Tag: The Malaysian Insider

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Economics

[1994] Of fiscal stimuli did not factor in Q1

Whatever the results may be for the gross domestic product growth rate for the first quarter of the year, let us be clear about one thing. The two fiscal stimulus packages have only insignificant impact, if not at all, to Malaysian economy in that period.

Any effort to paint the stimulus packages as having helped to cushion the impact economic slowdown we saw in the first quarter should be received with extreme skepticism.

One has to remember that, while the first fiscal stimulus package was announced by the Abdullah administration in November 2008, there was no real spending done even as February 2009 passed us by with the speed of a tortoise. The government at that time was still scrambling to distribute money to various ministries and not actually spending it.

This has been admitted by the Second Finance Minister himself. In early March, he was reported as saying that barely half a billion ringgit from a total of RM7 billion had been spent.

Two months later — by May 12 2009 — according to a website established by the Treasury to inform the public of the status of the two stimulus packages, only a further quarter billion ringgit was spent from the RM7 billion.

Given the horrifying demand gap caused by weakened external demand, actual spending derived from the first fiscal stimulus is very much irrelevant to the GDP growth figure for the first quarter of the year.

If one insists that the RM750 million did cushion the fall that certain Ministers claimed it would earlier in the year, perhaps I am obliged to share the following analogy: it is only akin to preparing a mattress on the ground with the intention of saving a person who has just jumped off from level 88.

One also has to remember that the second, much larger, stimulus package was only announced on March 10 2009, which was already close to the end of the first quarter. Furthermore, it is impossible to believe that the second stimulus package came into effect immediately, especially accounting for the kind of lag suffered by the first stimulus package.

How much of the second stimulus worth RM15 billion of government spending has been spent is unclear. The same website commissioned by the Treasury is coy about divulging the same information it shares when it comes to the RM7 billion stimulus package. Nevertheless, experience tells us to be rational and not to expect too much.

Consider this: if the government faces trouble in spending RM7 billion even after approximately 7 months have passed, how exactly does one expect the government to spend another RM15 billion within just over 2 months?

That skepticism should be strengthened further with the knowledge that the government only began to borrow massively in April. We know that the second fiscal stimulus needs to be financed through borrowings. And we know that April is not part of the first quarter.

The best hope of making the second stimulus relevant is the RM3 billion tax cuts as well as the loan guarantees attached to the second fiscal stimulus, or the mini-budget in the language of the government. Alas, information about that is not so forthcoming for us to move beyond mere speculation.

Hence, the effect of tax cuts and guarantees notwithstanding, the effect of the two government spending-based stimulus packages has to be largely discounted if we are interested in explaining the results of the first quarter for the year 2009.

What might make the two stimulus packages all the more irrelevant is the manner which the economy behaved in the first quarter. While the jury is no doubt still out there, early indications do not bode well for proponents of government spending as the heart of fiscal stimulus.

The reason is that the economy — as indicated by various indicators — is arguably performing better with each passing month since January, on the margin. It is better in a sense it has been less bad than before; to be precise, the change of sign of the second derivative.

This happens in spite of the lack of significant interference in the economic cycle as planned by the two fiscal stimuli. The significance of this is that it may prove to those who lack confidence in the market that the economy does not desperately need government spending. This also provides a damning evident that we do not need a third stimulus package at all.

So far, the best factor to explain possible turning of the economy may be the very factor that brought the economy to a tailspin in the first place: external demand.

It is hard to resist connecting the improved local condition with the health of the blessed Chinese economy. Even in the US — another major destination for Malaysian goods — talks of green shoots are aplenty.

If the trend continues, we may see a bottoming out soon enough even without additional government spending as allocated by the two fiscal stimuli. Indeed, the chances that the economy gets better before the full effect of the stimulus packages kick in are becoming brighter now than anytime before.

As it may turn out, the billions of ringgit of government spending may only increase our public debts. That will increase the cost of borrowing in the future and possibly later, the imposition of higher taxes for all, on average.

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 Malaysian Insider on May 26 2009.

Categories
Liberty Politics & government

[1983] Of stronger federalism demands greater division

The ugly episode in Perak raises several issues revolving around the idea of separation of powers. One of the least discussed powers separation matters is closely related to the concept of federalism. The fiasco clearly highlights that the state civil service is practically dependent on the federal civil service. This dependency is abhorrent to the spirit of federalism and it must be ratified.

The dependency however is nothing new. The position of district officers, for instance, is a state post. Nevertheless, it is a common practice for members of the federal civil service to be seconded to those positions. This is also true for multiple other positions within states’ civil service.

Although the practice of secondment is permitted by the Federal Constitution, when secondment happens it does raise a question relating to conflict of interest. If a state government does not see eye to eye with the federal government, where exactly does the loyalty of these seconded federal officers lie?

The line of reporting is clear. For those holding state positions, they report to the state government but theory does not always translate into actual practice. No demonstration is more vivid than the ongoing case in Perak. Several deplorable instances that threaten the spirit of Malaysian federalism were observable.

One of it harks back to the early part of the political and legal conflicts when the state legal adviser of Perak acted as if he was an agent of the federal government. In the ruling involving Datuk Seri Zambry Abdul Kadir and Datuk Seri Nizar Jamaluddin, a judge even said that the neutrality of the state legal adviser should be taken with ”a pinch of salt”.

That really is to frame it rather too kindly when it is a fact that the person holding the office of state legal adviser is a member of the federal civil service seconded to the Perak civil service. In the conflict, the state legal adviser clearly suffers from a conflict of interest. With a federal government which imperfectly separates political parties from the State, it is not hard to imagine why that is so. His loyalty lies with the Barisan Nasional-led federal government, not to the state government as it should be.

It is absolutely possible for a member of a state civil service, as with any civil servant, to hold a political bias that is opposite to the administrator. A civil servant has all the rights to have that bias as any free individual. Nevertheless, that does not dissolve his or her professional duties.

A state civil servant is a professional and he or she must be able to execute any rightful orders of the state government regardless of his or her political bias. Or else, respectfully, the civil servant must resign out of an irresolvable conflict of interest, or be fired. By this premise alone, the action of the Pakatan Rakyat government in Perak to suspend the state legal adviser — and the state secretary — is only natural and is only right in the spirit of federalism.

If this contradicts any law of the land, then the law must be amended accordingly. The law is only a tool to a goal, no more, no less. It is the spirit that matters and federalism is very much a spirit of Malaysia. To hide behind the law to subvert the spirit of Malaysian federalism is to undermine the spirit of Malaysia.

The conflict of interest is one reason why the secondment exercise as currently practiced must be re-examined. In the name of federalism, each state needs to develop its own civil service so that the federal government does not hold any state to ransom.

Until March 8, 2009, there were not too many chances to prove this point. In times where the administrations of state government and the federal government originated from the same quarter, it was hard to pinpoint a finger on any action violating the spirit of federalism.

It was easy for a Barisan Nasional-led state government to want to do something when in truth it was instructed by a Barisan Nasional-led federal government to do something. This happens concurrently with Barisan Nasional’s deplorable attitude of making machineries of the State as its private property.

For so long — the conflation between state and federal governments as well as conflation between the State and political parties — that continued unchallenged. After over 45 years of Malaysian federation with Barisan Nasional in power, actual power eventually became centralized to threaten the very foundation of Malaysia, a 13-state federation. Actual power not only centralized at the hand of the central government to make Malaysia come closer to a system of a unity state that we are not, it also centralized power in the hands of Barisan Nasional.

While it is inevitable to see the division of state and federal governments in the context of Perak through the prism of partisanship, the division is affirmatively beyond partisanship and beyond Perak. There is a genuine need for such systemic change.

Federalism is about a system of check and balance and it demands that division. This demand will remain true regardless who is in power. It will always remain especially poignant when the federal government holds too much power in relation to state power.

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 Malaysian Insider on May 14 2009.

Categories
Politics & government Science & technology

[1978] Of Twitter finally arrived in Malaysia

Away from the chaos on the streets of Ipoh and within the hall of Perak state assembly, a storm of short messages kept coming in, flashing and distributing the latest developments faster and wider than anything imaginable in the past.

Enter Twitter.

This is yet another sign of evolution within the already hyperactive Malaysian Internet community.

Truth be told, Twitter is not new among young techno-savvy Malaysians who are always ahead of the curve. Indeed, Twitter is a phenomenon in the US. In Malaysia itself, online press organizations like The Malaysian Insider, Nut Graph, Malaysiakini and even The Star Online do use Twitter.

Furthermore, its potential has been proven. For instance, in Moldova just weeks ago, Twitter played a crucial role in mobilizing a large successful protest against the Communist Party. In times of confusion as people kept wondering what was going on, Twitter was Mercury in that eastern Europe country.

Despite that, its importance did not impress too many Malaysians. That is, until May 7, 2009.

It started quite early in the morning. News of arrests was coming in but it came in slow through various blogs. Online news portals also were contributing but for them, extraordinary heavy traffic was taking its toll. Bandwidth demand spiked as demand spiked. Everybody wanted the latest news, even when there was none to be told.

People just kept refreshing like how that generation of gamers old enough to play the game Diablo on their computer kept clicking their mouse to whack on those devils running loose in a sprawling dark dungeon complex.

Multiple page reloads by thousands were beginning to frustrate both readers and administrations of portals alike. For bloggers, live blogging too was not enough. At the same time, Google Reader was amazingly relatively quiet when such an important event was unfolding in Ipoh.

For those on the ground, they needed something which they could post very quickly through their mobile application. Blogs just would not do. Forget about other more sophisticated content management systems. Those systems were too bulky.

“There has to be some other way to do this.”

That was probably what many were thinking. And yes, the answer is yes, there is.

Twitter is the way. It was time for live micro-blogging. Just type fewer than 140 characters into the Twitter account through any desktop, laptop or phone and Twitter will do everything else.

On Twitter, updates on Perak were up to the minute. It was more frequent than anything on any website. Those on Twitter were becoming the most well-informed observers of the May 7 fiasco, only next to those on the ground Twittering their tweets away to Twitter.

Oh, in case you were born yesterday, or rather, hundreds of years ago, tweets are Twitter updates. They are much like a post of a blog except shorter and crunchier.

From Twitter, messages were replicated across the Twitter universe, to Facebook, later to the blogosphere and online news portals.

Whatever the online media planned to publish — with the exception of their tweets — was yesterday news. And whatever news the mainstream media plans to print or broadcast was stale bread.

Twitter became more effective on May 7 when even state assemblymen and reporters began to Twitter. Information just flew freely and widely without censorship. At the manner information spread, those in power will really have to think twice about censorship. At one point, it appeared that even Kristie Lu Stout of CNN was following tweets by a reporter from The Edge.

After a while when the sitting in the Perak state assembly was adjourned for a second time by a new de facto Speaker and detained individuals released, those tweets slowed down a bit.

But it is not dead.

Twitter lies silently for the next big event, not unlike the black monolith in Stanley Kubrick and Arthur C. Clarke’s “2001: A Space Odyssey.”

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 Malaysian Insider on May 9 2009.

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

errata — the statement on Kristie Lu Stout might be inaccurate. While Stout does follow tweets from The Edge and that the reporter did tweet Stout, I cannot say with absolute certainty that Stout did follow the reporter’s tweets. I thank the reporter for clarifying the matter.

Categories
Economics

[1976] Of it is just as crowded over there

Read the mainstream press and it is hard to miss that the Economic Planning Unit and the Ministry of Finance are trying to market a new economic model to replace old ones. I fear that this new model is misguided and will lead Malaysia down the wrong path.

Read the mainstream press and one will find that it is popular these days to state that Malaysia needs to go up the economic value chain. Almost always accompanying that is rhetoric calling for Malaysia to graduate from its addiction to low-wage, low-skilled workers which, by and large, refers to dependency on cheap foreign labor.

Policy-wise, this has been translated into restriction on recruitment of cheap foreign labor. As proof, an astronomical levy on recruitment of foreign workers was imposed as part of the second stimulus package.

In time of economic slowdown, that particular action does not make sense and luckily, the Najib administration understands this and has decided to postpone it indefinitely. But even without a slowdown, that is no way to move forward due to uncertainty of any country’s development path.

Nonetheless, it is true that Malaysia needs to move up the value chain. We have been benefiting massively from early adoption of a liberal economy but other recently liberalized economies like India and China are finally catching up with Malaysia, and at an amazing pace.

Rapid reduction of poverty and continuous registration of high economic growth are testaments of how fast these countries are catching up after abandoning flawed economic models that ignore the importance of private property as a basis of a society.

Not only are they catching up rapidly thanks to liberalization, with their overwhelmingly larger and cheaper supply of labor, they are crowding out Malaysia and its peers like Thailand and the Philippines from the low-wage, low-skilled and labor-intensive niche. Penang, for instance, is already seeing multinational corporations migrating out from the state to Vietnam and China. This trend occurs because, among other reasons, of the availability of cheaper and larger supply of labor.

From this perspective, Malaysia is indeed losing its competitiveness; Malaysia is unable to compete in a low-wage model. If Malaysia fails to react, challenges from these low-cost countries have the potential to wreak havoc on the Malaysian economy. Fearing being pushed to the margin in the global market, Malaysia seems to be left with nowhere to go but up in the value chain.

Going up does not automatically mean actively restricting recruitment of cheap foreign labor, though. Cheap foreign labor still has roles in the Malaysian economy, even as its importance continue to diminish and even as other countries are able to excel at low-wage, low-skilled industry better than Malaysia.

This point is all the more tenable since in the long run, price equalization will happen to bring some kind of equilibrium between Malaysia and other competing countries.

The new equilibrium for low-wage, low skilled industry — perhaps especially for manufacturing — for Malaysia may be below its current level but the requirement for such industry will still exist since it provides goods or services which are hard if not impossible to trade. Somebody will have to do it.

Restriction on recruitment of cheap foreign labor is doubly unhelpful if the locals themselves refuse to take up low-wage low-skilled jobs. The restriction will create upward pressure on prices which include wages, pushing up the cost of living unnecessarily high when access to a large source of cheap labor to stabilize prices is available in the region.

In an open economy, that pressure will attract cheap supply of labor to act as a counterbalance. If that source is unavailable locally at the right prices, it will come from abroad.

That is already happening in Malaysia and the same trend is observable in the United Kingdom, where Eastern Europeans are taking up low paying jobs which the locals are reluctant to do as cheaply as the immigrants are willing. The same is true in the United States but instead of Eastern Europeans, they are from Mexico or other parts of Latin America.

A restriction on foreign labor will prevent that from happening, forcing prices and wages to go up. I feel this point must be stressed and hence, I repeat, that will inevitably cause the cost of doing business to increase.

The upward pressure on wages has been suggested as a tool to attract talents into Malaysia as an effort to take Malaysia forward beyond low-wage low-skilled economy into the realm of new economy.

This, however, confuses an increase in nominal wealth with an increase in real wealth. What is the point of being paid higher wages when the cost of living goes up accordingly, or higher?

In other words, the restriction which drives nominal wages up really makes no difference in real terms.

It must be noted that any increase in real wealth is largely due to productivity. This is not a mere opinion. Rather, it is an economic fact.

If one is less willing to believe mainstream economic theory due to the unfavorable popular reputation that economists currently suffer, then do refer to any econometric model on the matter; the correlation is strong and the causal relationship is enticing. Any effort at moving up the value chain must take this into account.

By moving up the value chain, it inevitably means greater application of science and innovation to increase productivity. A highly educated workforce will be required if the economy is to enjoy higher productivity.

In light of this, the question is not whether our addiction to cheap labor is a barrier to take the economy to a higher plane.

Instead, the questions that demand answers are: does Malaysia have a highly educated workforce; does Malaysia have the talents to fulfill the prerequisite of a high-value economy?

With a minority of its population holding a graduate degree and with an education system that seeks to brainwash its students rather than encourage critical thinking, it is a stretch to answer the questions in the positive.

That, by no means, is a reason to throw in the towel but it can help to refocus our energy from wrongfully vilifying low-skilled foreign labor to educating Malaysians better.

What is needed is an education system that demands the biggest effort from all. Schools, colleges and universities need to be liberalized to encourage development of competitive, thinking and open minded workforce, not yet more groups to be goaded for political purposes.

While these workforce is being developed, foreign talents should be welcomed and even offered citizenship.

Furthermore, just as the argument that low-cost giants are crowding Malaysia out from the low-wage, low-skilled niche, what actually guarantees that Malaysia can break into the high-value, high-skilled niche already filled with countries that with highly educated workforce?

Somehow, the rhetoric and the central planning action by the government which lead to curbs on foreign labor seems to suggest there is heavy competition in low-skilled industry but not in high-skilled industry.

”It’s crowded here, let’s move over there. Simple.” Well, it is not. While the pay off from a high-value economy is huge, it is naïve to think that there will be no competition.

Just imagine how much resources will be required to reverse the serious brain drain Malaysia has been experiencing for so long. Malaysia is way behind the curve in competition for talents. Compounding the issue is unfair practices by the government that make certain groups of Malaysia unappreciated.

If restriction of employment of cheap foreign labor is used as a stick to force Malaysia up the value chain, the danger is that Malaysia might fail to break into the high-skill niche and then finding itself with a largely dismantled low-skill industry.

With a serious lack of talent in the local economy, Malaysia might not only find itself entrenched in the middle-income trap, it might fall behind in comparison with its peers.

Unnecessary hostile position against cheap foreign labor might cause Malaysia to not have a fallback position if there is an error of judgment.

It is therefore, in my humble opinion, imperative that we ensure the ledge on the other side of the gully is properly secured before we make the jump across rather than chipping off the ledge we are still on. If we find ourselves in mid air only to realize that the ledge on the other side cannot support us, the next place we will be is at the bottom of the gully.

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 Malaysian Insider on May 4 2009.

Categories
Politics & government

[1966] Of and then there are the independents

The concept duality is helpful in understanding context a particular issue is set in. Without the idea of cold, how does one define the idea of hot? Without evil, how does one appreciate good? Without tyranny, how does one taste the sweet nectar of liberty? While such monochromic perception has its advantage in rationalizing the world, one must not take it too far lest one falls victim of false dichotomy.

To commit such elementary fallacy is especially easy in a highly politicized environment with heightened blind partisanship. Blind partisanship begins with prejudice taking over as the prevailing sentiment as trust and assumption of good faith vanish. With humanity’s amazing ability at selectively accepting evidence only when it is convenient to do so, our capability to confirm our prejudice even as we are unaware of our own effort at the confirmation bias should not be underestimated.

However fallacious the process is, the so-called evidence provides the foundation for paths to the mind be shut. So strong the foundation becomes that criticisms along with evidence to contrary become a squash ball to a wall. The ball bounces off and the wall stands so proudly, rightly or wrongly.

So strong they hold on to their prejudice — and emboldened by their confirmation bias — that everything now is colored in only black and white in the dullest of manner. But dullness is of no concern when one is right or rather, when one feels that one is right.

It is a kind of intellectual arrogance, except that intellectual arrogance is a property of those who are rigorous — slow perhaps for all evidences has to be considered objectively and mental model has to be set out right but rigorous nonetheless — in their thinking process. Intellectual arrogance is of no property of simpletons who resort to logical fallacies just because fallacies are easy to do. That arrogance is of no property of those who seek to merely confirm their bias.

As their colorful world turns monochromic, it is all about us versus them. The like-minded people versus the different others.

Close as I might come, fret not for I am here today not to burst into a raving recluse lunatic that I am sometimes as I sit in a corner embarking on a soliloquy amid a world which at times appears beyond saving. I am not here today to expound organic politics and to soil divine rights despite the enjoyment that I derive from doing so.

No. No.

I am here today to celebrate valiant individuals and to ridicule dronish collectives. I am here today to demonstrate as arrogantly as I find possible why my arrogance will trump monochromic arrogance. I am here today to admonish those who horrendously unjustifiably adopt arrogant monochromic worldview that there are only two groups in the world; that it is all about us versus them; that it is all about Barisan Nasional and Pakatan Rakyat.

Yes, today is not all about abstract idea while the mind wonders in the clouds. Today is about a very real issue.

While BN does exhibit some waning in terms of arrogance, only a blind cow would think BN is finally beginning to adopt a humble outlook. Ignore the slogans from the top echelon of BN leadership because the true measure of an organization’s sentiment is to be seen at the grassroot. No sincerity from the leadership in advocating change can supplant the unmoving signal from the grassroot.

The grassroot of BN, specifically UMNO, are unambiguous in its signal. As the Democrats in the United States used to say prior to November 4 2008, they want more of the same. The grassroot of UMNO still have not learned enough lessons to comprehend that globalization is here and that globalization is going to dismantle their precious affirmative action by hook or by crook. The time is up and to hide behind that crumbling wall is folly.

When Reagan said out loud in Berlin in 1987, ”Mr. Gorhachev, open up this gate. Mr. Gorhachev, tear down this wall!” the communists understood that the end was near. If somebody is to say the same thing to the grassroot of UMNO, do they understand it at all?

For them, what worked in the past will work forever.

Whatever arrogance BN manages to dust off its back, Pakatan accumulates. After a wild success, many in Pakatan feel that they are beyond criticism. Even if those criticisms are justified, they implicitly assume that voters really have no choice but to stay which Pakatan because Pakatan is the lesser of the two evils.

Oh, the arrogance is so suffocating that I just wish a general election to come quick for me to prove that Sophie’s choice is but an eroded disk brake of no use any longer. Pakatan does not get a get-out-of-jail-free card any more. The time for free ride is over. No more handicaps. It is time for free and fair competition that is the essence of a proper democracy.

For far too many, in BN and Pakatan as well as their sympathizers, this environment of heightened blind partisanship has encouraged them to adopt a monochromic worldview; a worldview of us versus them. So strong they hold on to their view and so paranoid at that that any opposition towards their position is automatically categorized as ”˜them’, ”˜the other’. It is all about us and them. The other is Pakatan if they are BN; the other is BN if they are Pakatan.

I say this from personal experience. Every time I criticize Pakatan, I am called a BN lackey and everything I criticize BN, I am called a Pakatan apologist, or something to the same effect.

I cannot accept this outrageous accusation for I am independent of Anwaristas and Umnoputras.

No. I will not take that for since when this country of over 26 million Malaysians is cleanly divided between BN and Pakatan?

There are those that do not belong to either party but care nonetheless about the country. To them, to fight for the country does not necessarily mean automatically aligning to either party. No party has a monopoly over the country and these people know it. These people are the independents.

The independents are known for swinging. They walk around for options and shop only they are satisfied with the goods, very unlike blind partisans who will continue buy the same old good from the same vendor, regardless of quality of the good.

Yes, sir. The independents shop around and the independents are no blind partisans.

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 Malaysian Insider on April 29 2009.