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NEM stillborn?

Malaysia’s Development Strategy Revisited (4)
by Dr. Mohamed Ariff*

New Economic Model Up Against Formidable Challenges

The structural change agenda presents formidable challenges. The kinds of skills that the new paradigm demands cannot be provided by Malaysia’s archaic education system, which needs a complete overhaul. At the same time, the country is suffering from a serious brain drain caused by both push and pull factors. The importance of a truly independent judiciary cannot be exaggerated: anecdotal evidence suggests that Malaysia’s tarnished judiciary and gutter politics are among the push factors. Seen in these terms, the brain drain is largely a manifestation of frustration that has led some people to vote with their feet.

All this calls for bold structural changes, including institutional reforms encompassing everything from education to the judiciary, backed by governance reforms to strengthen fiscal discipline, transparency and accountability. Nothing short of a holistic approach will set the Malaysian economy far enough or fast enough on a true development path. The politics of policy making, however, may hobble the reform process. Continue reading “NEM stillborn?”

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NEP “outlived its usefulness” – does not make sense to keep an obsolete policy ticking along on life support

Malaysia’s Development Strategy Revisited (3)
by Dr. Mohamed Ariff*

The New Economic Policy: Pervasive Poverty in the Malay Community

Multi-racial Malaysia’s major structural problems are largely attributable to the New Economic Policy initiated in 1970 in the aftermath of the May 1969 racial riots. With its emphasis on ‘positive’ discrimination in favour of the then backward Bumiputeras (literally ‘sons of the soil’), the objectives of the policy were laudable, serious misgivings about its implementation notwithstanding. The New Economic Policy continued to exist after reincarnating itself in various forms beyond the original 1990 deadline. While it has undeniably helped narrow interethnic income differences, all is not well judging by the outcomes. While interethnic income disparity has narrowed considerably, intraethnic income disparity, especially within the Bumiputera community, has widened. Continue reading “NEP “outlived its usefulness” – does not make sense to keep an obsolete policy ticking along on life support”

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Middle income-trap – Malaysia has shot itself in the foot!

Malaysia’s Development Strategy Revisited (2)
by Dr. Mohamed Ariff*

Input-Driven Growth unsustainable

It goes without saying that Malaysia must grow at a faster pace if it is serious about joining the club of developed countries by 2020 – hence the need to reinvent itself through reforms that can help restore the lost growth potential. Malaysia has learned the hard way that input-driven growth is unsustainable. It is instructive to note that the economy was growing at a rate of over 8.0 per cent in the early 1990s despite declining total factor productivity. To stay competitive, the growth strategy then was to keep wages low with the aid of a large migrant workforce. Obviously there was a dismal failure to understand that there were limits to economic expansion through input increases.

Migrant Workers depress wages

It was a major policy blunder to let migrant workers depress wages in the country, thereby throttling productivity improvements. Malaysia locked itself into low value-added manufacturing by allowing foreign workers to work in the sector for low wages, thus removing the incentive for manufacturers to automate. The size of the problem is huge: the country reportedly has 1.9 million registered migrant workers and another 600,000 unregistered ones (probably an underestimate), accounting for nearly one-fifth of the working population. These workers are not confined to the so-called 3D jobs – the difficult, dirty and dangerous jobs that the locals shun – but compete with Malaysians in the wider labour market. Continue reading “Middle income-trap – Malaysia has shot itself in the foot!”

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Solution to the problems of economic openness is not less openness but more openness

Malaysia’s Development Strategy Revisited (1)
by Dr. Mohamed Ariff*

Malaysia has turned 180 degrees since Independence in 1957, transforming itself into a thriving modern economy and leapfrogging from a low-income to a middle-income trajectory. The country owes its prosperity to its economic openness, with trade as the lifeblood and foreign direct investment (FDI) as the backbone of the economy.

Economic Openness and Vulnerability to External Shocks

The price Malaysia has had to pay for this success is greater vulnerability to external shocks, but it has learned to cope with cyclical ups and downs with remarkable dexterity. This does not mean, however, that all of the crises in the Malaysian economy were caused entirely by external forces, as if domestic policy missteps had nothing to do with them. The Malaysian experience shows that crises tend to be blessings in disguise, as they force the authorities to step back, take a hard look at their policies, learn lessons and move on. Continue reading “Solution to the problems of economic openness is not less openness but more openness”

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A Malaysian Lunch

By Zairil Khir Johari

While everyone spent the last weekend mulling over the recently announced Budget 2011, I spent mine immersed in chocolates and experiencing a brief moment of notoriety on Lim Kit Siang’s blog.

It was back to business on Monday as I met up with two old friends over lunch. In true Malaysian fashion, our conversation flirted with everything from the erection, oops, election budget to matters of national (un)importance and just generally anything that came into mind. All this over banana leaf and lots of (burp) curry. The following is a parable of our discussion:

Friend A (special officer to a certain executive in a certain GLC): Service is so slow. Why does it take so long to make one iced Milo?

Friend B (self-employed IT entrepreneur): Nothing new about that…

Me (chocoholic): Yeah, what do you expect? We don’t get first class service on private jets like you.
Continue reading “A Malaysian Lunch”

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Tan Zhong Shan – top law student at Cambridge University is Malaysian and latest example of our costly brain-drain

Congratulations to Ipoh-born 23-year-old Tan Zhong Shan who has emerged as the top student in his final-year law examinations at Cambridge University.

In a report headlined “Malaysian is top law student at Cambridge University”, the Star today reported that Tan obtained a first-class honours in the Bachelor of Arts (Law) in June this year at Queens’ College, which is part of the university, one of England’s oldest and most prestigious.

The report said:

“He even scored the ‘Slaughter and May’ prize given by the university’s Law Faculty – an award given to those who achieve the best overall performance in the final-year law examinations.

“Other coveted prizes he bagged include The Norton Rose Prize for Commercial Law, the Clifford Chance Prize for European Union Law and the Herbert Smith Prize for Conflict of Laws.

“Queens’ College dean Dr Martin Dixon said Tan definitely stood out among the students there.
Continue reading “Tan Zhong Shan – top law student at Cambridge University is Malaysian and latest example of our costly brain-drain”

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2011 Budget – Eulogy for NEM and relaunch of Mahathir economic model (Part 4 of 4)

Human Capital Issues

The allocations announced in the Budget for human capital development are indeed impressive. However, the question arises if the nation will get value for its money. There can be no denial of the fact that the Malaysian educational system is in disarray.

Standards have fallen dramatically. Our universities turn out graduates who lack rudimentary skills demanded by employers thus contributing to low productivity and loss of competitiveness. Our secondary school system is in disastrous shape.

Those who are charged with educating the next generation of Malaysians to be responsible citizens are more interested in promoting race hate as recent episodes of misbehavior by teachers highlight.

The lack of an adequate reaction from the top echelons of the Government has sent a strong signal to others in the educational system to project the message of hate that BTN promotes with impunity. These despicable acts and patterns of behavior give credence to the notion that the 1Malaysia slogan is nothing more than a catchy slogan devoid of meaning or sincerity.
Continue reading “2011 Budget – Eulogy for NEM and relaunch of Mahathir economic model (Part 4 of 4)”

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2011 Budget – Eulogy for NEM and relaunch of Mahathir economic model (Part 3 of 4)

The Pivotal Role of the Private Sector

Much was made in the ETP presentation about reinvigorating private investment, with 92% of the total projected investment of US$444 being investment by the private sector. These expressions are repeated in the Budget Speech. However no details have been provided as to how this target is to be achieved.

The speech tantalizingly offers the suggestion that the Government will intensify the Public-Private Partnership to “… enhance private sector involvement in economic activities” To this end the Government proposes to invest RM 1 billion from the Facilitation Fund in support of several infrastructure projects.

On the one hand the formulation is built upon the notion that the private sector will be unleashed; and yet the ETP is in reality a top down creation. PEMANDU is seemingly picking “winners” and it would imply that Malaysia is about to embark upon a new form of central planning to get to highly untenable targets.
Continue reading “2011 Budget – Eulogy for NEM and relaunch of Mahathir economic model (Part 3 of 4)”

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2011 Budget – Eulogy for NEM and relaunch of Mahathir economic model (Part 2 of 4)

Recent Economic Performance & Prospects

In the formulation of the Budget for 2011, the Prime Minister made the claim that the Malaysian economy had recovered from the global economic recession.

In an act of self congratulation, he attributed this to the proactive measures taken by the Government through the RM 67 billion stimulus package. He however failed to acknowledge that other countries in the region had performed equally well or even exceeded Malaysian performance.

The statistics he cited refer to the short term and are soothing. However, he made no mention of the challenging issues that will determine the medium term performance of the nation’s economy.

He appears to be suffering from a bout of amnesia about the need to address the issue of subsidies and to achieve fiscal balance.
Continue reading “2011 Budget – Eulogy for NEM and relaunch of Mahathir economic model (Part 2 of 4)”

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2011 Budget – Eulogy for NEM and relaunch of Mahathir economic model (Part 1 of 4)

The Budget presented by the Prime Minister was a eulogy for the death of the New Economic Model. It provides a clear confirmation that this Government is incapable of living up to the rhetoric of reform that it had vigorously promoted over the past year.

The slogans and feel good speeches crafted by highly paid spin doctors have not been translated into clear action programs. The divided and weak BN Government remains mired and has now demonstrated its inability to deliver upon its promises of change.

The Budget marks the return to failed economic policies of the past. The Mahathir Economic Model built around mega projects, crony capitalists as key players, bailouts and handouts is once again alive and returns to haunt the nation.

The Budget yet again demonstrates that this administration is incorrigibly incapable of drawing lessons from the past and persists with policies that have entrapped Malaysia in the middle income trap.

The Budget for 2011 has all of the attributes of a blunt tool for distributing public funds to UMNOputras, BN cronies, and vested groups that constitute the vote bank of the Barisan.
Continue reading “2011 Budget – Eulogy for NEM and relaunch of Mahathir economic model (Part 1 of 4)”

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Budget 2011: A budget for the big boys and civil servants

By Dr Lim Teck Ghee

There are several ways to analyze the budget. One is to take at face value what the Prime Minister has written in his blog just before his budget speech where he promised that it is “a budget by the rakyat”. By it, he explained that he had read through the more than 1,000 comments and suggestions from his readers and forwarded them to the Ministry of Finance to incorporate.

According to the PM, there were three key issues raised – employment, taxes and subsidies, and education.

In his words, “employment was the most frequently discussed with some of you calling for the implementation of a minimum wage policy”. Also, he noted that “comments from the youth requested for increased tax rebates for young families or ways to provide financial assistance in managing the rising cost of living”. As for education, the feedback on his blog related to concerns with education quality and the rising cost of education.

Now that the budget has been unveiled, it is clear that the civil servants preparing the budget have completely ignored the Prime Minister. Firstly, the implementation of the minimum wage policy has been further deferred for the umpteenth time. The only beneficiaries of wage reform appear to be security guards who deservedly see their minimum wages raised and female civil servants who will now have longer maternity leave.
Continue reading “Budget 2011: A budget for the big boys and civil servants”

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Budget 2011 – Unable to stimulate necessary growth to meet high-income nation objective

By Tony Pua

Budget 2010: Government failed to keep a lid on sky-rocketing operating expenditure

The Prime Minister in his speech announced that the Government will be on track to meet the projected budget deficit of 5.6% for the fiscal year 2010 giving the appearance that the Government was able to meet its financial commitment and targets. However, the meeting of the deficit target masks the fact that the Government had in fact substantially overspent its allocated budgets, and was “saved” only by a higher than expected collection of tax revenues.

Last year when the budget for 2010 was announced, the Government promised a commitment to trim operating expenditure to reduce wastage and to generate greater value for money returns with the tax-payers’ money.

We had in fact applauded the Government’s decision to reduce operating expenditure by a significant 13.7% from RM160.2 billion in 2009 to a budgeted RM138.3 billion. The government’s operating expenditure includes salaries and pensions for the civil service, purchase of government assets, supplies and services, rentals, various subsidies, debt repayments, toll compensations and “other” expenditures. A government’s “operating expenditure” is not expected to generate high economic multiplier effects, as opposed to “development expenditure”.
Continue reading “Budget 2011 – Unable to stimulate necessary growth to meet high-income nation objective”

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Key political risks to watch in Malaysia

Oct 1, 10
Reuters/Malaysiakini

Malaysia has unveiled ambitious plans to boost its economy by mobilising hundreds of billions of dollars of private investment, although questions remain over whether the money will materialise.

Prime Minister Najib Abdul Razak’s cut in fuel, gas and sugar subsidies in August triggered a political backlash that may see him holding off more reforms ahead of the next general elections due by 2013.

Najib has pledged to reform the country’s subsidy bill to tackle the budget deficit. But he is wary of upsetting the country’s majority ethnic Malays, a critical votebank whose support will be vital as he tries to revive his ruling coalition which was hit by record losses in general elections in 2008.

Following is a summary of key Malaysia risks to watch:

Political conflict

Political tensions spiked after the 2008 general election when unprecedented opposition gains transformed the political landscape. BN coalition’s 52-year grip on the country was dented when it ceded control of five states and lost its two-thirds parliamentary majority to an opposition led by former Deputy Prime Minister Anwar Ibrahim.

The political uncertainty has weighed on foreign investment with net portfolio and direct investment outflows reaching US$61 billion (RM188 million) in 2008 and 2009 according to official data. Money has since flowed into the bond market according to central bank statistics, but little has flowed into equities.

What to watch:

• Opposition leader Anwar Ibrahim’s sodomy trial. Anwar says the case is a political conspiracy, and a contentious verdict would anger his supporters. Any marked increase in political tensions could see more foreign money pulled from stocks, bonds and the ringgit. But with limited foreign portfolio investment still in the country, the impact will be muted.

• Elections in the Borneo state of Sarawak, expected by the end of this year. The state’s chief minister has directed the ruling coalition to ready itself for state-wide polls, and analysts say nationwide elections could follow soon after. BN’s shock defeat in a May by-election in Sarawak raised doubts over its support levels in the state. Continue reading “Key political risks to watch in Malaysia”

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International deluge of criticisms on persecution of Anwar

By Dr. Chen Man Hin, DAP life advisor

International deluge of criticisms from the conspiracy to convict Anwar of sodomy 2

Suddenly there appears to be a deluge of international personalities criticising the Malaysian government for persecuting Anwar on trumped up charge of sodomy 2.

It started with ex US vice president Gore, and IMF chief Stiglitz, followed by Barry Wain former AWSJ correspondent as well as a former US ambassador to Malaysia John Croft

All of them unanimously condemned the conspiracy to paint Anwar as a sodomist and therefore not fit to be the Opposition Leader.

These are all distinguished members of the international community who are shocked in unison by this serious transgression of justice, democracy and the rule of law by the Malaysian government. UMNO, the power behind the prime minister, intends to perpetuate their power by trying Anwar on trumped up charges of sodomy, to convict and imprison him, thus denying him the opportunity to be the next Prime Minister.
Continue reading “International deluge of criticisms on persecution of Anwar”

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Malaysia stumbling

Eric Ellis
TheAge
Australia
September 23, 2010

ONE of Australia’s key partners in Asia is struggling. Given the way its leaders have taunted Australia over the years, schadenfreude at its plight would be understandable. But this should be resisted, for if Malaysia stumbles, the effects may ripple across the region.

Erstwhile sponsor of the Carlton Football Club, a cash cow for the Australian education sector, Australia’s 10th largest trading partner and a champion of ”Asian values” – whatever they are – Malaysia seems to be brimming with sky-is-falling Chicken Littles. And their analyses are alarmist; ”failed state”, ”deep pit”, ”national decay”, ”ocean-going corruption”, ”useless mega-projects”.

While some of these could be used to describe the Delhi Commonwealth Games – a massive undertaking Malaysia successfully pulled off 12 years ago by the way – it is about a country oft-regarded as an Asian success, whose rampant economy inspired a cockiness among its leaders to take racially tinged potshots at the ”decadent and immoral” West, and at Australia in particular.

And then there was the International Monetary Fund and the World Bank to demonise, indeed anyone its mercurial then prime minister Mahathir Mohamad didn’t like on any given day. And there was 23 years of it, the Mahathir monopoly on Malaysian power.

So what’s prompted such painful hand-wringing from a tigerish economy that likes to boast how it ditched traditional models to virtually promise endless riches? The answer is some of the nastiest foreign direct investment (FDI) statistics an Asian economy has served up in a generation. Continue reading “Malaysia stumbling”

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How real is the Economic Transformation Programme?

The Economic Transformation Programme (ETP), the latest pronouncement by Minister in the Prime Minister’s Department Datuk Seri Idris Jala, follows upon a number of other pronouncements that have become the hallmark of Dato Seri Najib’s administration.

Like the previous pronouncements of 1Malaysia People First Performance Now, the Government Transformation Programme, the 10th Malaysia Five Year Plan, the ETP is rich in rhetoric.

The sloganeering and spin that is common to all of these exercises provides a clear indication that the Government led by Najib is wholly at sea in tackling the enormous challenges that the country faces.

These challenges have accumulated over the wasted three decades characterized by mismanagement, corruption and abuse of power that has benefited a small coterie.

A common feature of the series of announcements is that they contain unrealistic assumptions about economic growth prospects; they use clichés that are taken from business school texts that have been spun in order to create a false impression of a rethinking of policies.

The various announcements of “policies” and “strategies” are littered with a slew of abbreviations such as KPIs, NKRAs, MKRAs, NKEAs, EPPs and BIZ Ops are freely bandied about. Continue reading “How real is the Economic Transformation Programme?”

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A nation of failed economic development plans

Malaysiakini
AB Sulaiman
Sep 20, 10
COMMENT

The world can be a nasty place especially in terms of planning, where your best and well intentioned plans can produce the worst unintended results. The country’s numerous development plans is a perfect example of this.

Since Independence we have always strived to be a country with strong social, economic and political credentials: a strong healthy and united people, public safety and security, great infrastructure, mature democracy, clean human rights record, good education system, governed under rule of law, and of course, a justice-minded judiciary.

To top them all off we are to enjoy a per capita income equal to the peoples in advanced economies. We wish to be an advanced country in our own right.

The current realities are anything but. The people are fragmented while some are migrating to friendlier lands, our infrastructure while adequate is wasteful, our democracy is an ugly disguise for authoritarianism, our education system produces non-thinking graduates, the rule of law has become the rule by law, and the judiciary is an international laughing stock. Continue reading “A nation of failed economic development plans”

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Najib’s failure to stand up and be counted to condemn extremism and extremists especially from his own camp will be the undoing of his 1Malaysia concept

Malaysians are witnessing the Prime Minister, Datuk Seri Najib Razak, performing one of his biggest flip-flops in his 18 months at the helm of the country’s administration.

Najib’s attempt to distance or disentangle Umno from Perkasa did not last more than a week from the announcement of the Umno Secretary-General that Perkasa was eroding non-Malay support for Barisan Nasional to Najib’s Malaysia Day message expressing sadness at the rise of extremism in his 18 months as Prime Minister.

Most ironically, Najib chose the Yayasan 1Malaysia seminar themed “Living In a Multi-Ethnic Society” in Kuala Lumpur after the Malaysia Day celebrations in Sabah to perform the flip-flop – refusing to name Perkasa as the worst culprit responsible for the rise of extremism and scaring away foreign investors.

This is now followed by Tengku Adnan’s flip-flop today denying that the Barisan Nasional parties had agreed to keep a distance from Perkasa.

If Barisan Nasional parties had never agreed top keep a distance from Perkasa, are MCA and Gerakan national leaders to “eat their words” for publicly welcoming such a decision? Continue reading “Najib’s failure to stand up and be counted to condemn extremism and extremists especially from his own camp will be the undoing of his 1Malaysia concept”

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ANALYSIS – Malaysia “top-down” reforms set to disappoint

By David Chance | Reuters

Malaysia’s plans to revitalise investment by backing national champions and ending race-based policies may sound ambitious, but the details are hazy and real economic reform will face formidable obstacles.

The government starts public consultations this month on a new round of reforms, but there is growing resistance from voters and disappointment from investors over measures taken so far.

A government think tank has identified a dozen growth industries such as oil and gas, biotechnology and Islamic finance to focus on in a drive to double Malaysia’s income per capita and propel it into the ranks of “developed nations” by 2020.

Prime Minister Najib Razak’s record on reform is patchy — he shied away from big subsidy cuts and reversed tack on race-based preferential equity ownership rules for the majority ethnic Malay population under pressure from activists.
Continue reading “ANALYSIS – Malaysia “top-down” reforms set to disappoint”

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Will PM Najib Razak push through an effective NEM to transform a failed problem ridden Malaysia?

by Dr Chen Man Hin, life adviser DAP

IT WILL TAKE A LIBERAL NEW ECONOMIC MODEL AND A STRONG PRIME MINISTER TO PUSH MUCH NEEDED REFORMS TO TRANSFORM MALAYSIA INTO A HIGH INCOME COUNTRY WITH DEMOCRACY, JUSTICE AND PROSPERITY FOR ALL REGARDLESS OF RACE OR RELIGION.

The political and economic outlook for the country is critical. We are riddled with multiple problems of corruption, lack of judicial independence, racialism, brain drain, with 40% of households living below the poverty level of RM1,500, and four out of five poor households are bumiputras.

All these things are happening even after two years of PM Najib rule since April 2008. His 1 Malaysia and mediocre attempts at reforms have failed.

WORLD RANKINGS OF MALAYSIA

The sorry state of political and economic development is reflected in the world ranking status of Malaysia on areas which indicate whether a society is honest, democratic, transparent,and just.
Continue reading “Will PM Najib Razak push through an effective NEM to transform a failed problem ridden Malaysia?”