Rich Malaysia, Poor Malaysians?
I am honoured at having been invited by
Encik Anas Alam Faizli to launch his book, Rich Malaysia, Poor
Malaysians, a collection of essays reflecting his thoughts on energy,
the economy and education of our beloved country. I applaud Anas for his
intellectual discipline to pursue writing which demands mental
toughness, quiet tenacity and absolute patience. Indeed, he deserves our
admiration.
2. He deserves our respect given
that Malaysians are notoriously apathetic to reading, let alone writing.
I respectfully submit that we do not write enough, both fiction and
otherwise in comparison to, say, our sprawling archipelagic neighbour to
the south. It is in this context that our author deserves our
commendation – my commendation in particular – for a task well done,
even though the themes are serious and difficult. Well done, Anas.
3. Having
skimmed through the book, I must admit that I have more than just a
passing interest in it; and at least for two reasons. I am always
interested in writings on the subject of energy, be they articles for
lay reading or academic treatises. I feel especially close when oil and
petroleum are discussed. This is because of my task previously to see
through the legislation of the Petroleum Development Act, 1974 [PDA];
the negotiation of the Production Sharing Contracts with oil majors
whose roles were redefined as contractors to the national oil company in
the post-PDA era; and, establishing and developing Petronas into a
professionally reputable and internationally respectable national oil
company.
4.
Secondly, having been schooled in economics, I follow its development
keenly, both at the national and international levels. This is
strengthened further by my having once been the Minister of Finance
charged with the financial and economic management of the country. And
of course, given the collective responsibility of the Cabinet, national
policies on such subjects as education interest me greatly.
5. Let
us reflect, for a moment, upon the situation regarding the supply and
consumption of petroleum in the country and the downstream role of
Petronas in the retailing of this essential and strategic product. Given
our continuous inability to guide the country out of the middle income
trap into the high income bracket, we have been using, for long spells,
petroleum subsidization to solve the problem of its affordability by
ordinary people in the lower strata of the economic chain. While the
subsidising of consumer goods is not the most efficient of ways in
managing the high cost of living, it is fairly understandable if the
government extends a helping hand to the small man in that manner. What
is sinful and cannot be forgiven is the ease with which the power that
be had been dishing out subsidies to such entities as the national power
supplier, the independent power producers and some other non-power
outfits. As has been pointed out by Anas, since 1997 this subsidy has
amounted to RM136.5 billion. The sad part is that while these power
producers continue to enjoy subsidised fuel price, petroleum subsidy to
the consumers – which purportedly cost the government RM14 billion in
2011 – was partly discontinued recently.
6. It
is glaringly obvious that the government has been treating Petronas as a
cash cow. Anas continues to point out that over 37 years from 1974 –
2011, the government had been paid some RM529 billion in dividends,
taxes, petroleum proceeds and export duties from the national oil
company. The reliance on Petronas to help outfits with strong linkages
to the government out of financial trouble has been going on from as far
back as 1985. In that year it rescued Bank Bumiputera with a RM2.5
billion bailout and again in 1991 when it coughed up another RM1
billion. In 1997, Petronas had to rescue the financially ailing
Konsortium Perkapalan Berhad for RM2 billion. The national oil company
was also made to underwrite the construction of the Twin Towers in the
heart of the KL golden triangle for RM6 billion and the building of the
extravagant Putrajaya for RM22 billion. In all, more than a half
trillion ringgit have been spent. This amount could have been used more
productively to fund a national pension programme for Malaysians as has
been done by a certain Scandinavian country.
7. This
extravagance that had been forced on to Petronas has also deprived the
company from the much needed cash build-up for reinvestment which would
ensure its business sustainability. Given the finite nature of
hydrocarbon as a resource, it is important for Petronas to look further
afield at investments in businesses outside of oil and gas. Looked at
from this perspective, it is all the more critical for the corporation
to have a strong cash reserve for reinvestment purposes. It was this
need for prudence that had led Tun Razak, the Prime Minister of the day,
to impress upon me the need to ensure that Petronas would enjoy parity
with such multinational companies as the once much touted seven sisters,
two of which ultimately became its contractors. Today Petronas is at
par with the oil majors and it is ranked as one of Fortune 500’s largest
and most profitable oil and gas companies. But sadly, it is being
abused and treated as the piggy bank whenever the government needs cash
in a hurry.
8. Ladies
and gentlemen, why is this so? Why is there a discrepancy between what
was visualised by the founding fathers of Petronas and what it has
turned out to be 40 years on; that is, as a banker of sorts to the
government. The truth is that there had been consistent political
interference and this had affected Petronas, even though it is a
professionally well run corporation. There is a blurring of lines
demarcating the party in power and government, and by extension, the
party supremo and the head of government. Cynics would contend that it
was done on purpose to facilitate the development of politics of
patronage. This, in turn, led to the growth of crony capitalism.
9. This
state of affairs is brought about by the collusion of politicians, who
habitually line their pockets, and business people, who have come to be
known as cronies, who are not competitive without favours. It is this
cosy relationship and unholy alliance that has brought into focus the
activity described by economists as rent-seeking. It is, if you will, an
easy way of making money that is made possible by political
connections, without having to take part in healthy, and fair open
competitions. Sometimes money is made through outright corruption, poor
regulation and the transfer of public assets, through privatisation
exercises, at bargain prices.
10. Making
fortunes in this manner seems to be fashionable now that the
power-that-be has found it most profitable to issue licences, permits
and contracts to their cronies. Rent-seekers have never had it so good
since the mid 1980s. For instance, soaring property prices have brought
fabulous riches to developers who could rely on swift approvals for
projects. Some privatisation exercise have afforded opportunities for
businessmen to latch on to monopolies or acquire assets cheaply. The
link between politics and wealth is quite plain for us to see. For
instance, many from the rank of the wealthy are members or strong
supporters of the political party forming the government of the day. For
the man in the street, the wish is for rent-seeking practice to be
stopped as it would lead to cartels and monopolies. Rent-seeking also
takes the easy and lazy way in the conduct of business where the
tendency is to grab a bigger slice of the pie rather than making that
pie bigger. The customer suffers in the end.
11. The
entrenchment of rent-seeking and patronage system into the fabric of
Malaysian life begs the question – how did this come to pass? Much as
this sounds like a blame game and much as this is distasteful to
swallow, the answer lies in the New Economic Policy; or rather, the NEP
that had gone wrong in its implementation. Please make no mistake about
the NEP; the philosophy and thought underpinning this piece of social
engineering programme is just and noble. However, its implementation
went haywire and wrong because of the practice of patronage that had
led, in the first place, to cronyism and rent-seeking that we had just
spoken about. As a result, goals set out by the policy were not met in
the specified timeframe. In an effort to remedy the situation, a
so-called trickle-down plan was put in train. The plan was badly thought
through and represented more of a knee-jerk reaction in the desperate
bid to show that the NEP was not a failure.
12. In
essence, the plan called for the empowerment and enrichment of a select
few who would be supported to achieve success as entrepreneurs and
asset owners. The plan was supposed to have created a multiplier effect
that would trickle down to benefit the community financially. The plan
failed. In the words of Anas “the trickle-down effect did not and does
not work … In fact, it has perpetuated high inequality amongst
Malaysians.” To my mind, the plan helped to create a fertile breeding
ground for patronage which had led to cronyism and rent-seeking practice
stated earlier. Worse, it created ethnic rivalry which is clearly
manifested in the presence of parallel economic and social systems in
our midst. Observe, for instance, different ethnic groups competing in
the business of providing post-secondary education. The same could be
said regarding the ownership of financial institutions or commercial
establishments, the latter being physically represented by the
mushrooming of oversized and oversupplied shopping centres.
13. This
inter-ethnic dichotomy is no more than a duplication of effort which
result in the inefficient application of resources. It is worsened by
the economic disparity that continues to be persistently reflected along
racial line, notwithstanding the efforts made to blur and wipe it out.
As explained by Anas, the bottom 40 per cent of Malaysia in economic
terms is still made up of bumiputera households. Transpose this against
the notion that about 90 per cent of their incomes are made up of wages
and salaries which are hardly commensurate with the relatively more
rapid increases in living costs, this problem takes on a much darker
hue. As an illustration of how low Malaysian income generally is, it is
worthwhile noting that the EPF had been known to report that about 79
per cent of its contributors earn RM3,000 or less a month. This reality
becomes more significant when we realise that disposable income
contributes much to purchasing power, especially among the relatively
poor as opposed to the wealthy where purchasing power is additionally
sourced from assets other than salaries and wages. A report on the
national human development goes further to say that the “Chinese has a
higher purchasing power compared to other ethnic groups…” More
problematic and easily a potential source of politico-economic problem
is the assertion by the report that there is “homogeneity in the
purchasing power gap.” It asserts that the super-rich, regardless of
ethnicity, has about 18 to 20 times more purchasing power.
14. Purchasing
power has a graver ramification from the standpoint of economic
wellbeing. This has to do with the reality that a person who enjoys a
high income is not necessarily guaranteed a better quality of life.
Neither does the effort to improve the quality of life through high
income mean much if the cost of living rises rampantly. Again, an
observation by Anas is very illuminating here. He contends that a
graduate who entered the job market for the first time, say, in 1978 on a
monthly salary of RM1,000 could afford a lower-end car of RM12,400 or
12 months’ salary and take out a mortgage, perhaps, on a RM62,000 house
in a fairly upscale Kuala Lumpur suburb. Today, a fresh entrant into the
labour market on a monthly salary of RM2,500, which is two and half
times higher than his earlier counterpart, would find a roughly similar
car costing him RM178,000, roughly 71 months of his salary. A house
outside the Greater Kelang Valley area, in Nilai for example, would set
him back by RM350,000. This situation could get worse in all
probability.
15. Ladies
and gentlemen, the challenge before us is to mitigate the
socio-political issues and problems to a minimum. This will ensure that
they do not become a part of our political culture and, by extension,
our way of life. We must have the will to stop patronage and cronyism.
In this way rent-seekers would be cut off. But herein lies the problem.
Political leaders are loath to upsetting the apple cart and disturb
their cosy symbiosis with rent-seeking cronies. More often than not,
these are the people whom they rely upon for political funds in their
effort to continue to latch on to power.
16. What
then could be done given this near-checkmate type of a situation? I say
pressure must be brought to bear and it must be made known that we will
not tolerate any more politics that is less than ethical. We must
clearly and loudly make it known that politics must be practised with a
high level of integrity. No, politics is not dirty but its
practitioners, more often than not, are. In the longer run and in order
to ensure that ethical politics of impeccable integrity is practised, we
must overhaul our education system. We need to shift our education
paradigm from a system that emphasises regurgitating what is learnt by
rote to amass distinctions to one that puts a premium on logical and
critical thinking in which source as well as general reading is a major
activity in providing the primary material. We must revisit our
educational philosophy in order that we may give equal importance to
classroom and off-classroom activities in educating the young Malaysian
into a potential leader material for the public or private domains. Of
course, this is a huge and important subject that needs proper
addressing at, perhaps, another forum.
17. Ladies
and gentlemen, in the last several minutes I have shared with you my
thoughts on the subjects addressed by Anas in his book. I hope it has
generated enough interest to trigger off your critical thoughts on the
subjects or other related subjects. In the process it is hoped that some
of you will go a step further to put pen to paper as Anas had done. On
that note, I take this opportunity to congratulate the author for making
the book available to the public which I have much pleasure in
introducing. Thank you and I wish you a pleasant day ahead.
SPEECH BY TENGKU RAZALEIGH HAMZAH
OFFICIATING THE LAUNCHING OF THE BOOK “RICH MALAYSIA, POOR MALAYSIANS” BY ANAS ALAM FAIZLI
On Thursday, 3.4.14 At 8.00 P.M. at Sultan Sulaiman Club, Kg. Baru, Kuala Lumpur
