CPI Writings

The government’s New Economic Model structural reform agenda is aimed at raising average annual growth to 6% until year 2015. While implementation of the agenda would be positive for Malaysia’s economic fundamentals, even the talk of reform has already provoked considerable political opposition.

When first introduced, the NEM was supposed to be Malaysia’s new selling point to local and foreign investors and the country’s passport to a better future. It now appears to be aborted before birth. Or at best, it appears to be a newly arrived baby in the critically ill ward, and needing an incubator and special attention if it is to survive at all.

Chief amongst its enemies has been Perkasa and Dr Mahathir Mohamad. From them emerged harsh talk about Malays losing power in the country and of Umno allowing the situation of Malay dominance to be so badly eroded that the community is facing a bleak and hopeless future.

While Perkasa may claim a big membership of 200,000 – even if unsubstantiated or exaggerated – the results of a survey released in April by pollster Merdeka Center nonetheless did show that the right-wing group has been gaining popularity. The centre found that nearly 70 percent of Malay voters in the peninsula agreed with Perkasa’s demands for the government not to dismantle quotas and economic protection for the Malays.

Describing the list of demands sent to Najib Razak before the prime minister presented the 10th Malaysia Plan in Parliament, Perkasa economic bureau chief Dr Zubir Harun said, “We (Malays) would, of course, require assistance from the government.??? Asked by reporters about any consequences should the government not consider Perkasa’s memorandum, Zubir replied that there would be “political implications???.

What form the ‘implications’ might take would boil down to the numbers game. “Malaysia comprises 55 percent Malays and 12 percent of other Bumiputeras, which total 67 percent Bumiputeras. Therefore, the nation’s wealth must be 67 percent for Bumiputeras but we get 30 percent only,??? Perkasa president Ibrahim Ali decried at his movement’s inaugural congress in March – an event that was graced by ex-premier Mahathir.

It is the latter who has taken centre stage and had the spotlight shone on his continued manipulation of the Malay sense of insecurity. While Dr Mahathir’s scaremongering has been the grist for many a debate mill, his views on FDI is of equal public interest.

Now cautioning that Malaysia “should be more selective with FDI???, Dr Mahathir seems to have changed his tune from his past grand visions of ‘Look East’ development. He says presently: “Certainly we should not encourage foreign developers to develop high cost projects which are not within reach of local buyers. Rather Government should help local investors to develop these specialised areas by building needed infrastructure.???

He advocates “supporting local industries to grow big???, and cites Japanese and Korean world class businesses “with their own brand names??? as examples of success.

Dr Mahathir’s selective amnesia appears rather convenient when one recalls how his expensive state-backed Proton project failed to make a dent in branding overseas, not to mention at home where it would have surely failed a long time ago were it not for crippling taxes levied on imported cars and injection of massive amounts of taxpayers’ money to buoy Proton.

Dr Mahathir’s continued efforts at whipping up fear amongst Malays has now been taken up by some other Umno leaders, including former party secretary-general Sabbaruddin Chik who was reported by Malay daily Berita Harian recently as saying that all the hard-fought privileges accrued by the Malays over the years would soon be lost if they are to be “disunited???.

The anti-Chinese agitators are missing the forest for the trees since they fail to ask what would be the point of having 99.9 percent political power if the economic cake has crumbled. Getting a guaranteed share of a small equity or property market cake is what the warlords may insist upon but at what cost to young Malays when the jobs that come with local and foreign investment disappear.

And if investor sentiment is the gauge of how well Ibrahim Ali – who avows he is proud to be a “jaguh kampung??? – and Dr Mahathir and their friends have done, then they all should pat themselves on the back for doing a great job of scaring the business community, and not only just the Malay community.

Capital continues to flows out

According to a recent report, Malaysia’s capital account is now showing eight consecutive quarters of outflows. The capital account is an account that tracks the movement of funds for investments and loans into and out of a country.

Not only is money and funds moving out of Malaysia, so far this year, according to Emerging Portfolio Fund Research data, Bursa Malaysia has received just two percent of total equity inflows into the emerging markets of Asia – yes, two percent.

Unlike in other countries, where fund managers and strategists have been buoyed by recent sentiment and momentum, there are few catalysts to tempt investors into buying Malaysian stocks or to encourage new investment flows from abroad.

According to Fitch, one of the world’s leading rating agencies, in a statement issued on July 8:

“The deterioration in Malaysia’s public finances that motivated the local-currency rating downgrade in 2009 looks unlikely to be unwound soon. The authorities’ structural reform agenda has the potential to improve Malaysia’s growth prospects, but the government’s ability to overcome political obstacles to reform is not assured and it will take concrete progress to exert upward pressure on the ratings.???

Fitch projects Malaysia’s federal government debt to reach 54.4% of GDP by end-2010, up from 41.4% at end-2008 and well above the ‘A’ median of 40%.

The federal deficit hit 7.6% of GDP in 2009 on the agency’s measure and is projected to narrow only moderately to 6% in 2010.

Meanwhile, structural weaknesses in Malaysia’s public finances continue to weigh on the ratings. The country’s fiscal revenue base remains relatively weak, with federal revenues at 22.7% of GDP in 2009, against a 10-year average for the ‘A’ range of 34%.

Higher energy revenue reliance

Furthermore, fiscal dependence on the energy sector is high and rising, threatening higher revenue volatility in the medium-term. Energy-derived revenues were 41% of total fiscal revenues in 2009, up from 20% in 2003.

Should oil and gas revenues decline drastically, then the introduction of a goods and services tax (GST) to strengthen the revenue base may well be sooner rather than later.

An early warning of this has already been given by Petronas which revealed last week of a 23.2 percent plunge in net profit for the fiscal year ended March 31 due to weak demand and low oil and gas prices. Revenue fell 18 percent to RM216.4 billion due to a contraction in product prices and lower sales volume.

Should the collapse in global consumer spending and falling industrial output continue, the nation will be in deep trouble.

What are the alternatives?

The country’s best bet to attract investor interest and reduce the deficit appears to be the old standby of privatizations and special concessions to entice investors.

Some observers have argued that accelerating the privatization of GLCs can bring about a virtuous cycle of a reduced budget deficit; a re-rating of the country’s local-currency debt; and a chance of taking a bigger share of the short and long-term foreign capital heading Asia’s way.

Najib has recently been dropping discreet hints on the sales of holdings in Petronas Gas, Malaysia Airports and Sime Darby. However there is every indication that he will have to fight every inch of the way against Perkasa and its allies – the deeply entrenched warlords in Umno and the Malay bureaucracy.

When the prime minister warned local Johor leaders not to be emotional or parochial about Singaporeans investing in the state especially in the region of Iskandar Malaysia, he was not being proactive or referring to a hypothetical situation. He was finally reacting to statements by Dr Mahathir, Perkasa and the Bumiputera Economic Congress on the need to maintain the NEP status quo and to ensure Malay dominance.

Finally, it is the height of political stupidity to call for a Chinese Perkasa to meet the irrational and racist challenge of the Malay Perkasa. Whoever made that demand or issued a statement to that effect clearly needs to go back to study Political Ethics 101 which is that you do not fight darkness with equal darkness but with light and reason.

Note: This article first appeared in the Chinese paper, The Red Tomato.

• Add New
• Search

Comments (12)

• 17-09-2010 | thejester

  The Non Malays accused the Malays of a lot of things. They did a lot of things which really pissed off the Malays. Now the Malays are accusing the Non Malays of a lot of things and they are also doing a lot of things that really pissed off the Non Malays. This is really indeed very amusing. No wonder they always say Malaysia is so full of colours.

  Look here you guys, Malaysia is our country, our very own. Have we ever really sat down and discussed sincerely, intelligently, with a high level of tolerance and understanding what the issues are all about.

  We can`t go on like this, it will destroy the country. Look at Indonesia, look at Thailand, observe the Philippines, Singapore is just waiting to explode (watch the new generation of Singaporeans). In spite of these happenings, I still feel its safer to be in Malaysia. I`ve been to Singapore. No doubt its safe but its boring and dull.

  Honestly, I still think the politicians are the ones who are the main culprits, inciting everybody to do what they are doing today. You don`t believe me,ask around.

  Quote

• 11-08-2010 | No equal rights

  Sorry for taking reference from our world history to related my opinion.

  After reading through this article, I can see resemblances between Adolf Hitler speeches using his famous book that propelled Nazism ideology with the speeches that is given by Ibrahim Ali.
  In Adolf Hitler speeches, he emphasizes that the German Jews are in control of the country economy rather "true blood" Germans which resulted many "true blood" German to be poor. It is the same line of context that exist inside Ibrahim Ali speeches.

  Many context are similar and have the same meaning between all the speeches that is made by both Adolf Hitler (before he launch WWII) and Ibrahim Ali.

  Quote

• 17-07-2010 | eupara  - moron IBRAHIM

  Detain IBRAHIM as he causes so many public unrest to this multiracial country! Detain him with ISA!

  Quote

• 16-07-2010 | Malaysian First  - Reply to Peter

  Peter,

  Firstly, we must thank former PM Badawi for reversing one of the worst decision made by our 4th PM, i.e. capital control.

  Thanks to him, Malaysians are free to invest their hard earned Ringgit anywhere in the world. That is the reason why the capital outflow from Malaysia in 2008 alone was more than what went out in total between 2006-2007.

  Most of my schoolmates when we met during our reunion have only one aim which is to give our children the best education that we can afford, definately from a foreign university (twinning or otherwise) and then encourage them to work in any company anywhere in the world that appreciate their talent and more importantly treat them on merit.

  If they wish to stay overseas like what thousands of Malaysian are now doing, why should we stop them if things are not going to improve in Malaysia?

  I do not what my child to come up to me one day and start blaming me for not planning for him/her and as a result they do not have the options to go and work anywhere in the world.

  I can accept the NEP but I don't think the next generation of non-Malays will accept such discrimination.

  Quote

• 16-07-2010 | Anonymous

  Check the worldbank statistics for GNI/capita.

  Malaysia is stagnant at no.89

  Among the likes of Gabon, Kazakhstan ...

  Quote

• 16-07-2010 | Robert

  Ibrahim is a Moron!
  Mahathir on the other hand is just devious. He must have his reasons for his outspokeness. You'd suspect he is trying to remind Najib that he still has considerable influence and would use it if Najib stay too far from line.

  Beside he can use it to support his not too bright uncharismatic son.

  Quote

• 16-07-2010 | taintedweed  - murderers, bigots & hypocrisy

  I think the many discussions of the sad state of affairs in Malaysia does not reveal the naked truth of the actual situation of impending doom controlled by the junta-like government. The blatant corruption, utter arrogance displayed by the ruling elites & their ilks' are clear for all to see where the direction they are leading this once asian powerhouse is going into. There is a saying that you cannot teach an old dog new tricks. So another says, you cannot pour new wine into old wineskins. There is only one solution for Malaysia & its peoples to salvage itself. That is to change the powers that be. For too long now, the general population has either chose to ignore or were afraid to ensure equitable power between the opposition & the ruling elites. The last general election saw the birth of political awareness & maturity in understanding the basic process of a successful democracy. While this is a cause of achievement, it may a bit too late. Now all thats left is to witness the real Malaysian fighting spirit of Malaysia Boleh to rise to reclaim back truth, justice & love to all that which every single citizen hold dearly to their souls!!

  Quote

• 16-07-2010 | Peter  - Mr

  Oh dear.. we read , read and read so many disappointing news everyday. We feel helpless, expecially we Chinese who just want a place to earn a decent living or a place where we can do business to contribute to the country.

  What do we get in return are baseless Ibrahim Alis rumblings who we feel he does not understand the meanings of the words he used and will use in future.

  What can we Chinese do? We have given up hope. We feel hopeless.

  Is there any organisation here in Malaysia that can help Chinese to say do business locally or better still where to invest our money overseas? It is for the future of our children. We just cant depend on these locals to run the country... who are only interested in how to tax you rather than help.

  Quote

• 16-07-2010 | Malaysian First  - Empty Condos

  Dr Lim is spot on the "double whammy" of declining foreign FDIs and funds flowing out of Malaysia.

  Take the latest example of condos in the well sought after Desa Park City project in Kepong where the latest condo launches has touched RM1 million per unit. Most of these condos and the thousand of completed and about to be completed condos in the KLCC and Mon't Kiara areas requires a monthly rental of at least RM10,000 and above in order to sustain their value of more than RM1 Million per unit.

  Not many local can afford such rental or are willing to pay RM10K per month to stay in a condo. Might as well get a good semi-D or bungalow in a guarded development. As such, such condos required foreigners, i.e. mostly expatraites and the number of these expatraites are dropping due to decline in foreign investments in Malaysia.

  The decline in both local and foreign investment will not only affect the property market but the overall income levels of Malaysians as well. There will be less well paying jobs to go around for our thousands of fresh graduate every year. The living standards of Malaysians will decline in the very near future. Compound these with the increasing brain drain, the future doesn't look very bright for Malaysia unless there are strong political will from PM Najib's administration to implement the recommendations of the NEM with real urgency.

  Quote

• 16-07-2010 | A Cool  - ordinary person

  Thank you, Dr. Lim, for continuing to highlighting the damage that those Perkasa and self-serving enemies to the country are doing. Knowledge is power, and such facts and data will help to prusuade level headed people to do the right thing, hopefully. Doing the honourable thing of making conscientious people aware of the consequences is what you are contributing to reverse the garbage spewed by those wicked, self-serving, and self-destructing people!

  Quote

• 16-07-2010 | najib manaukau  - najib manaukau

  What is Umno going to do when one of his former P.M., the shenanigan Mahathir is openly supporting Perkasa ?
  Sack the shenanigan for his open support for another party other than Umno.
  Umno can say they cannot control what other party can do but surely they can control what their own members can say and do.
  Once and for all times have the shenanigan sacked from the party and have nothing to do with this shenanigan or his racist views.
  May be Umno is supporting his racist views in another way. Is this then the oneMalaysia the P.M. is talking about ?

  Quote

• 16-07-2010 | Will Darreh  - Stupidity Rules

  Firstly I disagreed with your suggestion and so many other gentle non-malays that we talk sense into Perkasa to be a gentlemen,Ibrahim has proven over and over again he don't care a damn about politeness,he don't respect your existence,he cannot be arrested for strange reasons,he don't care if the races are at war,he don't care if the nation economy is suffering .....so what now?Any Plan B from all you polite educated gentlemen?There are only 2 ways to get him- pay him big big bucks to sit down or plead with the authorities to arrest him which is unlikely to happen.God bless Malaysia!

  Quote

Write comment

Your Contact Details:

Name:

Email:

Comment:

Title:

UBBCode:         -color-aquablackbluefuchsiagraygreenlimemaroonnavyolivepurpleredsilvertealwhiteyellow -size-tinysmallmediumlargehuge

Message:

Security

Please input the anti-spam code that you can read in the image.

Joomla components by Compojoom