Thursday, December 31, 2009

Another interesting article from razaleigh.com mostly share by young professional Malays too.

*In a speech I made in January this year I spoke of where we stand in our developmental path and what I felt we must do to move forward.

Revisiting the middle income trap

I would like to revisit the argument of that speech to develop it further.

We are stagnating. The signs of a low growth economy are all around us. Wages are stagnant and the cost of living is rising.

We have not made much progress in becoming a knowledge and services based economy.

According to the World Bank, Malaysia’s share of GDP contributed by services was 46.2% in 1987. Ten years later, that share had grown by a mere 0.2%
Between 1994 and 2007, real wages grew by 2.6% in the domestic sector and by 2.8% in the export sector, which is to say, they were flat over that thirteen year period.

Meanwhile our talent scenario is an example of perverse selection at its most ruinous. We are failing to retain our own young talent, people like yourselves, let alone attract international talent to relocate here, while we have had a massive influx of unskilled foreign labour. They now make up 30-40% of our workforce. Meanwhile, alone in East Asia, the number of expatriate professionals here has decreased. Alone in East Asia, private sector wage increases follow government sector increases, instead of the other way around. We are losing doctors and scientists and have become Southeast Asia’s haven for low cost labour.

I said that we are in a middle income trap, stuck in the pattern of easy growth from low-value-added manufacture and component assembly and unable to make the leap to a knowledge-intensive economy. Regional competitors with larger, cheaper and dare I say, hungrier labour forces have emerged. China and India have risen as both lower cost and higher technology producers, and with giant domestic markets.The manufacturing sector which propelled the growth we enjoyed in the nineties is being hollowed out. There is no going back, there is no staying where we are, and we do not have a map for the way forward.

I am glad that the characterisation of Malaysia as being in a ‘middle-income-trap’ has been taken up by the government, and that the need for an economic story, or strategy, for Malaysia is now recognized. We stand in particular need of such a model because we are a smallish economy. We cannot be good at everything, and we don’t have to be.

We need only make some reasonable bets in identifying and developing a focussed set of growth drivers. It is not difficult to see what the elements of such a growth strategy might be. Whatever we come up with should build on our natural strengths, and our strengths include the following:

We are located at the crossroads of Asia, geographically and culturally, sitting alongside the most important oil route in the world.

a) We have large muslim, Chinese and Indian populations that connect us to the three fastest growing places in the world today.

b) We have some of the largest and oldest rainforests in the world, a treasure house of bio-diversity when the greatest threat facing mankind as a whole now is ecological destruction and the greatest technological advances are likely to come from bioscience.

c) We have the English language, a common law system, parliamentary democracy, good schools, an independent civil service and good infrastructure.

These advantages, however, are declining ones. Our cultural diversity is in danger of coming apart in bigotry, our rainforests are being logged out and planted over, our social and political institutions are decaying.

I have spoken at length on different occasions about the causes and consequences of institutional decline. The decline in our society and indeed in our natural environment, originates in a decline in our basic institutions. The link between these is corruption. The destruction of our ecosystem for example, is made possible by corrupt officials and business-people. The uncontrolled influx of unskilled labour is a direct result of corruption.

Dependencies and the young

These are problems we need to be aware of before we speak glibly about coming up with new strategies and new economic models. We need to understand where we are, and how we have gone wrong, before we can set things right.

You are young, well educated Malaysians. Many among you have left for other shores. Record numbers of Malaysians, of all races, work abroad or have migrated. Among these are some of our best people. They sense the stagnation I described. There is a certain lack of energy, ingenuity and “hunger” in the climate of this country that young people are most sensitive to. In the globalized job market, young people instinctively leave the less simulating and creative environments for those that have a spark to them.

How did we lose our spark as a nation?

We have a political economy marked by dependence on easy options and easy wealth. Like personal dependencies, these bad habits provide temporary comfort but discourage the growth of creativity and resilience.

I mentioned our dependence on low cost foreign labour.

The other dependence is something I played a part in making possible. This is a story I want to leave you with to ponder in your deliberations today.

Blessing and curse

Our nation is blessed with a modest quantity of oil reserves. As a young nation coming to terms with this natural bounty in the early 1970’s, our primary thought was to conserve that oil. That is why, when Petronas was formed, we instituted the Petroleum Development Council. Its function was to advise the PM on how to conserve that oil and use it judicially for national development. We knew our reserves would not last long.

We saw our oil reserves as an unearned bounty that would provide the money for modernization and technology. We saw our oil within a developmental perspective. Our struggle then, was to make the leap from an economy based on commodities and low cost assembly and manufacture to a more diverse, economy based on high income jobs.

Aware that we had an insufficient tax base to make the capital investments needed to make the leap, we planned to apply oil royalties to what you would call today strategic investments in human capital. whatever money left after making cash payments, allocations for development funds, etc, was to be placed in a Heritage Fund for the future. The Heritage Fund was for education and social enrichment.

In working out the distribution of oil between the states, who had sovereign rights over it, and the Federal government, we were guided by concerns for equity between all Malaysians, a concern to develop the poorer states (who also happened to be the oil rich states) and a concern for inter-generational equity. That oil was for special development purposes and it was not just meant for our generation.

Sabah and Sarawak joined Malaya to form Malaysia because of the promise of development funds. Yet today, despite being their massive resources, they are some of our poorest states.

Instead of being our ace up the sleeve, however, our oil wealth became in effect a swag of money used to fund the government’s operational expenditure, to bail out failing companies, buy arms, build grandiose cities in the middle of nowehere. Instead of helping eradicate poverty in the poorest states, our oil wealth came to be channeled into our political and politically linked class. Instead of being the patrimony of all Malaysians, and for our children, it is used as a giant slush fund that has propped up authoritarian rule, eroded constitutional democracy and corrupted our entire political and business class.

Our oil receipts, instead of being applied in the manner we planned upon the formation of Petronas, that is, according to its original developmental purpose, became a fund for the whims and fancy of whoever ran the country, without any accountability.

The oil that was meant to spur our transition to a more humane, educated society has instead become a narcotic that provides economic quick fixes and hollow symbols such as the Petronas Towers. Our oil wealth was meant to help us foster Malaysians capable of building the Twin Towers than hire foreigners to build them, a practice in which we preceded Dubai. I would rather have good government than grand government buildings filled with a demoralized civil service.

It is no wonder that we are no longer productive, no longer using our ingenuity to devise ways to improve ourselves and leap forward.

Malaysia is now an “oil curse” country.**

When I started Petronas in 1974, I did not realize I would see the day when I would wish we had not uncovered such bounty.

The story I have told is a reminder of the scale of the challenge of development. My generation of young people faced this challenge in the 1960’s and 70’s. You face it now. The story tells us that development is about far more than picking strategies out of a box.

You have kindly invited me to address a seminar on strategies for reinventing and liberalizing Malaysia’s economy. But the story of our squandered oil wealth reminds us that it was not for want of resources or strategies that we floundered. Our failure has been political and moral. We have allowed greed and resentment to drive our politics and looked the other way or even gone along while public assets have been stolen in broad daylight.

I encourage you to take up the cause of national development with the ingenuity that earlier generations of Malaysians brought to this task, but the beginning of our journey must be a return to the basics of public life: the rule of law, honesty, truth-telling and the keeping of promises.

The Malaysia we need to recover is one that was founded on laws and led with integrity. With the hindsight of history we know such things are fragile and can be overturned in one generation, forgotten the next. Without a living foundation in the basics you might sense an air of unreality around our talk of reinventing ourselves, coming up with a new economic model, and liberalizing our economy.

So before we can reinvent ourselves we need to recover our nation. That larger community, bound by laws, democratic and constitutional, is the context of economic progress, it is the context in which young people find hope, think generous thoughts and create tomorrow.



*Opening speech at

THE 1ST YOUNG CORPORATE MALAYSIANS SUMMIT

“Reinventing and liberalising malaysia’s economy:strategy and directions”

Saturday, December 12, 2009

—-

**The resource curse thesis

The idea that natural resources might be more an economic curse than a blessing began to emerge in the 1980s. In this light, the term resource curse thesis was first used by Richard Auty in 1993 to describe how countries rich in natural resources were unable to use that wealth to boost their economies and how, counter-intuitively, these countries had lower economic growth than countries without an abundance of natural resources. Numerous studies, including one by Jeffrey Sachs and Andrew Warner, have shown a link between natural resource abundance and poor economic growth. This disconnect between natural resource wealth and economic growth can be seen by looking at an example from the petroleum-producing countries. From 1965-1998, in the OPEC countries, gross national product per capita growth decreased on average by 1.3%, while in the rest of the developing world, per capita growth was on average 2.2%. Some argue that financial flows from foreign aid can provoke effects that are similar to the resource curse.

(Wikipedia: “Resource curse“)

Monday, December 14, 2009

Interesting Article From razaleigh.com

Human Rights and Good Government

HUMAN RIGHTS DAY*

December 10 marks the 61st Anniversary of the Universal Declaration of Human Rights “in recognition of the inherent dignity and of the equal and inalienable rights of all members of the human family”

Proclaimed at the end of war that had witnessed “barbarous acts which have outraged the conscience of mankind”, it recognized that such acts came out of a disregard and contempt for human rights. It recognized human rights as “the foundation of freedom, justice and peace in the world.”

Human rights are defined against or at least with respect to the powers of the state. They are “international norms that help to protect all people everywhere from severe political, legal, and social abuses.” More often than not, human rights are meant to protect individuals and minorities from governments and majorities.

Human rights are often defined in the negative, that is to say, they often define what may not be done to individuals. The basic rights of right to life, liberty and security of person are rights not to be interfered with in certain ways. Such rights are defined as limits upon the powers of the state, articulated after a World War in which it had become clear to all the world that state-sponsored brutality had plumbed new depths of barbarism.

The declaration also defines political and civil rights. Although defined in legal terms, these rights are universal, whether or not they have been enacted in any particular jurisdiction.

The declaration defines political, civil and social rights but also rights to a certain standard of living (Article 25) and to education (Article 26).

The language of human rights is legal and abstract, but the human dignity and equality it aims to uphold take shape in the real world through institutions and practices. The fundamental rights it champions must be enacted and protected by the organs, arms and agencies of the state. The substantive rights it guarantees must be delivered by government.

Human rights thus require a framework of good government in order to be more than paper guarantees.

Whatever the specific features of the government under which people live, their human rights will not be assured without the government itself abiding by certain basic principles, and being subject to the rule of law.

Let me just draw on some examples from my experience.

The tender committee


One of the basic functions of government is stewardship of the resources of a nation. In truth every nation has the natural, cultural and human resources to provide for the basic wellbeing of all its citizens. Even in famine, people usually starve not because there is not enough food in the country as a whole, but because their entitlements to it have broken down. In an age of abundance, poverty and shortage are social and political rather than natural problems. There is no evading our common responsibility for them. Where people are in want, weak government is almost always at the heart of the problem.

The government’s ability to provide for the basic necessities of its citizens is directly tied to its ability to be a transparent custodian of the nation’s resources. This custodianship is expressed through good practices. These good practices are only sustainable in an ethos of trusteeship.

Malaysia has suffered a worrying decline in both.

Let me cite some examples.

The tender committee


Of late in Malaysia it has become common to speak of the “negotiated tender”, the “direct nego.” When this term first started being bandied about in the 1980’s I couldn’t understand it. It had never existed before in our system of government.

I do not understand what kind of legal loophole was employed to make this aberration the new norm in government procurement.

What I do understand is that since Independence in 1957, and up to the time I served as Minister of Finance, the open tender was about the only way the government could procure anything.

It was ingrained in the civil service that all government procurement must be done in a visible manner and with the proper controls to ensure independence and effectiveness in procurement.

The Ministry of Finance ensured that all procurement was done through a system of tenders.

In the first instance, any tenderer must be pre-qualified and any submission must conform with specifications laid down by the technical and financial committee in consultation with prospective users.

Vendors had to be pre-qualified before they were allowed to submit a tender.

Thereafter their submission must meet basic specifications.

The tender committee was formed and managed with the utmost concern for independence. The committee would sit at a moment’s notice when the government had something to procure. All tender documents were coded and distributed to the members of the tender committee first thing in the morning. The members were isolated and given three or four hours to study the documents. Technical and financial advisors would be on hand to explain the technicalities to the decision-makers.

Immediately after the committee had decided, their decision on who the contract had been awarded to would be conveyed not only to the people who had participated in the tendering process, but to the public.

I have belaboured the details of the process because the details represent careful controls and checks through which the government exercised its custodianship of public resources. The committee was given no advance notice, was physically isolated, and had to work quickly in order to prevent communication with interested parties. The results had to be announced publicly immediately to prevent retrospective interventions with them.

Secrecy and publicity were deployed to ensure the integrity and transparency of the process. Contrast the uses of secrecy today, backed by the Official Secrets Act, to prevent the public from knowing how much has been stolen from them and by whom.

Public service as trusteeship

Good practices do not exist in a vacuum. They can only be applied by public officials who have had it ingrained in them that they hold their positions in trust for the entire rakyat. Not for themselves, their party or their community. Good practice in public service requires an ethos of public service as trusteeship.

My late father was a senior government official. He had an official car given by the government. He never used the car to go to the club, nor would he allow us children to go to school in it. If we had to go by car, we went in his personal car. If he must go to the club, he would come home and change cars and drivers, so that car and driver were personal. The car belonged to the government and the petrol in the car was paid for by the government. If you went for private function you used your own petrol and was driven by your personal driver.

I can remember being in his official car once. I jumped into it to go to the Sultan’s birthday celebration parade. He relented because he was going to an official function. What a thrill. He was very strict about these things.

Later, whether in business or government it was unthinkable for me not to apply the same practices. These practices were a kind of basic hygiene as unremarkable and ingrained as the habit, say, of washing one’s hands before a meal.

My experience was typical of public servants of my generation. Those of you acquainted with retired senior civil servants will recognize the type of person I am talking about. They lived and breathed this ethos.

Now we see politicians using official vehicles with no regard and indeed no understanding of the distinction between private and public assets. Their wives go shopping in government transportation.

I have gone on about these details because faithfulness in small things begets faithfulness in large things. It is in the details that the spirit of trusteeship is cultivated and passed on.

Public trusteeship and human rights


What is the relevance of this to human rights?

Good practices and a strict ethos of trusteeship in respect of public assets is important because they are a safeguard against corruption, and the biggest challenge to the full enjoyment of human rights by all in Malaysia is corruption.

As a result of corruption, stadiums collapse, bridges fall down, people die unnecessarily on roads not built to specification. As a result of corruption, communities and individuals in our midst suffer malnutrition, are deprived of education, are trafficked like slaves, die in official custody. As a result of corruption, the voiceless are exploited or neglected: vulnerable children, migrant workers, Orang Asli, and the interior-dwelling people of Sabah and Sarawak.

The people who bear the highest responsibility for this crime are people in high positions, both official and commercial, engaged in an elaborate game which in reality is simply about stealing public assets. These are people who expect and exact respect from the public, when their deeds costs people their livelihoods, their health and their lives, diminishes human prospects, blights the future of our children.

The rule of law and human rights


The most important safeguard of human rights is the rule of law. The ultimate safeguard of our human rights in Malaysia is the Constitution. A Constitution is a living thing only when it is instutionalised as a living practice. It needs judges, public officials and civil society who are committed to upholding and protecting it without fear or favour.

When the Constitution is ignored or contravened by the Government of the day, and by officials sworn to uphold it, this foundational institution is injured, the rule of law is undermined, and there is a little less standing between each Malaysian and the barbarism against which the Universal Declaration was proclaimed.

Our Constitution was flouted in Perak this year when its legitimate government was replaced by unconstitutional and undemocratic means. This was a violation of the rule of law. As this action was promoted and endorsed by the highest authorities, it damaged the people’s confidence in the rule of law, in democratic governance and in our constitutional monarchy.

The Universal Declaration on Human Rights which we celebrate today draws on the searing experience of the Great Wars of the twentieth century. An unforgettable impression left by that war is that the tissue between ourselves and barbarism is thin indeed, woven from the fragile thread of values, institutions and practices.

The Universal Declaration expresses the inherent dignity of the human person, and declares his inalienable right to life and liberty in the language of human rights. Those values are ancient and near universal, but the modern language of rights is now indispensable for discussing them.

Our founding Prime Minister, the late Tunku Abdul Rahman, understood this. He had wanted to have the UNDHR inserted as a supplement to our Constitution. I am not sure what prevented him from doing so, but it is clear from his conduct and from his statements that he shared its ethos. The “founding fathers” of this young country, who were of the generation that saw the founding of the UN and the formulation of the Universal Declaration, shared this ethos. To remind ourselves of the spirit in which we began, and the ethos we must now fight to recover, I would like to end with the beginning of the speech that Tunku gave upon the formation of Malaysia on September 16, 1963:

THE great day we have long awaited has come at last – the birth of Malaysia. In a warm spirit or joy and hope, 10 million people of many races in all the States of Malaya, Singapore, Sarawak and Sabah now join hands in freedom and unity.
We do so because we know that we have come together through our own free will and desire in the true spirit of brotherhood and love of freedom.


*Speech delivered at a seminar on human rights organized by the UNDP on Dec 8 at the Renaissance Hotel, KL