Even Dr M thinks Najib will lose but a debate with Anwar is still vital

THE RIGHT TO CHOOSE The polls are looming and Malaysia is gearing up for the most hotly-contested general election ever. Unlucky 13 may be the one that finally breaks the Barisan Nasional's 50-year dominance over Malaysian politics and welcomes the Pakatan Rakyat to Putrajaya.

With all things in the balance, it is only right that the people of Malaysia test the ability of its two prospective prime ministers on a public stage to discuss public policies. Yes, it’s high time we see a Najib Razak - Anwar Ibrahim debate.

For the record, the Republican Presidential candidates in the United States have already had 20 debates; which has helped narrow the field down to only 4 candidates. The debate floor is a great place to gauge each candidates stand on such things as immigration laws, English as the official language of America and setting up more jobs for unemployed Americans.

So why can’t Malaysia have a debate between Najib and Anwar?

Even Mahathir is worried Najib will lose

It is also telling that former premier Mahathir Mohamad has openly advised Najib not to debate Anwar. It immediately sparked talk that Mahathir was afraid the technically less competent Najib would disgrace himself in such a debate.

Indeed, the reason Mahathir trotted out defied logic, insisting that a 'debate' made sense only if Anwar shared the current the BN's views.

"What’s the point of debating when everyone knows his stand, and the debate won’t change this. It’s a different case if Anwar shares the government’s opinion on matters raised," the government media reported Mahathir as saying.

At the root of the BN's problems is that Najib Razak is merely caretaker prime minister, one who was appointed to the post by his party after an internal power struggle that ousted former premier Abdullah Badawi. Najib should have immediately called for snap general elections to win his own mandate from the people, but he chickened out, knowing that he was likely to perform worse than Badawi. Only one year remains of the BN's 5-year mandate now, with Parliament due to automatically dissolve in April 2013 regardless of whether Najib calls for polls.

On the other hand, Anwar has been prime minister in waiting for too long. Anwar Ibrahim is now the leader of the opposition pact Pakatan Rakyat, and if it wins more of the 222 seats in Parliament than BN, Anwar will finally become PM. Back in 90s, Anwar was already the hottest Malay leader in town. Then he was the Umno deputy president and even Mahathir feared him, so much so that sodomy charges were fabricated to bring down and jail Anwar.

At that time, Najib was nowhere in the radar, unable to command a following of his own. 

In fact, he claimed to be one of Anwar's biggest supporters then. And so did others like current Deputy Prime Minister Muhyiddin Yassin and Defense minister Zahid Hamidi. With Anwar released only from jail in 2004, it is not surprising that these men switched their allegiance to Mahathir, and now, they are keeping an eye on premiership for themselves. As for Mahathir, sure he would rush for the chance to be PM again - if Malaysians would vote for him that is - but basically, his efforts are now focused on getting his son Mukhriz to take over Umno and the premiership in the round after GE-13.

Paranoia only confirms Anwar's legitimacy to be PM

This is why since 1998, the BN government has gone to incredible lengths to keep denying Anwar his shot at the premiership. In fact, the change in the Malaysian political scene can be traced back to his detention under the dreaded Internal Security Act in 1999. This was the event that galvanised the opposition movement in Malaysia. And every political move the Umno-led BN has made since has been designed to keep Anwar out of the race for prime minister.

So silly is this thinking that many pundits say it is because of this very paranoia of Anwar, that Mahathir and gang have actually trapped themselves now. Always worried that justice will finally come and they will be made to answer for their misdeeds, they have helped themselves to huge chunks of the national wealth resulting in RM888 billion in illicit outflows to overseas accounts. They have also neglected their duties, the economy and the weak governance of the country have chased away massive foreign investment. At the same time, by their sheer insistence to 'shoot at sight' Anwar and his Pakatan cohorts, they have unwittingly confirmed Anwar's legitimacy as challenger for the Malaysian premiership.

So, barring other candidates who feel that they can garner the confidence of the Parliament as prime minister, these two gentlemen are Malaysia’s heavy-weights for the main contest. And should there be other candidates, they too should be allowed their chance to debate so that Malaysians as a whole benefit and get to choose the leader they believe can best deliver the job.

What does the Constitution say

Article 43 (2) states - The Cabinet shall be appointed as follows, that is to say: (a) the Yang di-Pertuan Agong shall first appoint as Perdana Menteri (Prime Minister) to preside over the Cabinet a member of the House of Representatives who in his judgment is likely to command the confidence of the majority of the members of that House;

The key to being prime minister in Malaysia is that a member of the House of Representatives command the confidence of the majority of the members of that house. Malaysians vote in fellow citizens as members of the House of Representative and 'pass on' the responsibility of choosing the Prime Minister to these elected representatives. Trust is passed onto these reps to make the wisest choice to benefit all. Whether these reps betray their countrymen and instead vote based on instructions from 'higher authority' in their party or in line with bribes taken will determine whether they are re-elected in the next round.

So the people must keep tabs and do not take for granted their reps will not betray their trust. But how can the people of Malaysia gauge the capabilities of whom will best fit the role of Prime Minister? A public debate would do fine.

But Malaysians still think MPs are their bosses!

A public debate is a medium by which the public can see and gauge for themselves the candidates with aspirations to lead the nation. Any reservations can then be voiced out to their respective Members of Parliament and the voice of the people must then be taken into account when choosing the person that would command the confidence of the House of Representatives to be PM. It is a process by which the people of Malaysia can be and should be part of. How difficult it this? Is this not a hall-mark of a progressive and mature democracy?

Sad to say, in many parts of the country, the people feel beholden to the reps. They feel their MPs are their bosses and not the other way around. But allocations given to the MP to distributes to the needy are actually money belonging to the nation - the Malaysian people as a whole. The elected rep is just a person chosen to undertake this task and the basis for choosing him or her should be trust.

The MP's constituents chose him because they trust him. So he has to do right by them and not behave as if they owe him and need to thank him and be grateful to him. This is the problem with Malaysia and only a government that will not take advantage of the rural people and instead educate them on their rights should be elected in GE-13.

This is 2012 and Malaysia is already very late in the people awareness and empowerment game.

Cannot function without a script written out for him

Yet in true BN government-knows-best form, Najib Razak will not take part in a public debate. And Mahathir supports this fully, although the older man's reasons may be less flattering to Najib than the younger man realizes!

But why won't Najib take on Anwar. At 58, Najib should possess greater fire and derring-do than the 64-year-old Anwar.

Perhaps, it is because in a public debate, Najib Razak’s most obvious flaw will be on show. He is a 'scripted' man - and in a volatile environment of a public debate where scripts are written on the spot by oneself as one speaks - he would simply be dumbfounded. Yes, the cat is out of the bag. Without scriptwriters, Najib will have nothing to say. Unaided, Najib would fail miserably against Anwar Ibrahim, a man who has been tried, tested and tempered through all temperatures on the most public of forums including the two Umno-instigated sodomy trials.

Bear in mind, Anwar has been defending himself in since 1999. He was not only the fastest-rising and most popular Finance minister of the Southeast Asian region, but he  has borne the brunt of all sorts of attacks against his sexuality, morality, character and personality. Both in the public sphere and in the courts of law.

Winner is obvious, and there may be sniggers but ...

In an immediate face-off the winner is obvious. But Najib should not be so vain and shallow as to refuse a debate because he knows, like the rest of the nation, he will surely lose. He must adopt a more gung-ho attitude and not just roll over and die. Style is not really that important, neither is articulation. Facts and substance are.

This is what Najib, at 58, should learn. He is no longer 18 and trying to show off to his girlfriend. He is Prime Minister of Malaysia and Malaysians want to hear what he has to say. How can he just drop his head and pretend it is not important. Not only will his critics in the Pakatan have a field day ridiculing his cowardice, even his own people in Umno will doubt him even more. Does Najib not think Mahathir would not in private sneer at him and perhaps tell common friends that 'Najib is so useless, I have to come out and help him to get out of it!' Isn't this a very likely reaction, even if not from Mahathir, others in Umno will surely say so.

Above all, Najib owes his countrymen. They already know him and they are entitled to know whether he has more to him than he has shown so far. Really, he should recognize their rights. Otherwise, he should talking about his dad, Abdul Razak who was the second premier, all the time as if being Razak's son means he would never do anything to harm Malaysia. But is not keeping Malaysia backwards and allowing ruthless opportunists like Mahathir to call the shots a slap in the face to the memory of his dad. One really wonders if Razak would approve of Mahathir or perhaps would have been even worse than Mahathir if he had ruled Malaysia longer.

Reclaim your rights

Malaysians should reclaim their rights and their nation. A public debate is the basic building block of a democracy. It is not an elocution or a beauty contest but a forum where the ideas and policies of two or more different quarters can be publicly evaluated, and the people can make up their minds. The prime minister's post is the highest executive job in the land. Malaysians have a right to gauge the potential of each candidate for themselves and not be curtailed by what the Umno-BN chooses because it is not to their disadvantage.

Finally, the prime minister can be anyone who is a member of the House of Representative and not limited to president of Umno. And to leave no room for doubt as to how the prime minister is chosen, all candidates must be made to lay out their plans and ideas and aspirations for Malaysians to vet through and to eventually approve of - whether at the ballot boxes on their own or through their reps in Parliament.

This is playing fair, this is playing fair according to the rules of democracy. This is the sign of a mature democratic country. If Najib or any other candidate in the future - whether from BN or Pakatan - refuses to debate in the run-up to any major election, he or she should not even be nominated to contest.

by  Maclean Patrick & Wong Choon Mei

Malaysia Chronicle

Malaysia's Slowing Performance

There are strong institutional reasons for the lagging performance against its regional neighbors








In the 70 years since World War II ended, East Asian economies, including Malaysia, appear to have largely got performance right. Malaysia was also one of 13 countries identified by the Commission on Growth and Development in its 2008 Growth Report to have recorded average growth of more than 7 percent per year for 25 years or more. Malaysia achieved this spectacular performance from 1967 to 1997.

However, since the Asian Financial Crisis of 1997 and1998, Malaysia’s economic performance when compared to previous decades has been lackluster and most macroeconomic indicators are trending downwards. This was confirmed by Prime Minister Najib Tun Razak himself in the publication on March 30, 2010 of the New Economic Model – Part 1. This was a very brave move but a necessary one by the premier as he acknowledged publicly the failures of Malaysia’s current economic model in order to demonstrate urgency for reforms.

The New Economic Model identifies domestic factors such as weak investor confidence, capability constraints (weak human capital, entrepreneurial base and innovative capacity) , productivity ceilings and institutional degradation and external factors such as a sluggish global economy caused by the global financial crisis of 2008-2009 and the rise of neighbors in the region in contributing to the declining growth trajectory.

If we were to revisit the determinants of growth and agree that proper institutions form the overall structure that determines long-term sustainable growth, then the logical response is to reform Malaysia’s institutional set-up, as it must be the deepest determinant of what is hindering economic growth.

This view is further strengthened as Malaysia’s other deep determinants, geography and trade, are favorable. The country has abundant natural resources, is shielded from natural hazards and is well-located strategically both geopolitically and economically. Malaysia has also benefitted tremendously from being an open economy, especially in the merchandise sector.

The New Economic Model also reports that regional challenges from China, India and Vietnam, etc. are a cause for Malaysia’s declining economic performance. What has changed about these countries? They have all undertaken institutional reforms: China since 1978, India since 1992 and Vietnam since 1986. They are reaping the benefits while Malaysia has stalled in its institutional reforms since the 1990s, regressed in some ways and is suffering from the consequences.

The above points stress the importance of institutional reforms in Malaysia, something that Najib has ironically neglected in his signature policies – 1Malaysia, Government Transformation Programme and Economic Transformation Programme.

According to the Growth Commission report, “…fast sustained growth is not a miracle; it is attainable for developing countries with the ‘right mix of ingredients.’ Countries need leaders who are committed to achieving growth and who can take advantage of opportunities from the global economy. They also need to know about the levels of incentives and public investments that are necessary for private investment to take off and ensure the long-term diversification of the economy and its integration in the global economy…”

Michael Spence, the Chairman of the Growth Commission, elaborated on his extensive experience working with developing countries on growth issues in his latest book by emphasizing two important characteristics for developing countries to ensure long term sustainable growth – the role of political leadership and democratic norms. He suggests four characteristics for governments that are necessary requirements to underpin long term growth:

1. The government takes economic performance and growth seriously.
2. The governing group has values that cause it to try to act in the interest of the vast majority of the people (as opposed to themselves or some subgroup, however defined)
3. The government is competent and effective and selects a viable sustained-growth strategy that includes openness to the global economy, high levels of investment, and a strong future orientation.
4. Economic freedom is present and is supported by the legal system and regulatory policy

Manifestations of Malay/Muslim Supremacy

Malaysia is classified as a non-democratic state by all international indexes measuring quality of democracy. This is also affirmed in academic circles. During the boom years, Malaysians accepted this tradeoff – restricted freedom for economic growth. Since 1997/98, this has changed as expected. The government has not delivered on growth, therefore the natural demand for reforms and by extension freedom.

There is consensus that Malaysia needs extensive economic, political and social reforms. This is all the more evident IF we agree that institutions are key to long term growth. Also, IF we agree with Spence, these reforms must come from a government with the four characteristics identified above.

Astute observers of Malaysia know the reasons why the present administration and the ones before were unable to make fundamental reforms. This has much to do with the ideology of Malay/Muslim Supremacy as defined by the United Malays National Organization (UMNO) and accepted by large swaths of Malaysians, Muslims and non-Muslims alike.

From the literature we can infer that the ideology of Malay/Muslim supremacy has provided the perverse incentives that have manifested themselves in many ways. The more critical ones are:

• Institutional degradation: The deterioration in the quality of Malaysia’s institutions, particularly during former Prime Minister Mahathir Mohamad’s years, such as the lack of independence between the branches of government; the politicization of the civil service, producing a culture of risk aversion and a lack of creativity; and the expansion of the non-transparent Government Linked Corporations (GLCs):
• Crony capitalism: Affirmative action in the name of Malays has become a smokescreen for crony capitalism. Affirmative action is the instrument for rampant elite-based (from all races, not only Malays) corruption. High levels of income inequality in Malaysia in general but more so within the Malay community prove this.
• Race based affirmative action: Race-based affirmative action in itself is recognized as one of the important reasons for Malaysia’s declining economic performance. Malaysia’s focus on the ex-post equalization of outcomes across ethnicities rather than ensuring effective ex-ante equalization of access to opportunities has had important direct efficiency implications, affecting growth by distorting incentives and thereby the competitive process.
• Excessive centralization: An interesting institutional feature is the lack of decentralization in the country, which is nominally a Federation and the top-down approach in public policymaking. This is a key disconnect in the reform rhetoric in the ETP and GTP. To strengthen public service delivery, local communities need to be empowered. Fiscal relationships between federal-state-local also demonstrates institutional failure.
• Feedback mechanisms: Related to Malaysia’s top-down approaches is an almost complete disregard for monitoring and evaluation. As a result there is little feedback from outcomes into policy design. The obsession with centralizing policy-making is also evident in lack of information sharing both within government and with the public.

The need to remove UMNO to create a new “people based ideology”

In relation to competency, the quality of the human capital base in Malaysia is suspect. This is due to the quality of education from preschool through tertiary and on-the-job training. It is linked with ethnicity issues and is exacerbated by the outflow of high-skill individuals and affected by the inflow of low-skill labor.

There are not only problems on the supply side of the market for skills, but also on the demand side, where firms may not be competitive enough to offer higher wages. The market for skills itself is also problematic in that the price mechanism does not work adequately and this is where wage-setting issues play a role.

A bigger and more important challenge than competency is the question of internal competition. This is quite distinct from external competitiveness, on which front Malaysia has scored relatively well in the merchandise sector given its stage of development and the nature of its manufacturing processes which are still dominated by competitiveness identified by low cost rather than high value.

Internal competition refers to the allocation of certain factors including labor, capital, land and product markets. Internal competition works well when there is good governance, openness and transparency. It relates to the need for deregulation, liberalization and competition policies especially in key areas such as government procurement and the activities of GLCs in the domestic economy.

All of these are also needed to produce effective competition for good ideas and good policies as well as competition in the political arena. This of course challenges the basic idea of meritocracy and affirmative action in Malaysia.

To reform these will ostensibly mean changing Malaysia’s embedded incentives and institutions. This definitely means undoing the manifestations of Malay/Muslim supremacy.



Can UMNO implement these reforms?

My hypothesis is that the present leadership in Malaysia within the Barisan Nasional framework is incapable of institutionalizing reforms as the present leadership does not meet the criteria set out by Spence for a simple reason – its ideology. This ideology that overrides and at the same time influences all other norms, rules, conventions, habits and values is the ideology of Malay/Muslim Supremacy.

As the Prime Minister of Malaysia always comes from UMNO it will be impossible for him or her to undo the cornerstone ideology of his/her political party and its adherents in the Barisan Nasional, which includes Malays and non-Malays.

The logic above is discussed extensively in the political science literature. To summarize, the Malay/Muslim ideology provides psychological and material benefits to its adherents. This makes it a potent force for groups that rely on this ideology. However, since it is deeply embedded, it is also extremely difficult to counter when needed. Malaysia’s present institutional equilibrium is a reflection of the strength of the adherents of Malay/Muslim supremacy, known by its Malay-language slogan Ketuanan Melayu.

There are many examples to illustrate Malay/Muslim supremacy but the one that is cited most often as holding back Malaysia’s economic reforms is affirmative action, the most comprehensive in the world. It has by inference been touted as the one of the key reasons for Malaysia’s declining economic performance although causality has not been explicitly demonstrated.

Supporters of affirmative action argue that Article 153 of the Federal Constitution provides the Bumiputeras the right to this extensive affirmative action. However this is factually incorrect.

Article 153 of the Malaysian Federal Constitution states that:

153. (1) It shall be the responsibility of the Yang di-Pertuan Agong to safeguard the special position of the Malays and natives of any of the States of Sabah and Sarawak and the legitimate interests of other communities in accordance with the provisions of this Article.

(2) Notwithstanding anything in this Constitution, but subject to the provisions of Article 40 and of this Article, the Yang di-Pertuan Agong shall exercise his functions under this Constitutions and federal law in such manner as may be necessary to safeguard the special position of the Malays and natives of any of the States of Sabah and Sarawak and to ensure the reservation for Malays and natives of any of the States of Sabah and Sarawak of such proportion as he may deem reasonable of positions in the public service (other than the public service of a State) and of scholarships, exhibitions and other similar educational or training privileges or special facilities given or accorded by the Federal Government and, when any permit or license for the operation of any trade or business is required by federal law, then, subject to the provisions of that law and this Article, of such permits and licenses.

In more simple words, the Federal Constitution limits affirmative action to placement in the civil service at the Federal level, scholarships and permits and licences for Bumiputras and only if necessary and in a reasonable manner by the Prime Minister who advises the Yang diPertuan Agung.



Does the Prime Minister have the power to revoke or reform affirmative action policies?

Yes, he does. Malaysia is a constitutional monarchy where the monarch reigns but do not rule. Article 153 is subject to Article 40 and Article 40 states that the Yang diPertuan Agung must act on the advice of the Cabinet.

40. (1) In the exercise of his functions under this Constitution or federal law the Yang di-Pertuan Agong shall act in accordance with the advice of the Cabinet or of a Minister acting under the general authority of the Cabinet, except as otherwise provided by this Constitution; but shall be entitled, at his request, to any information concerning the government of the Federation which is available to the Cabinet.

The decision to continue or reform affirmative action policies and the attendant institutions in Malaysia lies solely at the prerogative of the Prime Minister along with his colleagues in Cabinet as stated in Article 40.
With power centralized in the Executive (Cabinet), and with the Prime Minister already having six Ministers of 31 from the Prime Minister’s Department in the Cabinet, and with the Prime Minister himself holding two portfolios (Prime Minister and Finance Minister I), and legitimised by the Constitution (Article 40), the Prime Minister should on all counts, be able to implement these reforms without much difficulty.

Yet he has been unable to do so for the simple reason that the Federal Constitution may be the law of the land but it is clearly not the supreme power/ideology in Malaysia. The supreme power/ideology is the primacy of Malays/Muslims as defined by UMNO. Hence the Prime Minister may have de jure power to reform, but he does not have de facto power. This power resides among the Malays and non-Malays who support Malay/Muslim supremacy and the current institutional set-up.

Until and unless this supreme ideology of Malay/Muslim supremacy is removed, Malaysian politicians will be constrained in making the necessary institutional reforms to move Malaysia towards long term sustainable growth.







Asia Sentinel.com
Written by Greg Lopez, a PhD candidate at the Crawford School of Economics and Government, Australian National University.

A Malaysian Saga of Corruption Ignored

One of Mahathir's protégés evades charges, but his accusers are nearly capsized

On June 4, 1995, Tajudin Ramli, then one of Malaysia's brightest bumiputera, or native Malay stars, was named a Tan Sri, the country's second highest honor, by the country's reigning sultan. At the time he had been the managing director of Malaysian Airline System, Malaysia's nationally owned flag carrier, since July 1, 1994.

Like his friend the former Prime Minister Mahathir Mohamad, the then 49-year-old Tajudin was a native of Alor Setar in Kedah state. He would be the recipient of a long list of national honors including being president of the Malay Chambers of Commerce and Industry of Malaysia. He was regarded as a shining example of the bumi businessman that Mahathir wanted to foster to run the country and take the commanding heights of the economy back from the ethnic Chinese.

Unfortunately, according to a long list of whistle-blowers within the airline, he was also involved in looting it of tens of millions of dollars and very nearly putting it into bankruptcy, so that it had to be rescued by the government before he was forced out in 2001. It is a story that has taken years to emerge, and when officials recommended prosecution, they came under fire that nearly ruined their careers and almost put them in jail.

According to allegations in documents made public last week on Malaysia Today, the widely read website of fugitive gadfly Raja Petra Kamarudin, Tajudin colluded with three other MAS officers and directors through two nominee companies, one in Singapore and the other in Hong Kong, to establish a company called Advanced Cargo Logistics GmbH Germany, at Hahn Airport in Frankfurt, Germany, to provide ground-handling services for MAS.

According to a report filed in March of 2007, to then-Prime Minister Abdullah Ahmad Badawi by Ramli Yusuff, the director of Malaysia's Commercial Crime Investigation Department and an official who seems to have been singularly incorruptible, "Tan Sri Tajudin Ramli was in control of MAS from 1994 to 2001. When he left MAS in 2001, MAS had accumulated losses in excess of RM8 billion (US$2.54 billion). Many projects were made under very suspicious circumstances."

The ACL agreement, Ramli's report said, "was not an arms-length dealing." Evidence showed that all of the directors were closely connected to Tajudin, including Rizana Mohd Daud, Tajudin's sister-in-law, his brother, Bistamam Ramli, and companies owned by Tajudin or his family.

MAS suffered losses of approximately RM10-16 million per month from the moment the government-owned airline began to operate into the Frankfurt airport, according to Ramli's report. "As of November 2000, MAS had suffered RM174 millon in losses." To prevent the airline from going bankrupt, the MAS board closed the Hahn project, only to have ACL sue the airline for RM300 million for breach of contract on the basis that the contract obligated MAS to fly into Hahn for 10 years. Tajudin himself then sued various parties and the government of Malaysia for RM13.6 million.

Ramli recommended a series of charges against Tajudin, Wan Aishah Wan Hamzah, the former MAS director, and others for not declaring their interest in ACL.

"Since ACL is controlled by Tajudin's family companies, it is therefore presumed…that he has used his office and position as Executive Chairman of MAS to benefit ACL when MAS entered into (the agreements,)" the report continued. "This offence is punishable with mandatory imprisonment (up to) 20 years and a fine not less than five times the sum of gratification."

"CCID's investigation has disclosed that there is sufficient evidence to prosecute Tajudin, Wan Aishah and (another official) for all of the above offenses." The case was then handed over to the Malaysian Anti-Corruptin Agency for investigation and possible prosecution.
What happened then was totally unexpected. Instead of preferring charges against Tajudin, the Malaysian Anti-Corruption Commission (MACC) went after Ramli Yusuff on three separate allegations, all widely reported in the media, that he had not declared his assets as required under Malaysian law despite the fact that he had declared them as required every year since he had been in office. He was also accused of misusing a Malaysian police airplane although on the flight in question he was on duty, in uniform, and escorted by other police officers. Malaysia's mainstream media, all of which are owned by component parties of the national ruling coalition, wrote that Ramli and his family possessed assets worth RM27 million. He was accused of abuse of power for allegedly forcing villagers in the Lahad Datu district of Sabah off their land to allow a company in which he had an interest to take it over.

Officials brought 75 witnesses to testify against Ramli in a Sessions Court in Kota Kinabalu. Ultimately, Ramli would face charges in three different courts as officials appealed his not guilty verdict before he was finally acquitted for good on Aug. 9. Inspector General of Police Musa Hassan, one of the country's top police officials, appeared in the Kota Kinabalu court to testify against Ramli, only to have Judge Supang Lian tell him that his "evidence was incredible and not to be believed."

Attorney General Abdul Gani Patail appealed the Kota Kinabalu ruling to the High Court but lost again before Judge Rahman Sebli, who acquitted Ramli. Finally, Ramli was acquitted earlier this month outright by Judge SM Komathy, for the third time without having to put on a defense.

Ramli, however, wasn't the only one to go before the courts. His lawyer, Rosli Dahlan, who was also the lawyer for the airline itself, prepared Ramli's defense against the criminal charges only to be arrested himself on charges of collaborating with Ramli. At one point, on a pretext that Rosli had mishandled a letter from the MACC, police officers invaded Rosli's office, arrested and handcuffed him, then kept him in a cell overnight, refusing him medical treatment for injuries to his wrists from the handcuffs. They also refused his request to file a report against the arresting officers.

Rosli went to court in January in a court specially created to handle MACC cases, only to have the case fizzle out when a prosecutor announced that neither Rosli nor Ramli had been charged for corruption and that Rosli wasn't a suspect for anything.

"One wonders why, in Allah's name, since Rosli was a witness, did the MACC not interview him nicely or ask for his cooperation?" asked blogger Din Merican. "Why did the MACC abuse, arrest and charge him if they needed his cooperation? Why did the MACC conspire with the mainstream media to widely publicize that Rosli was arrested and charged for hiding assts worth RM27 million? Why after doing all that, then did they on the first day of Rosli's trial the MACC meekly admitted that Rosli was just a witness? Is there something amiss?

For his part, Rosli has charged that the MACC, Bank Negara, the government of Malaysia and the three major newspapers owned by the political parties had conspired with those in power to damage him for his attempts to defend Ramli.

And for his part, Tan Sri Tajudin Ramli remains uninvestigated and uncharged, and a continuing example of bumiputera power at the top of Malaysia's political and social structure.

Asia Sentinel.com 

Malaysia's Disastrous Capital Flight

Money leaves the country on an unprecedented scale

Churches are not the only thing to have been going up in flames in Malaysia. Take a look at the nation's foreign exchange reserves. They fell by close to 25 percent during 2009 according to investment bank UBS even though the country continued to run a huge surplus on the current account of its balance of payments.

Says UBS: "Question: which Asian country had the biggest FX losses in 2009?" The answer is Malaysia and by a very large margin; we estimate that official reserves fell by well more than one quarter on a valuation-adjusted basis". It describes the situation as "bizarre" and contrasts Malaysia with other countries with large current account surpluses – Thailand, China, Taiwan, Singapore, and Hong Kong – which have seen their reserves increase – as should be expected.

In short there has been an exodus of money from Malaysia on a scale which surpasses that which occurred during the Asian crisis. Nor is this just a mirage. The decline is also reflected in a sudden decline in base money supply – even while, thanks to Bank Negara, broader M2 has continued to grow modestly.

Who is responsible for this massive outflow? And where has it gone? The questions cannot be answered from the data and probably will not be by a government that knows its own state-controlled enterprises, headed by Petronas, may probably be responsible for part of it. The more certain reason however is the outflow of local private capital has been taking place on an unprecedented scale in response to political instability, massive official corruption and discrimination against non-Malays.

This capital bloodletting has as yet attracted little attention because Malaysia's foreign debt levels had declined dramatically since the Asian crisis and its reserves reached very healthy levels. So the outflow has not disturbed the financial markets, and Bank Negara has easily been able to keep interest rates low and the currency strong.

But unlike 1998, when the exodus of hot foreign money was a major contributor to the crisis, foreigners cannot be blamed. There is little speculative interest in the ringgit and the Malaysian bourse has rather fallen off the map as far as foreign institutional money is concerned. The BRICs, India, China, Russia, Brazil have taken the merging market lead once dominated by Southeast Asia.

Nor is there much evidence that the Middle East money which was supposed to be flowing into Muslim Malaysia, into holiday apartments or Johor's massive Iskandar development zone, has been much in evidence. Malaysia's one recent success, the development of its sukuk (Islamic bond) market may have caused more capital outflow than inflow. At any rate any overall net inflow of foreign capital whether into bonds, equities, factories or real estate has been dwarfed by the exodus of Malaysian money.

The latter is reflected in the weakness of private sector investment, which now trails public investment. Indeed it explains why the economy remains weak despite very healthy prices for most of Malaysia's commodity exports. The nation has been running a current account surplus of more than 10 percent of gross domestic product for the past decade and hit about 17 percent of GDP in the year just ended. Initially this surplus was needed to pay down debt accumulated during the mid-1990s Mahathir boom years and to rebuild foreign exchange reserves to healthy levels.

But subsequently it became simply a consequence of the weakness of private investment. Domestic investors were discouraged by the corrupt and warped system and foreigners moved to China and elsewhere. GDP growth has become ever reliant on government stimulus – again racially biased in its allocation -- financed by a persistently large budget deficit.

Meanwhile, publicly controlled capital has been rushing overseas. Petronas has been spending its billions in profits around the world as it attempts to become a major global player – at the expense of Malaysian citizenry in general and the oil and gas producing states in particular. Other government-controlled entities such as Malayan Banking Bhd have been bidding top dollar for foreign assets – such as Bank Internasional Indonesia.

Often with the exodus of money goes an exodus of talent as highly skilled persons disadvantaged by race or, as in the case of some Malays, disgusted by local corruption or primitive religious authorities, take themselves and their capital to Australia, Canada, India, China, etc.

The 2009 reserves loss may have had some specific cause which will not be repeated. But it has merely served to underline a dismal trend which has been in evidence for the best part of a decade. Malaysia has so far been saved from itself by the commodity price gains of the past five years – with even the late 2008 collapse now largely reversed. Oil and palm oil may be off their peaks but both are now double their prices of five years ago.

It is better not to imagine what will happen to Malaysia if prices collapse to 2004 levels and stay there. Better now to address the real reasons behind capital outflow and lack of private investment.




AsiaSentinel.com