Several hundred people gathered at Dataran Merdeka on Monday night demanding the release of Maria Chin.

On Tuesday, the number grew to possibly more than a thousand. It is a good turnout I think.

Maria Chin

I hope the crowd size will double tomorrow.

The crowd shouted “Reformasi!” last night as they gathered on the edge of Dataran Merdeka to demand the release of Maria Chin.

About 20 years ago, the term was so full of anti-Mahathir context. “Not today however,” History said, smirking as she played a joke on all of us.

Having the crowd crying out reformasi on Monday evening made the atmosphere surreal. Surreal because sitting at the front facing the crowd was the former Prime Minister Mahathir Mohamad.

Reformasi! Reformasi! Reformasi!” the crowd roared.

He managed a smile and raised his hand together with the rest. I had to assess my own sanity and senses whether I actually saw or heard him shout reformasi along the protesters, possibly numbering between 500 and 1,000 people.

Hishamuddin Rais with his hat and ill-fitted clothing — released from police lock-up just a few hours earlier — joked he could hardly believe Mahathir had attended Bersih and on this night, Mahathir was sitting close to him. Hishamuddin made a mocking impression of Mahathir. Yet, he, one of Mahathir’s harshest critics from the streets from the very beginning, is convinced of the need to work with Mahathir and put the past behind. Mahathir understands the compromise Hishammuddin has made, and took the jab with a open, humbled heart.

On Saturday, when Mahathir gave a speech to a much bigger crowd under the Petronas Towers, it was evident many were still distrustful of the old man. I could see it in their faces. They looked on and listened incredulously to Mahathir as he spoke of free speech, free press and freedom of assembly. “Malaysians have short memory,” remarked a friend to me as the clouds threatened to unleash a tropical rainstorm on us.

What was a clear blue sky had turned gloomy by four or five o’clock, when Mahathir arrived to give the speech. The rain god understood the popular sentiment on Jalan Ampang.

It is hard for anybody, me included, to stomach having Mahathir pontificating about free speech, free press and freedom of assembly. This is the man along with Lee Kuan Yew who believed in the so-called Asian values, the belief that the well-being of the whole trumps individual rights. I wonder how Lee would think of his former sparring partner.

To many liberals, I can see, Mahathir simply does not have the moral authority to say things he said on that Saturday afternoon and on that Monday night. Many liberals and others who opposed Mahathir during the 1980s and the 1990s yearn for pure heroes.

I hate to break it to you but those pure heroes do not exist in these desperate hours of ours. Anwar Ibrahim is in jail and Anwar himself is imperfect. Yet, we follow him, believing the injustice brought down upon him reformed him for the better for us all.

What we have now, ironically, is Mahathir.

At this stage, those who believe Najib Razak needs to resign and be brought to justice need to invest in coalition building. That is the only way realistically available to correct the wrong the corrupt have done. It is the only way to get Malaysia to move on. Without a coalition, Najib will continue to be in power plundering public wealth and undermining public institutions that we need to get to the next level of development.

Muhyiddin Yassin on Saturday is right. We need to forget our differences for a moment, just for this moment, and work together towards a common goal for the greater good. The urban and the liberal folks need their heartland cousins to push Malaysia forward and this is where Mahathir comes in.

Muhyiddin Yassin at Bersih 5

We have done it before. We saw that in 2008 and 2013. We just need to do it again. Yes, things crumbled afterwards but you know, if at first you do not succeed, try and try again. Nobody said it would be easy.

A defeatist would not even try. He would want to read a 100-year plan before starting anything.

I would say we should cross the bridge when and if we get there. It is premature to think about all permutations and worry about the downside as if the bad outcomes are guaranteed. There is no guarantee. None. And that is why attempts at building a coalition matter. We need to try instead of resigning ourselves to certain damnation.

And to the cynics who still distrust Mahathir, I think we can safely bet that Mahathir cannot be the dictator he used to be. As I stood at the back staring at him judgmentally, somehow I felt pity for him. There was a statesman, the former strongman of Southeast Asia, sitting upfront, shrunken, old, tired, small and humbled.

Yet, he was there on Monday night.

The question should not be why he was there, or whether he should to be there?

The question instead should be, where were you?

Mahathir ate his ego for something greater. Yet, here are the liberals, worried about some kind of ideological purity, trying to parade your moral superiority while more injustice is being committed by others.

Mahathir is not the authoritarian leader we have now. The monster is in Putrajaya.

Get on the program, fucking please.

[2840] Bersih 5, ticked

This edition of Bersih, felt less carnival-like unlike last year. Nevertheless, Bangsar still had the fun crowd, with all the banners and masks and flags and songs. I love the fight songs.

But well, the protest is not about having fun. It is about exercising political rights. And it is never really courageous to take potshots from the sides. From time to time, we hafta go down.

I had expected the worst, after all the heightened provocations and shrilling threats made by Umno men. I was prepared with salt water, some medication and legal aid contact written on a piece of paper in my bag. In the end, it proved to be unnecessary thanks to the protest organizers and the police. I m thankful in the end, the protest was peaceful.

I am glad we have learned something about right to peacefully assemble after all these years. That took a lot of work. And that alone is progress, and that should be restated time and time again to the cynics.

There are various persons currently being held by the police for merely protesting peacefully. Whatever progress we have achieved, there is still much to be done. After all, Najib Razak is still the Prime Minister, after all the wrongs he has done.

Bersih 5 on Jalan Bangsar

How was it in Bangsar?

Well, from left to right, Riza Aziz, Rosmah Mansur (obscured), Jho Taek Low and the man himself, Najib Razak.

Part of Jalan Bukit Bintang has been transformed into a mini-Arab town over the past 5 or 10 years. It has been quite an intriguing trend.

Arab restaurants and tourists are not uncommon along the stretch between the Pavilion and beyond Jalan Raja Chulan. They like Malaysia for various reasons and it is easy to see that they are a wealthy bunch, fitting the general stereotype assigned by the locals to those originating from the Gulf quite nicely.

But in recent weeks, something extraordinary has been happening. I am beginning to spot Arab women and their children begging on the streets on Jalan Bukit Bintang.

The first time I noticed them, I found myself feeling incredulous, feeling that this must have had been some kind of a prank. Many beggars all around the city are linked to some kind of syndicates. Some are manipulating public sentiment for disagreeable personal gains while others are truly desperate in need of help. The prevalence of syndicate-related beggars and the second group of people make me suspicious of these Arab beggars.

But yesterday, I spotted a woman in her black purdah without a face veil sitting on the floor just outside the newly renovated Isetan store in Lot 10. He held a small placard, telling passerby that she was from Syria and she needed money.

I do not how true her claim is but my heart melted nonetheless.

 

How would you imagine a utopia? What is that utopia?

These are hard questions to answer. It is hard because it requires deep reflection. It cannot be answered on the spot.

In this age when pessimism against liberal values grows day by day, to me, the need to imagine a utopia becomes greater than ever. It is either to criticize these ugly forces fueling Brexit and the Trump presidency (or Malaysian racism and corruption), or to convince the masses it is worth staying the course on the liberal project.

And so when I spotted an event called “Imagining Utopia” at the Kuala Lumpur Literary Festival earlier today, I decided to drop by hoping to find the seeds to my utopias. The liberal order is retreating and so I need my rally.

But as I sat in the front row listening to the panel members, I felt growing dissatisfaction against the majority’s view. Instead of a session imagining utopia, it was a discussion criticizing utopias for being out-of-touch/unconcerned with human nature, and then became a session praising dystopias.

I was mad at the direction of the discussion. In fact, when I took up the microphone to express my dissatisfaction, I sounded unreasonably confrontational, to which I had to apologize after.

Utopias and human nature

As a libertarian, human nature is tried and tested line of argument I used against socialists and communists out there, and to defend the liberal market orthodoxy. Greed, self-interest and other darker sides of us are harnessed by the market to do something good as the argument goes. We have to acknowledge these darker sides of us before we can go on to do good, typically the defense goes. Communism does a bad job at incorporating human nature, as the knife strikes into the heart of the anti-market belief.

Unsophisticated to say the least, but hilariously hard to counter at entry-level discussions.

But yes, utopias have trouble dealing with human nature, as human nature is now, to a realist. Utopias ignore, reject or assume heavily modified human nature to create a paradise on earth in our head.

However, the link between utopias and human nature should not be an excuse to dismiss utopias in the first place. Yet, the majority on the panel refused to imagine any utopia, dismissed the roles of utopia without assessing it and then hastily worshiped dystopias instead.

Roles of utopias and dystopias

The majority view is more interested in dystopias. Dystopias to them are of more value than utopias. Why? Because dystopias readily deal with current human nature. Boo!

Utopias and dystopias have their values in criticizing reality. Brazil, Nineteen Eighty-Four, Fahrenheit 451, The Wanting Seed and other dystopias take a development in the author’s reality and then project it forward to show what is wrong with that reality. Showing what is wrong with our (or somebody else’s) current society is one of the major functions of dystopias.

What the majority view fails to realize is the function – or as Zedeck Siew, the only one defending utopias on the panel, puts it, the utility – of utopias with respect to human nature.

The function of utopias is to imagine a different world where we can do better. Be it communist, liberal, religious, materialistic or whatever adjective there is out there to describe whatever philosophy, it is the imagining of a better world, a better way of organizing society or perhaps more importantly, a better or even different human nature. Indeed, it is a criticism of human nature, as it is, itself.

An example involves Edward Bellamy’s Looking Backward. It is a 1897 communist utopia that I disagreed with and an overly optimistic views of human nature. Nevertheless, it is a powerful criticism of capitalism and together with other experiences, transformed capitalism for the better especially after the 1930s Great Depression. It made us look at our reality clearer whereas before, we took it for granted. Really, the latest technology from computing to logistics risks making central planning more efficient than the free market, just as written in Bellamy’s utopia. This is a challenge to all modern libertarian thoughts.

I feel this is why such majoritarian dismissal of utopias based on our current human nature is highly unsatisfactory. Utopias assess our human nature more comprehensively than dystopias because of utopias’ radical imagination. Yet, the majority dismisses utopias because of human nature.

Radical imagination versus mere extrapolation

Imagining utopias, unlike dystopias, are not merely about extrapolating existing trends. Imagining utopias are about jumping to another plane altogether and projecting from that. It is the imagining of our new and better nature.

The newness requirement is why it is harder to imagine a utopia than a dystopia and why it is wrong to cheapen the value of utopias to that of common fluffy trash. This is probably partly also why, there are more dystopia than utopia literature.

More importantly, going back to the point about pessimism against the liberal order, a creative utopia creates a goal. The path towards that utopia will be the integration between that goal and our current human nature.

That shifting of plane requires radical imagination and that plane will provide contrast to the control group that is our reality.

The impermanence of human nature

And finally, human nature can change. We humans and our society evolve. There are still vestiges of cavemen inside of us but those urges have been modified by our understanding of sciences. Hundreds of years of advancement in physics, biology, chemistry, mathematics, economics, psychology, sociology, philosophy… knowledge has changed our human nature and will continue to do so. I am not about ready to say Darwin, Wallace and others involved in a whole line of evolutionary thoughts from biology to economics are wrong just to defend the idea of the permanence of human nature.

And really, the modern us have been around for less than 100 years. For millions of years, we were savages. For thousands, we lived in ancient civilizations. For hundreds, in nation-states. For decades, the confused post-modern now. After the dramatic change in our lives in just decades, can we be confident that human nature is unchanging?

Victims of our reality

One of the panel members, in making a short digression, said many writings today are clichés because many authors produce derivatives. Well, dystopias are clichés. Indeed, it is a failure of imagination to hastily and prematurely dismiss utopias in favor of dystopias.

In fact, I think we are living in a dystopia. The praising of and the addiction to dystopias is us becoming the trapped victims of our reality.

The Department of Statistics will release the third quarter GDP numbers this Friday.

Growth, I think, unlikely to be pretty and will likely be the worst so far yet this year. This slowdown has lasted longer than I expected but the good news is, I think we might be close to the trough. There is not much light at the end of the tunnel, but it does feel like it will get slightly better next year. Projections all around point towards a high-4% for 2017, versus this year’s low-4%.

Still, there is risk things would hardly move on the ground. I remember as we entered the last election cycle (possibly began as early as 2011 and definitely by 2012. It felt like forever) the government crept on its four legs. Everybody was being cautious. Friends in the government shared their frustration how the bureaucracy moved extra slow and reluctantly as the civil service felt the need to wait out for the election, lest work invested would go to naught. Najib Razak post-2013 did change the agenda rather spectacularly that Pemandu men and women hardly have work in Malaysia now, and working in India at this very moment.

So, forgive me when I am a bit skeptical upon hearing the government’s claim that the construction for the east coast rail line (ECRL) and the high-speed rail (HSR) will start next year. Maybe having a no-bureaucracy, no-tender MYR2 company doing the ECRL would hasten the timeline a bit.

But that is the prospect for 2017. What about 3Q16?

How fast do you think did the Malaysian economy expand in 3Q16 from a year ago?

  • 3.0% or slower (0%, 0 Votes)
  • 3.1%-3.5% (8%, 1 Votes)
  • 3.6%-4.0% (42%, 5 Votes)
  • 4.1%-4.5% (50%, 6 Votes)
  • 4.6%-5.0% (0%, 0 Votes)
  • 5.1% or faster (0%, 0 Votes)

Total Voters: 12

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I think growth would decelerate to below 4.0% YoY, about high-3%. That is the lowest expectation I have ever had since I left grad school and first started working. The unemployment rate is relatively high at 3.5% and export figures have not been pretty.

Still, the industrial production statistics have shown some encouraging numbers. Furthermore, consumption and imports are no doubt on the rise.

We will see how all this adds up this Friday.

Mohd Hafiz Noor Shams. Some rights reservedMohd Hafiz Noor Shams. Some rights reservedMohd Hafiz Noor Shams. Some rights reserved

p/s — Do not fuck this up Americans.

Has Malaysia eliminated identification of race by economic function?

I have been thinking about this casually over the past several years, ever since that one afternoon when I wanted a cold drink and began to take notice the ethnicity or nationality of the men and women working as waiters at various restaurants and cafes. I have always taken that reality for granted, but on that day I began to think about the association of certain professions with certain nationality, race or more accurately, ethnicity.

Going back to the question, I think the short answer is no.

Has Malaysia made progress towards elimination? It is complicated.

When a politically-conscious Malaysian thinks about the racial identification via economic role, it is usually within the context of the New Economic Policy. The policy had two objectives. One, the eradication of poverty. Two, the elimination of racial identification by economic function.

If you are a supporter of the NEP, it is likely you think both goals have been achieved, directly by the policy.

At risk of digression, I have reservations about the first claim because of the simultaneous roles industrialization played with respect to reducing poverty. To excite export-led industrialization, the NEP requirements were suspended and that at the very least suggests in some parts of the economy, the NEP was an obstacle. Further technical issues involve inconsistent poverty definition used throughout the years as well as the question why similar poverty reduction happened in in neighboring countries that had no NEP. Crediting the NEP alone ignores the competing factors that achieved the same goal through opposite means. But I will not go too deeply about it here as I am more interested in the second claim.

I think the second claim can be accepted without much protest. At least, as much as the following statistics can say (if we accept over-representation of one particular group in a sector is equivalent to identifying that group with a particular economic function):[1]

Ethnic composition by economic functions

The chart shows the ethnic distribution for various economic roles has come closer to actual population demographics by 2000 and 20100 than it was in 1970 (with the exception of agriculture; I left the sales and services sector out because official definitions changed between those years. I could make them comparable but I really do not want to invest the necessary time researching for it).  There is a better representation of the population demographics within those sectors in 2000 than 40 years earlier, which suggests any one Malaysian ethnicity has become less associated with a particular role, notwithstanding agriculture.

This does not mean such association has been eliminated altogether. One instance where identification has become stronger is in the civil service (apart from agriculture as seen above):[2]

Ethnic composition within the civil service

This should be compared with the composition of Malaysian citizen population:[3][4]

Composition of Malaysian population

But that is not the reason why I feel Malaysia has not eliminated identification of race by economic function, even when some reversal seems to be happening within some fields among Malaysia. Among Malaysians, you can see progress towards that direction.

A new source of ethnic identification by economic function began in the 1990s when Malaysia welcomed a new wave of migrant workers into the country during the boom years.

The NEP focused on Malaysians citizens only and it may have achieved success within its defined limits. Yet, the Malaysian society is bigger than the population size of its citizens. Out of the 31 million population, at least 10 per cent are foreigners, possibly double that if the unofficial numbers are to be believed.

And these foreigners – the one taking the low-paying jobs – are identified by their economic functions. Nepalese for security guards. Bangladeshis for manual labor. Indian for mamak-like restaurants. Indonesians as maid, until recently. For the more expensive restaurants, the English speaking servers are Filipinos. It is a generalization, but more often than not, it will hit the mark quite frequently.

Malaysia’s migrant worker policy contributes to the strengthening of the identification problem. The government has a policy of allowing certain nationalities are allowed to work in specific sectors. And the tendency for migrant and networking effect adds up to the concentration of workers with the same racial, ethnicity or national background.

Mohd Hafiz Noor Shams. Some rights reservedMohd Hafiz Noor Shams. Some rights reservedMohd Hafiz Noor Shams. Some rights reserved

[1] — Jomo Kwame Sundaram. The New Economic Policy and Interethnic Relations in Malaysia. United Nations Research Institute for Social Development. September 2004.

[2] — Lim Kit Siang. Lowest Chinese and Indian representation in the civil service in the 53-year history of Malaysia – 5.8% Chinese and 4% Indians as at end of 2009. April 6 2010.

[3] — Khoo Boo Teik. Ethnic Structure, Inequality and Governance in the Public Sector. United Nations Research Institute for Social Development. December 2005.

[4] — Department of Statistics Malaysia. Population Distribution and Basic Demographic Characteristic 2010. July 2013

New York has the Empire State Building. Think of Paris and the Eiffel Tower comes to mind. Cairo is inseparable from the Pyramids. Singapore has the smaller but not less iconic Merlion. George Town has the Penang Bridge, if you take a liberal view of the city’s boundary and ignore the unpleasant monolith towering over the island.

The Sultan Abdul Samad Building stood as Kuala Lumpur’s chief landmark for almost a hundred years. But on one fine morning in the late 1990s, two bluish skyscrapers dethroned the onion coppered-domes structure as the new symbol of Kuala Lumpur. The Petronas Towers emerged as the world’s tallest building.

This was possible due to one man. He is Mahathir Mohamad, the fourth Prime Minister of Malaysia.

The man did more than merely changed the landmark of the city. The symbolism – the switch from a building of colonial origin to one of contemporary Malaysia – reaches out with a far greater nuance. It represents the Malaysian industrial revolution that happened under his watch.

The reality of Malay feudalism

Before modern Malaysia, the society within the land we live in now was condemned to social immobility. Rarely would a person living at the bottom of the pyramid graduate upwards. If you were born to a common family, then you would be trapped in that world. You would have to be content with little reward for toiling under the unforgiving tropical sun. Only those belonging to the upper echelon had a realistic shot at material success.

Munshi Abdullah in the early 1800s criticized Malay rulers on the east coast for killing a person’s motivation to work. Far too frequently, those in power would confiscate wealth from the common folks, making the reward for work nonexistent for the majority. Capital accumulation for the masses – the recipe for modern capitalism – was impossible for the ruled.

Things improved when the British arrived, especially in the 19th century. Armed with advancement of the European Industrial Revolution, colonial technology increased productivity and brought material progress to Malaya and other parts of the region. Yet, the improvement was largely limited to the crown colonies and the colonial capitalists monopolized the most productive economic sectors, with most of the profits repatriated abroad instead of being reinvested locally. Penang, Malacca, Singapore and other smaller settlements like Kuching and Taiping were of their time, glittering cities benefiting from electricity, street lights, paved roads, schools and clinics, standing apart from the underdeveloped interior where many lived.

From our vantage point today, the situation had barely improved by the middle of the 20th century. Even as Malaya and later Malaysia emerged out of the Second World War, it was unclear if the welfare of the majority had risen meaningfully. Kua Kia Soong is convinced the May 13 race riots in 1969 was a coup by Tun Razak Hussein who rode on Malay peasant discontent against Tunku Abdul Rahman’s overly hands-off policy, as the glow of 1957 Merdeka and the 1963 Malaysia gave way to economic woes.

Mahathir’s industrial revolution

Mahathir’s industrial revolution of the 1980s and the 1990s overturned the highly inflexible calcified society. Fewer sons and daughters of fishermen and farmers took up their parents’ low-paying professions. Capital accumulation became possible for more and more people, freeing them from suffocating unjust feudalism.

They participated in the cogs of modern economy and migrated to the cities at an unprecedented rate. The rapid urbanization created or expanded towns like Petaling Jaya and Subang Jaya – a manifestation of the industrial revolution – to cater to the housing needs of the new urban middle class.

It was not just wealth that began to build up outside of the feudalist circle. Political power did too. Mahathir is the first prime minister who has no blood ties to the royal court. The other Prime Ministers were or are all blue-blooded, with the exception of Abdullah Ahmad Badawi, Mahathir’s immediate successor.

Malaysia experienced its fastest economic expansion in the 1970s – growth in the decade averaged 7.9% yearly – but it was during the 1980s that growth really took off in a manner the man on the street could feel the rising tides. The expansion of the 1990s would have been far greater if it was not for the devastating Asian Financial Crisis. The 1998 recession remains Malaysia’s worst yet.

Malaysian RGDP 1963-2015

Causes of the 1980s-1990s growth

The success of Mahathir’s Malaysia of the 1980s and the 1990s did not come out of vacuum.

The controversial affirmative action New Economic Policy (NEP) formulated in the aftermath of the 1969 race riots permeated the air. An activist government redistributed wealth across the society especially among the Malay populace in the 1970s to appease the peasant discontent, and to create a new and larger urban middle class. But the policy took time to mature and it ripened during Mahathir’s premiership. This was particularly true on the education front. The rapid expansion of formal education up to the tertiary level created enough talents to sustain an industrialization drive.

Equally important in industrializing Malaysia was the role played by Japan. Lee Kuan Yew engineered Singapore’s fantastic rise by capturing capital fleeing communist China’s disastrous 1960s-1970s Cultural Revolution (Chinese capital also fled to Hong Kong and Taiwan even earlier in the 1940s-1950s during the Chinese Civil War that the communists eventually won). Malaysia engineered ours by welcoming Japanese money and technology in the 1980s-1990s.

We have to understand the Japan of that time to understand its role in shaping Mahathir’s Malaysia. The Japanese post-war economic miracle created demand that far exceeded whatever input – labor, land, raw material – that existed domestically. The same problem had brought the Japanese Imperial Amry out to mainland Asia and to the archipelagos down south. The rapid reindustrialization out of the ashes of Hiroshima and Nagasaki used up all the workers the Japanese society could provide. Wages rose precipitously and so did cost of doing business. This was coupled with the 1985 Plaza Accord where major powers of the world agreed to the devaluation of the US dollar relative to the yen. The result: Japanese exports became increasingly expensive and uncompetitive in the US and in other countries where the local currency was linked to the dollar. In those days, the dollar was the effective gold standard.

Rising cost, severe labor shortage and strengthening yen threatened the profitability of exporting Japanese firms like Hitachi, Mitsui and Toyota. In order to remain competitive, they needed cheaper production bases outside of Japan.

Mahathir understood this perfectly and he cajoled Japan to invest in Malaysia in a big way. He succeeded.

Turning east from west

The Look East Policy should be read together with Mahathir’s Buy British Last. Unlike the earlier three Prime Ministers, Mahathir does not remember British rule as fondly. His family was far from the feudalist elites whom maintained close ties with the British. He did not spend his youth in England unlike the previous three prime ministers.

Even in a pro-British environment of the 1970s, Malaysia frequently clashed with British companies over the NEP. British investors then still owned a large chunk of Malaysian industries, especially in the plantation sector. Guthrie alone owned 17% of Malaysian land during the decade. British or European firms controlled 1.2 million out of 1.4 million acres of Malayan rubber plantation in the post-war period. James Puthucheary in his 1960 classic Ownership and Control in the Malayan Economy describes how strongly the British controlled the local economy in all sectors at that time.

Quoting a 1948 report, Puthucheary wrote “the control of Malaya’s most important industry by a ‘handful of large firms’ is the basis of the great political power wielded by them.” Indeed, the 1948 Emergency was declared only after the High Commissioner Edward Gent was pressured by British planters to do so, as recounted in Noel Barber’s The War of the Running Dogs. Gent was even removed from office because the planters did not like him. And the armed contest was called an emergency instead of a war only because the planters were worried insurers would refuse to cover losses arising from the conflict. But the Emergency was, in every respect, a civil war.

The Malaysianization of the domestic economy that began under the NEP – financed by oil windfall of the 1970s oil crisis – reached its climax under Mahathir when he sanctioned a 1981 dawn raid of Guthrie at the London Stock Exchange that ended with Malaysia owning the plantation major. Today, Guthrie is part of Sime Darby, which itself was acquired by the Malaysian government in 1977.

The hostile corporate maneuver of 1981 broke the Malaysia-Britain ties. So, Mahathir needed a new friend. Japan was looking for one too.

Running two industrialization policies concurrently

Japan supplied the money and the technology but the inspiration for industrialization came from the four original Asian tigers. Hong Kong, Singapore, South Korea and Taiwan all became rich by exporting manufactured goods to the world. Malaysia and Thailand – perhaps less successfully, Indonesia and the Philippines – adopted the export-led industrialization with vigor beginning in the 1980s.

Singapore in particular has a special love-hate tie with Malaysia. After two years as part of the Malaysian federation – and for a longer time part of Malaya – Singapore was booted out in 1965. For some in Malaysia, seeing Singapore thriving instead of suffering since then must have been vexing. Mahathir could never have a sustained friendly tie with Singapore or with Lee Kuan Yew, a British-educated lawyer who had labelled the Singaporean-educated medical doctor from Kedah as a Malay ultra. The Mahathir-Lee rivalry must have inspired the former to play the catch-up game with Singapore, out of honor and ego.

Industrialization happened and Malaysia radically shifted its emphasis to exporting manufactured goods such as air-conditioners, refrigerators, televisions and computers from merely selling raw material like tin and rubber. The policy shift created jobs just decades ago did not exist.

Mahathir was not the first Malaysian leader who saw manufacturing and exports as the new growth engines. Penang under Lim Chong Eu figured it out first in the 1970s by inviting American corporations to invest there and subsequently turned Penang into the Southeast Asian hub for electronics manufacturing. But it was who Mahathir scaled the model up at the national level.

He did not just press for export-led industrialization. He also pursued import substitution industrialization by establishing heavy industries like steel-making and automotive. Perhaps he was unsure if he could succeed with pro-export bias only and as a precaution, he bet on two competing horses. Mahathir had a good role model to follow. South Korea believed in import substitution too and achieved great success with it.

Unfortunately for him, only one of the horses finished the race in good health. His export policy worked marvelously but the import substitution lost steam along the way.

The easiest example of the failed import substitution policy is Perwaja, which made billion of ringgit of losses due to mismanagement, corruption and bad business model. Malaysia still has a steel industry despite the failure of Perwaja – a hung up from the Mahathir days – and it remains uncompetitive till this day. Domestic steel producers regularly lobby the government for protection from steel imports, unashamedly asking the public to pay for their losses.

The more interesting case is Proton. The whole enterprise got off to a good start in the 1980s with the help of Mitsubishi. The biggest factor contributing to Proton’s early success was the government support it received. Mahathir restricted competition by imposing astronomical tariffs on imported cars while refusing foreign car manufacturers the licenses they needed to produce in Malaysia. In a car-oriented society, a car was a necessity and most could afford Proton only.

But the success did not last for long.

Instead of following the Malaysian path, Thailand invited the likes of Toyota, Honda, Ford and General Motors to manufacture and assemble vehicles in Rayong. A great automotive city came to being south of Bangkok and turned Thailand into the largest vehicle manufacturer in Asean.

The implementation of the Asean Free Trade Area abolished import tariffs on all Asean cars. Proton too long addicted to protectionism, now had to compete with the automotive giants located up north.

The Malaysian carmaker competed badly. The Thai production was set up with the regional market in mind unlike Proton, which was and still is focused on the far smaller domestic market. That means Rayong manufacturers have the economies of scale Proton does not. It cost Thailand less to build a car than Malaysia could.

Proton lost the race by the 2000s. In 2016, it begged the Malaysian government for MYR1.5 billion just to survive. The Najib government bailed it out and it unlikely to be the last. The establishment of Proton has led to the creation of a long and complex supply chain which the government just cannot let fail out of political considerations, a legacy issue from the NEP as well as from Mahathir’s policy.

Foreign technology, foreign money and foreign labor

Regardless of import substitution failures, Malaysia industrialized.

Just like Japan, the 1980s-1990s Malaysian industrialization led to labor shortage. Export-oriented industrialization made the world the market. Yet, the 1981 Malaysian population of 14 million could not provide enough local hands to man the factories and build new office towers. The population size grew to 19 million by 1991 but still it was not enough. The economy was simply growing much faster than Malaysians could make babies.

Mahathir imported the workers Malaysia needed. The Petronas Towers were built by Japanese and Korean engineers, Malaysian oil money and Indonesian sweat. Without these foreign workers, the twin towers would not have been built and Malaysia would have unlikely to develop as fast.

This is an obvious historical parallel to the immigration of the late 20th century. When the British first introduced agricultural plantations and large-scaled mining, they quickly discovered the Malayan labor pool was too small to support their new economic endeavors. Syed Hussein Alatas in The Myth of the Lazy Native believed the Malay commoners refused to participate in these enterprises after witnessing how badly workers were treated on the plantations and in the mines. Life in the peaceful kampongs felt like paradise versus the hell within the mines. Yet, industrial production was the future, not subsistence activities. The British solved the problem by bringing in foreign workers from China, India and Java, who later became citizens of Malaysia.

Mahathir wanted Malaysia to have 70 million people by 2100. But rising prosperity is a potent birth control device. The average nuclear family size by early 2000s fell to about 4 persons a family from roughly 5 in the 1980s. It probably averaged 6 earlier. The United Nations projects by the end of this century, the Malaysian population will stabilize at around 41 million people from the current size of 31 million people. Immigration is likely the only way to achieve 70 million people target, if it is still a goal of the current government.

Some of these new immigrants will join us as citizens of this country if we intend to sustain our economic growth, changing the demographics of this land yet again. The alternative is Japan, a rich and advanced society, but with a shrinking population and a bleak future.

Loosening up of the NEP

One thing that stood in the way of export-led industrialization was the NEP as it imposed a 30% Bumiputra equity requirement on various sectors. Foreign investors did not like surrendering control of their investment to somebody else and they could simply go somewhere else – Thailand and Indonesia were the obvious alternatives – if they could not get their way. Despite being the author of The Malay Dilemma and an earlier proponent for the NEP, Mahathir was pragmatic. He abolished the requirement for foreign manufacturing as an expanded manufacturing would lift all boats up.

In 1986, foreign investors were allowed to hold 100% equity if at least half of their output were exported. By 1998, they were permitted to have 100% equity regardless of export level as the government tried to stimulate an economy battered by the Asian Financial Crisis.

Coupled with various tax incentives, the abolition spurred investment into manufacturing. Industrial free zones with minimal customs supervision popped up like mushrooms after the rain in Selangor, Penang and Johor. Non-Japanese companies like Intel, Dell and Texas Instruments set up plants in these zones. By the 1990s, manufacturing made up a quarter of the country’s economic output in contrast to 1965 when it was only a tenth and when agriculture dominated the economy. Malaysia was transformed radically then well before Najib Razak’s transformation programs.

Source: EPU

From industry captains…

Mahathir was still obsessed with hitting the 30% Bumiputra equity target despite abolishing that quota requirement for foreign manufacturers. With the NEP ending in 1990, he was at risk of coming short. He addressed that by picking and nurturing a cohort of Malay industrialists to help him achieve that goal.

Privatization was the favorite means by which the Mahathir government used to create the Malay industrialist class. It also killed two birds with one stone, as privatization tackled the problem of bloated inefficient government by cutting public expenditure.

Mahathir had inherited a monster of a government when he first came to power. Public spending had expanded greatly in the 1970s as the government sought to fulfil its NEP redistributive objectives. Public agencies and enterprises employed more and more people while disregarding the negative effects that had on efficiency.

The government would have been able to sustain the whole NEP spending if it was not for the mid-1980s recession. Oil, tin and rubber prices collapsed. Government revenue was depressed. Deficit widened. The government’s own import substitution initiatives cost money. One could not have one’s cake and eat it too.

A choice had to be made and Mahathir pushed the privatization drive through. Among the beneficiaries of the action were Tajuddin Ramli, Yahya Ahmad and Halim Saad. Malaysia Airlines, Celcom, Hicom and many others were privatized to the new Malay industrialists. Funnily enough despite not attending the school, Mahathir’s policy gave rise to the so-called “MCKK mafia” – a circle of Malay College men whom dominated the Malaysian corporate scene prior to the 1998 recession. Beyond the elite circle, the floating of government enterprises on the stock exchange gave a wider segment of the Malaysian population a chance to participate in the equity market.

There were Chinese and Indian entrepreneurs who enjoyed government support too. They went on to build companies like YTL, Genting, Berjaya and Maxis. One must not forget YTL was one of several companies that benefited massively from the first generation independent power producer (IPP) policy, arguably at the expense of Tenaga Nasional and the public. The IPP saga is a reminder that while the 1980s-1990s privatizations bore dividend, it also had its cost. The cost manifested itself spectacularly during the 1997-1998 Asian Financial Crisis.

…to crony capitalism

These individuals and companies were linked to the government, and Umno, through privatization of government enterprises, the award of government contracts or the granting of monopoly over a particular good or service. Edmund Terence Gomez and Jomo Kwame Sundaram wrote a 1997 book detailing the extensive links these businesses had with Umno and Barisan Nasional. There is no doubt that they financed Umno while industrializing Malaysia.

As the 1990s boom peaked, these celebrated companies making up Malaysia Inc. were slowly perceived as corrupt villains. The term cronyism entered the Malaysian vocabulary. The NEP, which was meant to help the masses, was now criticized as an excuse to fatten the selected few. Many laypersons believed the NEP had been corrupted.

The accusation of cronyism and corruption was not far from the truth. During the Asian Financial Crisis, many of these privatized companies were bailed out by the government. In 1998, state-controlled MISC bought the heavily indebted and financially stressed Konsortium Perkapalan for $220 million. The latter was controlled by Mahathir’s son, Mirzan. Many other industry captains nurtured by Mahathir had to be bailed out too.

The economic stress led to differences between Mahathir and his deputy, Anwar Ibrahim. Anwar, unceremoniously fired from office by Mahathir, later mounted a massive opposition against the government, demanded reformasi and opened a new contested chapter of Malaysian politics.

The Asian Financial Crisis

Mahathir liberalized the economy after a decade or two of NEP. The Asian Financial Crisis forced him to reverse the course.

Firms across Asia had borrowed heavily in foreign currencies during the 1990s economic expansion. In good times, servicing the debt was easy. But by mid-1997, local Southeast Asian currencies crashed and it increased these companies’ debt burden by multiple folds, automatically rendering them beyond sustainability. It began with the collapse of the baht and it developed into a full-blown regional contagion. The ringgit was not spared. Bankruptcy was inevitable for many across multiple countries.

NPL during 1997 AFC

The International Monetary Fund had proposed Malaysia let these businesses – including those helmed by Mahathir-linked industry captains – fail. In return for an emergency fund, the IMF also proposed the adoption of an austere fiscal policy to strengthen the ringgit. The idea was that if the ringgit recovered, it would reduce the debt burden.

Mahathir would have none of that, in contrast to Indonesia, Thailand and South Korea. He famously stood up, turned his back and did the opposite of IMF recommendations. Malaysia imposed capital controls and pegged the ringgit at MYR3.80 to a dollar. His Keynesian economic prescription shook the realm of orthodox macroeconomics, just as he shocked the world by coming down on Anwar Ibrahim in the most disagreeable manner.

Malaysian ringgit VS US dollar, 1970-2015

Malaysia Airlines and Renong were saved. Danaharta bought bad loans in the domestic system. Danamodal recapitalized domestic banks straddled with bad debt. Megaprojects like Bakun ran aground and needed public money to go on. Companies managing the light rail transit and the monorail systems were acquired by the government too; they were later restructured into Prasarana Negara and RapidKL.

These companies – the success story of Mahathir’s privatization effort – failed and were renationalized. They would later come primarily under the control of Khazanah Nasional, Malaysia’s sovereign wealth fund.

With mandate from Prime Minister Abdullah Ahmad Badawi – Mahathir’s successor – Azman Mokhtar working from Khazanah’s office on level 33 of the Petronas Towers transformed these so-called government-linked companies into the biggest corporations in the region. Corporate governance was improved and so did profitability. The turnaround has been so successful that these GLCs are often accused of crowding out the private sector out of the market.

The current success of these GLCs is a happy outcome of the 1990s bailout. But some things never change. Malaysia Airlines and Proton are still in trouble after all these years.

It would take the IMF more than ten years later to write a mea culpa – admitting austerity did not work – as the organization grappled with the 2008 global financial crisis and the subsequent European sovereign debt crisis.

But even as Mahathir’s supporters cheered the apology, lingering in the background are questions of what if. Would Malaysia have rid itself of cronyism if things had been left burned to the ground in 1997 and 1998? Would there have been a substantial structural reform if Malaysia had listened to the IMF? Would Malaysia get a better democracy if the Umno network was left to fail? Would 1MDB exist in that alternative history?

What if, what if. We can only speculate as we live our life today.

Are we there yet?

But even as projects abandoned, industrialists bankrupted, debt restructured and companies bailed out, by the late 1990s Malaysia was no longer a third world country. New terms were used to describe us: “newly industrialized economy” and “upper middle income country” were two among several. That is Mahathir’s achievement for us.

But despite resigning in 2003, the Mahathir project is still unfinished. It is a country on the cusp of something great, but it is not quite there yet. For all the material advancement we have achieved, something intangible is missing. Mahathir dug a deep hole to build those tall Malaysian towers. He ravaged Malaysian institutions to stay in power, and killed off political rivals that could bring Malaysia to greater heights.

Prime Minister Najib Razak vows to complete the task of turning Malaysia into a developed country by 2020. He thinks he can fill the hollow cavity inside us all by building a bigger economy, by pouring in more money and dig other holes elsewhere.

That is folly. Money can buy you only so much.

Mahathir realizes this only belatedly. That is his, and our, failure.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
Sources:

  • real GDP chart: World Bank, my calculation
  • GDP composition chart: Economic Planning Unit
  • debt obligation chart: World Bank
  • ringgit chart: Bank Negara Malaysia

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
First published for the Era Mahathir exhibition at the Ilham Gallery in July. The exhibition runs from July to November 20 2016.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
p/s — I have been criticized for ignoring Sabah and Sarawak. Perhaps I should have mentioned how the Malaysian industrialization was really a West Coast industrialization. I should have highlighted the geographical disparity of the 1980s and the 1990s industrialization as I highlighted the economic disparity between the cities and the interior during colonial times. For better or for worse, such focus is usually due to the logic of agglomeration. There is also the curse of history: it is easier to develop a place that has the basic infrastructure in place.

But perhaps that is a work for another person. It would be interesting to see what Sabah and Sarawak-specific industrialization was like during Mahathir’s time, though I would imagine, it would mostly be about oil and gas. For Sarawak in particular, perhaps an investigation in the roles of Cahya Mata Sarawak in the state’s industrialization drive.

Just yum.

Unawatuna

I had a bunch of mangosteens in Sri Lanka. It was just yum. I did not know they grew mangosteen and durian in Sri Lanka. I have always thought these fruits were purely a Southeast Asian thing.

I read a nice little article on the New York Times today on the history of British foreign trade policy during Elizabeth I. Here is an excerpt:

Elizabeth’s Islamic policy held off a Catholic invasion, transformed English taste and established a new model for joint stock-investment that would eventually finance the Virginia Company, which founded the first permanent North American colony. [Jerry Brotton. England’s Forgotten Muslim History. New York Times. September 17 2016]

There is more to the part where the author writes “established a new model for joint stock-investment that would eventually finance the Virginia Company, which founded the first permanent North American colony…”

Before that, we need a digression:

On to business.

I think I would trace the evolution of joint-stock company up to 500s-600s Arabia, where the model was innovated in the 1000s-1300s by early Renaissance era Italian cities, and later improved in England (and in the Netherlands?) by the 1500s-1600s.

The development was not random. They had a common origin in Arabia. The Italians imported the model through their trades with the Arab world, and later, the Italian way became the northern European law.

Arab traders formed temporary partnerships to finance long-distance trade. This preceded Islam. Muhammad participated in several before he became a prophet. It was especially a venture capitalist-merchant partnership. While this kind of economic cooperation probably happened elsewhere too, in Arabia it was  a common successful institution and that distinguished it from other common partnerships that might have existed in the 500s-600s or earlier elsewhere.

Italian merchants made the partnerships more permanent in the 1000s-1300s. Theirs was a merchant partnership although these merchants later became bankers themselves. Again, there was nothing extraordinary about such partnership except for one key feature: this was the first time in the world that a company could outlive the lifespan of its partners, leading to the possibility of intergenerational capital accumulation. Previous partnerships would usually dissolve once a partner quit or died. This very idea, commonplace now, was revolutionary and one of several components that gave birth to modern finance directly. Proof: when calculating the value of a company through its long-term dividend, we will take the timeline as going infinitely into the future. The method is called the discounted dividend model. We use the geometric series — ‘1/(1-r)’, an infinite series — to calculate the present value of dividend streams.

The English later refined it by introducing the joint-stock company, the first true company in the modern sense, taking to heart the Arabic and the Italian traditions and making ownership of wealth more democratic. I can recommend two books to explain the evolution. Kocka’s Capitalism and Koehler’s Early Islam and the Birth of Capitalism.

I like this article because it sets the context and explains why England needed a joint-stock company law: the monarch had no money to finance trade with the Ottomans and Morocco to bypass Catholic lands. Funny how history ties its ends. It meanders so violently.

And, British involvement in these Ottoman lands would escalate beyond trade one or two centuries later.

The same kind of law — company — did not evolve in China until much later during modern times. All Chinese foreign trades were done and financed by the Chinese emperor. There was no room for private initiative that much (that only changed several decades before the Opium War, and that company was (largely?) the East India Company, a British joint-stock company).

I’m unsure about company history/tradition in India or other places though. But we all know, the EIC ruled India for a long time.

284 pages