Powder kegs that are too close to the fire. That is the situation in Kuantan right now.

Local residents frustrated by the rampant bauxite pollution are beginning to take matters into their own hands. Threats have been made and carried out. Trucks carrying the mineral burned by the angry mob. Vigilantism is on the rise.

Vigilante justice is always worrying but it is hard to blame the local residents for resorting to it. When non-violent ways failed to address their grievances, they are left with less than desirable devices. Like it or not, vigilantism is a solution available when the typical mechanisms ― market and government ― are not working.

The free market usually provides robust solutions to a myriad of problems big and small. But such a market does not exist magically out of nothing. It is a human institution running on implicit human rules arising from our daily interactions with other fellow beings. As with any human creation, it can be imperfect. At times it can fail disastrously.

The market will disappoint the strongest supporters of the laissez-faire approach when too much of profits are privatized while too much of costs are passed on to the public with impunity. In economic jargon, that cost is called negative externality.

The tragedy of the commons is the oft-cited theoretical example of market failure involving extreme externality. Without any intervention to correct the misaligned private and public incentives, the benefits will be exhausted and the commons will collapse.

The negative effects of climate change are examples of market failure of global proportions.

Closer to home, I would submit the massive bauxite pollution in Kuantan, Pahang as a disturbing local case. The miners and the landowners reap their windfall profits but the rest bears the cost of the pollution.

Heavy red dust now contaminates the local air and water supply and that creates severe health threats to residents. One can only imagine the fate of whatever wildlife left in the plantations where the topsoil has been removed to feed China’s ferocious appetite for more bauxite.

When the market fails, then it is the responsibility of the government to step in and realign the diverging private and public incentives to produce a better outcome for both sides.

The typical solution involves taxing mining activities heavily, imposing strict production quotas or regulating the industry tightly in some ways to force the beneficiaries to take into account the disregarded general welfare.

But from the very beginning when the mining began, the government at the Pahang state level is not doing its job as the industry regulator and as the guardian of public welfare. Not enough has been done to correct the market failure. By definition, that is government failure.

Factors contributing to market failure mostly are innocent despite the grave consequences as it usually involves people minding their own legitimate business. It is always the government’s job to understand those businesses so that if there is any negative externality or conflict, then the authorities can come in and arbitrate any dispute. Any libertarian mindful of market failure will take this as one of the major roles of government.

In contrast ― if it is not incompetence or inadequate powers ― government failure is almost always about conflict of interest. In the case of Kuantan, it does seem like yet another case of conflict of interest.

For one, reports suggest the Pahang state government received more than RM37 million in revenue last year from bauxite mining. That figure will increase significantly once the state government doubles its current tariff rate on production to RM8 per ton.

The sum is significant for a government with a budgeted spending close to RM900 million in 2015. In a country where the concept of separation of powers is weak, the state’s fiscal interest can be hard to overcome.

But more troublingly, there are pictures circulating on the Internet, creating the allegations that some of the landowners enjoying the modern day gold rush are quite influential and close to the state government.

Information from the Internet may be wrong. While the local media has done a good job at reporting the impact of the pollution, not too many are investigating the identity of the landowners and the miners. Perhaps that is the cost of the culture of fear we have in Malaysia. Public welfare is suffering from gross disrespect for free press.

The federal government has come in to suspend the mining activities temporarily to order to study whether any environmental law has been breached. It is unclear if the suspension will mean anything or even be effective but one thing is certain: the issue falls firmly within the ambit of the state while the federal government is even more reluctant to do anything conclusive especially since Pahang is the political base of the prime minister. With so many troubles in other states, would he risk the ire of local politicians to do the right thing?

These are disheartening facts. Unless the conflict of interest is addressed strongly, the state and the federal government will likely continue to do too little, thus guaranteeing the continuing government and market failures.

I fear, at the rate we are going, the whole episode will lead to a period of persistent vigilantism. Down that slope ― however far down the slope is ― is a general breakdown in law and order. Miners are already employing thugs to protect the trucks from vigilantism. That sounds awfully close to anarchy.

But then again, does law and order mean anything these days? When the top leadership has no moral authority, will the so-called Little Napoleons down the line be impressed by any necessary directive from the top?

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
First published in The Malay Mail on January 5 2015.

[2811] Uncertainty

When the bus stopped outside the inn, and the rain could be heard loudly and—probably there was a window open—so could the voices of the guests, Raban wondered which would be better, to get out at once or to wait until the innkeeper came to the coach. What the custom was in this township he did not know, but it was pretty certain that Betty would have spoken of here fiancé, and according to whether his arrival here was magnificent or feeble, so the esteem in which she was held here would increase or diminish, and with that, again, his own, too. But of course he knew neither what people felt about her nor what she had told them about him, and so everything was all the more disagreeable and difficult. Oh, beautiful city and beautiful the way home! If it rains there, one goes home by tram over wet cobbles; here one goes in a cart through mud to an inn.—”The city is far from here, and if I were now in danger of dying of homesickness, nobody could get me back there today.—Well, anyway, I shouldn’t die—but there I get the meal expected for that evening, set on the table, on the right behind my plate the newspaper, on the left the lamp, here I shall be given some dreadfully fat dish—they don’t know that I have a weak stomach, and even if they did know—an unfamiliar newspaper—many people, whom I can already hear, will be there, and one lamp will be lit for all. What sort of light can it provide? Enough to play cards by—but for reading a newspaper?

“The innkeeper isn’t coming, he’s not interested in guests, he is probably an unfriendly man. Or does he know that I am Betty’s fiancé, and does that give him a reason for not coming to fetch me in? It would be in accord with that that the driver kept me waiting so long at the station. Betty has often told me, after all, how much she has been bothered by lecherous men and how she has had to rebuff their insistence; perhaps it is that here too…!” [Franz Kafka. Wedding Preparations in the Country. 1908]

[2810] Merry Christmas

Because I had time…

Creative Commons 3.0. By Attribution. Hafiz Noor Shams

The Phantom Menace came out at the cinemas in 1999. I greeted it with such enthusiastic fanaticism – I went to the movies thrice – that I ignored its flaws for years until my cinematic taste became more sophisticated than that of a geeky teenager.

Perhaps I am still suffering from the same affliction 16 years on. Nothing stopped me from waiting for December to arrive excitedly. There I was in the theater for The Force Awakens, a grown man at risk of tearing up as John William’s dramatic masterpiece blared out of the Dolby’s speaker and yellow-lettered paragraphs crawled across the screen slowly.

Watching the latest Star Wars installment felt like meeting an old friend. “Chewie, we’re home,” said Han Solo as he entered the Millennium Falcon. I smiled as wide as I could.

By the time the credit rolled, I was absolutely sure my latest appreciation for Star Wars would not have an expiry date. I love Episode VII even as Mickey Mouse erases my teenage years spent reading about Grand Admiral Thrawn, Mara Jade, the Rogue Squadron and the Corellian life into the dustbin.

The story flows well, the acting is not awkward and the jokes are tastefully delivered. It is certainly done cleverer than anything a character called Jar Jar Binks could muster. “I know how to run. I don’t need you to hold my hand,” barks Rey at Finn as both escape from the Stormtroopers. The best comic relief comes when onboard the Millennium Falcon, Finn conspires with the droid BB-8 to impress Rey which then leads to a hilarious scene of thumb-up exchange.

Nevertheless, several aspects bother me. I do appreciate the various references made to the original trilogy. These references help made The Force Awakens memorable, especially for the fans. But at times, it is too much.

Surely we do not need yet another Death Star and surely there are other plot devices and machines to wage terror. Yet, here comes the Starkiller Base. Director J. J. Abrams and his team pre-empted this criticism into the movie by having a minor character telling the Rebellion Alliance command – now the Resistance – that the Starkiller Base was significantly bigger than the previous two Death Stars. This is a case of imagination running short.

But when The Force Awakens should have copied the originals, it does not do so. The briefing for the Starkiller Base attack scene feels rushed. It gives the appearance that figuring out the weaknesses of a killing machine of that magnitude is easy. The scene lacks the deliberation that took place on Yavin 4 during A New Hope or in one of the Rebel cruisers in The Return of the Jedi.

Worse, despite not being a Death Star, the superweapon’s weakness is very much the same as its predecessor. And oh, do not forget to disable the deflector shield too. My mind wandered to the Forest Moon of Endor for a split second before I jerked it back down to Earth.

I see a parallel here between Star Trek: Into the Darkness and Star Wars: The Force Awakens. J. J. Abrams directed both of them. That 2013 Star Trek was the reimagining older version with Khan screaming all the way from 1982. This Star Wars is the stories of Tantooine, Hoth and Endor combined. Since the next Star Wars will be directed by somebody else, I hope more originality will be in order, hopefully without the disaster of the prequel trilogy.

But I do not hate the composite nature of The Force Awakens. I am just dissatisfied with the Death Star-like weapon.

Indeed, as I have mentioned earlier, I love this movie. There are various things I would like to mention but I will not lest this turns into an incoherent rambling of a fanboy, if it is not already. Despite its defects The Force Awakens makes a great addition to the Star Wars universe.

Of course, Star Wars in turn is part of the Disney universe now.

When the news first broke Disney that had bought the rights to Star Wars, a little part of me died. Posters of Death Star with Mickey’s large round ears started to pop-up all over the internet. With the prequel trilogy the way it was, there were fears Star Wars would turn into something that Star Trek fans could trivialize. I myself made snarky remarks, ruing the end of Star Wars.

But the end did not come and instead, Disney did to Star Wars what it did to Marvel and it feels great.

And so, Mickey, I am sorry for doubting you.

And thank you for not sending Darth Vader to force choke me for my lack of faith.

The Musée d’Orsay sits by the Seine in Paris. On one of the museum walls is hung a large painting by Thomas Couture. Named Romans during the Decadence, the work demands anybody passing by it to stop, decipher and contemplate Couture’s message for a minute or two.

Decadence has statues representing the better Roman spirit standing tall and looking down disapprovingly on contemporary Roman elites engaging in debauchery of various kinds.

Among the living there is a boy being utterly disinterested in the immorality of his older peers. On the opposite side, two travelers stand shocked discovering the state of the Romans.

Thomas Couture's Les Romains de la décadence. Wikipedia

The Empire was on the decline and Couture captured the idea thoroughly. The painter used sex and wine to represent vices of the world but the symbols signify something bigger than excessive human pleasure. Truly, it represents corruption at its widest meaning, something relevant everywhere for all times.

Painted in 1847, Couture was not thinking about the Romans. Far from it, he wanted to depict the moral bankruptcy of another society, one which he belonged to, the French. He was utterly critical of the depravity of the ruling class then. He had the right to do so. France of the 1840s was corrupt to the bones.

At the centre of it all were the July Monarchy and its supporters. Among the worst of scandals was a corruption case involving a government minister Jean-Baptise Teste, and a military-businessman Amédée Despans-Cubière.

Desirous of a business concession, Despans-Cubière bribed Teste with ninety-four thousand francs to secure the necessary contract.

The secret ties went on for years but they were caught eventually. Despans-Cubière was allowed to retire from the military. Teste meanwhile was imprisoned in Prison du Luxembourg. Yet, the prison was more a palace than anything else. Today, it is called the Palais de Luxembourg and houses the French Senate.

Separate but concurrent to the grand corruption was a murder case involving a nobleman. Charles de Choiseul-Praslin was thought to have murdered his wife. The scandal captured the wild imagination of the French masses already unhappy with the overly luxurious life of the upper class. Unable to withstand pressure from the trial, he committed suicide.

Yet, in a society where trust was thin, rumors had it the suicide was faked to save the accused. The chattering masses were convinced the authorities had allowed him to leave France for England.

The two cases came to a head in 1847 but it was only the last among many the government experienced throughout its reign. But the people finally had enough. A year later, the February Revolution erupted and ended the monarchy.

From the corrupt ashes rose the Second French Republic.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
First published in The Malay Mail on December 1 2015.

Race politics dominates Malaysia and our deplorable politics have us Malaysians as Bumiputras, Chinese, Indians and others.

At the center of it all is Malay politics. Yet, public statistics on Malay welfare are imprecise. This is true for household income and expenditure surveys conducted and published by the Department of Statistics. The surveys are the most comprehensive snapshots we have on the welfare of Malaysian households.

It is imprecise because the best we have to describe Malay welfare are not Malay statistics, but Bumiputra statistics.

The way the statistics is presented (or even measured) strengthens the flawed notion that the Bumiputras are Malays. Yet, we know the Bumiputras comprise not just the Malays but also the Orang Aslis in the Peninsula, and the Borneo natives.

Foreigners in particular are guilty of this but more unforgivably, so do the locals. When ethno-nationalist Malays want to back their point with hard data for instance, they would go to the household surveys and cite the Bumiputra figures as proofs, casually suggesting all Bumiputras are Malays with no hesitation as if there is nothing wrong with the statistics.

Our contemporary politics also means the recognition is not merely a pedantic concern. Sarawak parties especially are becoming increasingly important nationally, possibly convincing the federal government to spend more money there.

How can this be relevant? For example, I would like to know change in welfare of those Borneo native households as federal spending increases. It is not enough to claim they would do better because of the spending. We need data and it is certainly not enough with the Bumiputra net cast so widely.

So, as far as the category Bumiputra is concerned, I think it should be broken into its finer components to allow us to see exactly the state of various groups’ welfare.

After all, is it not ironic that for all the centrality of Malay politics, statistics on Malay welfare is not available on its own? We can know the income of the median Chinese and Indian households but we cannot know the median for Malay families. To belabor the point, what we know instead are Bumiputra statistics, which are at best a proxy to the state of the Malays. And we know it is a proxy because we know the Malays make-up the majority within the group. How big a majority? Interesting question, is it not?

And we also know how mean and median behave mathematically. Change in population will change both easily.

I have a lingering suspicion that the Malays are doing better than the reported Bumiputra average/median. My suspicion is based on the fact most Malays live in the Peninsula while the statistics show the Peninsula as a geographic group does better than the Malaysian Borneo (even when certain states such as Kelantan can do worse than Sarawak). The only way to conclusively address the suspicion is to look at the Bumiputra components cleverer than what we have been doing so far.

At the very least, regardless of my suspicion, improvement in reported welfare statistics with the Bumiputra category split into its constitutions can lead to better public debates and better policies. Without the split, we are forever condemned to debate from imprecise premises.

This was back in 2011 in Paris. I was there at the height of the Arab Spring and also interestingly, during the emergence of French far-right parties in mainstream politics.

20110129Paris

I do not have much or anything new to say. It is late here in Kuala Lumpur, six or seven hours ahead of Paris. Yet, I still want to express my opinion that we should not discriminate or blame the innocent refugees for the horrible acts committed today in Paris by a group of Islamist terrorists.

I am angry at the attack and I am sure a lot of others do, especially in Paris. The senseless killing is outrageous whatever the excuse. But I am also angry at the mistrust the attack is creating everywhere.

I am disgusted reading responses from right-wingers who somehow think the refugees from Syria and elsewhere from the Arab world as causing of the Paris attack. The right-wing xenophobic policy recommendation is to stop the refugees from coming in.

But as many have highlighted, these refugees are running away from the same barbaric Islamic State which attacked the civilians in Paris today. These refugees are civilians too and they are as much a victim as Parisians.

The right way is to direct the anger towards the Islamic State, and not at the innocents who just happen to share, nominally if I might add, the same religion at the attackers.

Growth in 2Q15 was bad but we know it due to the GST with all the front-loading spending.

The question now is, was the GST largely the one exerting negative pressure on growth?

In a very superficial way, growth should rebound in 3Q15 if the answer to the question is in the affirmative because it suggests consumption would return to normal.

If not, we should see worse growth in the last quarter, and possibly bigger trouble ahead.

Things are quite confusing for me at the moment because of the GST as well as due to low energy prices. Inflation has stopped being a useful proxy to demand and is out of wack. It is driven by cost factor and not really demand. I have not figured out how to handle this yet but things might only stabilize April next year, assuming energy prices remain at about current levels.

There are signs something bigger than GST is at work. The service sector is not doing too well. We know this from official 3Q15 statistics. Service growth was mostly pulled down by the finance sector, but retail growth also moderated. I am also hearing many anecdotes of personal hardship with greater frequency than usual. Some of my friends run businesses and they are not doing great either. I usually would dismiss anecdotes but I dare not do it this time around. There are just too many of them.

But there are good news. Industrial production did well, and so did construction and exports.

Net exports should give a big boost to the GDP, cushioning any expected slowdown in the domestic economy. I do not know how long the export strength will last, but for 3Q15, it looks like we had the two engine-model back. The weak ringgit might have a contributing factor, but I think it is a bit too soon to pass judgment about currency and competitiveness despite the temptation to claim so.

But, yea, the only reason I write this post is to do this poll:

How fast did the Malaysian economy grow in 3Q15 from a year ago?

  • 3.0% or slower (17%, 2 Votes)
  • 3.1%-4.0% (8%, 1 Votes)
  • 4.1%-4.5% (42%, 5 Votes)
  • 4.6%-5.0% (33%, 4 Votes)
  • 5.1%-5.5% (0%, 0 Votes)
  • Faster than 5.5% (0%, 0 Votes)

Total Voters: 12

Loading ... Loading ...

The official GDP figures will be released midday tomorrow.

 

Text to the Transpacific Partnership came out today. I have yet to go through it fully. It is massive and it can be technical. It is worse than Sejarah Melayu. It will take time.

Nevertheless, I attended a briefing at the trade ministry earlier today and I think I understand the gist of the most important chapters. My somewhat initial impression: there are damn lots of exemptions.

All these exemptions – including the continued maintenance of the Bumiputra policy, flexibility to government procurement for up to 25 years after signing/ratification much to the benefits of local firms and even what appears to be status quo for a lot of GLICs and GLCs – should allay nationalists, protectionists and anti-globalization groups’ fears that Malaysia is surrendering our policy space to foreign governments and multinationals.

In fact, there are so many exemptions that I am unsure I should support the agreement as strongly as I did previously, notwithstanding progress made on market access and tariffs. I have always understood that any FTA is not a real free trade. We live in a imperfect world and I realize that much, but the exclusions Malaysia won exceed my expectations. Hence, my surprise.

But the one clause that blows those “sovereignty” concerns out of the water is the exit option stated in the last chapter of the agreement. The TPP allows any country to quit the group unilaterally by giving a 6-month notice without incurring any penalty.

The easy exit clause means most of the requirements under TPP, like the extension of copyrights from 50 to 70 years and protections for biologics, are reversible by simply quitting the TPP. I reject the sovereignty argument but, if joining the TPP means losing national sovereignty, then the ability to quit and to reverse those policies must mean Malaysia is always be in control of its policy space.

(Not everything is reversible however. For instance, as I understand it the WTO disallows import tariffs to go up from any point of time and it does seem the TPP’s lower tariffs would be applicable even in the case of exit… I am unsure how post-TPP-exit discriminatory tariffs would work within WTO settings however. We need a trade law expert to answer that hypothetical.)

At the very least, the exit option lowers the cost and risk of joining the grouping.

Whatever it is, I come from the perspective we should always strive to create a rules-based world and then makes the rules as transparent as possible. To say it differently, we should reduce the discretionary powers from the authority as much as possible whenever it makes sense. I suppose, this originates from my libertarian tendency to control powers, be it states, companies or individuals.

In any case, I am a bit disappointed with the concessions Malaysia won, especially in terms of government procurement, state-owned enterprises and Bumiputra policy. I had believed TPP could liberalize Malaysia further more than local politics would allow it. Politics won.

Yet, I think I can stomach that. All this is a process and there will be another time. And right now, the TPP as it is seems okay to me. As I told somebody earlier today, better in than out.

Or, better we set the rules from a position of strength instead of wanting to join later and having to accept the rules from a weaker position.

Touching on the exemptions again, perhaps in retrospect we had too much strength at the negotiating table.

Unlike cabbies whose occupation is mostly driving (save for the minority), most Uber drivers drive part-time. I have had engineers, civil servants, doctorate students and advertising people as my Uber driver.

That occupational diversity makes conversation during an Uber ride much more interesting than that during a typical taxi journey. I have heard fascinating tidbits across industries as Uber transports me around Kuala Lumpur. This makes Uber a gold mine for economic anecdotes, giving colour and warmth to hard cold data.

These conversations have turned depressing lately.

The economy is going through a rough patch and official data tells you just as much. No citing of how well Malaysia ranks in the WEF Global Competitiveness Index — an index that does not measure economic cycles — can overcome concerns over the economy at the moment.

We are not in a recession but recession as a concept can be a statistical abstract. I would suppose in personal terms, you are in a recession if you lose your job and then struggle to meet your financial obligations. It is within this context my Uber conversations took place.

The worst stories almost always come from oil and gas professionals. With low petroleum prices and spending cuts by Petronas, the whole Malaysian oil and gas sector is in a recession of their own.

This has led one geologist to drive Uber. He used to spend months at sea and all around the world on lucrative contracts looking for oil and gas for big companies. But he has not been out of Kuala Lumpur for a while now. There is no new contract to sign. Nobody is exploring anymore.

Petroleum professionals like him are used to big pay and those in the industry did appear to be among the best paid compared to the rest. And this geologist in particular was used to big spending. He bought a property in a good neighbourhood along with a car last year through bank borrowings. Then, the repayment seemed insignificant.

But the times are changing. With no job on the horizon and no money coming in, his personal finances are not in a great shape currently. He is not alone. “My friends are trying to rent out their places. They did not need the money before but now every cent counts,” he insisted.

I fear what this portends. These are highly qualified and well-paid members of the middle class. Upper middle class perhaps but they are now at risk of losing that status.

There has always been somebody struggling with their finances even during good times. But the idea a person with a fine education such as the geologist could fall so far down so rudely because of something out of his control made me shrink in my seat as he drove me towards my destination.

There might be some comfort the petroleum industry employs just a small segment of the Malaysian labour force.

Yet, it is not the only one in trouble. Retail is not doing well too. It is unclear if the tough time there is temporarily caused by the GST or due to something bigger and more lasting. Meanwhile, euphemisms like downsizing, voluntary separation scheme and “having to let you go” are making its rounds in the banking sector.

Another sector I have had anecdotes to share is advertising.

One person running a small production house told me he drove Uber because there were fewer and fewer advertising jobs available for grabs these days. “In tough times,” he said when the lights were red, “businesses would cut advertising spending first. It is the easiest thing to do for them.” Indeed advertising expenditure has fared badly so far, contracting 9 per cent in the first eight months this year compared to 2014.

Before we parted ways, he joked driving was his full-time job now judging by the hours he spent on the road instead of at the desk doing creative work.

I only hope these are mere anecdotes.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
First published in The Malay Mail on October 29 2015.

282 pages