Category: Politics & government

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Politics & government Society

[2953] In Kampung Baru issue, PH supporters need to develop greater capacity for empathy

The expected eviction of some Kampung Baru residents by a private company during the administration of a Umno-led government has more than some Pakatan Harapan supporters feeling a little bit smug. Schadenfreude is aplenty. The residents are targets of that smugness.

This is the wrong.

Nevertheless, it is easy to understand the cause of those feelings RM1,000 per square foot offer was made on a willing buyer-willing selling basis, with a cash portion, as part of a plan to redevelop Kampung Baru comprehensively. It was not a perfect plan, but it was a plan. Many residents rejected the offer and many had legitimate reasons to do so.

But many too rejected it because they bought argument brought by Umno and Barisan Nasional’s politicians. Umno, Najib Razak especially, pushed for a ridiculous rate of RM3,000 per square foot deal. Ismail Sabri Yaakob, then leader of the opposition, also had commented on the issue to encourage residents to say no.

Roughly two years after the fall of PH government, Umno is back in power with Ismail sitting in the Prime Minister’s office. And here is where the incongruity happens.

Based on news reports from The Malaysian Insight and Malaysiakini, the private company is offering those whose properties have been taken over RM400 cash per square foot as compensation. This is approximately 3 times lower than the 2021-2022 market rate of RM1,500 per square foot. In addition, each household would be given the option to purchase a newly developed property there at discounted rates.

The numbers might change, but what will not is the sense of betrayal experienced by residents, and observed by third parties. There is no RM3,000 per square foot to be seen. Worse, eviction notice has been served regardless whether a resident agrees with the takeover term.

While it is tempting for PH supporters to hold that grin, and pontificate the residents on chances lost, and the betrayal the residents suffered, that is a self-defeating position to take.

PH needs those very residents’ support to win an election. But the way things are going, those residents will not be encouraged switch their political leanings. And if they are PH supporters in the first place, then the smugness will drive them away.

One has to remember, this is Titiwangsa, a seat PH won in 2018 but lost to political betrayal. That shared experienced of becoming victims of betrayal should enhance our capacity to be sympathetic to each other. But no. We prefer to say, “we told you so” instead.

PH supporters need to develop a larger capacity for empathy. Not just with respect to the Kampung Baru eviction, but also on other national issues. Build bridges instead of widening the chasms.

Again, this is Titiwangsa, a Malay majority seat in Kuala Lumpur. The way things are set up, if you cannot win urban Malays, you likely will not return to Putrajaya. Without empathy, you can wait for 10 years, and still not win federal power.

Categories
Economics Politics & government

[2951] Politics of prices is counter-productive

There has been a global supply constraint of various kinds for at least a year now. The supply chain disruption was expected by many—I quickly noted the post-war Malayan supply-side crisis as a parallel. Nevertheless, few people expected the constraints would be this tight for so long. I certainly did not.

The tightness has slipped over into the Malaysian consumer market. Chicken, beef, vegetables are the usual suspects.

The waitlists for cars are long due to a persistent global chip shortage: I test drove a Peugeot several weeks back and that experience to me underscores how modern ground vehicles these days are more and more an electronic device than a mechanical one. I knew vehicles had an ever increasing electronics (and electrical) components to them. Several months earlier, I read a report showing how the share of electronic cost relative to total car manufacturing cost has gone up drastically in the past 20 years, from less than 1% to maybe 40%-60%. But there is a difference between reading it, and riding the thing. The dashboard is a computer screen popping more information any older car could show. When I say dashboard, I mean a dashboard full of dynamic data, with customizable menu. The air-conditioning controls are only accessible through a separate central LCD screen, which also controls other aspects of the car. Even the brakes can be controlled by the computer, along with so many other things.

It is not just chip and electronic components are in short supply. Somebody on Twitter jokingly said “oh, this is the chip shortages they were talking about” in reference to shortages of fries at McDonald’s in Malaysia and Japan.

Consumer prices are rising, and it would have risen higher if it was not for price control mechanism and subsidies in place in Malaysia. This is readily observed from the following chart, where consumer prices are not rising as fast as producer prices. The latter is a proxy to global prices.

PPI vs CPI

Nevertheless, despite enjoying the shield, consumers have been complaining about rising living costs. They demand actions. More than a few activists and politicians have demanded the same.

All governments are sensitive to such criticisms and this government, especially as weak, incompetent and clueless as it is, is doubly so. The opposition has been relentless in their criticism. Some Pakatan Harapan supporters have highlighted how their government played a better and proactive role in addressing prices, and go on to claim a Pakatan Harapan government would have been far more effective in managing cost of living problem. And when Pakatan Harapan was in power, Barisan Nasional and Pas, on top of their usual racist rhetoric, also attacked the government for rising living costs regardless of whether prices was actually rising (prices then were actually very stable due to the imposition of an overly generous blanket fuel subsidy).

I dislike politics of prices. While it has its uses in cases when there are monopoly abuses and regulatory hurdles (the drop in broadband prices are a great exception), in the current climate prices are largely out of the government hands. The truth is, if Pakatan Harapan was in power, they too would not be able to do much about it either.

But that does not matter. Such is the politics of prices.

The problem is with the supply itself and the players of politics of prices simply ignore the cause of the problem. Some even go has far as misdiagnosing it as unhelpfully as greed.

A supply-driven crisis like this requires investment to loosen up the supply chain: expansion of ports, new technology to hasten production and delivery, new plants, more workers, etc. Yet, the aversion for price hikes have led to large government subsidies (think fuel), which takes fund away from productive investment purposes that are needed to address the supply chain disruption.

Politics of prices not only ignore the source of price pressures Malaysian consumers are experiencing. They ignore wages. Prices and wages are part of the same coin: wages are prices of labor. Notwithstanding issues relating to income distribution between employees and employers, and technology-driven price cuts among others, the politics of prices suppresses price growth, and through it, risk of suppressing wage growth.

More than once, the politics of prices have led to calls for wage cuts. The targets have been high-paying professionals and ministers (and their unqualified advisors), but too often, it has gone a little bit too far. Mahathir as the 7th Prime Minister for instance, is a fan of pay cuts and that unfortunately set the tone for the whole economy when he was in power. Coupled with his obsession with government debt (government debt and transparency were a problem), and his history with the gold dinar movement, it felt like he wanted a deflationary environment.

All that set the tone for austerity. There was really no austerity in place—government spending went up and the economy expanded—but the narrative set by the PM made it difficult to convince many out there that that was no austerity. And the economy, even as it expanded, took heed of the deflationary sentiment.

Categories
Liberty Politics & government Society

[2950] Too tame for our own good

Many things could describe the past two separate years that merged into one. Here, I would describe it as the taming of our society. The fire that powered many before was doused by shocks and disappointments of February 2020 along with all the political development that followed. This broke the heart of many.

And if there were still beating heart fighting on the political front, the pandemic that flared up soon after broke the body of many. The crisis and its mismanagement brought debilitating economic effects that forced many to switch attention away politics (politics here is not the narrowly defined partisan-party politics, but one about governance and the overall organization of society) to that of personal livelihood. Many died along the way.

Malaysian society as it was before the pandemic was mostly too polite for our own good, but the bludgeons needed to fight the pandemic turned that politeness into utter submission. There were noise and protests against the manner government regulation was applied incompetently. Some went to the streets. But those noise and protests were nothing compared to the years before. During the pandemic, far too few could, or willing to go to the ground, divided out of fear of getting infected, or the need to work at a time when unemployment was soaring, furloughing was the talks of the town, and wages were cut down significantly.

The foundation which the Muhyiddin government stood on was shaky soon after its undemocratic formation, but it stood for so long because any anger was contained by fear, or deference of power. But the ember-like anger burnt further and when it appeared a fire was about to lit—even patience among the polite has its limits—the irresponsible government played poker: they raised the stakes by declaring emergency. The stakes were raised to the point the polite did not dare challenge it too fiercely. Or they were too tired, and hapless.

The subsequent government under Ismail Sabri lowered the temperature for a while but the incompetence remained. That same incompetence was for all to see during the recent great floods across the peninsula. The further loss of life and property raised the political temperature yet again. The politics of race and religion showed it was all meaningless in the face of incompetence, so much so that this administration that largely has the same Cabinet members who previously prided itself as a Malay-Muslim government, has stopped marketing itself as one.

Amid the troubles faced by the general public, yet another scandal is erupting in the public first involving the Malaysian Anti-Corruption Commission, and as national crisis tends to pull other public institutions into the ditch (1MDB was one such case but on a grander scale), later the Securities Commission. A good institutional set-up would have contained it. This government prefers to drag everything down, for their benefits, at the expense of the country. All that highlights how institutional reforms achieved due to the 2018 General Election was fragile and needed nurturing, and how the events of February 2020 undid the good work. The message before had always been reforms took time, but few imagined there would be so big a digression happening so soon.

The digression is happening because we have been too polite, too tame amid assaults over our democratic institutions. It is time to be not so tame and fight.

I would like to end this post by reproducing Usman Awang’s Sepatah Kata:

Sebuah perkataan yang paling ditakuti
Yang tradisional sekali
Untuk bangsa kita yang pemalu.
Sekarang kata ini kuajarkan pada anakku:
Kau harus jadi manusia kurangajar
Untuk tidak mewarisi malu ayahmu.
Lihat petani-petani yang kurangajar
Memiliki tanah dengan caranya
Sebelumnya mereka tak punya apa
Kerana ajaran malu dari bangsanya.
Suatu bangsa tidak menjadi besar
Tanpa memiliki sifat kurangajar.

Categories
Economics Politics & government

[2948] Government money is best used for actual spending and investing, not replenishing EPF savings

National Union of Bank Employees (Nube), the banking union in Malaysia, wants the government to “return monies withdrawn by B40 and M40 members under the Covid-19 relief package.”[1] I take that as demanding the government to directly replenish EPF contributors’ savings that were depleted by government Covid-19 withdrawal programs. The news report does not mention when the union spokesperson wants the replenishing to happen, but I assume as soon as possible.

For the uninitiated, the Employees Provident Fund (EPF) is a compulsory retirement scheme for private sector workers.

I disagree with the withdrawal EPF schemes, and along with many others, instead have advocated for the government to raise its borrowing and commit to greater spending instead in order to provide greater assistance.[2] But the government was too worried about its fiscal deficit, too fresh to learn all the economic levers it had, and too desperate to find ways to relieve the spending pressures they felt. Among the chaos, they heard Najib Razak’s bad advice and took it.

But it is done now. A mistake has been made. While too many EPF contributors find their account depleted as a result, the overall economic circumstances have changed. During the pandemic, we needed economic programs guaranteeing everybody a certain level of welfare, particularly when a significant part of the economy was shutdown. With the private sector disabled so thoroughly, it was the responsibility of the government to secure everybody’s basic needs. It was a hibernation policy: lockdown and government assistance.

Now that the economy is back operating albeit weakly, priorities have changed. We need to strengthen the economy. Instead of hibernating, we need more spending and investing by the both the public and the private sectors.

This of course assumes we will not make any more mistake on the health front. While there is a real room for optimism going forward, with vaccination rate running high, and that we know more about the virus, after the government’s naïve V-shape recovery blunder, we can never be too careful.

Having the government replenishing EPF savings, especially if immediately or the near future, runs contrary to current priority of economic recovery: pushing for greater spending, investing in capacity building, and simultaneously creating jobs.

Why?

Because putting government revenue (or borrowing or both, since the government unlikely to enjoy any kind of fiscal surplus) into EPF savings would store the money into passive activity for an extended period of time (due to the nature of the scheme, which savings could only be withdrawn at retirement age under normal circumstances; for the macro-inclined, you would remember S=I, but here I would argue S=aI where a<1 since EPF typically invest in equities and debt, and not directly, and if directly definitely in the very minority, into new productive assets like factories and infrastructure). It would go into the financial market, but that is not the most productive of all options available out there. In other words, the act of replenishing will take a lot of steam needed to power the recovery.

And it is worth remembering that economy in 2021 will be smaller than it was in 2019: recovery is not complete. This is an important point because it has long-term repercussion on the economy.

To illustrate the point, it is good to go back to the 1998 during the Asian Financial Crisis. The Malaysian economy only truly recovered from the 1990s crisis by mid-2010s: actual GDP only surpassed the what-if-there-was-no-1990s-crisis GDP around 2015-2016. To put it differently, actual GDP level only surpassed the pre-crisis level around 2014. That is close to 20 years of lost potential.

Actual GDP vs hypothetical pre-AFC growth trend

For 2021, we are still both below pre-crisis level and trend.

For fear of losing more potential, we need to focus on spending and investing. Having the government correcting their EPF mistake by replenishing the accounts will heighten the risk of us losing potential.

The replenishing size, and in turn, potential loss from the replenishing policy, is not small. A report from the Finance Ministry shows the cumulative EPF withdrawal under the 3 programs (i-Lestari, i-Sinar and i-Citra) was RM90.3 billion as of early October 2021. More has been approved but yet to be withdrawn. Replenishing it as soon as possible would take at least RM90.3 billion off the economy in terms of spending and investment, ignoring any multiplier effect.[3] To put the number in perspective, that is nearly 30% of what the government plans to spend in 2022 and in fact, RM15 billion bigger than the government’s development allocation. Even by spreading the replenishment over 2 or 3 years, such policy would take so much money from most parts of the economy, and into the finance industry that will eventually manage those money.

But that does not mean there is no other way of replenishing it. Two ways I can think of are:

  • Tiering the dividend, which those with the least savings getting the highest rate. I have suggested tiering because, but it was primarily made out of realization the wrong people are given the incentive to save, and so, disincentive to spend and invest.
  • Increasing employers’ mandatory contribution. This will increase cost of doing business, but the government, while not doing enough, did a lot for businesses. Perhaps, it is time for businesses to play their role here.

Both however will be a slow replenishing process. Furthermore, increased mandatory contribution, for instance, might reduce take home pay as employers recalibrate their wage structure.

Another way by way of indirect replenishing is to make something like a senior citizen cash transfer bonus, payable by the government upon a person’s retirement, on top of existing cash transfer programs. But done together with dividend tiering, increased contribution and perhaps other ways too, this could reduce the size of the program, while pushing it far enough into the future.

Hafiz Noor Shams. Some rights reserved

[1] — KUALA LUMPUR (Nov 22): The National Union of Bank Employees (NUBE) had on Monday (Nov 22) urged the Employees Provident Fund (EPF) to demand that the government return monies withdrawn by bottom 40% (B40) and middle 40% (M40) segment EPF members to protect their retirement savings at a time when EPF members’ retirement savings have depleted due to Covid-19 pandemic-driven economic challenges. [Shazni Ong. EPF asked by NUBE to demand govt to return monies withdrawn by B40, M40 members during Covid-19. The Edge Markets. November 22 2021.]

[2] — Two experts Malaysiakini spoke to had concerns about allowing such a large number of people to dig into their retirement savings. Instead of tapping into EPF, both opined that the government could have spent more to provide assistance to households amidst the Covid-19 pandemic. Economist Hafiz Noor Shams previously analysed that the government was not spending enough in Budget 2021 to support the economy, by virtue of what he regarded as an overly conservative deficit estimate. [Annabelle Lee. Economists: Why let 8m tap EPF when govt can afford cash assistance?. Malaysiakini. November 27 2020.]

[3] — Laporan LAKSANA ke–76. Page 11. Ministry of Finance, Malaysia. November 17 2020.]

Categories
Politics & government

[2941] Ismail Sabri does not deserve 100-day honeymoon

In his speech revealing the Cabinet line-up, Prime Minister Ismail Sabri Yaakob said each ministry had to prove their early achievements within 100 days. He said that after stressing the Cabinet needed to have short and long-term plans.

That 100-day period might have been acceptable under normal circumstances. And it might be acceptable, if the Cabinet had a new line-up.

But this Cabinet is the same as the last one that failed miserably, with minor changes inspiring no confidence. The clueless Minister of Education is still the same. Ditto for MITI, and almost all other ministries. One improvement might be the promotion of Khairy Jamaluddin to the Health Ministry, but this could be negated by the silly switch: the ridiculous former Health Minister now takes over Khairy’s old portfolio. The health ministry under Adham Baba had been the source of dark comedy since March 2020, and only god knows what the Ministry of Science, Technology and Innovation has in store now. Good luck all the technologists out there.

So unchanged the line-up, that it is impossible to divorce the failure and incompetence of the previous Cabinet from the new one. The Prime Minister himself is the source of the current Covid-19 wave with his lack-of-quarantine mistake.

The largely disappointing line-up does not deserve space to breathe. This government does not deserve 100 days. They should be judged now. They must be put under pressure.

For heaven’s sake, there is an ongoing pandemic and we just do not have 100 days.  Thousands have died. If this government needs 100 days more, then we collectively as Malaysians have made a mistake and will pay a heavy price for it.