April 23, 2010

Second Malaysia: Economic Reform for a New Malaysia

Posted in Economics, Malaysia, Tricia's Writings at 9:17 pm by egalitaria

Sometime last year (I think it was the first quarter of 2009), I was asked to write a piece on economic reform for a “Second Malaysia”. It was for (at the time) a new and upcoming Chinese alternative website called The Rock News. Today, the site is flourishing- congratulations is owed to its facilitators. They were doing a series of articles focusing on different areas such as culture, history, the arts, judiciary, and the topic requested of me was economics. The target audience was for a very pop-heavy reading group (if I remember correctly) hence kept as general reading. 

Of course, me being me (a “Cina murtad”), I cannot read Chinese and hence never knew if my article finally got translated and published. [Aside: As far as I know, my maternal great grandmother came from Java and blended into the Peranakan society upon reaching Peninsular Malaya, so no feelings of guilt here!]

Second Malaysia:

Economic Reform for Birthing a New Malaysia

Tricia Yeoh

Ordinary Malaysians like you and I know that Malaysia’s economic performance has only been lacklustre in recent years. We have gone past the stage of convincing ourselves that those announcements painting a glowing picture of financial health and vibrancy had anything substantial about them. The frustrating thing about it is that Malaysia had all the right factors to make the equation work: abundant natural resources, strategic location, perfect weather conditions with no natural disasters, good soil, and a generally stable political climate. Perhaps it is possible to state that Malaysia had good economic growth in the past two decades, yes. But to pat ourselves on the back claiming that we outdid ourselves is farcical; Malaysia has never lived up to its true economic potential, and this will not change unless some drastic economic reform is undertaken immediately.

March 8th 2008 marked the birth of a new political Malaysia, one in which individuals finally saw the potential of their decisions in changing a leadership landscape. With the Pakatan Rakyat controlling five state governments (now reduced to four with the recent onslaught on Perak) and denying the Barisan Nasional its traditional two-third majority at Parliament level, citizens finally felt the political impasse had broken through. Subject to debate, the ground conditions for democracy have been ripe and raw for the consuming, people more willing and eager to express themselves. Except for the rule of law that the present Federal Government seems too ignorant of, Malaysian society is experiencing a new chapter in its political history.

The same cannot be said of the economic system of the nation. Where freedom of expression has prospered, economic principle has faltered. For forty years Malaysia has tasted stale, irrelevant policy crafted in a manner intended to pacify instead of liberate, break down instead of build up for the most part. What is needed to carry the country forward is a breakdown of our current economic model and a revolutionary reconstruction of a new one.

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February 28, 2009

Water, Water Everywhere

Posted in Economics, Selangor at 7:27 pm by egalitaria

“Water, Water Everywhere and not a drop to drink” is the quote most often in my head these days. No, I haven’t been obsessing about Coleridge’s “Ryme of the Ancient Mariner”, but have been rather involved in the water restructuring issue in Selangor recently. 

It’s actually a water fight, more like it. The Edge has a good report here.

Although it’s the financial and business news that’s been reporting on it mainly, I think the issue is beginning to take ground amongst the main papers and some blogs. Which is good because this is going to affect ALL consumers in Selangor and Kuala Lumpur. 

What is happening and why is it so important? In short, the Selangor water industry is in the midst of getting restructured. All this needs to be resolved by end of March or there will be a 31% tariff increase. 

The original plan was for the Selangor State Government to negotiate with the concession companies to buy them over. But before the offer expired, the Federal Government stepped in and announced it would negotiate directly with the concession companies because the State was taking too much time. They have sidestepped the State completely and this amounts to sabotage.

This is really bad news for us all because: 

  1. The Federal Government will be dealing with their crony companies Syabas and Puncak Niaga behind closed doors. More shady wheeling-dealing that has been going on for too many years. 
  2. The Federal Government will offer a higher price for the companies’ assets (compared to the State’s offer) and this is actually a Backdoor Bail-Out because they are heavily in debt today. 
  3. There will be a tariff increase in water as opposed to the State which is fighting to ensure NO tariff increases at all.
  4. The Federal Government will most likely continue to use Syabas as a licensed operator and we all know how bad the quality of water and services is today – just think about the quality of water you are receiving today at home… 

There have been a lot of silly statements coming from the Federal Government recently, and it’s tough because it can be a media perception war. And we all know what/who controls the media. 

For example, the Minister of Energy, Water and Communications said that they took the lead in negotiations for other states and were only “allowing” the Selangor State Government to take the lead. This is rubbish, because Water is a state affair. Please read the Federal Constitution. Water is listed under the Ninth Schedule as being a matter of the State. See here. 

Also, the decision to allow the State to lead negotiations was a Cabinet directive. Unless this decision has been revoked (which has not taken place), the State still has the mandate to be involved. Third, it is contravening the Water Services Industry Act 2006 if the State is excluded completely from these negotiations. Obviously, the State Government HAS to be involved – it is ridiculous to exclude the State from any decisions on water.

This exercise is an admission of the failure of privatisation. The Government privatised water, made the people lose out, and now in the de-privatisation process wants to benefit and prosper the rich crony companies yet again. Once bitten, twice shy, the saying goes. The people are wiser than that. 

CEO of Puncak Niaga Tan Sri Rozali Ismail was reported to have received RM5.1 million in 2007 as Director’s Fees. He claimed that “one must be willing to pay for a professional”. As far as I know, he is a lawyer and has had little experience in the water industry, much less a major international player. 

The bottomline is this: the Federal Government cannot bail out these crony companies. For the sake of the people whose taxpayer’s money will go to filling these greedy little pockets, this backdoor bailout should stop. 

Water, tolls, highways, hospitals, sewerage, and so on… all these are public utilities that should never have been privatised in the first place.

November 14, 2008

Bleak Times Ahead – CPPS forum

Posted in Economics, Malaysia at 5:35 pm by egalitaria

The Nut Graph, present at the recent CPPS forum, reported on it with a gloomy title (understandably so). Still, with all the pessimism coming up, one must still hold onto some glimmer of hope for self, family and country. Tighten the belt and pray hard, it seems to be the case.

Bleak times ahead
14 Nov 08 : 9.00AM

By Deborah Loh

YES, we are staring at the gathering clouds of an economic crisis. Sure, economic fundamentals are strong, as government ministers keep saying, but that’s only half the picture.

The other half is the financial scenario, as economic and financial principles are two different things. The sub-prime crisis that began in the US and western countries is essentially a financial problem. But in an interdependent world, a financial crisis in one place could result in an economic crisis in another.

To illustrate, if US consumers buy fewer cars from say, Japan, Japan slows production and therefore imports less steel and rubber from say, Malaysia. Faced with low demand, Malaysian factories may be forced to downsize by cutting wages or workforce. That would be the worst-case scenario.

Which begs the question: how well is Malaysia positioned to face an “imported” crisis we had no hand in starting?

No new revenue

To a panel of experts at The Global Financial Crisis and Implications on Malaysia forum on 12 Nov 2008 at Universiti Malaya, Malaysia is taking a practical, albeit predictable, approach by spending its way out of a crisis.

It is typical of most governments to respond to a crisis by injecting funds to keep the wheels of market and business turning.

Spend, but prioritise, is the panel’s advice. (From left) Sieh, Syed
Amin, moderator Tan Sri Ramon Navaratnam, and Denison
Jayasooria, the experts at the Centre for Public Policy Studies-organised forum also wondered, where was the money going to come from?

Already, the government has revised the national deficit for 2009 to 4.8%, up from the originally projected 3.6%.

Malaysia has had a budget deficit for the last 11 years. With earnings from commodities like crude oil and palm oil falling, the question is whether there will be enough money to pump-prime the economy.

The RM7 billion package announced by Deputy Prime Minister and Finance Minister Datuk Seri Najib Razak on 4 Nov is not new money. It is sourced from the savings made from reducing fuel subsidies following the drop in oil prices.

But while low oil prices may mean lesser government subsidies, hence more money in the government’s coffers, it also means less revenue because Malaysia is a net oil-exporting country. Indeed, national oil company Petronas contributes over 40% to government coffers.

Read more here.

July 23, 2008

Resource Curse leads to Wastage

Posted in Economics, Malaysia at 3:18 pm by egalitaria

Star Biz did a feature of a commentary I had sent in. Would have been good to have the commentary published in full, but it’s good to have it covered here.

   Wednesday July 23, 2008, Star Biz

‘Resource curse’ leads to wastage

PETALING JAYA: Responsible management of resources has not always taken place around the world, says Centre for Public Policy Studies director Tricia Yeoh.

The “resource curse” or “paradox of plenty”, which refers to the phenomenon by which countries take for granted their natural resources, eventually led to wastage and corruption, she said.

“The paradox is that natural resources do not necessarily bring greater growth and development to a country, and in fact the reverse may be true,” she said in a comment paper titled Promoting Revenue Transparency in Malaysia.

Yeoh said: “For example, between 1960 and 1990, per capita incomes in resource-deficient countries grew two to three times faster than resource-reliant export-driven countries.

“Based on the International Monetary Fund’s definition, a country is considered resource-reliant if at least 26% of its national revenues come from the extractive industry (oil, gas, minerals, etc).

To this end, Malaysia is a resource-reliant country with 44% of its national budget derived from revenues from the oil and gas (O&G) industry.

“Have these massive revenues been collected, managed and distributed responsibly?” she asked.

To “clarify” monetary matters in the local oil industry, “some organised analysis” could be helpful to track money streams, she said.

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August 21, 2007

Jeffrey Sachs

Posted in Economics, Malaysia at 4:07 am by egalitaria

This has been quite a period of celebrity speakers coming to Kuala Lumpur. August Merdeka month, mah.. lots of big names turning up at our doorstep, leaving but a shadow behind when September, October and November creep up towards us.

Jeffrey Sachs, head of the Earth Institute at Columbia University and advisor for the Millennium Development Goals, came to speak at an Economic Planning Unit (EPU) event last week. He spoke very highly of Malaysia, stating that there is hardly any poverty left to take care of. There were some excellent points made, the fact that Malaysia needs to seriously consider building walkways and paths to cycle in the city, lest our public becomes fat and lazy driving around in cars alone. Also that we can be a good example to other countries.

However, I felt like he was glossing things over, definitely sugar-coating us for the successes we have had without much focus on how we can improve. I asked him a question, quoting from his very chapter in a book I am reading. He says the following.

A successful development strategy should include 3 components:

1. A time path of public investments suited to the national circumstances.

2. An economic policy framework to support private-sector economic activity.

3. A political framework to ensure the rule of law and macroeconomic stability.

I asked Jeffrey to analyse Malaysia based on these three criteria, especially with regards to No. 1 (seeing that Malaysia has spent a lot of its resource money on mega projects and big buildings) and to No. 3 (seeing that Malaysia still has issues with corruption and the increasing Gini coefficient/larger gap between the rich and the poor).

He swerved away my question completely and didn’t answer it! I was quite disappointed. But then again, he was in the hands of the Good Government that invited him over.  And yes, he is still an amazing developmental economist. Left of the centre, in the very least, and that puts him in my good books.