Why no one charged for the failures and losses  of UEM-Renong, MAS?
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Speech (4) on the Ninth Malaysia Plan
by Lim Kit Siang  
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(Parliament, Monday) :As a preliminary discussion of the Ninth Malaysia Plan, there are both plus and minus points. Among the plus points are:

a)     Major emphasis on SME development as opposed to the previous  focus on the creation of Malaysian conglomerates;

b)     active promotion of Malaysian type industries, i.e. batik, songket, etc. Helps draw attention to potentially lucrative cottage industries, dominated by rural, poor, Bumiputeras;

c)      extensive support for research & development (R&D) in all key sectors of the economy;

d)     novel attempt to create competitive advantage in the economy by focussing on Islamic type products, for example, creating a niche market for halal food, for which Malaysia can create export capacity if well developed; and

e)     acknowledged desire to improve the delivery capacity of the bureaucracy.

However, the most serious drawback of the 9MP is that there is hardly any review as to why  policies that have been introduced have failed to achieve their goals, such as the following key questions:

Key Questions

a)     Why has the government failed to achieve its stated goal of Bumiputera ownership of 30% of corporate equity, even after 35 years of affirmative action?

b)     Why has the BCIC policy failed to achieve its goal of promoting Malay entrepreneurship?

c)      Why has privatisation proven to be such a dismal failure? For example, the re-nationalisation of Proton, MAS and IWK indicates that this policy needs thorough review before being continued to be promoted?

d)     Why has the quality of education reduced significantly, seen in the growing reluctance of Malaysians to send their children to national schools and in the increasing number of unemployed graduates with degrees from public universities?

e)     Why is the quality of the Malaysian civil service under question, even though it was once reputed to be among the most efficient and capable among developing countries?

f)        Can economic and social problems in Malaysia be resolved to any significant extent by establishing numerous institutions and new rating systems? and 

g)     What has been the impact of positive discrimination on Malaysian society, in terms of promoting the government’s objective of creating a ‘Bangsa Malaysia’?

By failing to answer these key questions, the government has gone on to replicate mistakes of the past, while its new recommendations appear inadequate to sustain economic growth, ensure equitable distribution of wealth and promote national integration.

Inadequacies of  9MP Policy  Reforms

Let me focus on some of  the inadequacies of the 9MP policy reforms:5

a) Problems with Enterprise and Entrepreneurial Development Endeavours

Pursuing BCIC

The focus on the promotion of Bumiputera capital and the creation of a new breed of competent Malay business people reinforces an old problem – bypassing potentially lucrative entrepreneurial ventures, because they do not involve Bumiputeras.

The government insists that the BCIC will remain the primary mechanism through which it will restructure society and ensure greater Bumiputera participation in the economy. Yet, there is no assessment why this policy has failed in the past to help promote the rise of an independent Bumiputera business community, evidenced in its own figures on number of businesses in key sectors of the economy owned by this community. The BCIC continues to be promoted in its original form with only one substantial change – a focus on helping Bumiputeras who run SMEs.

Reforming GLCs

The reform of the GLCs through the mere introduction of KPIs is not sufficient. The question of pattern of control of the GLCs is crucial. Do the professionals appointed by the government to manage the GLCs have autonomous decision-making powers?  Is there political interference by senior politicians in the running of the GLCs? Are these companies undertaking corporate ventures that serve the national interest or are some business activities pursued to serve vested interests? Since the government has ownership and control of the GLCs, which have an enormous interest in equity quoted on the Bursa Malaysia, will an independent watchdog be established to monitor the activities of these companies? 

Persisting with Privatisation

The implementation of privatisation has been replete with allegations of favouritism, nepotism and selective patronage. There is little evidence that privatisation has improved efficiency, nor has the private sector shown the capacity to finance projects that involve a high capital outlay. The case of Railway Malaysia, Proton, the LRT and Bakun Dam can be cited as examples.

If the government insists on persisting with this policy, how transparent will the system be? The pattern of implementation of privatisation indicates weak enforcement, mainly because of lack of political will to deal with beneficiaries of privatised projects who have abused their fiduciary responsibilities.

Why has no one been charged for running aground MAS, necessitating the re-nationalisation of the company at great cost to the government? Why has the government not held anyone accountable for the failure of Renong-UEM to emerge as a model Bumiputera-owned conglomerate, a company privy to numerous privatised projects but eventually bought over by the government?

Inadequate Promotion of SMEs

To help nurture and develop small and medium scale firms, the only new major recommendation is the establishment and active promotion of the SME Bank. However, the reason why SMEs have not been able to develop in a manner that equips them with export capacity and the ability to develop brand products is not inadequate access to loans.

SMEs have not invested adequately in R&D. They have shown little capacity to gain access to the local markets as well as promote their products abroad. To help SMEs improve their capacity to promote their products locally, the government has encouraged those who produce disposable goods to market them through hypermarkets, most of which are controlled by foreign firms. One drawback with this recommendation is that it might stifle foreign investment.

As part of its attempt to support SMEs, the government should focus on tapping into the skills of the newly-emerged professional middle class, especially those who have the expertise to venture into areas like IT, bio-technology, etc. Has the government undertaken a study to determine the needs of professionals willing to venture into private business in these sectors?

Will the government be just as supportive of non-Bumiputeras keen to venture into these fields? As part of the government’s brain gain programme, it would help if returning professionals knew they had government support if they wished to venture into business.

The use of the vendor system has been stressed, to tie SMEs to large-scale enterprises and the GLCs. However, has the government reviewed the performance of the vendor system long implemented by Proton, as a means to promote Bumiputera enterprises and to involve the community in this national project? 

Reviews of the Proton’s vendor system, to supply the firm with locally-produced goods for the national car, indicate that this programme has not been very successful in achieving the goal of promoting Bumiputera entrepreneurship. The vendor system has also not helped ensure that Proton model cars are equipped with quality material produced at affordable rates.

Cash flow-based funding by the SME Bank is not an adequate recommendation by the government to help promote the rapid development of a vibrant SME sector. It is a known fact many SMEs, especially those owned by ethnic Chinese, do not approach banks for loans for fear of the need to divulge information.

The government has proposed the use of the Institut Keusahawanan Negara as a mechanism to help train the young as well as cultivate entrepreneurs. It is extremely doubtful if entrepreneurship can be nurtured through training provided by such institutes. 

b) Inequities in Wealth Distribution

The government is concerned that Chinese own double the volume of equity owned by Bumiputeras. But there is no evaluation why this is the case, even though affirmative action has long been instituted to achieve wealth parity among all ethnic groups? The decline of Bumiputera capital during the currency crisis, the failure of privatisation to promote Malay-owned enterprises and the re-nationalisation of companies controlled by Bumiputeras were not mentioned.

The government also fails to note that the Chinese have been exposed to much competition because of the conditions under which they operate, a factor that has in fact helped them to thrive, though not necessarily develop export capacity because of little or no government support. The emphasis of the government should be on exposing Bumiputera-owned firms to competition, to enable them to secure the skills they need to survive independently. 

The government’s figures on wealth distribution can, however, also be disputed. For example, individual Bumiputeras and the government owned 51.7% and 31.2% of privatised entities at the end of 2005, while non-Bumiputeras owned only 8.9% of such equity. (Table 10-5) Noting also that the government holds this equity on behalf of Bumiputeras, the total amount attributable to this community would amount to a massive 82.9%. How is then that the volume of corporate assets attributable to Bumiputeras has not increased from 18.9% between 2000 and 2004? (Table 16-6)

It is also odd that even though the GLCs are majority shareholders of the largest companies quoted on the Bursa Malaysia, the non-Bumiputeras are listed as owning more equity than the Bumiputeras. Who are the owners of nominee companies, which own a massive 8% of corporate equity, even more than Bumiputera institutions which own only 2.2% of such wealth? If the government now claims to advocate a more open and transparent corporate system, why do they retain the practice of using nominee companies?

While the government claims that non-Bumiputeras, in particular the Chinese, own more than double the equity attributed to Bumiputeras, the perception among non-Malays is that they have little control over the economy and they harbour insecurities over their property rights over their assets. This is a serious problem because such perceptions and insecurities will ultimately lead to lost opportunities for the government to promote the rise of dynamic domestic entrepreneurs who can drive economic growth.

Since the government has noted that Indian ownership of equity has not increased in any appreciable manner since 1970, it now proposes to ensure that this community will come to own 3% of total national wealth within the next decade. The key question, however, is whether this 3% wealth will be equitably distributed among all Indians or if it will lead to more intra-ethnic wealth disparity?

This question suggests that the government’s emphasis should not be on figures, like 3% or 30%, which mean little in terms of ensuring equitable wealth distribution. The emphasis should be on ensuring equity in wealth distribution among all communities.

c) Improving Quality of Education

The government cannot hope to improve quality of national schools merely by ensuring that the number of teachers with degrees is increased. By appointing our unemployed graduates as teachers, would this inspire confidence that our schools are back on track providing quality education? The re-training of teachers would entail improving their language skills as well as their pedagogical capacity. What incentives are there to re-train as well as retain good teachers within the system?

For universities, the goal is to increase the number of lecturers with Ph.Ds to 60% within five years. The government proposes to offer scholarships to lecturers to pursue doctoral degrees to ensure this target is achieved. However, this pattern of offering scholarships to lecturers to pursue doctoral studies is not novel.

The government has not provided figures revealing the success rate of lecturers on public scholarships who have secured their Ph.Ds. What disciplinary action has the government taken against lecturers who have been sent abroad on government scholarships but have not completed their Phds? What incentive is there for lecturers to complete their Ph.Ds, as lecturers still get promoted and even secure professorships without having first obtained a Ph.D? Is the decline of tertiary institutions only attributable to the fact that the number of lecturers with Ph.Ds constitutes less than 30% of the total population?

What incentives are there in the 9MP to retain good lecturers within the system? Why has the government not considered a new scheme of service specifically designed for lecturers that would help attract well-qualified people to public universities? Is the setting up of a Malaysian Qualifications Framework the major remedial mechanism to stem the decline of tertiary education?

d) Increasing Agriculture Productivity

In the government’s New Agriculture initiative, the programme’s main endeavour is to transform traditional farming into modern commercial farming. The recommendations to achieve this goal include conventional proposals, i.e. replanting, land consolidation and rehabilitation, forest development and new marketing mechanisms.

One original contribution is the setting up of food production parks, though the major new thrust is to introduce ICT and biotechnology to farmers to help them increase productivity. Apart from the use of ICT to market their products, it is not clear how the government hopes to equip farmers with such technical skills.

The basic argument appears to be one of converting small-scale farm in large-scale entities that would then presumably have the resources and manpower to make agricultural endeavours more productive, less labour intensive and more technologically equipped. It is unclear, however, how farm consolidation will help obtain these goals.

Moreover, the issue of ownership of these enlarged farmlands is not addressed in the plan, thus providing little insight into how land consolidation will help rectify problems faced by poor farmers.

e) Innovative Ideas and Important Recommendations Not Developed

The most important chapters in the 9MP, which outline Abdullah’s new ideas, are also the most brief, that is the sections dealing with the promotion of good governance and improving the public delivery system.

Good Governance and Corruption

Good governance, according to the 9MP, will be encouraged through a review of legislation and by establishing new institutions. These recommendations are not sufficient if the government hopes to create a more open and accountable civil service.

There must be devolution of power to agencies, like the ACA and the Securities Commission, to allow them to act autonomously. There still appears to be selective prosecution, as there is overwhelming evidence of corruption involving senior politicians.

How can Malaysians be expected to take seriously the government’s pledge to enforce transparent and accountable governance when autonomy is not provided to such institutions? Is the establishment of an Integrity Institute and the creation of numerous indexes the solution to eradicating or stemming corruption in Malaysia?

Would the government consider reviewing legislation to provide the media more independence to expose corruption and abuse of power in government. The issue of freedom of the press did not get a mention in the Plan, even though the Prime Minister has spoken of the need to speak truth to him in his endeavour to eradicate corruption in Malaysia.

Creating an Efficient Delivery System

One of the key issues debated prior to the release of the 9MP was the quality of the government’s delivery system. While the Plan does attempt to grapple with this serious problem, it is not merely through training programmes provided by MAMPU that the government is going to help improve efficiency, productivity and effectiveness of the bureaucracy.

The issue of the delivery system should focus on how it plans to equip the bureaucracy with the skills and capacity to implement the policies proposed by the government. How confident are we that the government can deliver on these recommendations in the 9MP?

There are other important questions that have not been addressed. How sure are we that political considerations will not undermine government agencies from acting independently? Have these institutions been given the autonomy to override political intervention to suit the vested interests of influential politicians?

We have seen in the case involving Daim Zainuddin, Halim Saad, and Metramac, the capacity of influential politicians to get government agencies, both at federal and local levels, to institute actions that serve vested interests.

On the structure of the civil service, there is no attempt to deal with the ethnic imbalance among staff in the employ of the government. The question why non-Bumiputeras are not considered as suitable candidates for senior positions in the civil service has not been addressed.

f) Race-based Plan?

There is little in this Plan that proposes ideas how to create a ‘Bangsa Malaysia’, one of the goals of this government. The Plan is framed along racial lines, reinforcing the point that policies are conceived and implemented based on (usually political) considerations of needs of particular ethnic groups, which undermines the spirit of a ‘Bangsa Malaysia’.

The government should be reminded that the issues of nation building and sustainable economic development are tightly inter-related and inter-dependent. The brain drain problem and the limited capacity of domestic enterprises to compete internationally are some of the repercussions of long-standing implementation of policies that favour one community over another.

The problem of growing intra-ethnic inequalities, especially serious among Bumiputeras, is evidence enough that government policies should be universal in orientation, developed to help groups that are in need of help, regardless of race.

Universal-type policies, rather than those that target specific ethnic groups, are also imperative if the government hopes to inspire confidence in all Malaysians that they belong to this nation. The government’s promotion of a ‘Bangsa Malaysia’ will only succeed if all Malaysians genuinely feel that they are fairly treated.

(03/04/2006)