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.

Malaysia's Mahathir Defends Sarawak Chieftain

Charges of looting Sarawak could just be electioneering, he says
Malaysia’s former Prime Minister, Mahathir Mohamad, has defended Sarawak’s embattled chief minister, Abdul Taib Mahmud, questioning calls by international NGOs for investigations of Taib’s vast fortune.

"When an election is near, you get funny things like this coming out," Mahathir told reporters at a press conference Tuesday. "If it is just a political game to try and undermine somebody's political image then I think it is not right."

If the allegations are true, the 86-year-old Mahathir said, the authorities could be expected to take action. In May, Swiss authorities announced they were investigating accounts held in Swiss banks by the Taib family for evidence of corruption. Shortly after that, the Malaysian Anti-Corruption Commission announced it would also investigate Taib’s holdings, although observers in Kuala Lumpur said it was unlikely that the MACC would follow through, Indeed, one source told Asia Sentinel recently that the investigation had “gone cold.” A Taib spokesman said the funds had been legitimately deposited and that there was no evidence of criminality.

Many political observers expect Prime Minister Najib Tun Razak to call national elections in the early part of 2012, possibly in March. Sarawak, the country’s largest state, is key to efforts by the Barisan Nasional, the country’s ruling national coalition, to maintain a healthy majority in parliament. Both Najib and Mahathir earlier this year reportedly tried to dissuade the scandal-ridden chief minister to quit before state elections.

When Taib refused to step down, both had to criss-cross the state, campaigning for Taib’s coalition. However, the coalition produced a two-thirds majority in the state assembly. Although he had publicly offered to step down, the magnitude of the victory impelled him to stay in power.

Mahathir’s defense of Taib was generated by the fact that on Tuesday, NGOs from six different countries issued a joint letter demanding that Malaysia’s sultan appoint a royal commission of inquiry and that authorities arrest and prosecute Taib and 13 members of his family for massive fraud, theft, corruption, illegal appropriation of land and abuse of public office. They allege that the looting of Sarawak’s rich timber and other natural resources has earned Taib’s family billions of US dollars through investment in as many as 400 companies in 25 countries.

They also demanded that a multi-agency task force be appointed to attempt to repatriate the vast sums from other countries to the people of Sarawak.

Research released earlier this month by the Switzerland-based Bruno Manser Fund said official documents show the Taib family stake in 14 Malaysian companies alone is worth US$1.46 billion. The fund has uploaded all of the documents onto the Internet. They can be found here. Billions more are believed to be held in other countries.

The fund said its research only covers publicly available information from Malaysia’s Registry of Companies and other official documents and the total of all of the Taib family’s holdings could run well in excess of that amount.

“Not counting their more hidden wealth, this puts the Taib family firmly into the category of one of the richest families in the world and makes them far richer than the Queen of England (whose assets are a mere half billion pounds),” the fund said.

In all, according to the fund, named for a Swiss environmentalist who disappeared in Sarawak in 2000 while trying to aid the Penan tribe, the family also has stakes in companies in Australia (22 companies), Bermuda (1), the British Virgin Islands (7), Brunei (1), Cambodia (1), Canada (9), the Cayman Islands (1), Fiji (3), Hong Kong (7), India (2), Indonesia (3), Jersey (1), the Kingdom of Saudi Arabia (1), Labuan (1), New Zealand (5), the People’s Republic of China (2), the Philippines (1), Singapore (2), Sri Lanka (1), Thailand (2), the United Arab Emirates (1), the United Kingdom (4), the United States of America (6) and Vietnam (1).

Allegations are that as chief minister, Taib granted timber access permits to a plethora of companies, most of them owned by ethnic Chinese, that denuded much of the state of its tropical rainforest. The two NGOs previously reported that Taib's children are the shareholders and directors of numerous companies controlling residential and commercial buildings in Canada, Australia, Britain and the United States together worth hundreds of millions of US dollars. Many of the assets came into their possession when they were in their early 20s and were still college students with no visible access to legitimate resources to invest.

Taib has been chief minister, finance minister and planning and resources management minister of since 1981 and he hardly conceals his vast wealth, riding around the capital of Kuching in a cream-colored Rolls-Royce sedan.

Taib, his four children, eight siblings and his first cousin Hamed bin Sepawi have stakes in 332 companies worth several billion US dollars in Malaysia, the report says. “The Taib family’s share in 14 large companies’ net assets alone has been calculated at US$1.46 billion (RM4.6 billion). The three largest Taib family-linked companies are the 84 percent Taib-owned Cahya Mata Sarawak (net assets RM2.4 billion), the 25 percent Taib-owned Custodev Sdn Bhd (net assets RM1.6 billion) and the at least 35 percent Taib-owned Ta Ann Holdings Bhd (net assets: RM1.4 billion).

Cahya Mata Sarawak is a construction conglomerate listed on the Kuala Lumpur stock exchange (KLSE 2852) that allegedly has benefited enormously from a cement monopoly and from untendered public contracts awarded by the Taib-led Sarawak state government. Ta Ann Holdings Bhd (KLSE 5012), which is chaired by Hamed Sepawi, is an internationally active logging company. Since its foundation in the 1980s, Ta Ann has been granted more than 675,000 hectares of logging and plantation concessions by the Taib government. Privately-held Custodev Sdn Bhd is a Sarawak-based property development company. Achi Jaya Holdings (net assets RM550 million), which is wholly owned by the Taib family, holds a monopoly over log exports from the timber-rich state.

“We consider these corporate interests of the Taib family to be illicit assets”, said Bruno Manser Fund director Lukas Straumann in the prepared release. “There are many clear indications that Taib has abused his public office to build a corruption and fraud-based billion-dollar empire.”

“We are shocked to see that the Taib family has so shamelessly enriched itself while the people of Sarawak have to struggle with widespread poverty and an appalling lack of infrastructure and government services.”
The Bruno Manser Fund called on anti-corruption and anti-money-laundering authorities worldwide to investigate the Taib family’s business activities and freeze Taib family assets in their countries.





Asia Sentinel.com

Sarawak Chief Minister's Vast Holdings Revealed

A Swiss NGO says Abdul Taib Mahmud’s holdings span the globe and then some...


The looting of the riches of the Malaysian state of Sarawak has earned the family of Chief Minister Abdul Taib Mahmud billions of US dollars through investment in as many as 400 companies in 25 countries, according to allegations by an NGO that has been stalking him for months.

Research by the Switzerland-based Bruno Manser Fund said official documents show the Taib family stake in 14 Malaysian companies alone is worth US$1.46 billion. The fund has uploaded all of the documents onto the Internet. They can be found here: http://stop-timber-corruption.org/resources.

However, the fund said, its research only covers publicly available information from Malaysia’s Registry of Companies and other official documents and the total of all of the Taib family’s holdings could run well in excess of that amount.

“Not counting their more hidden wealth, this puts the Taib family firmly into the category of one of the richest families in the world and makes them far richer than the Queen of England (whose assets are a mere half billion pounds),” the fund said.

In all, according to the fund, named for a Swiss environmentalist who disappeared in Sarawak in 2000 while trying to aid the Penan tribe, the family also has stakes in companies in Australia (22 companies), Bermuda (1), the British Virgin Islands (7), Brunei Darussalam (1), Cambodia (1), Canada (9), the Cayman Islands (1), Fiji (3), Hong Kong (7), India (2), Indonesia (3), Jersey (1), the Kingdom of Saudi Arabia (1), Labuan (1), New Zealand (5), the People’s Republic of China (2), the Philippines (1), Singapore (2), Sri Lanka (1), Thailand (2), the United Arab Emirates (1), the United Kingdom (4), the United States of America (6) and Vietnam (1).

On May 12, in the wake of previous revelations by the Bruno Manser Fund and another reform NGO, the Sarawak Report, Swiss President Micheline Calmy-Ray announced that she was asking Swiss financial authorities to investigate the chief minister's assets held in Swiss financial institutions. In a letter to the Bruno Manser Fund, Calmy-Ray indicated that if the probe finds evidence of corruption from timber sales, Taib's Swiss assets could be frozen. There has been no indication of the progress of that probe.

At the time, a Taib spokesman said the funds had been legitimately deposited and that there was no evidence of criminality.

Allegations are that as chief minister, Taib granted timber access permits to a plethora of companies, most of them owned by ethnic Chinese, that have denuded much of the state, Malaysia’s largest, of much of its tropical rainforest. The two NGOs previously reported that Taib's children are the shareholders and directors of numerous companies controlling residential and commercial buildings in Canada, Australia, Britain and the United States together worth hundreds of millions of US dollars. Many of the assets came into their possession when they were in their early 20s and were still college students with no visible access to legitimate resources to invest.

Although the two NGOs have filed numerous complaints with the Malaysian Anti-Corruption Commission, the anti-graft agency only reluctantly agreed to investigate Taib’s holdings after the Swiss decision. A well-placed source told Asia Sentinel at the time that the MACC had no choice but to do so in the face of an international probe or face embarrassment. But, the source said after the new allegations, “that investigation has gone cold.”

Taib is the linchpin to control of Sarawak by the Barisan Nasional, the national coalition that controls the government in Kuala Lumpur. Despite widespread and embarrassing publication of Taib’s holdings by the Sarawak Report, both Prime Minister Najib Tun Razak and former Prime Minister Mahathir Mohamad campaigned energetically for Taib in April state elections, which the Barisan won, although with a sharply diminished ethnic Chinese vote. Although news media in Malaysia carried stories saying Taib had agreed to step down as chief minister after the election had concluded, he has not done so and there is little sign that he will.

Taib has been chief minister, finance minister and planning and resources management minister of since 1981. “He has been long criticized for corrupt practices and abuse of office but the Malaysian authorities have failed to take action against him, despite an ongoing investigation by the Malaysian Anti Corruption Commission,” a fund spokesman said in a prepared release. “Taib is a key supporter of Malaysian Prime Minister Najib run Razak’s ruling Barisan Nasional coalition.”

Taib, his four children, eight siblings and his first cousin Hamed bin Sepawi have stakes in 332 companies worth several billion US dollars in Malaysia, the report says. “The Taib family’s share in 14 large companies’ net assets alone has been calculated at 1.46 billion US dollars (RM4.6 billion). The three largest Taib family-linked companies are the 84 percent Taib-owned Cahya Mata Sarawak (net assets RM2.4 billion), the 25 percent Taib-owned Custodev Sdn Bhd (net assets RM1.6 billion) and the at least 35 percent Taib-owned Ta Ann Holdings Bhd (net assets: RM1.4 billion).

Cahya Mata Sarawak is a construction conglomerate listed on the Kuala Lumpur stock exchange (KLSE 2852) that has benefited massively from a cement monopoly and from untendered public contracts awarded by the Taib-led Sarawak state government. Ta Ann Holdings Bhd (KLSE 5012), which is chaired by Hamed Sepawi, is an internationally active logging company. Since its foundation in the 1980s, Ta Ann has been granted more than 675,000 hectares of logging and plantation concessions by the Taib government. Privately-held Custodev Sdn Bhd is a Sarawak-based property development company. Achi Jaya Holdings (net assets 550 million Ringgits), which is wholly owned by the Taib family, holds a monopoly over log exports from the timber-rich state.

“We consider these corporate interests of the Taib family to be illicit assets”, said Bruno Manser Fund director Lukas Straumann in the prepared release. “There are many clear indications that Taib has abused his public office to build a corruption and fraud-based billion-dollar empire.”

“We are shocked to see that the Taib family has so shamelessly enriched itself while the people of Sarawak have to struggle with widespread poverty and an appalling lack of infrastructure and government services.”

The Bruno Manser Fund called on anti-corruption and anti-money-laundering authorities worldwide to investigate the Taib family’s business activities and freeze Taib family assets in their countries.






Asia Sentinel.com

REVIEW - An Analysis of Malaysia’s 12th General Election

1.    Introduction

In our pre-election analysis, we estimated that the Opposition parties will win about 50 parliamentary seats and face a very strong challenge from DAP-Keadilan in Penang. We also warned of the strong wind blowing in the Indian and Chinese communities towards the Opposition. We did not and could not then anticipate the equally strong wave of Malay support for the Opposition which resulted in the Opposition gaining 82 seats in Parliament, denying the Barisan Nasional of its two-thirds majority, the first time since the May 1969 General Election. We had in our pre-election analysis noted the possibility of a divided outcome with a strong Malay government against a strong non-Malay Opposition. However, this did not materialize as Malay support for the Opposition was also strong resulting in multi racial Keadilan winning 31 seats and PAS 23 seat in Parliament. In fact, the popular votes obtained by UMNO (35.5%) and combined PAS/Keadilan (34.8%) was almost equal. Whilst the loss of Penang state to the Opposition did not come as a surprise after the first week of campaign with massive turnout at DAP ceramahs and large donations collected on the spot for the DAP candidates, the fall of Perak and Selangor was totally unexpected. What happened? What caused the massive swing?

Some facts on the 12th General Election should be noted and analysed. The Barisan Nasional within Peninsular Malaysia failed to obtain a majority of popular votes cast. It only obtained 49% of the popular votes in Peninsular Malaysia whereas the Opposition had the majority of popular votes – 51%. UMNO won 35% of popular votes against 34.8% won by PAS and Keadilan. Although the Barisan Nasional won 140 seats in Parliament, 54 seats came from Sabah and Sarawak. So, without Sabah and Sarawak, Barisan Nasional will not have even obtained a simple majority in Parliament. If the Federal Territory was to be considered as a state, the Barisan Nasional actually lost 6 states. In Negeri Sembilan, it survives with only a 4-seat majority. In Pahang, Barisan Nasional even lost the state capital, Kuantan. Even the Barisan Nasional fortress of Johor was successfully penetrated by the Opposition this time with both DAP and PAS winning seats. There are no safe bastions for Barisan Nasional anymore.

Although, the Chinese and Indian votes have decisively swung to the DAP and Keadilan, causing MCA, MIC and Gerakan to lose massive support, it was totally unexpected for UMNO to lose in urban and semi-urban Malay seats like Titiwangsa and Lembah Pantai (in Kuala Lumpur city), Shah Alam, Hulu Langat, Kuala Langat, Kuala Selangor, Gombak, Ampang, Sungei Petani, Merbok, Kulim, Nibong Tebal, Balik Pulau (in Penang), Parit Buntar and Bagan Serai in Perak. Barisan Nasional even loss Kuantan – the capital of Pahang and Indera Mahkota. With increasing urbanization with the urban population projected to increase to 73% in 2020, up from 62% in 2000, can UMNO prevent a slide in urban Malay votes? What made the urban Malays desert UMNO? This question needs to be addressed. For the MCA and MIC, it was clearly their worst ever electoral performance ever. In 1969, MCA won 13 out of 24 seats contested (54%), whereas this year MCA only won 37.5% of parliament seats contested. Gerakan was totally wiped out in Penang – its stronghold. The DAP campaigned that a vote for MCA or Gerakan is a vote for UMNO to capitalize on the anger of the Chinese community over UMNO. Hence, the track record of MCA and Gerakan was ignored with an emotional swing against UMNO.

2. What the Election Results Mean

Several broad conclusions can be drawn from the 12th General Election:-

(i) It is a seismic shift in Malaysian politics. A political tsunami as the Star headlines said. The old ways of campaigning may no longer work. Putting fear into voters minds did not work. The use of mainstream media to create spin or to demonise the opposition was detested by urban voters and had a counter-effect instead. From feedback, many urban voters were turned off by the spin especially in NST and Star.


(ii) The victory of DAP, Keadilan and PAS in many areas showed that voters do not buy the argument that the Chinese won’t support PAS and DAP won’t get Malay votes. As Dr. Farish Noor reported from the PAS Headquarters in Kota Baru on Saturday night (polling night), Kelantan PAS supporters cheered when the DAP gained control of Penang. So the notion Malays won’t support DAP was debunked that night in Kota Baru.


(iii) Makkal Sakhti (People Power), the cry of HINDRAF, caused a tidal wave of support from the Indian community towards the opposition. This seismic shift of Indian voters contributed to the defeat of many Barisan Nasional candidates, not only MIC candidates.


(iv) The Barisan Nasional’s brand of race-based politics is no longer an attractive proposition to voters. Chinese voters deserted MCA and Gerakan. Indian voters swung away from MIC. Many Malay voters switched to Keadilan, making Keadilan the biggest opposition party with 31 parliament seats. The Opposition parties won, not on race-based issues but across a range of issues that cuts across ethnic lines. The MCA and MIC lost whilst trying to portray themselves as defenders of their race. UMNO lost ground to Keadilan even with Anwar calling for an end to NEP. Is this then, a new paradigm for Malaysian politics that Malaysian voters are more taken in by wider national issues such as corruption, crime, cost of living, social justice and human rights which cuts across all ethnic groups rather than narrow ethnic issues that favour any particular race? Even MCA championing the cause of Chinese schools didn’t get much support from the Chinese community. But, PAS delivered votes to DAP and Chinese voters supported both PAS and Keadilan. Should MCA remain purely a Chinese party when it lost more Chinese votes to the DAP or should it become a multi-racial party and widen its appeal to non-Chinese? This has set the stage for a new era of multi-racial politics in Malaysia, perhaps the beginning of a two-party system which is healthy in any democracy.


(v) The loss of Penang, Kedah, Selangor and Perak can perhaps be partially attributed to complacency in the Barisan Nasional camp. Over-confidence in a proven track record may be another factor. In Penang, the non-Malay voters were unhappy with Gerakan for being unable or unwilling to stand up to UMNO. However, the Opposition’s ability to capture, in particular, Penang and Selangor, the jewels in the crown so to speak, and even Perak to a lesser extent, will enable DAP and Keadilan to attempt to provide a new model of governance, which if they succeed, could further strengthen their grips on these states in the next General Elections and extend their support in other states like Negeri Sembilan (remember earlier point: Barisan Nasional only have 4 seat majority in Negeri Sembilan). However, if the DAP and Keadilan mess up, they will lose their opportunity and the voters in the 3 states Penang, Perak and Selangor may revert to the Barisan Nasional. It is however, unlikely DAP and Keadilan will squander their chance. It is left to be seen if the new State Governments in Penang, Perak and Selangor can deliver. If so, expect them to control these states for at least two terms if the state governments are administered well with good governance, accountability and transparency.


(vi) The point has also to be made that never in the history of Malaysia has the Prime Minister ever lost his own home state. In Penang, UMNO/Barisan Nasional only retained 2 parliamentary seats, that of the Prime Minister and Second Finance Minister Tan Sri Nor Mohamed Yakcop. The 12th General Election by any reckoning is UMNO’s worst-ever performance, worse than in 1969 and 1999.

3. What Caused the Swing to the Opposition

The political tsunami was brought about by various factors, foremost of which is the perceived arrogance of power. All racial groups – Malays, Chinese and Indians have the perception that the Barisan Nasional did not hear or listen to the voice of the people. The Barisan Nasional mishandled the Bersih and HINDRAF protests. This show no tolerance for public assemblies and no outlet for grievances which resulted in the aggrieved parties voting against the Barisan Nasional in the ballot boxes. The Barisan Nasional’s over-confidence and poor intelligence failed to identify growing anger and frustration of the people. The Prime Minister’s challenge to Opposition supporters not to demonstrate but to take it to the ballot box also made many fence sitters and opposition sympathizers to vote for the opposition. The Barisan Nasional failed to effectively read the mood on the ground. Many urban voters in particular the fence sitters were put off by the propaganda, spin and one-sided coverage on TV and in NST and Star.

A contributory factor could be internal bickering over the choice of candidates within the Barisan Nasional component parties not only in UMNO but also in MCA and Gerakan. Apart from the above, other factors also contributed to the unprecedented swing in support to the Opposition. These can be attributed as the 9C’s:-

(i)                 Change : A massive mood swing brought about by the opposition’s promise of change and reform.

(ii)                 Crime : Growing anger at the seeming inability of the Federal Government to tackle crime effectively.

(iii)               Cost of Living : Rising frustration over increases in the cost of living.

(iv)              Corruption : Growing perception that corruption has worsened over the past four years. (v)               Courts : Disgust over the Lingham enquiry and concern about judicial independence.

(vi)              Convergence of Issues : All these issues coming to a head at the same time and perception that government is not listening or effectively addressing them. There is really no one single big issue but a convergence of issues that caused people to be dissatisfied and angry with the Barisan Nasional.

(vii)             Communications Technology : The power of the internet and blogs to provide alternative information, that is downloaded, printed and distributed even to kampungs and new villages. With the spin in NST, more people trust the blogs more than the mainstream media.

(viii)            Credible Leadership : For the first time, the Opposition was able to present credible leadership and credible alternatives. The Anwar factor is pivotal. More than the 1998 reformasi campaign this year is much more an Anwar-coordinated campaign. DAP, Keadilan and PAS put up young, credible candidates. Lim Guan Eng, a Monash economics and accounting graduate, taking charge of Penang instead of his father Lim Kit Siang provided a younger and less belligerent face to the electorate backed by credible candidates like Prof. Ramasamy, Lim Chin Tiong and Jeff Ooi.

(ix)              Campaign Strategy : The Barisan Nasional’s campaign strategy was much of the same. The old school approach – some carrots and sticks. It offered development on the one hand, it threatens on the other, warning the Chinese and Indian communities that they will have no representation in government. The Chinese and Indian voters didn’t buy this argument this time. At one point in Penang, feedback from many Chinese voters is they don’t mind not even having a Chinese Chief Minister to teach the Barisan Nasional a lesson. Promises and fear didn’t work this time. UMNO also took Malay voters for granted. On the other hand, the Opposition’s strategy was low-key, humble and non-threatening. PAS didn’t speak of an Islamic State. DAP didn’t campaign to capture Penang as was the case during Tanjung I, II and III. All DAP asked for was to deny Barisan Nasional two-thirds majority both in Penang and in Parliament. This softer approach compared to Kit Siang’s aggressive style in 1990, 1995, 1999 won DAP many sympathetic votes. The use of blogs as alternative media was also highly successful.

For the Chinese voters, memories don’t fade easily. Often politicians tend to think people have short memories. But the Chinese voters are still upset and aggrieved over the waving of the keris incident at UMNO Youth Assemblies and the racial rhetoric in the 2006 UMNO General Assembly. Chinese voters also perceived MCA and Gerakan to be too subservient to UMNO. For the Indian voters, HINDRAF was a key factor. The power of Makkal Sakhti (People’s Power) is real and translated into votes for the Opposition throughout the country where there are sizeable number of Indian voters. For Malay voters, Anwar provided an alternative leadership. He read the Malay mood well. To the Malay voters in Anwar’s campaign speeches, the NEP because of its over-obsession with Bumiputra equity, benefitted only UMNO Puteras and didn’t benefit the ordinary people in the rural heartland. UMNO Youth was also perceived to be brash and arrogant.

4. Looking Ahead

What the 12th General Election provided is a timely wake-up call to all political parties. They need to change, reform and deliver. For the Barisan Nasional, it means reinvention to stay relevant. For the Opposition in control of the 5 State Governments, it means the need to deliver what they promised. Can they work together? The question, looking ahead, is how UMNO will react. Will it be magnanimous and learn the right lessons? Will it change and reform from within and lower racial rhetoric to win back non-Malay support or will it up the ante to become even more ultra-Malay to retain whatever Malay support it still has? Will UMNO remain united and cohesive or will there be a scramble for positions in its coming General Assembly and party elections? The internal dynamics in UMNO in the lead up to party elections need to be watched.

For the Opposition, the key question is whether the new State Governments in Penang, Perak and Selangor can perform and deliver and meet the expectations of the people? Will there be a witch-hunt against Barisan Nasional supporters? Will they be able to cooperate and work closely together? Will they gain the support of civil servants? Will they be able to cooperate and work with the Federal Government? What will be the impact on Government-Linked Companies controlled by or connected to these state governments? For the MCA and MIC, the question is whether they should continue to narrowly fight for Chinese and Indian interests or should they reinvent themselves to become multi-racial parties like DAP and Keadilan and champion wider national issues such as corruption, human rights, judicial independence and economic opportunities.

For the Gerakan and PPP, the key question is whether they should continue to exist and if so, what is their niche in Malaysian politics? Should they bring about the merger of smaller parties in the Barisan Nasional including those in Sabah and Sarawak? Will the 2008 Election lead to the emergence of a two-party system in Malaysia? For the Prime Minister, this is an opportunity to clean house. To listen more to the voice of the people and not to be disconnected to the feelings on the ground. We have in Pak Lah a decent man, a dedicated and pious Muslim. He should use his strength to reinvent himself and renew UMNO and Barisan Nasional. Credit ought to be also given to the Prime Minister for providing more democratic space and a fairer, freer election as well as for his stoic acceptance of the democratic voice of the people, and for not reacting ala the midnite snatch in Sabah in the mid-1980’s or having an Operasi Lallang or May 13/NOC type reaction. There is clearly a need to review certain National Policies that causes unhappiness and decisiveness. Will the Barisan Nasional leadership, be able, perhaps more willing to rise to the occasion to bite the bullet?


In the final analysis, despite the massive swing to the opposition, the Barisan Nasional still remained in office at Federal level and has a comfortable majority to provide continuity and political stability. This analysis provides some key facts and pose some key questions that need to be pondered over in the days and months ahead. Whatever it is, Malaysian politics post March 8, 2008 will not be the same again. It is time for a new beginning. A new era has begun. More importantly, to note that the morning after, most surveys showed that many Malaysians from all races and different walks of life felt good over the election outcome. Dated: 13th March 2008





By Asli

Racial poisoning hits BN, leaving Chinese parties drained and Umno vulnerable

1957 saw the United Malays National Organisation (UMNO), Malaysian Indian Congress (MIC) and Malaysian Chinese Association (MCA) work together to achieve the country’s independence. Together, the three parties formed a coalition that collectively represented the welfare of all three of the majority races. It was our first act of unity, and it gave us our independence.

Fast-forward 54 years to present day, and we see the now larger coalition unravelling at the seams, with Chinese-based components MCA, SUPP and Gerakan at the zones of greatest pressure, and many say past the point of return.

It takes both hands to clap, and in any polygamous relationship all parties have to bear the blame whenever there is divorce albeit in differing degrees. In the case of the BN coalition, the party most faulted is UMNO. Although, it always held the leadeship position due to the Malay electorate being the largest at some 60 per cent, UMNO became overly greedy through the years. Not that its partners were blameless, but UMNO was the aggressor, willing even to cannibalise the BN to feed its own ambitions and goals.

Leave, not join BN
A telltale sign of distress within the coalition came in the form of a rare outburst from SUPP president George Chan. Shedding a harsh light on the state of equality across the parties within BN, he recently advised the opposition’s Democratic Action Party (DAP) not to join the coalition and openly admitted that it gives no priority to its Chinese-majority members.

There have been speculations, and even calls for SUPP, MCA and Gerakan to team up and leave the coalition. The three parties have performed poorly in recent elections, with SUPP losing most of its contested seats in April’s Sarawak state elections, Gerakan losing control of Penang for the first time since 1969 and MCA retaining only 15 parliamentary seats, less than half of what they had before.

With the opposition coalition gaining popularity, the three BN Chinese-majority parties are increasingly being accused of not serving and representing the welfare of the Chinese community within the government. The recent years have seen the media, bloggers and even Facebook groups call for the parties to leave BN, if only to reinstate their credibility as the Chinese representatives. They came close, but not quite close enough.

A SUPP leader told Malaysia Chronicle earlier this month that the three parties had late last year discussed plans to leave BN but had not the will to carry through.

This has left many disgruntled and disappointed in their representatives. Now, with the people’s spirits still high from the adrenaline rush that was Bersih 2.0, Chan’s public outburst of discontent at BN and the General Elections coming up, change seems to be the mantra for all and the views are growing by the day that the only way the three parties can stave off extinction was to turn independent.

Colour-blind and policy-centred
Whether BN or more to the point, UMNO, admits it or not, ties between the race-based parties are now under such strain that the very coalition that gave us our independence is struggling to hold onto power.

However, whether or not the Chinese majority parties leave the BN, join the opposition, or form their own group, it would do little or nothing to appease the undercurrent of racial discord in the country. Racial politics may have had its place half a century ago, but times now have changed.

As has been said time and time again, Malaysia needs to steer herself towards a political system that is colour-blind and policy-centered. Leaving coalitions and forming parties while only looking out for those whose skin colour resembles ours will only deepen the cracks between races and incite more fear and resentment based on the brownness or yellowness of our skin.

If SUPP, MCA and Gerakan walk out today, sure, most of the Chinese will cheer, and the rest of UMNO will be left reeling and scrambling to pick up the pieces.

However, it would be naïve to not expect some serious backlash and repercussions as consequences. Not only will UMNO clamp down on this “walk-out” with lightning speed; it will perhaps go so far as to suspend or seize MCA-owned national newspapers The Star, Sin Chew Jit Poh and Nanyang Siang Pau or even to unleash its proverbial tyrannical power that is the ISA unto the party leaders for alleged anarchy of some sort, but the parties’ action may also create even larger rifts between the people.

From the bottom-up, it is highly unlikely that many non-Chinese would be supportive of a Chinese-stronghold political group. But it won't really matter for the SUPP, MCA and Gerakan because if they remained in the BN, they would lose even more. There is also the option of working with the Malay parties in the Pakatan Rakyat. As for UMNO, with 23.7% of the population being Chinese, it will be almost impossible to assume power when only looking after the welfare of its own ethnicity.

Ideals
As such, what we need today is a party or a coalition that first and foremost represents not the race of its members but our ideals as Malaysian citizens. With that right step in mind, we can then work on the not any less important factor of transparency within the administration.

Many of us are now second and third generation Malaysians since our independence and have lived on Malaysia’s soil our whole lives. It is time now that we define ourselves, our party ideals and who owns the land not by how long our ancestors have been here, because, really if we did, it would be the aboriginals and indigenous people who should be in power, but by how we as today’s generation of Malaysians want to shape our country and future.

We are a young country, and we are a young people; only 5% of the population is over 65 years old. So, some may say we aren’t ready for secular politics; some may caution that as a people we are unprepared; we are too young. But what relevance does youth have? If anything, as children we pay little attention to skin colour on the playground. Most only grow more racially aware as we get older. It is the old; the archaic policies championed by previous generations that are crippling this young country. We are young, and therefore we are open to the new. Why do we allow ourselves to be governed by the fear of leaving behind the old? There can be no denying that the step towards secular politics needs to be taken.

No one should have more right over a piece of land just because their grandfather set foot on it first; this game of “finders’ keepers” needs to end, or has it not dragged on for too long now?

- Malaysia Chronicle

NINA in UMNO...........No Income, No Assets.... BUT RICH

In UMNO there are many Malays who have become rich without working for it, without any business acumen and without any brains!

In UMNO there are many Malays who have been given lucrative business opportunities without any financial risks for them. These are fail-safe cash cows with an iron clad money back guarantee - the government buys it back from you at a premium – not IF you fail but WHEN you fail! But here is where UMNO has failed these Malays.

Tajuddin Ramli, Amin Shah, Halim Saad…

These are the top of the heap of failed Malay ‘businessmen’ who epitomize those who benefited from selective government patronage and became part of the culture of greed now infused into many Malay consciousness. These individuals have been given every assistance, every fail- safe option to succeed. And yet they fail.

And then there are those like Mahathir’s son, Mirzan: whose ‘businesses’ have been kept afloat by billions of ringgits belonging to the people and this son of Mahathir considers himself a businessman of considerable abilities - the new rich Malays. Malays who are multi millionaires riding on the back of UMNO and the people’s money. But at least this son makes a show of running a business empire- a diverse conglomerate that covers a range of activities – mostly legal! But come on lah….what business empire?

Given the breaks he has had, even a monkey can live in clover without ever running out of bananas for the rest of his life!

Then we have Malays like the late Zakaria Deros, Muhammad Taib, Isa Samad, Shahidan Kassim and of course the infamous Khir Toyo.

These are the scums of the earth. They do not even have the intelligence or decency to hide the wealth that they have stolen from the very people who have voted to put them in power. The hastiness in which Khir Toyo had proceeded to display his stolen wealth after losing office fills most of us with stomach wrenching disgust. But these are the people that UMNO has chosen to be leaders within UMNO.
But what is most damaging to the Malays are the many thousands of Malays who have been taught that money can be got by abusing the trust placed in them by other Malays.

A Ketua Cawangan gets a contract to build a primary school in his “kawasan”. Without any knowledge of business he is given a business opportunity way beyond his capacity to manage. All he knows is that he has to get someone… just about anyone…. who will take the contract off his hands and give him a handsome commission. He makes the 20% to 50% commission off the contract price. It does not concern him if the contract is successfully completed or not – what matters is how much he will make as commission from that contract – after all he has already spent the advance given to him by JKR to start the contract. To him this is a good way of doing business.

And so UMNO teaches a Malay to do business without having any knowledge of the business that he does, without any working capital, without risks and certainly without any brains to be able to better himself by this business opportunity given to him by UMNO. While all this is going on the wheeling and dealing is most intense in the corridors of power.

In Putrajaya and in the Government Ministries. Not only by the Minister himself but also by all his staff – anybody and everybody with access to the Minister will make their money. In Agriculture, Defense, Education, Trade, Energy, Water and Communication and the mother of all Ministries, The Ministry of Finance. And do not forget the Government Agencies and anywhere else a ringgit can be made. Hell there are money to be made even in Rela and the Anti-drugs Agency!

All this orgy of making money makes these Malays cash rich. Wine, women and song…big cars, nice clothes are easy enough habits to acquire but it does not teach them how to keep the money or how to use the money to make more money. And their ability to make money remains as long as their Minister stays a Minister – so make hay while the sun shines!

And so what does it do to these Malays? They become parasites. Parasite: “Somebody who lives off the generosity of others and does nothing in return” What they earn is not enough to keep them in the lifestyle that they want to live up to and so they take from us. While we have to live on the wages we earn UMNO eagerly opens up many sources of illegal income for those that pledge allegiance to the party.

These Malays are regarded by most Malays as the worst of the blight that UMNO has caused to the Malay race. The presence of these Malays makes real all that UMNO leaders have been saying about the Malays. That the Malays need to be spoon fed, that the Malays are unable to compete on a level playing field with the other races, that the Malays will always need Ketuanan Melayu or they will be no more Malays left in their own country! This is certainly true of the Malays in UMNO but not of the Malays outside UMNO!

I shudder to think of what the future will hold for these people. Where will they go and how will they survive when UMNO is out of government?

We see a bit of the future for these people in the likes of Ibrahim and Mahathir

They know nothing but politics. Without politics they do not have a life…….even when they are past 80. But there are no more places for them within UMNO. And so we see them do what they do now and they become a pain to us in a place where the sun does not shine! Just think of the negative impact it will have on the country when this scenario is repeated thousand of times at various levels after the next general elections when UMNO is ousted!

The way things are for UMNO they know it would be a mistake to send a message to the other races that UMNO only looks after their own – but what choice do they have?

What we need to understand is that UMNO has a fragmented political reality with real power residing outside cabinet. The extent to which this power is exercised will depend on the Prime Minister of the day.

Our history will show us that Tunku, Hussein Onn and Abdullah Badawi left office because of circumstances beyond their control. Circumstance created by those outside government but within UMNO. A weak PM like Najib will surrender power to this faction, or for the lack of a better word, to these warlords as and when dictated to do so.

Because UMNO has been identified with the Malays, UMNO’s problem is the Malay problem. UMNO’s crisis is a Malay crisis. And UMNO’s solution to their problem will also be a Malay solution. UMNO wants to lead but its ability to lead will depend on whether their intention to change is sincere. Whether it can be backed by positive change in the face of opposition from the powerful forces within UMNO that wants to maintain its present status quo. I think not. UMNO is deceit. UMNO is greed. UMNO is not our future!

As the Chinese says :
“The harsh winter is gone and spring is around the corner”
….I think that spring is indeed around the corner for all of us. We await the 13th general Election with much impatience!!

by A.Sulaiman

Malaysia's UMNO Scandals - A new set threatens

For weeks, just in time for Malaysia’s United Malays National Organization’s annual general assembly which opened this week, the party has been embroiled in an embarrassing scandal involving a 2007 government decision to spend RM300 million (US$94.3 million)to establish a national feedlot corporation to slaughter as many as 60,000 cattle annually under Islamic halal dietary requirements.

The scandal seems emblematic of a long series of such situations that imperil Prime Minister Najib Tun Razak’s vow in April 2010 that the government "can no longer tolerate practices that support the behavior of rent-seeking and patronage, which have long tarnished the altruistic aims of the New Economic Policy.”

The National Feedlot Corporation, as it is known, has never slaughtered 10 percent of the projected total and has since scaled back its target to 8,000 head but hasn’t been able to meet that target either. Worse, the company has been losing millions of dollars every year – while pouring funds into an RM10 million condominium in Kuala Lumpur, among other things, and spending RM800,000 for overseas travel and entertainment.

The scandal is doubly embarrassing because the agreement to establish the National Feedlot Corporation, made when Abdullah Ahmad Badawi was prime minister, went to the family of Shahrizat Abdul Jalil, the Minister of Women, Welfare and Community Development and head of the women’s wing of Umno. Her husband, Mohamad Salleh Ismail, is the chairman. Her three children are respectively the chief executive officer and executive directors of the company. None had any experience in cattle production or beef supply prior to the establishment of the company.

The report of the NFC’s operations was contained in the 2010 report of Malaysia’s Auditor General, which was delayed for weeks before it was finally released. The scandal has generated tensions inside UMNO, with some reformers demanding that Shahrizat be forced out of her job as minister. However, the leadership has circled the wagons to protect her. In particular, Muhyiddin Yassin, the deputy prime minister, has said there was no case to be brought against her. Muhyiddin was the agriculture minister in 2006 when the project was approved. Others who have come to her defense are Abdullah Badawi and his son-in-law, Khairy Jamaluddin, the head of the UMNO Youth Wing.

The National Feedlot scandal is said to have the potential reformers worried because party operatives thought they had the Selangor electorate turned around and that they could take the state back from the opposition Pakatan Rakyat in national elections expected to be called early next year. However, Asia Sentinel has been told, the refusal to hold anybody to account in the feedlot scandal could well turn the tide back against them, especially as other patronage scandals continue to bubble up.

The depth and breadth of the scandals also calls into question moves earlier this year with Najib launching a series of programs to develop bumiputera, or ethnic Malay companies, including allocating an RM2 billion fund for development. In the 2012 budget, Najib also announced the government would allocate RM200 million to guide 1,100 high-performing bumi companies with the potential for listing on the Kuala Lumpur Stock Exchange. Critics are concerned that the patronage system will continue unabated. The current UMNO general assembly was hoped to provide a dramatic backdrop for Najib to win back disaffected Malay voters.

For decades, this patronage has involved highway construction and defense contracts and a variety of other government arrangements with UMNO cronies in a plan formulated by former Prime Minister Mahathir Mohamad. His ambition was to create a cadre of 100 super-rich bumis who in turn would help rural Malays into prosperity under a konsep payung, or umbrella concept routed through UMNO, much the way he envisioned driving the country into industrialization through massive projects. However, many of the companies eventually collapsed and are being supported by government institutions such as Kazanah Nasional, the country's sovereign investment fund, or the Employee Provident Fund.

Contained in the same 2010 auditor general’s report, for instance, is a passage on the decision to privatize a 77-km stretch of highway from Senai to Desaru on Peninsular Malaysia’s southeastern coast. The land acquisition turned out to have doubled, from RM385 million to RM740.6 million, with the road surface described as “undulating.” The project completion “was not in accordance with specifications, causing damage to the road surface and endangering road users.” The company failed to complete construction within the stipulated period of the contract. However, the construction agreement didn’t specify damages in the event it wasn’t completed. Required maintenance is described as “unsatisfactory.”

The company that won the RM1.7 billion contract is Ranhill Corp. Sdn Bhd., which has long been described as UMNO-linked. It is partly owned by Lambang Optimia Sdn. Bhd. Both are headed by Hamdan Mohamad, described as Malaysia’s “water baron,” who operates several utilities and power companies. He was one of several ethnic Malay businessmen who followed former Prime Minister Mahathir Mohamad’s vow to take Malaysian companies overseas. Another shareholder is YPJ Corp. Sdn Bhd., an arm of the Johor State Government, and yet another appears to be UMNO itself, which owns a minority share through an account at Public Bank Bhd., according to records. Ranhill has had a lackluster two to three years, capped by disaster earlier in 2011 when its Libyan operations were caught between the Muammar Qaddafi forces and those of the Libyan rebels aided by NATO air strikes.

Also, earlier this year, Deftech, a wholly-owned subsidiary of DRB-Hicom, won a contract without an open tender to produce and deliver 237 eight-wheeled armored personnel carriers to the Ministry of Defense. DRB-Hicom is 55 percent owned by Etika Strategi Sdn. Bd., which is wholly owned by billionaire Syed Mokhtar Al Bukairy, one of Mahathir’s targeted bumiputras and a man who is extremely tight with UMNO. Opposition member Tony Pua complained on the floor of Parliament that the average price of RM29.4 million for each unit compared unfavorably with a Portuguese Army purchase of 363 similar vehicles for the equivalent of RM4.4 million each from the Swiss MOWAG CmBH Corp, Malaysia is paying a 6.6-fold increase over the Portguese purchase. Saudi Arabia, he said, bought 724 such vehicles for the equivalent of RM9.9 million from General Dynamics Land Systems-Canada, with Malaysia paying almost three times as much Government officials said the contracts don't compare with each other and that the government is getting more equipment, maintenance, etc. for its money.

“Further research has revealed that DRB-Hicom will be acquiring the AWC technology from a Turkish company – FNSS Defence Systems Inc which manufactures the Pars 8x8 AWV models,” Pua said. “With this deal, Malaysia will be its first foreign customer for this vehicle. What is perhaps of greater alarm is the fact that FNSS has announced that they have sold 257 units of Pars 8x8 AWVs to Malaysia for approximately US$600 million or RM1.83 billion or only RM7.1 million per unit,” Pua said in a prepared statement -- considerably different from what the Malaysians said they bought the vehicles for.

Pua also complained about the cost of six offshore patrol vessels from Boustead Naval Shipyard Sdn Bhd at RM1 billion each in the aftermath of another total fiasco. The Auditor General, in a 2007 report tabled in Parliament, alleged that a contract to build naval vessels given to PSC-Naval Dockyard, a subsidiary of Penang Shipbuilding & Construction Sdn Bhd, which was owned by another UMNO crony, Amin Shah Omar Shah.

PSC-Naval Dockyard, which was taken over by Boustead, contracted to deliver six patrol boats for the Malaysian Navy in 2004 and complete the delivery in 2007. Those were supposed to be the first of 27 offshore vessels ultimately to cost RM24 billion plus the right to maintain and repair all of the country's naval craft. But only two of the barely operational patrol boats had been delivered by mid 2006. There were 298 recorded complaints about the two boats, which were also found to have 100 and 383 uncompleted items aboard them respectively.

The original RM5.35 billion contract ballooned to RM6.75 billion by January 2007. The auditor also reported that the ministry had paid out RM4.26 billion to PSC up to December 2006 although only Rm2.87 billion of work had been done, an overpayment of Rm1.39 billion, or 48 percent. In addition, Malaysia’s cabinet waived late penalties of Rm214 million. Between December 1999, according to the Auditor General, 14 “progress payments” amounting to Rm943 million despite the fact that the auditor general could find no payment vouchers or relevant documents dealing with the payments.

The auditor general attributed the failure to serious financial mismanagement and technical incompetence stemming from the fact that PSC had never built anything but trawlers or police boats before being given the contract. Once called “Malaysia’s Onassis” by Daim Zainuddin, Amin Shah was in trouble almost from the start, according to a report in Singapore’s Business Times in 2005.

Eventually Boustead PSC was born out of the Royal Malaysian Navy’s dockyard facilities which were to provide ship repairs and maintenance services. Under the corporatization program advocated by the Malaysian Government, the dockyard was set up as Limbungan TLDM, a wholly owned government company. It has modern facilities to meet the maintenance requirements of the Royal Malaysian Navy fleet, from hull repairs to major overhauls and from radar refitting to weapon systems refurbishment.
The six patrol boats have now cost five times what the Royal New Zealand Navy paid for its patrol vessels, bought at only RM210 millon each (NZ$90 million) from BAE Systems, the second largest global defense company.

The irrepressible Raja Petra Kamarudin in early November found that the Philippines was buying Hamilton-class patrol ships from the US that would be deployed to the West Philippine Sea area to secure the country’s natural resources. The latest one is to be transferred by the first or second quarter of next year, to guard energy projects in Malampaya off Palawan.

“Malaysia is going to buy six patrol boats at a total cost of RM6 billion or RM1 billion per patrol boat. Of course, Malaysia’s patrol boats are going to be far advanced and more sophisticated than those of the Philippines who paid only RM31.5 million for theirs,” he wrote. “The Philippines’s patrol boats can only patrol the waters. Malaysia’s patrol boats can…well…patrol the waters.”




Asia Sentinel.com