Reviewing the economy

First published in theSun here, on 10 July 2014.

FEW writers and analysts are able to both identify precisely the challenges facing the Malaysian economy as well as communicate these in a manner easy to digest. Shankaran Nambiar’s new book, The Malaysian Economy: Rethinking Policies & Purposes does so with bold and relevant commentary. Dating from 2003 to the present, this compilation of writings focuses on six broad themes including the need to strengthen institutions, the importance of competitiveness, regional trade, fiscal reform and finally, the reality that is the influence of elections and politics over economic policy.

What is prevalent throughout the book is the clear economic position he takes, arguing for a more open and free economy, one in which companies and traders would be able to compete without the shackles of a large and interventionist government. He takes cognisance that our neighbours are moving at a rapid pace, and mentions specifically China in its ability to out-compete many in the region, but that Malaysia would need to “develop our human capital and readjust our institutional framework to align it with global requirements.”

Of course, on the economic ideological continuum, criticisms often abound of the far-right leaning liberal position. More specifically, public sentiment in Malaysia has weighed heavily against the free market and privatisation. This is not surprising, since the Malaysian version of “free market” and “privatisation” is anything but. It has been but a muddied example of what a free market could actually do to improve the quality of goods and services.

Nambiar does not shy away from this oftentimes-controversial debate. He states explicitly, “privatisation, in theory, implies giving markets a bigger role … privatised companies have to be efficient … and cannot rely on the government to bail them out.”

Theoretically, yes. But in the execution of it – and Malaysia has done a poor job at this – privatisation has not been done in a fair, competitive way. In fact, what took place in our context is that when public entities were privatised, instead of improving efficiency, things got worse. Again, Nambiar hits it squarely on the head: “What was once a government monopoly now becomes a private monopoly. One form of inefficiency is substituted with another.”

Reading the book, one would initially conclude that he is a hard-hitting liberal – libertarian in American circles – and based on many principles, indeed this is so: his firm belief in competition, economic freedom, strong institutions and a legal framework, property rights and so on.

But what is refreshing to note is that he does not blindly accept what would typically be a liberal’s position, but views all subjects with a critical mind. Instead, he agrees with the need for a minimum wage because based on empirical research, this would transform the economy into one that is technologically advanced and contribute towards high value-added growth. A hardcore liberal economist would usually argue against the minimum wage as it is a false and forced imposition by government, which does put many small and medium companies out of business.

Second, he takes a similarly nuanced position on the Trans-Pacific Partnership Agreement (TPPA) and the then-hotly debated (and still unconcluded) US-Malaysia Free Trade Agreement. For instance, although he considers it positive that the latter would “push us towards greater liberalisation”, he also thinks that US firms would be “better equipped to enter Malaysian markets than the other way round.” Likewise, the TPPA would be an opportunity to be part of a global community, but also understands the need to continue certain domestic policies that are “beneficial to the nation”.

Finally, as many things seem to be in Malaysia, economic policy is subject to political influence, and this is evident in the many examples Nambiar provides, such as how the federal government transfers revenue to individual state governments, Najib’s electoral position determining whether or not the goods and services tax is introduced, and other “inappropriate policies” that are introduced “because of the polls”, which is “as if we have an economy balancing on the tip of a pin”, which is dangerously accurate.

Many proposals have been expressed elsewhere, on the need for fiscal reform and discipline, addressing structural issues (income distribution, corruption, crime, education), and so on. But the book’s beauty lies in its concise and deft articulation of problems and solutions. The commentaries are candid, and arguments tight. He also comes across as rational and fact-based, criticising or praising whenever necessary. This neutral, non-partisan position of analysing economic (or any other) conditions in the country is rare and must be valued.

As Malaysia enters into its final year of the 10th Malaysia Plan in 2015, and draws up its next set of policies for what would be the last five-year plan before the year 2020 – the 11th Malaysia Plan (2016 – 2020) – it is certainly worth examining Nambiar’s publication that spans the last decade or so. Where exactly are we going? Will the problems raised in his book 10 years ago start to manifest themselves in the next 10? What happens to an economy that pays little attention to such recommendations, and fails to strengthen its institutions?

Policymakers, politicians, academics and students ought to pick up this slim and thoroughly readable volume to gain a historical perspective of good and bad policy. History may not repeat itself, but its leaders may very well do – so it is up to the electorate like us to know which pressure points to press, well before the alarm bells start ringing.

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A transparency tool we can use

First appeared in theSun here, on 20 June 2014

DURING the 2015 Budget Consultation, the World Bank representative said explicitly that Malaysia would have to cut its annual budget down by 2.5% each year starting immediately, if it is serious about fiscal prudence. This is highly unlikely, given that the budget has always grown and never shrunk, not to mention the need for very large supplementary budgets too each year.

In a sense, Malaysia has never quite needed to exercise great fiscal prudence, since we have been able to rely upon revenues reaped from the expansive oil fields off Peninsular and East Malaysia. As stated in my previous column, Malaysia is highly dependent on oil and gas revenues, contributing more than a third of our government coffers.

And as predicted, the debate surrounding the issue of oil royalties in oil-producing states is growing, having begun in Sarawak, and creeping slowly to Kelantan, Terengganu and Sabah. The federal government has largely maintained its silence on the issue, but the reality is that it may well have to engage with civil society and other opinion shapers in the near future. After all, the discussions are already taking place, especially so in cyberspace and ignoring it would only contribute to further speculation.

One of the main reasons there is growing dissatisfaction is the perception that the lucrative returns from oil and gas have not been put to their best use. Of course, it is difficult for a neutral party to conduct a fair assessment of this without sufficient information. Although some figures can be found from Petronas’ annual report and other government documents, they do not contain other information that would be crucial in determining the benefits accrued by each of the states.

Some examples are information on licences that are given out to companies (emphasis is usually placed on upstream companies, although increasingly information on downstream companies such as service providers have also been published), production data that is disaggregated by company and state, details on state-owned enterprises, as well as social and infrastructure investments.

In fact, in an international tool called the Extractive Industries Transparency Initiative (EITI), many of these are requirements that would help to clarify the benefits received by any one country resulting from its natural resources. In Malaysia’s case, this is most useful when investigating the oil and gas industry.

On that note, lDEAS had the pleasure of hosting Jonas Moberg, head of the EITI International Secretariat based in Norway, for a two-day visit in Kuala Lumpur last week. This is part of a research and awareness-building project to introduce the EITI to Malaysian stakeholders.

Several roundtable discussions were conducted with government officials, members of the media, several parliamentarians and civil society. Whilst it is positive that representatives from government agencies were present, it is too soon to tell whether or not they were receptive to using the EITI to benchmark Malaysia against.

In its simplest form, the EITI is an international standard that governments voluntarily subscribe to, in committing to a platform where an agreed-upon set of information is published transparently each year. It started out by adhering to the simple principle of “publishing what you pay”, wherein companies would publish what they pay to governments and governments would publish what they receive – and see if there are any discrepancies between the two. It has now grown to become much more than that, requiring licence information, transfers between federal and state governments, and even encourages contract transparency.

The EITI is also a very unique arrangement in that it is government-initiated, but multi-stakeholder in composition. It is required for the government to form a multi-stakeholder group with representatives from civil society, oil and gas companies, and government itself. The ownership varies from country to country, for instance the EITI secretariat in Afghanistan is parked under its Finance Ministry, whilst in Indonesia it falls under the Coordinating Ministry for Economic Affairs.

Many questions were asked throughout the various engagement sessions, chief of which was how the EITI could help to improve economic conditions, since it is just a transparency tool. And perhaps this is an argument that needs to be made about transparency itself – what is the benefit of transparency?

Transparency itself does nothing to advance the cause of reform without consequent use of such transparency. But equipped with the right information, facts and figures, citizens have the opportunity to carry out their own analysis and keeping the relevant parties on their toes. The EITI is similar in this respect, where it is useful only to the extent that an active civil society community will make use of the information to reveal discrepancies, if any, in payments made to and received by government.

More importantly perhaps is that government has an opportunity to build trust with civil society, taking the initiative in making more information available than less. This would be a timely move, seeing as there is some public distrust surrounding the financial agreements between the federal government, Petronas and the various oil-producing state governments. Educating the public with information will surely mitigate some of these misgivings.

44 countries around the world are either implementing or candidate EITI countries. In the region, this includes countries like Indonesia, Timor Leste, the Philippines and most recently, Myanmar. What is most interesting is that Petronas has agreed to be part of the Myanmar EITI multi-stakeholder group, which means that in time to come, it will have to publish how much funds it is paying to the Myanmar government. In that one step, Malaysians will also have such information available when investigating our involvement there. This applies for other EITI-implementing countries in which Petronas operates.

We are still a long way from seeing the EITI coming close to being considered for adoption in Malaysia. But it will certainly be a boost to our international reputation, since we are already well known as a country that has used our oil revenues well, relative to other “resource-curse” nations. We could do more on both counts: in being proactive to promote transparency as well as set high standards that show the international community that Petronas practices the same level of integrity, transparency and accountability as other international oil companies.

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Push for a better quality of life

(First published in theSun on 5 June 2014, and can be accessed here).

AS I prepared for my presentation to the prime minister last week on what the government can do to enhance Malaysians’ quality of life during the Ministry of Finance’s annual budget consultation, I asked myself what exactly “quality of life” means. After all, this could mean different things to different people, especially comparing against regional, gender, age, income and ethnic variations.

After reviewing international data and weighing it against personal considerations, my proposals eventually centred around three broad themes of improving public services, having better jobs and a work-life balance, and finally enhancing civic participation which a transparent and accountable government would complement.

In the Economist Intelligence Unit’s “Where-to-be-born Index 2013”, previously known as the “Quality of Life Index”, Malaysia ranks 36 out of 80 countries with a score of 6.62 out of 10, 1 being the best and 10 being the worst. Switzerland is in the top spot with Singapore in 6th place, South Korea in 19th and Thailand 50th positions.

Measures used to define quality of life in this index are material wellbeing, life expectancy, climate, many of which are fairly intuitive and to be expected, especially job security and physical security. Interestingly, quality of family and community life were also included, and perhaps most relevant to civil society activists, governance and gender equality.

The OECD has an excellent “Better Life Index”, which asks what matters most to people around the world. Although only a small set of 122 responses in Malaysia were obtained, it shows that health, work-life balance, life satisfaction, education and safety rank very highly.

Respondents in Australia, Norway and Sweden, the top three in the index globally, chose housing, income, jobs, community and even civic engagement as the most important in determining the quality of their lives. The more developed the country, the more likely it is that people seem to value community and civic engagement.

Improving public services

The first proposal was to improve public transport. For instance, the share of public transport in 1985 was 35%, 16% in 2005 and fell drastically to 12% in 2011. Although efforts have been made recently to consolidate the previously fractured administrative units covering public transport through SPAD and Greater KL initiatives, there are still outstanding areas that need attention.

First, state and local governments are not being sufficiently empowered. Public transport cannot be only centrally controlled, as problems start at the local levels. Councils should be used to identify gridlock areas, and errant bus operators. Public transport desks in local councils can be set up to liaise with SPAD, which the Ipoh City Council recently announced. Selangor has set up its Public Transport Council, and it is positive that SPAD has been co-operative thus far.

Extended walkways and bicycle lanes should be prioritised, but these should be built closer to train stations. Bikes should be allowed on all railway options.

Companies can be given incentives if they allow shower facilities. Cycling to work is a healthy option that would reduce traffic congestion, but conditions must be right. Finally, public transport efforts should not focus within the Klang Valley alone, but also cover cities like Malacca, Ipoh and Penang.

The second proposal was how the non-state sector could contribute to helping in education services. IDEAS conducted a nationwide survey on parents from the bottom 40%, on the challenges they face with children’s education. We found that only 15% of poor parents benefit from the Poor Students’ Trust Fund, among other findings.

There are 10,000 public schools in Malaysia, and the government should be open in working with non-state players to help poor families. But we, outside of government, need clear, defined guidelines on how non-state players can contribute to education services.

School boards should be actively restored and encouraged, so that alumni and even surrounding community members can get involved in helping the school. NGOs and social enterprises can be set up through venture funds.

The Ministry of Education should also release school rankings publicly. This includes both academic and extra-curricular performance, as this would encourage competition among school leaders to improve.

Households in the Klang Valley recently suffered the consequences of a water shortage. This could have been avoided by adopting water demand management early on, which was my third proposal. This requires a paradigm shift from planning for water supply to water demand.

This would avoid the need to even develop new resources, and instead encourages water recycling and conservation. Incentives can easily be given to developers that install water-efficient equipment. SPAN as the water regulator should strictly enforce water operators’ activities especially on Non-Revenue Water.

I was mugged twice last year (once in Petaling Jaya and once in Malacca), and still get paranoid when I hear motorcycles on the road. This affects my quality of life and mental health. My fourth proposal was on combating crime, where more personnel should be moved from the Special Branch to the CID as a matter of priority, with a strong focus on street crime.

An important aspect the administration has not considered is to provide transparent data on crime hot spots.

Finally, the public ought to be involved. We all have smartphones and tablets. Just like the apps we use to update Facebook and Twitter on-the-go, why not share crime hotspots, crime incidents on social media?

Beat the criminals by getting the public flooding an area in instant time that a certain crime has occurred. There simply isn’t enough of co-operation and sharing of information between the police and all other stakeholders.

Better jobs and work-life balance

A better work-life balance is difficult enough as it is for city-dwellers, and much more so for working women who are also mothers.

Talent Corporation has already developed a “flexibility in the workplace” programme that provides tax incentives to companies that provide flexi-hours, and childcare centres to accommodate working mothers.

Women should also be encouraged to take part in public office, since being city councillor may offer the kind of flexibility needed for the work-life balance they seek.


Transparent government and civic participation

By conventional standards, a transparent government does not directly impact on the rakyat’s lives. But transparency and openness equals a government actively engaged with its people. It enhances life satisfaction through civic engagement as people get involved and increase their respect and trust for the government.

The first is on the Open Government Partnership, an international platform for governments to make public their commitments to being more open, accountable and responsive.

The second is the Extractive Industry Transparency Initiative (EITI), an international standard to improve the governance of natural resource revenues via collaboration between government, civil society and oil companies in the oil and gas sector.

Oil revenue contributes 40% to our national coffers. We do have a Kumpulan Wang Amanah Negara (KWAN), or Heritage Fund, which is managed by Bank Negara, but such data should be published regularly since its objective is to ensure oil money is sustainable for future generations.

This is not the case currently. Signing up to these two initiatives would reflect strongly upon the government’s commitment to governance.

Finally, the two most important measures in improving civic participation are the Freedom of Information Act and local government elections. Allowing citizens to access data means they are more empowered and involved in decisions, thereby making them feel included by building a sense of ownership over the country and outcomes.

Local councils are the very first point of contact that we have. They provide the most basic of public services, and therefore need better accountability.

These were the 10 recommendations I presented on improving quality of life in Malaysia. We shall see if any of these are considered for inclusion when the 2015 budget is tabled in Parliament on Oct 10.

Posted in Civil Society, Crime, Economics, Public Administration, Water | Leave a comment

The rights of oil producing states

(First published in theSun on 22 May 2014, and can be accessed here).

THE Sarawak state assembly recently passed a resolution calling for an increase from 5% to 20% of its oil royalty entitlement, along with seeking more developmental grants from the federal government. Kelantan has also followed suit to call for an increase in its oil royalties.

Increasing oil royalties to the states may seem fairly straightforward, but it is in reality a far more complex issue, and not as simple as one may think.

The logic is that oil producing states should receive a higher proportion of oil revenues vis-a-vis that given to the central government. While royalty paid to the state and federal governments is equal (5% each), the federal government receives other large revenues in the form of taxes and duties, as well as dividends from its wholly-owned Petronas.

In 2012, the federal government received RM207 billion revenues from oil and gas alone, having grown significantly as a proportion of total government revenue over the years.

This is how a typical production-sharing contract works in Malaysia: assuming that the production of oil comes up to 100 barrels, 10 barrels would be taken as royalty payments, five of which are given to the oil-producing state and another five to the federal government.

Up to 60 barrels are for “cost oil” (costs incurred by the oil operator that is recovered) and the remaining 30 barrels are “profit oil”, which are again split between the operator and Petronas according to the terms of the contract.

First, should states be allowed more fiscal responsibility?

There are two sides to this: on one hand, it is true that those whose resources are being extracted ought to have primary ownership and self-determination of the accruing wealth. After all, if there are any side effects – both positive and negative – this would affect the surrounding community first and foremost.

At a course I recently attended on “Improving the Governance of the Extractive Industry” at the Universitas Gadjah Mada, Yogyakarta, I learnt that Indonesia follows a strict revenue sharing model, with the central government receiving 84.5% of oil revenue and the local government receiving 15.5%.

The latter is further split into 6.1% for the relevant province, 3.2% to other regencies in the same province, and 6.2% in the producing regency. The producing regency of Bojonegoro, for example, is actively able to negotiate with the local oil company in demanding for information transparency.

But not all regencies have similar leverage. The regency office of Tuban had minimal knowledge of how oil revenues had been able to benefit them, if at all. In such cases, it is impossible to tell if Tuban’s oil wealth has contributed to its development.

This seems to be the case in Malaysia, where poverty rates in the four oil-producing states are the highest, at 7.8%, 2.4%, 2.7% and 1.7% for Sabah, Sarawak, Kelantan and Terengganu respectively. (The average national poverty rate is 1.7%). The most resource-rich states also happen to be the worst economically.

On the other hand, shouldn’t the resources of all states be used for the betterment of all citizens? This is in fact the current philosophy, where revenues from a multitude of sources are pooled together in the federal government’s consolidated fund and Putrajaya decides on how they are best used and distributed throughout the country.

The second question is whether or not increasing the oil royalty is even possible.

The Petroleum Development Act 1974, which governs all aspects of the oil and gas industry in Malaysia, does not specify quantitative amounts owed to oil-producing states, mentioning only that Petronas should make cash payments to the federal and state governments “as may be agreed between the parties concerned”.

However, all 13 states simultaneously signed deeds and vesting grants agreeing to vest the rights to petroleum onshore or offshore to Petronas in return for cash payments of the 5% of the value of petroleum produced.

Passing a motion in the state assembly to increase oil royalty from 5% to 20% does not therefore automatically apply, since these agreements signed back in 1974 would need to be revoked, redrafted and signed with new terms and conditions. Note that these are tri-party agreements, so the terms would have to be renegotiated between state governments, the federal government and Petronas.

There is an additional complication of how far exactly offshore can be considered as state territory, since the Emergency Ordinance 1969 that defines how far “territorial waters” go was revoked in 2011. This is a fairly complex issue that requires another column.

In principle, sharing oil revenues fairly with oil-producing regions is a form of compensation and equalises benefits between poorer and richer regions. This also allows better decentralisation of decision-making and accountability to more efficiently monitor spending and benefits derived from oil production.

In Sarawak’s case, while it is worth exploring the case for greater fiscal decentralisation, the state government should first be willing to be fully transparent in its budget – how are they spending existing revenues, for instance?

As more oil-producing states increasingly demand for greater rights – which is all well and good in the pursuit of local democracy – they must also specify what the additional money would be used for, what are the appropriate fiscal rules, what sort of institutional oversight should be introduced at the state level, and whether cash transfers are in fact preferable over, say, transfers in kind, and so on. There are more issues at play here than merely demanding oil royalty of 20%.

Posted in Economics, Federalism, Public Administration | Leave a comment

Teaching for Malaysia

(first published in theSun on 1st May 2014)

ONE Friday afternoon, I took a break from my office job and went to a school just outside Kuala Lumpur to teach a bunch of pubescent kids. I had hoped that I could teach them something inspiring. But what they taught me was just as illuminating.

So there I was in a classroom for the first time in years, in the unfamiliar position of standing in front of 40 Form Two kids, in a school somewhere in Seri Kembangan, where I had been invited to participate in “Teach For Malaysia (TFM) Week”.

For those unfamiliar with TFM, this is a brilliant programme replicated all over the world where young professionals, usually in their idealistic twenties, dedicate themselves to teach in national secondary schools full-time for two years.

The students in the school were predominantly Chinese, being situated in one of the former new villages, set up in the past by the British to contain Chinese families from being influenced by the then Communist insurgency. Despite increased urbanisation and social mobility, the area remains an ethnic enclave – the reasons why it has remained so is for another column for me to explore.

TFM’s idea is to target lower-grade schools struggling to provide a decent education, usually in working class areas. So the kids in front of me were not your iPad-wielding, piano-lessons-on-weekends middle-to-upper class children. I was told that these were kids from the lower class socio-economic bracket with all the usual idiosyncrasies – many were from single-parent households; some worked with their parents, others had jobs that went on till late at night just to earn that extra pocket money. They came to school exhausted and sleep-deprived, nodding off in the middle of class.

I didn’t want them to nod off in my class, but introducing 13-to-14-year-olds to the world of public policymaking on a sweltering Friday afternoon was always going to be a challenge. So I had them standing up and moving around.

The first activity was to show in physical terms just what public policymaking is about: a cacophony of voices giving directions to move the country from Point A to Point B. So I divided the class into two groups of boys and girls, where each group chose a representative who was blindfolded, and then their group-mates had to verbally direct them from one end of the classroom to a specific spot at the other end (of course, the girls won).

Then we played some word association games. Malaysia? “Najib!” and “MH370!” were at the top of these young minds. “What about the people of Malaysia?” I asked, and they trotted out the different ethnic groups including Iban and Kadazan. Knowing the multi-ethnic face of Malaysia is one thing, but in a class that was practically mono-ethnic, I had to demonstrate “diversity” through a different method: a diversity of opinion.

In my next game, the classroom was divided into four corners: “Agree”, “Disagree”, “Strongly Agree” and “Strongly Disagree”. I would read out statements and they would move to the corner which best represented their opinion. Then I would ask them why they took that stand. So often do we hear pronouncements that “kids these days …” don’t think for themselves. But these single-parent, night-job working-class teenagers showed to me a striking level of independent thinking and robust reasoning.

I kicked it off with a light topic. “Are computer games good for you?” Most of the boys went straight for the “Strongly Agree” corner. The girls varied widely along the other corners. One “Agree” girl said, “They can be good because we can learn different languages, like English, Cantonese and others.”

After a few softballs came the heavy-hitters. “Malaysia is a united country,” I said and watched in anticipation. Most of them went to “Strongly Disagree”, with the second largest group in “Agree”. One particularly bright girl who strongly disagreed said this was because, “whenever things go wrong in the country, we don’t take responsibility for it, but blame others instead”.

There was also a group of three girls who were mature enough to see both sides of an issue, and always remained somewhat in between. To the statement above, they said “Malaysia is not always united because people are not treated fairly. Malays look down on Chinese, Chinese look down on Malays.”

I was surprised that this was a “Band Five” school, where national schools are classified into six bands in Malaysia, six being the lowest possible. Perhaps these students were performing poorly in national examinations not because they are unable to comprehend the subject content, but because of the language barrier. Many students could hardly string together a grammatically correct sentence in either English or Malay, and several answers had to be translated from Mandarin.

This is not unnatural, given their social exposure is severely limited to one ethnicity and language. But this does not mean they are unable to think critically, as the above game demonstrated.

I wondered (and worried) about their future. A good education is certainly the great game-leveller. But without the right supporting environment within which these kids could otherwise flourish – language and communication skills, equal opportunities and involved parents – would they achieve their dreams?

I shared my hopes for Malaysia with the kids, and got some of them to share their own dreams with me. They wanted to become pilots, teachers, doctors. One girl, interestingly, dreamt of becoming a newscaster. Why? “So that I can read out news that is fair.”

 

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Crony capitalism or plain cronyism?

(first published in theSun on 26th March 2014 and can be accessed here.)

THE hallmark of a free economy is that it allows for perfect competition in a level-playing market where all players have access to both information and the buyers making purchasing or contracting decisions equally.

But we know that there are fundamental flaws in this assumption, especially so in countries which have strong state influence. This makes industry players heavily dependent upon the patronage of government bureaucracy since officials are more likely to grant favours when those favours are what make the crucial difference between winning and losing a tender.

This is certainly the case in Malaysia, which has a highly centralised government. So it did not come as a surprise when Malaysia ranked third globally in the Economist’s crony-capitalism index 2014, just after Hong Kong and Russia.

The index took the total wealth of billionaires earned in that country through sectors most vulnerable to monopoly, or that involved licensing or heavy state involvement, and calculated this relative to the country’s gross domestic product (GDP). Malaysia’s billionaires earned 18% of the country’s GDP, according to the index.

The rent-seeking sectors included casinos, energy (oil, gas, chemicals), coal, palm oil, timber, defence, infrastructure, real estate and construction, steel, utilities and telecoms services, and deposit-taking banking and investment banking – since all of these were more prone to graft and relied on awards by the state to businesses.

Although the index does admit there are flaws in its methodology for a number of reasons, this is a telling sign that even the freest economies suffer heavily from cronyism. Hong Kong tops the list, with Singapore in a close fifth place. And both of these are economies that do the best in the annual Economic Freedom of the World Index, which my think-tank heavily promotes. So what does this make of the so-called free economies of the world, if the countries’ wealth is respectively dominated by tycoons close to the state?

One might argue that the term “crony-capitalism” is oxymoronic. This point was contested heatedly in a recent Regional Liberal Colloquium that IDEAS hosted, since “capitalism” in its original meaning of the term represents a market in which its players operate on the rule of law, where all are equal before the law.

This is the complete opposite of “cronyism”, in which one set of players is granted biased favours in preference over another. It might therefore be more accurate to call it the “crony-pseudo-capitalism” index, or just plain “cronyism” index instead.

Semantics aside, one could also ask why this means anything at all. After all, countries that have high scores in the index still perform well in their economic growth (again, citing Hong Kong and Singapore). And in a free economy, isn’t it the case that there will bound to be winners and losers – entrepreneurs that work hard to ensure their businesses succeed and do so strategically would naturally more likely amass their wealth as opposed to those who made poor business decisions?

One could accept such a situation in which this set of hardworking entrepreneurs truly did earn their wealth through the sweat of their brow. Nobody faults an honest player who works his way out of poverty by engaging in private enterprise if he did so purely based on skill, ability and merit. Under such circumstances, each individual would be given an equal chance to seize such opportunities to climb the ladder.

But it is not acceptable when such businesspeople gain wealth not through hard work but through the well-oiled connections they have fostered with the state and its wily politicians.

The solutions are simple enough to preach but are seemingly impossible to achieve, even or perhaps especially here. First, monopolies should not be allowed to flourish the way they do. The Competition Act was enacted with the purpose of legislating for greater competition, but still does not deal with many industries in which monopolies still exist, for instance in telecoms, media, rice, satellite television and airline services. In this respect, Pakatan Rakyat’s election manifesto had the foresight of proposing an anti-trust law and commission to levy fines and break up companies against monopolies and oligopolies.

Second, it is important to improve regulation and enforcement – and this does not mean making more rules just for the sake of it – but to restrict the overbearing role that government bureaucracy plays, for example in the awarding of licences. A rules-based regime would ensure that licences are given out on the basis of expertise and competence. Once a company satisfies these rules, there should be no reason that personal, discretionary (and more importantly, political) influence is used to choose one over another.

It is significant to note that the sectors chosen by the Economist are also those that Malaysia depends heavily on for our economic growth, namely energy (oil and gas), real estate and increasingly so banking and investment banking.

It would be interesting to determine just which billionaires would be considered as cronies in our context.

Finally, it is also important to analyse countries that did very well in the index like France and Germany. Two factors can be considered here: one, that billionaires in these countries did not depend on the state for growing their wealth but made their money “largely from retail and luxury brands” without the patronage factor.

Two, just because industries are close to the state, this does not necessarily mean they must be, by nature, cronies.

What is needed in this case is a transparent, robust regulatory environment as mentioned above. Even what critics consider to be natural monopolies – in which it is assumed that it is most efficient for production to be concentrated in a single firm – transparency and good regulation would help reduce the likelihood of cronyism.

In fact, there is also debate that these industries (typically, water services and electricity) do not necessarily have to be monopolies if they can be broken down into smaller segments, and yet not compromising on cost or technical efficiency. The important element is that the regulator must be strictly independent from either political or state-driven intervention.

So are the ideals of a truly free market conceivable in countries where corruption is rife and the influence of state is still overwhelmingly strong? There aren’t direct answers, but this much is true: whichever side of the ideological spectrum one is on, cronyism must be considered the common enemy, as it concentrates wealth in the favoured and deprives hundreds of other competing firms from growing, bumiputra or not.

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Politics in Policy

(First published in theSun on 13 March 2014, here.)

AT the time of writing, it would be more than 60 hours since Malaysian air traffic control lost contact with the ill-fated Malaysia Airlines flight MH370. For the past few days, so many of us have desperately sought out bits of information to make sense of this mysterious disappearance, with very little explanation forthcoming as to what actually happened. We have to face the reality that even if the wreckage is eventually found, it will take months or even years to obtain and analyse the contents of the black box.

It never rains but pours, or so the saying goes.

This crisis comes at a time when Malaysia is facing multiple challenges. Especially for those living in the Klang Valley, this might feel like the straw that is about to break the camel’s back. What with the dry spell, haze, water rationing, dengue outbreak, monkey malaria cases, tussle over “Allah” and the court judgment that is likely to end opposition leader Anwar Ibrahim’s political career, reading the news can cause a migraine.

The tendencies in such a situation for us who feel thoroughly exasperated are multiple: one is to throw up our hands and consider migrating to another country. Second, to declare the oft-repeated phrase of “There’s too much politicking in this country. We should leave politics out of it.” The latter phrase was also used by one of the panellists at the National Economic Summit last week (which the prime minister officiated).

Leaving the problem behind is an easy way out and does not confront or resolve matters. And I suspect that by blaming “politicking”, many point to the playing-up of issues brought up by one side or the other to score public brownie points.

The truth is that it is impossible to “leave politics out” in Malaysia at the present, a country whose decision-making processes lie predominantly within the political structure itself. Many things we face on a daily basis have resulted from intervention from a leader or policymaker somewhere along the line. Politics has everything to do with this, and it is also why we keep turning to it when things are in need of reform, whether or not this ought to be the case.

When Malaysians suffer annually from haze as a result of fires in Indonesia, these are fires that burn on timber and oil palm plantations owned partly by Malaysian companies (some companies have been known to use fires for land clearing). While Indonesia is responsible for enforcing the law, Malaysian government-linked oil palm companies could also step up their monitoring of activities in Sumatra.

After all, this has a direct impact on our respiratory health back home.

When Selangor residents suffer from water rationing, this is a result of poorly managed water distribution, and indirectly of the still yet unresolved complex relationship between the private concessionaire (which was a political choice made by the then state government and federal government), the present state government and federal government.

Some have accused the present Selangor government of being at fault for the current water shortage, because the mentri besar had held off the Langat 2 construction amid water restructuring negotiations. But this claim is unsubstantiated; even under original plans, Langat 2 would not have been completed till 2016.

These two examples illustrate just how much politics has a role to play in things that affect us daily.

In fact, the political process is part and parcel of opening up democratic space. The conduct of elections is giving voice to each citizen equally to choose for oneself the country’s leadership. It is when the boundaries of this space are abused – which is often the case – and extended way past its rightful limits that it cannot be condoned.

It might be different in countries that have much stronger institutions, namely a free media, a robust and independent judiciary, a culture of civil society movements, and an independent civil service (including independent commissions and agencies that report to government). In those instances, each institution would be free to exercise its discretionary abilities as accorded to it, without any political interference. Citizens would also be able to claim recourse through alternative means, not just by lobbying their political representative as is the case in Malaysia.

This does not mean, of course, that those not in political positions should sit around and do nothing. On the contrary, the objective of removing political interference ought to be amplified by the actions of citizens through various means: advocating for a free media, supporting think-tanks and civil society, and strengthening public voice. But, until the day when political interference is minimised in institutional decision-making, we have to concede that politics is still one of the main routes through which most administrative change takes place.

So, as we face daily encumbrances, we should use all means available to us to make Malaysia a better place to live, but while equally acknowledging that politics is a perfectly legitimate way to push for change as long as it stays well within its limits as defined by the country’s laws.

Posted in Civil Society, General Politics, Public Administration | Leave a comment

Uniting ourselves

(First published in theSun on 13 February 2014, here.)

LAST weekend on Feb 8, IDEAS celebrated its 4th anniversary in conjunction with the 111th birthday of Almarhum Tunku Abdul Rahman Putra Al-Haj, the country’s first prime minister. Speeches by Tan Sri Ramon Navaratnam and IDEAS president Tunku Zain Al-‘Abidin Tuanku Muhriz were reminiscent of the Tunku’s leadership qualities and principles he stood for.

The Tunku is known to have strongly emphasised equality for all regardless of race or religion; strived to ensure unity and harmony among Malaysians; promoted meritocracy and competition, not forgetting to care for the poor and underprivileged; and stood for religious freedom.

In their speeches, both questioned just what the Tunku would say about the Malaysia of today, recalling how he had once said, “I am the happiest prime minister in the world” – would he conclude the same if he were prime minister today?

In the past few weeks alone, one group has offered financial rewards in exchange for slapping a senior female politician (for a Chinese New Year video of purportedly offensive nature), Christian gravestones were damaged in Kuantan, and a church had Molotov cocktails thrown into its premises. These are black marks in the nation’s history, and surely the Tunku would have been greatly saddened.

Yet, perhaps we romanticise the past, since the country in 2014 is a very different animal from what it was in 1957.

Then, spirits were high after having gained independence from the British. Malayans were united in efforts towards rebuilding the nation they could finally call their own. Inter-personal differences would have been overlooked above the bigger picture of freedom, self-rule and ownership. The Tunku said in his speech in Malacca on the return of the Merdeka Mission in 1956, “we have been able… to uphold God’s gift of self-pride, dignity, justice and an unwavering spirit … we the people of Malaya have been united in our aim for independence …”

Perhaps, then, the more accurate questions are: Has collective responsibility over the country’s future been replaced by individual interests? Would the Tunku have allowed for circumstances to descend to what they are today? Or are current developments of ethnic and religious discord merely an inevitable result of our multi-faceted society?

It is not for the lack of trying. Each time in our past when such tensions arose, leaders have attempted to respond through a mix of experiments: the New Economic Policy in 1971, accompanied by the National Culture and Language Policies, the National Economic Consultative Councils, and more recently the New Economic Model, and PEMANDU’s Government and Economic Transformation Programmes.
The government’s approach has been to intervene by ensuring the bumiputra (in reality, Malay) communities are protected in all possible socio-economic spheres: academic, corporate, land and housing, government service and so on.

But each time a policy for a level-playing field – by creating a more open and free economy – is announced, this is reversed due to protests. The imposition of these obviously has not worked.

The relationship between economics and inter-ethnic or inter-religious tension is clear – in 1969, when a large percentage of Malays were living in abject poverty despite being the majority, steps were made to primarily address this. But today, statistics show the tremendous growth of Malays in professional positions, forming part of the middle and upper income classes. It can no longer be said that Malays are the sole underprivileged lot.

If anything, differences are inter-regional and not inter-ethnic. Sabah, Sarawak, Kelantan and Terengganu – ironically the states with oil and gas resources – are those in dire need of economic development. And there are certainly pockets of very poor Indians, indigenous, and yes, even Chinese families.

But the trend shows it is no longer about facts and figures, at least to the many groups formed recently that have as their mottoes “to defend the rights of Malays”. They are not referring to the inherent human rights and dignity everyone possesses, but their exclusive rights and privileges over and above any other group.

Perhaps the predicament Malaysia is in emerged out of the then differentiated economic conditions, but today it has transformed to becoming much more than that. And how does one argue against the deeply embedded belief that this birth-right is naturally bestowed, regardless of socio-economic status?

If it is the perception of being downtrodden upon that is causing such violent reaction from the likes of Perkasa, Pekida and others, then this must only stem from a deep insecurity that cannot be easily or quickly corrected, despite efforts from the most earnest of human rights activists. The silence of the ruling government only serves to embolden such voices. Given the lack of inspiring leadership, what then can be done?

Where arguments fail, action may have to prevail.

Alternative groups have emerged to dispel the notion that the conservatives speak on behalf of all Malaysians. Multi-ethnic groups turning up to distribute flowers at churches, and taking casual walks in parks to emphasise unity and friendship between races are simple examples of how we can take matters into our own hands. Changing the discourse cannot be done overnight; there exist real misgivings over “the other”, which can be addressed only through developing real relationships and acts of kindness and service. But this has to happen through a lot more channels to connect people with diametrically opposed opinions.

In the Tunku’s speech during the formation of Malaysia in 1963, he admitted that the road to nationhood has not been an easy journey, with “surprises and disappointments, tension and crises, (which) have marred the way”.

Likewise, many of us may feel we are on the verge of a crisis. But it is the “common destiny” we must emphasise, looking to our individual human dignity and collective goals.

The Tunku’s closing remarks in that speech were: “… the Malayan Nation(‘s) multi-racial society emerged, endured and survived as a successful and progressive nation, a true democracy and an example to the world of harmony and tolerance. As it was with Malaya, so it can be with Malaysia. With trust in Almighty God, unity of purpose and faith in ourselves, we can make Malaysia a land of prosperity and peace.”

We can still make Malaysia that land of prosperity and peace he envisioned – but maybe we have to do it ourselves, without government and its policies that attempt to unite us but fail.

Happy 111th Birthday to Almarhum Tunku Abdul Rahman Putra Al-Haj!

Posted in Civil Society, Ethno-Religious Politics | Leave a comment

Much ado about Selangor

(First published in theSun on 30 January 2014, here).

NOT half a year has gone by since the 13th general election, and already interesting developments are taking place in the state of Selangor. Just this week, Kajang assemblyperson Lee Chin Cheh resigned from his position, and Opposition Leader Datuk Seri Anwar Ibrahim announced his candidacy for the seat that will have to be contested within 60 days (of the Election Commission having been informed). It has also been widely speculated that these moves will pave the way for Anwar to replace Tan Sri Khalid Ibrahim as the Selangor mentri besar.

Just how can the mentri besar be changed mid-term? This short piece tries to address this, taking both the constitutional and political dynamics into consideration.

The numbers of seats each of the three Pakatan Rakyat parties holds are almost equal. The Democratic Action Party (DAP) and the Pan-Malaysian Islamic Party (PAS) each hold 15 seats respectively, whilst Parti Keadilan Rakyat (PKR) held 14 seats before Lee’s resignation. These add up to 44 – and form more than two thirds – of the total number of 56 seats.

First, to be a mentri besar, the only conditions the Selangor state constitution has are that the person is to be Malay, professes the Muslim religion and is a Malaysian citizen by birth. The person does not need to be born in Selangor itself, which some have wrongly assumed.

Second, it is the Ruler of the State (the Sultan of Selangor) who appoints the mentri besar from among the Legislative Assembly “who in his judgment is likely to command the confidence of the majority of the members of the Assembly”. In this case, it can be argued that it would simply be a matter of the current mentri besar resigning and making this known to the Sultan, who would then proceed to appoint someone else whom he believes to command the majority of the assembly.

In fact, there has been exact precedence to this, where in 1997, a Selangor state legislative seat was vacated in order for Tan Sri Abu Hassan Omar, who was then federal minister of domestic trade and consumer affairs, to run in a by-election and therefore be appointed the Selangor mentri besar. The previous mentri besar, Tan Sri Muhammad Muhammad Taib, resigned in order for this to take place.

The constitution states that “if the mentri besar ceases to command the confidence of the majority of the members of the Legislative Assembly”, two options are available: either
a) The mentri besar requests for the Sultan to dissolve the Legislative Assembly, or b) If he does not request as such, then he tenders the resignation of the State Executive Council (Exco), which includes himself.

These steps would be straightforward enough if two assumptions hold true: First, that the mentri besar would resign of his own accord and second, that the Sultan would agree to the newly proposed name.

If, however, the mentri besar chooses not to resign, this is where it gets tricky. Several possible scenarios may come into play. One possibility is for the Sultan to meet with the representatives of all three parties forming the Pakatan Rakyat coalition government to ascertain the situation as to which individual commands the majority. In recent times, parties have taken to signing statements showing the same (although these statements are not binding), and here all three parties would also propose the new person to be appointed.

“Another possibility that several have raised is for the Legislative Assembly to conduct a vote of no confidence against the present mentri besar. However, in order to call for a Legislative Assembly sitting, which the Speaker would call for (conventionally with the agreement of the mentri besar), this would still need the Sultan’s consent.”

Even if either of these scenarios do transpire (in order to prove there is no confidence in the current mentri besar), Article 55(2) sets out exceptional circumstances under which the Sultan does not need to act on the advice of the Exco, for instance, to appoint the mentri besar at his discretion. A change in the mentri besar would still need the Sultan of Selangor’s final endorsement.

The Sultan can also choose not to consent to requests for the dissolution of the state Assembly – which is what happened during the Perak state crisis in 2009 when Datuk Seri Mohammad Nizar Jamaluddin requested for the state assembly to be dissolved, but his request was rejected by the Sultan of Perak.

The points raised so far suggest that the Sultan possesses tremendous discretionary powers with regard to the appointment of a mentri besar.

This is precisely what happened in Terengganu in 2008 when the person chosen by the prime minister and the Barisan Nasional assemblymen to be its mentri besar, Datuk Seri Idris Jusoh, was not favoured by the Sultan. This was a clear situation in which he commanded the confidence of the assembly’s majority. In this instance, the Sultan appointed Datuk Seri Ahmad Said instead, who remains as mentri besar to this day.

Another point of view, however, is that the constitution should not be interpreted to accord such powers, to be exercised willy-nilly. Instead, the Sultan is to act with wisdom in identifying the best course of action given his knowledge of the political circumstances.

This article has laid out different possible scenarios that could unfold in what will surely be an exciting few months ahead for Selangor. It is hoped that all of this will ultimately bring about benefits to the people of Selangor, lest the futility of an additional by-election and the spent energies of each of those involved.

Posted in Elections, General Politics, Public Administration, Selangor | Leave a comment

Women in the Workforce

(first published in theSun on 16th January 2014 here).

LAST week, I had the privilege of presenting at the Asia Liberty Forum 2014 in New Delhi, India, on the issue of women and liberty in Malaysia. It was somewhat disconcerting, as I do not typically see the world through a gender lens. In the past, I have felt indignant at being invited to speak just to fulfil a female quota, as if the invitation would not have come about otherwise and therefore had little to do with my knowledge of the subject at hand.

Nevertheless, preparing the speech has forced me to look squarely at the issues that women do honestly face in the workforce today.

Women make up almost half the Malaysian population, but our labour force participation rate is relatively low at 46%, one of the lowest amongst the Asean countries, below Singapore (60%), Thailand (70%) and even Indonesia (52%).

This is surprising, given the fact that we have a very highly-educated female population. National data shows that women tend to be more highly qualified and go further in our studies (68.9% of females have a tertiary qualification as opposed to 66.8% of males as at 2010), and out-perform our male counterparts in international Pisa scores (which measure educational skills in schools).

So why is this not matched by labour participation statistics? Surely the country would benefit from half of the population’s talented and highly-educated human resource in its various sectors, which would in turn contribute to economic growth and development.

There are several conceivable reasons for this. First, the labour force participation hits its peak for women in the age group of between 25 and 29, after which there is a dramatic fall. This means that the majority of women will work upon graduation, but leave as they start families and then very rarely return to the workforce. This can be compared against Japan and South Korea, in which women who stop working tend to re-enter the workforce in their 40s.

This could also account for the fact that women occupy very few managerial positions. Malaysia scores 30 in the managerial gap index (100 reflects no gap between men and women), lower than Thailand and the Philippines. Women make up 50% of entry level professionals, but form only 5 to 6% of CEOs and board members in the country. Since women tend to leave the workforce in their 30s, this would not have allowed them sufficient time to climb the ladder, corporate or otherwise, to assume more senior positions in their organisations.

Of course, the challenge in many Asian countries – and Malaysia is no exception – is that there are deeply embedded socio-cultural perceptions of women, which impact upon their presence in the workforce. In a World Bank study in 2012, 60% of males and 39% of females agreed that men should have priority for jobs, a much higher statistic than even Southeast Asian counterparts like Vietnam and Thailand.

Such perceptions are prevalent even – and perhaps especially more so – in politics. From the 13th general election, women formed 10% of all candidates, 10% of elected parliamentarians and 11% of elected state assemblymen. This is slightly on the low side, with Indonesia and Cambodia having a 18% and 21.1% representation of women in Parliament respectively. When women politicians were interviewed by academic Dr Cecilia Ng in 2010, they said they had to “fight harder to prove their significance and worth in a male-dominated governance structure”. One recalls a particular parliamentarian making sexist, insensitive remarks to a female colleague on her monthly “bocor” when arguing about Parliament’s ceiling leaks.

But examining how women’s roles are perceived in Malaysia is perhaps to generalise what is in fact multi-layered, given the different ethnic backgrounds from which we come. Each community – whether racial or religious – would have its own view of how women are to behave, rightly or wrongly. And it is when these traditional values are confronted with the needs of modern society – urban living, dual income households – that inter-generational conflict may come into play.

In fact, one interesting phenomenon is how ethnic-based affirmative action policies since the 1970s that encouraged Malays to enter the civil service resulted in non-Malays seeking employment in the private sector. Non-Malay women working in the usually faster-paced, higher-expectations private sector would in turn change the roles they play in society; working longer hours directly impacts a woman’s ability to balance between family and career.

Finally, one cannot exclude the rise in religious conservatism in Malaysia as being a significant determinant of women’s presence in the workplace. In 2010, Noorfadilla Ahmad Saikin’s initial job offer as a teacher was retracted when the education department found out she was pregnant. In 2012, a TV anchor was suspended for shaving her head in a cancer awareness campaign, after anonymous calls accused her of defying a religious fatwa prohibiting women from shaving their heads.

On a more personal level, an essay by former US state department head of policy planning, Ann-Marie Slaughter, struck a chord when she said that the culture of today’s working environment makes it impossible for women to “have it all” – wanting to pursue a professional career all the way and simultaneously be a responsible mother and wife. In her own words, “Many women of my generation have found themselves, in the prime of their careers, saying no to opportunities they once would have jumped at”, and more poignantly, “You should be able to have a family if you want one … and still have the career you desire. If more women could strike this balance, more women would reach leadership positions, and … they could make it easier for more women to stay in the workforce.” (Slaughter, 2013).

Slaughter chose to leave her high-profile job in Obama’s administration to take better care of her young children.

Back home, a survey done by ACCA of more than 800 professionals reflected similar sentiments: although 93% of women would consider returning to the workforce, 63% found it difficult to return, primarily due to family commitments, lack of social acceptance for women occupying leadership roles, a male-dominated work environment and inflexible work arrangements.

Changing the cultural view of women will not happen overnight, but employers adapting office policy to be more flexible and accommodating can surely take place. In fact, it is already happening, where companies offer work-from-home days and flexi-hours, on the condition that these should not compromise on productivity. Women entrepreneurs and those in the informal sector (doing online business, freelance consulting, or even street hawking) are ways in which more liberal values and attitudes toward women are by-passing conventional perceptions of women’s roles.

As Malaysia gears up towards what it hopes to be a high-income nation, it is important to raise women’s labour force participation rates, and then retain them. The government invests heavily into the education sector, but the phenomenon of women leaving the workforce forms another type of “brain drain” that is less frequently talked about. By doing this, we can tap into the human resources currently absent from the labour market (estimated at anywhere between 1 to 2 million people), and eventually optimise what is currently latent talent. Some very deeply ingrained cultural and pseudo-religious views of women will also need some serious altering to get where we want to.

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