Malaysia Today - Your Source of Independent News
Malaysia Today - Your Source of Independent News |
- Reducing Malaysia’s debt burden
- Who can meet the expectations of the majority?
- A Barisan Win is No Victory for Malaysia
- Fulfilling a promise of hope?
- Use of Sosma an Overreaction to a Non Situation
| Reducing Malaysia’s debt burden Posted: 15 Apr 2013 03:51 PM PDT Malaysia came out of the 'Great Recession' relatively little the worse for wear, but bearing a higher burden of debt than is common among emerging markets, both in the public as well as in the private sector. While concern over Malaysia's public sector debt has been less evident in the public discourse lately, those concerns are never far away. At 52.9% of GDP in 2012, the debt level is nowhere near the onerous burdens carried by many advanced economies, with much of the increase in debt due to the 6.7% fiscal deficit incurred during the Great Recession. Yet public sector debt remains far above the regional average and while not in itself dangerous, it does limit the ability of the government to counteract future crises. Arguments against the government's debt level are thus now framed in terms of improving "fiscal space". For example, in the latest Article IV Consultation, this is what the IMF had to say:
There are quite valid concerns over the sustainability of government revenue and expenditure. The tax base is narrow with less than 10% of the workforce actually paying taxes, while a third of government revenue comes from taxes and dividends on the oil & gas industry, which over the long term is threatened by potentially declining reserves and more recently, lower global prices. Nevertheless, the overall debt to GDP ratio is below any critical threshold, and the government carries minimal external debt with over 95% raised domestically. The financial system has more than sufficient excess liquidity to absorb further debt issuance, and both interest rates across the term structure and debt service ratios are at near all time lows. So while immediate concerns over a Malaysian sovereign debt crisis are substantially overblown, the case for reducing the debt to GDP ratio makes sense. This is especially true since the economy appears to be growing along its potential-output growth path which means, whether viewed from the lens of neo-classical or Keynesian macroeconomic thought, fiscal consolidation in Malaysia is thus both necessary and appropriate. The question remains as to how to go about it. Much of the government's financial commitments are "sticky" – salaries, pensions and debt service payments make up nearly 40% of the 2013 Budget. The development budget (which is fully funded through debt) is discretionary, but cuts here would reduce future potential growth, and limit investment in needed infrastructure. The two other major items of expenditure that could be ripe for the plucking are procurements and subsidies, which combined total nearly 30% of total government expenditure. Shifting to a largely open-tender based procurement approach, as the government has committed to doing, could yield some savings by plugging leakages and wastage. But gains here may be more limited than one might imagine – open tenders may be more cost-effective in theory, but much of these efficiency gains are lost as procurement needs grow larger and more complex. Subsidy reduction offers greater scope for cost savings. The federal government expects to spend RM37.6 billion (about US$12.3 billion) on subsidies in 2013, of which the largest portion will go towards maintaining below market petrol and diesel prices. In addition, there is the "hidden" subsidy borne by the national oil company Petronas, which provides natural gas below market prices to domestic power producers, industry, and consumers. In 2011, this subsidy amounted to an additional RM18.7 billion (US$6.1 billion). Rationalising subsidies would go a long way towards reducing the deficit, and begin making a dent in reducing the government's debt load. While this has met with considerable and understandable civil and political opposition, there's no doubt that any future administration will need to address this issue. The long overdue implementation of GST would also, on the revenue side, help close the fiscal gap. But leaving aside the effort to improve fiscal space, of more pressing concern is Malaysia's private sector debt, specifically household debt. Malaysian corporate gearing ratios have been generally declining since the Asian Financial Crisis of 1997-98, but household debt has been concurrently on the rise. From 72.6% of GDP in 2005, household borrowing has increased to 80.5% as of 2012 – as corporate balance sheets mended, household balance sheets have deteriorated. This trend has come from a confluence of global and domestic macroeconomic factors such as low-wage competition (e.g. from China), wages progressively delinking from productivity, falling real interest rates, banks shifting emphasis from corporate to household lending, rising property prices, and a higher cost of living. While much of this household debt has been used to acquire properties and financial assets which could presumably back the attendant liabilities in the event of a crisis, there is a worrying heterogeneity in the distribution and direction of borrowing. Something like 80% of household borrowing is by households that earn higher than average incomes (greater than RM3,000 per month, or US$1,000), and 46.5% are to households earning above RM5,000 (US$1,600) per month. The leverage ratio of the latter is in the region of 2.3-3.3 times annual incomes, a relatively comfortable level. For households earning less than RM3,000 however, the leverage ratio ranges from 4.4 to an astonishingly high 9.6 times annual income. More worrying still, the fastest growing component of low income household debt is in personal loans, which are increasingly provided through the non-bank sector. The numbers are frightening – loan approvals through non-banks rose 63.7% in 2012, and the average personal loan was for RM68,000 (US$22,300) with a duration of 20-25 years.
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| Who can meet the expectations of the majority? Posted: 14 Apr 2013 02:51 PM PDT It is not easy to categorise the two opposing coalitions and its members as they are disparate, complex, and, with multiple agendas, often fractured. This is primarily the outcome of Malaysia's recent history. The disparate regions and people that make up Malaysia today are, after all, an artificial construct whose only common denominator was that they were all subject to British Imperial power. A peninsular with 9 Malay kingdoms at the end of Asia's land mass whose citizens were populated in majority by a polyglot of people from the Malay Archipelago, the Chinese and South Asian subcontinents, with a sprinkling of Arabs, Turks, remnants of past colonialists, various unique groups that were created through inter-marriages, and not to mention the many indigenous peoples aggregated together with two geographical entities on the island of Borneo, that is separated by 800 kilometres of the South China Sea, and whose people have greater cultural affinities with the peoples of the Philippines and Indonesia, and who themselves are disparate in culture, ethnicity and language. However, all these societies did have one feature in common – feudalism. This was buttressed by British efforts to violently suppress progressive elements in the Malayan polity, preferring instead to hand over power after independence to conservative elements, primarily as a means to protect British interests. The feudalistic nature of these societies gave rise to what has become a very successful model of politics practised by the ruling coalition since the first elections before independence in 1955: Consociational politics, where the elites bargained and struck a deal where each group – first three, then rising to 14, now 13 political parties – had some share of political and economic power under the hegemonic power of the Malay and increasingly Islamised United Malays National Organisation (UMNO). This system has served BN well, chalking up electoral victory after victory at the past 12 general elections. More importantly, the BN and its predecessor, the Alliance, were able to monopolise power because they were able to forge a 'syncretism' in their style of government i.e. governing via a variety of ideological orientations and political practises. The BN was successful not only because of its competent stewardship of the Malaysian economy but mainly because they were able to straddle competing (social, economic and political) interests within their coalition as well as address competing interests outside it by either co-opting them into BN, stifling them through draconian measures or skilfully manipulating these competing interests. The opposition parties and coalitions of the past were not able to successfully mount a challenge to the Alliance and BN partly because the electoral process and system was stacked against them, but also because the opposition parties could never successfully find a way to manage the competing interests that they each represented. In the past decade or so, especially since the sacking of former Deputy Prime Minister Anwar Ibrahim and the East Asian Financial Crisis of 1997/98, the BN appears to have lost this unique ability to straddle the competing interests of its members and the communities they represent, while the opposition, led by, ironically, the sacked former Deputy Prime Minister, appears to be increasingly adroit at managing these tensions. Therefore, one big question at GE13 is how the two coalitions are projecting themselves as true representatives of the people's wishes, and how they go about addressing the key challenges that Malaysia as a country and Malaysians as a people face, in a way that satisfies the myriad competing interests. The key reasons for widespread dissatisfaction with the present situation are manifold, but the key issues that both coalitions have to address are the rising living costs, demographic change, rapid urbanisation and increasingly uneasy race-relations. The BN, in the past, has been very successful with their politics of development and key among these has been the reduction of absolute poverty to below three per cent and shaping Malaysia into a middle income economy by 1994 on the back of a low-cost, export-oriented economic model whilst at the same time creating a Malay middle class, primarily through the expansion of the public sector and government linked corporations (GLCs) jobs that is financed primarily through Malaysia's revenue from non-renewable resources. However, this particular model has two unintended effects: widespread relative poverty and high income inequality. The low-cost model has seen wages for 80 per cent of Malaysian households stagnate over the past three decades. These households earn less than RM3,000 (around AUS$ 1,000) a month in a country where the average monthly income is RM4,025 (around AUS$ 1,250). More critically, the bottom 40 per cent of households earn on average RM1,440 a month (around AUS$ 450). Most shockingly, the vast majority (71 per cent) of people in the bottom 40 per cent are bumiputeras – literally sons of the soil, a designation that includes Malays and a range of indigenous groups – despite 40 odd years of affirmative action for this group. Indeed, their well-being is and has been the raison de être of UMNO, the backbone of the ruling coalition. People have been able to get by in spite of rising living costs, because they have been kept at bay by infusing government funds into basic social services, food staples and a fuel subsidy. The last especially has proven effective, but any attempts to rein in costs have been met by popular resistance as a motorised populace has become addicted to cheap petrol. There is also a significant demographic change in Malaysia. 71 per cent of Malaysians are under the age of 40 with 34 per cent aged between 20 and 40. They face a major challenge. Malaysia is in a middle income trap and must either develop or procure high quality human capital as a pre-requisite to transition into a high income economy. However, Malaysia's poor quality education has not prepared them for the necessary challenges of a knowledge intensive economy. International benchmarks and surveys shows that the quality of education in Malaysia, at all levels, is no match to the successful East Asian economies that Malaysia has chosen to emulate. 80 per cent of Malaysia's labour force has no more than the Sijil Pelajaran Malaysia (SPM – equivalent to year 10 or O'levels qualifications), and the 57 universities and the more than 500 colleges are producing large numbers of graduates that the Malaysian labour market deems unsuitable or poorly skilled. This in an economy experiencing full employment since the late 1980s, and severe skills shortage since the early 1990s. Ironically, unemployment among graduates was highest. In 2007, graduates accounted for more than one-quarter of those unemployed, while unemployment among new graduates was 24. 1 per cent in 2008. With limited employability, mediocre wages and loans to be repaid, young Malaysian graduates end up saddled with enormous debt. The bloated civil service and GLCs, which are also perceived to be inefficient and a fiscal drag on the economy, are unable to provide the expected middle class jobs for bumiputeras long accustomed to getting them as part of a perceived social contract with UMNO. However, perhaps ironically, it has been rapid urbanisation, that has brought these once disparate communities closer together. While many urban areas are still stratified by race and class, the sheer density has increased the interaction. 71 per cent of Malaysia is now urban. Only Kelantan, Pahang, Perlis, Sabah and Sarawak have rates or urbanisation below 55 per cent. Better infrastructure, especially information communication and telecommunications, in urban areas have also provided a platform for dissatisfied Malaysians to hear alternative views and to connect with each other. 65 per cent of Malaysians were using the internet in 2010. As the internet largely remains uncensored, the opposition coalition and civil society movements have used it effectively to mobilise support for their causes. These groups have used social media, technology and the internet to also penetrate into rural areas through free radio, websites, but also the audio-visual recording of government scandals in DVDs, and other forms. While the ruling party has also joined the information technology revolution, the opposition has been quicker and more able to marshal support online despite being out-resourced by the ruling coalition. These developments, whose impacts were first experienced at the 2008 general election, have impacted the coalitions in different ways, and have prompted different reactions. It appears that the BN continues to rely on its tried and tested race-based, trickle-down economic growth, and welfarist approach to policies while PR sensing that the ground has shifted, appears to focus on class-based and rights-based policies.
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| A Barisan Win is No Victory for Malaysia Posted: 14 Apr 2013 02:30 PM PDT (Second of Four Parts) There can only be three possible outcomes to the next election: Barisan to win with a comfortable victory; Pakatan Rakyat to prevail; and a hung parliament. A comfortable victory is one where the expected hopping of a dozen or so successful candidates would not materially affect the political balance. A hung parliament is where the buying or the shifting of allegiance of a handful of elected members would significantly alter the political balance. Contrary to the pronouncements of many, the worst possible outcome would not be a hung parliament but a Barisan victory. The best possible outcome would be for Pakatan to secure that majority. A hung parliament is not the worse but then also not the best possible outcome either. I begin with Barisan being returned to power, not with a supra majority for not even Najib Razak is predicting that, not in his wildest dream. In his speech dissolving Parliament, he implicitly conceded the possibility of defeat. Only his fanatic supporters are fantasizing big victory, but only after they have been high on their free tapai(fermented rice). If you relish precious public funds being squandered through bloated contracts (think of the scandalous "commission" that slimy "Datuk T" secured for the non-existing crooked bridge) and outright pilferage (as with the "cow-gate" scandal and the Scorpene submarines that would not submerge), then expect more of the same with another Barisan victory. Only this time the scale would be even more outrageous both in scope and amount, difficult though that may be to imagine. Barisan, and UMNO specifically, would look upon their victory as approval if not vindication of their corrupt and wasteful ways. That is what Najib meant by not changing horse midway. He and his cronies wish to remain on their gilded saddles. With a Barisan victory we would never get to the bottom of the "cow-gate" scandal or the outrageous civil settlement between Khazanah and ex-Malaysian Airlines' boss Tajuddin Ramli. Consider that had Barisan won Selangor in 2008, that Khir Toyo character would still be its Chief Minister and not the convicted criminal that he is today. There are many Khir Toyos at the federal level; only a Barisan defeat would expose these scumbags. Only with a Pakatan victory could they be held accountable and be prosecuted. Read more at: http://www.bakrimusa.com/archives/barisan-win-no-victory-for-malaysia
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| Posted: 14 Apr 2013 01:51 PM PDT Barisan Nasional launched their long awaited manifesto on Saturday 6 April. I was in Kuala Terengganu that evening for a meeting. Since I knew that the Barisan Nasional event will be broadcasted live on the taxpayer funded RTM, I decided to head for an ikan bakar dinner near the Kuala Ibai bridge, expecting to watch it while enjoying the food. But someone stood up as soon as the programme started and changed to a football match instead. So I missed the atmosphere of the grand event as it happened.
Luckily there is Youtube. Watching the video recording, I could see that the atmosphere was electric. The Bukit Jalil National Stadium was filled was BN supporters, cheering Dato' Sri Najib as he attacked Pakatan Rakyat's record, presented BN's plans for the next five years, and proudly praising BN's achievements to date. Indeed BN deserves to be proud of what they have achieved. There is no doubt that under BN, and its predecessor Alliance, Malaysia has changed tremendously. Particularly during the time of Tun Mahathir, Malaysia was transformed from an agriculture economy into a manufacturing powerhouse. And over the last four years, Najib has worked hard to turn our economy into one that is based more on knowledge and technology. The New Economic Model (NEM) has become the thrust of BN's agenda today. It aspires to make Malaysia a high income nation that is both inclusive and sustainable by galvanising the private sector to become our engine of growth. The NEM also aspires to remove the distributive and entitlement culture and rentier behaviour that has become widespread in our society. This is almost the best promise of hope any leader can give. So when BN launched its first manifesto – the first one after the NEM- I expected the spirit of NEM will envelope all their promises. Surely BN wants to be consistent in their messaging, ensuring people take their promises seriously. Alas the manifesto confirms that BN too has chosen the populist and welfarist path. The manifesto contains a deluge of promises on how BN wants to spend our money. The list of welfare programmes is extensive, including committing to more than doubling the amount for BR1M to RM1200 per household and RM600 for singles, increasing the value of 1Malaysia Book Vouchers to RM300, and Schooling Aid to RM150. If BN wins GE13, we can expect to see more widespread use of the 1Malaysia brand. There will be more clinics, retail outlets, retail items, daycare centres, and housing projects sporting the brand. The implication is that these will all be "affordable", which should be read as the government actively distorting prices or heavily subsidising them. When the promises of handouts and subsidies were read out at Bukit Jalil Stadium, the crowd cheered loudly. And with those cheers, the NEM promise to remove the distributive and entitlement culture looks set to be broken. BN's manifesto also makes several promises involving the private sector and government-linked companies (GLCs). The production of more 1Malaysia products will be "driven by GLCs and the private sector" The private sector is expected to take part in building 1 million affordable homes, including 500,000 PR1MA houses. GLCs will be expected to be more active in developing Bumiputra entrepreneurs by increasing outsourcing programmes for Bumiputra companies. And social engineering will be made a norm in GLCs as BN promises to "ensure a fair mix of all races" in these companies. In other words, this manifesto envisions a Malaysia in which the private sector and GLCs will play the role of political agents tasked with delivering the agenda of a political coalition. This is a worrying future and is at odds with what was envisaged in the NEM. Rather than stepping out of the way to allow the private sector to do what they do best – create wealth for everyone – BN is embedding government intervention in the private sector to achieve political Read more at: http://ideas.org.my/?p=6771
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| Use of Sosma an Overreaction to a Non Situation Posted: 13 Apr 2013 03:17 PM PDT Think tank Political Studies for Change (KPRU) welcomes the assurance given by the police that Security Offences (Special Measures) Act 2012 (SOSMA) will not be abused during the the run up to the 13th General Election. The assurance is a proactive measure to quell any distrust by the public towards the police on the possibility of SOSMA being arbitrarily used. However, as well as providing assurance that SOSMA will not be abused, the police is highly recommended to take immediate and appropriate actions against perpetrators of political violence seen during and post election season. This comes considering that SOSMA is intended to be used against matters that are a threat to parliamentary democracy. Considering that the definition to what constitutes to threat against parliamentary democracy is neither clear nor succinct, it opens the possibility of abuse. Malaysians are reminded of the arrests made in relation to the Lahad Datu intrusion which individuals were arrested under SOSMA for suspicions of having connections with the intrusion. What assurance does the police have for Malaysians and the opposition or its supporters will not be arrested under SOSMA on grounds of "suspicions for being a threat to parliamentary democracy" during this GE13? A fair and just police is a police that protects the public at all cost. However, that role of the police in Malaysia is a perverted role. Instead of protecting the public, the police have issued a threat to all Malaysians that they will use the newly minted and widely controversial law of Sosma on Malaysians during the 13th General Election (GE 13) "to ensure the general election is not affected by incidents or security threats and be accused of being terrorist"? The irony of this situation by the police comes when it warns individuals and non governmental bodies to not overstep the law but the police itself are overstepping the toes of Malaysians by indirectly accusing Malaysians of having intentions to disrupt the peace of this country. The recent selective screening of the controversial movie Tanda Putera also raises the question on its weightage as influence during the GE13. Malaysians familiar with the tragedy of 13th May are also familiar of the conspiracies surrounding the cause of the tragedy. How will the police ensure that the selective screening of Tanda Putera will not fall into one of the conspiracy theories behind any unwarranted incidents during and post GE13? There is a problem with wearing the badge with too much pride when the police asserts that SOSMA will not be abused during GE 13 when past records indicate the police have no experience or the know how to handle situations when faced with large crowds. On the other hand, the problem with threatening to enforce SOSMA during GE13 is that it gives a considerable amount of power and justification for the police to exercise their brute enforcement on Malaysians if, to say things went awry. Read more at: http://kpru2010.wordpress.com/2013/04/14/use-of-sosma-an-overreaction-to-a-non-situation/
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