The rights of oil producing states

Posted on May 23, 2014 by Tricia

(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

Posted on May 2, 2014 by Tricia

(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.”

 

Posted in Education, Language | Leave a comment

Crony capitalism or plain cronyism?

Posted on March 26, 2014 by Tricia

(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.

Posted in Economics | Leave a comment

Politics in Policy

Posted on March 13, 2014 by Tricia

(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

Posted on February 13, 2014 by Tricia

(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

Posted on January 30, 2014 by Tricia

(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

Posted on January 16, 2014 by Tricia

(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.

Posted in Economics | Leave a comment

Let’s get our numbers right

Posted on January 1, 2014 by Tricia

Let’s get our numbers right

First published in theSun on 1st January 2014, here.
Tricia Yeoh is the chief operating officer of a local, independent think-tank. She wishes everyone a happy and crime-free 2014. 

THE last week of the year is meant to be a peaceful, reflective one. Mine was anything but. For the second time in 2013, I contributed to the country’s crime statistics by having my personal belongings taken from me (this time, in the not-so-sleepy-town of Malacca).

Anyone who has been a victim of crime would go through the normal steps of feeling shocked, angry and then eventually disappointed with the system that one imagines is meant to protect, and not harm. My experiences have been no different; and it is certainly easy to poke at why the administration has failed to combat crime when these incidents become personal stories that are shared widely on social networks.

Official government statistics, however, seem to indicate a lowering of reported crime. Indexed crime reportedly fell from more than 76,000 cases in the first half of 2012 to over 74,000 cases in the same period of 2013.

But violent crime itself has risen, which includes robbery.

Of course, the real question is how reliable these figures are. Malaysia has stopped providing crime data to the United Nations Office on Drugs and Crime. Critics would be quick to point out that statistics can be easily manipulated to suit political needs. Recall, for instance, the startling revelation last year in which a veteran police officer wrote a letter claiming there was a systematic attempt to lower crime statistics by tampering with how crime cases are classified whenever a police report is lodged.

This letter is worth revisiting because it hits the nail on its head, addressing the core of what truly afflicts crime management today: Political interference.

Take, for example, the claim that there were cases where foreigners with work permits were being arrested just to increase statistics, and where suspects in other cases would be shifted around just to “close” a case.

This reminds me of what I consider to be the most brilliant television series to date, The Wire (Season 3), which presents an accurate picture of that sometimes murky relationship between politics and the city police in America’s drug-ridden Baltimore.

In one episode, the police commissioner is under pressure from the city’s mayor to reduce crime rates, in light of an impending election, and instructs his subordinate to lower the felony rate, with a blatant, “I don’t care how you do it”. The weary police major responds by saying there are “processes” he could employ to “reclassify” cases.

This is a fictitious rendition of a city in a different part of the world, but the game-play between this politician seeking a popular mandate and the public administration that does his bidding out of sheer coercion can be easily transplanted into any context, ours included.

What politicians may not realise is that massaging these crime figures can have serious consequences. Falsely depressing numbers give the impression that a certain location is safer than it actually is. Residents are not put on the alert they ought to be. Worse, when reality hits based on personal experiences, there is a growing sense of distrust of the authorities.

Now, I cannot begin to understand the complexities of managing a police force in any comprehensive way. But this one example shows that, perhaps, politicians are making use of “indexed crime” and statistics in a way that disincentivises performance in a real and meaningful way. Perhaps, ironically enough, it is due to the incessant need to deliver numbers that has eroded the police force’s ability to truly tackle crime in a more concerted and effective manner.

And this is where residents like you and me come in. As people who would be the direct beneficiaries of an improved system, we ought to first demand for transparency in information. Having clearly broken-down data as to specific locations in which crimes are taking place, and at what time of the day, would help us be on the alert. This ought to be regularly updated and publicly accessible.

This sort of data is controversial because it highlights hotspot areas, which may in turn place black marks on selected police stations. But this is the best possible way of ensuring accountability. In fact, William J. Bratton (the famed police commissioner of New York City) went on to successfully transform the Los Angeles police department by establishing personal relationships between police officers and residents, and introducing new statistical models to track crime.

There are numerous other factors that contribute to a rising crime rate, chief of which being socio-economic conditions and poor educational backgrounds.

These are macroeconomic factors beyond the control of a police force, but which do fall under the mandate of a government. These must be consistently examined, and the results of Malaysia’s dismal standing in the international PISA rankings are not encouraging either.

But even without elaborating upon the root causes of crime, it is clear that much can and should be done in the way the police force as an institution itself can be better managed. Much has already been written about the recommendation to implement the Independent Police Complaints and Misconduct Commission. This is not likely to be revisited, given past vehement opposition.

The most basic and practical thing to do is for political leaders to show leadership by publishing accurate data on crime, regardless of whether the numbers have risen or not. The police force ought to also co-operate on this count, which would display goodwill on their part.

Finally, a lot more effort must be put into police-community interactions, either with the help of local councils, neighbourhood committees, Rukun Tetangga, religious groups or otherwise. Armed with the right information, these multi-stakeholder interest groups can then collaborate in the collective effort of managing crime together.

 

Posted in Crime, General Politics, Public Administration | Leave a comment

Leaky valves need fixing

Posted on December 20, 2013 by Tricia

(first published in theSun on 19th December 2013 here).

GREATER scrutiny needs to be placed on public officials, especially in their relationship with the private sector, in light of reports and indicators.

In the Global Financial Integrity (GFI) report released last week, Malaysia was ranked as the fourth highest in the world in terms of illicit capital outflow, just after China, Russia and Mexico. Malaysia had a cumulative outflow of US$370 billion from 2002 to 2011 – or a whopping RM1.2 trillion in total. This is a significant increase of almost 30% from its last report, where over the previous 10 years up to 2010, Malaysia exported US$285 billion, or RM921 billion of illegal funds.

Illicit outflows in this context are defined as illegally earned, transferred or utilised cross-border transfer of funds, which can generally be categorised as either money disappearing from the national balance of payments, or as trade misinvoicing.

There are several sources of such illegal outflows. One possibility is that our macroeconomic conditions have been considered so unstable as to have triggered loss of investor confidence in the economy, and subsequently capital flight out of the country. Recall that earlier this year, Fitch Ratings downgraded Malaysia from “stable” to “negative” outlook, noting the country’s poor public finances and uncertain budgetary reform prospects. (The government has since announced that the goods and services tax will be introduced from mid-2015, which is expected to help in fiscal consolidation).

Second, public officials have also been identified as one of the leaky valves, who are able to “siphon money away from public coffers and into secret offshore bank accounts”. This is both caused by and creates an underground economy, in which external contractors foster relationships with friendly officers to win government tenders. Indeed, model simulations of Mexico’s illicit outflows confirmed a dynamic interaction between illicit flows and the underground economy that each drove the other.

In a separate study in 2009, academics from Germany and Austria estimated that the shadow economy in Malaysia constitutes 30% of its GDP, even higher than Mexico. And this was taking the conservative definition of market-based legal production of goods and services that are deliberately concealed from public authorities.

It is interesting to use Mexico as a case study, given that it ranks only one place above Malaysia in the current GFI report. Several findings from a detailed analysis of Mexico’s conditions are relevant and ought to be taken as lessons for us, and these are examined below.

For instance, a stable relationship was found between the volume of illicit outflows and the onset and aftermath of its macroeconomic crises, during its 41-year period of study.

Two such crises included a 1976 balance of payment crisis, and the 2007 global economic crisis, after which illicit flows increased as a percentage of GDP.

The finding that a macroeconomic crisis caused illicit financial outflows to increase one year past the crisis is something to be cognisant of, especially since Malaysia has faced running budget deficits since 1998, and a diminishing size of our balance of payments surplus. We are also dangerously nearing the federal debt limit of a debt to GDP ratio of 55%.

In Malaysia’s case, our illicit outflows as a percentage of GDP seemed to spike in the years 2005 and 2010 consisting of about 25% of GDP as opposed to 17-18% of GDP in all other years dating from 2002. One could conduct further studies to examine why the outflows were particularly rampant in these years.

A second observation is that illicit flows (as a percentage of GDP) increased after the North American Free Trade Agreement (NAFTA) was implemented, possibly because trade openness provided traders more opportunities to misprice trade. This was also exacerbated by high rates of inflation.

Policymakers should also take note of this, given negotiations of the Trans-Pacific Partnership Agreement and renewed talks of the EU-Malaysia Free Trade Agreement. There are certain benefits that would accrue from free trade, including potentially increasing economic growth through access to bigger markets, but weak institutions and legal frameworks may then facilitate mispricing, and in turn, illegal capital outflow.

The government’s response to these reports is somewhat mixed. On one hand, it is taking measures to address concerns, for instance amending the Anti-Money Laundering and Anti-Terrorism Financing Act to better control for cross-border transfers. Second and more recently, directly negotiated contracts are being published online, and such contracts lie at the heart of kickbacks and bribery.

But these are nowhere near addressing structural and governance-related issues. In the case of Mexico, some specific recommendations included to shrink the underground economy through transparency and accountability involving the award of government contracts, and collecting information on beneficial ownership of companies and financial accounts. Prudent macroeconomic measures would be required to reign in excessive spending, leakages and wastage. Customs administration should also be reformed by ensuring customs invoices are accompanied by a legal undertaking of pricing accuracy by exporters and importers.

The same can surely be argued for Malaysia. Labuan is placed 12th in the Financial Secrecy Index 2013, which ranks jurisdictions according to their secrecy and possible tax havens to attract illicit financial flows.

This year, Malaysia climbed one rank in Transparency International’s Corruption Perceptions Index 2013. Although this is to be applauded, it should be noted that Malaysia performed worse in one of the contributing indices, within which country experts are asked whether public officials who abuse their positions have been prosecuted, and whether government has successfully contained corruption.

Much work is still needed in weeding out corruption at its very core. The GFI report has demonstrated the disingenuous relationship between public officials and the private or underground sector, which without the rule of law, leads to massive capital outflow. Policymakers would do well to sit up, take notice and be very, very worried.

Posted in Corruption, Economics | Leave a comment

Who governs city hall?

Posted on November 7, 2013 by Tricia

(First published in theSun on 7th November 2013, and can be accessed here).

AT a #BetterCities event I spoke at recently on sustainable public transportation, questions were raised as to what initiatives are taking place in Kuala Lumpur to improve access for cyclists, given the lack of cycle ways in the city.

Although there is some information within the Greater KL Plan under Pemandu on its initiatives to improve the bus, taxi and rail systems, and increase pedestrian walkways, it is only by contacting someone personally within government that I was able to find out that KL City Hall will soon introduce bicycle lanes in parts of KL.

Despite being the nation’s capital, very little is known about KL’s planning policy, how money is spent on this city with an estimated 1.6 million people, and most importantly, how the decision-makers are kept accountable by the public, if at all.

Kuala Lumpur is classified as a Federal Territory (together with Labuan and Putrajaya), making it fall outside the jurisdiction of any state government, although the area was originally part of Selangor before it was created in 1974, which one could say was for primarily political purposes.

The result of this is the unique situation of having KL governed entirely by its local council, in this case the Kuala Lumpur City Hall. Like all other local and municipal councils in Malaysia, the City Hall is run by its civil servants with numerous departments. But there is one significant different, where for instance City Hall does not have councillors, who would ideally act as policy-makers separate from the civil servants who implement policy.

Instead, it has a 15-member Advisory Board, chaired by the mayor, all of whom are appointed by the Yang di-Pertuan Agong on the prime minister’s recommendation. The Federal Capital Act 1960 requires for one member each to come from the Federal Territories Ministry, Finance Ministry, Economic Planning Unit and two members nominated by the Selangor state government.

But it is not just the City Hall that governs what takes place in KL. There is also the Federal Territories Ministry dedicated to the three Federal Territories. For instance, the 2014 budget allocates funds to the City Hall through this ministry. Next year, City Hall is given a total of RM76 million directly, but Kuala Lumpur is also given an additional RM71 million or more, on “new policies” and “one-off” budget items. Some of these are items that fall under the watch of Pemandu, the unit under the Prime Minister’s Department, in the National Key Economic Area’s Greater KL Plan.

In fact, that isn’t its total budget, since additional funds are derived from assessment fees, public housing rental, licences and so on. For instance, the 2013 budget was a whopping RM2 billion. This is even more than the total annual funds given to some ministries in 2014, including the Ministry of Youth and Sports (RM754 million), Foreign Affairs Ministry (RM847 million) and the Human Resources Ministry (RM1.4 billion). This therefore begs the question of financial accountability.

There are three main stakeholders when it comes to issues pertaining to KL: the City Hall, the Federal Territories Ministry, and Pemandu. One pertinent question is which of these three would be the ultimate decision-maker for KL, and more importantly, whose responsibility is it to transparently make budgets accessible? A preliminary search on the City Hall’s website reveals practically no information on its annual budgets, how allocated funds are spent, and for what purposes.

There has been debate in the past on introducing local council elections, an issue which both the opposition-led states in Selangor and Penang have explored but in vain, given the negative response by the federal government. It is certainly time to advocate perhaps for a pilot local elections to take place, perhaps at one of the zones within Petaling Jaya to begin with.

However, even if local council elections take place – which is a long shot – this would not solve the lack of accountability problems in KL since it does not even have councillors to elect in. Under such circumstances, perhaps it is time to raise the possibility of having mayoral elections.

The mayor is currently appointed by the federal territories minister for three-year terms.

If KL residents were able to vote in their mayor of choice in City Hall, they would be able to hold this person accountable to funds paid, demand access to all sorts of information, and fully participate in the city’s policy-making process. This is not the case currently, where the RM2 billion or so is spent practically without public scrutiny.

As we respond to the national budget that was unveiled two weeks ago, it is equally imperative that citizens take cognizance of how the numbers work for those of us who are rate-payers in the city. City budgets are what eventually contribute to making our daily lives better through what is spent on roads, public transport and infrastructure. Without a detailed budget breakdown from the City Hall, keeping government in check is almost an impossible task.

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