Sunday, June 29, 2008

Things fall apart; the centre cannot hold

This poem by William Butler Yeats is relevant to our times. The poem was written in 1919 in the aftermath of the First World War. Chinua Achebe titled his most famous novel Things Fall Apart (1958), prefacing the book with the poem's first four lines. Achebe's novel adheres to Yeats' theme by evincing the sudden collapse of African societies in the age of European colonialism.

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold ;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.

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Surely some revelation is at hand;
Surely the Second Coming is at hand.
The Second Coming! Hardly are those words out
When a vast image out of Spiritus Mundi
Troubles my sight: somewhere in sands of the desert
A shape with lion body and the head of a man,
A gaze blank and pitiless as the sun,
Is moving its slow thighs, while all about it
Reel shadows of the indignant desert birds.
The darkness drops again; but now I know
That twenty centuries of stony sleep
Were vexed to nightmare by a rocking cradle,
And what rough beast, its hour come round at last,
Slouches towards Bethlehem to be born?

Friday, June 27, 2008

MALAYSIAKINI: The failure of federalism?

The latest batch of Malaysiakini reports; Opposition pledges yet to be fulfilled, Koh tells Lim to make up his mind and, Penang fumes over scrapping of mega-projects is, to me, further evidence of the major mistake made by the drafters of the Federal Constitution.
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One of the key features in the brief given to the Reid Commission was "the establishment of a stong central government".
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Concentration of financial power at federal level
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Upon that feature alone is built the ridiculous edifice of the Malaysian constitutional structure where easily 95% of ALL revenue collected goes to the federal government. Yes, there are state grants under Part VII of the Constitution, but it is a pittance. It is hardly sufficient to keep each state afloat in operating expenses.
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The states are left with powers to collect revenue from quit rent, assessment and entertainment duties. As I said, hardly enough to cover costs. It is no wonder that Guan Eng's Penang state govt has had to immediately look into austerity measures upon assuming office.
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This unfair constitutional bias towards the federal govt also explains Najib's smug position as posted in Malaysia-Today.Net which I extract here:-
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There are strong murmurs that the Pakatan Rakyat Government is not leaving the “lost of ideal funding” for these two projects to providence or any justification that their needs are not “people-friendly”.
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The PR, arguing in principle that the BN lost of way among the plebiscites was the primary reason why they lost far too many seats on March 8, is determined not to be dragged that way too if they fail to get these projects moving.
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Some would say that getting the projects done at all cost would be their flagship election issue five years from now. The business savvy among the PR crowd may now be thinking of alternative and independent means to raise funds for the two projects. That’s what it is: a mere lack of funding rather than lack of resolve, resourcefulness and some third party angel investors willing to fork out a cool RM3.5 billion in a coterie of investments and soft loans.
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But Najib seemed to have anticipated this economically subversive thinking. When he was asked whether Penang could carry out the deferred projects on their own, Najib pointed the issue as a matter subject to the Federal Constitution. “You have to decide whether it is under the state or federal list. Secondly, if the state want to borrow (a loan), they still need permission from the federal government," he said in underscoring the Federal Government’s stand.
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Article 111 of the Constitution requires states to borrow from the federal govt. So, Najib believes that he's got Guan Eng checkmated. Or, has he? Believe me, there ARE ways to work around Art. 111. But that's another story.
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For now, I want to say that our M'sian constitutional structure has engendered an unfair situation where states that are governed by Pakatan are being deprived of their right to development.
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What happened to EQUALITY & FAIRNESS to ALL M'sians, even Penangites?
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The Constitution contains the principle of EQUALITY. That means the BN federal govt is acting unconstitutionally by granting more funds to BN-controlled states at the expense of Pakatan-controlled states. We have seen this happen with RM1 billion "goodies" being given to Sabah and Sarawak.
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What about the RM30 billion under 9MP? Obviously the funds are not going to Penang.
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What the BN federal govt has shoved into M'sian voters' faces this time around is that until such time Pakatan has a majority in Parliament (and, therefore, forms the federal govt) the 5 Pakatan states will be starved financially.
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Lessons from Sabah
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The BN seems to have forgotten about Harris Salleh's experience in 1985 when he starved Tambunan because of Pairin Kitingan's recalcitrance and audacity to leave Berjaya Party to be come an independent Assemblyman. There was a landslide against Harris and Berjaya Party!
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Why the crossover is necessary
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Given the above scenario, if fair-minded M'sians still maintain that crossovers are morally wrong, then they should ask themselves (and BN) if depriving Penangites of their right as tax-paying M'sians to the development of their state and LIVELIHOOD is morally right?
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Let's not be sanctimonious about illusory principles about crossovers. I say here that the morality of development and livelihood outweighs by a billion times (or RM3.5 billion - take your pick), the morality of crossovers.

Escapist - Never!

This is a Robert Frost poem that I dedicate to all Malaysians who desire a better future under a better government and, who are doing their part to make it happen...
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Escapist - Never

He is no fugitive - escaped, escaping.
No one has seen him stumble looking back.
His fear is not behind him but beside him
On either hand to make his course perhaps
A crooked straightness yet no less a straightness.
He runs face forward.
He is a pursuer.
He seeks a seeker who in turn seeks
Another still, lost far into the distance.
Any who seek him seek in him the seeker.
His life is a pursuit of a pursuit forever.
It is the future that creates his present.
All is an interminable chain of longing.

Thursday, June 26, 2008

MALAYSIAKINI: Pete, Najib & Rosmah

Tony Thien's report in Malaysiakini Settle it the Bidayuh way: Star chief is very cool! I can't resist highlighting it. This is Dr Patau Rubis' suggestion on how to settle the dispute between Deputy Prime Minister Najib Tun Razak and his wife Rosmah and blogger Raja Petra Kamaruddin over the truth of the matter relating to the Altantuya murder case.
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Dr Patau Rubis says that he is prepared to sponsor the ceremony if the trio will come and swear before a Bidayuh ketua gawai in the Kampung Gumbang baruk (head house) to the truth of their statements to the authorities.
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According to him, the Bidayuh belief is that anyone who tells a lie will die within three weeks. Now that is swift justice!
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But if you are scared to come, let the court decide the matter,” he added, referring to Najib and his wife Rosmah's denial about any link to the Altantuya murder case. In law this procedure is called a trial in absentia. Very cool, indeed!

MALAYSIAKINI: Abdullah launches mid-term review of 9MP

This is the time to take stock and discuss key measures to deal with the impending economic challenges. Read the report at Malaysiakini Abdullah launches mid-term review of 9MP and
Gov't injects extra RM30 bil into 9MP.
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Earlier I have commented on Malaysiakini's report on Beh Li Yi's report on EPU: Penang monorail, Porr shelved here.
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The debate on the 9MP mid-term comes at a time when the fuel price hike and rising food prices are impacting Malaysia. The economic situation has changed quite drastically from as recently as 12-24 months ago. Even Singapore, the pillar of inflationary stability in Southeast Asia is looking at 7% price inflation.
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As the debates begin in Parliament, what our politicians need to realise is:-
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1. Asset inflation is now replaced with consumer price inflation
Asset inflation is a sort of "happy" problem since wealth is created in the form of rising property prices. Many Malaysians get to enjoy capital gains. But consumer price inflation eats into the disposable income of Malaysians, especially those earning below RM5,000-00 a month (& who are married, with kids & paying mortgages & car loans!)
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2. Monetary policies cannot help consumer price inflation
No matter what Zeti & Bank Negara does with M'sia's money supply, consumer price inflation CANNOT be managed by monetary policies. Petrol prices and food prices are basic necessities that are consumed EVERYDAY.
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3. Fiscal policies on subsidies must be short-term
To alleviate the burden of consumer price inflation, I am prepared to accept that subsidies may be necessary to control food prices and other necessities. But they must have a SUNSET PROVISION to be removed when e.g. the price of crude oil goes down to, say, USD100-00 per barrel, or lower (is that possible?). As I have said before, subsidies distort the price mechanism. It has made us inefficient. But subsidies may be necessary during this difficult time for a short term.
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That is all I can say for now.

Protes 2008

Looks like the masses are restless! I wonder whether Malaysiakini has caught this...
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Sekretariat PROTES telah mendapat panggilan daripada ramai pihak yang inginkan kepastian berkaitan tarikh sebenar bagi Himpunan Aman PROTES Sejuta Rakyat.
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Justeru, kami sekali lagi ingin mengulangi bahawa PROTES telah menetapkan satu TARIKH MUKTAMAD bagi himpunan ini iaitu :6 Julai 2008 ( 6.7.08) Bersamaan Hari AhadJam 9 PagiBertempat Di Padang Timur, Petaling Jaya, (Berhadapan Amcorp Mall)Selangor.
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Justeru, PROTES menegaskan bahawa tiada lagi sebarang pindaan tarikh bagi Himpunan Aman PROTES Sejuta Rakyat ini. For more information READ HERE.

Wednesday, June 25, 2008

Penang's Porr and monorail projects put off

Malaysiakini reports that the federal govt is postponing the RM2 billion monorail project and the RM1.5 billion Penang Outer Ring Road (PORR) project. Read here.
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It is true that both projects have been unpopular among Penangites including the Penang Global City Centre (PGCC) project that is now mired in a legal controversy. Read Anil Netto's report on the Penang Turf Club and PGCC here.
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Although the federal govt says that the postponement of the projects is not a punishment of Penangites for having voted for PR on March 8, the deferment of the Penang projects smacks of the same reasons Pak Lah used when he deferred some of Dr M's lembu suci (sacred cow) projects such as the double-rail link and the crooked bridge (remember that?).
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Instead of a policy of engagement with PR states like Penang, the federal BN govt seems to have taken a myopic view of finding ways and means to circumvent the 5 PR state govts.
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I'm certain that the federal BN govt will say, "Well, Penangites rejected BN, rejected PGCC, complained about the monorail and complained about the PORR. So, we are responding to the views of Penangites!" And, they actually believe they can get away with that kind of logic. Do they seriously think that Penangites are THAT stupid?
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The federal BN govt should be engaging Penang to examine the NGOs' call for a consideration of a tram project in place of the monorail. Is it wrong for the community to give suggestions? Trams will be more cost-effective than monorail. Read here.
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Does Pak Lah, Najib and the rest of the federal BN team actually think that this type of strategy will preserve their tenuous hold on power?

The siege of Abdullah & possible outcomes

Since the political situation persists as reported in MALAYSIAKINI read here and here, let's see who the possible Prime Ministerial candidates are:-
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1. Pak Lah stays in power even after December
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2. Najib takes over
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3. Ku Li comes through
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4. Muhyiddin pushes through
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5. Frogs jump across the aisle paving the way for Anwar (I know! I know! Wan Azizah takes PM-ship first. But we all know that she'll be warming the seat for Anwar.)
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Frankly, I have stopped biting my nails over this. Our main concern should be whether any one or more of these leaders can be agents of true economic reform?
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Because I believe that our economic situation is increasingly dire. Rome is burning! Yet, there's so much fiddling around.

An economic agenda to consider

I suspect that the amount of RM380 billion lost in corrupt activities over 20 years (see http://www.malaysiakini.com/news/84954) is only a fraction of the actual amount lost to corruption.
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Be that as it may, the Malaysian government's approach, whether BN or PR, to economic development and wealth management must be drastically revamped. Here are some possible policy approaches.
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Petronas funds to be moved from Consolidated Revenue to a Malaysian sovereign wealth fund
Borrowing the Norwegian example (see http://ctchoolaw.blogspot.com/2008/06/managing-malaysias-common-wealth-2.html) a M'sian sovereign wealth fund ("MSWF") must be created to receive at least 80% of the annual profits of Petronas. We have to define Petronas' oil revenues as the common wealth of all Malaysians.
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Key directors of the MSWF should be Tengku Razaleigh Hamzah, Tan Sri Robert Kuok, Ananda Krishnan, Tan Sri Quek Leng Chan and Tan Sri Teh Hong Piow. These are M'sians who have a proven track record of financial astuteness. These M'sians can be entrusted to have M'sia's best interests at heart.
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The MSWF will be value-neutral investing only in assets and funds worldwide that will provide the best financial yields. The MWSF is to be preserved for future generations of M'sians. We can work out the details in due course.
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No longer can Petronas funds be used for subsidies of consumption goods which are short-term and renders the M'sian economy inefficient and uncompetitive.
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Nationalise toll roads
The M'sian govt must take over the toll operations. This can be done through raising sovereign debt which will have a triple-A rating based on the cashflow from toll collections. By sovereign debt, I mean Treasury Bonds aka Malaysian Government Securities.
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This move will remove the rent-seeking formula endemic in toll collections. It will ensure that surplus and profits go straight into the Consolidated Revenue. It will help to offset the removal of Petronas funds from the Consolidated Revenue.
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Reduce the income tax top bracket to 18%
This will stimulate greater private sector-led economic activity and attract more foreign direct investments ("FDI"). The influx of capital will generate economic activity that will offset the lower income tax rates.
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Tenaga to acquire all IPPs
IPPs are protected by the unfair Power Purchase Agreements ("PPA") which forces Tenaga Nasional to purchase all power generated by the IPPs. We are told that Petronas is also subsidising the fuel consumed by these IPPs. Consumers are being forced to absorb the increased costs via higher electricity tariffs. This is classic rent-seeking behaviour.
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The government must do a work-out for Tenaga to acquire the IPPs. Tenaga can do a massive bond-raising exercise to acquire the IPPs with the government to stand as a sovereign guarantor. The consolidated cashflow from the IPPs and Tenaga's own operations combined with the sovereign guarantee should make these bonds attractive and be given a triple-A rating.
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I know there are brickbats thrown at Tenaga. But it is still a better vehicle that can be audited as opposed to the opaque structure that currently exists. Furthermore, the PPAs are under the Official Secrets Act, apparently. That is a sham!
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Reduce importation of foreign workers
This will force M'sian companies to increase their efficiencies and shift from labour-intensive activities to more capital-intensive ones. It will also force M'sian businesses to move further up the value chain of goods and services.
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Increase vocational training institutions
To meet the shift up the value chain, M'sian workers must acquire new skill sets. Greater fiscal resources must be directed towards the establishment of more vocational institutions.
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Reduction of the defence budget
No more hardware acquisitions such as submarines. The reduced defence budget should give priority to the standing Army, smaller surface coastal vessels for the Navy and, only towards replacement of Air Force hardware (no more net increases).
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Removal of tariffs for automotive industry
This protectionist measure has only benefited an inefficient local automotive industry and the rent-seekers that own it. It has made M'sians pay exhorbitant prices for imported motor vehicles. Worse still, this policy has cost M'sia FDIs from the automotive industry and allowed Thailand to create an automotive hub. A major loss of FDI. And, M'sian automotive workers has the correct skill sets for such FDIs! A wasted opportunity.
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Increase efficiency of public transportation
Sack most members of the newly-formed Public Transportation Commission. Include more NGO representatives. Most importantly, pinch and entice the key managers of Hong Kong's incredible Transport Department to lead and manage the change. (see http://www.td.gov.hk/home/index.htm and http://en.wikipedia.org/wiki/Transport_in_Hong_Kong)
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No more rent-seekers to operate public transportation i.e. buses and light-rails. A government-owned Public Transport Authority must be formed to nationalise public transportation. Private-sector rent-seekers are prone to making decisions that are sub-optimal to the public but are super-beneficial to the rent-seekers who don't even use public transportation.
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Maintain English as a medium of instruction for Science and Maths
No reverting to Bahasa Malaysia for Science and Maths. I am hearing ridiculous pronouncements from Hishamuddin's Ministry of Education about a reversion to BM. If the rural constituents are suffering then create a full BM curriculum for the rural areas. It does not have to be a "one-size-fits-all" education policy.
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Prior to the 1970s, before the odious Rahman Yaakub became Education Minister, M'sia's education addressed this type of education product differentiation. Hisham should read the history of his own Ministry. He shouldn't have to wait for bloggers to remind him!
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This is not a full list, of course
There's a lot here to digest and discuss. What I have outlined is not complete. But it is a start. Solutions are available if we all apply our minds to it. But we need a real federal government that is responsive and genuinely concerned about moving Malaysia forward. The rakyat has been sanguine in the past in accepting a paternalistic form of governance.
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But, the trust is lost. More so because of the present (and past) government's inability to forward-plan. The federal government's obssession is clearly directed at creating rent-seeking opportunities for their cronies. Change is necessary.
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The economic storm is coming. We are witnessing a phenomenon that was forgotten since the 1970s. It is called STAGFLATION; a stagnating economy with inflationary pressure (see http://en.wikipedia.org/wiki/Stagflation). No more time to lose, people!

Tuesday, June 24, 2008

Fuel prices, inflation & the M'sian economy

The government motion as tabled by Datuk Shahrir yesterday (see Malaysiakini http://www.malaysiakini.com/news/84874) is platitudinous and short on substance. I have great respect for Datuk Shahrir and I sympathise with his ministerial portfolio. But, it's too bad that he is now the BN mouthpiece.
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We are now confronting a 41% increase in fuel prices. My courier guy just told me that they are imposing a 25% "fuel surcharge". At RM3.00 per document, the courier charge will now be RM3.75. This is inflation at the micro-economic level arising from the fuel price hike.
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Bank Negara has forecast a 5% inflation growth. I suspect it will be closer to 8%.
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Fuel subsidies distort the pricing mechanism
My concern is not so much with the fuel price hike because fundamentally the removal of subsidies from all consumption goods in the Malaysian economy will remove pricing distortions. It will remove the "make-believe" world originally created by Dr M. It is like Neo in The Matrix. Having taken the coloured pill he is woken up and unplugged from the make-believe world of the Matrix. That's what will happen to us when subsidies are removed.
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The worst part, as I have blogged about earlier, is that subsidies makes the Malaysian economy inefficient. It artificially lowers the cost of production and, therefore, create an artificially low price for specific goods such as petrol, rice, flour and sugar.
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The challenge for the government, whether BN or PR, is to have the political will or cojones to dish out the bitter pill. BN will claim that the removal of fuel subsidies does exactly that. True! But that is only one part of the story.
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Foreign labour as a perverse form of subsidy
Through the irresponsible policy of issuing permits for importation of foreign workers Malaysian employers have been able to keep labour costs lower than normal. I submit that this is also a form of subsidy.
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Worse than that, it is a subsidy to consumers of goods and services but it has a deleterious effect on the Malaysian workers and employees who have to face low wages and salaries.
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Worst still, the foreign workers create a leakage of wealth from the local economy by repatriating their wages back to their homeland. Does the government have the political will to drastically reduce the 2 million or millions more of foreign workers?
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Rent-seeking behaviour as a contributor to inflation
Let's not pretend anymore. Toll operators are rent-seekers. IPPs are rent-seekers. Government contractors who sub-contract 100% of the work are rent-seekers. They are parasitic creatures that draws an income from having inside access to the government contract-givers.
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Since they add nothing of real value to the process of creating goods and services, the percentages that these rent-seekers impose are passed on to the consumers in the form of added-on prices. Hence contributing to inflation.
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Tip of the iceberg
What I have described is only the tip of the iceberg. Of course, economic issues are complex. Of course, every facet of the economy is connected to another. Of course, dealing with one feature will be to the detriment of another economic feature. But not everything has to be Pareto optimal in the sense that an economic benefit need not be at the expense of another (see http://en.wikipedia.org/wiki/Pareto_optimum) e.g. lowering income tax need not mean that value-added taxes must be introduced simultaneously. Most things can be Kaldor-Hicks efficient in that economic policies can be designed to benefit more Malaysians and, yet doesn't make too many Malaysians worse-off (see http://en.wikipedia.org/wiki/Kaldor-Hicks).

Monday, June 23, 2008

Sapp leaders 'threatened', says party boss

Not that it was unexpected. But to read in Malaysiakini (see http://www.malaysiakini.com/news/84913) that the 2 SAPP MPs have received threats just makes me angry, sad and frustrated...all at the same time.
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This is the quality of Malaysian politics. This is the reason why many of our generation's best and brightest stayed away from politics. This is also the reason why we stand in salute to the heroic deeds of Lim Kit Siang, Karpal Singh, Lim Guan Eng, Wee Choo Keong, Anwar Ibrahim...the list goes on. These are the true Malaysian heroes who have been arrested and detained without trial under the odious Internal Security Act. In the case of Guan Eng, he was unfairly charged, tried and convicted under the Sedition Act for defending a helpless 15-year old Malay girl that was allegedly raped by the then-serving Chief Minister of Malacca. So much sacrificed.
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And, now, the gangster-style of Malaysian politics has resurfaced in Sabah against the hapless SAPP MPs. This is a low tactic. I dare say, having read The Prince, that Machiavelli would not have countenanced such a low tactic. Certainly, such a low tactic would be unbecoming of any Oxford graduate... or is it?
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I had wanted to spend some time considering the economics of the fuel price hike, its knock-on effect on inflationary pressure and the dwindling disposable income of the fixed-income earners in Malaysia. But, as Tan Siok Choo has remarked in The Sun (Monday 23/06/08) (see http://www.malaysia-today.net/2008/content/view/9145/84/) Malaysia is now embroiled in Byzantine politics.
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It is an awful spectacle that is distracting us from turning our minds to the important issue of economic management (or, mismanagement). I just wish Pak Lah will go away. Najib, too. In fact, throw the lot of them out so that we can concentrate on how to survive and thrive in the aftermath of this looming economic debacle.

Sunday, June 22, 2008

Federalism: Things fall apart; the centre cannot hold

Reading Malaysiakini and Malaysia-Today.Net we can see the strenthening of federalism in Malaysia. This is a sight that is very refreshing. I had written about this earlier (see http://ctchoolaw.blogspot.com/2008/05/good-times-for-federalism-in-malaysia.html) but I strongly recommend this recent article by Dr Francis Loh, entitled "Restructuring federal-state relations" in Aliran magazine which is excellent even by his usual high standards (see http://www.malaysia-today.net/2008/content/view/9097/84/).
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Federalism describes the dynamic legal, constitutional and administrative relations between the federal government and state governments. Over the past 50 years, due to the emphasis on giving revenue and many powers to the federal government many Malaysians, analysts and academics have despaired over the display of arrogant power by the federal government to the point that Professor Andrew Harding made the observation that Malaysia was very much a "unitary" state instead of a federal state. This was especially so in the Mahathir era.
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But a refreshing change is setting in. With 5 Pakatan Rakyat states and a wavering Sabah (still nominally under BN control?) I am reminded of the phrase used as a book title by Nobel Literature Prize-winner Chinua Achebe, that was part of a poem by William Butler Yeats, "Things fall apart; the centre cannot hold".

Join us, DAP Sarawak urges BN reps

It's starting to get hotter in Sarawak. Malaysiakini reports an audacious call by DAP Bandar Kuching ADUN, Chong Chieng Jen (see http://www.malaysiakini.com/news/84838) for all BN legislators in Sarawak to join the DAP or form alliances or a coalition.
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3 key agenda items
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The DAP mentioned 3 key agenda items. Firstly, to implement a chief minister rotation system whereby a Dayak, a Malay and a Chinese will take turn to be the Sarawak chief minister. The tenure of each CM will be for a full term after a state election. One full term will be quite sufficient for a CM to implement his policies and visions. Dayak will be the first to be the CM under the rotation system as they have the largest population.
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Secondly, to demand for 20% oil royalty for Sarawak. Despite our state’s riches in natural resources, we are one of the least developed State. Sarawak has been marginalised by the BN government all these years.
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Finally, to implement total reform of Sarawak's land policy by converting all leaseholds to 999 leaseholds and, to survey and issue land titles to all NCR land.
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It looks like the views expressed in many blogs (including this one) on NCR lands is being taken up even more earnestly by the Sarawak Opposition (PKR and DAP). At least the effort is not in vain!

Monday! Monday!

It would appear that no one in Malaysia can avoid the mention of SAPP and Monday. You read it in Malaysiakini, you hit it in Malaysia-Today.Net. Hell! You can even stare at it in the mainstream media (MSM).
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So, is Yong Teck Lee a hero, villain or, a soon-to-be-martyr? In the course of my readings, I discovered that many Sabahans of Chinese descent originate from the Hakka families that had to make a run (with the help of Christian missionaries with links to the Basel Church in North Borneo) after the quelling of the Taiping Rebellion in Qing China. Does that explain the robustness and ruggedness of the SAPP leaders like Yong?
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The parliamentary procedures on the tabling of a "no confidence" motion is well elucidated and considered by Malik Imtiaz (see http://malikimtiaz.blogspot.com/2008/06/will-speaker-uphold-constitution.html). I have nothing further to add on it.
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Instead, I want to make a small observation on Dr Chua Soi Lek's take on this SAPP business (see http://drchua9.blogspot.com/2008/06/another-political-drama.html). Dr Chua, being an MCA ex-leader-soon-to-be-future leader, is very much a part of the "enlightened" Establishment (meaning BN, of course).
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Dr Chua tries to dampen and temper the excitement over SAPP+Monday by expressing his concerns over the insidious agenda of PAS and the possibility of a 2-party system in future Malaysia. These are also his reasons for arguing that the MCA should not leave BN.
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Dr Chua also tries to take us through the history of the meaningful role played by the MCA in the Malaysian polity.
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To assist Dr Chua, I wish to highlight 2 episodes in the MCA's history that has been glossed over. First, is 1958 when Dr Lim Chong Eu was elected MCA President on a plank of asserting MCA's status as an near-equal to UMNO instead of junior partner. MCA should explain how Tun Tan Siew Sin, with a little help from friends in UMNO, got rid of Dr Lim.
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Next is the 1975 push by Dr Lim Keng Yaik in Perak for MCA to assert itself against UMNO on many key policy matters. MCA should explain how MCA got rid of this other Dr Lim.
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Now, Dr Chua and his "reformist" colleagues may be able to get rid of the Ong mafia. But can any leaders of MCA truly be a near-equal partner to UMNO?
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In any case, I don't really care for a communal MCA. The most important issue, Dr Chua, is NOT whether MCA should leave BN or not. The most important issue, Dr Chua, is whether the MCA is prepared for a sea-change by becoming MULTIRACIAL?

Friday, June 20, 2008

Sarawak NCR Land: The heavy price of progress

It is sad and frustrating to read in Malaysiakini (see http://www.malaysiakini.com/news/84757) about the Kenyahs desperately protesting against logging at their communal lands (which are NCR land).
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I had written about this NCR challenge earlier (see Sarawak: Ningkan & Native Lands at http://ctchoolaw.blogspot.com/2008/05/sarawak-ningkan-native-lands.html).
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The basic issue about NCR lands, which cost Stephen Kalong Ningkan the Chief Minister's post, is that it is a putative legal claim for the natives. There is no clear legal right. The Malaysian courts have doggedly stuck to a very narrow interpretation of the Sarawak Land Code.
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The courts' interpretation is that Section 5(3) and (4) of the Sarawak Land Code (SLC), which authorises the Minister of Planning and Resource Management to declare, by Gazette Notification that the extinguishment of native customary rights (NCR) over state land, and whatever compensation to be paid to the native claimants of such NCR, are valid and constitutional. For example read this report at Rengah Sarawak: http://www.rengah.c2o.org/news/article.php?identifer=de0601t&subject=6.
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In other words, all the Minister needs to do is to issue a Land (Extinguishment of Native Customary Rights) Direction and, literally at the stroke of the pen, the natives' claim is gone. Poof!
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My point is, why is CONSULTATION such a problem in Malaysia? Why is there so much insolence and arrogance when exercising political and executive powers? What is the hurry to fell trees for timber and clear jungles for oil palm planting? What is the hurry?
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How would these politicians and towkays feel if some natives went into any property belonging to the politician or towkay and start planting vegetables and fruit trees and rear poultry and build a dwelling? Obviously they will pull out their TITLE DEED and lodge a Police report for criminal trespass.
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Ah! There it is! The natives living in NCR lands have NO TITLE DEED! So, how can they complain about trespass or poor compensation?
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And, a Title Deed requires an OFFICIAL mapping and survey exercise. That means only the State Land & Mines Department can do it. And, so far, they won't.
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I am not a Sarawak native. But I am sure that most natives want progress too just like any other Malaysian. But, is it wrong to want progress with REASONABLE terms and conditions set by the natives? Has the compensation for taking NCR lands been REASONABLE?
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And, what is so wrong about respecting those native communities that do not want logging and oil palm plantation encroachment?
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That should be the true spirit of the Federal Constitution and the right to property in Article 13 of the Constitution.
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What is being done now and, the way in which it is done, may be legally right (only because the courts wrongly say so), but MORALLY it is very wrong.

Thursday, June 19, 2008

Sarawak: Dam it!

It had to happen sooner or later. As reported in Malaysiakini (see http://www.malaysiakini.com/news/84715) the "dam" of deceit has burst open. Sarawak's marginalised Dayaks have been crying out for so long and yet, their cries fall on deaf ears. The so-called Dayak leaders must search their souls and their conscience at the plight of their Dayak constituents.
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For that matter, the non-Dayak leaders have to start asking hard and difficult questions about the method in which so-called development is being brought into the State. WHO does such projects benefit? It almost always affects the NCR land that have never been officially surveyed.
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And, why is there NEVER any consultation?
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The answers are obvious. Years of incumbency breeds an incestuous in-breeding between BN Sarawak leaders regardless of political parties. This incestuous in-breeding extends to elite and well-connected businessmen. Charles Lindblom calls such a grouping a polyarchy. But by whatever name it is called, it is no good.
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The fear of bai moh (the White-haired One) is very palpable in Sarawak. But the Sarawak voters must take heart from GE2008 when the "gods" and "emperors" of BN were exposed. Just as Dorothy discovered that the Wizard of OZ was a mere midget with a lot of bells and whistles special effects, the Sarawak voters must know now that all it takes is to mark an "X" in the right place when the time comes.
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Only then can the accountability and audit and reform start. Or, maybe it will start sooner. Who knows?

Wednesday, June 18, 2008

MCA can't turn multiracial until Umno does???

Malaysiakini carried a report that quoted Yap Pian Hon as having made the above statement (sorry! I added the question-marks for dramatic effect) (see http://www.malaysiakini.com/news/84679).
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I want to avoid adding my voice to the cacophonic ranting and raving that typifies many blogs that deal with the current affairs of Malaysia. I just want this entry to register my view that the Malaysian Chinese Association which my late father was a proud branch chairman of (in the 1970s) has come up to a political and ideological dead-end. Finito
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Yap Pian Hon is supposed to be one of the "reformers" of MCA (his current guise) in the wake of MCA's absolute debacle in GE2008. He and Dr Chua Soi Lek are amongst the marginalised ex-leaders-soon-to-be-future leaders. But a statement that the MCA cannot turn multiracial until UMNO does is ... wait for it ... #$%@!*&%$-up!!!!! (sorry! couldn't do it out loud, the kids do visit my blog ...sometimes).
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It confirms my worst fears that the MCA will not and cannot reinvent itself. If the so-called "reformist" leaders cannot go beyond their myopia, if they cannot perform a post-mortem of the message sent by the voters in GE2008 then, like UMNO, the MCA is destined to go to the columbarium at the Nirvana Memorial Park in Nilai.
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For good measure, let me use a marketing analogy (maybe some MCA fellows, being towkays, may understand better).
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The MCA lost some very serious market share in GE2008. Their "product" of communal politics has gone past its shelf-life. Most voters (if not all) are not buying the product anymore.
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When Maxis began to lose its market share to the upstart Digi, AK removed Jamaludin and put in a new CEO to re-brand and review the Maxis marketing plan. Maxis didn't wait for Digi to falter.
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Unless the current bunch of Ongs (i.e. OKT, OKC and...yes! even OTK) or Yap (as in Pian Hon) or Chua (as in Soi Lek) or even (Jui Meng) doesn't GET IT, then MCA can book a place at the columbarium mentioned above.
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As for waiting for UMNO, just remember the famous words of the then JFK-appointed US Ambassador to the United Nations, Adlai Stevenson, when the US U-2 planes had taken photos of Soviet ships carrying missiles into Cuba, that, in waiting for the Soviet Ambassador to reply to the damning photographic evidence, Stevenson said, "Mr Ambassador, we can wait here (for your reply) TILL HELL FREEZES OVER!"
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P.S. Sorry I realise that I ended up ranting and raving. Damn! It feels good though! No wonder bloggers do it (rant & rave, I mean!).

Monday, June 16, 2008

InvestPenang & Malaysia: FDI Challenges & Opportunities

Outside of the Klang Valley in Selangor, Penang is next largest manufacturing centre for Malaysia. This fact is obviously not lost on Lim Guan Eng's Penang state government. Using InvestPenang as the primary investment-seeking vehicle, Guan Eng and his team has assiduously sought to bolster and expand Penang as an attractive manufacturing hub. The challenges are daunting though not insurmountable. Let's look at InvestPenang's challenges in the broader context of Malaysia and ASEAN.
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A disturbing trend of MNC relocation/divestment from Malaysia
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Recent studies show that Malaysia has been the country most affected by divestments (9 cases) i.e. MNCs choosing to relocate away from Malaysia, accounting for approximately 25 percent of all divestments by Japanese MNCs from the ASEAN region. Penang, as we know, was not spared.
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Labor cost consideration appears to have been the major driving factor, because in 5 out of these 9 cases labor costs were reported as one of the main reasons for divestment. Although the wage level in Malaysia is significantly lower than many Asian countries, it is still higher than that in other countries such as China and Thailand.
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The increasing occurrence of divestments in Penang and Malaysia as a whole probably indicates that Japanese firms are in a later stage of cost-driven divestments and relocations, where the main divestments in Asian counties have already largely been accomplished.
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China the big winner?
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China appears to be the biggest winner during the late 1990s, despite the 5 divestments that took place in the country. China stands out as the most important country for relocation, hosting more than 60 percent of all identified relocations (16 out of 25).
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The rivalry between ASEAN countries and China in terms of attracting FDI is evident, as most affiliates or production lines that were relocated to China (12 out of 16 in the late 1990s) were originally located in one of the ASEAN countries (Singapore, Malaysia, Thailand and Indonesia).
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Studies also show that this rivalry might not to be too harmful for ASEAN countries. Out of these 12 relocations, only 5 involved actual closure of the affiliate, whereas in the other 7 cases only a product line is relocated. Moreover, all these 12 relocations involved production of relatively low-end products, such as tape recorders (Asahi Corporation), PC keyboards (Minebea), low-end air-conditioner (Matsushita) or scanners (Seiko Epson).
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Studies also reveal that there is no evidence that ASEAN have lost competitiveness in higher-end and more technologically advanced production activities, and the only relocation case of which China is the country of divestment (instead of country of relocation) is additional evidence that China is still a secondary choice for Japanese firms producing high-end products: Sony moved its production of camcorders, designated for the US market, from China back to Japan, in an attempt to shorten delivery time and to better control over product quality.
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Impact of MNC FDI investment decisions
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Given the major role played by foriegn direct investment (FDI) in industrialization and economic growth of East Asian countries, systematic shifts in Asian investment strategies of multinational
firms carry important economic implications for short-run economic performance and long-run development of these countries. Therefore, it is crucial for policy-makers and researchers to have a clear and thorough understanding of the nature, pattern and possible impacts of these shifts, to formulate sensible policy suggestions.
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Three Asian production network (APN) configuration strategies can be identified: geographic concentration, focusing on key-product markets, and outsourcing. Geographic concentration strategies, the concentration of roduction of a certain product in a single (low-cost) location, are followed to benefit from scale economies. The ongoing trade and investment liberalization efforts by ASEAN countries and their trade partners have made geographic concentration strategies more attractive.
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Focusing on key-product markets and outsourcing strategies are chosen to allow corporate resources to be freed for technology intensive and higher value-added activities. Japanese electronics firms are withdrawing from lower technology and commodity markets where they are facing intense competition from other Asian firms, such as market for TVs and scanners. With outsourcing strategies, firms divest their own production facilities, and outsource production to outside original equipment manufacturing (OEM) or electronic manufacturing services (EMS) firms, to focus in-house production on innovative products.
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Studies show that APN reconfiguration efforts by MNC pose challenges for host countries, but also open new opportunities. To properly address these challenges and opportunities, policy-makers in ASEAN countries will have to devise institutional and policy innovations, and adjust the industrialization trajectory of the country to make it more compatible with the changing pattern of APN configuration of multinational firms in the region.
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First of all, the footloose nature of FDI is clearly illustrated by the relocation patterns of Japanese electronics firms in Asia. Comparative advantages based solely on low labor costs appear less sustainable, and once these advantages deteriorate in one location, FDI pursuing such advantages will pack up and move to another location.
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The footloose nature of FDI requires two possible responses: host countries can offer benefits to selectively attract those investments that are less footloose, or take measures to increase the local embeddedness of foreign investments. Good examples for the first approach are recent efforts by several ASEAN countries, such as Singapore, Malaysia and Thailand, to encourage MNC to co-locate service and headquarter coordination functions with their manufacturing roles. -
Regional headquarters or operational headquarters status have been assigned, by these countries, to those MNC who invest in affiliates that are established to provide managerial and
technical support to affiliates in the whole East Asia area, and such status entitles the MNC to subsidies and other benefits.
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With regard to increasing local embeddedness of FDI, host countries can choose to cultivate regional industrial clusters in the country, through upgrading capabilities of local manufacturing firms and supporting industries, increasing the sophistication of skills and knowledge of local workers and managers, and improving the quality of industry-specific infrastructure.
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Industrial clusters are highly attractive to foreign investment. These clusters might become increasingly important, as more MNC have opted for a geographic concentration strategy for their APN configuration. In the electronics industry, several of such industrial clusters have emerged in ASEAN countries, such as wafer fabrication in Singapore and Malaysia, electronic home appliances in Malaysia, and disk-drive assembly in Thailand.
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New opportunities for ASEAN countries arise from the increasing importance of MNC strategies to outsource manufacturing activities to subcontractors and EMS providers to free themselves from routine production and to focus on technology intensive and value-added manufacturing. ASEAN countries might be able to transform their existing production bases in the electronics industry into more integrated and innovation-oriented manufacturing operations capable of providing more sophisticated EMS operations.
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Leading EMS providers in Asia, such as Solectron and Flextronics, have established major manufacturing sites in Malaysia. However, the systematic outsourcing trend led by major multinational firms also poses a threat to ASEAN countries. MNC engaged in outsourcing might be less likely to upgrade local capabilities of affiliates, and investments by large scale subcontractors, such as EMS providers in the electronics industry, are likely to be even more footloose because of higher sensitivity to differences in cost and productivity advantages of different locations.
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Studies also show that all is not lost. There is a remarkable resilience of electronics manufacturing investments in ASEAN countries despite the emergence of China as the major host country for electronics MNC. Nevertheless, the ‘China issue’ still needs to be addressed by ASEAN countries. The ASEAN area can still be made more attractive to MNC by further efforts to create an integrated trade and investment area.
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Even in the electronics industry, which is the most open sector in the region in terms of trade and investment liberalization, bolder measures, such as a complete removal of tariffs for electronics products, can still be taken.
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Principal source: RenĂ© Belderbos, Jianglei Zou (2006) Foreign Investment, Divestment and Relocation by Japanese Electronics Firms in East Asia; Asian Economic Journal 20 (1) , 1–27

Sunday, June 15, 2008

Anwar : Intellectual Discourse & Globalisation




Anwar, once again, reminds us of his intellect at the launch of Dr. Syed Husin Ali's new book. This discourse on the Malay mindset and the colonial stereotype of the Malay psyche is always in play. Is it possible to shed the agrarian roots of the Malay psyche? This will be one of the defining challenges for Anwar and other leaders.
The urgency of this mission is underlined by Malaysia's eroding national economic competitiveness. How will Anwar be able to parlay his populism into a catalytic cry for mindset change? Is change even necessary? These are the pressing questions in an era when financial borders are being dismantled in the wake of globalisation.

Is globalisation the new face of colonialism? Is globalisation the ultimate Trojan horse that removes nationalism? What is the substitute governance model? How will this change impact on the Malays and Malaysians as a whole?

These are not mere rhetorical questions. These are questions that we need to remember when we frame Anwar's discourse on the Malay psyche because Anwar is also someone that leans towards internationalism over nationalism in that he appears to subscribe to the conventional global economic model. In contrast Dr. Mahathir clings to the nationalistic ethos and measures globalisation against nationalistic interests. This may be an oversimplification of 2 complicated adversaries. But, the divergence in outlook of both men are quite stark when you magnify their positions.
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Malays at 'defining moment' of history (see http://www.malaysiakini.com/news/84505 reproduced here in full)
Terence Netto Jun 15, 08 5:26pm

PKR de facto leader Anwar Ibrahim said Malays were at a "defining moment" of history that demanded they "disenthrall" themselves from the colonial discourse that portrayed them as dependent on patronage to survive.

Anwar said neo-colonial elements such as Malay-based ruling party Umno promoted this dependence syndrome as an instrument of "political control".

"It's time this myth of dependence is exploded," said Anwar in remarks made at the launch yesterday of the book The Malays: Their Problems and Future by Dr Syed Husin Ali, the deputy president of PKR.

The book was first written and published in the late 1970s when Syed Husin was detained under the Internal Security Act following his involvement in mass protests over the impact of depressed rubber prices on the livelihood of smallholders in Baling, Kedah.

Those protests led to the detention without trial in December 1974 of university academics like Syed Husin, as well as student activists and youth leaders including Anwar Ibrahim.

The Malays: Their Problems and Future has been updated in a revised edition that was launched by Anwar in Petaling Jaya before an audience of some 400 people, composed of PKR supporters, members of parliament and state assemblies from the opposition Pakatan Rakyat, ex-Universiti Malaya students of Syed Husin, retired academics, and other close friends of the author.

Anwar, whom Syed Husin tutored at the University Malaya in the late 1960s, said he saw Syed Husin's book in the same vein as The Myth of the Lazy Native by the late Dr Syed Hussein Alatas, which attempted to refute the colonial discourse that "brown humanity" was indolent and largely dependent on patrons for economic upliftment.

The talent and creativity of the Malays will flourish when the myths of their dependence are exploded," said Anwar referring to the eclectic survey of colonial writers on the conditions of the Malays such as Frank Swettenham, Hugh Clifford and Richard Winstedt.

Instead he welcomed the counter discourse by academics such as Edward Said, Alatas and Syed Husin.

Dr M fails to break away from colonial discourse

Anwar equated Dr Mahathir Mohamad's The Malay Dilemma and Revolusi Mental, an Umno inspired tract circulated after the May 1969 riots to rationalise affirmative action for the Malays, with the colonial discourse that held Malays to be dependent on patrons for their economic advancement.

He said both Revolusi Mental and Mahathir's book were the works of "surrogates and subalterns" of the colonial mindset.

Anwar lauded Syed Husin's "strong passion" and "consistency" all these years in espousing the cause of Malay upliftment from poverty.

He said he saw Syed Husin's book when it was first published as a significant departure, much like Alatas' opus, from the conventional wisdom on Malay dependency.

The PKR leader also described his party's Malaysian Economic Agenda as the antidote for this mentality that will not only liberate the Malays, and the non-Muslim bumiputeras of Sabah and Sarawak, but also the Chinese and Indians, from the outdated thinking that has warped the nation.

Friday, June 13, 2008

Managing Malaysia's Common Wealth 2: Learning from Norway's experience

Letters displayed by Malaysiakini under the title caption High time Petronas answer to Parliament  (see http://www.malaysiakini.com/news/84416) rekindles the need to examine Malaysia's economic and natural resource management weaknesses. That is, of course to put things mildly.
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One kind commentator of my earlier entry on this subject, Nilesh, has given me an excellent reference to Professor Thorvaldur Gylfason's explanation of the Norwegian economic and natural resource wealth management experience. It is a recommended read for all interested persons. I invite you to read this.

Thursday, June 12, 2008

Selangor's welfare plan for its citizens: Part 2

The Selangor welfare plan will be unveiled when Pakatan celebrates their first 100 days between June 18-20. But since YB Lau Weng San has called for feedback, let's do an anticipatory feedback.
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There is talk of the establishment of trust funds for the poor, underprivileged and elderly in Selangor.
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Possible sources of funds
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Selangor has a projected state revenue of RM1.34 billion (Edge March 17,2008). With a projected administrative expenditure of RM670 million, the state has a 50% revenue surplus. So, clearly Selangor is sitting pretty from a financial standpoint.
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The state government is likely to use the budgetary mechanism of assigning specific revenue sources to specific trusts. It is also likely to use professional fund managers to manage these trust funds in order to grow the wealth using prudential investment criteria.
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Apart from the financial advantage, what also sets Selangor apart from the other states is Tan Sri Khalid who had an excellent track record in running Permodalan Nasional Berhad (PNB). There is no doubt that Khalid is parlaying his PNB management experience for the benefit of harnessing the Common Wealth of Selangor for the long-term benefit of, initially, the poor, underprivileged and elderly in Selangor.
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The end of rent-seeking policies?
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Although it is not unique by any measure this social welfare plank of Selangor is significant in that it signals an intention to move away from the rent-seeking policies that has dogged Malaysia's economic policies. Whether other features of Selangor's economic policies will escape rent-seeking tendencies remain to be seen. But the signalled intent is already a refreshing start.
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Non-discriminatory approach
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Another key feature of the nascent welfare policy is the absence of any ethnic discriminatory themes. The criteria appears to be objective. For the poor, there is likely to be a means test-approach. What constitutes "underprivileged" needs to be articulated in due course. As for the "elderly" it is a clear demographic cut-off and eligibility will literally be based on the date of birth.
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Can other states learn from this?
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States like Kelantan actually have very enlightened social and welfare programmes. Kelantan has done so via statutorily enacted bodies. It has created scarce revenue sources for these statutory bodies via alienation of land and natural resources in favour of specific statutory bodies.
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But a resource-starved and deficit state like Kelantan can learn from the professionalism that will feature in Selangor's state apparatus. The one thing Khalid has is a long list of names of professionals that he has personally dealt with during his time in PNB and Guthrie. We can be certain that he will be generous in sharing the contact list!
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This augurs well for the Pakatan-led states. It is a positive and concerted beginning.
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But I should hasten to add that this is also something that BN-led states can learn from. In this respect politics must take a backseat in favour of proper economic management. This, of course, assumes the absence of vested interests, cronyism and vestiges of rent-seeking behaviour.

Selangor's welfare plan for its citizens

Malaysiakini reports that the Selangor State Government aims to forge a ‘communitarian economy' that would benefit the people of Selangor (see http://www.malaysiakini.com/news/84359).
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The purpose of communitarian economy was to lessen the people's burden, especially in the aftermath of the dramatic fuel price hike last week. The communitarian economy, he said, would include setting up of funds for people below the age of 18 and also funds for the state natural sources. Nik Nazmi also said that the state government would aim to set up funds from "newborn-babies to the elderly".
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I am waiting to see the funding plan for this before commenting on it. Is the Selangor Government planning a state sovereign wealth fund for this? The source of funds is a key issue here. Where will the funds come from?

Petronas: Managing Malaysia's Common Wealth

Guan Eng is right (see http://www.malaysiakini.com/news/84325) the wealth of Petronas needs to be made transparent. It's the rakyat's money.
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On how to manage this Common Wealth just take a look at Norway's policy on its oil bounty (see http://en.wikipedia.org/wiki/Norway). In 2006, oil and gas accounted for 58% of exports. To reduce over-heating from oil money and the uncertainty from the oil income volatility, and to save money for an aging population, the Norwegian state started in 1995 to save petroleum income (taxes, dividends, licensing, sales) in a sovereign wealth fund.
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The fund invests in developed financial markets outside Norway. The budgetary rule ("Handlingsregelen") is to spend no more than 4% of the fund each year (assumed to be the normal yield from the fund ). By January 2006, the pension fund had reached a value of USD 200 billion. During the first half of 2007, the pension fund became the largest fund in Europe, with assets totalling about USD 300 billion, equivalent to over USD 62,000 per capita.
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As such, the Norwegian state has savings equal to 100% of the Norwegian GDP. Norway has the largest capital reserve per capita of any nation (April 2007). Projections indicate that the Norwegian pension fund may become the largest capital fund in the world.
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It is the second largest state-owned sovereign wealth fund in the world, second only to the sovereign wealth fund of Abu-Dhabi. Conservative estimates tell that the fund may reach USD 800-900 billion by 2017. Other natural resource-based economies in countries like Russia and Chile are trying to learn from Norway by establishing similar funds.
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Why can't we do the same thing in Malaysia? It's not as if we need to re-invent the wheel. No need for lawatan sambil belajar. Just call the Norwegian embassy to invite their experts to come over to help us set it up!

Tuesday, June 10, 2008

Sarawak: RM1 billion goodies?

Reading Tony Thien's report in Malaysiakini that Sarawak will now receive an additional RM1 billion for infrastructural development raises serious questions about the federal government's approach to economic management and, the concomitant feedback from Sarawak government in response to the impact of the fuel price hikes and the knock-on inflationary spiral. Recently Sabah was granted an additional RM1 billion also. What gives? They taketh and then they giveth. This is NOT democracy, it is ad hocracy.
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Can Malaysia afford to be led by ad hoc government?
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Let's look closer. The RM1 billion is for infrastructural development in rural and coastal areas of Sarawak.
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Sarawakians probably know that "infrastructure development" means that the MAIN CONTRACTOR is likely to be "government-linked", such as Ting Pek King or CMS or similar entities. So, now the Dayaks can expect to use bridges instead of boats to cross the riverine districts of Sarawak with the RM1 billion. But are they going to WALK across the bridge or use motor vehicles or public transport? If they use motorised transport they will still be exposed to high fuel prices whteher directly or indirectly. And, unless they are self-sufficient in consuming their own farm produce they will still be exposed to the knock-on effect of inflation. So, as the Americans say, "Where's the beef?"
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I haven't even begun to point out that the RM1 billion will not be enjoyed by the townfolk of Sarawak. Remember? The money is for infrastructural development in rural and coastal areas of Sarawak.
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So, the townfolk of Sarawak must still accept a similar fate as their Semenanjung friends - higher fuel costs and higher prices from inflation. What "goodies" is that? More importantly, WHO will enjoy the "goodies"? Not the Sarawakians in rural and coastal areas of Sarawak. Not the Sarawakians in the interior. Not the Sarawakians in the towns of Sarawak. So, if you'll pardon the pun, everything comes to NAUGHT! That is the short-term and reactive thinking that is endemic in federal government policy-making. Is the state government any different? I haven't looked at it. Maybe we should ask the State PKR and State DAP leaders.
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And, while we're at it let us also ask whether there will be open tenders for these infrastructure projects or is it going to be the same old negotiated (behind closed doors) tenders?

The Tun Salleh Saga - an open reply to Dr Mahathir

This is so resonant that I had to post it here. http://thegazerofnavels.blogspot.com/ is the source. Also featured in http://www.malaysia-today.net/2008/. Everyone should read this open letter from Art Harun. Please follow the link above.
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Monday, June 9, 2008

Fuel Hikes: Minimum Wage+ and National Welfare

In the aftermath of the fuel price hike there are 2 proposals that warrant consideration. Firstly, as reported in Malaysiakini (June 9) Dr. Francis Ngu of the Sarawak PKR has called for the introduction of a national social welfare system. This proposal is underpinned by reference to the Petronas revenue contribution to the federal coffer.
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The second proposal is a reiteration by Tony Pua in his latest blog entry entitled "Fair Wages & Malaysia Bonus" also linked at Malaysiakini. Tony's proposal is a hybrid of minimum wages. Let's call it Minimum Wages+ (The name reference is given with apologies to Tony and, I stress that this moniker is in no way intended to trivialise nor to make light of an excellent proposal. It is merely an easy reference in the context of this blog piece).
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There are other more radical and interesting proposals to deal with the fuel price hike such as Dr. Azly Rahman's "One Nation Under God, In Sarong Protesting" featured in www.malaysia-today.net. But let's just discuss Dr. Ngu and Tony's proposals.
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The common thread between Dr. Ngu and Tony's proposals is the dire need to alleviate the burden of the fuel hike on lower fixed income earners and Malaysians living at the fringes of poverty. All Malaysians with a conscience should be in full agreement with this central plank of both proposals.
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Dr. Ngu's idea of the source of funding i.e. with reference to Petronas is, with great respect, too simplistic. But, the message is clear. The message is that the current Malaysian National Budget and 9th Malaysia Plan must be urgently reviewed.
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The allocation of national financial resources which is contained in the Consolidated Revenue must be reviewed. The obvious area for review must be the National Defense Budget. For instance, does Malaysia seriously need military hardware such as French submarines? What is the security and threat justification for submarines? We can't imagine terrorists attacking from the sea by any stretch of even the wildest imagination. And the exertion of sovereignty over little pieces of maritime rock formations along our littoral borders and coastline cannot be done furtively. In fact, we actually need loud surface vessels with drumbeats to assert our presence! The necessity for submarines is puzzling ... unless the intention is to scare away cetaceans from the Straits of Malacca or the South China Sea.
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So, on this matter of allocating resources for welfare matters, we should leave Petronas out of it. Petronas isn't going anywhere. We know the obvious point that whoever is in control of the federal government will control Petronas and its coffers. And, Petronas is not the panacea for all of Malaysia's economic challenges. The solution must come from sound economic policies, not the erstwhile policies that favours rent-seeking behaviour (such as APs, tolls, IPPs).
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Tony's (or DAP's) Minimum Wages+ proposal
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The Minimum Wages+ idea is sound. I say this even though I am a small employer (and would be saddled with the proposed increase in employer EPF contribution from 12% to 15%). I am even prepared to agree with the component that Tony calls the "Malaysia Bonus".
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The intention is good and the rationale is sound. As an employer (a small one) I am prepared to stand up to be counted.
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Tony's point about middle-aged workers earning less than RM1,400-00 per month is very true and very real. If we each take the trouble to talk to the middle-aged clerical staff at our respective offices, we will fully appreciate that the Minimum Wages+ proposal addresses very real and necessary needs of the Malaysian workforce. It is to be commended and supported.
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On a facetious note, since Tony and the DAP has been generous in sharing this proposal, the BN should photocopy the proposal and put it on their letterhead and implement it. It will be popular with the voters and the DAP and Pakatan Rakyat will be forced to support it sebulat suara!
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Points and principles to consider on Miminum Wages+ and the national welfare proposal
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It may be said that from an economic perspective (and I stand to be corrected), the recent 40% fuel price hike and the forecasted inflationary rate of 5%, will lead to an increase in the cost of living. But wages and salaries are lagging. There is also a very real possibility that Malaysian employers will completely ignore this phenomenon. Malaysia does not have a mandatory statutory policy on COST OF LIVING ALLOWANCE (COLA) which adjusts salaries and wages based on changes in a cost-of-living index. The Minimum Wage+ proposal will have a salutary effect and, will combat this phenomenon of employer callousness towards the plight of employees.
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Although it is a tedious matter, we should all consider the pros and cons of the Minimum Wage+ and national welfare proposal. We need to think about it so that we can make an informed decision whether to support or modify the proposals (I didn't say oppose it!).
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Points in favour
  • It will help alleviate the double-whammy shock of increased fuel prices and inflation.
  • It will motivate employees to work harder.
  • It does not impose any cost on the government (the cost is borne by the employer).
  • It is a policy that is administratively simple - aggrieved workers just complain if employers do not comply with the policy.
  • It stimulates consumption by putting more money into the hands of lower-income Malaysians who spend their entire paycheck.
  • It increases the work ethic as employers demand more return from the higher labour cost.
  • It decreases the cost of government social welfare by increasing the income of the lowest-paid workers.
  • It will shift the employers' dependency on cheap foreign workers in favour of employing Malaysians.
Points against

  • It hurts the small- and medium-enterprises more than large corporations.
  • It lowers competitiveness by increasing the labour cost component of production.
  • It will force employers to automate and reduce dependency on human labour.
  • It will reduce profit margins.
  • It will result in higher prices of goods and services.
Naturally, the list is never complete. But this is to give you an idea and to challenge all of us to think harder!



Sunday, June 8, 2008

Fuel Hikes: Somnambulism and Insolence

Is the fuel hike necessary? Why now? As reported in Malaysiakini on June 7, 2008 "PM: Understand reasons for fuel hike", the PM has asked for us to understand the reasons for the fuel hike. He says it is due to the global price of oil. That may be true. Certainly we are aware from news reports that fuel hikes have been felt all over the world. Even the United States is not spared. There are demonstrations in India. The stock market melt-down in Vietnam is partly due to its being a net oil importer.
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But, wait a minute, isn't Malaysia a NET EXPORTER of oil?
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The CEO of Petronas has made a public statement that Petronas is not Santa Claus. The Malaysian public is warned that our oil reserves will be depleted by 2014. The underlying message is for us to shut up and put up with this fuel hike.
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We are also bombarded with messages that we have to curb our wanton consumption. Belt-tightening is necessary. But, wait a minute (again!), isn't the PM reported as saying in the Malaysiakini report that the Malaysian economy grew at 6.3% last year. Furthermore, Malaysia is supposed to be at full employment (which probably explains why there are so many foreign workers in our midst). So, things should be looking up. But, while large corporations are announcing bumper profit growth, the small and medium enterprises (SME) are facing challenges. Salaried workers are experiencing the effects of inflation on their disposable income even before the fuel hike.
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Some quarters estimate that since the formation of Petronas some RM3 TRILLION has been received by the Malaysian government. Now there is a major outcry for a full disclosure of where the wealth has gone to.
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There is one aspect of the Malaysian economic policy that may partly explain where the wealth has been frittered away.
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The populist policy of price control and subsidies
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Prior to the 1980s the government applied subsidies for improvement of padi farming, rural land development and resettlement schemes, education and certain manufacturing activities. These were target-specific subsidy policies designed to encourage and enhance PRODUCTION in key areas of the Malaysian economy.
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During the Mahathir era, a more populist approach was used in the realm of economic policy. Subsidies were introduced in the area of CONSUMPTION. For instance, the Approved Price Mechanism (APM) was introduced in 1982 to regulate pricing of petroleum products. This is a price control mechanism for the government to step into the free market pricing mechanism for petroleum products. We now know this as the petrol price subsidy.
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Subsidies and price controls are a distortion of the price-fixing mechanism which is based on the laws of supply and demand. It is not an unusual policy especially in the agricultural sector. Even the United States and Japan has agricultural subsidies.
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But the APM was a GENERAL POLICY that benefitted any consumers of petroleum products. In other words, any motor vehicle owner would benefit from the subsidy. That is why it was a populist measure. Why was it necessary? This is something Che Det may wish to answer in his blog. The APM benefited only owners of motor vehicles. Why couldn't the funds be used for more productive purposes?
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Faustian pact
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The point here is that by introducing populist measures like the APM, Malaysians are offered an addictive drug. This has made the entire country uncompetitive. It is a crutch that was foisted upon us to ensure the popularity of the political party in power. This type of molly-coddling policy affects the cost of goods and, affects the efficiency of the process of producing goods and services. It makes us think that we are productive and efficient when, in fact, we are not.
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To digress a little, this is the self-same approach that has made Proton so price-competitive. Import duties are imposed on imported cars to make imported cars more expensive. Proton's inefficiencies are all absorbed by a slew of special fiscal policies designed to protect a weak car manufacturer.
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But, like all such populist measures, price controls and subsidies are a Faustian pact. It is a deal with the Devil. It will and, it has come back to haunt us. The party is over and we are all suffering a major hangover. Overnight, our cost of living has increased tremendously.
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The cost of the subsidies and price control mechanism is likely to been drawn from and, paid from the Petronas revenues. That is likely to be where the billions of Ringgit of Petronas money has been used. Of course, there are many other "leakages" that we can be sure Pakatan Rakyat will get around to audit at some point in time. But that is another story.
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Understand reasons for fuel hike?
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In the context offered above, we have to wonder if Abdullah Badawi really and holistically understand the reasons for the fuel hike.
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We are now asked to go "cold turkey" as the opiate of price control and subsidies are violently weaned from us. Many Malaysians can adapt. But many more Malaysians in clerical and labouring jobs may not be able to make ends meet.
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This is the type of government policy that we fear the most. A little bit of do-gooding followed by a double- or triple-whammy. It's like being invited to a karaoke party and to be left holding the bill. That is okay between friends (sometimes). But that is not okay between the rakyat and kerajaan.
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There is little point in the current government leaders blaming the previous leaders. BN (and its former guise, the Alliance) has ruled Malaysia for the past 50 years. We have accepted the paternalistic policies for all this time. We implicitly TRUSTED in the political and economic wisdom of the BN leaders. The economic policies have seamlessly morphed from the 1950s to the current millemium. But as time elapsed the fiduciary feelings of the Merdeka leaders have deteriorated into the bunch of leaders that exhibits what Hamlet described as "the insolence of office". For the record that "bunch" includes those from 2 decades or so ago.
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Worse still, certain leaders suffer from a condition that Franklin Roosevelt called "somnambulists walking backwards".

Friday, June 6, 2008

Ensuring our oil bounty is not a curse

This entry by M Bakri Musa in Malaysiakini is another well-written analysis and it warrants consideration.

With Malaysia forced to end or at least reduce its petroleum subsidy, it is circumspect to learn from the experiences of other oil-producing countries.
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There are enough lessons in the world today on how we should manage our precious God-given oil bounty. Prudently done, as in Alberta (Canada) and Norway, it would bring peace and prosperity. Anything less and it would be a curse; the new wealth would breed corruption and tear the socioeconomic fabric of society, as seen in today’s Iraq and Nigeria.
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I would rather that Malaysia emulates and builds from the Albertan and Norwegian models.Remove all subsidies on petroleum products. This would encourage conservation. It would also prod Malaysians into the global economic reality instead of being insulated from it.In order for this giant step to be accepted, the government must divert the savings into a separate trust fund for use by future generations when our oil would run out, with a small portion devoted for current use in subsidising cooking gas for the poor, and users of public transportation.
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Norway, with a land mass slightly larger than Malaysia and a population only twice that of Perak, ‘sterilises’ its oil revenue by diverting it into a separate trust fund for use by future generations.The wisdom of that initiative is that the new wealth did not disrupt the social and economic fabric of Norwegian society. There was no runaway inflation as in Nigeria, and the Norwegians did not become lazy profligate consumers dependent on their new oil wealth, as with the Arabs.
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The Norwegians pay the same world price at the pump for their petroleum, currently at about seven ringgit per litre, nearly three times the new Malaysian price. One consequence is that while they have one of the highest per-capita incomes, car ownership among Norwegians is one of the lowest in Europe. To them, a car is simply a means of transportation, not for ostentation. Everybody knows that they are already wealthy; they do not need to flaunt it. Further, the cars on the streets of Oslo are mostly fuel efficient brands like Volkswagen rather than luxurious Mercedes. In fact there is a stiff tax for gas-guzzlers.
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Among the many positive consequences are that their roads are not congested and their air less polluted.Today the Norwegian Petroleum Trust is the world’s second largest sovereign fund, and fast expanding. It may have already exceeded half a trillion (500 billion) US dollars. When the oil wells run dry, as they inevitably will, the Norwegians could still enjoy their present lifestyles as the Trust Fund’s income could cover the country’s budget till perpetuity.Like everyone else, the Norwegians do not like paying high prices for petrol, or anything else for that matter. However, they willingly do so because they see the direct and tangible benefits of such an enlightened policy.
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The Albertans too pay world price for their energy, with their government diverting the extra bounty into a separate Heritage Fund. Unlike the Norwegians who invest in global stock markets, the Albertans invest in their schools, universities, and hospitals. Consequently, as noted in the Economist and also from my firsthand knowledge, Alberta is the only place where the rich send their children to public schools! The University of Alberta (which happens to be my alma mater) is now regarded as one of the finest, thanks to generous funding from the Heritage Fund. Malaysian Petroleum Trust Fund Malaysia can improve on the Norwegian and Albertan models. We must commit to remove all subsidies on energy, and do so in a phased and predictable manner, perhaps over a couple of years. This must be coupled with a properly thought out plan to protect the poor.
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For example, there must be subsidized cooking gas for the poor, and only for them. We can easily estimate the energy needs for the typical poor family, and limit the subsidy or even direct grants only for that amount, and nothing more. It should be fairly easy to devise such a poverty-ameliorating program with minimal leakage. We could model it after America’s 'food stamps' programme.
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Likewise, we should subsidise and thus encourage public transportation. In British Columbia, season pass holders (rich and poor) for public transit get a rebate from the government. There is a public good in this; for by not using their cars for commuting, the air is less polluted and streets less congested, and thus require less maintenance.
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The money saved from removing the subsidies should be diverted to a special Petroleum Heritage Fund. The corpus (or principal) would be invested locally in a broadly diversified portfolio to include stocks, bonds, real estate, and venture capital. The fund should be passive investor, concerned only with profit making.
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The Norwegians limit their holding in any company to no more than five percent, meaning, they are in it purely for the profit potential and not to seek control or management. It is for this reason that unlike other sovereign funds (Singapore’s Temasek and China’s many funds), the Norwegians are the most sought after investors.Local use onlyLike the Alberta Heritage Fund, the income from the Petroleum Fund should be used to improve our schools and universities, as well as providing affordable housing and better health care. Just as the corpus must be invested locally, the income too must be spent locally.
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Thus no scholarships to send students abroad, instead the money should be spent to improve local universities so as to benefit the greatest number of students.The country now has many such trust funds, from Tabong Haji to Employees Provident Fund. All too often they serve as nothing more than as sources of cheap funds for the politically well connected. They are also not well managed.To sell this idea, the Petroleum Fund must be professionally managed and free of political interference. This is a very high but achievable order. Its governing board must have wide representations, including nominees of the opposition political parties and NGOs. Anything less and it would be hard to sell the policy.
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Pakatan Rakyat’s leader Anwar Ibrahim rightly expressed the public fear and mistrust that the funds saved from reducing or abolishing the subsidy would be used to benefit Abdullah’s political cronies and family members. Anwar and Malaysians generally have good reasons for this suspicion.I am not impressed with Abdullah’s proposal to provide tax rebates for car owners. If they can afford to buy a car, then they do not need any subsidy or rebate from the government.Abdullah must also spend the petroleum dollars locally to benefit especially the residents of the oil-producing states. It is morally indefensible and politically foolish to see residents of the three states where oil is produced (Trengganu, Sabah, and Sarawak) among the poorest in Malaysia.
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If Abdullah does not handle this petroleum subsidy issue wisely, it could prove to be the final straw to his downfall. On the other hand, if he could learn (a big if) from the Norwegians and the Albertans, he could not only salvage his political future but more importantly, leave a significant legacy.