Category: Finance

By Boo Su-Lyn
The Malaysian Insider
October 25, 2010

KUALA LUMPUR, Oct 25 — Putrajaya’s focus on mega construction projects instead of key reforms in its economic plans — symbolised by the 100-storey Warisan Merdeka tower — will hamper the country’s goal of becoming a high-income nation, analysts have said.

They have stressed that economic and institutional reforms to increase market efficiency and human capital development were the crucial elements to lift Malaysia out of its middle-income trap.

“It is not sustainable as we will have first-class infrastructure and facility and third-world work ethics and mentality,” RAM Holdings group chief economist Dr Yeah Kim Leng told The Malaysian Insider.

“The soft part of the development, which is the human capital, will have to take centre stage for the high-income transformation drive to be successful,” he added.

Yeah noted that Prime Minister Datuk Seri Najib Razak’s reform commitments in his New Economic Model (NEM) have been eclipsed by the mega construction projects announced in Budget 2011 and the Economic Transformation Programme (ETP). Continue reading “Building projects unsustainable in long run, say analysts”

Philip Ho
Klik4Malaysia
23 October 2010

Petaling Jaya, Oct 23 – Housing and Local Government Minister Datuk Chor Chee Heung has urged house buyers to sign up two-generation housing loans so that more Malaysians can afford to own houses.

“The most important thing is for the individual to own a house for his family to live in. If loan repayment is extended to the second generation, that means the family will remain intact,” said Chor yesterday after launching the Malaysia Building Society Bhd’s Ultimate Mortgage programme on Friday (Oct 22).

Chor said that the newly announced 2011 Budget also encouraged the two-generation loan term while denying that the move would increase the financial burden of the next generation.

“I don’t think it is a burden for the next generation because the repayment will be spread over a long period and the younger generation are financially strong. They can even buy a second house,” he added.

Klik4Malaysia (K4M) contacted Selangor state government’s chief executive of economic advisory Rafizi Ramli for comments from an accountant’s perspective, regarding the implications on the younger generation’s financial burden. Continue reading “Two-generation home loans may bankrupt the next generation”

Malaysia’s Development Strategy Revisited (5)
by Dr. Mohamed Ariff*

A New Pro-Poor Economic Policy and Reform

There is certainly a need for a clear focus on the needs of the poor and marginalized regardless of race, colour or religion. In other words, Malaysia needs a ‘new’ New Economic Policy that is explicitly pro-poor. The main beneficiary of such a policy would still be Malay households, as they account for roughly three-quarters of the bottom 40 per cent of households in terms of income distribution. Continue reading “Malays competitive and competent – need for New Pro-Poor Economic Policy/Reform”

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?”

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”

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!”

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”

Deputy Prime Minister Tan Sri Muhyiddin Yassin and Umno Ministers should decide at the Cabinet meeting tomorrow whether they will return their salaries and allowances to Treasury as they do not want to be associated with gambling money.

Ten days ago on September 25, Bernama carried the following report:

MUAR, Saturday 25 September 2010 (Bernama) — Deputy Prime Minister Tan Sri Muhyiddin Yassin has called on Penang Chief Minister Lim Guan Eng to answer allegations made by Umno Youth on the state government’s financial source to fund its poverty eradication programmes.

Muhyiddin said Muslims would not want to be associated should gambling money were used for the programmes.

“We want an answer from Lim. If the money is from a forbidden source, Muslims will have no part in it,” he told reporters after launching a Pagoh education excellence programme at the Dewan Sri Pekembar, here.

Muhyiddin was asked on a news report today quoting Umno Youth as claiming that funds from gambling activities were used to finance poverty eradication programmes in Penang.

Continue reading “Will Muhyiddin return to Treasury his salaries and allowances as Federal Minister for past 15 years so as not to be associated with forbidden money?”

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”

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?”

The Minister in the Prime Minister’s Department Tan Sri Nor Mohamed is quoted in today’s press as saying that Talent Corporation has been tasked with attracting at least half of the 750,000 Malaysian professionals working overseas to come home as part of its efforts to draw the best brains in the world to Malaysia.

Speaking at the launching of the Public-Private Partnership’s website www.3pu.gov.my, he said seeking out the Malaysian diaspora for the top brains was necessary as the Government aimed to hit the target of RM115 billion per year in local and foreign investments to turn the country into a developed nation by 2020.

It is shocking that Nor Mohamed could come out with such an unrealistic and “tall order” not only because of the dismal failure of previous government “brain gain” policies but in the light of recent events when the unchecked escalation of the rhetoric of race and religion would have the effect of giving a major push to greater brain-drain from the country instead of pulling back talents from the Malaysian diaspora to return to serve the country.

It is time that the Prime Minister, Datuk Seri Najib Razak and his Ministers wake up and realize that the twin crisis of human talents and investments confronting the country are more than a matter of economics.
Continue reading “When will Najib and his Ministers wake up and realize that the twin crisis of human talents and investments confronting the country are more than a matter of economics?”

Malaysiakini
Humayun Kabir
Jul 3, 10

The DAP has slammed the additional project allocations to parliamentary constituencies totalling RM111 million, saying the money would be better spent on more scholarships to deserving students, our future assets.

Party supremo Lim Kit Siang lashed out at the BN government for squandering precious public funds for their personal political agenda instead of helping needy students.

He said more non-Malay students who deserve scholarships are not getting the opportunities, describing Prime Minister Najib Abdul Razak’s 1Malaysia policy as hypocritical.

Lim praised party national vice chief M Kula Segaran – who is helping Indians secure Public Services Department (PSD) scholarships – for championing the rights of his community. Continue reading “DAP: MP allocations better spent on scholarships”

The signature theme of Datuk Seri Najib Razak on his accession as Prime Minister in April last year was the national transformation of Malaysia, which is anchored on four critical pillars:

• 1st pillar: “1Malaysia, People First, Performance Now” concept to unite Malaysians.

• 2nd pillar: the Government Transformation Programme (GTP) to deliver the outcomes defined under the National Key Result Areas (NKRAs).

• 3rd pillar: the New Economic Model (NEM) resulting from the ambitious Economic Transformation Programme (ETP) to transform Malaysia by 2020 into a developed, competitive and high income economy with inclusivity and sustainability.

• 4th pillar; the 10th Malaysia Plan 2011-2015 as the first policy operationalisation of both the government and economic transformation programme.

The Prime Minister unveiled the New Economic Model on 30th March and the presented the Tenth Malaysia Plan in Parliament on 10th June. A sea-change took place in the intervening two months, with Najib retreating from his national transformation programme when he succumbed to pressures from extremist groups making baseless and incendiary claims such as that the Malays are under siege and that the Chinese would take over the economy and country.
Continue reading “Tenth Malaysia Plan: Long Live NEP – RIP NEM”

A dispassionate analysis of the forty years of implementation of the NEP-NDP provides many lessons. These include:

• There is no alternative to pro-growth policies if Malaysia is to attain the original goals of the NEP, namely eradication of poverty irrespective of race and economic restructuring; pro-growth policies are also essential if the Vision 2020 goals are to be achieved.

• Malaysia has achieved rapid growth and prospered when the policy framework has been pro-market and liberal.

• On the other hand, pro- distribution policies such as those favored and advocated by Faaland in the early 1970s and again revived now championed by PERKASA, have led to slow overall growth and more specifically low achievement of the restructuring targets.

• The private sector constitutes the main engine of growth. Over-regulation of the sector under the NEP framework creates impediments to investment, both domestic and foreign, thereby impacting on poverty eradication and opportunities for restructuring.

• There is a high cost of doing business when there is over-regulation or bureaucratic control. Distortions emerge that create opportunities for rent-seeking and corruption.

Continue reading “The 10th Malaysia Five Year Plan : Old Wine in New Bottles – Part 7 (National Agenda for all Malaysians instead of a mutating NEP)”

Equity Restructuring and Ownership

The Plan restates that the target of attaining at least 30% Bumiputra corporate equity ownership at macro level remains. It goes on to indicate that the focus will be on promoting genuine economic participation, consistent with the objective of sustainable high growth, rather than corporate equity allocation.

The Plan proclaims that this will be achieved through more transparent, market-friendly and merit-based instruments, focused on:

• Strengthening Bumiputra entrepreneurship to help create competitive businesses in high impact sectors;

• Increasing wealth ownership beyond corporate equity to include other properties and business assets such as retail space landed properties,
commercial buildings, intellectual properties and other services through pooling of funds and institutional investment; and

• Promoting Bumiputra representation in high paying jobs through enhanced capability building and demand-side incentives.

These statements can be cautiously welcomed as they represent a nuanced shift. However, if the past is any indicator, this shift may be no more than illusionary and a mutation of the NEP. Continue reading “The 10th Malaysia Five Year Plan : Old Wine in New Bottles – Part 6 (Equity Restructuring/Ownership)”

Poverty

Chapter 4 of the Plan document together with several Tables dealing with Thrust 3 in the Appendices present fairly detailed statistics on poverty and income distribution.

In a somewhat self-congratulatory tone, the Plan proclaims that hardcore poverty was reduced from 1.2% in 2004 to 0.7% in 2009 and that the incidence of overall poverty fell from 5.7% in 2004 to 3.8% in 2009. These claims are questionable because of the underlying methodology employed in deriving these estimates.

In the first place there is no indication as to how the Poverty Lines were estimated. Assuming that the methodology used mirrors that used in the 9th Plan, the bar to define poverty is set at far too low a level.

In the second place, the use of “households” rather than “persons” distorts the measurement.

On the flawed basis, 228,400 households were categorized as poor. It is most significant that of these 99,100 were in Sabah with another 27,100 in Sarawak. Thus, there were a disproportionate number of the poor in these two states highlighting gross neglect by the Federal government of Malaysians in these two states. Continue reading “The 10th Malaysia Five Year Plan : Old Wine in New Bottles – Part 5 (Poverty)”

The Five Thrusts of the 10th Malaysia Plan

The Prime Minister stressed that the 10th Malaysia Plan is oriented around five key strategic thrusts, namely:

* Stimulating Economic Growth – implementing a policy framework that will galvanize the private sector and promote trade and investment;

* Moving towards Inclusive Socio-Economic Development – focusing government support on those most in need and reforming affirmative action policies;

* Developing and Retaining a First-World Talent Base – improving schools, providing skills training to those in the workforce and implementing important labour market reforms;

* Building an Environment that Enhances Quality of Life – investing in housing, transport, healthcare, utilities, crime prevention and the environment to support economic activity and improved living standards; and

* Transforming Government to Transform Malaysia – building on the success of the Government Transformation Program to continue to improve government performance and transparency to best serve the people

The question that arises is: How different are these in comparison with the corresponding thrusts that were outlined in the 9th Five Year Plan? Continue reading “The 10th Malaysia Five Year Plan : Old Wine in New Bottles – Part 4 (5 Thrusts of TMP)”

Unlearnt Lessons from the Past: Where have we come from?

A brief review is in order to understand how the nation got to the precarious point best amplified by a Minister sternly warning that Malaysia is heading towards bankruptcy by the end of the decade.

Malaysia is more integrated into the global economy than many other countries of a similar size and at a comparable stage of development. Globalization is a fact of life. It has contributed both positively and negatively to Malaysian development. On the upside, integration with the global economy permitted the nation to prosper through trade and flows of FDI in the years prior to the East Asian Crisis of 1997. There was rapid economic growth, rising income levels, declining poverty and unemployment and a somewhat more egalitarian distribution of wealth. A contributing factor was the fact that Malaysia was blessed with a rich resource base – its forests and oil and gas. It had reasonably well functioning institutions in the form of an established public service, a modestly independent judiciary and institutions that measured well against those in other developing countries. The nation progressed despite creeping corruption, growing race polarization, authoritarianism and a general deterioration in the delivery of public services. The early 1990s saw a degree of deregulation and the privatization that gave momentum to modest reforms. The economic fundamentals were essentially sound with the budget largely balanced, and low inflation and robust growth. These outcomes occurred despite the constraints and distortions imposed by the NEP.

The 1997 East Asia crisis provided a rude awakening. Absence of accountability, lack of transparency and the growing cronyism, nepotism and the megalomaniac obsession with mega projects Continue reading "The 10th Malaysia Five Year Plan : Old Wine in New Bottles – Part 3 (Unlearnt lessons from the past)"

Malaysian Insider
By Clara Chooi
June 08, 2010

KUALA LUMPUR, June 8 — Prime Minister Datuk Seri Najib Razak today moved to quell fears raised by a minister that Malaysia would one day go the way of Greece and Iceland and become a bankrupt nation.

In a written response to a question by Lim Kit Siang (DAP-Ipoh Timor) in Parliament, the premier gave an assurance that the government was taking steps to ensure that Malaysia’s debts would be reduced and maintained at a manageable level.

“Malaysia will not face problems like what is happening at present in Greece and Iceland. Continue reading “PM dispels fears of possible bankruptcy”

SOALAN:
Lim Kit Siang (Ipoh Timur) minta PERDANA MENTERI menyatakan apakah tindakan yang telah diambil untuk memastikan bahawa Malaysia tidak akan mengikut jejak langkah Iceland dan Greece dan menjadi sebuah negara bankrap yang memerlukan penyelamatan dan masyarakat serantau atau antarabangsa.

JAWAPAN:
Tuan Yang di-Pertua,

1. Untuk makluman Yang Berhormat, hutang negara adalah hutang luar negara yang terdiri daripada hutang luar jangka sederhana dan panjang bagi Kerajaan Persekutuan, Perusahaan Awam Bukan Kewangan (PABK) dan sektor swasta serta hutang jangka pendek sektor perbankan dan swasta. Peratusan hutang negara kepada Keluaran Dalam Negara Kasar (KDNK) dan tahun 2004 hingga 2009 kekal terurus dengan purata 34.6% dan pecahannya adalah seperti berikut:

   Tahun	Peratus hutang negara kepada KDNK
   2004	42.3
   2005	37.8
   2006	32.1
   2007	29.2
   2008	31.9
   2009	34.3

Continue reading “Malaysia’s foreign debt – Parliament Question”