Wednesday, September 30, 2009

Malaysian corporate governance lacks bite

Nestor Advisor Ltd senior advisor Ken Rushton's observations on Malaysian corporate governance are accurate. Here are some of his reported observations:

“The culture here does not seem entirely supportive of good governance. And you cannot write a code of culture. You need more education. Education is part of ethics,” he said, adding that change had to come from the grassroots and not necessarily from the government.

“Good people who could be coming on the board (of directors) are worried about reputation risk. This is unfortunate as you need competent people on the board,” he said.

“It seems to me a surprisingly immature market. The perception of Malaysia as far as corporate governance is concerned is not good overseas and that does not encourage foreign direct investment because foreign investors will only come in if they have confidence,” he said.

In spite of listed companies having committees to evaluate candidates for board positions, the truth of the matter is that board of directors appointments are, in the main, based on perceived loyalties and, in many cases, sycophantic attributes. Kaki ampu are usually favoured over more independent-minded persons.

It is equally true that intelligent directors tend to be reticent in board meetings so as not to say the hard truths that will make the dominant director-shareholder lose face and cause personal offence.

It is imperative that a pool of non-executive directorial candidates be created by corporate governance entities such as the Minority Shareholders Watchdog Group to be available as directorial candidates based on the "cab rank" principle i.e. "first-come-first-served" basis to ensure that there is true and genuine independence on the part of those directors that are designated as "independent directors". Barring this development the true state of Malaysian corporate governance will remain as moribund as ever in spite of the best written corporate governance codes.

Positive perceptions of stimulus packages

Economic policymakers will be reassured that their stimulus packages were not acts of insanity when they read Krugman's views here which suggests that the stimulus packages has a likelihood of catalysing a virtuous cycle where increased fiscal debts will be increasingly offset (but not completely negated) by increased economic activity.

Increased economic activity means greater revenues. Greater revenues points toward higher tax revenue to governments which will ameliorate the fiscal deficit burden.

Will this view hold up in a "W" recovery pattern? We will all have to revisit Krugman if there is a change of circumstances.

Saturday, September 26, 2009

MIC: Leave with dignity, not in shame

M. Veera Pandiyan's column in The Star on Friday is a rare combination of candour and insight written at a personal level. It does tell us that times have changed that the piece could even be approved for publication. In another time and age, it may well be that a piece of this nature would have been blue-pencilled to nothingness. Then again, it may be that this piece was "approved" because the apex leadership of BN wants to see a major revamp of the MIC.

In any event, here we are. And, this part that I extracted is most rivetting. The column piece should be read in toto to do it justice for, as the columnist intoned at the end of the piece, I might be inviting a garland of slippers for this, but there is a danger of the MIC ending up as an abbreviation for Megalomaniac In Command if he chooses to stay on to the end of his 11th term. (emphasis mine)

“You have sold your community for a fistful of dollars!”

The thundering voice was that of Datuk Seri S. Samy Vellu, then, and still, president of the MIC, during a press conference in January 1983 to announce the launch of Maika Holdings.

The initial reaction of shock segued into amusement. In the mind, the image of the party leader who had just taken over the helm of the Indian component party of Barisan Nasional morphed into that of a cowboy – albeit more like Bud Spencer than Clint Eastwood in the old spaghetti Western movies.

The reason for Samy Vellu anger? I had asked a question that I felt was fair: How is Maika going to be any different from the party’s existing business entities like Koperasi Nesa and Koperasi Pekerja Jaya?

“You Indian reporters in The Star are always running down the MIC, you have all sold out your community for a company run by the MCA!” he said.

If I remember correctly, that was the end of the press conference.

As other bewildered reporters and I walked down the steps of the party headquarters, one of the president’s then economic advisers, who has since moved on to champion human rights and other currently politically correct causes, asked me: “Why do you all always belittle the MIC?”

But when asked to name the instances, the economist could not be specific. By then we had reached the end of the stairway and the still incensed party leader, who must have seen us arguing, came rushing forward with some of his aides.

Fortunately, the late Datuk K. Pathmanaban, then a deputy minister and party vice-president, pulled me away and cooled off the situation.

Friday, September 25, 2009

It’s unthinkable for a tainted man to lead MCA

I found this view offered by Tan Sri Robert Phang to be sensible. It is a sentiment that is along similar lines to what Dr M and Tengku Razaleigh Hamzah has said about the selection of candidates for the Bagan Pinang by-election.

The surest way for BN and its components to regain lost ground is to lead by example. The clearest message of leadership must surely be exemplified by verbs such as "clean", "moral", "upright", "honest", "humble" and the like.

I was tempted to suggest words like "sanitize" or "hygienise" but I realised quickly that such words may suggest meanings such as "To make more acceptable by removing unpleasant or offensive features from..." which may inadvertently remind any person reading the verb to subliminally infer that there were "unpleasant" or "offensive" features that were whitewashed earlier.

In any event, this form of "recycling" (of politicians "with a past") is bad for the political environment.

I have digressed. Read on...

It is unthinkable for a tainted leader – and by his own admission, too – to become the MCA president, said community leader Tan Sri Robert Phang.

The Chinese community will also feel its future and welfare will never be protected or enhanced by a leader with a tainted record,” he said.

The Social Care Foundation chairman was referring to Datuk Seri Dr Chua Soi Lek, the MCA deputy president who was recently suspended for four years by the MCA central committee.

Phang added that “morality is definitely a very important fundamental requisite part of political leadership.”

Wise words: Phang appealling to all MCA delegates to do away with emotion, exercise prudence and due diligence in exercising their votes.

“What affects MCA will certainly affect Barisan Nasional,” he added.

The future and welfare of the Chinese community, said Phang, would also be at stake should Dr Chua become MCA president.

The party would always be subject to blackmail and intimidation by members of the public and other political parties should they choose a “tainted” person to be its leader, he added.

Phang said the five proposed resolutions submitted by Dr Chua’s camp for the Oct 10 extraordinary general meeting (EGM) were well constructed.

“Dr Chua has said many times he was never, and is still not, interested in becoming the party president or a Cabinet member.

“However, it has become very clear that the five resolutions are well engineered and if they are passed, party president Datuk Seri Ong Tee Keat would have no choice but to step down,” he said, adding that Dr Chua would automatically take over from Ong.

He said such a scenario would definitely create anxiety for the Chinese community and cause the central delegates to be affected.

Phang also called on Dr Chua to retire from politics permanently.

“If this decision is taken, I’m sure it will go down in history that you have further contributed and become a tremendous helping hand to the party by not disrupting its machinery.

Tuesday, September 22, 2009

Property market distortion

The elements of the stimulus package and low interest rates may be fueling the apparent recovery of the Malaysian property market. Property prices are holding steady. It hasn't really come down. This has something to do with low interest rates. Lots of speculative property buyers are refinancing in the hope of unloading at the appropriate time.

There is local buying interest. This may be due to the ridiculously low fixed deposit rates. People may be shifting their savings into properties in the hope that capital gains will be better than fixed deposit interest rates and, maybe higher than government-issued savings bonds. In a sense this portfolio shift is part of the excessive liquidity that typifies the menu of economic stimulus measures taken by the government.

While this phenomenon is not quite a property bubble, it does point to a facade of economic recovery. It is an artifice that may lend support to the notion of a double-dip "W" recovery pattern.

The concern is that property developers may be misreading the signs. The original intent of the stimulus package was to permit existing property projects to be completed so that excess inventory can be cleared. But, the buying interest is engendering new property launches so that a potential vicious cycle is being created if there is another economic correction forming part of the "W" recovery pattern. What happens then? Can the government afford another stimulus package when it is struggling with a 7.6% of GDP deficit?

There is a disconcerting policy dysfunction where new property development plans are approved by state governments and local authorities while macroeconomic planning is done at the federal level. The federal economic planners need to communicate the macroeconomic concerns to the state governments and local authorities to avoid another round of excessive property inventory build-up. Failure to do so may negatively affect the economic recovery efforts.

Sunday, September 20, 2009

Sarkozy and Stiglitz on happiness, sustainability and social well-being

French President Nicolas Sarkozy is quoted as saying that he wants France to move beyond GDP measurements as the primary measure of economic welfare. Sarkozy wants to urge his Group of 20 counterparts to join him in what he calls “a great revolution” in which economic performance will be measured in terms of happiness, sustainability and social well-being.

Sarkozy is also quoted as saying, “The crisis not only makes us free to imagine other models, another world. It obliges us to.”

Sarkozy was responding to a report from a commission headed by Nobel economics laureate Joseph Stiglitz which called for measures of growth to be expanded to include concepts such as work-life balance, environmental sustainability and mental health.

One observation made in tha report is that “There often seems to be a marked difference between standard measures of socio-economic variables like growth...and widespread perceptions of these realities.”

Here is one observation of the GDP:

GDP is a basic measure of a country’s economic performance and is the market value of all final goods and services made within the borders of a nation in a year.

Revered for 60 years as a benchmark of performance, progress and prosperity, and referred to slavishly by politicians eager to point to a number going upwards, this measure of economic output has itself fallen on hard times, embarrassed by the crisis it failed to foretell and discredited by the large disconnect between the ‘growth’ it suggests and the grubbier realities of everyday life.

To put it bluntly, few people really trust GDP as a measure of anything any more. The fact that it has started rising again in most developed countries while millions struggle joblessly onwards merely underscores the point: GDP is anachronistic, a throwback to an era last century when the material privations of life meant it was important to know how much stuff we were producing.

Nowadays, it’s just a Grossly Dated Parameter. As one analogy puts it, measuring progress by calculating GDP is like measuring a person’s health purely through the amount of food he takes in.

Many leading economists have been suggesting this for years, but until now only one country — Bhutan — has moved to a more qualitative measure of life, incorporating factors as diverse as pollution, noise, serious illness, divorce rates and democratic freedoms into its assessment of social progress.

I fully and wholeheartedly support this move. There is so much neurosis building up in the modern urban human that is caused by GDP as the measure of the idea of success. The GDP measure may have contributed to a misplaced value system that extols materialism at the expense of true happiness.

Many of us know that GDP cannot measure the economic value of a home-making and parenting? Is it any wonder that these roles have been trivialised in urban living?

How many people do you know have expressed a belief that they would be better off (career-wise) without a spouse, children or ageing parents? That, I believe, is an attitude and value that can be traced back to the use of GDP as a measure of economic success.

Saturday, September 19, 2009

Salam Aidilfitri from here.

To all my Muslim friends in MALAYSIA and elsewhere, may I wish you SALAM AIDILFITRI.

And, a special SELAMAT HARI RAYA greeting to my Muslim blogger friends. May you have all the blessings for the season.

To bro Sak and Mamasita, I hope you will have the perfect family reunion during this blessed time.

Friday, September 18, 2009

Shahrizat and the Penan women

Shahrizat did not do the right thing by not coming out to meet with the NGO protesters who were highlighting the outrage felt by Malaysians at the plight of those Penan women who were violated.

protest-3.jpgpix from here.

It may be a reflection of her "fair weather friend" attitude that under pressure she chose to withdraw into her cave and mutter sulky statements against the very same NGOs that she was purportedly courting.

By her sulk and, worse still, her criticism of the NGOs, which were mainly NGOs for the welfare of women, Shahrizat has lost any iota of pretended goodwill that she and her Ministry has made with the NGOs.

How can she lose the plot? The answer may well be that she does not and, perhaps never did, believe in the cause of women in Malaysia. It may all have been mere lip-service.

This debacle by Shahrizat may make many Malaysians wonder how a Malaysian woman leader like Rafidah Aziz or, even Ng Yen Yen, may have handled the situation.

One thing is for certain, Shahrizat missed a great opportunity to score one for UMNO and BN. By her act of shrinking away from the NGO protesters and worse, she aggravated the situation by criticising the protesters, she did a disservice to herself and the ruling coalition. The worst of it was when she turned on Ivy Josiah who was, in many ways, her bridge to the NGOs.

What Shahrizat should have done as a human being and someone who purports to be a woman political leader was to empathise with the Penan women who were violated. After all, she would have been on very safe grounds. There was already an official report that confirmed the allegations of Penan women being violated.

She should have expressed outrage that such an inhuman and criminal act had taken place. But by not so doing she has invited Malaysians to infer that she lacks sincerity and may even have an absent heart and emotion when it mattered most.

Thursday, September 17, 2009

Has anything changed, really?

When I read the analysis done on Malaysia by Rainer Heufers in 2002, I am reminded that despite the momentous results of the 12th General Elections on March 8, 2008, Malaysia has still some distance to go in many aspects of governance. Here are extracts for you to consider and, judge for yourself whether anything has changed:

Moreover, ministers are seldom held responsible and accountable before parliament. Ministerial responsibility has hence to be enforced and the legislative process should open up, so that formulation and deliberation of bills take into account the public views and parliamentary debate. Finally, the people should elect at least some of the members of the Senate.

The judiciary is generally independent except in those cases that touch upon the interest of the political and economic elite of the country. Several of such cases have significantly affected the reputation of the judiciary. The executive needs to recognize that it should not interfere with the independent constitutional position of the judiciary. The judiciary itself needs to maintain its independent decision-making.

Lastly, there are several direct and indirect controls of the media that have led to a biased reporting in favour of the ruling coalition. In this respect, the annual licensing procedure and the party ownership of news organisations have to be reviewed.

The general elections in 1999 mainly focused on such issues like Islam and democratic reforms, cruelty, corruption and mismanagement, foreign policy, and the affirmative action policy towards Bumiputeras. Following the events described in this article, the next elections that will be held at latest in 2004, will probably revolve around the same issues. But as tensions have risen since 1999, they might be tackled in a rather aggressive manner. Jesudason projected that "future political changes in the country are more likely to come from the loss of coherence of the ruling coalition, particularly the UMNO, than from a more effective political opposition."

The major failure of the present government is that it failed to develop skills in dispute management and dispute resolution. Civil society groups hardly have the legal options to fight lawfully for their respective causes, the reputation of the judiciary has deteriorated due to government interference, and there is no significant extrajudicial arbitration. Moreover, the government has suspended popular elections for local governments, which has led to negative repercussions on the political culture in the constituencies. The Malaysian democracy is equipped with weak institutions that are conditioned to prevent crisis. Once a crisis hits, there are no competencies to master the situation. The country thus appears not sufficiently prepared for future political challenges and possible crisis scenarios ahead.

Really, has anything changed? Any sincere and truly patriotic Malaysian political leader must work to strengthen our moribund constitutional institutions. Malaysians must remind our political leaders of Lord Acton's axiom that "power corrupts, absolute power corrupts absolutely". Therefore, there must be strong institutional audits and checks and balances. The weakening of these checks and balances has distorted Malaysia's trajectory of progress. The absence of real checks and balances has created monsters such as PKFZ.

Malaysian voters will come to greater sentience that if the ruling coalition cannot address this issue within the next few years, we may be inclined to let the other guy have a go at it.

Wednesday, September 16, 2009

Dalian, the Bangalore of China

Malaysian economic managers need to read this AFP report to get a reality check on how urgent it is that we need to crank up our economy. I need to do some nagging here even if it is to state the obvious. Dalian, China has enough HUMAN CAPITAL conversant in the ENGLISH LANGUAGE for the city to become an outsourcing hub for multinational companies.

So, while some members of the Cabinet like the Prime Minister and the Minister of International Trade and Industry are urging foreign direct investors to give Malaysia a second look, the Deputy Minister merangkap Minister of Education has decided that PPSMI be abolished in stages. This rojak approach to economic management (yes, education IS part and parcel of economic management...although many Cabinet members may believe that education is only about politics) will have a deleterious effect on Malaysia's economic competitiveness in the medium to long term. Mark my words.

Anyway, read this to get an idea of why I feel exasperated with the language policy reversal:

Once a simple port city on China's northeast coast, Dalian is now the hub of the country's booming outsourcing and IT industries, with dozens of the world's top high-tech firms on site.

In little more than a decade, the city -- located where the Bohai and Yellow Seas meet -- has become home to seven massive business parks, spread out along 30 kilometres (20 miles) of rolling green hills.

About 70,000 people work here for more than 700 companies, more than half of which are foreign-owned or contain foreign capital, according to officials, who say that more than 2,000 companies could be set up here by 2013.

"Dalian has become China's number one spot for outsourcing", both in terms of call centres and management facilities, said Chuck Shi, deputy director of the high-tech zone.

The Chinese port city is following in the footsteps of Bangalore, which became India's high-tech hub and the world's back-office for outsourcing and off-shoring, with 650 foreign and domestic IT firms on the city register.

The result of Dalian's focus on IT has been that economic growth has topped the already impressive national average in recent years, and the city for the second time recently hosted the World Economic Forum's "Summer Davos in Asia".

"The theme of this year's meeting was the resumption of growth. We've faced up to that test pretty well. We posted 11.6 percent growth in the first half," said the city's Communist Party boss, Xia Deren.

The city's main high-tech complex, Dalian Software Park, is home to about 470 companies, 40 of which are on the Fortune Global 500 list.

  • Bird's eye view of the city of Dalian, host of the World Economic Forum's summer meeting. Dalian is now the hub of China's booming outsourcing and IT industries, with dozens of the world's top high-tech firms. Photo courtesy: AFP.


General Electric was the first foreign company to set up shop, and others quickly followed: US computer giants such as Dell, Hewlett-Packard and IBM; Finnish mobile phone maker Nokia; and Japanese electronics firm Sony, to name a few.

In 2007, Dalian scored a major win by attracting Intel, the world's leading producer of semiconductors. The US giant has invested 2.5 billion dollars in a wafer factory here -- its first such facility in Asia.

Xia said at the time that Intel's move could help "kickstart the development of the northeast" Liaoning, Jilin and Heilongjiang provinces, which used to rely on heavy industry that underwent restructuring in the 1990s.

The transformation of Dalian from a naval construction site and a petrochemicals hub to a high-tech centre came in large part thanks to one time mayor Bo Xilai, who later became China's high-profile trade minister.

But even if the decision was political, the money has all been private.

The next phase of the Dalian Software Park -- four times bigger than the current complex -- should be completed within 10 years, with a total of about 15 billion yuan (2.2 billion dollars) invested.

Some of the city's more than 20 universities -- many of them specialising in science, technology or foreign languages -- are expected to set up there, giving Dalian an extra competitive advantage.

The port is hoping to draw even more call-centre and outsourcing business from both South Korea and Japan -- each a stone's throw away -- by offering a highly-trained workforce with top-notch language skills.

Curtis Eubanks, chief of British Telecom's call centre here, told AFP at the 10th anniversary of the park last year Dalian was an unbeatable location.

"Dalian has an impeccable reputation in this area. Amassing such a talent pool in other countries, or even elsewhere in China, would be more difficult and more expensive," Eubanks said.

Fair value accounting unfair?

Don't worry about this particular entry. I've been examining the issue of "mark-to-market" and "fair value accounting" for some time. These accounting rules are being debated heatedly in the U.S. and Europe. I've done some previous posts on this under the label "Mark-to-Market Rule". It is something you can click on if you have lingering symptoms of insomnia and, if you find that Perry Como and Mantovani isn't able to cure your predicament. I am just pasting this piece by Stephen Oong from Ernst & Young as published in The Star for my own reference. You will find this matter becoming more and more prominent in the coming months because the accounting profession in Malaysia has determined that from January 1, 2010 (that would be some 3 months away), Malaysian corporates must adopt this rule in measuring the value of their assets.

FAIR value accounting has been the subject of intense scrutiny and debate in the uncertainty of the current economic times. Under such conditions, the fair values of certain assets and liabilities are more volatile, causing the income statements of some companies to be more volatile too. Certain quarters are of the view that fair value accounting is the main culprit behind the poor performance of many of the worst affected companies. Or is fair value accounting a mere bearer of the bad news?

Fair value accounting is a financial measurement methodology whereby companies are permitted or required to measure certain assets and liabilities at fair value or market value. Under fair value accounting, companies report losses when the fair values of their assets decrease or liabilities increase. The gains or losses are reflected directly in the income statements or sometimes in the statement of equity changes.

Companies in Malaysia are very familiar and comfortable with using fair value accounting. For many years, Malaysian companies have been applying fair value accounting in the measurement of certain permissible items and transactions in their financial statements. Such applications are allowed for by our Malaysian accounting standards. Why then the sudden spate of criticism on fair value accounting? Could it be that fair value accounting is not fair?

Fair value accounting is accused of being pro-cyclical. In periods of growth and during downturns, fair value accounting accentuates the volatility of the financial statements. When assets are measured at their respective fair values, rising or falling values will be reflected in the financial statements of the company and such swings could move in a cyclical fashion.

Fair value accounting appears harsh when prices are going down; yet no one complains when asset values are rising. However, fair value accounting is merely reporting and reflecting the outcomes of market forces at play, not causing them.

When market conditions result in volatility in values and earnings, users of financial statements benefit when companies transparently report these circumstances and their impact on financial reporting. Users of financial statements would like to know the financial position of a company based on its current value rather than some old historical costs.

Although the information contained in the balance sheet is reliable (because it is based on verifiable historical costs) and not subjective, it is irrelevant, and accordingly not useful, for decision-making purposes.

Assets acquired years ago and newly-acquired assets do not have the same costs and hence have different carrying values, even though their respective current values may be the same. To account for such assets in the financial statements of different entities at their respective historical costs would make comparisons between companies almost impossible.

Historical cost information for assets has no economic relevance to the buy, sell, hold decisions that management must make each day. However, making economic decisions using fair values may also be inappropriate because the fair values used may not be reliable, but at least they may not be totally wrong all the time.

The support for the use of the fair value approach is principally grounded on relevance. The adoption of fair value as the primary basis of measurement should be tested explicitly against the four attributes that make information in financial statements useful to users: understandability, relevance, reliability and comparability. However, information needs to pass a reliability threshold before it can be considered relevant.

In this respect, fair values based on prices quoted in an active market will pass both the reliability and relevance attributes. However, a source of discomfort among the fair value dissenters is when assets and liabilities are not quoted in an active market; or when there are infrequent or no transactions for the kind of assets or liabilities held by the entity.

Under FRS, in such illiquid market situations, companies are to use adjusted mark-to-market measurements based on observable market prices for similar assets and liabilities. Where such market observable data is not available, FRS suggests the use of acceptable valuation models to estimate fair value (mark-to-model measurement). Such adjusted mark-to-market and mark-to-model basis of determining fair value is what users of financial information are not comfortable with.

In any adjusted mark-to-market models and valuation models, the output is only as relevant and reliable as the input. Because the assets are in an illiquid market, input using market observable data is hard to come by. Companies would therefore have to rely heavily on the estimation of future cashflows and to use input based on non-observable best estimates and best judgments.

So can valuations that are not independently verifiable be considered reliable? And is information that is not reliable relevant in the world of financial reporting? Under such circumstances, the financial statements produced using fair values may be more relevant (vis-à-vis historical costs) but one cannot be so sure about its reliability either.

Relevance and reliability are the two key attributes of financial reports that are useful to readers. However, these attributes could be compromised by the use of adjusted mark-to-market and mark-to-model calculated fair values.

That is why it is important that companies make adequate and robust disclosures in their financial statements as to the valuation processes and methods used in determining fair values, what the significant estimates are and the assumptions used as inputs.

The balance sheet prepared using fair value as a basis of measurement gives a better reflection of the actual worth of the company. Until and unless another better basis of accounting measurement can be identified, fair value accounting is still the fairest option available.


Today, September 16, is the 46th anniversary since the formation of Malaysia. On this day Sarawak and Sabah became members of the Federation. This day should be made a public holiday in recognition of the importance of Malaysia's formation. Malaysia Day should be a celebration of solidarity between Malaysians in Semenanjung with Malaysians in Sarawak and Sabah.

Large animated Malaysian flag graphic for a white background.

I am mindful that on this day, Singapore also became a member of the Federation. But, for reasons that I may examine one day, on August 9, 1965 Singapore left the Federation. from here.

timemagazineapril121963-1.jpg image by malaysianunplugpix from here

Here's the actual Time Magazine report on April, 12 1963 on the formation of Malaysia:

Manila hummed with excitement as delegates gathered for the third annual meeting of the Association of Southeast Asia. Phalanxes of motorcycle police escorted shiny official limousines to meetings at the pale, domed conference hall in the heart of the city. Inside the paneled auditorium and at diplomatic cocktail parties, an endless stream of dignitaries strolled up to greet the man who was the focus of everyone's attention. Malaya's stocky, smiling Prime Minister Abdul Rahman. 60. the golf-playing ex-playboy who this summer will bring into being a new Asian nation.

To one and all. Abdul Rahman happily took credit for the formation of the Malaysian Federation. As he puts it. "I am the father of Malaysia." Strictly speaking, this is not true; the idea has long been the dream of Asian nationalists enchanted by its economic and political prospects. For years. Britain too has advocated the plan as a neat way to tie up all its remaining Asian colonies (with the exception of Hong Kong) into one tidy independent package. But the Tunku (it means Prince) was the indispensable catalyst without whom Malaysia could not have been achieved. He wooed, bullied and cajoled the four other countries into the federation agreement, was the only logical choice to serve as the new nation's first Prime Minister.

Happy, Not Mighty. Unlike most other new Asian leaders, Abdul Rahman is no rabid nationalist. He has remained on close, friendly terms with the British, has no interest in pie-in-the-sky economic schemes. His political aims are simple: "Food instead of bullets, clothing instead of uniforms, houses instead of barracks.'' His new nation has a combat army of only seven battalions and an air force so small that the pilots often have trouble finding a fourth for bridge. "My ambition is not mighty Malaysia," says Abdul Rahman, "but happy Malaysia."

But many pressing problems threaten the Tunku's ambition. Malaysia's current prosperity is endangered by its dependence on a one-crop economy. Synthetics have already captured half the world's annual 5,000,000-ton rubber market and forced down the price of latex. On top of this, Brunei's oil reserves are fast depleting. To counter the economic threat, Malaya has embarked on an ambitious diversification program, is offering a five-year tax holiday to new industries and pushing a big land-development program for new cash crops.

Politically, Malaysia has already experienced some acute pains. Fearful that a stable new nation will curb Communist subversion in Southeast Asia, Russia has branded the federation "a cunning invention of London" set up with the "unqualified support of U.S. imperialists.'' Both neighboring Indonesia and the Philippines have launched a campaign of invective against the whole idea.

Walls of Prejudice. By far Malaysia's most complex and festering problem is the simmering racial hostility between the new nation's Chinese and Malay populations. Throughout the federation, the astute, prosperous, hard-bargaining Chinese dominate business, industry and trade, have economically far outstripped the rural, easygoing Malays. Chinese tycoons control North Borneo's booming young timber industry and Sarawak's vast, rolling pepper gardens; in Malaya. Abdul Rahman's government has complained that the rich, inbred Chinese business community has erected a "wall of prejudice" against ambitious young Malay businessmen.

The Malays have built some walls of their own. By Malayan law. only one-quarter of the government jobs can go to non-Malays, while Malays get special concessions in the granting of scholarships and licenses for new businesses. Rigid citizenship requirements have been set up for the Chinese (Malays are automatically citizens), and the Borneo territories plan immigration restrictions to keep Chinese businessmen out. "Special privileges are like a golf handicap." rationalizes Malaya's Chinese Finance Minister Tan Siew Sin. "They are not to hold the Chinese down, but to help the Malays along."

Golf Every Morning. It is ironically fitting that the complicated problems of federation are the province of a man who. on the face of it. is so uncomplicated himself. "I am a lazy man." admits Abdul Rahman cheerfully, and six years as Malaya's Prime Minister have not altered his funloving ways. The Tunku plays golf every morning (handicap: 24), checks the racing calendar before making advance political engagements, always takes a nap in the afternoon. An avid soccer fan and sports-car buff, he is chronically late for appointments, explains: "Being punctual always wears me out."

The Tunku has the charisma of the really successful politician. His title draws enormous respect from the masses, and at the same time his genuine charm and easygoing manner quickly win their confidence. Though he is a devout Moslem, Abdul Rahman enjoys brandy and soda; he is also an excellent curry cook. With his third wife, Sharifah Rodzia, and their four adopted children (two of whom are Chinese),* the Tunku leads a life of cheerful disorder in Kuala Lumpur's open, airy Prime Minister's residence, allows the 70 children of his servants the run of the house; visiting diplomats are often surprised during a conference to see a servant's child wander into the sitting room and climb up onto the Tunku's lap.

The Tunku has solved the problem of paper work simply: he does not read it. He has always had an aversion to the printed page, as a student picked up the knack of absorbing pertinent passages from books or papers that were read aloud to him. But though he has no intellectual pretensions, the Tunku commands unswerving loyalty from his brilliant subordinates for his almost charmed ability to avoid political mistakes. Says an aide: "He understands the Malay mind better than anyone else ever has." Abdul Rahman agrees. "I have the feel of the people." he says. "I have the touch."

The Playboy Prince. Abdul Rahman was the seventh son of his father's sixth wife and, with his 44 brothers and sisters, lived the plush life befitting the offspring of the Sultan of Kedah. His Siamese mother demanded that he be carried to school on the shoulders of a retainer, and though he was an indifferent student, his royal birth won him a scholarship to Cambridge, where he began to read law. But the Tunku skipped most of his lectures, seldom missed a tea or dinner-dance, distinguished himself mainly by picking up 28 traffic violations in his silver Riley with red fenders.

Not unexpectedly, the playboy prince flunked his bar exams. So far down the line of succession that he had no chance of ever attaining his father's sultanate, the Tunku returned to Malaya as a minor civil servant in a number of remote outposts. On foot and on elephant, he traveled through the bush getting to know the land and the people, once even worked as a manual laborer to help build a new mosque, which the grateful Malays named Rahmaniah after him.

World War II and Japan's swift conquest of the Malayan peninsula hastened Abdul Rahman's maturity. As a useful district officer, the Tunku was kept on the job by the Japanese. Secretly, however, he helped hide escapees from Japanese death camps, kept in contact with British guerrilla units, which were supplying arms to anti-Japanese Communist irregulars in the jungles.

"Who the Hell Is He?" Abdul Rahman was also in contact with the Malayan independence movement that began to take root when the Japanese ousted the British. With the end of the war, at the age of 42, the Tunku returned to England to get his law degree, began to play a larger part in the cause of merdeka (freedom). He insisted that it was the duty of every Malay in Britain to join the nationalistic Malay Society. Because of his age and long experience in the civil service, younger Malay students looked to him as their leader, called him—because of his darker skin—"Black Uncle." In fiery political bull sessions with youthful follower Tun Abdul Razak, the seeds of a future political partnership were being sown; today Razak is the most trusted member of his Cabinet.

Back home, the middle-aging lawyer joined the United Malay Nationalist Organization, slowly began building up a political following in his native Kedah. In other Malay states, the Tunku's firebrand followers from the London days began pushing him for the party leadership; finally, in 1951, Abdul Rahman took over as boss of the U.M.N.O. "Nobody had ever heard of him," an official recalls. "I remember people asking 'Who the hell is he?' "

They soon found out. Convinced that he could only achieve national leadership at the head of a multiracial united front, Abdul Rahman muted hotly anti-Chinese sentiment in his own Malay party, stumped the country urging Chinese and Indian leaders to unite behind him under the banner of a new organization called the Alliance Party. To finance his crusade, he sold his expensive cars and most of his other property. "I worked like mad, living andy sleeping on trains," says the Tunku. "I was often home only one day a month." But Abdul Rahman's zeal paid off. In the 1955 general election, the Alliance swept 51 of the 52 seats in the federal legislature, and the Tunku took over as Chief Minister under the British High Commissioner.

Merdeka. Abdul Rahman was so busy politicking that he had taken little military interest in the brutal, bloody guerrilla war that 350,000 British and Malayan troops and home guardsmen were waging against Communist insurgents in Malaya's tangled jungles. But after his 1955 election landslide, the Tunku grew afraid that the British might use the emergency to delay independence, arranged to meet the Communist rebel chieftains in northern Malaya to see if some sort of settlement could be worked out. "My ideas about Communism were determined by that meeting," says the Tunku. "I became convinced that once a Communist, always a Communist. They could never coexist with us in an inde pendent Malaya."

As the war in the jungle began taking a turn for the better, Abdul Rahman flintily told Britain that the time was long overdue for Malaya's independence. After months of haggling and delay, the Tunku finally forced Britain's Colonial Secretary Alan Lennox-Boyd (now Lord Boyd) to the conference table. Throughout the grueling, three-week session in London, the Tunku refused to budge from his ultimatum that independence must come no later than Aug. 31, 1957. "When the Siamese have no intention of yielding, they just appear stupid," he told subordinates. "I'm half Siamese, you know." At last, Lennox-Boyd got the point and caved in. On the Tunku's target date, independent Malaya came into being.

"Good Old Tunku." The Tunku had no revolutionary blueprint for his new nation, brought into his Cabinet his old London crony, Abdul Razak, to hammer out a program for orderly progress. While Abdul Rahman ground down hard on Red subversives, Minister of Rural Development Razak (in the post he will retain in Malaysia's new government) started a program of new roads, schools and clinics to boost the standard of living in the primitive kampongs (villages) of the interior, where the Communists were trying to gain a foothold. In the air-conditioned "operations room" of his ministry, gadget-loving Razak carefully watched the progress of his bulldozers on dozens of charts, movie screens and map displays, kept his program constantly ahead of schedule with his cold insistence on re sults—or else.

Abdul Rahman made no effort to squeeze the British out of the country, was convinced that Britain's continued economic and military presence was the best possible insurance for Malayan stability. Today a British officer commands the Malayan army, five senior British civil servants hold key positions in Malayan government ministries, and British businessmen control more than half of the rubber industry, repatriate $86 million in profits annually. "It's wonderful how this place has flowered since independence." says one businessman. "We're really much better off. Good old Tunku."

Parleys on the Green. With his young nation booming, Abdul Rahman looked with increasing fear at the predicament of neighboring Singapore, just three-quarters of a mile across the Johore Strait. There Communism was spreading like an infection among the underfed, underemployed masses in Singapore's squalid, teeming tenement quarters. By strikes, riots and boycotts, the Peking-oriented Communist-front Barisan Socialist Party tried to topple the tottering government glued together by Singapore's shifty, brilliant, Cambridge-educated Prime Minister Lee Kuan Yew, 39.

Never too choosy about where he got political support, "Harry" Lee first tried cooperation with the Communists, later adopted a "leftist, not extremist, nonCommunist, not antiCommunist" policy. It did not work; to save his political neck, he was forced to go for help to an old golfing partner—Abdul Rahman.

Lee's vacation house bordered a fair way of Kuala Lumpur's rambling Selangor Golf Club, where the Tunku shot his daily round. From tee to green, Lee tried to convince Abdul Rahman that Singapore's rickety coalition could never survive another election, and that a Red Singapore could only spell trouble for Malaya. Gradually, the Tunku came to the frightening conclusion that Singapore might well become "a Chinese Cuba."

One solution to the "Singapore problem" was obvious: a merger, so that Malaya's powerful internal security police could move in and help Singapore authorities hold Red subversion in check.

But the Tunku shuddered at the prospect of upsetting his nation's Malay racial preponderance by the addition of Singapore's 1,300,000 Chinese. "In order to balance the population," he says, "I thought of the Borneo territories."

Wining & Dining. Sarawak, Brunei and North Borneo, however, were less than enthusiastic about the federation scheme. Borneo leaders resented being invited to join merely as a political and racial accommodation, desired instead some sort of independence of their own. Then Britain began putting quiet pressure on the three territorial governments, tried to persuade them that union in Malaysia offered them far more economic and political power than they could ever achieve by themselves.

But it was Abdul Rahman who sold the scheme. The Tunku wined and dined a continuous stream of Borneo delegations in Kuala Lumpur, warmed up Borneo leaders cool to the federation with promises of favored political positions in the new nation. He shrewdly offered the Borneo territories 70 seats in the federal parliament, against only 15 for far more populous Singapore and 104 for Malaya. He promised tax concessions and a $12 million dollop of Malayan aid annually to the territories, agreed to keep federal hands off Brunei's oil reserves. It was the Tunku's fondest hope that the new nation come into being on Aug. 31, 1963, the sixth anniversary of Malaya's independence.

Then last December came a blow that threatened to destroy the Tunku's timetable. It was the uprising in Brunei.

"Just Too Much." Discontent with the Sultan of Brunei's corrupt, inefficient and autocratic regime had long been festering in the tiny, Delaware-sized territory. Last year the Sultan's government spent only $50,000 on drugs and medicine for its people, while laying out $47,000 for electrical illumination on the Sultan's birth day; action on requests to the government usually took from six months to three years. The dominant but powerless People's Party was also dead-set against Malaysia; the party's erratic, goateed, onetime veterinarian leader, Sheik A. M. Azahari, 34, wanted instead to align Brunei, Sarawak and North Borneo into a single independent state—with himself as its leader.

When it finally erupted, the revolt was poorly organized and badly led. Four battalions of Britain's tough little Gurkha troops landed on Brunei, inside of a week sent the shattered remnants of the 3,000-man rebel army scuttling back into hiding in Brunei's steaming jungles.

But the Brunei revolt at last gave the Philippines and Indonesia, for different reasons, an excuse to display their opposition to the scheme. Oblivious to Malaya's success against Red infiltration, the Philippines feared that leftists would ultimately take over the new nation, thus putting a Communist neighbor right on their doorstep. Dusting off an old claim to North Borneo, the Philippines maintained that in 1878 the Sultan of Sulu had only "leased," not sold, the territory to the British. London stiffly rejected the Filipino claim to the region.

Indonesia shouted that the turmoil showed the deep dissatisfaction with Malaysia in the Borneo territories, and that the federation was only a plot to extend Britain's colonial influence in Asia. Rabble-rousing President Sukarno knew that a British-backed, economically viable Malaysia would not only derail his ambition to extend his influence over the Borneo territories, but might also serve as an inducement to rebellion for the people of depressed Indonesian Borneo. Moreover, Abdul Rahman has ignored every "revolutionary principle" for which Sukarno stands, has in the process created a conservative, prosperous nation, while revolutionary, leftist Indonesia, with its 100 million people, has slid to the edge of economic ruin. Says a diplomat: "To have a little country like this extending its influence in Southeast Asia was just too much for Sukarno."

Sound Ground. In a drumfire of propaganda outbursts, Indonesia hailed the "Brunei freedom fighters," lashed out at "British mercenaries and puppets," granted political asylum to Brunei Leader Azahari, raved that Abdul Rahman was "round the bend." (Retorted the Tunku: "What can you expect from a pig but a grunt?") Djakarta mobs hanged the Tun ku in effigy, and Sukarno declared a "policy of confrontation" against Malaya. Indonesian jets buzzed Malayan ships in the South China Sea, and army leaders darkly threatened "incidents of physical conflict" along the border of Brunei and Indonesia.

Sukarno did not dare to invade; he plainly hoped to induce the United Nations to step in and placate him as it did with West New Guinea—thus sparing him the necessity of fighting for what he wants. However, the U.N. seems unwilling to play Sukarno's game; a U.N. observer team told him that Malaysia is "on sound legal ground."

Promise to "Brothers." Last week in Manila, the acrid dispute between Indonesia, the Philippines, and Malaysia added an undertone of tension to the otherwise calm meeting of the Association of Southeast Asia. Not on the official agenda, the Malaysia question came up repeatedly in long private discussions between Abdul Rahman and Philippines President Diosdado Macapagal. The Tunku was anxious for the whole matter to be settled quietly. In an attempt to be reasonable and friendly with his "Malay brothers," he agreed to look into the Filipino claim to North Borneo, lukewarmly endorsed a proposal for an Asian summit meeting between himself, Macapagal, and Indonesia's Sukarno. But the Tunku vetoed the suggestion that he postpone the creation of Malaysia until some settlement could be reached; the federation, he said, would come into being by Aug. 31 as planned.

From the standpoint of language, religion, culture or geography, Malaysia is not a natural nation. But Abdul Rahman has faced problems similar to Malaysia's in his own Malaya—and there a decent society has flourished. He does not promise the moon to his new nation, only a sane, humane, workable government. Under his leadership, Malaysia can be, as John F. Kennedy has said, "the best hope of security in that vital part of the world."

*The Tunku's first wife, who died of malaria in 1935-was the mother of his two children, Daughter Kathijah, 29, wife of a Malayan studying in Britain, and Son Xerang, 27, now a major in the Malayan army. His second wife was a white Englishwoman, Violet Coulson, whom he married over the protests of his family; they were divorced in 1946.

Let us celebrate today as MALAYSIA DAY

Tuesday, September 15, 2009

1Malaysia F1 Team

If anyone can make it happen, Tony Fernandes can. The 1Malaysia F1 Team will inject some branding excitement on Malaysia. I like Tony Fernandes and Kamarudin Meranun. If they and the team can inject the Air Asia pizzazz into the 1Malaysia F1 Team, then, I think we're in for a treat.

Large animated Malaysian flag graphic for a white background.

I'm rooting for the 1Malaysia F1 Team, for sure.

I do hope that Tony and Kamarudin will have the time for it, though.

UPM lecturers "hauled up" over plagiarism

The penalty for academic plagiarism in Malaysia is a mere "stern warning".

For anyone who has undergone tertiary education, you would have been made aware that plagiarism is a serious offence.

What message does this "stern warning" by Universiti Putra Malaysia send to aspiring students and lazy academics?

This is symptomatic of the Malaysian malaise. The culture of "sweeping things under the carpet".

And, yet, we pretend to wonder why we are losing in the competitive stakes.

I'm not saying that we should "rotan" these fellows. But, they need to be sacked. They weren't foolish students. They were lecturers, academics for Heaven's sake.

So, with Google planning to put out electronic versions of books out in the Internet everyone can be a "cut-and-paste" author too. All you get is a "stern warning" for plagiarism.

Monday, September 14, 2009

A minor observation on the Treasury Sec-Gen's column

Tan Sri Dr Wan Abdul Aziz Wan Abdullah, who is the secretary-general of Treasury, Ministry of Finance said this, among other things, in his column today. The emphasis are mine:

Human capital is the key ingredient in the new growth model. As we progress in the new economy, there will be a greater demand for high skilled jobs and if the supply is not available domestically we have to source and pay for such talents elsewhere.

This is the challenge for the education institutions in Malaysia. Our schools, skills centres, polytechnics and universities must play a proactive role and expose our students to the state of the art technologies. In addition, our students should be inculcated with good working habits, suitable soft skills and the yearn for continuous improvement. This long-standing issue must be addressed immediately.


Having said all these, the architecture of the new model must be structured on the two pillars of Malaysia’s inherent strengths, namely political stability and racial unity. The political stability that we continue to enjoy enables us to plan ahead with greater certainty and enhances investors’ confidence, both domestic and foreign. We must also continue to build on something that is very dear to us, and that is racial unity.

To move beyond platitudes, the Tan Sri needs to get his colleagues in the Higher Education Ministry and the Education Ministry to seriously apply academic meritocracy.

First, reward only those students who actually provide the correct answers. Do not fiddle around with the passing marks.

Second, promote good academics who have consistently produced good students and produced good academic papers. Get rid of the the kaki ampu sycophants who are more interested in non-academic things like developing vacant land in the campus, building a surau in the school compound (at the expense of teachers' carparks and students' outdoor tempat perhimpunan) and arranging the next VVIP visit and, of course, getting promoted by ampu instead of merit or seniority.

That is the fundamental matter to address the HUMAN CAPITAL pipeline in Malaysia.

As for POLITICAL STABILITY and RACIAL UNITY, I don't know why that should be raised at all by the Tan Sri because Malaysia has always had these two assets, even after March 8, 2008. We still have the same coalition running the Federal Government.

So, Tan Sri, we love the words and, we accept the points wholeheartedly But, let's see some serious bootstrapping action on improving the Human Capital i.e. education. Otherwise, these are mere words to sooth those Malaysians that suffer from temporary amnesia. For those with long memories, it may be painful to be reminded of these words when Vietnam's economy exceeds ours in all respects.

Sunday, September 13, 2009

Samy also lives in Egypt

I read this report by Hafiz Yatim in Malaysiakini. Here's an extract:

MIC president S Samy Vellu today said the Indian community voted against the Barisan Nasional because they were fed up with the ruling coalition, and not him.

The 73-year-old politician lamented that he was often made the scapegoat for the dismal results in the last general election, which saw MIC nearly being dealt a fatal blow.

“This is a blame that people throw back to me. During my time (as minister and parliamentarian) they said people were fed-up with me (and) that was why the Indian community did not vote for BN.

“It is not that they are fed-up with me. They are fed-up with BN,” stressed Samy Vellu who was defeated in his parliamentary stronghold of Sungai Siput in the March 2008 polls.

For reasons that I am still trying to fathom, I just cracked up into fits of uncontrollable chuckles as I read the report. We should just add Sam to the list of BN leaders who live "in the Nile".

Saturday, September 12, 2009

Economics in evolution

The salutary effect of the economic debacle of 2008 is that it is forcing economic thinkers to review the conventional wisdom of the past half century.

The European economic thinkers have always approached economics from a philosophical and values-based perspective. You could call it pure economics in the academic sense.

On the other hand, American economic thinkers, particularly those from the Chicago School, tended to be more into applied economics and, tended to use intensive mathematical modelling. Econometrics owes its development very much from this approach.

Another way to look at it is that the values-based approach is classified as normative economics while the applications-based approach is positive economics.

If you are still awake after reading the above, we may soldier on...

Krugman's clue
Paul Krugman's latest blog post, Mathematics and Economics, point towards a growing belief among contemporary economic thinkers that in the wake of the 2008 economic debacle, there is a need to re-inject an understanding of human behaviour into the study of economics beyond numbers. It will be interesting to see how this process will evolve. Instead of recycling the tagline of "normative economics", people are calling this renewed approach to economics, behaviourial economics.

Death of mathematics in economics?
It is impossible to remove mathematics from economics since postulations need to be proven and, you cannot prove or disprove anything without mathematical formulation and statistical data. So, anyone (particularly students) who think that they can throw out their statistics and probability textbooks should refrain from doing so. Economic modelling is here to stay.

Rather, thinkers like Krugman are critiquing the hegemony of Chicago School-types that formulated, developed and encouraged the quantitative approach to economics in the strong belief that human economics and business behaviour - particularly how we look at and, deal with risk - can be reduced into numbers. I believe that in a marketing context, we can include Stephen Baker's The Numerati into this category albeit in a loose association.

Thinkers like Eugeme Fama pushed the thinking that dominated U.S. regulatory and capital market practises that relied heavily on assumptions about availability of information and its effect on fair price and valuation. This was tagged the Efficient Capital Market Hypothesis or Efficient Market Hypothesis. In many ways, it took the Price Theory to its apogee.

In fairness to Fama, he did call it a "hypothesis" and, not a "thesis" or "axiom".

The X-factor in human economic behaviour
At the risk of widespread opprobrium from the wider community of economic thinkers, I make the observation that the 2 things that cannot be quantified are GREED and STUPIDITY. That is probably why behaviourial economics is necessary.

Friday, September 11, 2009

Malaysia: 30 A's but 90 D's

The number of A's and D's are plucked from the Global Competitiveness Report 2009/2010 that is seeing the Malaysian government's knickers in the twist though, if I were them, I wouldn't worry too much about it. Just study where the D's are are start strengthening those areas. Pretty straightforward, I'd say. See our Report Card here. We are ranked 24th in the overall competitive stakes.

It's a Friday. The mind is wandering towards more delectable things. I may or, may not, write more about this.

An Indonesian reminder

The recent anti-Malaysian events in the Menteng district of Jakarta should serve as a stark reminder that Malaysians have more in common with each other than with non-Malaysians within the archipelagic islands that dot the South China Sea.

Ask any indigenous person from the Orang Asli in the Peninsular, to the Penans in Sarawak, to the Aborigines in the Australian Outback, to the Native American, about where and what "home" is and you will receive the same answer. It's the physical space where we live most of our lives that define WHO we are. It is the neighbourhood where we live that defines us. It is the types of food that we eat, from recipes created and evolved from all the different races, cultures and faiths of the Malaysian people, that defines who we are. It is the recognition of familiar geography and terrain from past experiences - the spot where we crashed our bicycle - where the irate neighbourhood dog chased us - where we stole the first kiss - where we flew kites - these experiences are rooted in the place and, they define who we are. Well, if you don't already get it, my point is that a Malay Malaysian may have more in common with a Chinese Malaysian and an Indian Malaysian than he or she has with an Indonesian or Filipino because of common life experiences.

The puzzling thing is that our peculiar Malaysian brand of communal politics thrives on magnifying the things that separate us than the things that we have in common. This is something all Malaysian political leaders need to admit. You are killing the nation.

The angry Indonesians in the Menteng district were looking for Malaysians, not Malays, Chinese, Indians, Kadazans, Kelabits, Ibans or any specific ethnic person. They were looking for Malaysians (and, I need to give a "shout out" to my bro satD - Stay safe, bro. I hope the people in your neck of the woods are not going ape shit, if you'll pardon the pun).

Merdeka fortnight is from 31st August to 16th September
Maybe it is the political struggle in the aftermath of the General Elections of March 8, 2008. Maybe it is the economic challenges. Maybe its A(H1N1). Maybe Rais Yatim is too busy finding ways and means to narrow the Information Superhighway to 1kbps. But, I was and, am still, very disappointed with the Merdeka non-celebrations of 2009.

There was hardly a whimper from any Malaysian political leader of any stripe for the Jalur Gemilang to be hoisted.

And, within less than 24-hours from 31st August the few Jalur Gemilang that were put up were quickly taken down.

What happened to 16th September, my Malaysian brothers and sisters?

And, particularly to those from BN, didn't March 8, 2008, show that Sabah and Sarawak is your "fixed deposit"? I would have thought that to preserve your "drawdown" rights, you would want to make a timely reminder to our brothers and sisters in Sabah and Sarawak that Kita serumpun. But, apparently not.

I will have to say that it is not too late. There are still 5 days to 16th September. There still time to book the Padang Merdeka in Kuching for flag-raising on 16th September before Dominique Ng gets there!!! But, then again, maybe not...

The strategy deployed by the Malaysian leaders in 1988 (in the aftermath of the death of UMNO tulen and the emasculation of the Judiciary), was a particularly good one. It was based on one key public relations programme which I call, the "when-in-doubt- wave-the-flag" strategy. And, the key was only one simple word, "SETIA".

I could only find Siti Nurhaliza's version on Youtube (too lazy to look). But many will recall the multiracial ensemble that sang on the television every night.

The Setia song and the video that accompanied Negaraku when the television stations were shutting down for the night (yes, in the 80s there was no Astro and 24-hour television) provided a powerful and resonant audio-visual imagery that swelled the chest (and, buxom bosoms...regardless of gender) of many Malaysians. I'm no political scientist nor sociologist and, I therefore, cannot say for certain the extent to which the Setia strategy tilted the balance of the 1990 General Elections in favour of BN (despite a spirited fight by the Opposition parties that included Semangat 46). But, I am certain that the Setia strategy deserved credit in getting Malaysians to "stay the course". And, the Information Minister at the time was Tok Mat (Datuk Mohamad Rahmat). That was a good strategy.

BN will do well to remember, the "when-in-doubt-wave-the-flag" strategy because when Malaysians wave the flag, it is more than certain that the positive feeling is directed towards Putrajaya and, by association, the occupants thereof (pardon the legalese). Now, that's a thought.

Thursday, September 10, 2009

MCA: Decoupling ain't that simple, Tee Keat

Ong Tee Keat is expressing wishful thinking in the SinChewDaily report which goes like this:

MCA president Datuk Seri Ong Tee Keat said, he had advocated the investigations of the Port Klang Free Zone (PKFZ) scandal because MCA must no longer take the blame for other people.

"Before me, the PKA chairman and transport ministers were all MCA leaders. Whoever is corrupt should bear the responsibility himself, not MCA."

While it may be true that the MCA predecessors that are found to have dipped their hands into the proverbial cookie jar will be brought to book at a personal level (God willing), Ong Tee Keat and the current MCA will find that it the stigma and stench of the PKFZ scandal will be hard to wash off no matter which political and public relations detergent that Ong and the MCA uses.

I am not contradicting my previous post.

It will take time...a long time...for MCA to deconstruct its PKFZ past and, to reconstruct itself. I'm sorry to say that the deconstruction process hasn't even begun and, I suspect Ong knows that.

If Ong can lead MCA past the deconstruction process - which will involve some fatricidal feuds which may get quite ugly - then, the difficult process of reconstruction can begin.

Put simply, in the political ethos post-March 8, 2008, it's about being transparent. It's about keeping as much out in the open as possible. It's about communal parties engaging in multiracial issues (something UMNO needs to understand). It's about open-ness.

Until that happens, it is wishful thinking that PKFZ, which is fast becoming a pejorative for all that is wrong with Malaysian governance, will be an abbreviated noun that the MCA can be decoupled from.

Wednesday, September 9, 2009

MCA: A re-examination of Ong Tee Keat

These are the things that Ong Tee Keat is quoted as having said:

1. Impact on public trust towards BN
Ong said how he and the BN government handles the issue will have a bearing on public trust.

2. Rules of political appointments to statutory bodies and corporations must change
He also said the rules of political appointment in government corporations must change, where those sitting on the Board of Directors must have certain aptitudes and skills.

“We must get people who at least know something about the subject matter. You might be a political appointee, but at least be well-versed with the subject matter,” he said.

Ong admitted that this proposal was not going to earn him many friends but stressed that this must be done if one is to learn any lessons from the RM12.5 billion fiasco, illustrating that the management of the Port Klang Authority (PKA) had operated with impunity probably because the Board of Directors was not savvy enough to comprehend the intricacies of port management.

3. Make the PKFZ fiasco the turning point
“PKFZ should be made a turning point if we really want to bring in a new breed of political culture of accountability and transparency.

“We don’t just talk, we must walk the talk,” he said, adding that this is the acid test to the government’s commitment to accountability and transparency.

I have previously written that the MCA feud was fought on personality against the backdrop of the PKFZ fiasco.

I must say that on the strength of the 3 matters enumerated above, neutrals should support Ong Tee Keat to ensure that he carries out this agenda.

There are many - particularly in UMNO - who are taking the stand that BN components like the MCA, particularly leaders like Ong Tee Keat, and, are of questionable use to UMNO. See, for instance, Nur Jazlan's column.

These views do point towards the urgent need for the MCA to re-position itself. This is something it cannot do until the internal convulsions can be sorted out. But, can it be done?

The most intriguing feature of the MCA tussle is, to me, not the actual contenders. Rather, it is the shadowy role being played by ghosts of MCA leaders past who have a personal stake and exposure to the PKFZ issue. These are the characters that will prevent any attempt by Ong Tee Keat to quell dissent in order to commence genuine reform.

The other intriguing matter is that of strong murmurs that the UMNO leadership are not inclined towards Ong Tee Keat. Whether this has anything to do with PKFZ and, if so, which aspect of PKFZ, is unclear. But, such inclination or non-inclination is irrelevant and, should be irrelevant to Ong Tee Keat because for as long as he is the leader of the MCA, UMNO has to work with him. And this, if I may say, should make Ong Tee Keat more attractive for supporters. It allows him to be perceived to be independent (perception is everything even if reality may not be quite the same) and, therefore, worthy of support.

If Ong survives this test - and, I expect that he should - Ong should parlay public perception of his courage and leadership to see through the PKFZ matter and bring the guilty parties to book and, equally important, garner his MCA colleagues towards a multiracial platform. The parochial Chinese issues will always be there.

And, if Ong is to make his mark, it will be that he transformed MCA from the Malaysian Chinese Association to the Malaysian Community Association. By so doing, Ong and the MCA will have a fighting chance in the Thirteenth General Elections.

Sunday, September 6, 2009

Is China de-industrialising countries like Malaysia?

The postulation by Jorg Mayer and Adrian Wood as to whether China's continued ascendancy as an industrial powerhouse and "factory to the world" is causing developing countries to de-industrialise is relevant.

Another way to look at it is that China's production prowess is the catalyst to hasten the urgent attempt to shift Malaysia from a manufacturing- and export-dependent economy into a services economy. How this will happen is open to debate. The delivery and, quality of, Malaysian education is at issue. For, how do we shift from one economic level to another without laying the foundations? The services sector, even more than the manufacturing sector, depends very much on human resources. Poor quality human resources are likely to kill any ambitions in the services sector.

In any event, the other question is how long the "de-industrialisation" phenomenon will last? Will it be permanent? We may take some mixed comfort from Mayer & Wood's concluding remarks:

China’s opening was a one-off event, which caused a step change in the comparative advantage of other countries. In contrast, its rapid growth, based on accumulation of more skills, capital, and modern technology, is a continuing event, and one whose effects will change with the passage of time. Thus far, China’s growth has mainly amplified the effects of its opening, raising both its supply of labour-intensive manufactures and its demand for primary products. Over the longer-term future, this rising demand for primary products will continue, but China’s accumulation of skills will move it out of labour-intensive manufacturing, tending to increase the size of this sector in other developing countries, rather than reducing it as the country’s opening initially did.

The above conclusion suggests that China's magnitude is cutting a large swathe through developing economies and disrupting traditional developmental economics. The socio-political and socio-economic impact has already been felt for over a decade.

We, in Malaysia, are certainly feeling it. We need China's money and we need China's consumption of our commodities. We also need the Chinese to visit with us and spend some money during their visit. Against that is our having to close certain industries that are in direct competititon with Chinese manufacturers.

I hope Malaysian economic managers are continuing to examine Malaysia's comparative advantages over the span of at least 20 years. That would be proper economic planning.

We may count some small blessings that we are ahead of the Africans and Latin Americans in many aspects of economic development so that the disruptive effect of China's industrial prowess has less impact. But, we cannot ignore the fact that it does have an impact.

Read Mayer & Wood's joint paper, Has China de-industrialised other developing countries?

Krugman: How Did Economists Get It So Wrong?

Paul Krugman's piece in the New York Times is quite long. But, it is a worthwhile read on economics history and a perspective of how the "dismal science" appears to be in need of a revamp as it attempts to explain and understand new economic challenges. Here are extracts:

Few economists saw our current crisis coming, but this predictive failure was the least of the field’s problems. More important was the profession’s blindness to the very possibility of catastrophic failures in a market economy. During the golden years, financial economists came to believe that markets were inherently stable — indeed, that stocks and other assets were always priced just right. There was nothing in the prevailing models suggesting the possibility of the kind of collapse that happened last year. Meanwhile, macroeconomists were divided in their views. But the main division was between those who insisted that free-market economies never go astray and those who believed that economies may stray now and then but that any major deviations from the path of prosperity could and would be corrected by the all-powerful Fed. Neither side was prepared to cope with an economy that went off the rails despite the Fed’s best efforts.

And in the wake of the crisis, the fault lines in the economics profession have yawned wider than ever.

As I see it, the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth. Until the Great Depression, most economists clung to a vision of capitalism as a perfect or nearly perfect system. That vision wasn’t sustainable in the face of mass unemployment, but as memories of the Depression faded, economists fell back in love with the old, idealized vision of an economy in which rational individuals interact in perfect markets, this time gussied up with fancy equations. The renewed romance with the idealized market was, to be sure, partly a response to shifting political winds, partly a response to financial incentives. But while sabbaticals at the Hoover Institution and job opportunities on Wall Street are nothing to sneeze at, the central cause of the profession’s failure was the desire for an all-encompassing, intellectually elegant approach that also gave economists a chance to show off their mathematical prowess.

Unfortunately, this romanticized and sanitized vision of the economy led most economists to ignore all the things that can go wrong. They turned a blind eye to the limitations of human rationality that often lead to bubbles and busts; to the problems of institutions that run amok; to the imperfections of markets — especially financial markets — that can cause the economy’s operating system to undergo sudden, unpredictable crashes; and to the dangers created when regulators don’t believe in regulation.

It’s much harder to say where the economics profession goes from here. But what’s almost certain is that economists will have to learn to live with messiness. That is, they will have to acknowledge the importance of irrational and often unpredictable behavior, face up to the often idiosyncratic imperfections of markets and accept that an elegant economic “theory of everything” is a long way off. In practical terms, this will translate into more cautious policy advice — and a reduced willingness to dismantle economic safeguards in the faith that markets will solve all problems.

Read the full piece here.

Saturday, September 5, 2009

No strong MCA without a strong UMNO

Ooi Kee Beng's perspective on the context of the Ong-Chua struggle for power in MCA is a holistic one and, it is a sound examination of where the MCA stands in the present political landscape.

Undoubtedly, the 60-year-old MCA, just like the United Malays National Organisation (Umno), its senior partner in the ruling Barisan Nasional (BN), has had a long history of conflict. The current split, however, comes when the party is at its weakest; and BN, the coalition that had always been the vehicle for the MCA’s success, is facing the strongest opposition it has ever known, having lost its two-thirds majority for the first time in last year’s general election.

One quick look at relevant tables shows that the MCA today has substantial support only in semi-rural and rural states.

Indeed, despite being allocated 40 parliamentary seats by the BN to contest last year, it won only 15. Twelve of these are in Johor, Pahang and Perak.

In clearly urban states like Penang, Selangor and the federal territory of Kuala Lumpur, it was wiped out, with the exception of one seat in Selangor. Urbanity and urban voters are a problem for the MCA, as it is for the BN and Umno.

Given such a thrashing, one would have expected the MCA to suffer an immediate meltdown. That did not happen, partially thanks to its former president Ong Ka Ting retiring and thus taking part of the blame for the defeats.

However, this paradoxically passed the buck to his successors. With the pyramid of power so much narrower at the top, tolerance for opposition within the party has become a luxury it could not afford.

Dr Chua Soi Lek, the former Health Minister who resigned before the elections in the aftermath of a scandal where he was caught on video with his mistress in a hotel room, received formidable support in the subsequent party election, and emerged as deputy president. He has now been surprisingly sacked by the new president Ong Tee Keat. The old video was re-used to justify Ong’s desperate move.

Such a sudden disposal of a popular leader leaves those of Chua’s supporters, whose political future depends on their man being ahead, understandably angered. They have vowed to challenge the president’s decision. A nasty clash is imminent.

What this reflects is the unease spreading through the party, as it is spreading within Umno as well, that the political future of many who wedded their lives to their party is in jeopardy. The cake has shrunk and its eaters are hungrier.

The MCA’s fate and fortune cannot be separated from Umno’s. It is, after all, BN that brings power, not each member party by itself.

With the weakening of race-based parties like MCA, Umno and their old ally, the Malaysian Indian Congress, it is tempting to conclude that even if ethnic identity remains strong among Malaysians, the willingness to let personal sentiment decide national politics is not as intuitively given a thing as it used to be.

There are certainly signs suggesting such a development. A row of attempts to rouse racial feelings against the opposition — many done on the front pages of Umno’s newspaper, Utusan Malaysia — have had limited success. Even the bizarre use of a cow’s head by some Malays demonstrating against the building of a Hindu temple in their neighbourhood failed to anger Indian Malaysians into action.

The inability of BN to regain voter support, as painfully revealed through its loss in all by-elections held on the peninsula since the general election, makes its leadership extremely uncertain about which card it can play.

Should Umno spin itself as protector of Malayness, guardian of punitive Islam or custodian of secular governance?

The danger here is that Umno/BN, left at its wits end, will get ever more desperate. Rumours are rife that Prime Minister Najib Razak is planning the fall of the Pakatan Rakyat government in Selangor.

These are nourished by Najib’s expressed wish to bring the state back into the BN fold and his becoming the Umno liaison chief in Selangor. After all, the BN regained Perak state soon after the PM moved in as Umno liaison chief there.

The key question for MCA members to ask today — be they supporters of Ong or Chua — is whether or not the dubious recovery of power by Umno/BN through intrigues will make it impossible for the party to ever regain voter sympathy, and national relevance, no matter who is running the party.