity. 
What is missing are any aspirations about the dreams on which the nation was founded. An alternative sense of identity has crept in – divisiveness, exclusion and hate. The country now lives within a psychic prison that is full of illusions about enemies that don’t exist. People are suffering from hallucinations of Jewish plots, Christian plots and Chinese plots.  
In government, the centralization of decision making, often within secretive circumstances indicates fear of scrutiny. This paranoia is displayed in the way ministers attack those who expose their shortcomings. This depressive display of force has been nurtured on the assumption that ‘we are the law’. Within Malay society, ‘Malay unity’ means that all must agree to the views and ideas of the elite. Dissent is considered disloyalty. Challenging the teaching khat, or Muslim calligraphy and Jawi – Arabic script – in schools is akin to an attack on the national language. Those who have alternative views are the enemy.  
Racism and cultural imperialism have become embedded within Malaysian culture to the extent of delusion. It is now ingrained into the psyche. Racism, however, has also become cover for deep corruption arising from discriminatory policies like the New Economic Policy (NEP). The anxiety generated by the ‘lazy Malay’ being raped and plundered by other groups fallacy revived by Mahathir from British colonial times was its justification. 
The ruling elite has always been projected as Malaysia’s savior although this projection is more about resolving intra-Malay political and power rivalries, than inter-racial conflict. It’s all been a convenient fabrication for maintaining power, severely impairing Malaysia maturing as a nation. 
Ketuanan Melayu must be seen for what it really is; a defense mechanism against change. The irony is that it is not protecting and enhancing a rich Malay culture, but rather gutting it to the mercy of some alien tribal desert culture. The imposition of Arabism has destroyed much of the richness in a Malay culture that was once fondly treasured, even by non-Malays. Many traditional Malay traditions and artforms have been discouraged and even banned, under the arbitrary declaration that they are un-Islamic. 
These hardline Islamic policies are taking root throughout government institutions, leading to the belief that the more one takes on the artifacts of Arabism, the better a Muslim he or she will be. Reciting Rukun Negara – Malay national principles – would be much more appropriate than reciting prayers before government events and meetings. 
Curing Malaysia’s national psychosis can only come from reverting to the assumptions, beliefs and values that were around when the nation of Malaysia was created. This means breaking up the fallacies that are hindering the pursuit of nationhood, including that public enterprise can do what private enterprise can’t. This is where the elite have gained their ill-gotten wealth and most state economic development corporations, and their subsidiaries are bedrocks of corruption. 
Malay and other indigenous cultures originated from three distinct sources. Those indigenous to Tanah Melayu (the Malay Peninsula), Sabah and Sarawak, those who migrated to Malaysia from the Nusantara archipelago, and those who migrated to Malaysia while the Sultanates were riverine rather than territorially defined. 
Some of the migrants from outside of Nusantara over the centuries from China and South Asia formed a unique Baba culture that has co-existed with Malay culture for centuries. The new Arabized cultural traits and inwardly politically defined Islamic view of the world have become a fence of exclusion. This is pushing younger Chinese into a China admiration syndrome which holds China’s accomplishments in awe, which China is now clandestinely exploiting for its own advantage. Expect this to become much more pronounced over the next few years. 
Malay culture started to change when the cikgu (teachers) and civil servants were replaced within UMNO by an opportunistic rent-seeking Malay class and when Mahathir and his then-ally, Anwar Ibrahim, Islamized the government and civil service. This was also the time of the birth of crony capitalism which guaranteed the gentry would rule over the rest. The rule of law became we are the law, where police need special permission to interview anyone seen as being a member of the gentry in any investigation.
However, the constructed truths created and manipulated by those in power have always depended upon economic prosperity. The government handed out millions of ringgit to the people, gave out privileges and extended credit. Affluence bought silence, it kept the opposition weak, and enhanced the image of the government as being benevolent. 
Government budgetary and fiscal problems, economic downturn, and rising cost of living are making it much harder for any government to placate the people, as has been done traditionally for decades. It’s going to be much more difficult to buy into power in the future.
None of the present political parties, either alone or in any combination can remedy this national psychosis. Bersatu cabinet members have shown their disdain for transparency, in honoring their pledges, and have been implementing their own agendas. PKR ministers have been enjoying the trappings of office. They are changed people from the days they were in opposition. 
The Malaysian Malaysia dream of Tunku Abdul Rahman is fading away into a Wahabi state with all the tribal trimmings, pushed by the Malay-centric parties on the people.
The only hope for a cure is for intellectuals, activists, writers, lawyers and other professional people, members of royal families, along with ordinary citizens, led by those who once experienced a Malaysian Malaysia to come together to initiate change. 
This doesn’t have to immediately become a political movement, but a diversity of social and cultural organizations that refocus the narratives back to the old Nusantara values, society once cherished. This movement could advocate de-Arabizing the Malay language and returning to Islam Hadhari (today) with its wider universal values. Kampongs need revitalization, where mosques become centers of vocational and community education. Cottage industry can be revitalized to develop local sustainable economies. This would also mean dissolving state economic development corporations and their subsidiary companies that are full of corruption and taking market space away from local entrepreneurs. 
The states need their sovereignty back. They need to campaign for local government and Citizen Development Committee elections, so that as many people as possible can participate in some level of governance. History needs to be taught as it really was. A country without a deep sense of history is a country without a soul.
If such a movement could ever gain momentum, some of the old political partisans from the PKR, DAP, and political forces in Sabah would come onboard. This is not an impossibility. Thanathorn Juangroongruangkit’s Future Forward Party made a successful debut in Thailand’s general election last year, and is very quickly becoming a mass social movement aimed at changing Thailand’s current political paradigm.

Murray Hunter is a Southeast Asia-based development specialist and a frequent contributor to Asia Sentinel.