Archive for the ‘Malaysian Economics’ Category



To claim that things are getting better in their tenure and because of them is an old Prime Ministerial habit. A PM is undoubtedly a very important person in our dispensation. The office is vested with great authority and there is an aura about the incumbent that often fools even the cameras whose lights seem to caress rather than expose the object of their focus. Our system of government, with so much power of patronage concentrated in one person, ensures that mostly fawning and obsequious people who constantly whip up a lather of simulated adulation surround the Prime Minister. PM’s consequently confuse the power of patronage with the power that ensures compliance. It is small wonder when our supreme leaders start thinking of themselves as King Canute’s who can order the waves about.

The reality is that like the ocean’s waves, economic waves too are cosmically controlled and PM’s are like King Canute’s who futilely wave their hands about. Happily most PM’s realize this and make sure they are seen waving their hands appropriately with the tides of growth and the ebbs of inflation. But once in a while we get a leader who actually believes that the waves are obeying him. That is when we enter dangerous waters.

I recently attended an event that Prime Minister Najib Razak addressed. Unlike most other PM’s with the exception of Tun Dr Mahathir, he came promptly at almost the appointed minute and walked briskly to his place on the dais. He listened as the host, with a wry sense of humor, exclaimed how fortunate Malaysia is to be united as never before under one charismatic man. The Prime Minister looked on expectantly and the audience was suitably primed to roar its approval.

The Prime Minister then spoke and without much ado took the fight straight to the critics, a few of who like me were seated in the back row. He said: “For Malaysia to be at the top of the growth tables is an unusual situation. Obviously, there are some who find that difficult to digest and come up with imaginative and fanciful ideas to belittle that achievement.” This is unfair. But it is churlish to say that his critics do so because his government is perceived unable to resolve the debt-ridden government strategic investment arm, 1MDB’s RM46 billion debt or address the falling value of the Ringgit. To be truthful based on facts as perceived does not mean a person takes pride in belittling one’s own country? Is the next litmus test of patriotism going to be supporting the PM’s extravagant flights of fancy?

The Prime Minister’s case is that “Malaysia’s economic success is the hard-won result of prudence, sound policy and effective management.” He repeated: “Malaysia’s growth rate is acknowledged as the highest among major economies.” With evident sarcasm he added that his critics are confused when they say, “the growth rate does not feel right” and generously offered to alleviate the confusion with “facts in place of feelings.” The point here is no critic of any consequence ever argued that the growth rate “does not feel right.” They have just said that his government’s interpretation of the facts is not right.

Take GDP growth for instance. Few argue that the “real’ GDP growth is 4.97% as his government is claiming though there have been serious misgivings on how the GDP calculations were tweaked to jump growth a further 1%. The problem here is the use of the term “real.” In the real world the number that matters is the “nominal” GDP growth rate, which is a measure of current market prices.

For much of the past decade Malaysia’s nominal GDP growth was in the 4% range and corporate profitability growth was also in that range. Since inflation used to be in the 0.5% to 1.5% range, real GDP was in the 5% range. The present nominal GDP growth is 4.2%.

But the popular mood is determined by actual accruals and not by economic sleight of hand. In the real world it is the nominal GDP that matters. Corporate sales and profitability are calculated in nominal terms. Everyday commerce and business takes place in nominal terms. Government revenues are collected in nominal terms and levied on nominal incomes or sales. It is not a matter of feeling but the reality of life.

The fact is that 2015-16 has been a bad year for the Malaysian economy. In the budget for 2015-16 the government set a nominal GDP growth target of 5% . The nominal GDP growth turned out to be just 4.2%, which is below target. The real GDP growth of 4.97% is because of the collapse of world commodity prices and has little to do with the so-called “prudent policies.” Comparing apples with oranges can only fool some people for some of the time, and not all the people for all the time.

While on apples and oranges, food inflation is the inflation that matters to most people in this country where the average family expends over 60% of its income on food. This inflation has been well over 5% even though the government projected in the 2016 federal budget at 2% – 3%. Since the introduction of GST, the Consumer Price Index (CPI), which is used to measure inflation, has been on the increase. By the end of April 2015, the first month when GST was implemented, CPI increased 1.8 percent when seasonally compared to April 2014. In July 2015, four months after GST, CPI index was 3.3 percent higher than the same month a year earlier.

In his speech the PM also specifically referred to The Bantuan Rakyat 1 Malaysia (BR1M) monetary aid which will be increased to RM1,200 next year from RM 1,000 under the 2017 federal budget. The BR1M allocation will cost the government RM6.8 billion, to be delivered to 7 million households. The PM then goes into Tun Dr Mahathir bashing and says that BR1M is not “dedak”, but rather, it is a sincere assistance from the government to prioritise the rakyat’s needs.

Look at theses figures, Goods and Services Tax (GST) to rake in RM39 billion in 2016 (3.1 percent of GDP) (2015: estimated RM27 billion from April). Malaysia’s fiscal deficit is projected to decline to RM38.8 billion or 3.1 percent of GDP in 2016 (2015: 3.2 percent). Oil-related revenue to drop 14.1 percent in 2016 due to lower global crude oil prices (2015: 19.7 percent). The federal government expenditure to increase 1.7 percent to RM265.2 billion in 2016 (2015: RM260.7 billion). Nominal GNI (gross national income) per capita to increase 5.6 percent to RM38,438 next year from 4.2 percent anticipated growth to RM36,397 this year.

One is tempted to dismiss this as just fanciful claims, but in these times when ones patriotism and professional integrity is apt to challenged for lesser lese majeste, it will be prudent to just say: It’s time to get real!

Meanwhile honest heart-centered Malaysians continue to struggle to make ends meet, their ideas, talents finding little or no nourishing context in which to flourish.


“Cutting off the nose to spite the face” is an expression used to describe a needlessly self-destructive over-reaction to a problem: “Don’t cut off your nose to spite your face” is a warning against acting out of pique, or against pursuing revenge in a way that would damage oneself more than the object of one’s anger.

The phrase is known to have been used in the 12th century. It may be associated with the numerous legends of pious women disfiguring themselves in order to protect their virginity.

It was not uncommon in the Middle Ages for a person to cut off the nose of another for various reasons, including punishment from the state, or as an act of revenge. Cognitive scientist Steven Pinker notes that the phrase may have originated from this practice, as at this time “cutting off someone’s nose was the prototypical act of spite.”

The expression has since become a blanket term for (often unwise) self-destructive actions motivated purely by anger or desire for revenge. For example, if a man was angered by his wife, he might burn down their house to punish her; however, burning down her house would also mean burning down his, along with all of their

The Embargo Act of 1807, passed by the United States Congress in protest against British and French interference in U.S. shipping. The Act had the side-effect of prohibiting nearly all U.S. exports and most imports, greatly disrupting the U.S. economy.”

Now course we have this 1MDB fiasco at a time when a dipping growth rate and drop in value of the Ringgit was holding out hopes of revival.


Lopsidedness is a matter of perspective. Consider this: 35% of Malaysia’s disposable income comes from the top six cities. The bottom 1000+ kampongs account for 35% of income. Of the rest of the income, 30% is in the remaining hundreds of towns. These are what some marketing pundits euphorically call the Tier-2 towns, places with perceived potential for immense growth. Does this Tier-2 layer really exist?

This must be judged from the headline news — “Malaysia’s August inflation seen steady at 1.4%”, “Falling Inflation”, “Bank Negara and the Malaysian economists celebrate volubly”. Is this really worth celebrating for all?

I was recently touring Kundasang, home to South East Asia’s highest mountain – Mount Kinabalu, also South East Asia’s largest cabbage and broccoli market which I’m very familiar with, as I was one of the pioneers years ago doing experiments on pesticides and introducing hybrid cabbage and highland vegetable seeds from Taiwan and Japan some twenty years ago. I can’t say people of Kundasang would celebrate a fall in highland vegetables i.e. cabbage, cauliflower and broccoli prices. Hundreds of farmers are mourning the crash of prices, sometimes to even below the cost of production.

The cost of cabbages has fallen at the farm gate by over 50% over just 6 months! Overall, prices have deflated over 30%. But it will take years before they could go up again.

Unfortunately, the farmer is not treated like an investor whose money commands the headlines, and who reports farm level profitability. No farmer ever computes his ROI (return on investment) on the land that he owns. It is inherited and comes for free to cultivate.

If we were to cost up all farm level production based on the cost of fertilizers, insecticides, fungicides, weedicides, labour and land, everything will be ten times more expensive! Not many recognise this, but Malaysian agriculture is highly subsidised by the farmer who treats the cost of land as free.

Think about the positives of inflation for a moment. How many people know how inflation is computed actually? There are 435 articles or commodities across three major groups that are taken into consideration and given different weights. Milk has the highest weight (4.4), rice is (2.44), weights for all fruits and vegetables are less than that of milk.

This raises another question: how many times do the media complain about the cost of milk? Cabbages and most highland vegetables have a collective weight of 0.54, jagung (corn) even less (0.09). Then, why are corn prices more of an issue than cabbages? The Malaysian farmer would say that vegetables and fruits get unfairly low attention in the context of the perceived causes of inflation. I want to argue that farmers need inflation for a better living.

When I did economics as one of my first year papers in uni, as a student, I was taught that “a little inflation is not such a bad thing”. But how ‘little’ is little? The bigger issue is, 65% of Malaysia that lives off agriculture, will have to suffer from curtailed income due to deflation. And this clearly takes money out of the hands of semi-urban and rural people.

Would the Tier-2 story stand then with just 2% inflation? I would think not.

One also begins to wonder about the policy-making process and about those who are entrusted with the hallowed job of policy-making as well. Time and again, we have seen that Parliament is not where policy is made; it seems as though it is an arena where political parties stage their differences in acts of one-upmanship.

Policymakers are influenced heavily by three kinds of people: the man in the street types who just look at day-to-day gains and valuation; the politicians who do not understand economics when it is separated from politics; and the global investors who are at best opportunists and who treat Malaysia like a cell in a game of snakes-and-ladders.

The point is, good intentions of a few policymakers are not getting translated into ground reality at the farm level. There is too much media glare on produce prices than is required.

There is an urgent need for a fresh look at the needs of specific businesses in rural Malaysia, in terms of supply chain infrastructure, training and financial support. One size does not fit all. Individual ministries must debate thoughts and ideas with commercial businesses at the grassroots level, to understand the travails and opportunities.

Meantime, surely the dreams of Fast Moving Consumer Goods (FMCG) companies and other categories must be put on hold till the work performed by farmers in smaller towns and kampongs for their livelihood becomes profitable again. Some inflation is surely good.



HAVING witnessed democracy in action in the form of state assembly elections in Sarawak recently, it is worthwhile looking at what the Sarawak elections had exposed. Political analysts have already made pronouncements about identity politics, that is, the politics of race and community, being pushed to the side by new demands for development. They have pronounced on the virtues of being “with the people” in the manner of Taib Mahmud, the Chief Minister of Sarawak, as opposed to the “parachute politics” of Anwar Ibrahim.

Corruption has been mentioned, but in terms that are not very clear, at least to lay people like myself. Has this exercise in democracy proved that there is widespread anger at the corruption that exists in almost all parts of society, in public bodies and authorities as well as in private entities? From what one can comprehend, the answer is the familiar “yes-and-no” that analysts take shelter behind when faced with a phenomenon they cannot really understand.

The verdict cannot be against corruption in, for example, Sarawak, where the reputation of the ruling Parti Pesaka Bumiputera Bersatu (PBB) and the other Sarawak BN component parties combine is not of its being a group of saints, to put it mildly. For the record, the perception about the party that lost badly, the Sarawak United People’s Party (SUPP) which lost 13 of 19 seats it contested and its President Dr. George Chan Hong Nam, Deputy Chief Minister of Sarawak, humiliating defeat in the hands of the DAP, is no better.

In Sarawak, no one will take you seriously if you claim that the Barisan National Sarawak is pure as driven snow; that the losing SUPP was seen as utterly corrupt, which is why it lost; and that the Sarawak BN and Taib Mahmud is responsible for the chopping down of most of Sarawak’s rainforests at the expense of the indigenous communities; and Taib Mahmud was also seen as corrupt and the protector of corrupt allies. The fact is that all of them are seen as corrupt.

Without making any solemn pronouncements on why a party won or lost, or the role played by rebel candidates of all parties in splitting vote banks, one can say with a degree of certainty that a rejection of corruption was not really the main issue in the election. And that is the truly worrying factor in this round of exercise of democracy.

Equally worrying is the sense one gets that the major political parties know this and are not really bothered. They also know, from the look of things, that the public protestation of corruption will never ever amount to anything as far as political power in our system is concerned. The parties strategise their moves and countermoves on the basis of other considerations, which they think to be more effective and relevant. So we can continue to bark corruption, coruption, coruption but nothing is gonna happen and nothing is gonna change, it has not change for the last 50 years.

An article that appeared not so long ago in The Nation cited a study by a group of scholars in the London School of Economics, which said that the comparisons made by various writers and experts between Malaysia and Singapore as emerging economic powers were erroneous; that Malaysia could never hope to be a rival to the economic powerhouse that Singapore already is. One reason given for this is the all-pervasive corruption in Malaysia.

This trend of thinking will in all likelihood catch on, despite brave words from leaders of Barisan National. One can sense it in the way the Malaysian stock market has behaved; in the way the ringgit has got weaker by the day; and in the general gloom among bankers, which they will not admit to publicly but will talk about mainly among themselves. It is not gloom about the immediate future – it is about Malaysia in the long term. It is, finally, about the nature of Malaysian democracy.

There are those who increasingly see signs of fatal flaws in Malaysian democracy because of the way it has developed. Political parties in power, from regional parties to so-called national parties, depend on corruption from the top down to survive, and survival is all that matters. An even more dangerous trend was the failure to improve the education standards.

Malaysia’s failure to provide quality education means that eventually our young men and women will lack the intellectual capabilities, leading to a falling off of quality of work, of skill levels and so on, with its inevitable ill effects on the economy as a whole. But are our politicians who are engaged in the task of survival, interested or concerned?

Eventually, one has to conclude that Malaysian-style democracy and the ills afflicting our economy, our industry, our infrastructure, our health services and our education system will ensure that Malaysia does not become an economic superpower, emerging or otherwise, and that it will have to depend on aid to keep itself going after all the natural resources have depleted. Then, multinational corporations will start to invest in other more lucrative ASEAN countries. Remember, Malaysia’s debts is now a whopping RM0.5 TRILLION.

Now, a lot depends on what young leaders such as Nurul Izzah and others such as Chief Ministers Musa Aman of Sabah and Lim Guan Eng of Penang do. There is little to be gained by looking at any other leader; those who are indeed leaders are either erratic and whimsical, or interested only in lining their pockets. Some like Taib Mahmud although in his twilight may well take Sarawak towards development, but he has to provide proof of that, as Musa Aman has done so admirably.


by Lim Guan Eng

Even though many goodies where announced during yesterday’s Budget 2013 speech by Prime Minister Najib Tun Razak, this budget has failed the Malaysian people by not addressing three crucial areas which are necessary to guarantee the long term well-being of our country and its people – namely fiscal prudence, economic sustainability and cost of living increases.

Firstly, even though the budget deficit is projected to come down from 4.5% in 2012 to a ‘mere’ 4.0% in 2013, this figure masks the poor track record of the BN government in sticking to its spending plans. For example, total expenditure for Budget 2012 was announced at RM232.8b in last’s year’s budget speech. But in this year’s Economic Report 2012 / 2013, total expenditure for 2012 is projected to total up to RM252.4b. This is almost RM20b more than the projected expenditure announced last year.

We were fortunate that projected revenue is expected to be RM207b for 2012, RM20b more than the RM186.9b projected revenue announced last year. Without this tax ‘windfall’, our budget deficit would have ballooned up to 6.7% of GDP rather than the projected 4.5% for 2012. But we cannot expect that actual revenue will continue to exceed projected revenue especially given the slowing global economy. Furthermore revenue from oil related tax revenue is likely to decrease given the change in the dividend policy of Petronas as well as political uncertainty in Southern Sudan which could decrease Petronas’s bottom line by as much as US1 billion.

While we do not object to giving financial assistance to the truly deserving, there is nothing to indicate that the government has stopped leakages in the BR1M program which went to people like an MCA Datuk in Pahang. The initial RM1.8b that was allocated to BR1M for 3.4m households in the 2012 budget ballooned to over RM2b for over 4m households. A country whose GDP is projected to expand by 5% in 2012 should see fewer households earning less than 3000RM. And yet, BR1M recipients are projected to increase to 4.3m households with another 2.7m individuals earning less than 2000RM joining them. Without proper checks and balances, the RM3b that has been allocated to BR1M 2.0 for Budget 2013 can easily increase to more than RM4b, if not more.
The same lack of fiscal prudence could be seen in the expenditure on subsidies. An allocation of RM32.8b was given for subsidies in Budget 2012 but the actual expenditure on subsidies is projected to be at RM42.4b, an increase of RM9.6b or 29.3% over the original budget! If the same kind of trajectory is followed, the RM37.6b which is allocated for subsidies in Budget 2013 could easily increase to almost RM50b!

Given the BN’s poor record for fiscal prudence and especially if elections are held next year, it is likely that BN will break the bank to funnel out as much taxpayer’s money as possible in a blatant attempt to buy votes by giving handouts irresponsibly. I would not be surprised if our total expenditure will be RM30b over budget and our budget deficit for 2013 would end up well in excess of 5.0%!

Secondly, this budget provides incentives and handouts which favors certain projects and parties rather than providing the basis for longer term sustainable economic growth that will benefit all. In fact, many of these incentives will skew the system against hardworking Malaysian entrepreneurs who are not in the position to receive and benefit from these incentives.

For example, Budget 2013 continues to give preferred incentives and tax treatments for companies who want to locate to and developers who want to build in the Tun Razak Exchange formerly known as the Kuala Lumpur International Financial District (KLIFD) including tax exemptions for property developers, income tax exemption for 10 years for TRX-status companies, stamp duty exemptions, industrial building allowance and accelerated capital allowances for TRX Marquee-status companies.

The aggressive promotion of TRX not only increases the problem of a property glut in commercial office space in Kuala Lumpur, it also unfairly disadvantages developers who own and are in the process of developing commercial property which TRX is directly competing against. These developers would lose out if existing or future tenants decide to relocate to TRX and at the same time, the taxpayer would also lose out since these companies would be given income tax exemption for 10 years. As part of this initiative, 1MDB will be allocated an additional RM400m from the Prime Minister’s Department in Budget 2013, an unnecessary expenditure for what is essentially a property development project.

Similarly, under the guise of lowering prices of goods in Sabah and Sarawak, the government is introducing 57 Kedai Rakyat 1Malaysia or KR1M stores at the cost of RM386m. Just like in Peninsular Malaysia, the ones who will be hurt by this move are the owners of the kedai runcit stores who cannot compete against the government subsidized KR1M stores. It would make more sense for the government to abolish the cabotage policy and to improve the transportation network in Sabah and Sarawak to reduce prices of goods in Sabah and Sarawak, which is what Pakatan is proposing, rather than to subsidize KR1M stores that are run by one private company which would drive out many existing kedai runcit owners out of business.

These kinds of initiatives contradict PM Najib’s statement that the era of ‘government knows best is over’. Indeed, according to the Economic Report 2012 / 2013, the public sector is expected to expand by 13.3% in 2012 to account for 25.2% of GDP (up from 23.3% in 2011), meaning that the government will play a larger role in the economy, rather than to reduce its footprint and to allow the private sector to thrive and drive the economy forward. By promoting and undertaking these initiatives, Najib is contradicting one of the major thrust of the New Economic Model (NEM) and also the impetus behind the Economic Transformation Program (ETP).
Thirdly, this budget fails to bring to the table long term solutions for the problem of rising cost of living, especially in the urban areas.

Crime is one of the main drivers of cost of living increases. Businesses which have to spend more on security pass the costs to consumers. Residents who have to pay for private security have less disposable income. Sadly, the measures which are in Budget 2013 to reduce crime leave much to be desired.

There are no recommendations to re-organize the police force by re-allocating Special Branch officers, which have twice as many investigating officers / detectives as the Criminal Investigation Department (CID), or by re-allocating some of the 14,000 General Operations Force (GOF) police personnel, an organizational legacy from the Communist fighting days, to the CID and the frontlines of fighting crime.

Instead, what was provided was the allocation of RM20m to buy 1000 motorcycles at a cost of RM20,000 per motorcycle to set up a Motorcycle Patrolling Unit.

In addition, there were hardly any efforts proposed to involve the state and local authorities to fight crime. All that was mentioned as the allocation to buy 496 units of CCTVs for 25 local authorities to prevent street crimes in urban areas. This works out to 20 units of CCTVs for every local authority which is not even sufficient to cover one neighborhood, much less the area in one state authority.

Similarly, the ambitious program to build more than 100,000 affordable and low cost houses will come to naught if these housing projects are not integrated with public transportation. The MRT project and the LRT extension cannot possibly cover all the areas which have or will have low cost and affordable homes, assuming that they even get built. Allowing the state and local authorities to provide bus services would be one possible solution to this problem. But instead of this, the federal government is expanding the federally owned RAPID bus services to other places, this time to Kuantan.

With car prices still at very unaffordable levels, especially for the lower middle income groups, the issue of affordable and low cost housing cannot be seen in isolation from the issue of public transportation. Unfortunately, PM Najib does not seem to have realized this as seen by his Budget 2013.

Pakatan Rakyat’s budget, on the other hand, exercises much more fiscal prudence. Not only is our projected deficit lower at 3.5% of GDP or approximately RM37b, our revenue and expenditure projections are also much more conservative, at RM197b and RM234b respectively. A more conservative budget would give us more room to maneuver if Pakatan does take over power at the federal level and puts its budget in place.

PR’s budget is also more economically sustainable in that we do not attempt to favor one sector or project over another. Instead we will set out to abolish monopolies, abolish unfair practices and increase competition in all sectors of the economy.

Our budget also gives more focus on long term solutions to address cost of living issues including a proper redeployment and reallocation of police personnel to fight crime, more involvement of local authorities to reduce crime and provide public transportation alternatives, reduce and abolish toll rates to put money back into the pockets of the people and to find new ways of providing affordable public housing.

The choice for Malaysians is very clear. Najib’s 2013 budget is full of one shot goodies and handouts which do not adequately address the long term concerns of the country namely fiscal prudence, economic sustainability and cost of living increases. Pakatan, through its Alternative Budget, and through the state governments in Penang and Selangor, have shown that it can govern with fiscal responsibility in mind, with sustainable policies which encourage fair competition and with measures that puts money in the pockets of the people in the long term. Let the people of Malaysia choose wisely.

Lim Guan Eng

Read the rest in Mandarin here


In this time of stupefying political stagnation at the highest levels of the Government of Malaysia, good news is hard to come by. Good news is only possible when governments show that they are capable of firm economic and political decisions. And, there is not the smallest sign that the Najib’s government plans to do anything other than continue stagnating till the next general election somewhere on March/April 2013. Please do not allow 1Malaysia People’s Aid (BR1M) payment of RM500 to households with an income of less than RM3000 per month to fool you into believing that there are signs of renewal that are suddenly going to manifest themselves. The results of the last round of General Elections the 12th were so stunningly bad for UMNO that there is not a murmur of revival in the hot June air.

On the economic front, where there is the most urgent need for change, the Minister in the Prime Minister’s Department Datuk Seri Idris Jala also Chief Executive Officer of the Performance Management and Delivery Unit (PEMANDU) drops a bombshell that Malaysia will be bankrupt by 2019 if it does not cut subsidies and rein in borrowings. Idris a Sarawakian the former “Number One Man” for Sarawak Shell further added fuel when he said that Malaysia’s debt would rise to 100 percent of GDP by 2019 from the current 54% if it did not cut subsidies. And what is even more frightening is when Idris said that Malaysia was likely to become an oil importer as early as next year at the current rate it was consuming petroleum. It seems Malaysians continue to be among the highest fuel consumers per capita in the world fuel consumption habits pattern which generally has remained relatively unchanged despite increased oil prices in 2008. The damage that can be done by a tired, comatose government before 13th General Elections is too horrific to think about but do not despair. There are signs of good news from the states.

You would have noticed them if you read between the lines of the statements that were made in Keningau Sports Complex few days ago by Prime Minister Najib Tun Razak when he celebrated Tadau Kaamatan this year in Keningau with 20,000 Natives including, Huguan Siou Pairin Kitingan and Chief Minister Musa Aman. Najib openly acknowledged that Sabah is experiencing rapid growth under Musa Aman and Sabah in the first quarter of this year had attracted about RM10 billion from foreign investors including the Sabah Ammonia Urea (SAMUR) project in Sipitang and the Keningau Integrated Livestock Center and a lobster cultivation project in the east coast of Sabah. But, UMNO now rules only 8 states minus Sarawak, so it does not matter. What does matter is for chief ministers like Musa Aman, Lim Guan Eng and perhaps even Menteri Besars like Khalid and Tok Guru Nik Aziz to wake up to how they could become the engine that takes Malaysia forward despite the inertia in Putrajaya.

To wake up and become engine that takes Malaysia forward, sometimes the state governments should be vocal with the way development projects from the Federal is forced down their throats and not done according to the aspirations of the local population. So far they have only rebelled against the Rural Development Ministry’s attempts to set up rural development committees to bypass and to undermine the state governments without consulting them. In states were UMNO was not in control, the minister Shafie Apdal uses his district rural development committees to bypass and to undermine state governments. In states were UMNO is in control, the rural development program was used in a pork-barrel fashion to support local party leaders. And, the states are right to do so but they now need to become more vocal about other things like having centrally controlled development and welfare programmes rammed down their throats. I have met state ministers and state exco members who admit privately that they are often forced to sacrifice excellent welfare programmes of their own for the sake of national welfare programmes. Remember, the former Chief Minister Harris Salleh recently even said that Shafie’s Rural Ministry had even justified awarding a RM100 million tender amount for the Pulau Gaya electrification project when the actual tender cost was only about RM25 million. Harris Salleh even said that he had received “many complaints from rural folk” that the billions of ringgit allocated by the federal government for rural projects was not having an impact on their lives and these projects were introduced for the sake of contracts and most of them are of low standard.

This is wrong because I can confirm from my own field research that the rural development programmes and welfare programmes that work best are the ones that are locally controlled. I have said it before and I will say it again that if we are seriously interested in ensuring that not another child grows up malnourished and illiterate in Malaysia, the solution lies in giving kampong women control of food programmes. This is something that more enlightened chief ministers should start doing forthwith which brings us back to what chief ministers can do to become Malaysia’s engine of growth.

They must demand more control over their resources. The sight of chief ministers and Meneri Besars lining up outside the Putrajaya to beg for development funds is an ugly one. Some states are bigger than the whole of Peninsula Malaysia and they would develop and grow much faster if they had more control over their economies. Many distortions crept into Centre-State relations in those bad old days when UMNO controlled nearly all of our major state governments. These distortions need to be removed and should be quite easy to remove now that we see Non-UMNO chief ministers making common cause on matters of national security.

Once state governments start competing with each other to become popular tourist destinations, favorites for foreign investment and centres of excellence in rural development, education, healthcare, sanitation and infrastructure building, Malaysia will finally begin to really change.

If this starts to happen soon, then the deleterious consequences of having a stagnant government in Putrajaya and a Prime Minister who seems to be in a somnambulant state will be mitigated. At the moment, despite the “spectacular” success of BR1M, we are in the hands of so weak a government that not a day seems to go by without someone giving it a slap or two. In recent months, we have seen Ministers and supposedly faceless bureaucrat interfere publicly in matters of policy.

When Federal Ministers decide what our telecommunications and multimedia policy should be and when Ministers decides whether MAS should be refinanced or abandoned to its fate. And, when the Minister tells us despite possessing state-of-the-art warplanes, modern weapons  and submarines that the nation’s security was so fragile that it could be compromised by mineral water bottles and packets of salt, it starts to feel as if we do not have an elected government at all. The Chief Ministers and Menteri Besars have at least a mandate to rule and real administrative experience.


Sabah Chief Minister Musa Aman has turned the fortunes of the state around since he came to power in 2003. He has come down hard on corruption, has improved infrastructure and infused new life into a creaking state machinery.

Sabah achieved sound financial management 11 years in a row with clean bill certification awarded by the Auditor General. Sabah also achieved the highest ratings of “AAA” by RAM Ratings Services Berhad for 3 consecutive years. Sabah also obtained ISO certification by Moody International for efficiency and proper state budget management for 3 consecutive years. Sabah under Musa Aman achieved record annual GDP growth, averaging 5%, in the eight years, 2004-05 to 2008-11. For 2012 the growth is projected 5% again when the State 2012 Budget was unveiled yesterday by Musa Aman amidst a backdrop of rising uncertainties in the global economy.

The release of the 2012 Sabah budget yesterday has left many Sabah observers relieved by what Sabah Chief Minister cum Finance Minister Musa Aman didn’t do: He avoided throwing Sabah’s economic recovery off course. The widespread view is that he has handled two major issues — the state’s Wellbeing and Prosperity — with aplomb.

The budget for the next fiscal year 2012 presents a balanced approach to long-term economic planning and short-term considerations of sustaining … the momentum in economic recovery. The budget reflects confidence and clarity and many describe the budget as “prudent and progressive”, and one businessman friend called the budget … pragmatic and practical.

In presenting previous budgets in his role as finance minister between 2001 and 2003, Musa Aman was as populist as they come. Today, his approach is different. “Fiscal policy has to be guided by the required framework for fiscal prudence,” Musa said as he unveiled the budget, proposing to spent RM4.048 billion next year making it the biggest State Budget ever in the history of Sabah.

The overall focus of the government on improving its fiscal position and increasing fiscal transparency is highly commendable. Musa Aman said the huge supply expenditure was estimated after taking into account the states financial strength and estimates of revenue totaling RM3.69 billion. The major revenue contribution is to come from sales on crude palm oil, petroleum royalties, income and interest from investment, land and forestry and another RM1.521 billion from the Federal Government.

Moving toward better fiscal management and transparency would mean a number of benefits, including increasing the efficiency of the economy, improving Sabah’s attractiveness as an investment destination and providing the government greater fiscal flexibility if — or perhaps when — it has to deal with future economic shocks.

Musa Aman who is also the finance minister has done “a decent job”, the 2010 Auditor General Report showed several actual figures that reflect the highest achievements in the states financial history such as:
1) State Reserves exceeding RM3 billion
2) State Revenue exceeding RM4 billion
3) Actual surplus amounting to RM730 billion
4) Development expenditures at RM1.17 billion
5) No arrears on Federal loans ( Under Musa Aman Sabah Government has paid all its dues to the Federal Government)

I’m sure the latest budget may lay the foundation for bolder measures in coming years. However, it is often the budget’s less bold and often boring bits that matter the most. That is, the reams of tedious fiscal arithmetic that go into determining whether the various commitments that the finance minister makes in his budget speech can be easily funded from the revenue or hinge on some preposterously optimistic assumptions. On this criterion, the budget fares rather well.

To critics of Musa Aman’s 2012 Budget, Keep in mind that Pakatan Governments would kill to be in the position Sabah is in, to grow at 5%, Sabah has endured the economic downturn with modest impact, and its economy “grew well” in 2011, “so let us not worry too much”.

Musa Aman has maintained relief for some sectors. For example, the implementation of infrastructure and public utilities programmes will involve an allocation of RM1.285 billion of which RM458.8 million is for water supply, Rm270.63 million for road and RM63.58 for sewerage. And then to strengthening further the agriculture sector RM335.95 million would be allocated so that there is high yield in local food production. Even in the tourism sector RM158.84 will be allocated and mind you tourism from January to September 2011 registered RM3.662 billion of which RM1.45 billion was from foreign tourist and RM2.212 billion from domestic tourist. Even the manufacturing sector will be getting allocation of RM98.15 million.

Sabah is addressing foreign direct investment (FDI), too. The Sabah Government under Musa Aman is working with the Federal Government and wants to make FDI user-friendly by consolidating regulations and guidelines into one document. This will enhance the clarity and predictability of our FDI policy to foreign investors. Musa Aman expects foreign investors to bring in big money — an estimated in billions.

If Musa Aman has his way, Sabah’s GDP will grow well beyond current expectations. One of his priorities is to revert quickly to the high-growth path of 9%, then find the means to hit double-digit growth. The economy stabilized in the first quarter of 2010-2011 itself, when it clocked a GDP growth of 5%, as against 5.8% in the second quarter of the preceding year. It registered a strong rebound in the second quarter, when the growth rate rose to 5.5%. With the advance estimates placing the likely growth for 2010-2011 at 5%, Musa Aman said “we are indeed vindicated in our policy stand.” The final figure may well turn out to be higher when the third- and fourth-quarter GDP estimates for 2010-2011 become available. He expects growth in the next fiscal year to be higher.

Many things do indeed seem to be going his way. The growth rate in manufacturing in December, for example, was 7% — the highest in two decades. There are also signs of a turnaround in merchandise exports, with growth in November and December after a decline for some months.

Indeed, Sabah has become miracle economy, defined internationally as those with over 5% growth. The best news comes from Sabah, historically the biggest failure. From 2004-05 to 2008-11, Sabah averaged 5% growth annually. It was virtually Malaysia’s fastest growing state, on par with Selangor and Penang. That represents a sensational turnaround. Musa Aman deserves an award for the most inclusive revolution of the decade and he deserves kudos for making Sabah stage a huge turnaround.

I must qualify this story. Fast growth in poor states does not automatically mean that growth has reached all poor people.

But let us celebrate the emergence of Sabah as miracle economy. This is surely one of the biggest achievements of the decade.


Consider the issue that now captures financial market attention: public debt. The experience in Greece, Spain, Portugal and elsewhere suggests that finance capital is increasingly “intolerant” of what is perceived as excessive public debt. Governments seem increasingly incapable of meeting their debt service commitments. Sovereign default threatens investor solvency. We see this now triggering protest and social disruption all around the world, from Wall Street in New York to Australia and now has spread even to Tokyo. It is a crisis. The young are getting desperate because of the contraction of employment and incomes.

Malaysia also seems to have lost its bearings.

Look at the analysis above, the analysis suggests that Malaysia’s gross public debt to GDP ratio increased from 42.7 per cent to 55.1 per cent between 2007 and 2011,  it is among the highest in the region. Malaysia’s 55.1 per cent level compares with Pakistan’s 54.1, Philippines’ 47, Thailand’s 43.7, Indonesia’s 25.4 and China’s 16.5. This is shocking as we have more debts than Indonesia and even Philippines.

Our government is excessively indebted, and we are in the firing line. Really!

Remember, Malaysia has never been an economic wizard. Never in our history since 1963, we find, any original thinker on economy and hence we lack an economic model which we may call as our own. We never cared to evolve an economic model which cared for the needs of our country and sought to utilize our own resources in our way according to our own needs and aspirations, Najib calls it “MY WAY”, my foot lah! We borrow ideas – economic and political – from others and when the idea suppliers fail, we rue and indulge in illusions as Najib Tun Razak and his team are doing today. From our experience we know that whenever our Prime Minister – Najib Tun Razak – tell us not to worry , they mean nothing and we have to actually start to worry. The Rakyat are the real victims. Prices are skyrocketing from “roti chanai” to “teh tarik” to “kon lo mein” and even “nasi lemak”, all are going up up up. We cannot talk of Rakyat because they never had any significance for our Malaysian shining politicians. They are of no consequence and, hence, can not be counted or considered, and this is how the masses feel.

At the rate we are going we are surely heading towards an economic collapse.

In Bank Negara Malaysia’s latest report issued on Oct 14, our country’s national debt currently stood at RM437 billion (as of June 30, 2011), with domestic debt amounting to RM421 billion and foreign debt at RM16 billion.

Malaysia is in a very very vulnerable position. Many economists say that 90% of GDP Debt is point of no return. Malaysia’s exports primarily petroleum and oil palm are heavily dependent on India and China for its trading. Malaysia must resolve its debt problems and sober up, it has to  cut its spending, increase taxes and prepare for more than a lost decade or it can just print money. Either case Malaysia will either face severe deflation, real estate collapses, stock market collapses, low demand leading to joblessness and more Bersih style protest given the youth population of the country. 75% debt is really intolerable for any developing economy. What is happening is in the name of social schemes the government is literally putting the country in debt and eating the money through corruption.

My economist friend from University Malaya tells me Malaysia has insufficient funds to finance the 2011 expenditure, there is RM46 billion deficit and this will be funded by further debts. Truly, it frightens me!


In the season of scams when political reputations are at their lowest ebb, Sabah Chief Minister Musa Aman stands out as a remarkable exception. His emergence as a front-runner in a field crowded with seemingly redoubtable figures like Shafie Apdal, Rahim Ismail, Yong Teck Lee, V K Liew, Chong Kah Kiat, et al, is all the more noteworthy because of his quiet, unassuming persona.

Yet, by winning a resounding electoral mandate in 2008, he has been unequivocally hailed by vox populi as their choice as the best chief minister of Sabah since 1963.

The extraordinariness of Musa Aman’s feat is demonstrated by the unbelievable turnaround that he has brought about in Sabah’s social and economic scene. Needless to say, his political success is based on this transformation.

The result is that he has proved beyond all doubt that if a politician uses the official and political power in his hands for the betterment of ordinary people’s lives, he becomes virtually unbeatable.

Malaysia will be a much improved country if this simple lesson provided by Musa Aman is widely emulated. And at no time is there a greater need for such emphasis on the fundamental requirements of the people than in the present murky atmosphere when, as Lim Kit Siang has said, the country’s ‘moral universe’ has shrunk.

Except, perhaps, in Sabah where the incarceration of thousands of illegals and criminals, and the fall in the number of abductions to nearly zero in the east-coast of Sabah, and the continuous deportation of illegals back to Philippines and Indonesia, have largely restored the common man’s faith in the administration’s clout and goodwill. In a state where the parties are not averse to get illegals as voters or illegals as cadres, since the days of the Late Tun Mustapha, the chief minister has shown that he means business. Besides, as the Sabah State Security Chief, he does not use the police to harass the opposition and he upholds civil liberties.

As a result, there has been a huge surge in tourist coming to Sabah because people are no longer afraid to visit Sabah with women and children. Besides, they can afford to remain out after nightfall unlike in the past when the town and roads became deserted and the haunts of criminals.

But it isn’t the improved law and order situation alone which has encouraged greater outdoor excursions to the beautiful islands in the east-coast of Sabah. There has also been a vast improvement in the condition of roads with the restoration and construction of nearly hundreds of kilometers of highways and bridges, including elevated hanging bridges.

Much of this work was done by public sector undertaking and also private sector undertaking, which was able to overcome its earlier deficit to contribute for relief even to the flood victims the last time. But no less noteworthy than its good work was the subsequent appointment of capable executives, which underlined the chief minister’s ability to spot and reward talented bureaucrats.

At the same time, he has been ruthless in the matter of initiating action against officials found guilty of corrupt practices. Many have been sacked.

Since these measures have improved the investment climate, it is not surprising that Sabah’s current growth rate of 8 percent has become comparable to Penang and Selangor’s. For the present, however, this upward trend can be ascribed to the fact that shops and commercial establishments are mushrooming all over Sabah and they can remain open till late at night, which was not possible during the days of PBS and Pairin Kitingan when even the streets had no lights.

The phrase was earlier derided as political hyperbole, but not after the return of normalcy in daily life.

Apart from law and order, Musa Aman has focused on the education sector which is under the Federal Government, he has been continuously pressuring the Federal Government, to get more teachers at the primary and secondary levels to reduce the teacher-student ratio from the present dismal 1:50. The provision of uniforms and school shoes and free milk for kids attending school has also been an attractive feature of his policies.

The chief minister has now turned his attention to higher education with his proposal to the Federal Government to set up more colleges and technical institutions. For this purpose, he has selected some good academicians to advice the state government.

Health had been a neglected factor in Sabah. Hospitals were in a bad way and most primary health centers were non-functional in the interior of Sabah. Musa is now working at upgrading health facilities. He is inviting private partnership to achieve this and already millions and millions have been spent in construction and upgradation. Federal Government who is responsible for health in Sabah has been constantly told to pay more attention to Sabah. Immunization, the key to control disease is being aggressively promoted.

The power situation was pathetic. With the exception of Kota Kinabalu, almost all the districts have severe power cuts and even now have power for only a couple of hours sometimes everyday.

Musa understands that power will bring in industry. A new Power Policy is being prepared that will woo private investment in generation and distribution. For a start, there are proposals for new power projects that could generate 300 megawatts. Geothermal power plant and gas fired power plant are also being considered without adversely damaging the environment. Private players are being roped in and Sabah Electricity Sdn Bhd (SESB) has been constantly told to improve their performance. He has even warned Tenaga Nasional Bhd (TNB) and Sabah Electricity Sdn Bhd (SESB) to justify the recent increase in the power tariffs and not burden Sabahans with the increase.

Then there is the issue of children from Chinese-native parents in Sabah where the National Registration Department (NRD) is unwilling to specify their mixed ethnicity in their MyKad applications. The NRD required Sino-Kadazans or Sino-Dusuns to choose between Chinese, Kadazan, Dusun or Murut ethnicity for their MyKads. The NRD is insisting that the community use the generic term “Sino-Native” in the documentation. So silly for the NRD to do this. This policy has angered the mixed Chinese-native community in the state and they have refused to subscribe to the NRD ruling and are demanding that their particular native groupings be recognised. As a Sabahan, Musa Aman understands their feeling. Musa Aman has even told the NRD repeatedly that in Sabah by virtue of its traditions, customs and beliefs everyone recognises the existence of Sino Kadazan, Sino Dusun and others because inter-marriages in Sabah are norm, just like in my own case where my wife is Chinese-Native. After all, as far as Sabah is concerned there are many things that were being done in Sabah that was not done in other parts of Malaysia. KL must recognise and learn from Sabah in terms of harmony and living together. Musa even said that blanket policies could no longer apply for Sabah and that the federal government must take into account local situations and accord the ‘right treatment’ in policies to be implemented in the state.

Then we have the Christians in Sabah and Musa’s success in winning the support of the Christians despite having the Party Bersatu Sabah (PBS) and UPKO and even PBRS as a partners is based on a no-nonsense approach to communal relations. In this respect, Musa Aman has shown how stern he is compared to Taib Mahmud of Sarawak, who looked on helplessly when the Alkitab and Allah issue was played up by fanatics within UMNO.

In contrast, Musa Aman showed the firm, uncompromising side of his character when he refused to let extremist break the racial harmony in Sabah which has been around for hundreds of years and a trademark of Sabah, and the West Malaysians will never understand this.

Musa Aman’s success via these steps in weaning sizeable sections of the Christians undoubtedly contributed to his electoral triumph in 2008 and even the recent Batu Sapi Parliamentary by-elections.

His focus on the natives also helped him by widening the distance between them and the others, who constitute the Sabah’s vote bank.

Musa Aman knows that he now has to start delivering and there is great expectations by Sabahans. He has got everyone thinking and interested in Sabah, but that is not enough. Change has now to be felt and experienced. The masses are eager and impatient. No one knows it more than Musa Aman does. Elections are only months away. Time flies.


First it was the Kimanis Power Plant project, Sabah’s new 300-megawatt power plant, a whooping RM1 billion contract. Then Sabah has been allocated another RM10.723 billion to implement 424 new projects in the first phase (2011-2012) of the Rolling Plan under the Tenth Malaysia Plan. Then there is another RM3 billion in MoUs signed by Sabah State Government with private sectors to invest in agriculture and forestry and manufacturing.

It is a commentary on the bizarre priorities of our information order that investment commitments total-ling $14 billion, equaling nearly one tenth of Malaysia’s GDP, are either ignored or put on par with anodyne political statements. This, however, is not the occasion to lament the lack of even-handedness in the treatment of anything remotely connected to Sabah chief minister Musa Aman. It is the time to celebrate something that is fast becoming undeniable: the emergence of Sabah as the investment powerhouse of Malaysia.

The start of the Rabbit Year, there was a stark contrast between a Sabah bubbling with optimism and the rest of the country despairing over economic mismanagement and missed opportunities. It is not that all the MoUs signed with private sector will be translated into reality. Many will remain paper commitments . But when the who’s who of Malaysia industry line up to proclaim their faith in Sabah as a wholesome place for investment, having already put their money where their mouth is, neither Malaysia nor the rest of the world can afford to be in denial.

The proclamations of faith in Sabah are all the more meaningful because they have been made despite KL’s unremitting displeasure with anything that could bolster Musa Aman’s credentials. Musa Aman doesn’t usually win awards for being the “Reformer of the Year” or for innovative governance. In fact, he doesn’t even make it to the shortlist. But he has invariably secured an unequivocal thumbs-up from those who have a real stake in the emergence of Sabah as a Malaysia economic power house.

The skeptics, who insist that the rise and rise of Sabah has little to do with the state government, are partially right. Entrepreneurship and business are part of the Musa Aman’s DNA and not because he is Sabahan, and its reason why Sabah has always proudly cloaked itself in the business ethos since Musa took over as CEO of the state.

The reason Sabah has registered the highest, near double-digit GDP growth in the past 2 years owes much to the targeted, business-friendly approach of its government. Four features stand out. The first is quick decision-making—what Musa Aman has dubbed the “red carpet, not red tape” approach, ask corporate philanthropist Datuk Victor Paul, for example, recount how the land allotment and development for the Perdana Park in Tanjung Aru was made possible. Datuk Victor Paul built the multi-million ringgit park all with his own money, there was no such thing as land swap and he build the park entirely as part of his Corporate Social Responsibility and as a gift to the state and the people without any form of payment or reward. Victor Paul completed the whole project in less than two years, a quick-fire decision that has fetched Sabah this park.

The second feature is the curious phenomenon of the near-absence of political corruption at the top. Even Musa Aman’s worst enemies will not deny that the chief minister’s fanatical personal integrity has had a salutary trickle-down effect. Irritated by politically inspired extortion, industry has identified Sabah as a place where it is possible to do ethical business.

Third, Sabah since Musa Aman 2003, has been marked by social and political peace. Particularly important for industry is the absence of political unrest, which unseated Pairin in 1994 and is now so marked in Perak. This is because Sabah has bucked a national trend and is witnessing high growth in agriculture—last year the sector grew by 9.9%. This means that farmers mainly natives, now have a stake in the larger prosperity of the state and aren’t swayed by populists like Anwar Ibrahim.

Finally, the growth of Sabah has been spurred by a philosophy of “minimum government and maximum governance”. In plain language, this means that the state government has concentrated on creating the infrastructure for growth and left it to the private sector to get on with the job of actual wealth creation. In Sabah, politicians don’t talk the language of class conflict; they too mirror the preoccupation with business. So all-pervasive is the respect for enterprise that even the Perdana Park which I call Victor Paul’s Park, which has the state of the art facilities, someone has even suggested that Victor Paul create amusement features for kiddie games centred on the use of virtual money!

The extent to which this vibrant Sabah capitalism will benefit Musa’s ambitions is difficult to predict. But one thing is certain. As Sabah shines and acquires an economic momentum of its own, more and more businesses will find it worthwhile to channel a major chunk of their new investments into Sabah. Kuala Lumpur may not like the resulting uneven growth but the alternative is not to thwart Sabah by political subterfuge-such as preventing public sector from engaging with the state government and the whimsical use of environmental regulations. Sabah has shown that accelerated and sustained growth is possible when the state plays the role of an honest facilitator, rather than a controller.

Musa Aman didn’t create the Sabahan character; he was moulded by it. He merely gave it a contemporary thrust and an ethical dimension. If politicians focused on these, Malaysia as a nation will be a much better place.