The government’s New Economic Model structural reform agenda is aimed at raising average annual growth to 6% until year 2015. While implementation of the agenda would be positive for Malaysia’s economic fundamentals, even the talk of reform has already provoked considerable political opposition.
When first introduced, the NEM was supposed to be Malaysia’s new selling point to local and foreign investors and the country’s passport to a better future. It now appears to be aborted before birth. Or at best, it appears to be a newly arrived baby in the critically ill ward, and needing an incubator and special attention if it is to survive at all.
Chief amongst its enemies has been Perkasa and Dr Mahathir Mohamad. From them emerged harsh talk about Malays losing power in the country and of Umno allowing the situation of Malay dominance to be so badly eroded that the community is facing a bleak and hopeless future.
While Perkasa may claim a big membership of 200,000 – even if unsubstantiated or exaggerated – the results of a survey released in April by pollster Merdeka Center nonetheless did show that the right-wing group has been gaining popularity. The centre found that nearly 70 percent of Malay voters in the peninsula agreed with Perkasa’s demands for the government not to dismantle quotas and economic protection for the Malays.
Describing the list of demands sent to Najib Razak before the prime minister presented the 10th Malaysia Plan in Parliament, Perkasa economic bureau chief Dr Zubir Harun said, “We (Malays) would, of course, require assistance from the government.” Asked by reporters about any consequences should the government not consider Perkasa’s memorandum, Zubir replied that there would be “political implications”.
What form the ‘implications’ might take would boil down to the numbers game. “Malaysia comprises 55 percent Malays and 12 percent of other Bumiputeras, which total 67 percent Bumiputeras. Therefore, the nation’s wealth must be 67 percent for Bumiputeras but we get 30 percent only,” Perkasa president Ibrahim Ali decried at his movement’s inaugural congress in March – an event that was graced by ex-premier Mahathir.
It is the latter who has taken centre stage and had the spotlight shone on his continued manipulation of the Malay sense of insecurity. While Dr Mahathir’s scaremongering has been the grist for many a debate mill, his views on FDI is of equal public interest.
Now cautioning that Malaysia “should be more selective with FDI”, Dr Mahathir seems to have changed his tune from his past grand visions of ‘Look East’ development. He says presently: “Certainly we should not encourage foreign developers to develop high cost projects which are not within reach of local buyers. Rather Government should help local investors to develop these specialised areas by building needed infrastructure.”
He advocates “supporting local industries to grow big”, and cites Japanese and Korean world class businesses “with their own brand names” as examples of success.
Dr Mahathir’s selective amnesia appears rather convenient when one recalls how his expensive state-backed Proton project failed to make a dent in branding overseas, not to mention at home where it would have surely failed a long time ago were it not for crippling taxes levied on imported cars and injection of massive amounts of taxpayers’ money to buoy Proton.
Dr Mahathir’s continued efforts at whipping up fear amongst Malays has now been taken up by some other Umno leaders, including former party secretary-general Sabbaruddin Chik who was reported by Malay daily Berita Harian recently as saying that all the hard-fought privileges accrued by the Malays over the years would soon be lost if they are to be “disunited”.
The anti-Chinese agitators are missing the forest for the trees since they fail to ask what would be the point of having 99.9 percent political power if the economic cake has crumbled. Getting a guaranteed share of a small equity or property market cake is what the warlords may insist upon but at what cost to young Malays when the jobs that come with local and foreign investment disappear.
And if investor sentiment is the gauge of how well Ibrahim Ali – who avows he is proud to be a “jaguh kampung” – and Dr Mahathir and their friends have done, then they all should pat themselves on the back for doing a great job of scaring the business community, and not only just the Malay community.
Capital continues to flows out
According to a recent report, Malaysia’s capital account is now showing eight consecutive quarters of outflows. The capital account is an account that tracks the movement of funds for investments and loans into and out of a country.
Not only is money and funds moving out of Malaysia, so far this year, according to Emerging Portfolio Fund Research data, Bursa Malaysia has received just two percent of total equity inflows into the emerging markets of Asia – yes, two percent.
Unlike in other countries, where fund managers and strategists have been buoyed by recent sentiment and momentum, there are few catalysts to tempt investors into buying Malaysian stocks or to encourage new investment flows from abroad.
According to Fitch, one of the world’s leading rating agencies, in a statement issued on July 8:
“The deterioration in Malaysia’s public finances that motivated the local-currency rating downgrade in 2009 looks unlikely to be unwound soon. The authorities’ structural reform agenda has the potential to improve Malaysia’s growth prospects, but the government’s ability to overcome political obstacles to reform is not assured and it will take concrete progress to exert upward pressure on the ratings.”
Fitch projects Malaysia’s federal government debt to reach 54.4% of GDP by end-2010, up from 41.4% at end-2008 and well above the ‘A’ median of 40%.
The federal deficit hit 7.6% of GDP in 2009 on the agency’s measure and is projected to narrow only moderately to 6% in 2010.
Meanwhile, structural weaknesses in Malaysia’s public finances continue to weigh on the ratings. The country’s fiscal revenue base remains relatively weak, with federal revenues at 22.7% of GDP in 2009, against a 10-year average for the ‘A’ range of 34%.
Higher energy revenue reliance
Furthermore, fiscal dependence on the energy sector is high and rising, threatening higher revenue volatility in the medium-term. Energy-derived revenues were 41% of total fiscal revenues in 2009, up from 20% in 2003.
Should oil and gas revenues decline drastically, then the introduction of a goods and services tax (GST) to strengthen the revenue base may well be sooner rather than later.
An early warning of this has already been given by Petronas which revealed last week of a 23.2 percent plunge in net profit for the fiscal year ended March 31 due to weak demand and low oil and gas prices. Revenue fell 18 percent to RM216.4 billion due to a contraction in product prices and lower sales volume.
Should the collapse in global consumer spending and falling industrial output continue, the nation will be in deep trouble.
What are the alternatives?
The country’s best bet to attract investor interest and reduce the deficit appears to be the old standby of privatizations and special concessions to entice investors.
Some observers have argued that accelerating the privatization of GLCs can bring about a virtuous cycle of a reduced budget deficit; a re-rating of the country’s local-currency debt; and a chance of taking a bigger share of the short and long-term foreign capital heading Asia’s way.
Najib has recently been dropping discreet hints on the sales of holdings in Petronas Gas, Malaysia Airports and Sime Darby. However there is every indication that he will have to fight every inch of the way against Perkasa and its allies – the deeply entrenched warlords in Umno and the Malay bureaucracy.
When the prime minister warned local Johor leaders not to be emotional or parochial about Singaporeans investing in the state especially in the region of Iskandar Malaysia, he was not being proactive or referring to a hypothetical situation. He was finally reacting to statements by Dr Mahathir, Perkasa and the Bumiputera Economic Congress on the need to maintain the NEP status quo and to ensure Malay dominance.
Finally, it is the height of political stupidity to call for a Chinese Perkasa to meet the irrational and racist challenge of the Malay Perkasa. Whoever made that demand or issued a statement to that effect clearly needs to go back to study Political Ethics 101 which is that you do not fight darkness with equal darkness but with light and reason.
http://www.spiegel.de/international/germany/0,1518,706443,00.html
Emulate Britain and lop 40% off all the ministries budgets. More effective and beneficial than cutting subsidies or imposing GST
Perkasa may claimed to achieve huge success in term of membership but for what ? Will it helps the ordinary malays to be rich and powerful when it scared away most foreign investors and even certain local investors to invest in other more conducived countries such as Thailand,Indonesia,vietnam and china.And without these,the ordinary malays will not be able to sustain its present status quo let alone wish to be pretty well of.And to add insult to injury when the Umno/BN government goes bankrupt who would be mostly affected ? Will Perkasa be able to feed all its members ? I’m of the opinion that Perkasa is doing more harm than good to all its members in particular and the malays in general.
Dr Lim Teck Ghee:
You obviously don’t know what it feels like to be The Lord of the Rambutan Tree.
Those lazy, greedy and racialistic dickheads in Perkasa, Gertak and some NGOs especially that fat bum I Ali and the half dead mamak kutty big fat foul mouths contributed to this decline in FDIs. As i have said, our PeeM can have all the best plans in the world, planets moons etc…. But if you have those dickheads running around like headless chickens, these plans will be just talk, talk and talk only.
No rational foreigners will care and come and invest here. Why should they when they know Bolehland have dickheads like these and never want to change. Even Indonesia is well high above us.
The best comment I heard so far about the Price Increases is:
“Thank you Perkasa”!
Pray to the Lord to Send Mr Maverik and Katak Him to meet their Descendants Fast Before they do more damage to our Beloved Country by playing with Racial Sentiments to project their personal image and interest.
It’s good to have such people around.
People who thought that they are doing UMNO/BN a great service but in fact, is galvanising and mobilising everybody to dump this alliance.
There is another trend that is disturbing – increasingly jobs are created mainly in the public sector. Not only jobs, public sector employees are also on average being paid more handsomely than those in the private sector. This is indicated by increasing number of job applications from those currently working in the private sector, citing job insecurity, low pay and long working hours as reasons for leaving.
I find this trend rather strange. First, most public sector jobs are unproductive; in fact, in many situations these jobs are not providing a service, but a disservice to the economy. I find this odd, how do we continue to pay higher salary to unproductive jobs. Second, I find job creation in the private sector slow and anaemic. Hence, increasingly the employers are exploiting these workers by offering only contractual positions with minimal benefits and low salary.
We now have a situation where productive workers in the private sector (workers who create real goods and services) are paid miserably while unproductive workers (workers who create nothing) in the public sector are paid higher salary. This trend would inevitably lead to:
1. Private sector employees continue to migrate or apply to join the public sector whenever given an opportunity. It is pointless for them to slog but being paid miserably;
2. Public employees, having received high salary, are consuming undeservingly more so their salary is financed by the government borrowing;
3. Soon we shall see that the most “dynamic” sector of the economy is the public (government) sector – yes the most dynamic sector is the sector that does nothing!
4. People who really work have limited or no ability to spend while those who do nothing but sitting around “governing” and “lording” over others are doing all the spending;
5. Situation in 4 is sustainable only when the size of government sector is relatively small. But look at the recent increases in the size of government in terms of number of employees, the number of higher grades positions created and the salaries, benefits and pensions accorded to these people.
///The centre found that nearly 70 percent of Malay voters in the peninsula agreed with Perkasa’s demands for the government not to dismantle quotas and economic protection for the Malays.///
That precisely is the problem this country faces. The Reid Commission suggested ‘special assistance under Article 153’ for only 15 years, to allow Malays to catch up. After 15 years NEP was introduced, said to be for 20 years, as a way to appease the anger of Malays. Mamakthir explained that there was lack of rich Malays, and the prestige and wealth of Malay rulers did not count, and so jealousy caused May 13. NEP was exploited by Mamakthir to create a foolproof legalised corruption. UMNOputras are so addicted to the easy money and influence that they make NEP permanent. Now, it is not a case of catching up with other race, but because somehow their ancestors came from the right place or they were inspired by the right religion.
Only in Malaysia do we have 70% of 55% of the population think that they should be treated more favourable, not out of affirmative actions, but because they have the number of votes, or the capacity to run amok.
The affirmative actions are meant only to alleviate problems of those had been born and were when such correction measures were needed. They are not meant to be provided to the descendents of people supposedly weak and needed assistance. The wrongs done to Malays by the British could only be experienced by those born before 1957. Malays who are 53 years and older might have a claim on assistance, as though their fathers and grandfathers who benefited from Article 153 and NEP could not provide them a better start in life than the non-Malays whose parents and grandparents had been discriminated, institutionally, for 53 years. But for those younger than 53 years, they simply have no moral right to make such claim. If Malays who have studied overseas using government funds are found among the 70 %, then the country has really wasted its resources. Indeed, the non-Malays should cry that opportunity given to Malays to be educated overseas made them suffer more when such graduates return to claim special right with overseas-trained argument. Many a Malay ministers have their education overseas, and they did it under NEP. But they still have the NEP mindset. How sad!
ah so… Dr. Lim….What’s new?
///“Malaysia comprises 55 percent Malays and 12 percent of other Bumiputeras, which total 67 percent Bumiputeras. Therefore, the nation’s wealth must be 67 percent for Bumiputeras but we get 30 percent only,” Perkasa president Ibrahim Ali decried at his movement’s inaugural congress in March – an event that was graced by ex-premier Mahathir.///
Non-Malays never set an upper limit on the wealth and economic activities Malays should have; they just want Malays to earn what they keep. The government steals and robs for a few Malays to keep the wealth, saying always that they represent the wealth of the community. Having received more than 30% of equity in the corporate sector and having converted most to other form of wealth and assets, they claim that the 30% has yet to be achieved. Meanwhile the world knows that through of investments overseas such as have been carried out by Daim Ibrahim and the like, and the way EPU compute their ownership statistics, they are able to claim that the target of any percentage, be it 10 or less would never be achieved. Why did Ibrahim Ali bother to claim more?
Malays include the 12 per cent so-called bumiputras when they fight for Malay right. But we know that natives of Sabah and Sarawak, with the exception of Taib Mahmud, have been discriminated by UMNO policies and UMNO ministers. How convenient now to count them in when their number is needed!
///Dr Mahathir’s continued efforts at whipping up fear amongst Malays has now been taken up by some other Umno leaders, including former party secretary-general Sabbaruddin Chik who was reported by Malay daily Berita Harian recently as saying that all the hard-fought privileges accrued by the Malays over the years would soon be lost if they are to be “disunited”.///
The fear of tyranny through democracy when the wrong group has the right number rings true now. To Mamakthir unity is not for the purpose of pursuing social and economic development without unnecessarily duplication and wastage which unity might help to prevent. Mamakthir views unity as a collective vote bank to allow Malays to bully the smaller communities. That unity allows Malays to extract unfair advantage over others in a zero-sum game.
If Mahathir had not been a MP or minister, one might forgive him for not realising the raison d’etre for democracy. With his back ground, one can only confirm that he is an opportunist, and a man with no principle. As human, how much of him can be so classified?
///According to a recent report, Malaysia’s capital account is now showing eight consecutive quarters of outflows. The capital account is an account that tracks the movement of funds for investments and loans into and out of a country.///
It will also have other implications when rich Malay businessmen choose to park their money outside. How much has the Malay ownership share figure been made constant by the outflow of Malay capitalists?
///Furthermore, fiscal dependence on the energy sector is high and rising, threatening higher revenue volatility in the medium-term. Energy-derived revenues were 41% of total fiscal revenues in 2009, up from 20% in 2003.///
It should do Tengku Razaleigh proud to have his creation account now for a huge percentage of government revenue. Few countries have that luck. Malaysia’s good luck is of course counter balanced by the presence of Mamakthir as Malaysian.
The government will soon claim that even if oil runs dry, they can carry on just like Singapore. Remember, Malaysia Boleh.
///Some observers have argued that accelerating the privatization of GLCs can bring about a virtuous cycle of a reduced budget deficit; a re-rating of the country’s local-currency debt; and a chance of taking a bigger share of the short and long-term foreign capital heading Asia’s way.///
The government should sell GLCs to Malays and ask Malays to convert their other assets to equity. GLC was originally meant to be held in trust to make Malays own 30% though EPU never admit GLC as Malays investments. I hope this suggestion will not be taken up. Or else some rich UMNOputras will buy GLCs at par and sell them the next hour for market value. EPU computes ownership data by par value and claims that that was the only correct way to process those statistics. So when Malay ownership is concern, they will choose the correct valuation, i.e. sell to Malays at par value.
FDIs have more attractive places to go like Vietnam which does not have the NEP hangover. When a fringe group like PERKASA can influence a government, it shows the Bankrupsi Negara has very little credibility left.
Its mainstay is that both the police and military still support it as most people have lost trust in the government to do the right thing.
http://malaysiawatch4.blogspot.com/2010/07/of-subsidies-and-wanton-wastages.html
How true winston. How true. But lets hope that they die a quick death. Otherwise the whole nation would be dragged down needlessly. And that would be horrible. Trouble with these people is they are so inclined. They will not leave honourably. They will surely mess things up big time before leaving. For them I can see no way out other then the back exit. Leave they must. But it has to be by force I fear. Legally, the ballot box should decide the issue and their status completely. Its just a matter of the kicks of a dying man and how strongly he can deliver them.
If the current policies of the BN-UMNO led gov.remain,it’s not surprise to see that M’sia will lose out to the regional countries faster.
Ibrahim Ali will be a happy man when he does not need to work and the God will pour gold and other good things in life onto his door step.
No need to work and money come!
Singapore is booming ahead with a 13 – 15% growth rate and looks set to be the world’s fastest-growing economy in 2010. In the meantime, Malaysia is losing out because of a few unlearned, short-sighted racists.
Racist Mahathir’s anti-Jews rants scare away Jewish investor Michael Dell. Dell closes its factory in Penang & moves to China. Many Malaysians were out of job because of irresponsible racist Mahathir.
Wot? 70% of malays surveyed want status quo? Ho. Ho. Ho. Ho. Now umno you are really sitting on a veeeery veery large heap of problem. And dont you umno ever for one moment think that the survey result, if true, favours umno’s cause. Its a huge problem and the problem will weigh you umno down. And sooner than we can anticipate, it will sink you umno to the bottom of the ocean.
Is the Perkasa mean PERKOSA?
Ok, it is mean PERKOSA indirectly.