Are We Short of Rice?

Local rice has gone missing. A Federal investigation is required? Not just consumers are wondering, wholesalers and retailers too. If we produce 70 per cent, it must be in the shops. But it is not there.

The owner of the Mydin Hypermarket chain and president of the Bumiputera Retailers Organisation, says local rice had disappeared a couple of months ago. From hypermarkets to supermarkets to retailers are saying the supply of local rice has been negligible. This fits a Malaysian pattern. When prices of imported goods go up, local goods are "made" to disappear, only to reappear as imported ones. Is it greedy commerce?

https://www.freemalaysiatoday.com

Local rice has a control price of RM26 per 10kg, while imported rice is being sold at RM33 per 10kg. A price difference of RM7 per bag is quite a temptation many find hard to resist. The price of imported rice is slated to be RM39 per 10kg shortly. There is also a rumour that a tycoon who has monopoly interest on rice is behind this.

And what is the Agriculture and Food Security Ministry's response? They have asked the millers and rice wholesalers to increase the local white rice supply by 20 per cent. The Prime Minister may have broad enough shoulders to bear the weight of the cabinet, but he can't do everything. So where is the Agriculture and Food Security Minister?

Bernas, which has a monopoly to import rice, said it has distributed 630,000 metric tonnes of white rice from January to August, a 38% increase compared to the average monthly sales over the past five years.

The Agriculture and Food Security Minister said the government will need a “strong reason” if it is to end Bernas’s monopoly on rice imports as it is bound by a 10-year agreement which runs from Jan 11, 2021 to Jan 10, 2031.

This is only rice. What about eggs?  Have you noticed there is a shortage of eggs? One retailer says he has not seen eggs for two weeks. Next, could be flour or sugar or salt. Then vegetables? All these are ingredients for a general and sustainable increase in prices – i.e. inflation. Meanwhile, the Government has a task force (or committee) on cost of living. Can the Madani Government remove price control and permit more than one player for supply of rice?

References:

NST Leader: Short of Rice? News Straits Times, 4 September 2023

Enough white rice, no need to use govt stockpile, says Bernas, FMT Reporters, FMT, 

28 September 2023

The Mid-Term Review of 12MP: What is at Stake?

The Federal Government has raised its revenue target for the five-year period in 2021-2025 to RM1.43 trillion under the 12th Malaysia Plan Mid-Term Review (12MP MTR), from RM1.22 trillion forecasted previously.

On the broadening of the revenue base, the plan was silent on the reintroduction of the goods and services tax (GST). Instead, the capital gains tax (CGT) will be introduced in January 2024. This is not surprising as the proposed introduction of the CGT on non-listed shares of corporates was announced in the 2023 budget. The CGT would stifle start-ups and entrepreneurship development. There is no guarantee that the CGT will not extend to cover other asset classes in the future.

Source: https://www.acccimserc.com

Meanwhile, the Government will spend RM90 billion each year in development expenditure in 2024 and 2025. It has earmarked RM97 billion in development spending in 2023.

The GDP growth target throughout the 12MP is projected at 5% to 6%, from 4.5% to 5.5% target earlier prior to the review. Malaysia’s GDP growth stood at 5.9% in 2021-2022, and is seen at 5% to 5.5% in 2023-2025. This is a “tall” order or an aspirational goal!

Fiscal deficit target is at 3% to 3.5% of national GDP by 2025, from the expected 5% for 2023. 

Private consumption, which increased by 5.1% in the first half (1H) of 2023, is projected to increase by 6.1% p.a. in 2023-2025 (6.4% p.a. in 2021-2022), supported by stable labour market conditions and better income growth. The unemployment rate is projected to improve significantly to 3.3% in 2025 from 3.9% in 2022.

Private investment, which had grown by 4.8% in 1H 2023, is projected to increase by 6.4% p.a. in 2023-2025 (4.9% p.a. in 2021-2022), looks feasible if we manage to attract high inflows of quality foreign direct investment and drive more domestic direct investment. Nominal private investment would amount to RM328.4bil or 15.2% of GDP in 2025 (RM222.3bil or 15.7% of GDP in 2020).

Inflation is expected to increase by between 2.8% and 3.8% p.a. in 2023-2025 (2.8%-3.8% in 2021-2025), attributed to the gradual implementation of a targeted subsidy. Inflation pressures could flare up given the risk of supply shocks as well as changes in domestic policies concerning price subsidy and ceiling price controls. Business cost pressures, including employment costs could emanate from the implementation of a multi-tiered levy and Progressive Wage Model, along with still elevated cost of domestic and imported inputs.

Gross exports, which had expanded strongly by 25.5% in 2021-2022 have declined by 5.9% in Jan-Jul 2023, are projected to increase by 3.7% p.a. in 2023-2025. This will be supported by the expected economic recovery of major trading partners, trade expansion leveraging on the Regional Comprehensive Economic Partnership and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. A conducive trade ecosystem to facilitate exports will enhance export capacity and expand market access.

A beautiful plan could be prepared. The key is execution. This is the key sticking point for most of Malaysia Plans. Actually it is true for most countries with some form of central planning. The other is leakages – we now have a culture where 30-50 sen out of every ringgit could go to non-productive sectors. A laptop that costs RM1,000 is bumped-up to RM1,500 – and who pays? The rakyat. So, for the PM to succeed he needs to have great monitoring/follow-up and exceptional control of leakages. And what is at stake is Madani Government’s ability to deliver the “Promised Land”.

References:

Putrajaya lifts revenue, GDP growth target for 2021-2025, Izzul Ikram & Choy Nyen Yiau, TheEdgeMalaysia.com, 12 September 2023

How the Mid-Term Review of 12MP stacks up, Lee Heng Guie, The Star, 14 September 2023

Calibrated Steps for War: An Image Creation?

The Iraq war was a military action that claimed half a million lives, racked up a $2 trillion price tag, and resulted in untold costs for a country that remains in disarray. Major media outlets, like the New York Times, were careful to include editorials that acknowledged the war’s grim adolescence. CNN featured a piece that urged Americans to “not to repeat the mistakes of the past” in light of the destruction that the war has brought. Absent from much of these discussions was how the American media itself carried water for the war effort, and how political pundits and respected journalists served to legitimize and market the war to the American people. 

Source: https://en.wikipedia.org

From the beginning, President Bush had viewed any proposal to invade Iraq as requiring a public relations campaign in order to persuade the American people that the war was necessary and just. In September of 2002, the Bush administration had planned to use the President’s 9/11 commemoration speech as an emotional lead-in to a speech he would deliver to the UN General Assembly the following day. The New York Times reported that administration officials hoped that Bush’s 9/11 remarks would “help move Americans toward support of action against Iraq,” which could come within six months. Bush’s chief of staff Andrew Card noted that the public relations campaign would need to begin in September because, “from a marketing point of view, you don’t introduce new products in August.”

On the whole, the US news media did not systematically challenge the Bush administration’s insistence that Iraq possessed WMDs, nor did it question reports that Hussein was pursuing nuclear weapons. When Colin Powell delivered aspeech at the United Nations in February of 2003 falsely insisting that Saddam Hussein was hiding WMD facilities from UN inspectors, the US media reported Powell’s accounts as though they were true. 

The Iraq War was hardly the first war to be subject to media spectacle, but it was one of the first to use the media as an integral part of the war effort. This process, known as “embedding,” involved “integrating journalists into military units for the duration of [the Iraq War.Part of that is information warfare. So we are going to attempt to dominate the information environment.” There were anywhere between 570 and 750 embedded reporters in Iraq during the beginning of the war in March 2003.

Embedded journalists were indeed subject to a series of restrictive “ground rules” in which they agreed to have their articles reviewed by the American military prior to release, their movement restricted to their assigned military unit, and their embedded status liable to revocation at any point. 

Embedding journalists had an effect on the kind of reporting that news outlets produced. While reporting was overwhelmingly factual, the work of embedded journalists was more likely too biased from the perspective of the American troops with which these journalists were assigned. 

War reporting, of course, is also a media product. What makes discussions about the US media “selling” the Iraq War to the American people so important is that Americans were not only buying a justification for a war, they were also buying a particular image of what that war looked like – an image mediated by television cameras and journalistic accounts and informed by ideas and sentiments about American military power.

Image creation was not only done with visuals, but also with the language of the news media. News anchors, pundits and journalists were happy to recite George Bush’s doomsday claims of WMDs in Iraq but did not employ the same language to describe America’s armaments. 

The US media’s complicity in selling the Iraq War to the American people is an important object of analysis when assessing how enormously consequential foreign policy decisions can be distorted and manipulated within democratic societies. It is a reminder that democratically elected governments can and do act in ways that appeal to base emotions and greatest fears in order to push otherwise unpopular wars and initiatives. The mistakes of the Iraq War have been made, and the war’s consequences remain tangible to this day. But no one is held accountable to-date. Just like in Vietnam, Syria, Libya or Afghanistan. None of these were “just” wars! We don’t need war to settle disputes. We need peaceful dialogues – please give peace a chance!

Reference

Selling the Iraq War, Luca Brown, The McGill International Review, 10 April 2018

Teacher Absenteeism: Another Problem in Malaysia!

One of the least acknowledged issues in the government school system, teacher truancy or absenteeism, was highlighted in a recent court case in Kota Kinabalu. Three former secondary students from SMK Taun Gusi in Kota Belud, Sabah, won a civil case in the High Court against the school’s former headmaster Suid Hanapi, the director-general of education, minister of education and federal government. The case involved their former teacher, Jainal Jamran, who was assigned to teach English for three hours a week, but was absent from class for seven months from January to October 2017.

The trial also brought up issues of general corruption and nepotism within the school system. There was an attempt by a former education director distantly related to Jainal to cover up the truancy by backdating the teacher’s class attendance books. The case also publicly exposed the use of death threats against one of Jainal’s fellow teachers, whistleblower Nurhaizah Ejab, who also had her car tyres slashed in retaliation.

Source: https://www.wikiimpact.com

An amazing observation arising from this case was how the education ministry (MOE) defended the case so vigorously.

The case opened up one of the major problems within the secondary school system, and attempts to cover it up. Undoubtedly, teacher absenteeism from classes in both primary and secondary schools is far more widespread than what most outsiders believe. It could be a major factor in the underperformance of many students, particularly in poor rural areas across Malaysia.

Teacher absenteeism cases in Malaysia have not been reported for over 14 years. According to Tiada Guru, an NGO in Sabah, an OECD report back in 2009 indicated that 19.5 percent of Malaysian school principals had reported teacher absenteeism.

There is a culture of fear that prevents school students reporting teacher absenteeism. Perhaps the most telling statistic is that between 2010 and 2017, 55.4% of disciplinary cases heard by the MOE ministry involved teacher absence from duty. Teacher absenteeism is just as much a problem in schools, as are curriculum, pedagogy, and class size issues.

According to Tiada Guru, this problem (absenteeism) tends to happen more in poor rural settings, than in urban environments, and contributes to the continuing cycle of poverty. Lower exam passes directly affect income. A diploma holder earns 1.4 times more than someone with only SPM, while a degree holder earns 2.3 times more. Literacy rates remain much lower in rural than urban areas.

Teacher absenteeism is therefore more than an education issue. It perpetuates the incidence of poverty in rural families. Teacher absenteeism also contributes to student truancy. When there is no supervisory teacher in class, students will wander away or not turn up to class at all. Many students come from homes where the parents work and want their children to assist with home duties, or family enterprises. Unlucky ones may go astray outside of class, and become involved in using narcotics due to boredom.

Teacher absenteeism is a symptom of dissatisfaction within elements of the teaching profession. Many have low motivation levels. Others are just not suited for the profession. Some others use the time dishonestly to undertake other income earning activities. Teacher absenteeism has been kept a secret at school level, away from the MOE to protect reputations. The school management culture is to engage in cover-ups, with staff problems kept “in-house”, outside the ministry disciplinary system. Unfortunately, much more than teacher absenteeism is also covered up. This may include theft, rape, and molestation.

Surely, the Madani government will want to be transparent and root-out the problem. It is not good enough to set-up a “Jawatankuasa” or a Task Force to examine the issues – there are many including lack of integrity, theft, molestation beyond absenteeism. We have not just curricula issues but also teachers and environment. The MOE has to stop having the ostrich effect – a cognitive bias to avoid negative information or feedback.

Reference:

Teacher absenteeism: Malaysia’s biggest education problem, Murray Hunter, FMT, 12 September 2023-09

Can We Buy Land on The Moon?

India accomplished a great feat on August 23 when Chandrayaan-3 made a soft landing on the southern pole of the moon. With this accomplishment, the crucial phase of lunar exploration comes to a close. According to ISRO, the moon rover Pragyan rolled out from the lander Vikram to begin its exploration of the unexplored lunar surface.

According to popular belief, there will soon be life on the moon, and humans will be able to relocate there.

Source: https://en.wikipedia.org

As per several media reports, the late actor Sushant Singh Rajput purchased property on the moon. In addition to him, one of his followers gave Shah Rukh Khan a spot on the moon.

The land purchased by Sushant Singh Rajput was through the International Lunar Lands Registry. This is at the Sea of Moscow. Along with him, the other buyers of the lunar land were Rajiv Bagdi from Hyderabad and Lalit Mohta from Bengaluru.

There are rumours that companies like Luna Society International and the International Lunar Lands Registry are in the business of selling moon territory. According to the Lunar Registry, one acre of land on the moon costs USD 37.50. That’s cheap!

It's crucial to keep in mind that according to international organisations, no one is permitted to legally possess the moon. This is so that no single person or nation may claim ownership of the outer world, which is the collective inheritance of the whole human species.

No nation or individual is permitted to lawfully possess a satellite or a planet in space, according to the Outer Space Treaty of 1967. This convention has 114 countries.

But leave it to the scammers. We could have “Moon Cove” or “Everglades on the Moon” as your next real estate investment for your great-grandchildren. And if you let your imagination run, you could have banks looking at bridging and end-financing for your Moon property. How about a “tax haven” for all money looted or laundered on Earth to be stored on the First Moon Bank! Then we could have manufacturing, mining and resource companies tapping on the Moon’s minerals.  Then perhaps we could also have “Moonlywood” with Shah Rukh Khan as the hero. I think you get the picture!

Reference:

What is the price of land on the Moon? It is only Rs..., Zee Media Bureau, updated on 

25 August 2023

Some Issues Faced in Retirement!

Most people see retirement as “freedom from working formally at a company from nine-to-five”. In Malaysia, people officially retire at age 60. But for those who own their own business, there’s never a ‘correct’ retirement age. You usually work until you pass your company onto your successor. It’s important to retire well, and this means preparing early.

The Employees Provident Fund (EPF) has set the recommended minimum savings required to retire comfortably at RM240,000 by the age of 55, but many Malaysians do not reach that amount by the time they retire. As a general rule, you'll need two-thirds of your last drawn income to maintain the same standard of living. For example, if you earn RM7,500 monthly while working, you'll need RM5,000 monthly when you retire. 

Source: https://www.piermontwealth.com

Some seniors sometimes end up in old folks’ homes because they don’t get along with their children. And in some cases, as a result, their children don’t want to look after them in their old age. It was also observed that those who end-up in old folks’ home have their lives shortened by 2-6 years.

In terms of employment, companies or bosses usually choose younger workers. But when you raise the retirement age and allow older people to work, it takes the financial burden off their children. It also takes the burden off the government who don’t have to spend so much on social welfare and free medical services. 

Ageism also occurs in education. Many retirees may not have the chance to further their studies and secure some qualification since they will not get bank a loan or scholarship because the ceiling age for applications is usually 45.

Isolation is another danger for some newly-retired people as contacts such as colleagues or friends are lost. Connections become rarer. It’s the same with friends who may be still working. And this happens more with men.

In their old age, retirees often feel ‘discarded’ and that they’re nobody. But if you’ve money, people will still listen to you. And in old age, women suffer more because they’re single and living alone.

Older people are also target of scammers because people perceive them as “more vulnerable and not tech-savvy”. There are always people who want to sell you things and one needs to be alert as well as adept to advances in technology. I had a friend who refused to use a computer and another who didn’t like ATMs or online banking. That’s really tough!

Take each day as it comes and enjoy to the fullest whether you are 60, 70 or 80.

Reference:

Save for retirement early with a “cradle to grave” approach, says gerontologist, Ming Teoh, The Star, 13 September 2023

Can We Expect Better Growth and Earnings in 2024?

At the start of 2023, many were optimistic about the earnings growth prospects for 2023, mainly driven by economic recovery domestically, with China’s reopening seen as a saviour to global growth expectations.

The United States was expected to hit a soft patch, with rate hikes since March 2022. Then the new Madani government was expected to work on the weakening domestic consumption and external headwinds.

Source: https://wikifinancepedia.com

The star performers in the current quarter (2Q) were surely YTL Corp and YTL Power as the latter’s surge in earnings from its power segment with favourable exchange rates. However, the same cannot be said for domestic-based power players, in particular Malakoff and Tenaga Nasional.

The performance of the telecommunication companies (except for Axiata) was decent. The rubber gloves sector has remained a drag.

The performance from the banking sector as compression in net interest margin slowed, while non-interest income helped to cushion the increase in higher operating costs. Automotive stocks too performed reasonably well, on the back of strong total industry volume growth, which jumped 10.3% year-on-year (y-o-y) for the first half of the year.

The Malaysian economy showed weakness in 2Q23 as the economy only expanded by 2.9% y-o-y.

The quarterly trend improved further as the 2Q23 gross domestic product (GDP) growth of 1.5% on a quarter-on-quarter (q-o-q) seasonal-adjusted basis was stronger than the preceding quarter’s growth of 0.9%. However, in nominal terms, the Malaysian economy contracted by 1.2% y-o-y and 1.1% q-o-q to RM439.1bil in the 2Q23 period. The negative economic momentum compared with a year ago as well as the preceding quarter was perhaps a reflection of the pain experienced by corporate Malaysia as core net earnings too fell by 5.9% y-o-y, although on a q-o-q basis, core earnings expanded by 2.1%.

Given that the market is always forward-looking, the zero earnings growth envisaged for 2023 is  now more or less been fully priced in by the market and is now looking at next year’s 11.2% earnings growth.

The market has also fully priced in that rate hikes are no longer a concern but perhaps the weakness in the local currency is still on top of investors’ minds, given the weakening Chinese economic data points.

Hence, the tabling of the Budget 2024 proposal on Oct 13 will be a closely watched event as this will be the first budget to be presented by the honourable Prime Minister. He knows and we know he has limited options. We could expect more taglines and slogans which may bypass real issues. Having said that, perhaps he will focus on improving private investment and domestic consumption. Current trade numbers and government finances preclude any external improvement or capacity-building option by the public sector for 2024. So, good luck Mr PM!

Reference:

Better growth in 2024?, Pankaj C. Kumar, The Star, 9 September 2023

Has Tourism in Asean Recovered?

In 2019, China was the world’s largest source of tourists, responsible for US$255bil worth of overseas spending, according to the World Tourism Organisation. But more recently, the number of Chinese travellers into Asean has been underwhelming.

It was recently reported by Bloomberg that the number of Chinese arrivals in five South-East Asian countries varied between 14% and 39% in May 2023, compared with 2019 numbers.

According to Singapore’s tourism board, Chinese travellers totalled 310,901 from January to May 2023, compared with 1.55 million in the same period in 2019. The faltering number of Chinese tourists could also see Thailand missing its goal of hosting 30 million foreign tourists in 2023. In 2019, the number of Chinese tourists into Thailand rose 4.4% year-on-year to 10.99 million. According to the country’s Tourism and Sports Ministry, the country saw a total of 1.85 million Chinese visitors from January to July this year.

The island of Bali welcomed around 1.2 million Chinese tourists in 2019, just slightly behind the Australians who formed the largest group with 1.23 million arrivals. Indonesia expects to welcome 10 million foreign tourists in 2023, exceeding the target of 8.5 million. The country’s tourism minister said Indonesia was targeting 253,000 Chinese tourists this year.

Flight capacity, China’s economic downturn are possible reasons for the country’s cautious number of tourists. According to global management consulting firm McKinsey & Co, international airline seat capacity had only recovered to around 37% of pre-pandemic levels as at April 2023. 

There are also deep structural issues such as: younger Chinese are no longer interested in the group travel experience. More are seeking ‘niche’ experiences that provide access to unique cultural attractions. And then more Chinese are spending more money at home, especially on luxury goods. In 2019, the Chinese accounted for 35% of the global luxury market. Luxury boutiques and duty-free shops in places like Bangkok, Phuket and Kuala Lumpur were the beneficiaries.

However, with duty-free shops at home, luxury sales are expanding quickly in China and could account for nearly 90% of Asia-Pacific’s duty-free sales in the coming years.

While the number of Chinese travellers has been slow to recover, Indian travellers, especially into South-East Asia, have been showing promising growth.

In May 203, more Indians than Chinese travellers visited Singapore. So too for other parts of the region. According to Reuters, 130,400 Indian travellers visited Singapore in May, compared with 95,600 Chinese tourists.

In other Asean countries, while the number of Chinese tourists still exceeds the number of Indian travellers, the drop in visits this year compared with pre-pandemic levels has been lesser for India.

Indian tourists into Thailand in May this year slipped 14% compared with the same month in 2019, while the number of Chinese tourists plunged more than 64%. Indonesia, meanwhile, saw their number of Indian visitors drop 10% in May 2023 from May 2019, compared with a 61% decline in China tourists over the same period. In the Philippines, the number of Indian tourists dropped 53% in May this year, compared with the same month in 2019, while the number of Chinese travellers fell by 86% over the same period.

Cultivating the Indian tourist market would require taking many of the same steps that Asean countries have long taken with China. Easing visa policies, expanding air links and assisting hotels, restaurants and attractions in customisation for Indian arrivals are some of the measures.

Meanwhile, the United Nations World Tourism Organisation foresees the global tourism sector’s recovery to continue throughout 2023, even as the sector faces up to economic, health and geopolitical challenges.

For Malaysia, whether it is from China, India or Singapore, how tourists are welcomed is important. If you are stuck in traffic jam for 9 hours at the Tuas Second Link on a weekend, that is not really a warm welcome. Some have reported all Customs officers on the JB side took off for lunch – causing uproar among the waiting crowd. People will relate these experiences to others. We have this “couldn’t care” or “tidak apa” attitude, which bodes badly for the tourism sector.

 If we truly can’t handle too many tourists, then do like Bhutan – have an entry quota and a daily tax of USD250. At least people know they are not welcome in 2023, but maybe in 2024. Otherwise we need to do lots of re-education and re-orientation to welcome people to Malaysia, Truly Asia!

References:

S-E Asia needs to diversify marketing for a more sustainable tourism industry, The Star, 2 September 2023

“Sour destroying”: Man shows day turn to night as he spends over 9 hours crossing Tuas Second Link, Drima Chakraborty, AsiaOne, 2 September 2023

Malaysia at 60: What Does it Mean?

On 16 September, the Federation of Malaysia celebrated its 60th anniversary. While neighbours such as Indonesia, Thailand and the Philippines have suffered military coups and a heavy toll from civil strife, Malaysia has only experienced one episode: the 13 May 1969 ethnic riots.

More and more Malays, especially in the younger demographic, are backing arguments that Malaysia’s future lies in PAS’ vision for the establishment of a Malay-Islamic state.

Source: https://en.wikipedia.org

The biggest takeaway from the November 2022 election was “the Green Wave”, or the rise of political Islam and Parti Islam Se-Malaysia (PAS). PAS is now the largest party in the Malaysian parliament with 49 seats. The second-largest party in parliament is the Democratic Action Party (DAP), a Chinese-based party representing the non-Malays, with 40 seats.

The second vision for Malaysia is the one espoused by the DAP, who won all but one of the non-Malay seats it contested in the August state polls, thus confirming its status as the political voice of the non-Malays. DAP’s vision for Malaysia can best be described as the “middle path” – meaning that while Malaysia is largely a secular country, Islam remains the de facto official religion, with non-Muslims not subject to Islamic laws and still able to play a substantive role in the political process, including holding cabinet positions, although not the prime ministership. The state will respect the non-Islamic religions and allow the minorities a free hand in the economy.

Most analysts of Malaysia forget the “Borneo bloc” is now crucial for anyone who wants to form the federal government.

The third vision for Malaysia comes from the Borneo states, Sabah and Sarawak. Most analysts of Malaysia forget the “Borneo bloc” is now crucial for anyone who wants to form the federal government. Since the 2008 general elections, MPs from Borneo have offered the numbers needed to form the federal government. Their vision is that political Islam does not apply to the Borneo states and that there is freedom of religion. They accept the phrase used in the Constitution of Malaysia, that “Islam is the religion of the federation”, but argue this does not apply to them since it was stated clearly in the 1963 Malaysia Agreement that there will be no state religion in Borneo. They also want a high degree of autonomy and, if possible, no interference from the federal government on anything to do with Sabah or Sarawak affairs. In other words, they are almost a “state within a state” in the Malaysian federation. This sees two Malaysias with vastly different characters: Malaya and Sabah and Sarawak, divided by the South China Sea.

After 60 years of the federation, and with much success to celebrate, national unity and national identity are still in the formative stage.

The PM wants to be equal and fair to all the people while he also wants to show the Malay community he is their ‘champion’. But he cannot be everything to everybody. He has about four years, maybe less, before the next general election. 

The PM should not vacillate in his leadership. He has to stand up and be counted if he wants Malaysia to be better than it has been. If he wants his tenure as prime minister to mean something, this is the time to prove he is, hopefully, better than the rest put together.

References:

Malaysia at 60: One country, three visions, James Chin, https://www.lowyinstitute.org

What are we celebrating? Jem, Aliran, 30 August 2023

Can We Learn Anything from the Indian Space Programme?

Recently, we witnessed an incredible moment in history when India’s Chandrayaan-3 mission landed and delivered the Vikram lander and Pragyan rover on the south pole of the moon.

This makes India the first country to land a spacecraft at this location, and also only the fourth ever to have probes on the moon. It is worth noting that India is only one of two Asian countries with a space programme sophisticated enough to achieve this feat.

Source: https://www.padu.edu.my

On the surface, it may be easy to assume that the Indian Space Research Organisation (ISRO) spent a lot to achieve this success. However, reports show that the Chandrayaan-3 mission is considered one of the cheapest in recent history, costing just US$74.43mil (RM345.36mil). In fact, India’s total annual space budget is only US$1.5bil (RM6.98bil), which is far lower than that of the United States, Russia and China.

What India did get right was investing heavily in its people, building a highly skilled, knowledgeable and capable talent pool in science, technology, engineering and mathematics.

According to the World Economic Forum, with 34% of its tertiary students in STEM, India is producing the world’s highest number of STEM graduates annually. And the World Bank has reported that, at 43%, India has a higher percentage of female STEM graduates compared to developed nations like the US (34%), United Kingdom (38%), Germany (27%) and France (32%).

Organisations such as the Indian National Skill Development Corporation (NSDC) and India STEM Foundation have also played critical roles in shaping the nation’s STEM workforce.

On the other hand, if we look at our Education Blueprint (2013-2025) we have not met the project goals. Achievements appear to align with objectives for 2016-2020 and not for the 2021-2025 phase. Malaysia is to be in the top one-third of nations in global assessments, such as the Programme for International Student Assessment (Pisa) and Trends in International Mathematics and Science Study (Timss) in 15 years. However, as of 2021, the country remain rooted in the bottom third of both assessments.

We can’t get English right (or write!), we can’t do maths or sciences and we only have limited skills to be Grab riders. And once we have drones, doing that job is also gone! Perhaps, we could provide short-stay visas for Indian and Chinese graduates to work on more complicated areas for Malaysia – a new breed of immigrants instead of those from Myanmar, Bangladesh and Indonesia. With Reformasi ditched, Malaysian youngsters will leave in droves. God help Malaysia!

References:

What we can learn from India, The Star, 30 August 2023

Education Blueprint 2013-2025 hardly a success, says educationist, Lynelle Tham, FMT, 2 September 2023

Will “Grandternity Leave” Come to Malaysia?

As working people find themselves working to an older age with countries setting retirement age later, companies need to address the reality of working with multigenerational teams. Employers now take into account the different needs of various age groups, including that of older adults. The growing presence of these workers is prompting some companies to offer leave to the grandparents that make up their ranks.

Companies in the United States such as Fannie Mae, Booking, and SentinelOne are among those now offering their staff this new kind of leave, according to “Quartz” magazine. They are entitled to it as soon as they become grandparents, whether through childbirth or adoption. This trend suggests that companies see family and work-life balance as a benefit that can be useful for attracting and retaining employees. A growing number of retirees throughout the U.S. are returning to work, due to the financial difficulties they face.

Source: https://www.benefitscanada.com

The idea of “grandternity leave” has only recently made its appearance in the US, like the idea of unlimited vacation time previously. And it’s unsurprising, given that the country has no legal minimum for paid leave, and the average number of leave days taken per worker is around 15 a year. Grandparent leave is a way of boosting a company’s attractiveness when recruiting talent.

While few companies have actually created a dedicated policy, a much larger number offer their employees a degree of organisational flexibility so that they can balance their professional and family priorities.

It’s a balancing act in line with recent developments in the world of work, and just maybe, grandternity leave may make its way to Malaysia!

Reference:

Will “grandternity leave” become the norm for senior employees? FreeMalaysiaToday, 2 September 2023

Fukushima: What a Prolonged Disaster!

Nearly 12 years ago, a massive earthquake and tsunami triggered a nuclear catastrophe at Japan’s Fukushima Daiichi plant. The nuclear reactors have been decommissioned - a process which will take 40 years to complete. But the shutdown has stalled over the build-up of vast quantities of water used to keep the damaged reactors cool.

To free up space, operator TEPCO has started to release 1.3 million tonnes of the wastewater into the sea. They claim that the water is filtered to remove most radionuclides, making the release safe. But local fishers and environmental groups aren’t convinced.

Source: https://en.wikipedia.org

The site produces 100,000 litres of contaminated water daily. It is a combination of groundwater, rainwater that seeps into the area and water used for cooling. More than 1.32 million tonnes of treated wastewater is currently stored at the site. That accounts for 96 per cent of storage capacity.

TEPCO says several filtering systems remove most of the 62 radioactive elements in the water, including caesium and strontium, but tritium - a radioactive form of hydrogen - remains. TEPCO plans to dilute the water to reduce radioactivity levels to 1,500 becquerels per litre, far below the national safety standard of 60,000 becquerels per litre.

The International Atomic Energy Agency (IAEA) has said the release meets international standards and "will not cause any harm to the environment". But neighbouring countries, including China and South Korea, along with activist groups such as Greenpeace and some local residents are strongly opposed to the release.

Around 12.1 trillion yen ($82 billion) has already been spent to deal with the 2011 disaster at the Fukushima No. 1 nuclear power plant. That means more than half of the government’s total estimated cost of 21.5 trillion yen, including compensation payments and reactor decommissioning expenses, has been used in the 11 years since the meltdowns occurred. However, the nuclear decommissioning process is not going smoothly, and there are fears that the planned discharge of treated radioactive water from the plant into the sea could damage the reputations of the disaster-affected areas. The government, however, said the cost will likely not increase.

The total cost incurred until the end of 2017 was around 8.6 trillion yen. The breakdown was: 7.1472 trillion yen for damages paid to people affected by the disaster; 2.9954 trillion yen for decontamination-related costs; 268.2 billion yen related to temporary storage facilities for contaminated materials; and 1.7019 trillion yen for nuclear decommissioning work and dealing with contaminated water.

Tokyo Electric Power Co., operator of the stricken plant, and other parties published an “estimated compensation cost” of 12.5865 trillion yen as of April 2023. However, this figure doesn’t include projected damages to compensate businesses and others for reputational damage caused by the treated water being discharged into the sea. TEPCO pays for all nuclear decommissioning work and dealing with contaminated water.

If the wastewater is safe, why can’t TEPCO direct it to the Japanese people for the local water consumption instead of the Pacific Ocean? Should we stop or ban all Japanese seafood? And for how long? 40 years? Why is the U.S. exceptionally quiet with this development? Why is Japan behaving like a nuclear terrorist? Do all the Pacific nations need to suffer because of TEPCO’s ineptitude? Is there any compensation to the Pacific-rim countries?

References:

Fukushima: Japan prepares to release 1.3 million tonnes of treated wastewater into the sea, Charlotte Elton, Euronews, 20 Feb 2023

12.1 trillion yen spent so far on Fukushima nuclear disaster, Takaoki Yamamoto, The Asahi Shimbun, 7 November 2022

Do We Believe in the NIMP for Breakthrough?

The New Industrial Master Plan (“NIMP”) is pivotal for Malaysia’s industrial development. Malaysia’s manufacturing sector has to accelerate the Fourth Industrial Revolution, taking advantage of smart technologies. 

The manufacturing sector remains one of the primary engines of growth (2022: 24.1% of gross domestic product or GDP: 84.2% of total exports and 16.8% of total employment) and had expanded at steady rate of 4.8% per annum in 2015-2022 (4.9% per annum in 2011-2015).

Source: https://www.bernama.com

The NIMP targets to increase the manufacturing sector’s value-added by 6.5% per annum to RM587.5bil by 2030 (RM364.1bil in 2022); employment growth of 2.3% per annum to 3.3 million in 2023 (2022: 2.7 million persons); while median salary will increase by 9.6% per annum to RM4,510 in 2030 (2021: RM1,976).

The country has prematurely de-industrialised since early 2000s, mainly due to increased global competition and slow progress in moving up the value chain.

Malaysia’s Economic Complexity Index ranking (24th in 2021), which indicates the productive capability of an economy, was lagging behind advanced economies (first for Japan, fourth for South Korea and sixth for Singapore); other developing regional peers are fast catching up (29th for Thailand); and labour productivity growth has moderated and stagnated (2.3% per annum in 2013-2022).

Our regional peers are receiving more foreign direct investment (FDI) inflows in recent years. During the period 2017-2022, Malaysia registered FDI inflows of US$9.4bil per year compared to US$96.4bil per year for Singapore, US$20.9bil per year for Indonesia and US$15.8bil per year for Vietnam. The Philippines is catching up fast (US$9.2bil per year) while Thailand’s FDI has dwindled to US$7.1bil per year.

The NIMP maps out a comprehensive industrial direction, strategies and enablers with the aim of positioning Malaysia for new growth catalytic sectors and industries in the decades ahead. The NIMP 2030 calls for a “Whole-of-Nation” approach and adopts a mission-based approach to drive the manufacturing transformation in four ways:

• Advancing economic complexity,

• Tech-up for a digitally vibrant nation,

• Pushing for the net-zero target, and

• Safeguarding economic security and inclusivity.

The master plan will chart a new generation of sustainable industrial policies, underpinned by four enablers, 20 strategies and 56 action plans.

Domestic manufacturing industries have to strengthen their resilience and competitiveness to counter operational challenges caused by geo-economic conflicts that disrupt supply chains, resource scarcity that threatens energy and utilities security, and adverse climate change disruptions.

The identified five pivotal sectors are:

• Electrical products and electronics,

• Chemical and chemical products,

• Advanced materials,

• Aerospace, and

• Healthcare (including medical devices and pharmaceuticals).

The key is implementation. Plans can be beautiful but if the Ministries and individuals are not subscribing (buy-in) to the Plan, it becomes purely an academic exercise. Trust me, I have been there before.

The other resources, like the right people, skills, talent are they available? Do we encourage STEM? Will the Education Ministry recalibrate their Blueprint? I know I sound like a cynic, but forgive me for my doubts!

Reference:

NIMP sets the breakthrough agenda, Lee Heng Guie, The Star, 5 September 2023

Is Singapore’s Presidency a Consolation Prize for Tharman Shanmugaratnam?

The former deputy prime minister Tharman Shanmugaratnam, whether measured by opinion polls or real-world election results, is the most popular politician in Singapore. He is the smartest and most imaginative reformer in Singapore’s Cabinet in recent decades. Electoral setbacks in the 2011 parliamentary and presidential elections, Tharman has been credited with pushing the government to modify its longstanding aversion to welfare and introduce modest support for the elderly and the poor. These measures have not been sufficient to resolve the government’s electoral problems, but they have at least stopped the haemorrhage.

Tharman also has another political advantage — he is faithful to the most powerful patron in the country, Prime Minister Lee Hsien Loong. His patron–client relationship with Lee began in the 1980s when he worked for the Monetary Authority of Singapore. Tharman has been investigated by authorities over security concerns on three occasions, but these tight spots have not been allowed to adversely affect his political career.

Source: https://en.wikipedia.org

Opinion polls routinely name Tharman as the best candidate for prime minister. This is particularly so since Lee announced in 2017 that he planned to step down in 2019, not withstanding the reality that more than five years later, Lee remains prime minister.

Given his popularity and mastery of economics and public policy, Tharman should have been an obvious candidate to succeed Lee. But in 2008 Lee declared that only a candidate from Singapore’s majority Chinese community was acceptable. This verdict was confirmed in 2019 by Lee’s then-designated successor, Finance Minister Heng Swee Keat. In the same year, Tharman stepped down as Deputy Prime Minister to make way for Heng. This is the lot of a talented Indian in Singapore’s supposedly meritocratic society.

On 8 June 2023, Tharman announced that he was stepping down from Cabinet to run for President. This should not have been a surprise, given that he had no prospect of advancement in Cabinet.

The choice of Tharman for President arguably solves several problems for Lee. The presidency provides an august reward for Tharman’s loyalty and stunted executive mobility. Tharman’s popularity also guarantees Lee will not be embarrassed by the spectacle of an establishment candidate almost losing to a strong alternative candidate. This nearly happened in the presidential election of 2011.

But if the advantages to Lee are clear, so are the disadvantages. Lee loses the input of an innovative economic and public policy expert in Cabinet. This loss comes at a time when Singapore’s government is facing a potential electoral blowback over unpopular housing policy reforms. The government is also struggling with cost-of-living issues, the prospect of a deteriorating economic outlook and a growing list of scandals.

Could Lee have done better? Maybe, because the victory that Tharman had (over 70% voted for him) suggests he was popular with the majority group in Singapore. That speaks volumes on race relations and possibilities of others rising to the top in the Executive chain. For now, it is a good development for Singapore and others in the region.

Reference:

Singapore’s presidency a consolation prize for Tharman Shanmugaratnam, Michael Barr, East Asia Forum, 25 July 2023

Net Foreign Inflows Exceed Outflows?

One of the closest barometers for the ringgit is the correlation with foreign portfolio flows. And for the local bourse, a continuous inflow of foreign funds suggests that the market has good prospects.

Up to July 2023, based on data compiled by Bursa Malaysia and Bank Negara, foreign portfolio inflows into the Malaysian capital market has been strong with total cumulative net inflow at RM29.6bil. A strong inflow of RM12.7bil was seen in July 2023. The July inflow was mainly due to the massive inflow of some RM11.3bil in the Malaysian fixed-income market while the equity market saw an inflow of RM1.4bil for the same month.

For foreign investors, there are only two reasons to buy Malaysian fixed-income instruments and this is either related to the current yield spread vis-a-vis other foreign jurisdictions; or in anticipation of capital gains, which foreign investors may realise on the back of the strengthening ringgit or drop in the benchmark yields.

The benchmark five-year and 10-year Malaysian Government Securities (MGS) papers,  average traded yield in July 2023 was at 3.62% and 3.87% respectively, which is not significantly higher than regional peers and much lower than what US treasuries offer sovereign bond investors.

Based on the current yield on the 10-year MGS at 3.85%, the local sovereign paper is only higher than Canada (at 3.69%), half of Europe (which trades between as low as 0.95% in Switzerland to as high as 19.5% in Turkiye), Japan (at just 0.64%), Singapore (3.26%), Thailand (2.58%), Vietnam (2.68%), China (2.56%), and Taiwan (1.21%).

However, when viewed with Malaysia’s current credit rating of A- by Standard & Poor’s, Malaysia’s rating is only higher than that of Thailand and Vietnam as these two countries are rated BBB+ and BB+ respectively. Hence, the argument of foreign inflows into the Malaysian fixed-income market for carry trade purposes has little weight as there are other  more rewarding options out there, and to start with, the US treasuries.

Although in July, the 10-year US treasuries only gave investors almost identical returns when compared with the similar 10-year MGS, the yield spread has now widened to more than 40 basis points as the 10-year US treasury paper has now spiked to almost 40 basis points against the current yield on the 10-year MGS at 3.85%.

Hence, the other underlying pull factor has to be the inexpensive ringgit. In July this traded at about RM4.5939 to the US dollar and down some 4.6% since the end of last year’s close of RM4.3900 to the dollar. Short-term funds must have positioned themselves in anticipation of a weaker dollar, which in turn would result in foreign exchange gains once these positions are closed.

Bank Negara is not expected to raise the overnight policy rate (OPR) any higher. As such, portfolio inflows are in for both capital gains as well as perhaps foreign exchange gains.

Foreign shareholding, which stood at 20.6% as at the end of June 2023, remained unchanged in July despite the net inflow of some RM1.41bil. For July, the total market capitalisation of foreign-owned shareholdings improved by 5.2% month-on-month to RM361bil, in line with the increase of the total market capitalisation of Bursa Malaysia, which rose by a similar quantum to RM1.757 trillion from RM1.669 trillion as at end of June 2023.

Until and unless the Fed turns dovish and China stops cutting its benchmark interest rate, the ringgit is likely to remain under pressure and hence the capital market inflows seen in the past few months will likely reverse. It is trying times for BNM. To hold rates or otherwise? If they raise OPR, it may prove useful for foreign fund inflows and exchange rate but GDP growth will be impacted downward. Why? Some businesses may not survive with another rate increase, especially those that cannot pass on their costs to consumers. Adjustments have to be made in measured steps so that private sector performance and domestic consumption are not unduly affected.

Reference:

Is the tide turning? Pankaj C. Kumar, The Star, 26 August 2023

Education: The Challenge for Malaysia!

Recently, the authorities expressed a keenness to secure feedback from the public on suitability of the education curricula. This is in the form of a survey. Although I laud such an approach, the deficiencies are almost common knowledge. Then there are activists and public interest groups like PAGE Malaysia or Teach Malaysia who advocate their viewpoints.

If I were to do this (from the Ministry), I will put-out a policy paper for debate after consulting some key interest groups, including politicians. This outlines the Madani Government’s framework for the future of education for Malaysia. Feedback from public will be useful to “tweak” the Plan.

Source: https://www.wikiimpact.com

The key problems in education as many are aware, include:

• Quality of teaching;

• Content of curricula;

• Objectives of a society in 30 year’s time;

• Environment and competition over the longer term; and

• Resources required – people, talent and financials

Upon having a broad framework then I am able to keep improving almost yearly to better assess outcomes and objectives. We can delve on the problems and go down a slippery slope or be creative and find a new pathway for the future. Some key points must be at the back of our minds, which are sacrosanct for the harmony of the nation:

• The Malay language is the principal and official language of the Federation;

• Vernacular schools are permitted with ingredients to form a unified nation; and

• Religious education for those of the Islamic faith (and civics course for others).

Beyond that, we need to gauge what essential skill sets are necessary for the future. To my mind it is STEM (Science, Technology, Engineering and Mathematics) that needs to be emphasised from a very young age to university. Currently about 15% of form four students took pure science subjects, namely physics, chemistry, biology and additional mathematics. The percentage has fallen from about 19% back in 2019. All those countries that have progressed faster than us (Taiwan or South Korea) emphasised STEM, created an environment for R&D to blossom and commercialise patents that were secured by citizens.

If we accept STEM, the other area to emphasise is language – Malay, English, Mandarin and/or Tamil. We need a minimum of three languages to trade and invest. Even Saudi Arabia is having Mandarin as a compulsory subject for secondary school students.

Next, we need to ponder on those subjects that maybe required in the future. Currently, the world is about data mining, coding, artificial intelligence and the like. Then we bespoke resources to meet our objectives which are monitored by way of public exams and merit-based advancement. Affirmative action is not lost but focused on the needy or the B40 group.

If we could do all that, then Malaysia is on a secure road to being competitive, innovative and advanced. God Bless Malaysia!

Reference:

Comment: Some badly needed changes in education system, P. Gunasegaram, Malaysiakini, 29 August 2023

Malaysia Must Remain Resilient!

A small and open economy like Malaysia is sensitive to global macroeconomic challenges. With trade valued at 141% of national gross domestic product (GDP), Malaysia relies heavily on external demand, especially from its top trading partners such as China, the United States and Singapore.

The three countries contributed over 40% of Malaysian exports value in the first seven months of 2023. Malaysia is so intertwined with the global manufacturing landscape that one out of five chips imported by the United States in February 2023 came from Malaysia.

These countries (China, U.S, Singapore) are also the top investors for Malaysia. In 2022, the United States and Singapore contributed nearly 66% of total net foreign direct investment flows into the country.

Global economic growth has turned modest, with the world’s second largest economy – China – recording lower than expected growth. Its consumer spending, factory production and investment in long-term assets all slowed further in July from a year ago, according to the country’s National Bureau of Statistics.

Meanwhile, most countries in South-East Asia posted continued decline in exports, reflecting weaker external demand amid global technology down-cycle. Singapore, for example, saw its key exports – non-oil domestic exports – fall for the 10th straight month in July by 20.2%, dragged by weakness in both electronics and non-electronics exports.

As a result of the challenges, Malaysia’s GDP only managed to grow by 2.9% year-on-year (y-o-y) in 2Q23. This is below the market prediction of 3.3%. In comparison, the economy had grown by 5.6% y-o-y in 1Q23.

Economic growth was seen moderating for a third consecutive quarter after hitting 14.2% in 3Q22. The high base effect from 2022 and the 3.7% contraction in net exports also dragged down national growth in 2Q23.

Bank Negara clarified that the GDP growth in 2Q23 would have been recorded at 3.3% – in line with market prediction – had it not been for the “synchronised commodity-related factors”. The moderate growth in 2Q23 was partly driven by several temporary factors, including plant maintenance in the mining sector, hot weather affecting agricultural output, as well as high base effects from the economic reopening and policy measures in the second quarter of 2022.

Private consumption, which grew by 4.3% y-o-y in 2Q23, was underpinned by firm labour market conditions. Private investments grew stronger by 5.1% y-o-y, supported by further progress in construction projects and continued capacity expansion.

Sector-wise, services expanded at a slower pace of 4.7% y-o-y, compared to 7.3% in 1Q23. This was due to a moderation in consumer- and business-related services. The construction sector saw a growth of 6.2% y-o-y amid continued progress of large infrastructure projects and support from higher special trade activities. The manufacturing sector recorded a flattish growth of 0.1% y-o-y in 2Q23, down from 3.2% in 1Q23. This was caused by weaker electrical and electronics production as well as lower refined petroleum production amid a decline in mining output.

So, in all likelihood, we are only be growing by 3.5% to 4.0% for 2023. And 2024 is not expected to be anything higher. Why? All the major economies are expected to grow lower or remain flattish. That’s the World Bank’s forecast. It is incumbent upon the PM and the Economy Minister to devise steps for higher private investments and consumption to offset the decline in trade-related expansion.

Reference:

M’sia to remain resilient amid global uncertainties, Ganeshwaran Kana, The Star, 19 August 2023

R&D Investments: We are on the Decline!

Six decades ago, Malaysia was richer than South Korea and Taiwan. Today, the country is behind these two technology superpowers. Taiwan overtook Malaysia’s gross domestic product (GDP) per capita in the mid-70s, and not long after that, South Korea overtook Malaysia in the mid-80s.

A major reason for Malaysia lagging behind Taiwan and South Korea is the failure to invest adequately in research and development (R&D). This is reflected in the number of patents granted, as mentioned in the World Intellectual Property Indicators report. In 2022, a total of 6,876 patents were granted in Malaysia, out of which almost 85% were granted to non-residents. In contrast, South Korea granted 145,882 patents in 2022. Three out of four patents in that year were granted to residents.

Official figures show that Malaysia’s gross expenditure on R&D (GERD) has been declining in the past several years, even before the Covid-19 pandemic. The country’s GERD as a percentage of GDP dropped to just 0.95% in 2020. The lowest since 2010.For comparison, countries like South Korea, the United States and Japan spent 4.81%, 3.45% and 3.26% of their GDP in 2020 for R&D, respectively. Notably, China’s GERD per GDP stood at 2.4% in 2020, significantly higher than Malaysia despite having an almost similar GDP per capita.

Malaysia is well behind its GERD per GDP target of 3.5% by 2030. The intermediate target is 2.5% by 2025 which seems a mile away! There is a funding shortfall of RM40bil to achieve the 2025 target.

Malaysia’s long-delayed ambition to become a high-income nation relies on the country’s ability to effectively spend on R&D efforts in high-potential areas. Increased R&D efforts that would lead to greater technology adoption in the country are highly necessary, considering that Malaysia is set to become a super-aged country by 2056.

In the Madani Economy Framework, Malaysia is to be among the top 20 countries in Global Innovation Index (GII) by 2025. As for Global Competitiveness Index (GCI), Malaysia aims to rank in the top 12 within the next 10 years. Foreign investors examine these indices.

The easy supply of cheap foreign workers, particularly before the pandemic, has further allowed Malaysian companies to avoid R&D and automating a large part of their operations. Malaysian companies also face fundraising difficulties for R&D purposes, especially small and medium enterprises and unlisted companies.

R&D efforts are not just about investing a large sum of money. They will only yield best results if they are supported by qualified, world-class researchers. Unfortunately, in the case of Malaysia, brain drain has become a major challenge in pushing for greater R&D.

The ongoing decline in interest among schoolchildren in science, technology, engineering and mathematics (STEM) studies will only worsen the situation in the future.

There is a shortage of STEM graduates in Malaysia to serve the needs of the industries. The country’s target was to have 500,000 STEM graduates by 2020, but we now have only 68,000 such graduates. The highest number of unemployed graduates here is from the STEM stream. Currently, about 15% of form four students took pure science subjects, namely physics, chemistry, biology and additional mathematics. The percentage has fallen from about 19% back in 2019. This is alarming. We need more students to take pure sciences if we want to create more scientists, data analysts and researchers for the future. STEM culture has to be fostered among children from a very young age.

In 2020, Malaysia saw a decline in the number of researchers per 10,000 labour force at only 31.4 persons, as compared to 74 persons in 2016. This was the lowest level since 2010. Malaysia’s researchers and R&D personnel in the labour force fall way below that of Japan, South Korea, Taiwan, Singapore, and China.

Many things are on the Government’s plate. STEM and R&D take countries forward. We don’t have much time and children lose their future when a Government dithers on reformasi!

Reference:

Reversing declining R&D investments, Ganeshwaran Kana, The Star, 26 August 2023

Malaysia Day: Have We Restored Status?

On 3 November 2021, the Malaysian government tabled four constitutional amendments relating to Sabah and Sarawak, which was to realise the terms agreed to under the Malaysia Agreement 1963 (MA63). MA63 was a treaty for the creation of the Federation of Malaysia by combining the states in the Federation of Malaya with North Borneo (which became Sabah), Sarawak, and Singapore. The Federation was left with the Malayan states as well as Sabah and Sarawak after Singapore seceded by mutual agreement in 1965.

The first three amendments are symbolically important, though their legal significance remains unclear. The first amendment concerns Article 1(2). The proposed amended Article 1(2) would specify that “[T]he States of the Federation shall be (a) the States of Malaya …; and (b) the Borneo States, namely Sabah and Sarawak.” The current version of Article 1(2) was the product of a further constitutional amendment in 1976 and lists all states within the federation under a single category in alphabetical order. This effectively placed Sabah and Sarawak on equal footing with the other states in the Federation. The 1976 amendment was justified as necessary to create equality among states and ensure further unity within the federation, and received overwhelming support in the federal legislature, including the acquiescence of members of Parliament from Sabah and Sarawak. Opposition on this only came from the DAP. So, the “downgrading” in 1976 was with consent of the representatives from Sabah and Sarawak.

The current amendment reverts Sabah and Sarawak’s perceived status change, clarifying that the Federation is comprised of two groupings – one encompassing the states in Peninsular Malaysia and the other comprising the two territories of Sabah and Sarawak. Besides changing Article 1(2), the second amendment namely Article 160(2) has a new definition. The new definition of “The Federation” refers to the Federation that was first established under the Federation of Malaya Agreement 1957 and MA63, taking into account the separation of Singapore from Malaysia. The third amendment, also to Article 160(2), includes a new term, ‘Malaysia Day,’ defined as 16 September 1963, the day Sabah and Sarawak joined the Federation. This is in addition to ‘Merdeka Day,’ which remains 31 August 1957, when the Federation of Malaya was created.

The constitutional amendments are welcomed by Sabah and Sarawak for restoring their status as equal to the Peninsular Malaysia. But this begs the question of what legal impact these amendments will have. The Constitution had already granted Sabah and Sarawak special status, conferring specific powers to Sabah and Sarawak not available to the other states. An entire section in the Federal Constitution (Part XIIA) is devoted to additional protections for Sabah and Sarawak. It preserves the use of English (time limited) and native languages in native courts in Sabah and Sarawak (Article 161); restricts non-residents from practicing before courts in Sabah and Sarawak (Article 161B); and gives the two states veto rights to certain constitutional amendments which affect them, including in relation to citizenship, the High Court in Sabah and Sarawak, legislative power and executive authority, and financial arrangements, religion, language, special treatment of natives of the State, as well as allocation of members of the federal House of Representatives (Article 161E).

But the amendments do not go far enough to address the actual demands that Sabah and Sarawak have concerning financial allocation, resource autonomy, as well as the assurance over matters not already currently included in the State List, such as educational policy. As resource rich territories, Sabah and Sarawak’s levels of economic development simply do not match their financial contributions. 

The proposed constitutional amendments are a step in the right direction, symbolically restoring the status and dignity of Sabah and Sarawak within the Malaysian constitutional order. The amendment to Article 161A is also an important step in the devolution of powers to Sarawak, which hopefully would allow for stronger protection of native rights. Other matters such as resource allocation, financial/budgetary support and education also need to be addressed. Hopefully, we will progress as one nation.

Reference:

Restoring Constitutional Equality to Sabah and Sarawak: Do the Proposed Amendments to the Malaysian Federal Constitution Go Far Enough? Jaclyn L Neo, Constitutionnet, 19 November 2021

Is Rent-Seeking Entrenched?

The government intends to draft new laws to curb rent-seeking or the “Ali Baba” culture. Estimated losses from rent-seeking is around 1% of the country’s gross domestic product (GDP), or RM17.9bil of GDP (nominal GDP in 2022: RM1.791 trillion).

Rent-seeking practices have become entrenched in government processes such as procurement, licensing, permit and quota allocation, as well as the distribution of subsidies and grants. The AP holders are the best known rent-seekers. Why work? When others will work for your and give a percentage of their revenue.

Rent-seeking includes the mark-up of government projects, piracy, lobbying the government for subsidies or acting as a middle-man soliciting government’s contracts for some fees.

Source: https://corporatefinanceinstitute.com

There are three costs associated with the rent-seeking activities. First, direct costs such as consumers pay higher prices of goods and services due to market imperfection. Second, opportunity costs as real resources were not invested productively. And third, moral costs as people and businesses also join the fray of engaging in rent-seeking themselves.

Studies have shown that the rent-seeking activities have exerted a heavy economic and social toll on a country. Pervasive rent-seeking reduces economic efficiency through the misallocation of resources.

It does not add value as it distorts market competition that provides the products and services at reasonable and competitive price. It hinders the creation of wealth, reduces government revenue, increases income inequality, and potentially leads to decline in national output and productivity.

Ali Baba is a classic example of a bumiputra firm having won a government contract or obtained a licence for a contract, but it did not do the work or operate the business. Instead, it is sub-contracted to other firms at a price for easy monetary gains. This system has created a rent-seeking class among the politically-connected, plus an inefficient and uncompetitive economy.

Individuals and firms spend vast amounts of money attempting to lobby and convince bureaucrats and regulators to provide some forms of protection, concession, monopolistic structure or restrict free entry or competition so that some industries or individuals can realise economic rent.

Less government involvement and intervention, as well as less bureaucratic and regulatory procedures will reduce the opportunities for rent-seeking. If a reasonable reward and punishment mechanism is in place with third-party Oversight, then you may reduce this activity.

Many say public procurements must be by way of competitive tender. Even this, rent-seekers can manipulate. The key issue is integrity – and that too at the highest levels. Some previous PMs had no compunction to this malfeasance.

The enactment of the Government Procurement Act is a positive step to curb excesses. But in the end it (rent-seeking) is something society has to abhor. If you say “rasuah” is “rezeki Tuhan” and it is permitted then we have a long way to go.

Reference:

The economic and social bane of rent-seeking, Lee Heng Guie, The Star, 17 August 2023