Subsidies must be cut, or else Malaysia goes bankrupt
Barry Wain provides insights on Mahathir at UM
May 28, 10
What was supposed to be a highbrow discussion of Barry Wain’s Malaysian Maverick: Mahathir Mohamad in turbulent times led by the author himself at the nation’s oldest university turned out to be a critical session on the fourth prime minister.
Wain (right), started yesterday’s evening session in Universiti Malaya with recounting his fascination in writing about Mahathir, owing to his interests in Southeast Asia and the rise of dominant political figures here like Ferdinand Marcos (Philippines), Suharto (Indonesia) and Lee Kuan Yew (Singapore).
“As Malaysia was a rising Southeast Asian country, I thought it would be fruitful to write on Mahathir. I had interviewed the fourth prime minister three times before writing this book.”
One of the lesser known things, Wain, 65, disclosed to the 100-plus audience that despite Mahathir being known to be anti-American, the former premier was agreeable to the country signing an agreement with the United States to allow the US army to conduct jungle warfare training in Johor.
Mahathir, the author said, had opposed the presence of the American 7th fleet in Singapore, but he did not make a public disclosure of 1984 document.
Wain, a former Asian Wall Street Journal editor said this showed the two contrasting characters of the Malaysia’s fourth prime minister.
“Despite Mahathir’s passion for politics, such matters were never discussed at home,” he said, adding he verified this fact with Siti Hasmah Mohd Ali, the former premier’s wife.
“Hasmah said politics was never discussed at home. Even when Mahathir had written the infamous letter calling for the first premier Tunku Abdul Rahman’s resignation following the 1969 racial riots, the matter was not made known to her or the family,” he said.
It was as if Mahathir had compartmentalised his life, said Wain in providing an insight into Malaysia’s long-serving prime minister.
Wain had mentioned this compartmentalised thinking in an exclusive interview with Malaysiakini.
Wain, also said while Mahathir was bent on the physical development of Malaysia, not much was centred on human capital development of the country.
Ong: Conduct research on brain drain
Political analyst Ong Kian Ming, one of the panelist who reviewed the book concurred with Wain, saying that studies should be conducted on this issue.
“For example, the Public Services Department spent a lot in awarding scholarships to Malaysians for overseas studies. However, when they return, do they work or contribute their best minds to the government and civil service?” he asked.
“I can say 99 percent of them are working outside the government. As a result, the civil service here is still incompetent.”
Ong, who had just completed reading his PhD in Political Science at Duke University in the US, asked why can’t Malaysia emulate her southern neighbour, Singapore, in that the best minds are all in the government sector or in government-owned companies.
However, he stressed that while he was not arguing that the Singapore model was better, this contrast needed to be examined.
Prof Edmund Terence Gomez, another panelist agreed that despite all the attention in the New Economic Policy, Mahathir’s (right) tenure as prime minister was not used properly to achieve its goals.
“Mahathir had noble goals. However, the outcomes of his policies did not conform with these goals. For example, Mahathir’s aim was to industrialise Malaysia and create a new breed of Malay capitalists who would lead internationally renowned conglomerates,” he said.
“But, by the end of his tenure, not even one Malay was listed among the top 10 publicly-listed companies. Seven of the top 10 companies in the Bursa Malaysia were GLCs. His heavy industry projects had also failed.”
Gomez said that there was a need to understand what had gone wrong with the implementation of Mahathir’s policies.
Wain: Investments not coming in
Wain noted that foreign investments to Malaysia had dropped compared with the 1990s.
“What is a source of concern is also that Malaysian businessmen themselves are not reinvesting in Malaysia but are doing so in some other countries. Money is not coming in but instead it is going out.”
“The recent 10.1 percent GDP first quarter growth was as a result of government spending.”
He agreed with the findings released by Minister in the Prime Minister’s Department Idris Jala (left) yesterday that if subsidies were not cut, the country would go bankrupt.
Wain, who was also the now defunct Far Eastern Economic Review editor, said besides subsidies, the Goods and Services Tax would have to be imposed to widen the base in taxes, through which the government could boost its revenue.
The author was also asked his opinion on why Mahathir supported Perkasa as it goes against his mooted idea of Vision 2020 of seeing the many races in Malaysia unify, and to which the reply was succinct: the former premier was a person who likes the limelight.
“He craves media attention and that is the reason why,” he said.
Responding to another question whether he would write a second book on Mahathir since some topics like Sabah and Sarawak and aspects of his children were not covered extensively, the author said no, as his second would be on Southeast Asia.
Wain, said a sixth reprint of the book is in the works and that 4,000 copies of the books were sold out in Malaysia since the Home Ministry gave the green light for its distribution in the country on April 23, and another 5,000 copies had just been recently ordered.
He also said that he had given a copy of his book to Mahathir but had not either personally met him or knew his response to it.
May 27, 10 11:13am
Malaysia risks becoming the next Greece unless voters swallow subsidy cuts that will see the price of petrol, food, electricity and other staples rise, a government minister warned today.
A government think-tank charged with producing plans to cut the country’s subsidy bill presented its plans to the public in
a bid to win acceptance for painful cuts, which have yet to be voted on by the government.
Idris Jala, a minister in the prime minister’s department who heads the body advising the government, said that Malaysia’s debt would soar to 100 percent of gross domestic product by 2019 from 54 percent of GDP at present without the cuts.
“We don’t want to end up as another Greece,” he told a roadshow, referring to the European Union member whose debt woes have unsettled global markets.
Malaysia spent 15.3 percent of total federal government operating expenditure on subsidies in its 2009 budget when its deficit surged to a 20-year high of 7 percent of the GDP.
The cabinet discussed the subsidy proposals on Wednesday, but any decision on cuts could be months away, a government source told Reuters.
Political analysts and economists say the failure of the government to push through previous subsidy cuts casts doubt on whether it can do it this time, especially with state elections looming in Sarawak, a government stronghold that is under threat from the opposition.
The proposals presented would see petrol prices for the benchmark RON95 blend rise by an initial 15 sen per litre from their current price at some stage this year.
RM2.60 per litre by 2015
The benchmark RON95 grade currently costs RM1.80 ringgit per litre.
Reuters reports the proposals presented by the advisory body, the price of petrol would be pushed up some time this year followed by two more totalling 20 sen per litre in 2011 and another two totalling 20 sen per litre in 2012.
In the 2013-2015 period, the price hikes would slow down and by the end of 2015, RON95 would cost RM2.60 per litre, according to the plans that have yet to be approved by the government.
The forecasts were based on a crude oil price forecast of $73.06 per barrel for 2011 and $79.41-$94.52 for 2013-2015.
‘Plug leakages first’
Meanwhile, a panelist at the roadshow from opposition DAP hit out at the government for only proposing to remove subsidies for consumer staples and not corporate subsidies.
“Some big companies such as independent power producers enjoy gas subsidies every year. It can be as high as RM13 billion.
“But for the people, the food subsidy merely amounts to RM3.4 billion,” said Tony Pua, who is also Petaling Jaya MP.
Pua argued that the government’s priorities appear to be misguided.
“The government is burdened by all kind of subsidies, but one fo the biggest problems is corruption and leakages,” he said.
He said that should these two problems not be resolved, even the austerity drive would not resolve the budget deficit.
No timeline to start subsidy cuts
May 27, 10
The government finally unveiled its subsidy rationalisation plan today, but without any indication as to when it will be implemented.
Minister in the Prime Minister’s Department in charge of working out the plan, Idris Jala, said he cannot set a deadline to finalise and carry it out as everything is up to the cabinet.
“We have now got quite a lot of public feedback. We will go to cabinet to take a decision on it.
“The cabinet may ask us to do further work, but we cannot predict what decisions the cabinet will arrive at,” he said when met after the Subsidy Rationalisation Lab open day at the KL convention centre.
Idris, (right) who is also Performance Management and Delivery Unit (Pemandu) chief executive, said the plan will uphold Prime Minister Najib Razak’s 1Malaysia concept of people first, performance now, but stressed that any benefit from the plan must extend to the future generation.
“There are a lot of rakyat who are not yet born, they will ask questions about us who are alive today… the decisions we make today, (we make) for them too.
“Quite a lot of discussions have to be taken into account by the government. This is a responsible government, not only for Malaysians today but also for Malaysians tomorrow,” he said.
Teetering on brink of bankruptcy
Earlier when presenting the proposed plan to some 1,000 people attending the event, Idris said Malaysia needs to reform its subsidies system if it wants to pull itself back from the brink of bankruptcy.
He painted a bleak picture of the country’s heavy debt problem, saying Malaysia needs to start cutting its RM362 billion “hutang” (debt) before it is too late.
“Malaysia has been borrowing every month for the past 10 years because we have been living beyond our means.
“We ought to live in the real world, and the party must cease,” he said, noting that savings of some RM105 billion over five years with the subsidy cuts.
At a later forum to discuss the subsidy rationalisation measures, a panellist, Petaling Jaya Utara MP Tony Pua (left) pointed out it is important for the government to address other contributing issues to Malaysia’s high deficit while it pursues reforms to its subsidy system.
He said it is not impossible to rectify lopsided deals such as the long-standing toll concessions issue, which Idris had said would cost the government nearly RM300 billion in total to buy over.
In his earlier presentation, Idris had said that it would be unfair to taxpayers in Sabah and Sarawak if the government buys over the toll concessions when the highways do not even extend to the two states.
The Federation of Malaysian Manufacturers’ former president Yong Poh Kon, another panellist, suggested that the government instead spend a small premium to engage a top-flight team of lawyers to renegotiate the toll concession contracts.
“Renegotiation of all (toll) contracts is essential, it must be done. Instead of buying back (the concessions), the government could pay RM20 to RM30 million for a good legal team to relook the contracts,” he said.
Yong also suggested that the government waive road tax for Malaysians who use small-capacity vehicles, instead of dishing out cash rebates of RM126 for cars below 1,000cc and motorcycles below 250cc as proposed.