Managing Plural Societies

Posted on December 10, 2011 by Tricia

In this article, I look at just how a consociational a democracy our country is, based on reflections of a dialogue session that I participated in at the Centre for Dialogue in Melbourne. A version of this was published in theSun on the 9th of December 2011.

Managing Plural Societies

Earlier this week, I had the opportunity of speaking at a Malaysia-Australia dialogue at the Centre for Dialogue, La Trobe University, in Melbourne. This was the second of such dialogues, the first of which took place in Penang two years ago. The theme was Malaysia-Australia relations and a sub-theme of managing plural societies was chosen, particularly relevant given that both countries consist of communities with diverse ethnic and cultural backgrounds.

The challenge of dealing with pluralism is obviously real in Malaysia, and we see evidences of this everyday whether we are dealing with religious, educational or political affairs. What this challenge is grounded upon is the problem of identifying boundaries between the exercising of respective communities’ freedoms. For example, to what extent can my rights be exercised such that it does not impinge upon the rights of someone else’s? And it is this negotiation of precisely what defines the ‘freedom’ each community enjoys – both theoretically and realistically – that we in plural societies grapple with on a daily basis.

Take civil society, for instance, which is the subject I chose to speak on. Civil society itself is not homogeneous in Malaysia, which is fragmented along the lines that have come to define society here, and as a result also represents the multiple demands they have for the country. Put simply, with each community envisioning different, and often polarising, ideals for Malaysia, the notion of a “common identity” and “common goal” for the sake of unity is sometimes considered fallacious.

But hold on a minute. We have presumed these divisions to be natural, inherent, in-built into our ethnic and cultural roots. Perhaps to a certain extent, yes, there will be a tendency for Muslims to want more mosques, Hindus and Buddhists their respective temples, Christians churches, and so on. This does require some give-and-take since land and economic resources are scarce.

The real problem, however, is centred upon a more systemic one, the country’s political structure.

A ‘consociational democracy’ can be defined as one in which a stable democracy is achieved through a power-sharing, or guaranteed group representation, solution, in societies that are differentiated by sharp cultural, social, religious, ethnic, and political cleavages. The Barisan Nasional model is a good example, whose component parties satisfy these elements by having race-based parties representing each ethnic group.

All well and good, except that the conditions for such a consociational arrangement to survive may no longer be existent today, more than 50 years after Malaysia’s independence. The political scientist Lijphart proposed several favourable conditions, including segmental isolation of ethnic communities, where it must be possible to identify the segments into which society is divided.

Because the Barisan coalition has been so structured along ethnic lines, it has never been in their interest to cultivate a true commonly shared vision, beyond race or religion. In fact, such “segmental isolation” that is a pre-condition for a stable power-sharing agreement would be to an electoral advantage. This is to say that the problem lies within the very structure of political governance.

And so, even though modern trends of globalisation, the Internet and the like ought to dictate the blurring of ethnic identities, in Malaysia we have seen the reverse taking place. One would have imagined that by now, with inter-racial marriages, the concept of ethnicity would have ceased to be all that significant. (After all, it is not as simple as looking at physical traits these days as a differentiating factor – I have several times been mistaken as Malay especially when clad in a sarong kebaya.) One would have also imagined that with technology, culture (albeit, and unfortunately so, Western) would cut across other societal differences.

Some of this has taken place, this is true, but it is my suspicion that if not for our ethnic-based political structure, and the very strong political incentive to keep society divided that way, Malaysia’s pluralism would be a much more flourishing one. In the sense that although ethnic and religious identities would remain, this would be so only for cultural and festive reasons. On issues that truly matter: democratic development, economic growth, social justice; it would be citizenship first and foremost that determines and informs our shared vision for Malaysia.

Where does this lead us? Well, back to square one, apparently, judging from the closing remarks of the recent general assembly of a certain political party. The very predictable retreat to the comfort zone of maintaining ethnic fears and insecurities about “the other”. It is my idealistic, naïve self that hopes against hope for alternative media, education and civil society efforts to undo the knots of a pluralism that keeps people apart instead of bringing them together.

Can plural societies be managed successfully? Sure. It ought to be everyone’s responsibility. But in reality, so much of it has been taken into the hands of government, and so, the buck stops there.

Posted in Ethno-Religious Politics, Outside Malaysia, Religion | Leave a comment

What do the state budgets of Penang and Selangor tell us? (2012)

Posted on December 8, 2011 by Tricia

The 2012 state budgets of Penang and Selangor would speak of brilliant financial performance from both states, an affirmation that Pakatan Rakyat governments have done well in managing their states. This is a case study for what a Pakatan federal government would achieve.

What do the state budgets of Penang and Selangor tell us?

With power going to different parties and coalitions after March 8, 2008, policy competition became a thing to watch. This was one of the major gains for Malaysia as a democracy. Now, three-and-a-half years down the road, enough time has passed for us to do some comparisons. What better way than to compare budgets?

We are living in times beset by talk of financial difficulties all over the world.

The Eurozone crisis continues to unfold with the economies of Spain, Greece and soon Italy spiralling steadily downward, while the US’s massive budget deficit threatens to have far-reaching implications for other economies. How efficiently public finances are managed will determine how stable governments can stay in each of these nations. It is a tough battle to fight, balancing harsh austerity measures yet retaining enough popularity to stay in power.

Malaysia is no different, and Minister in the Prime Minister’s Department Idris Jala had warned in 2010 that we were heading for bankruptcy if subsidies were not removed eventually. Although there is some internal dispute on actual figures, all would agree that Malaysia’s budget deficit (14 years of consecutive deficit) needs reducing. Whether or not this can be achieved is a different question, given the government’s track record.

Whilst the national budget was being debated, yet another level of budgets was passed recently: the state governments’. The Pakatan Rakyat (Pakatan) coalition is often harshly critical of the Barisan Nasional’s inability to manage the country’s wealth, and so it is of interest to examine the performance of Pakatan-led states.

This article focuses on selected aspects of the state budgets of Penang and Selangor to gain some insight into how the governments there are doing.

Tabling the budget each year is as good a time as any to reflect upon the year’s achievements. The first trend that is evident here is that in both states the emphasis was on the performance of financial management. Both had budget themes along these lines: the Penang Chief Minister’s budget speech contained phrases such as “thrifty expenditure”, “reducing state debt, increasing revenue” and “financial management based on CAT (competency, accountability, transparency)”; while the Selangor Menteri Besar’s was peppered with “state revenues for the people”, “better financial management” and so on.

Such highfalutin language may have been unnecessary; the results were able to speak for themselves. Penang, for instance, managed to reduce its state deficit from RM630.13mil in 2008 to RM29.66mil in 2011. This marks a reduction of 95.29% over a period of three years. This reduction was attributed first to the migration of water assets to Water Assets Management Berhad, and second to a strategic financial management practice – mainly with reference to its decision to implement an open tender system more than a year ago.

Similarly, Selangor registered its highest cash savings in 28 years—a total of RM1.2bil made up of RM946.65mil in cash reserves and the remaining in trust reserves. The data obtained from the Selangor state government is reflected in an impressive graph that clearly shows the reserves growing significantly since the coalition took over in 2008. This increase in reserves is attributed to better management of state resources, more efficient collection of overdue arrears and stricter use of state assets.

The second visible trend is that both governments have been increasingly dedicating financial resources to the democratisation process, which includes empowerment of communities and maintenance of transparency and accountability standards. Penang, for example, is in the process of forming its Penang Women’s Development Corporation to empower women through developmental and training programmes. It also initiated an Accountability Index for its civil servants, with an audit being carried out in January 2011 which ranked various government agencies accordingly.

Selangor introduced a “Selangorku Grant” for 2012, which includes allocations to various communities with a specific focus on empowerment. Some of these include a grant to empower women, to train and develop young entrepreneurs, to strengthen democracy, to contribute to culture and activism and for other vocational educational support. It is important to note that this philosophy is one that propels individuals to better themselves through the equipping of knowledge, training and skills development to enhance their capabilities. Nevertheless, both state budgets do still allocate certain sums to ensure social safety nets are provided to the lower income segments of society.

It is commendable that both governments have decided to spend state resources on empowering the citizenry through programmes that promote democratisation.

Finally, both state budget speeches seem to place a strong emphasis on developing their state economies on a higher-level plane, in recognition of the demand for high-quality performance-based services. One theme in the Selangor budget is to build a society that is knowledgeable. After all, the services sector contributed 57.4% to its state gross domestic product (GDP) in 2010. In Penang, the tourism sector is to play an increasingly important role, with plans to capitalise on its World Heritage status through a number of events (George Town World Heritage Festival is one), its food as an attraction and the Meetings, Incentives, Conventions and Exhibitions (MICE) industry. Penang attracted 18.3 million tourists between 2008 and 2010.

The two states in which the country’s major industries, offices and factories are located seem to be moving forward with a steady momentum. There are certainly success stories to speak of, chief of which is better efficiency in public financial management.

Then there are the budget figures themselves: Penang tabled a budget of RM740.53mil, an increase of 0.16% from RM638mil for 2011. Out of this total, RM599.6mil is for operational costs, and RM44.24mil is for development. However, this was a deficit budget of RM213.71mil, which Penang said would be funded by State Accumulated Savings. Selangor tabled a balanced budget of RM1.6bil, an increase of 11.89 % from RM1.43bil in 2011. Out of this, RM1bil is allocated for the operational budget (62.5%) and RM600mil for development (37.5%).

At the national level, things remain uncertain. The principle is simple enough: governments ought not to spend more than their revenues unless they have savings to turn to. Notwithstanding the political unpopularity of pulling out subsidies and implementing the Goods and Services Tax (GST) at this crucial pre-election period, it is surprising that the federal government has not yet emerged with an alternative solution that safeguards the interests of future generations. As long as the government continues spending heedlessly, long-term consequences are to be expected.

In the words of Idris Jala himself, “…If our economy grows less than four per cent… and we don’t cut our operating expenditure, if we borrow at 12.5%, if our annual debt rises to 12.5% and our revenue does not grow, then it (bankruptcy) will happen.” (The Malaysian Insider, November 1, 2011).

It is a healthy exercise for us Malaysians to compare and contrast the financial performance of different governments in matters of governance and in the management of public funds. This, after all, should be a determining factor in our evaluation of government.

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

Malaysian Lessons from Bolivia

Posted on December 8, 2011 by Tricia

Having worked on a documentary last year, I truly appreciate the worth of the visual medium now. Documentaries add great value to the study of politics as well, as the “Our Brand is Crisis” documentary shows. This was first published in Selangor Times in December 2011, but equally relevant for us today.

Malaysian Lessons from Bolivia

At the Centre for Independent Journalism’s ‘Human Rights in Outer Space’ series of events last week, I was asked to speak on a panel analysing the “Our Brand is Crisis” documentary and draw comparisons between issues arising within that, and the Malaysian context. My fellow panelists were the established Hishamuddin Rais (also known as Tukartiub) and Ray Lagenbach, both esteemed in their own right. The little I had to contribute came in the form of experience working within a state government, and my observations of the Malaysian political and electoral system.

The documentary, in short, shows the intimate behind-the-scenes action of the Bolivian Presidential Election campaign, specifically that of Goni’s (Gonzalo Sanchez de Lozada, Presidential candidate) team. An American political consultant, Greenberg Carville Shrum, was hired to conduct a series of focus group discussions in order to ascertain the needs and wants of the local Bolivians. Following this, the Goni team was to have crafted political campaign messages such that they reflected what the people most wanted to hear.

The role of consultants

There were four themes that I highlighted during my short presentation. First, the role of consultants. In the documentary, the consultants were presented as Western, young and English-speaking, juxtaposed visually against the Bolivian team who were depicted as relatively older, Spanish-speaking. The latter group was placed in an awkward position of having to begrudgingly follow whatever instructions were given to them from this foreign consultant, since it was placed upon them, presumably by Goni himself.

The moral question that emerged was whether it was possible to export an American-style politics into a country like Bolivia, and whether the consultants were able to provide relevant and suitable advice given the varied political conditions. For example, at the end, when Goni admits his campaign did not go as successfully as he expected, he says, “Only in the US can you believe that you can change people with information.”

In the Malaysian context, we have had our fair share of foreign consultants. One need not be reminded of the criticisms befalling the federal government upon the exposure of its utilising Apco as a public relations consultant, and its alleged Jewish connections by the Pakatan Rakyat. Secondly, the Pemandu outfit under the Prime Minister’s Department has freely employed the services of consultants under its ETP and GTP programmes, oftentimes paying a significant amount to conduct workshops. Whether or not this is justified is left for another debate.

Marketing and branding

The second theme I spoke on was on the fact that the world of marketing and branding has been absorbed into that of politics, just as the theme of the documentary suggests. The consultants immediately launch into how to position the economic crisis; in their own words, they say “we must own crisis” and therefore, “we must brand crisis” to their electoral advantage, as spin-doctors.

Capitalism, although in its purest form is meant to be based on the belief that human beings are perfectly capable of forming their own decisions based on a set of incentives, most usually economic, this has resulted in something quite the opposite. The fact is material and non-material consumerism is now a lot less dependent upon the content’s value as it is on the marketing and branding associated with the content. This notion has spilled over into the spheres of politics, as we can see in the documentary, where it is now the flashiest of campaigns, the most beguiling of politicians, the most emotional of messaging, that finally hits home in the supermarket culture of capitalistic politics.

Hence, similar to the commercial world, the tools and methodologies used there have also been absorbed and adopted into the political world. Focus group discussions and opinion polls are often used within the market research industry in order to test all sorts of things, including advertisements, packaging, pricing, products and so on. These days, companies are also observing acutely any movements and trends emerging from social media and social networks like Facebook, Twitter, and any online chatter.

Let’s face it. Market research does work, simply because when brands find out how their consumers tick, it makes it all that much simpler to craft messages along those lines. In fact, there are numerous examples in which companies did not conduct research and then failed miserably when their new products were launched. In this case, the product in question is a candidate. And without a doubt politicians would want to have their ears to the ground, detecting any likes or dislikes of their personality’s image. This is only natural, and the political polling and research industry is ever growing, including within Malaysia, where political stakes are high.

One of the unfortunate elements about this, however, is that it is easiest to appeal to one’s emotions. In Malaysia, we are not alien to the game of emotional politics, and indeed, parties have played into the sentiments of fear and insecurity, very often irrational in nature. The Umno party within Barisan Nasional knows perfectly how to tug at the heartstrings of the Malay Muslim, for example. But in order to move towards a more inclusive society, surely all parties have it in their interest to have a different sort of branding exercise altogether?

Popular vs. Effective Leadership

There is a disparity between doing what is popular, and what is actually effective for the country. For example, the people stated upfront within the focus groups that they did not want drastic measures that would affect their income. They also said they did not want their country to sell gas (especially through Chile, for historical reasons), but Goni, upon becoming President, immediately instituted these two measures. When asked, he replied by saying, “I don’t have time to meet the people; I don’t want to be popular, I want to be a good President.”

So there you had a President who was willing to push through policies that the majority of the people did not support – in our analysis, perhaps one who is either stubbornly foolish, or confident, or both, resulting in his eventual fall.

The trick is balancing between popularity and doing something unpopular but necessary for the country. In his case, he felt that selling gas was important to increase national revenue, although the people considered this to be selling away the country’s natural resources to the corporates. Note that Goni was already known for liberal economic policies, and had to defend himself for bringing in foreign companies at the expense of local jobs.

In Malaysia, the government has a tough position in removing subsidies for oil and essential items, as well as the still frozen Goods and Services Tax (GST), which it considers necessary to fill government coffers. These are undoubtedly unpopular measures, and the latter would be impossible to implement just before a general election.

Promise vs. Implementation

There is a danger of over-promising at the campaign level, which leads people to overwhelmingly reject the politician in question if no such change takes place within the first year of administration. Goni promised local jobs to a degree that was unrealistic. In Malaysia, we have seen the example of former Prime Minister Abdullah Badawi promising to rid the country of corruption, but whose ratings fell all too quickly.

It is clear that in the lead-up to the next General Elections, there will be much activity and hype, research, polling and focus groups similar to what was observed in the documentary. Malaysians will see the political battle played out in real life, and if there are lessons to be learnt from the “Our Brand is Crisis” documentary, it is this: That despite the wonderful advantages of branding, communication, and consultancy work, nothing can bear down the will of a people frustrated with their government. Goni was forced to step down less than one and a half years into his Presidency. We hope Malaysian leaders will learn to read the right signals and messages from the voters who are also increasingly frustrated with their government.

Posted in General Politics, Outside Malaysia | Leave a comment

The Paradox of Plenty

Posted on November 26, 2011 by Tricia

Haven’t you ever wondered why Malaysia with all its glorious resources, is not more developed than it is today? This has been called the “Paradox of Plenty” – my piece which was published in theSun on the 25th November 2011.

The Paradox of Plenty

The paradox of plenty refers to resource-rich countries that had slower economic growth and worse development outcomes than those without. At first glance, it does not look like we have been hit with this “resource curse”. But a deeper analysis might show otherwise.

The Malaysian story of growth and development has been romanticised over the years, having successfully reduced poverty to very low levels. Its economic growth also surpassed many Southeast Asian neighbours in the 1980s and 1990s (except our island neighbour down south, of course). Even now, Malaysia scores fairly decently on international indices measuring the ease of doing business, human development and competitiveness levels, moving up or down several notches each year.

But an alternative way to view it is: Given our geographic advantage, abundance of resources, language and cultural diversity, we could have achieved a great deal more. Over the past few years, this problem has been acknowledged by various quarters and coined into catchy phrases such as being stuck in the “middle-income trap” and the need to “move up the value chain”. Simply put, it is a culture of mediocrity that has led to this rather dull mode of stagnation.

High Oil Dependence

But it is not just by chance that we are sluggish. One of the most important factors that must be considered is Malaysia’s unhealthy dependency on oil and gas resources. Almost 40 percent of our national revenue comes from oil and gas revenues.

The recently released World Bank’s Malaysia Economic Monitor reiterated this burgeoning problem, stating that although higher oil prices have driven revenues higher, this also means that Malaysia’s dependency on oil has increased. Over the past five years, petroleum-related revenues “averaged 38 percent of all revenues”.

There are several implications for this. First, oil prices are volatile, which means that our national fiscal position is exposed to such global uncertainty. Government developmental expenditure would be highly dependent on what happens to the oil and gas market internationally.

Second, Malaysia is falsely lulled into believing that our national balance sheet looks fairly healthy. It is crucial to look into non-oil growth to examine the activity of real economic and industrial sectors, where in the case of Malaysia, “the non-oil primary deficit has roughly doubled over the past five years to almost 20 percent of GDP in 2009” (World Bank, 2011). Is our non-oil sector growing at a much slower pace, but having gone unnoticed because of the oil sector’s growth?

Third, there is a risk that these plentiful funds are made use of with less stringent oversight and caution. In Malaysia, it is impossible to tell what our oil money is used for specifically, because all revenues are pooled together into a consolidated fund, which contributes to all government spending. For example, would government embark on mega-projects if we did not have oil money to fund them?

Note that Petronas controls 84 percent of Putrajaya Holdings Sdn. Bhd. Petronas also financed and built a private healthcare facility Prince Court Medical Centre in Kuala Lumpur, with costs estimated at RM544 million. Although one argument is that the country’s resources ought to be used for national development, these commitments must be prioritised. Such new business investments must be adding value to the core petroleum business and not burden Petronas (and the country) with additional costs.

Responsible Resource Management 

Talking about oversight into oil money, the Petroleum Development Act 1974 actually gives sole discretionary power over the management of Petronas to the Prime Minister, Section 3 (2) reading, “The Corporation shall be subject to the control and direction of the Prime Minister who may from time to time issue such direction as he may deem fit.”

Many countries control for the unpredictability of oil prices by having sovereign wealth funds (SWF), or oil stabilisation funds, which compensate for revenue shortfalls, save for future generations, and invest in physical or human capital for future economic growth. Norway is probably the best example of having a successful SWF, whose operations are strictly controlled and monitored by the Parliament, to which it reports three times a year. On the flipside, Nigeria is an example of a country whose Excess Crude Account (ECA) “will soon be empty of the sizeable windfall profits collected during the recent period of high oil prices” (Gillies, 2010), mainly because the fund was not protected from the short-term political pressures to spend.

The closest Malaysia has to this is a “Kumpulan Wang Amanah Negara”, or National Trust Fund, which has RM5.43 billion as at June 2011. But for the fund to fulfill its purpose, Malaysia must resist the use of windfall profits from petroleum money by present politicians intending to stay in power. Depleting resources should be used for both current and future generations.

Transparency is crucial. A Revenue Watch Index placed Malaysia in the “Partial Revenue Transparency” category, scoring only 48.4 out of the full 100 points. This index measures public accountability by both government and oil companies, in the extraction of oil and gas resources. This was reportedly due to an absence of legislation providing for disclosure of information in the oil and gas sector. Relatively little is publicly disclosed such as contracts and agreements. Also, Parliament does not have the authority to ratify contracts.

Malaysia must therefore have better monitoring of natural resource accounts and the National Trust Fund by government together with civil society. With steadily depleting oil and gas reserves, the non-oil sectors must play the more important role in contributing to national income. Responsible resource management is the only way to ensure a sustainable and promising future for Malaysians in the long-run.

Posted in Economics, Human Rights | Leave a comment

Open Crucial Mega-Deals to Public Eye

Posted on November 12, 2011 by Tricia

And the financial mismanagement of the Malaysian corporate sector (or should we say pseudo-corporate) keep taking place. A version of this was written and published in theSun on the 25th November 2011.

Open Crucial Mega-Deals to Public Eye

Cyberspace was on fire last week after the Auditor-General’s 2010 annual report revealed a whole host of financial irregularities perpetrated by several government agencies and government-linked companies. Indah Water Konsortium (IWK) was among six GLCs reported to have paid up to two months’ bonus despite having suffered RM354.91 million in losses in 2009. IWK suffered losses amounting to RM33.35 million that year (The Malaysian Insider, 24th October 2011).

It isn’t too difficult to understand why people are angered each year when these scandals are unveiled. As taxpayers, they feel indignant that their hard-earned money is being thrown about – and worse, to line the pockets of those they feel are undeserving.

But this is the epitome of everything that went wrong with the country’s privatisation scheme. Sewage treatment was privatised in 1994, taking over the functions of local government authorities to improve service efficiency and effectiveness. Again, the argument that under a privatised company, things would be better managed.

But in 2000, the government had to dish out RM200 million to nationalise IWK because it was debt-ridden, and today it is wholly-owned by the Minister of Finance Incorporated. Just last month, the Finance Ministry said that the government had spent RM1.2 billion to cover its operational deficit. In fact, its total liability (up to June 2011) is made up mostly of “government support loans”, which means that it operates at a loss and could not possibly survive without such grants.

This seems to be the repetitive story for so many of our country’s public utility GLCs. Over the years, we have observed the same drama unfolding within water services and solid waste management as well: privatising and taking over services from the state authorities with the intention of better management, but failing and eventually requiring government assistance.

So, it is most strange that recent reports indicate that the government, after nationalising IWK in 2000, is reverting to the solution of privatising it all over again.

1MDB, a strategic development company wholly owned by the government, has stated that it plans to form a consortium to take over the national sewerage company for a nominal fee. The consortium would secure RM800 million from 1MDB as seed capital and help to clear IWK’s debts, which stand at RM1.5 billion (Business Times, 9th September 2011). Puncak Niaga Sdn Bhd, dominant player in Selangor’s water services industry, is also reported to be involved in the consortium.

Although details of the takeover seem to be unconfirmed, it is certain that the sewerage industry is undergoing major restructuring. This is something all Malaysians should pay careful attention to, for several reasons. One, as ratepayers, we would be directly impacted by any changes made to the sewage management tariff and payment system, not to mention the service quality itself. Secondly, any debts that are paid off by government in acquiring IWK would consist of taxpayers’ funds.

Finally, this is a crucial mega-deal that should not be hidden away from the public eye. In light of the furore sparked off by the Auditor General’s report, anyone in public service ought to realise by now that transparency and accountability are key in winning the hearts of the many.

It is of great concern that these important negotiations are taking place without any participation whatsoever from parties external to the deal. A monitoring body or watchdog group like Transparency International could possibly be invited to ensure transactions take place in an open, transparent manner.

The fact that year after year, billions of public funds seem to disappear in an instant – poof! – is truly astounding. The clarion calls repeat themselves in vain, to improve the system of governance and monitoring.

And these deals that seem to be opaque and obscure really do not help public perception of the administration. One would imagine that we would have learnt from past mistakes on several counts, namely that privatising public utilities does not work in this country. If and when these deals are made, they must ultimately be watertight to protect consumers’ interests.

Before the deal is signed, it is hoped that the officials representing all Malaysians (read: government) are carefully scrutinising every line of the concession agreement, making sure the terms and conditions of the document are favourable to the people. It would be a ridiculous affair if, several years down the line, the same pattern of being financially unviable and the need for public funds arises yet again.

Posted in Corruption, Economics | Leave a comment

What’s in the Budget for State Governments? (Federal 2012 Budget)

Posted on November 8, 2011 by Tricia

Every year when the Federal Government tables the budget in Parliament, the focus tends to be on national benefits. But here in my column for the Penang Monthly in December 2011, I write about what’s in it for state governments (the little that there is!).

What’s in the budget for state governments?

Nowhere is the excessive centralisation of Malaysian politics more obvious than in how the National Budget is controlled and conceived. For example, the Prime Minister’s Department uses up 5.8% of the whole, with a volume that is 10 times the budget of the richest state, Selangor; and 15 times that of Penang’s.

Prime Minister Najib Abdul Razak tabled the 2012 Budget amidst great fanfare, announcing a slew of benefits for almost every possible layer of society. One common criticism is that his administration was heavy on welfare handouts, despite the fact its Performance Management and Delivery Unit (Pemandu) chief had earlier warned of the country’s bankruptcy should our deficit be allowed to continue. Malaysia, as a result, is in its 15th consecutive year of a budget deficit, and although the government expects this budget deficit to be reduced to 4.7% in 2012 from 5.7% last year, this will be achieved only given a five to six per cent economic growth —something economists, including those from the Malaysian Institute of Economic Research, have expressed serious doubts over.

So the budget’s ballooning size did not come as a great surprise, especially for political pundits whose every second sentence over the last few months has been to speculate when the 13th General Elections will be called. If this is truly an election budget – and the stakes are extremely high at both state and national levels – how exactly will this budget affect state administrations? This is a particularly necessary question to explore given political competition for state governments between the Barisan Nasional (BN) and Pakatan Rakyat (Pakatan) coalitions.

There are several forms of financial contributions made by the federal government to all the 13 state governments in Malaysia. They are categorised into the following: population size grant, state road-maintenance grant, local and municipal council grant, service payments, grant under the concurrent list (of the Federal Constitution), local and municipal council grant for street lights, road slope maintenance grant and a grant based on development of the economy, infrastructure and prosperity levels.

All 13 states receive some form of allocation under each of these categories. In 2010, Kedah, Selangor, Sabah and Sarawak were also given additional “Annual special grants”, whilst Perlis and Kelantan were given grants due to operational account deficits. Finally, Sabah and Sarawak were given RM120mil each in relation to their petroleum resources.

In the year 2010, Penang received a total contribution of RM144.28mil from the federal government; Selangor received RM589.8mil, Kedah RM296.79mil and Kelantan RM287.8mil. In total, the federal government distributed RM4.75bil to all 13 states in 2010 (Source: Actual Grants to State Governments in 2010, Estimates of Federal Government Expenditure, 2012 Budget, Treasury). This represented 2.48% of the RM191.5bil budget for 2010.

The 2012 budget documents, however, unfortunately do not provide a breakdown of how much the federal government allocated to each of the state governments in the coming year. This is because the budget document (as downloaded on the Treasury website) lists expenditures categorised into respective ministries – no other format is provided. Of course, it would have been possible for the office in charge to extract the values of grants allocated to each state to facilitate detailed analysis.

This is an issue that Parliamentarians perhaps will be raising during the Budget Debates. Only then will researchers have access to estimated financial allocations to states like Penang and Selangor.

Until then, all we have are hints at how the state governments are expected to benefit from the 2012 budget through programmes run by federal-level ministries. What are some of these “benefits” under the budget? The list below is representative of all departments and ministries that explicitly state “State Government” as being a target “customer” of a particular programme.

  • The Auditor-General’s Department will spend RM59.8mil to audit all state governments’ accounts;
  • The Public Service Commission will service the state governments of Penang, Negeri Sembilan, Malacca and Perlis; and act as mediator between the Sabah state government and federal government under the Sabah Secretary Office;
  • The Attorney-General’s Office has representatives in all Legal Advisor Offices of the respective state governments and will spend RM34.65mil in total (RM3.68mil in Penang, RM3.38mil in Selangor, RM2.13mil in Kelantan and RM2.85mil in Kedah);
  • The Treasury will spend RM6mil to process loan applications from state governments (and other loan management duties in relation to development projects);
  • The Ministry of Natural Resources and Environment (MONRE) will spend RM28.64mil to assist state governments in Peninsular Malaysia to settle their land management arrears and other duties (federal government land acquisition operations, and implementing an information and communications technology [ICT]-based land management system); and
  • The Ministry of Housing and Local Government deals largely with local government issues, but one programme specifically listed as “Local government” or Pihak Berkuasa Tempatan has as its objective to assist, coach and encourage socioeconomic development programmes and services, for which RM331.3mil will be allocated. (The total ministry’s budget is RM1.63bil, where other entries on the list include solid waste management, town and country planning, landscaping, housing, policy, management and the fire department). This entry is also included here since local and municipal councils fall under the jurisdiction of state governments.

This list may not be exhaustively representative of other intrinsic benefits that may accrue to state and/or local governments (for example, agriculture departments which are federal offices seconded to state governments, amongst others). However, the total sum of these items which have been explicitly tagged as benefiting state governments come up to a paltry RM460mil, a tiny fraction of the total budget’s RM232.8bil.

This should not be too surprising, nevertheless, given the extremely centralised manner in which budget and policy-making have become (a point I have belaboured in past columns in this magazine). The budget for the Prime Minister’s Department, for example, has grown from RM11.9bil in 2010 to RM15.9bil in 2011. In 2012, this seems to take a slight cut down to RM13.5bil, a positive sign, but the point is that the Prime Minister’s Department alone takes up 5.8% of the total national budget.

Compare this to the Selangor state government budget (one of the larger state budgets in Malaysia), which totals RM1.3bil annually. And the significance is even starker when compared to the smaller state government budgets in Penang (RM900.35mil) and Kelantan (RM53.24mil).

In answering the question of just how much the state governments benefit from the 2012 national budget, one is brought back to the issue of the federal-state structure of government administration. The fact that the figures show minimal direct contributions by the federal government to state and local governments is merely a reflection of the ways in which policies are set and implemented. Macroeconomic and social policies are still largely governed by the centralised federal government, and hence that is where the money lies.

Decentralisation of government policy would encourage greater local participation in the decision-making process. Under the BN coalition, this trend is nowhere near taking place in Malaysia. It is clear that as long as Putrajaya intends to micromanage policy and execution (even of issues that can be much better managed at the local constituency levels, like community public transport and solid waste management), the purse strings will be held tightly at the top of the food chain.

As the general elections approach, some state governments may raise this as an issue of contention. After all, it is extremely difficult to demonstrate to an electorate the changes in a state if its government is not in fact in control of factors affecting their livelihood. Control of funds is tied directly to control of one’s resources: the election issues of, for example, management of water resources and payment of oil royalty (in Kelantan, Terengganu, Sabah and Sarawak) will therefore be recurring themes. For now, state governments will have to be satisfied with a top-heavy budget, taking whatever remains that do trickle down to them.

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

We can’t afford bad waste management

Posted on November 8, 2011 by Tricia

One thing politicians sometimes forget is that people just want their basic services to get done right: safe streets, clean streets. And so, I am convinced issues of water and waste will eventually be primary factors in how satisfied people are with their governments. This appeared first in the Penang Monthly issue of November 2010.

We can’t afford bad waste management

Curbing the amount of solid waste we generate and improving our ability to collect them and then dispose of them rationally are major challenges for a modern state. Malaysia’s political culture of centralised solutions may be more a hindrance than a help.

Whilst the words “green” and “sustainable” have been gaining popularity in both the public and private sectors in Malaysia, it is worrying that problems associated with solid waste have intensified. No doubt, the management of solid waste over the years has always left much to be desired. Piles of rubbish strewn across open sites, irregular waste collection and dirty garbage trucks chugging along our roads are part of our national landscape.

Whether we like it or not, they are signs that something is not right in this country of ours. Why have the issues been so difficult to resolve, and who and what are responsible for this baneful affair?

Solid waste can be discussed in three segments, namely waste generation (residential, commercial, institutional and municipal), waste collection, and finally waste disposal. Where waste generation is concerned, the problem is worldwide. Since we consume in increasing amounts, the things we have to throw away have multiplied tremendously in volume. This of course puts great pressure on a society’s ability to collect and to dispose of its own throwaways.

The problem is not beyond our ability to manage. Some developed countries have learnt to deal with the problem. But in Malaysia, we are still fumbling around for acceptably efficient solutions.

Problems at three levels

According to the Housing and Local Government Ministry, Malaysia produces 25,000 tonnes of waste daily, and this is expected to rise to 30,000 tonnes by 2020. Out of this, 45% is food waste, 24% plastic, seven per cent paper and six per cent iron and glass. Selangor’s population of 3.49 million produced 3,090 tonnes per day in 2004 with Kuala Lumpur being responsible for 2,538 tonnes per day, or 5/6 of them.

Penang’s population of 1.34 million in 2002 produced 1,189 tonnes per day, and the MPPP (Municipal Council of Penang Island) showed that the amount of solid waste disposed increased by 52% to 768 tonnes per day in 2006 from 505 tonnes per day in 2005.

In 2001, Malaysia as a whole generated 0.68kg per capita/day, compared with Vietnam at 0.61kg per capita/day, Thailand at 0.23kg per capita/day and Singapore at 1.13kg per capita/day. Curbing waste generation is definitely the first thing that needs doing.

The second issue is waste collection. This has been under the purview of local authorities. However, whilst local councils that had sufficient funds could provide those services by contracting them to private companies, poorer councils could not. Waste management is never a profit-making exercise. For the latter, collection became infrequent. Local authorities spend RM1bil annually dealing with solid waste.

In Penang, collection coverage reportedly approaches 90% of households on Penang Island and 70% of households in Seberang Perai on the mainland.

The third problem is waste disposal. Less than five per cent of all waste is currently being recycled, when 30-50% is actually recyclable. Although recycling campaigns have been carried out before, these have largely failed to result in a systematic process of extracting recyclable items from the waste flow. Open dumping and open burning of waste were common practices until the early 1990s when landfills gradually became the preferred solution. As at April 2007, there were 261 landfills in the country, about 150 of which were still operating. There are now nine operating landfills in Selangor, all located away from urban areas. Landfills come under local council jurisdiction and are managed by appointed operators.

Landfills however are not a sustainable solution, as many are at critically full levels and need safe closure, non-sanitary landfills require upgrading and some landfills have been found to have been built too close to water catchment areas and access roads. An example is the Bukit Tagar landfill in Rawang where in 2006 an open pipe valve caused leachate spillage, leading to the contamination of Sungai Selangor. A more recent phenomenon is that of scavengers (immigrants and Orang Asli, depending on the site) who are exposed to toxic wastes and dumpsite collapse. Landfill capacity is severely limited today and land availability for new sites or transfer stations is not promising.

Land filling however remains the predominant treatment for municipal waste, even in Organisation for Economic Cooperation and Development (OECD) countries.

Solid Waste and Public Cleansing Management Act 2007

The federal government at the time did take measures to address this and passed the Solid Waste and Public Cleansing Management Act 2007 to institutionalise strategies and procedures for solid waste management. The objective was to ensure better and efficient management of waste collection, recycling and disposal, all at no extra charge. The distinctive feature of the legislation is that it removes the responsibility of solid waste management from local authorities and transfers this to the federal government instead. This has been a reiterated feature under the planning authority Performance Management and Delivery Unit’s (Pemandu) recently announced Economic Transformation Programme (ETP).

Between 2007 and today, the privatisation process has been ongoing with negotiations expected to conclude by the end of this year. Eventually, the federal government’s plan is to pay three concessionaires to operate solid waste management in Peninsular Malaysia: Alam Flora (central zone), E-Idaman (northern zone) and Southern Waste (southern zone).

The current status in Penang is that the collection system is actually being operated by contractors on behalf of the two local authorities. In Selangor, all 12 local councils except for Hulu Selangor already contract out to Alam Flora, although in some councils these are sub-contracted further. It is estimated that between 30-40% of local council revenue is used for solid waste management.

Penang, however, is resisting the takeover by the federal government. The takeover requires councils to surrender their Solid Waste Management Department assets and human resources to the Solid Waste Management Body. The state is also not convinced that a third party will be more efficient, and is understood to be in consultation with the proposed concessionaire and the Ministry of Housing and Local Government.

The success of this privatisation process depends on several factors, namely concessionaire ability to deliver on waste collection, recycling and disposal and maintain financially viable operations. Solid waste management companies cannot be given concessions similar to that of the water services concessions in Selangor, some of which were biased in their favour despite their lack of experience. More importantly, the federal government must not try to “save” the companies if they eventually become financially unsustainable, and risk being accused of bailing out private companies. Solid waste is not as capital intensive as water services, the bulk of the cost being vehicles, collection and overcoming environmental costs such as leachate.

The Act legislates for twice-a-week waste collection for households and daily for wet markets. The existing 112 unsanitary landfills are to be closed and rehabilitated, with some to be upgraded to sanitary landfills. There will also be mandatory garbage sorting in 2012, with accompanying fines for any failure to adhere to the regulations.

Other recommendations

Mandatory waste separation is definitely one necessary solution, although ideally, waste generation should be reduced at source. This means purchasing items with minimal package. Recycling can itself be wealth-generating, for example large cardboard boxes can be disposed of at shopping centres. Scavenging at landfills could also be formalised through a material recovery facility for manual sorting. At a conference I attended in Jakarta recently, a folder handmade from waste was distributed instead of the usual conference files, product of a project called Trashpickers (website www.xsprojectgroup.com).

Other alternatives have been proposed, such as the use of integrated solid waste management systems with zero emissions, or incinerators. Some countries already use eco-friendly incinerators, such as Austria and Japan, for example.

In order for incinerators to work, their design must ensure complete combustion, and they must be well-maintained. Poor management of equipment in Malaysia however has led to doubt as to whether large-scale incinerators will work here. Another problem is that transporting waste to incinerators will require smooth traffic conditions, which currently do not exist in the Klang Valley. In Malaysia, a study was conducted in the 1980s and early 1990s which ruled out heavy-duty incinerators in the Klang Valley because of bad traffic conditions. Kuala Terengganu and Broga are two sites with incinerators presently.

Ultimately, the proposals by the federal government will only work if the new concessionaires ensure efficiency of collection, mandatory separation, and efficient transportation of rubbish and disposal of waste in an environmentally-safe way. It will be interesting to see what transpires if not all state governments accede to federal demands. From the consumers’ perspective, all should advocate the 5Rs recommended by the Centre for Environment, Technology and Development Malaysia (CETDEM): rethink, reduce, repair, reuse and recycle.

Posted in Public Administration, Selangor | Leave a comment

The Vicious Cycle

Posted on October 22, 2011 by Tricia

Economics and Education – why one needs and contributes to, the other. First published in theSun on the 21st October 2011.

The vicious cycle 

For the last two weeks, all eyes have been focused on the 2012 budget (themed “National Transformation Policy: Welfare for the Rakyat, Well-Being of the Nation” that was unveiled by the Prime Minister in Parliament, politicians and economists analysing its contents and what it means to Malaysians. Interestingly, this was also the first time the Pakatan opposition coalition launched its Shadow Budget, with three key thrusts of “Opportunities and Dignity for all Malaysians, Sustainability and Empowering Malaysians”.

Other analysts have elaborated on the budget’s details, a whopping total of RM232.8 billion. But is this, along with other initiatives, enough to shake the economy out of its doldrums? A global survey of financial professionals by the ACCA showed a deterioration in Malaysian confidence, for example, although this is exacerbated by negative sentiments of the stagnating economy worldwide.

Economic woes

Some major concerns have been expressed. First, economic growth. The Malaysian Institute of Economic Research (MIER) downgraded the 2011 GDP growth rate to 4.6 percent year-on-year, despite originally rosy government estimates of 6 percent. Najib’s 2012 budget speech hopes for economic growth in 2012 of between 5 and 6 percent, although other analysts have expressed their views this is unrealistic.

Second, the national debt. Independent think-tank Research for Social Advancement (REFSA) reports that the federal government has more than doubled our national debt burden from RM217 billion in 2004 to RM437 billion today. Although the 2012 budget hopes to reduce the deficit to 4.7 percent of GDP next year, this will only be achieved based on high economic growth. A budget deficit would be burdensome ultimately on tax-payers.

The responses by government officials have not been very comforting either. The economic planning minister Tan Sri Nor Mohamed Yakcop said that Malaysia does not need a contingency plan or “Plan B” to bolster growth even if the global economy weakens, saying that we already have an in-built system that can adjust itself. One wishes he would elaborate upon this “in-built system” to enlighten the rest of us.

It was also amusing to have our Prime Minister criticise the Pakatan Rakyat shadow budget as “right-wing”. It was only last month that all guns were blazing against a member of the Pakatan coalition for being sympathetic to the socialist movement. Never mind that Barisan’s pro-corporation and right-leaning economics form the bulk of its ETP, the likes of mega projects such as the Mass Rapid Transit (MRT), development of Sungai Besi land by 1MDB and the 100-storey Warisan Merdeka tower.

Education, Education, Education

The second alarming report coming our way this week was a World Bank study that cited race-based admission quotas and political interference in university management as reasons for the falling standards of Universiti Malaya. This was starkly contrasted with the National University of Singapore that prioritised research, kept English as a medium of instruction and a merit-based admissions policy.

It was found that the quality of the faculty and, ultimately, talent, was crucial in distinguishing a “great university” from a “good university”. These reasons seem to encapsulate everything that has gone awry with Malaysia’s education system, although in an immediate response the Ministry of Higher Education said that ranking was not a priority anyway.

What we need to realise is that Malaysia is shooting itself in the foot by failing to improve its standards of education. By failing to invest in probably the most valuable resource and asset of a country – its people – this alone will account for the country’s lacklustre economic performance.

A reliable, intelligent, critically-thinking and creative workforce would be able to contribute positively in leaps and bounds to a thriving economy. Think industries such as technology, service, banking and finance, creative arts and theatre, research and development, and so on.

Our economy would be more fiscally healthy if its debts were better accounted for, and so unnecessary expenditure could be curtailed: excessive spending to bail out failed companies for failed projects; employing an unnecessarily large civil service; paying lucrative amounts to external consultants for jobs that government servants are responsible for; maintaining subsidies because the low-income strata of society cannot afford staples otherwise – all these point to a system that bleeds the economy, for the simple reason that it is equally a system with poor human resource and talent management.

This is the vicious cycle that will spell disaster for us. As much as we worry over the national debt and economic growth (or lack thereof), it is even more crucial that we put our brains together to worry about the national education system as a first and foremost priority.

The 2012 budget gives tremendous incentives to private and international schools (in the “hopes” there will be “reduction of school fees”) but gives handouts to national and national-type schools which do not essentially reform the quality of the system. If we lose out again on crafting quality and consistent education policy, syllabus and educators to produce Malaysians who decide to stay and contribute to nation-building processes, we lose, period. The education and economic systems are intrinsically linked and we will need the strengthening of the former in order to propel the latter forward.

Posted in Economics | Leave a comment

Malaysia the Welfare State?

Posted on October 16, 2011 by Tricia

Are we a welfare state, or are we not? I’m not sure even our government knows how to classify us, since there have been conflicting remarks on the matter in the past. This was first published in the Penang Monthly in October 2011.

Malaysia the welfare state?

“Welfare policies” are always controversial issues for various reasons. Who gets what and why is the major question. In Malaysia, answering “who” leads quickly to debates on class and race and what-not, answering “what” leads to fiscal arguments and answering “why” leads to ideological quarrels. Be that as it may, Malaysia has always had interventionist governance, and the new disputes are welcomed for highlighting what nation building is about.

Ever since the Pan-Malaysian Islamic Party (PAS) muktamar in June, which had as its theme the “welfare state” policy concept, there has been a scramble by the ruling coalition to respond, and not so gracefully either. Prime Minister Najib Abdul Razak claimed that PAS had plagiarised the idea, stating that the Barisan Nasional (BN) government had already been implementing the welfare state policy in Malaysia and was doing it better than the PAS government of Kelantan ever could.

This seems to have provided generous room for a policy and idea competition to flourish – the fight for which side is dishing out more aid for the locals. Strangely enough, back in 2009, then Women, Family and Community Development Minister Shahrizat Abdul Jalil retorted to the media that Malaysia was not a welfare state, when asked about the lack of welfare aid in a particular constituency.

That there is any reaction at all by the government this time around is an admission in itself of the growing impact PAS is making on the Malay electorate. The choice of the theme, although not entirely new, is brilliantly timed. It encapsulates all the points of a theologically acceptable “Islamic state” that many PAS members aspire towards, but without actually making use of the term itself. The “welfare state” concept is something all three Pakatan Rakyat (Pakatan) coalition parties have expressed public support for, although their articulation of it so far has been vague enough for centre-right leaning individuals within the Democratic Action Party (DAP) and People’s Justice Party (PKR) to formulate a response. A somewhat more detailed version of what welfare means can perhaps be referenced from the Pakatan’s Common Policy Platform (CPP) and the Orange Book (Buku Jingga).

It has never been easy describing the economic ideology generally practiced in Malaysia. As it stands, however, the economy is driven very much by government-linked companies (GLCs), quotas and other stringent requirements and foreign restrictions. Its government’s so-called “welfare state” policies include a slew of packages that are targeted at the poor through education, health and other poverty-alleviation aid. How different, then, are the proposals by Pakatan from what the BN has already been implementing over the years? And secondly, it is pertinent to examine what welfare measures Pakatan states have been implementing over the last three years.

The discussion is even more important today as Malaysia grapples with a rising budget deficit amidst the growing needs of her citizens. The Statistics Department, for example, reports that the average cost of living for an urban household in Malaysia is about RM2,500 (2010 prices), whilst the average household debt has risen to 76% of gross domestic product through mortgages, car loan repayments and credit card spending (Hariati Azizan, The Star, August 28, 2011). About 36% of Malaysian households (2.1 million) have a total income of RM2,000 a month while almost 55.6% (3.3 million) of households have a monthly income of less than RM3,000. Making ends meet is a common household headache.

“Welfare state”: Pakatan vs BN 

Abdul Hadi Awang’s speech at the PAS muktamar included references to economic social justice, where the public should not be coerced into paying high taxes, and where the prices of essential goods should not be hiked. He cited as examples the abolishing of road tolls; the removal of unnecessary taxes that burden people and the improvement of basic public services as had been implemented in Pakatan states. The speech also focused on the fight against corruption, where profits of GLCs have been “distributed…to cronies” and “losses are absorbed by the public through taxes.” Addressing corruption would bring greater economic competitiveness, was the line of argument. The PAS definition of a welfare state is essentially one that is based on the Islamic belief that one ought to administer the state holistically, with great and equal care for the environment, spiritual and moral health, as well as the economic and general wellbeing of the people.

The Pakatan CPP and Orange Book similarly outline the need to address tremendous leakages and corruption. This gives utmost priority to, for example, the removing or renegotiating of subsidies paid to lucrative independent power producers (IPPs) ahead of the removing of the subsidies given for everyday needs. There are also references to assistance items, such as the increase of teacher salaries.

On providing aid to the people, it seems like both coalitions largely subscribe to the same philosophy in theory. However, where they differ is in their definition of what an economic system would look like under a welfare state exercising principles of good governance. Where Pakatan would prefer to get rid of the culture of GLCs and of benefitting crony companies under the guise of “privatisation”, BN still maintains these relationships and in fact continues to set up more quasi-governmental institutes. In theory there may be attempts to encourage transparent and accountable behaviour, but the practice of crony selection of contractors and negotiated tenders is still rampant.

Welfare aid in Pakatan states 

It is relevant to examine the sort of welfare aid already being implemented in the Pakatan states, since this is a testament to the sort of national policy envisioned by that coalition. The Penang government increased welfare aid by giving RM100 yearly to 115,000 senior citizens, single mothers and the disabled, and RM1,000 one-off payments to their beneficiaries; allocated 150 acres for public housing in the Batu Kawan township ranging from RM72,500 to RM220,000 per unit and set up an RM2mil dialysis centre with reduced treatment rates, amongst other things.

In Selangor, its “Merakyatkan Ekonomi Selangor” – loosely translated as the People’s Economy of Selangor – epitomises the welfare state policy to its core, with a series of nine packages that help a spectrum of Selangor residents. These include an education fund for plantation workers’ children, RM1,500 given to all babies born in Selangor which can be redeemed at the age of two, a one-off RM2,500 given to those whose elderly family member has passed away, 20m3 of free water for every household, RM1,000 for those who enter university (who come from households earning less than a certain amount), a women’s health scheme including breast cancer screenings, a microcredit scheme, dialysis centre and additional leave for pregnant civil servants, free tuition services and a slew of others.

Kedah also has a similar one-off payment of RM500 for families where an elderly family member has passed away, whereas Kelantan has introduced loans to civil servants at no interest and a whole host of various funds such as the al-Qardhu Hasan, Kifalah scheme, people’s plantation dividends, distribution of grain, extension of maternity leave and youth empowerment programmes.

The federal government recently announced that it would provide assistance to those earning RM3,000 and below. Although the details of this scheme are not yet ironed out, this is seen as a welcome move (and yet another response by BN to Pakatan’s highlighting of a growing problem).

Instead of entertaining the futile debate about which coalition is providing more “welfare”, it is imperative that the discussion moves towards how the needs of the labour market and lower income groups can be better addressed. Even without going into strict definitions of what a “welfare state” entails, it doesn’t take an economic dictionary for us to realise that all sides should be fighting against the system of cronyism, nepotism and patronage, especially in the awards of tenders.

Because the real culprit is this: any efforts made to dish out dole to the masses will have little impact if the nation’s riches are allowed to flow out in many other (surreptitious) ways.

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Same rules of the game

Posted on October 8, 2011 by Tricia

In October 2011, the Occupy Wall Street movement was rife, infecting many other cities in the US and England. We had a similar movement, although ours started even before theirs began, interestingly enough. A version of this was published in theSun on 7th October 2011.

Occupy – The Same Rules of the Game

“We are the 99%” is the slogan used by the thousands of protestors who have stormed New York City in the “Occupy Wall Street” campaign, which culminated in the march and mass arrests on Brooklyn Bridge last weekend. Their message is simple: a protest against the well-oiled financial and economic system that is led by the 1% of the population, made up of the wealthiest and most well-connected Americans; the same system that despite having wreaked havoc on the country’s (and therefore, the world’s) economy, still continues running unabashedly on the same rules of the game as it did previously.

Watch the scenes on Al-Jazeera (or Youtube, depending on your generation) and you’d think the protestors are starving, with nothing to lose, like in the Arab Spring revolution. We often think Americans have it all, abundant manna from heaven, but a Washington Post columnist decries this fallacy, saying that three years after the crash, “youth employment is at its lowest level since the end of World War II” (Downie, J., 26th September 2011).

The Malaysian Prime Minister will be tabling the 2012 Budget in Parliament on this very day. At the time of writing, he has hinted that its contents will address the rising cost of living of low-income earners, like “extending financial aid, subsidies, incentives, skills training, healthcare services and housing”. (Funny, were we not told by Pemandu just last year that subsidies would have to be withdrawn, failing which Malaysia would be bankrupt by 2019?)

My humble prediction of the Budget’s contents is that it will be precisely that: a combination of motherhood statements like “increasing foreign investment”, “stimulating economic growth”, and welfare aid policies like “1Housing Scheme”, “1Skills Programme” and “1Subsidy”, and so on. A number of quotes from the ETP, GTP, EPP and the 10th Malaysia Plan, to be sure.

All well and good, except that nowhere in the Prime Minister’s speech or the accompanying budget documents will there be an incisive analysis of the failures of an economic system that will break (and has been breaking) Malaysia.

And what exactly is this? 

It is the culture that embraces, breeds, and practically worships the means of getting rich quick, and finding deceptively roundabout ways of doing so. It is considered the intelligent thing to do, in climbing the ladder of crony capitalism. Forget the free market; this is pulling every string you’ve got to get ahead of the crowd.

In fact, this is a culture deeply embedded within the privatisation scheme introduced by then Prime Minister, Dr. Mahathir in the 1980s, many of which turned awry. Recall the multiple bailouts and losses the Malaysian government (and hence, taxpayers) had to consequently bear throughout the 1990s: Bank Bumiputera Finance, Star LRT, Putra LRT, EPF are some examples. The principle of privatisation is to maximise competitiveness and productive efficiency, but the Malaysian version seems to have emerged with the opposite results.

The Najib administration has declared its wishes to minimise government’s role in the economy, transferring this to the private sector. One wonders if real competition and private-led initiatives will be permitted to flourish.

Especially since recent privatisation schemes with similar modus operandi have continued. The water services industry in Selangor is an example of failed privatised public utilities, one particular concession company of which being continually in the red, sustained only by Federal government loans.

Another example is the current and ongoing Federal government move to centralise the privatisation of solid waste management in Peninsular Malaysia. Under this scheme, three private companies will be given 22-year concessions to undertake solid waste management (Alam Flora in the central zone, E-Idaman in the north and Southern Waste Management in the south). The Selangor, Penang and Perak state governments have opted out, having their local councils take over instead.

There are several issues here that Malaysians should be concerned about. First, although the Federal government will pay the additional fees to the concession companies, this is only for the first five to seven years. The Minister of Housing and Local Government stated that “after the KPI is fulfilled and people feel satisfied with the services, we will start charging”. These funds dispensed by government are effectively taxpayers’ money anyway. Second, the companies will receive RM500m to RM600m annual payment from the government on top of the assessment fees. Finally and most importantly, how were these companies selected?

In Malaysia, 60 percent of households still earn less than RM3,500 a month in 2009 (10th Malaysia Plan), whilst six percent earns more than RM10,000 a month (there is frustratingly no data available for higher income categories).

The privatisation model seems to be a repetition of schemes that in the past have failed to deliver public benefits effectively. Further, it enriches a rentier, crony class disproportionately to corporate performance. Unending “corporate welfare” provided by government could instead be channelled more effectively for public good.

Given the trend, one hopes the Budget 2012 will tackle structural reform. Failing which, Malaysians may begin to ask themselves whether they belong to the 1% of society – or the 99%.

Posted in Economics, Human Rights, Outside Malaysia | Leave a comment