Constructive criticism
Neil Khor@ www.malaysiakini.com ( April 28,2009)
In his blog postings about the stock market and financial institutions, Dr Mahathir Mohamad is giving us a very good lesson in economics. More importantly, he is doing what the Barisan Nasional and the opposition are not able to: re-focus the national lens on economics and the well-being of the country.
In late 2007, upon returning from the United Kingdom, I realised that the cost of living in Malaysia had gone up quite dramatically. By March 2008, Malaysians have all effectively become poorer due to inflationary forces. But what was worse, the working class and even the lower middle class (people with income less than RM2,000 per-month and living in urban areas) were badly effected. The government was, however, too reliant on feel-good facts and figures. In the end, I am quite sure that many decided to vote opposition because their quality of life had deteriorated.
It is now more than a year after that watershed political event. Though unseen but felt acutely, the insidious economic tsunami is pushing many Malaysians onto the edge of financial ruin. Car loans, housing loans, credit card debts; all need to be serviced based on shrinking incomes.
Whether or not we realise it, our economy is very much export-driven. Malaysia ranks third in Asia behind Singapore and Hong Kong on the export dependence indicator. This exports measured against the overall size of the economy. Petroleum, palm oil, rubber, electronics and electrical products are our mainstay. For many years, the government has tried to develop the services sector: banking, healthcare, education, information technology and tourism-related products.
Unlike mono-ethnic states, Malaysia has to achieve development whilst playing a fine ethnic-balancing act. But most Malaysians agree that development should not result in the alienation of anyone.
Intra-ethnic problem
However, the reality is that we are also one of the most unequal societies in Asia and governmental policies have inadvertently made that gap an intra-ethnic problem, especially amongst bumiputeras. The nature of competition is such that talent is concentrated in particular segments of society sustained by wealth and education. By this I mean, the wealthy have access to capital and better education.
To remedy this, the BN-led government decided to provide, what in golfing terms, are called handicaps; which is an amateur’s playing ability. Ethnic-based policies means the handicap was applied across the board but we know now that it ended up handicapping whole ethnic communities whilst building up resentment in others. For Indian Malaysians, the pit was even deeper with a staggering 40 percent of crime in Selangor allegedly committed by this vulnerable group.
Malaysia’s tired social and economic engineering programmes now need revision although for a time, they were successful. Put the hardware in and some level of progress can be achieved. But in the process, freeloaders have gotten used to easy contracts. As a bumiputera friend said to me, “the Chinese are stupid. Why work when you can freeload, get commission and sub-contract the work to the others?”
One of the reasons why a governmental ombudsman was recommended by the first National Consultative Council in 1971 was to monitor the implementation of the NEP. The ombudsman is responsible directly to Parliament and would have acted as the eyes and ears of the NEP. Why the government did not set-up such an institution is a question for those former prime ministers to answer.
It is easy to say all these things with the advantage of hindsight. Few would have been able to foretell the negative impacts of privatisation. Despite his critical comments about western financial institutions, Mahathir’s government also attempted to profit by indulging in forex trading with less than happy ends. But there is no point in crying over spilt milk and Mahathir is correct to emphasise what he has learned from past policies and mistakes. For a long time, non-governmental organisations in Penang, for example, have warned against over-dependence on exports and foreign direct investments.
They put forward the idea that development should be sustainable. In the past, the strategy, to put it crudely, was to throw money at a problem. Today, we have to pay more attention to quality interventions.
Class F contractors
Let us take the case of Class F contractors. Government contracts are often given to bumiputera companies to help them gain capital. This, theoretically, will help them build capacity in management and the procurement of talent to do the work. A long-term strategy, these contractors will then move up the value chain ultimately becoming a YTL, etc. But the reality is that no capacity-building is happening because they sub-contract out the work to non-bumiputeras.
Instead of giving contracts to bumiputera companies, what the government should do is to require these companies to have genuine working relationships with their non-bumiputera partners. The onus should be on the bumiputera companies to find expertise outside their own “gene” pool and thus create a sustainable business model.
Non-bumiputeras would also be more willing to establish genuine partnerships if they feel assured that their bumi partners will not only get the contract but also contribute qualitatively to the partnership. It is also important to make sure that we have only a certain number of contractors. This will encourage other bumiputeras to aspire to other types of professions that are less dependent on government contracts.
In the education sector, meritocracy must be practiced relentlessly. This is simply because Malaysians cannot be short-changed by having half-baked teachers at primary, secondary and tertiary levels. Moreover, if we are to be a supplier of educational services, we need to have the best teaching at private colleges, public universities and our think tanks.
Some will cry foul but they should crawl out of their time-warps. This is not 1971 or even 1985. Most of the members of Gapena, for example, have sent their children to overseas universities and they have all done very well. It is time, that the same opportunities be given to poorer Malaysians in the rural areas. This means investing more in education by raising the salaries of quality teachers.
As we make ourselves less dependent on exports, we need to offer the world better services. But unlike the policies of the past, let us put Malaysians first. If our health, education and tourism products are so good that Malaysians feel proud of them, then it should be quite natural that they will be good enough for regional and international investors and customers.
It is therefore time to put into practice the ethnically neutral aspects of the NEP so that we can build a strong and sustainable nation. On this point, the constructive criticisms and observations of Mahathir should be heeded.
Neil Khor@ www.malaysiakini.com ( April 28,2009)
In his blog postings about the stock market and financial institutions, Dr Mahathir Mohamad is giving us a very good lesson in economics. More importantly, he is doing what the Barisan Nasional and the opposition are not able to: re-focus the national lens on economics and the well-being of the country.
In late 2007, upon returning from the United Kingdom, I realised that the cost of living in Malaysia had gone up quite dramatically. By March 2008, Malaysians have all effectively become poorer due to inflationary forces. But what was worse, the working class and even the lower middle class (people with income less than RM2,000 per-month and living in urban areas) were badly effected. The government was, however, too reliant on feel-good facts and figures. In the end, I am quite sure that many decided to vote opposition because their quality of life had deteriorated.
It is now more than a year after that watershed political event. Though unseen but felt acutely, the insidious economic tsunami is pushing many Malaysians onto the edge of financial ruin. Car loans, housing loans, credit card debts; all need to be serviced based on shrinking incomes.
Whether or not we realise it, our economy is very much export-driven. Malaysia ranks third in Asia behind Singapore and Hong Kong on the export dependence indicator. This exports measured against the overall size of the economy. Petroleum, palm oil, rubber, electronics and electrical products are our mainstay. For many years, the government has tried to develop the services sector: banking, healthcare, education, information technology and tourism-related products.
Unlike mono-ethnic states, Malaysia has to achieve development whilst playing a fine ethnic-balancing act. But most Malaysians agree that development should not result in the alienation of anyone.
Intra-ethnic problem
However, the reality is that we are also one of the most unequal societies in Asia and governmental policies have inadvertently made that gap an intra-ethnic problem, especially amongst bumiputeras. The nature of competition is such that talent is concentrated in particular segments of society sustained by wealth and education. By this I mean, the wealthy have access to capital and better education.
To remedy this, the BN-led government decided to provide, what in golfing terms, are called handicaps; which is an amateur’s playing ability. Ethnic-based policies means the handicap was applied across the board but we know now that it ended up handicapping whole ethnic communities whilst building up resentment in others. For Indian Malaysians, the pit was even deeper with a staggering 40 percent of crime in Selangor allegedly committed by this vulnerable group.
Malaysia’s tired social and economic engineering programmes now need revision although for a time, they were successful. Put the hardware in and some level of progress can be achieved. But in the process, freeloaders have gotten used to easy contracts. As a bumiputera friend said to me, “the Chinese are stupid. Why work when you can freeload, get commission and sub-contract the work to the others?”
One of the reasons why a governmental ombudsman was recommended by the first National Consultative Council in 1971 was to monitor the implementation of the NEP. The ombudsman is responsible directly to Parliament and would have acted as the eyes and ears of the NEP. Why the government did not set-up such an institution is a question for those former prime ministers to answer.
It is easy to say all these things with the advantage of hindsight. Few would have been able to foretell the negative impacts of privatisation. Despite his critical comments about western financial institutions, Mahathir’s government also attempted to profit by indulging in forex trading with less than happy ends. But there is no point in crying over spilt milk and Mahathir is correct to emphasise what he has learned from past policies and mistakes. For a long time, non-governmental organisations in Penang, for example, have warned against over-dependence on exports and foreign direct investments.
They put forward the idea that development should be sustainable. In the past, the strategy, to put it crudely, was to throw money at a problem. Today, we have to pay more attention to quality interventions.
Class F contractors
Let us take the case of Class F contractors. Government contracts are often given to bumiputera companies to help them gain capital. This, theoretically, will help them build capacity in management and the procurement of talent to do the work. A long-term strategy, these contractors will then move up the value chain ultimately becoming a YTL, etc. But the reality is that no capacity-building is happening because they sub-contract out the work to non-bumiputeras.
Instead of giving contracts to bumiputera companies, what the government should do is to require these companies to have genuine working relationships with their non-bumiputera partners. The onus should be on the bumiputera companies to find expertise outside their own “gene” pool and thus create a sustainable business model.
Non-bumiputeras would also be more willing to establish genuine partnerships if they feel assured that their bumi partners will not only get the contract but also contribute qualitatively to the partnership. It is also important to make sure that we have only a certain number of contractors. This will encourage other bumiputeras to aspire to other types of professions that are less dependent on government contracts.
In the education sector, meritocracy must be practiced relentlessly. This is simply because Malaysians cannot be short-changed by having half-baked teachers at primary, secondary and tertiary levels. Moreover, if we are to be a supplier of educational services, we need to have the best teaching at private colleges, public universities and our think tanks.
Some will cry foul but they should crawl out of their time-warps. This is not 1971 or even 1985. Most of the members of Gapena, for example, have sent their children to overseas universities and they have all done very well. It is time, that the same opportunities be given to poorer Malaysians in the rural areas. This means investing more in education by raising the salaries of quality teachers.
As we make ourselves less dependent on exports, we need to offer the world better services. But unlike the policies of the past, let us put Malaysians first. If our health, education and tourism products are so good that Malaysians feel proud of them, then it should be quite natural that they will be good enough for regional and international investors and customers.
It is therefore time to put into practice the ethnically neutral aspects of the NEP so that we can build a strong and sustainable nation. On this point, the constructive criticisms and observations of Mahathir should be heeded.
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