Of Pygmies and Infants

Dr Sukhdave Singh, the former Deputy Governor of Bank Negara Malaysia recently published an excellent article entitled “When Infants Do No Grow Up”. He describes the NEP and its drawbacks on the Malay community. It has hindered their advancement rather than accelerate their progress.

Source: https://www.malaysiakini.com

Incentives and penalties play a key role in social behaviour in any society. That can be observed in corporate life, traffic enforcement or in other aspects. A corollary to this is infant industry. The fundamental idea is for an industry to grow in a incubator-like environment till it is ready to compete. The creation of taxes, permits and licenses on others (competitors) is to allow the “infant” industry or company to survive in its initial years. Proton is a great example. So was the “Ambassador” of Hindustan Motors, India. The former ended in Chinese hands and the latter stopped production with market reforms (in India)  in the 1990s.

The key issue is, it is difficult to breed competitive champions in a protected environment. You only get a “Jaguh Kampung” or a “Jagung”. The latter is at least edible.

Protection under the NEP has been on for 50 years. Although there was a “jump” in holdings of corporate equity in the 90s, it has largely remained stagnant at around 17-23% over the last 20 years. Why? The equity value is at par (no idea of what is mark-to-market); the elite who subscribe to the allocated shares dispose them at the earliest opportunity; then you have GLCs and the GLICs not included in the computation. It is this “suppressed” figure (of failure) that entitles extension of a defunct policy forever.

A consequence of the above is that the Nons have learned to be more resourceful while the Malays have become increasingly dependent on their political masters. That is the tragedy.

We are behind South Korea, Taiwan and Singapore. And we are now unable to understand UAE or even Saudi Arabia. Muslim societies more conservative than us at one time are throwing the shackles of bondage for progress.

In the end it is the mindset, no reset, restoration or rebuild can help if the mind is still in 1971. Only the elite will enjoy the fruits of corruption, greed and avarice. It takes a benevolent leader (or leaders) to change the status quo, otherwise we will plod on with 3-4% growth when it should be double that!

Reference:

When infants do not grow up, Sukhdave Singh, Dec 6, 2021 (https://www.linkedin.com)